AGREEMENT AND PLAN OF MERGER

EXHIBIT 2.1

 

AGREEMENT AND PLAN OF MERGER

 

Among

 

QUANTUM FUEL SYSTEMS TECHNOLOGIES WORLDWIDE, INC.,

 

QUAKE SUB, INC.

 

and

 

STARCRAFT CORPORATION

 

Dated as of November 23, 2004

 

TABLE OF CONTENTS

 

 

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AGREEMENT AND PLAN OF MERGER , dated as of November 23, 2004 (this “ Agreement ”), among Quantum Fuel Systems Technologies Worldwide, Inc. , a Delaware corporation (“ Parent ”), Quake Sub, Inc. , an Indiana corporation and a wholly owned subsidiary of Parent (“ Purchaser ”), and Starcraft Corporation , an Indiana corporation (the “ Company ”).

 

W I T N E S S E T H :

 

WHEREAS, the Boards of Directors of Parent (“ Parent Board ”), Purchaser (“ Purchaser Board ”) and the Company (the “ Company Board ”) have each determined that it is in the best interests of their respective stockholders and shareholders for Parent to acquire the Company upon the terms and subject to the conditions set forth herein;

 

WHEREAS, for federal income tax purposes, it is intended that the transaction contemplated herein shall qualify as a reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the “ Code ”); and

 

WHEREAS, Parent and the Company have received voting agreements (the “ Voting Agreements ”) from certain stockholders of Parent and shareholders of the Company agreeing to vote in favor of the transactions contemplated by this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Purchaser and the Company hereby agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

For purposes of this Agreement:

 

“ affiliate ” of a specified person means a person who, directly or indirectly through one (1) or more intermediaries, controls, is controlled by, or is under common control with, such specified person.

 

“ beneficial owner ,” with respect to any securities, means a person who shall be deemed to be the beneficial owner of such securities (i) which such person or any of its affiliates or associates (as such term is defined in Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly or indirectly; (ii) which such person or any of its affiliates or associates has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or subject to the passage of time or other conditions), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) which are beneficially owned, directly or indirectly, by any other persons with whom such person or any of its affiliates or associates or person with whom such person or any of its affiliates or associates has any agreement, arrangement or understanding for

 

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the purpose of acquiring, holding, voting or disposing of any such securities. No person shall be deemed to have acquired beneficial ownership of Shares or shares of Parent Stock for purposes of this Agreement by virtue of execution of this Agreement or any agreement contemplated by this Agreement until the Closing.

 

“ business day ” means any day on which banks are not required or authorized to close in the City of New York, New York.

 

“ Company Acquisition Proposal ” means (i) any bona fide written proposal or offer from any person relating to any direct or indirect acquisition of (A) all or a substantial part of the assets of the Company or of any of its material Subsidiaries or (B) over fifteen percent (15%) of any class of equity securities of the Company or of any of its material Subsidiaries; (ii) any tender offer or exchange offer, as defined pursuant to the Exchange Act, that, if consummated, would result in any person beneficially owning fifteen percent (15%) or more of any class of equity securities of the Company; or (iii) any merger, consolidation, business combination, sale of all or a substantial part of the assets, recapitalization, liquidation, dissolution or similar transaction involving the Company or any of its material Subsidiaries, other than the Transactions; provided , however, that for purposes of Section 8.3 of this Agreement, each reference above to “15%” shall be changed to “35%.” A Company Acquisition Proposal includes a Company Superior Proposal.

 

“ Company Common Stock ” means the common stock, without par value, of the Company, together with the corresponding common share purchase rights associated with such shares of the Company’s common stock in accordance with the Rights Agreement.

 

“ Company Expenses ” means an amount equal to all out-of-pocket expenses and fees of the Company, up to One Million Dollars ($1,000,000) in the aggregate (including, without limitation, fees and expenses payable by the Company to all investment banking firms and other persons, and their respective agents and counsel, for structuring the Transactions and all fees of the Company’s counsel, accountants, experts and consultants, and all printing expenses), actually incurred or accrued by the Company or on the Company’s behalf in connection with the Transactions, and actually incurred or accrued by investment banking firms and other persons, in connection with the negotiation, preparation, execution and performance of this Agreement and the structuring of the Transactions.

 

“ control ” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, or as trustee or executor, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise.

 

“ Daily Volume Weighted Average Price ” means the daily volume weighted average price based on trading on the Nasdaq National Market between 9:30 a.m. and 4:00 p.m. Eastern Time as reported by Bloomberg Financial L.P., or any successor.

 

“ Environmental Claim ” means all claims or causes of actions, whether or not asserted, including but not limited to claims by any person or Governmental Authority or other third party, alleging potential liability or responsibility for violation of any Environmental Law or

 

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Environmental Permit or for threat or injury to the environment, health or safety, personal injury (including sickness, disease or death) or property or natural resource damage, or otherwise alleging liability or responsibility for damages (punitive or otherwise), investigation, cleanup, removal, remedial or response action or costs, contribution, restitution, administrative civil or criminal penalties, injunctive relief, or other type of relief, resulting from or based upon a Pre-Existing Environmental Condition.

 

“ Environmental Laws ” means any United States federal, state, local or non-United States laws, statutes (including common law), regulations, directives, ordinances, orders, policies, or decrees relating to (i) Releases or threatened Releases of Hazardous Substances or materials containing Hazardous Substances; (ii) the manufacture, handling, transport, use, generation, treatment, recycling, recovery, storage or disposal of Hazardous Substances or materials containing Hazardous Substances; or (iii) pollution or protection of human health or the environment, including any natural resources.

 

“ ERISA Affiliate ” means any trade or business (whether or not incorporated) under common control with a person and which, together with the person or any Subsidiary, is treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code.

 

“ Exchange Act ” means the Securities and Exchange Act of 1934, as amended.

 

“ Governmental Authority ” means any of the following which has jurisdiction and is exercising lawful authority: (i) nation, principality, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (ii) federal, state, local, municipal, foreign or other government; (iii) governmental or quasi-governmental authority of any nature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, board, instrumentality, officer, official, representative, organization, unit, body or entity and any court or other tribunal); (iv) multinational organization or body; or (v) individual, entity or body exercising, and entitled to exercise, any executive, legislative, judicial, administrative, regulatory, police, military or taxing authority or power of any nature (including Nasdaq).

 

“ Hazardous Substances ” means (i) any material, substance or waste which is defined or regulated as a “hazardous substance,” “pollutant,” “contaminant,” “hazardous material,” “hazardous waste,” “extremely hazardous waste,” “restricted hazardous waste,” “infectious waste,” “radioactive,” “toxic substance” or any other formulation intended to define, list or classify substances by reason of deleterious property, such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, or reproductive toxicity by any Governmental Authority pursuant to any Environmental Law; (ii) petroleum, petroleum products and fuel additives, including crude oil and any fractions thereof; (iii) natural gas, synthetic gas, and any mixtures thereof; and (iv) polychlorinated biphenyls, and asbestos.

 

“ Intellectual Property ” means (i) all United States, non-United States and international patents and patent applications, all letters patent or equivalent rights and applications, including any reissue, extension, division, continuation, or continuation-in-part applications throughout the world; (ii) all Trademarks; (iii) copyright registrations and applications for registrations thereof,

 

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certificates of copyright and copyrighted interests throughout the world, and all rights in mask works; and (iv) trade secrets under all applicable Law, including know-how and confidential and proprietary information.

 

“ knowledge ” means as to any party the actual knowledge of each director and executive officer of such party or such knowledge as such officers and directors should reasonably be expected to have in the conduct of their duties.

 

“ Law ” or “ Laws ” means any applicable United States or non-United States statute, law, ordinance, regulation, restriction, rule, code, executive order, injunction, judgment, decree or other order of any Governmental Authority.

 

“ Liens ” means pledges, claims, liens, charges, restrictions of any nature, leases, assignments, subleases, easements, covenants, rights-of-way, encumbrances, adverse claims, mortgages, options, rights of first refusal, agreements, limitations on voting rights, and security interests of any kind or nature whatsoever.

 

“ Material Adverse Effect ” means, as to any party, any event, circumstance, change or effect that is or is reasonably likely to be materially adverse to the business, assets, liabilities, financial condition or results of operations of such party and its Subsidiaries, taken as a whole.

 

“ Order ” means any (i) temporary, preliminary or permanent order, judgment, injunction, edict, decree, ruling, pronouncement, determination, decision, opinion, verdict, sentence, stipulation, subpoena, writ or award that is or has been issued, made, entered, rendered or otherwise put into effect by or under the authority of any court, administrative agency or other Governmental Authority or any arbitrator or arbitration panel; or (ii) agreement with any Governmental Authority that is or has been entered into in connection with any Proceeding.

 

“ Parent Acquisition Proposal ” means (i) any bona fide written proposal or offer from any person relating to any direct or indirect acquisition of (A) all or a substantial part of the assets of Parent or of any of its material Subsidiaries or (B) over thirty-five percent (35%) of any class of equity securities of Parent or of any of its material Subsidiaries; (ii) any tender offer or exchange offer, as defined pursuant to the Exchange Act, that, if consummated, would result in any person beneficially owning thirty-five percent (35%) or more of any class of equity securities of Parent; or (iii) any merger, consolidation, business combination, sale of all or a substantial part of the assets, liquidation, dissolution or similar transaction involving Parent or any of its material Subsidiaries, other than the Transactions. A Parent Acquisition Proposal includes a Parent Superior Proposal.

 

“ Parent Expenses ” means an amount equal to all out-of-pocket expenses and fees of Parent or Purchaser, up to One Million Dollars ($1,000,000) in the aggregate (including, without limitation, fees and expenses payable by Parent or Purchaser to all banks, investment banking firms, other financial institutions and other persons and their respective agents and counsel, for arranging, committing to provide or providing any financing for the Transactions or structuring the Transactions and all fees of Parent’s and Purchaser’s counsel, accountants, experts and consultants, and all printing expenses), actually incurred or accrued by Parent or Purchaser or on

 

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their behalf in connection with the Transactions, and actually incurred or accrued by banks, investment banking firms, other financial institutions and other persons and assumed by Parent or Purchaser in connection with the negotiation, preparation, execution and performance of this Agreement, the structuring and financing of the Transactions, and any financing commitments or agreements relating thereto.

 

“ Permitted Liens ” means (a) liens held by Comerica Bank under the credit facilities set forth on Section 3.18 of the Company Disclosure Schedule; (b) liens for unpaid Taxes that either (i) are not yet due and payable or (ii) are currently being contested in good faith by appropriate proceedings and disclosed in Section 3.15 of the Company Disclosure Schedule; (c) liens or restrictions or rights set forth on or referred to in Sections 3.1, 3.3, 3.13, or 3.14 of the Company Disclosure Schedule or in the Notes or related documents; (d) the interests of lessors under operating leases and purchase money liens of lessors under capital leases and so long as the lien only attaches to the asset purchased or acquired and only secured the purchase price of the asset; (e) liens arising by operation of law in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course of business of the Company and not in connection with the borrowing of money, and which liens either (i) are for sums not yet due and payable, or (ii) are currently being contested in good faith by appropriate proceedings and disclosed in Section 3.15 of the Company Disclosure Schedule; (f) liens arising from deposits made in connection with obtaining workers’ compensation or other unemployment insurance; (g) liens or deposits to secure performance of bids, tenders, or leases (to the extent permitted under this Agreement), incurred in the ordinary course of business of the Company and not in connection with the borrowing of money; (h) liens arising by reason of security for surety or appeal bonds in the ordinary course of business of the Company; ( i ) with respect to any real property, easements, rights of way, zoning and similar covenants and restrictions, and similar encumbrances that customarily exist on properties of companies engaged in similar activities and similarly situated and that in any event do not materially interfere with or impair the use or operation of the Company, or materially interfere with the ordinary conduct of the business of the Company, excluding , however , any monetary liens (other than the payment of real estate taxes and assessments that are liens for sums not yet due and payable) except to the extent expressly assumed by Parent; (j) the interests of licensors under any license agreements for intellectual property, including software, imbedded software, and the like; and (k) restrictions contained in the Company’s or any Subsidiary’s Articles of Incorporation or Bylaws, or any Subsidiary’s Operating Agreement or Partnership Agreement or Bylaws.

 

“ person ” means an individual, corporation, partnership, limited partnership, limited liability company, syndicate, person (including, without limitation, a “person” as defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or government, political subdivision, agency or instrumentality of a government.

 

“ Pre-Existing Environmental Condition ” means (i) any presence, Release or threatened Release of any Hazardous Substances at, on, under, from or to any property currently or formerly owned, leased, controlled or operated by the Company or any of its Subsidiaries before or at the Closing (and any migration therefrom, whether before or after the Closing); (ii) any presence, Release or threatened Release of any Hazardous Substances at, on, under, from or to any other location before or at the Closing (and any migration therefrom, whether before or after the

 

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Closing); and (iii) any other circumstances occurring before or at the Closing forming the basis of any actual or alleged violation of, or liability under, any Environmental Law.

 

“ Proceeding ” means any action, litigation, arbitration, suit, claim, proceeding or investigation or review of any nature, civil, criminal, regulatory or otherwise, before any Governmental Authority.

 

“ Release ” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, ejecting, injecting, escaping, leaching, migrating, dumping or disposing into the indoor or outdoor environment, including without limitation the abandonment or discarding or disposal of barrels, drums, containers, tanks and other receptacles containing or previously containing any Hazardous Substances.

 

“ S/OX ” means the Sarbanes-Oxley Act of 2002.

 

“ SEC ” means the Securities and Exchange Commission.

 

“ Securities Act ” means the Securities Act of 1933, as amended.

 

“ Shares ” means the shares of Company Common Stock issued and outstanding immediately prior to the Effective Time.

 

“ Subsidiaries ” or a “ Subsidiary ” of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, fifty percent (50%) or more of the equity interests of which) is owned directly or indirectly by such first person.

 

“ Tax ” or “ Taxes ” means (i) all net income, gross income, gross receipts, value-added, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever imposed by any Governmental Authority, together with any interest, any penalties or additions to tax with respect thereto, and including any fees or penalties imposed on a person in respect of any information Tax Return made to a Governmental Authority; (ii) any liability for payment of amounts described in clause (i) whether as a result of transferee liability, of being a member of an affiliated, consolidated, combined or unitary group for any period, or otherwise through operation of Law; and (iii) any liability for the payment of amounts described in clauses (i) or (ii) as a result of any tax sharing, tax indemnity or tax allocation agreement or any other express or implied agreement to indemnify any other person.

 

“ Tax Returns ” means all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns) required to be supplied to a Governmental Authority (or any agent thereof) relating to Taxes, including information returns or reports with respect to backup withholding and other payments to third parties.

 

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“ Trademarks ” means trademarks, service marks, trade dress, logos, trade names, corporate names, Internet domain names and addresses, general use e-mail addresses and other source identifiers, together with (i) all national, foreign and state registrations, applications for registration and renewals and extensions thereof; (ii) all common law rights related thereto; (iii) all goodwill associated therewith; and (iv) and all benefits, privileges, causes of action and remedies relating to any of the foregoing.

 

This Agreement sets forth the meaning of the following defined terms in the locations indicated below:

 

 

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ARTICLE 2

 

THE MERGER

 

2.1 The Merger . Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with Indiana Law, Purchaser shall at the Effective Time be merged with and into the Company (the “ Merger ”). As a result of the Merger, the separate corporate existence of Purchaser shall cease and the Company shall continue as the surviving corporation of the Merger (the “ Surviving Corporation ”). From and after the Effective Time, the Surviving Corporation shall be a wholly-owned Subsidiary of Parent.

 

2.2 Effective Time; Closing . The closing (the “ Closing ”) shall be held at the offices of Morrison & Foerster LLP, 19900 MacArthur Boulevard, Irvine, California 92612, or such other place as the parties shall agree, at 10:00 am Pacific Time, on the third business day following the satisfaction or waiver, as the case may be, of the conditions set forth in Article 7 or at such other date, time and place as the parties shall agree in writing. The date on which the Closing occurs is referred to as the “ Closing Date .” On the Closing Date, the parties hereto shall cause the Merger to be consummated by filing articles of merger or other appropriate documents (in any such case, the “ Articles of Merger ”) with the Secretary of State of the State of Indiana, in such form as is required by, and executed in accordance with, the relevant provisions of Indiana Law. The Merger shall become effective at the time of such filing or at such subsequent date or time as Parent and the Company shall agree and specify in the Articles of Merger (the date and time the Merger becomes effective being the “ Effective Time ”).

 

2.3 Effect of the Merger . At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the Business Corporation Law of the State of Indiana (“ Indiana Law ”). Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company and Purchaser shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of the Company and Purchaser shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation.

 

2.4 Articles of Incorporation; By-laws .

 

(a) At the Effective Time, the Articles of Incorporation of the Company shall be amended to read as set forth in Exhibit ”A ” until thereafter amended as provided by Indiana Law and such Articles of Incorporation and shall be the Articles of Incorporation of the Surviving Corporation.

 

(b) Unless otherwise determined by Parent prior to the Effective Time, the By-laws of Purchaser as set forth in Exhibit “B” shall, effective as of the Effective Time, be the By-laws of the Surviving Corporation, until thereafter amended as provided by Law, the Articles of Incorporation of the Surviving Corporation and such By-laws.

 

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2.5 Directors and Officers . The directors of Purchaser immediately prior to the Effective Time shall as of the Effective Time become the directors of the Surviving Corporation, each to hold office in accordance with the Articles of Incorporation and By-laws of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time shall continue to be the officers of the Surviving Corporation, in each case until their respective successors are duly elected or appointed and qualified or until their earlier death, resignation or removal.

 

2.6 Conversion of Securities . At the Effective Time, by virtue of the Merger and without any further action on the part of Purchaser, the Company or the holders of any of the following securities (the aggregate of (a), (d) and (e), is the “ Merger Consideration ”):

 

(a) Each Share (other than any Shares to be canceled pursuant to Section 2.6(b) and any Dissenting Shares) shall be canceled and shall be converted automatically into the right to receive 2.341 shares (“ Exchange Ratio ”) of common stock, par value $.001 per share, of Parent (“ Parent Stock ”) and cash in lieu of fractional shares as set forth in Section 2.10 , payable, without interest, to the holder of such Share, upon surrender, in the manner provided in Section 2.9 , of the certificate that formerly evidenced such Share. Parent shall have the right to increase the Exchange Ratio as provided in Section 8.1( i ) . If, prior to the Effective Time, Parent should split or combine the shares of Parent Stock, or pay a stock dividend or other stock distribution in, or in exchange for, shares of Parent Stock, or engage in any similar transaction, the Exchange Ratio will be appropriately adjusted to reflect such split, combination, dividend, exchange or other distribution or similar transaction. Each Dissenting Share shall not be converted into the right to receive any shares of Parent Stock and shall only have the rights described in Section 2.8 .

 

(b) Each Share held in the treasury of the Company and each Share owned by Purchaser, Parent or any direct or indirect wholly owned subsidiary of Parent or of the Company immediately prior to the Effective Time shall be canceled and retired without any conversion thereof and shall cease to exist, and no payment or distribution shall be made with respect thereto.

 

(c) Each share of common stock, no par value, of Purchaser issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one (1) duly authorized, validly issued, fully paid and nonassessable share of common stock, no par value, of the Surviving Corporation.

 

(d) Each holder of a Company Stock Option shall be given the election (i) to receive the cash payment described in Section 2.7(a) , or (ii) to have such Company Stock Option cancelled and converted into the Parent options described in Section 2.7(a) .

 

(e) Each right to acquire a share of Company Common Stock upon conversion of those certain 8.5% Convertible Subordinated Promissory Notes (the “ Notes ”), due July 1, 2009, in aggregate principal amount of $15,000,000 issued by the Company shall be converted in accordance with the terms of such Notes into the right to receive that number of shares of Parent

 

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Stock equal to the number of shares of Company Common Stock into which they are convertible immediately prior to the Effective Time, multiplied by the Exchange Ratio.

 

2.7 Employee Stock Options .

 

(a) Prior to the Effective Time, the Company shall have adopted such resolutions, taken such actions and obtained any necessary consents (including the consent of individual option holders or awardees, if necessary) as may be required to provide that (i) (A) every option to acquire shares of Company Common Stock outstanding at the Effective Time (the “ Company Stock Options ”) shall be assumed by Parent as of the Effective Time and shall thereafter be deemed to constitute an option to acquire, on the same terms and conditions as were applicable under such Company Stock Option immediately prior to the Effective Time, the number (rounded to the nearest whole number) of shares of Parent Stock determined by multiplying the number of shares of Company Common Stock subject to such Company Stock Option immediately prior to the Effective Time by the Exchange Ratio, at a price per share (rounded to the nearest whole cent) equal to the exercise price per share of Company Common Stock otherwise purchasable pursuant to such Company Stock Option divided by the Exchange Ratio; provided , however , that with respect to any Company Stock Option that is an incentive stock option within the meaning of the Code, such substitution shall be effected in accordance with Section 424(a) of the Code; or (B) the holder of such Company Stock Option shall have agreed to surrender and cancel such Company Stock Option in full in exchange for a payment (to be made at the Effective Time by Parent) equal to the difference, if any, between $15.61 per share of Company Common Stock and the applicable per-share exercise price, multiplied by the number of shares of Company Common Stock subject to such Company Stock Option and then vested and exercisable; and (ii) each holder of an outstanding interest in the Company’s directors share plan effective as of July 3, 1995 (the “ Directors’ Share Plan ”) shall have agreed to surrender and cancel such interest in exchange for a payment (to be made at the Effective Time by Parent) equal to $15.61 per share of Company Common Stock represented by such interest.

 

(b) The Company shall take all action reasonably necessary to approve the disposition of the Company Stock Options in connection with the Transactions so as to exempt such dispositions under Rule 16b-3 of the Exchange Act. To the extent any option holder becomes a director or executive officer of Parent at or before the Effective Time, Parent shall take all action reasonably necessary to approve the issuance of any replacement option so as to exempt such award under Section 16b-3 of the Exchange Act.

 

2.8 Dissenting Shares .

 

(a) Notwithstanding any provision of this Agreement to the contrary, Shares that are outstanding immediately prior to the Effective Time and which are held by shareholders who shall have not voted such Shares in favor of the Merger and who shall have properly asserted dissenters’ rights for such Shares in accordance with Chapter 44 of the Indiana Business Corporation Law (collectively, the “ Dissenting Shares ”) shall not be converted into or represent the right to receive any shares of Parent Stock. Such shareholders shall be entitled only to such rights as are granted by the provisions of such Chapter 44, except that all Dissenting Shares held by shareholders who shall have failed to perfect or who effectively shall have withdrawn or lost

 

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their rights to demand payment for such Shares under such Chapter 44 shall thereupon be deemed to have been converted into and to have become exchangeable for, as of the Effective Time, the right to receive Parent Stock under Section 2.6(a) , without any interest thereon, upon surrender, in the manner provided in Section 2.9 , of the certificate or certificates that formerly evidenced such Shares.

 

(b) The Company shall give Parent (i) prompt notice of any demands for payment or notices of intent to demand payment received by the Company, under such Chapter 44 withdrawals of such demands, and any other instruments served pursuant to Indiana Law and received by the Company; and (ii) the opportunity to direct all negotiations and proceedings with respect to any shareholders asserting dissenters’ rights under such Chapter 44. The Company shall not, except with the prior written consent of Parent, make any payment with respect to any demands for payment or offer to settle or settle any such demands made under such Chapter 44.

 

2.9 Surrender of Shares; Stock Transfer Books .

 

(a) Prior to the Effective Time, Purchaser shall designate a bank or trust company to act as exchange agent (the “ Exchange Agent ”) for the holders of Shares to receive Parent Stock to which holders of Shares shall become entitled pursuant to Section 2.6(a) . Within three (3) business days after the Effective Time, Parent or Purchaser shall deposit with the Exchange Agent certificates representing the number of whole shares of Parent Stock and cash in lieu of fractional shares into which such Shares are converted in the Merger. Such funds shall be invested by the Exchange Agent or other person engaged for that purpose by the Exchange Agent.

 

(b) As soon as reasonably practicable (and in any event within 10 business days) after the Effective Time, Parent shall cause to be mailed to each person who was, at the Effective Time, a holder of record of Shares entitled to receive shares of Parent Stock pursuant to Section 2.6(a) a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the certificates evidencing such Shares (the “ Certificates ”) shall pass, only upon proper delivery of the Certificates to the Exchange Agent) and instructions for use in effecting the surrender of the Certificates pursuant to such letter of transmittal. Upon surrender to the Exchange Agent of a Certificate, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor such shares of Parent Stock, and any cash in lieu of fractional shares, which such holder has the right to receive pursuant to the provisions of this Article 2 , and such Certificate shall then be canceled. No interest shall accrue or be paid on amounts payable upon the surrender of any Certificate for the benefit of the holder of such Certificate. If delivery of Parent Stock is to be made to a person other than the person in whose name the surrendered Certificate is registered on the stock transfer books of the Company, it shall be a condition of payment that the Certificate so surrendered shall be endorsed properly or otherwise be in proper form for transfer and that the person requesting such transfer shall have paid all transfer and other taxes required by reason of the delivery of Parent Stock to a person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of Parent that such taxes either have been paid or are not applicable.

 

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(c) At any time following the date that is six (6) months after the Effective Time, Parent shall be entitled to require the Exchange Agent to deliver to it any shares of Parent Stock and any funds which had been made available to the Exchange Agent and not disbursed to holders of Shares (including, without limitation, all interest and other income received by the Exchange Agent in respect of all funds made available to it), and, thereafter, such holders shall be entitled to look to the Surviving Corporation (subject to abandoned property, escheat and other similar Laws) only as general creditors thereof with respect to any Merger Consideration that may be payable upon due surrender of the Certificates held by them. Notwithstanding the foregoing, neither the Surviving Corporation, Parent, nor the Exchange Agent shall be liable to any holder of a Share for any Merger Consideration delivered in respect of such Share to a public official pursuant to any abandoned property, escheat or other similar Law.

 

(d) At the close of business on the day of the Effective Time, the stock transfer books of the Company shall be closed and thereafter there shall be no further registration of transfers of Shares on the records of the Company. From and after the Effective Time, the holders of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares except as otherwise provided herein or by applicable Law.

 

(e) In the event that any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed, Parent will issue or cause to be issued in exchange for such lost, stolen or destroyed Certificate the number of whole shares of Parent Stock and cash in lieu of fractional shares into which the Shares are converted in the Merger in accordance with this Article 2 . When authorizing such issuance in exchange therefor, Parent may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Certificate to give Parent a bond in such reasonable sum as it may direct as indemnity, or such other form of indemnity, as Parent shall reasonably direct, against any claim that may be made against Parent with respect to the Certificate alleged to have been lost, stolen or destroyed. Subject to the preceding sentence, no dividends that are declared on shares of Parent Stock after the Effective Time will be paid to persons entitled to receive certificates representing shares of Parent Stock until such persons surrender their Certificates. Upon such surrender, there shall be paid to the person in whose name the certificates representing such shares of Parent Stock shall be issued, any dividends which shall have become payable with respect to such shares of Parent Stock between the Effective Time and the time of such surrender.

 

(f) Each of the Surviving Corporation, Purchaser and Parent shall be entitled to deduct and withhold from the Merger Consideration otherwise payable pursuant to this Agreement to any holder of Shares, the Company Stock Options, or the Notes such taxes and other amounts as it is required to deduct and withhold with respect to the making of such payment under the Code, and the rules and regulations promulgated thereunder, and pursuant to the applicable provisions of state, local and foreign Tax laws. To the extent that amounts are so deducted, withheld and paid to the applicable taxing authority by the Surviving Corporation, Purchaser or Parent, as the case may be, such deducted, withheld and paid amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares, the Company Stock Options, or the Notes, as the case may be, in respect of which such deduction, withholding and payment was made by the Surviving Corporation, Purchaser or Parent.

 

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2.10 No Fractional Shares . No fractional shares of Parent Stock shall be issued pursuant to the Merger. In lieu of the issuance of any such fractional share of Parent Stock pursuant to Section 2.6 , cash adjustment will be paid to each holder in respect of any fractional share of Parent Stock that would otherwise be issuable to such holder (after taking into account all the certificates representing Shares delivered by such holder). The amount of such adjustment shall be the product of such fraction of a share of Parent Stock multiplied by the closing sales price per share of Parent Stock on the Nasdaq National Market on the business day preceding the Closing Date.

 

2.11 Supplementary Action . If at any time after the Effective Time, any further assignments or assurances in Law or any other things are necessary or desirable to vest or to perfect or confirm of record in the Surviving Corporation the title to any property or rights of either Purchaser or the Company, or otherwise to carry out the provisions of this Agreement, the officers and directors of the Surviving Corporation are hereby authorized and empowered, in the name of and on behalf of either or both of Purchaser or the Company, as appropriate, to execute and deliver any and all things necessary or proper to vest or to perfect or confirm title to such property or rights in the Surviving Corporation, and otherwise to carry out the purposes and provisions of this Agreement.

 

2.12 Plan of Merger . The Plan of Merger to be filed with the Articles of Merger shall consist of the text of this Article 2 , omitting Section 2.2 and this Section 2.12 , provided, that (i) the final Exchange Ratio shall be specified in the text of Section 2.6(a) , (ii) the words “as set forth in Exhibit “B” in Section 2.4(b) shall be omitted, and (iii) the second sentence of Section 2.6(a) shall be omitted. The Plan of Merger shall also include necessary definitions of terms provided for in this Agreement and shall be in such customary and legally sufficient form appropriate for filing with the Articles of Merger as Company and Parent reasonably approve.

 

ARTICLE 3

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth in the disclosure letter (the “ Company Disclosure Schedule ”) delivered to Parent, with section references in the Company Disclosure Schedule that correspond to the applicable sections of this Agreement, or in the Company SEC Reports on file with (or furnished to) the SEC, in each case at or prior to the execution of this Agreement, the Company hereby represents and warrants to Parent and Purchaser that:

 

3.1 Organization and Qualification; Subsidiaries .

 

(a) Each of the Company and its Subsidiaries is duly organized, validly existing and, to the extent applicable, in good standing under the laws of the jurisdiction in which it is organized and has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted, except where the failure to be so organized, existing and in good standing or to have such power and authority would not, individually or in the aggregate, have a Material Adverse Effect. Each of the Company and its Subsidiaries is duly qualified or licensed as a foreign entity to do business and is in good

 

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standing, in each jurisdiction where the character of the properties owned, leased or operated by it or the nature of its business makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect.

 

(b) Section 3.1(b) of the Company Disclosure Schedule lists the names and jurisdiction of incorporation or organization of all the Subsidiaries of the Company, whether consolidated or unconsolidated. The outstanding securities of the Subsidiaries of the Company consist of (i) shares of capital stock or other equity interests that are owned, directly or indirectly, by the Company; and (ii) such securities as are set forth in Section 3.1(b) of the Company Disclosure Schedule. All outstanding shares of capital stock of, or other equity interests in, each such Subsidiary (A) have been duly authorized, validly issued and are fully paid and nonassessable; (B) are owned directly or indirectly by the Company, free and clear of all Liens except as set forth on Section 3.1(b) of the Company Disclosure Schedule; and (C) are free of all other restrictions (including restrictions on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests) that would prevent the operation by the Surviving Corporation of such Subsidiary’s business as presently conducted. Except as set forth above or in Section 3.1(b) of the Company Disclosure Schedule, the Company does not own, directly or indirectly, any capital stock of or other equity or voting interests in any person.

 

(c) The Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity other than the interests in Subsidiaries set forth in Section 3.1(b) of the Company Disclosure Schedule.

 

3.2 Articles of Incorporation and By-laws . The Company has heretofore made available to Parent a complete and correct copy of the Articles of Incorporation and the By-laws or equivalent organizational documents of the Company, each as amended to date, and each of its Subsidiaries. All such Articles of Incorporation, By-laws or equivalent organizational documents are in full force and effect. Neither the Company nor any of its Subsidiaries is in violation of any of the provisions of its Articles of Incorporation, By–laws or equivalent organizational documents. The minute books of the Company contain complete and correct records of all meetings and accurately reflect all consents, resolutions and other material actions taken by the shareholders, the Company Board and all committees of the Company Board since October 1, 1999.

 

3.3 Capitalization .

 

(a) The authorized capital stock of the Company consists of 20,000,000 shares of common stock, no par value, and 2,000,000 shares of preferred stock, no par value (“ Company Preferred Stock ”). As of the date hereof: (i) 8,968,691 Shares are issued and outstanding, all of which are duly authorized, validly issued, fully paid and nonassessable; (ii) no shares of Company Preferred Stock were issued and outstanding; (iii) no Shares are held in the treasury of the Company; (iv) no Shares are held by any of the Company’s Subsidiaries; (v) 833,401 shares of Company Common Stock are subject to outstanding options, 814,030 of which

 

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are vested and exercisable in accordance with their terms and 19,371 of which remain unvested; (vi) 833,401 shares of Company Common Stock are reserved for future issuance pursuant to outstanding employee stock options or stock incentive rights granted pursuant to stock option plans of the Company or any of the Company’s Subsidiaries; and (vii) rights to receive 28,074 shares of Company Common Stock as deferred compensation are vested under the Directors’ Share Plan. Since June 27, 2004 to the date of this Agreement, no Shares or securities convertible into or exercisable for shares of Company Common Stock or other securities of the Company have been issued other than the Notes and Shares issued pursuant to the exercise of employee stock options or stock incentive rights granted pursuant to stock option plans of the Company and outstanding as of June 27, 2004.

 

(b) Except as set forth in this Section 3.3 and except for (i) the Voting Agreements; (ii) the rights (the “ Rights ”) issued pursuant to the Rights Agreement dated as of August 12, 1997, between the Company and Harris Trust & Savings Bank, as Rights Agent (the “ Rights Agreement ”); and (iii) the Notes, there are no options, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or any of its Subsidiaries or obligating the Company or any of its Subsidiaries to issue or sell any shares of capital stock of, or other equity interests in, the Company or any of its Subsidiaries. No bonds, debentures, notes or other indebtedness of the Company or its Subsidiaries having the right to vote on any matters on which the shareholders of the Company may vote are issued or outstanding.

 

(c) All Shares subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable. There are no outstanding contractual obligations of the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Shares or any capital stock of any of its Subsidiaries or to provide funds to, or make any investment (in the form of a loan, capital contribution or otherwise) in, any of its Subsidiaries or any other person.

 

(d) Section 3.3(d) of the Company Disclosure Schedule sets forth a complete and correct list as of the date of this Agreement of all outstanding options to purchase Shares or other securities of the Company and the exercise prices thereof.

 

(e) Each outstanding share of capital stock or other equity interests owned of record by the Company in each of its Subsidiaries is duly authorized, validly issued, fully paid and nonassessable, and each such share or other equity interest is owned by the Company or another of its Subsidiaries free and clear of all Liens.

 

3.4 Authority Relative to This Agreement .

 

(a) The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and, subject, in the case of the Merger, to obtaining the Company Shareholder Approval, to consummate the transactions contemplated hereby, including the Merger (the “ Transactions ” or, individually, “ Transaction ”). The execution and delivery of this Agreement by the Company and the

 

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consummation by the Company of the Transactions have been duly and validly authorized by all necessary corporate action on its part, and no other corporate proceedings on the part of the Company under the Indiana Business Corporation Law are necessary to authorize this Agreement or to consummate the Transactions other than, with respect to the Merger, the approval and adoption of this Agreement by the holders of a majority of the then-outstanding Shares (the “ Company Shareholder Approval ”) and the filing and recordation of appropriate merger documents as required by Indiana Law. This Agreement has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Purchaser, constitutes legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except (i) that such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws, now or hereafter in effect, affecting creditors’ rights generally; and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

 

(b) The restrictions on business combinations contained in Chapter 43 of Indiana Law have been satisfied with respect to, or are not applicable to, the Transactions.

 

(c) The Company Shareholder Approval is the only vote of the holders of any class or series of the Company’s capital stock required by applicable Law and the Company’s organizational instruments to duly effect the approval and adoption of this Agreement and the Transactions. Pursuant to meetings duly noticed and convened in accordance with all applicable Laws and the Company’s Articles of Incorporation and By-laws, and at each of which a quorum was present, the Company Board, after full and deliberate consideration, unanimously has (i) duly approved this Agreement and resolved that the Merger and the Transactions are fair to, advisable and in the best interest of the Company’s shareholders; (ii) resolved to unanimously recommend to the Company’s shareholders that they approve and adopt this Agreement and the Transactions; and (iii) directed that the Merger be submitted for consideration by the holders of Company Common Stock at the Company Shareholders’ Meeting for such purpose.

 

3.5 No Conflict; Required Filings and Consents .

 

(a) The execution and the delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, (i) conflict with or violate the Articles of Incorporation or By-laws or equivalent organizational documents of the Company or any of its Subsidiaries; (ii) subject, in the case of the Merger, to obtaining the Company Shareholder Approval, conflict with or violate any Law applicable to the Company or any of its Subsidiaries or any Law by which any property or asset of the Company or any of its Subsidiaries is bound or affected; or (iii) result in any breach of or constitute a default (or an event which, with notice or lapse of time or both, would become a default) under, or give to others any right of termination, amendment, acceleration or cancellation of, or result in the creation of a Lien on any property or asset of the Company or any of its Subsidiaries pursuant to any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation by which the Company or any of its Subsidiaries is bound.

 

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(b) The execution and the delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority, except (i) for applicable requirements, if any, of the Exchange Act, state securities or “blue sky” laws (“ Blue Sky Laws ”), state takeover laws, the pre-merger notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “ HSR Act ”), Nasdaq, the requirements in the countries where a merger filing may be necessary or advisable, and filing and recordation of appropriate merger documents as required by Indiana Law; and (ii) where the failure to obtain such consents, approvals, authorizations or Permits, or to make such filings or notifications, would not prevent or materially delay consummation of the Transactions and would not have a Material Adverse Effect.

 

3.6 Permits; Compliance . Each of the Company and its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Authority necessary for each of the Company or its Subsidiaries to own, lease and operate its properties or to carry on its business as it is now being conducted (the “ Permits ” or, individually, “ Permit ”), except where the failure to have, or the suspension or cancellation of, any of the Permits would not prevent or materially delay consummation of the Merger and would not have a Material Adverse Effect. As of the date hereof, no suspension or cancellation of any of the Permits is pending or, to the knowledge of the Company, threatened, except where the failure to have, or the suspension or cancellation of, any of the Permits would not prevent or materially delay consummation of the Merger and would not have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in conflict with, or in default, breach or violation of any Law applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected, or any note, bond, mortgage, indenture, contract, agreement, lease, license, Permit, franchise or other instrument or obligation to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any property or asset of the Company or any of its Subsidiaries is bound, except for any such conflicts, defaults, breaches or violations that would not prevent or materially delay consummation of the Merger and would not have a Material Adverse Effect.

 

3.7 SEC Filings; Financial Statements .

 

(a) The Company has timely filed or furnished all forms, reports and documents it is required to file or furnish with or to the SEC since January 1, 2003 (the “ Company SEC Reports ”). The Company SEC Reports (i) complied as to form in all material respects with the applicable requirements of the Securities Act, or the Exchange Act, as the case may be, and the applicable rules and regulations promulgated thereunder; and (ii) did not, at the time they were filed or furnished, or, if amended, as of the date of such amendment, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. No Subsidiary of the Company is required to file or furnish any form, report or other document with the SEC.

 

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(b) Each of (i) the consolidated financial statements (including, in each case, any notes thereto) contained in the Company SEC Reports, (ii) the Company’s preliminary annual consolidated financial statements for the fiscal year ending October 3, 2004 provided to Parent (the “ Preliminary 2004 Financial Statements ”) and (iii) as of the Closing, the Audited 2004 Financial Statements, were prepared in accordance with United States generally accepted accounting principles (“ GAAP ”) applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto) and each fairly presents, in all material respects, the consolidated financial position, results of operations and cash flows of the Company and its consolidated Subsidiaries as at the respective dates thereof and for the respective periods indicated therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments).

 

(c) Except as and to the extent set forth on the unaudited consolidated balance sheet of the Company and its consolidated Subsidiaries as of June 27, 2004 including the notes thereto (the “ Company Balance Sheet ”), neither the Company nor any of its Subsidiaries has any liability or obligation of any nature (whether accrued, absolute, contingent or otherwise), except for liabilities and obligations, incurred in the ordinary course of business consistent with past practice since June 27, 2004 that would not prevent or materially delay consummation of the Merger and would not have a Material Adverse Effect. Crowe Chizek & Company LLC, who has expressed its opinion with respect to the financial statements of the Company and its Subsidiaries included in the SEC Reports is an independent public or certified public accountant firm as required under the Securities Act and the Exchange Act.

 

(d) The Company has heretofore furnished to Parent complete and correct copies of all amendments and modifications that have not been filed by the Company with the SEC to all agreements, documents and other instruments that previously had been filed by the Company with the SEC as exhibits to the Company SEC Reports and that are currently in effect.

 

(e) The Company is in compliance with the provisions of S/OX applicable to it as of the date hereof and has implemented such programs and has taken reasonable steps, upon the advice of the Company’s independent auditors and outside counsel, respectively, to ensure the Company’s future compliance (not later than the relevant statutory and regulatory deadlines therefor) with all provisions of S/OX which shall become applicable to the Company after the date hereof.

 

3.8 Absence of Certain Changes or Events . Since October 3, 2004, except as contemplated by this Agreement, the Company and its Subsidiaries have conducted their businesses only in the ordinary course and in a manner consistent with past practice and, since October 3, 2004, there has not been:

 

(a) any change in the business, operations, financial condition, assets or liabilities (including, without limitation, contingent liabilities) of the Company or any of its Subsidiaries having, or reasonably likely to have, individually or in the aggregate, a Material Adverse Effect;

 

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(b) any damage, destruction or loss (whether or not covered by insurance) with respect to any property or asset of the Company or any of its Subsidiaries and having, or reasonably likely to have, individually or in the aggregate, a Material Adverse Effect;

 

(c) any change by the Company in its financial or tax accounting methods, principles or practices;

 

(d) any revaluation by the Company of any asset (including, without limitation, any writing down of the value of inventory or writing off of notes or accounts receivable), other than in the ordinary course of business consistent with past practice;

 

(e) any entry by the Company or any of its Subsidiaries into any commitment or transaction material to the Company and its Subsidiaries taken as a whole except in the ordinary course of business consistent with past practices;

 

(f) any declaration, setting aside or payment of any dividend or distribution in respect of any capital stock of the Company or any redemption, purchase or other acquisition of any of its securities; or

 

(g) any increase in or establishment of any bonus, insurance, severance, deferred compensation, pension, retirement, profit sharing, stock option (including, without limitation, the granting of stock options, stock appreciation rights, performance awards, or restricted stock awards), stock purchase or other employee benefit plan, or any other increase in the compensation payable or to become payable to any officers or key employees of the Company or any of its Subsidiaries, except in the ordinary course of business consistent with past practice.

 

3.9 Absence of Litigation . There is no litigation, suit, claim, action, proceeding or investigation (an “ Action ”) pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries, or any property or asset of the Company or any of its Subsidiaries, before any Governmental Authority that could have a Material Adverse Effect or is reasonably likely to result in liability of the Company in excess of $300,000 (including all related claims); or seeks to materially delay or prevent the consummation of any Transaction. Neither the Company nor any of its Subsidiaries nor any property or asset of the Company or any of its Subsidiaries is subject to any continuing order of, consent decree, settlement agreement or similar written agreement with, or, to the knowledge of the Company, continuing investigation by, any Governmental Authority, or any order, writ, judgment, injunction, decree, determination or award of any Governmental Authority, except as would not prevent or materially delay consummation of the Merger or not would have a Material Adverse Effect.

 

3.10 Employee Benefit Plans .

 

(a) Section 3.10(a) of the Company Disclosure Schedule lists (i) all material employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)) and all material bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, supplemental retirement, severance or other material benefit plans, programs or arrangements, and all material

 

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employment, termination, severance or other contracts or agreements to which the Company or any ERISA Affiliate is a party, with respect to which the Company or any ERISA Affiliate has any obligation or which are maintained, contributed to or sponsored by the Company or any ERISA Affiliate for the benefit of any current or former employee, officer or director of the Company or any ERISA Affiliate and (ii) any material contracts, arrangements or understandings between the Company or any of its Subsidiaries and any employee of the Company or any of its Subsidiaries including, without limitation, any contracts, arrangements or understandings relating in any way to a sale of the Company or any of its Subsidiaries (collectively, the “ Plans ”).

 

(b) The Company has delivered to Purchaser true, correct and complete copies of all documents creating or evidencing any Plan listed in Section 3.10(a) of the Company Disclosure Schedule including (without limitation) (i) all amendments thereto and all related trust documents, administrative service agreements, group annuity contracts, group insurance contracts, and policies pertaining to fiduciary liability insurance covering the fiduciaries for each Plan; (ii) all Internal Revenue Service determination, opinion, notification and advisory letters, and any pending applications and correspondence to or from the Internal Revenue Service or the Department of Labor with respect to any such application or letter; (iii) all written communications to any employee or employees relating to any Plan and any proposed Plans, in each case, relating to any amendments, terminations, establishments, increases or decreases in benefits, acceleration of payments or vesting schedules or other events which would result in any material liability to the Company received by employees in the last two (2) years; (iv) nondiscrimination test reports for each applicable Plan for most recent plan year; (v) all registration statements, annual reports (Form 11-K and all attachments thereto) and prospectuses prepared in connection with each Plan for the most recent plan year; and (vi) all reports, forms and other documents required to be filed with any Governmental Authority in the last three (3) years (including, without limitation, summary plan descriptions, Forms 5500 and summary annual reports for all plans subject to ERISA). Neither the Company nor any of its Subsidiaries has any express or implied commitment (x) to create, incur liability with respect to or cause to exist any other material employee benefit plan, program or arrangement, (y) to enter into any contract or agreement to provide compensation or benefits to any individual other than in the ordinary course of business, or (z) to modify, change or terminate any Plan, other than with respect to a modification, change or termination required by ERISA, the Code or other applicable law.

 

(c) None of the Plans is a (i) defined benefit plan (within the meaning of Section 3(35) of ERISA); (ii) a plan subject to Section 412 of the Code; (iii) a multiemployer plan (within the meaning of Section 3(37)(A) or 4001(a)(3) of ERISA) (a “ Multiemployer Plan ”); or (iv) a pension plan for which the Company or any of its Subsidiaries could incur liability under Section 4063 or 4064 of ERISA or Section 413(c) of the Code (a “ Multiple Employer Plan ”). None of the Plans (x) provides for the payment of separation, severance, termination or similar-type benefits to any person, (y) obligates the Company or any of its Subsidiaries to pay separation, severance, termination or similar-type benefits solely or partially as a result of any Transaction, or (z) obligates the Company or any of its Subsidiaries to make any payment or provide any benefit as a result of a “change in control,” within the meaning of such term under Section 280G of the Code. None of the Plans provides for or promises retiree

 

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medical, disability or life insurance benefits to any current or former employee, officer or director of the Company or any of its Subsidiaries except as may otherwise be required by applicable Law. Each of the Plans is subject only to the laws of the United States or a political subdivision thereof.

 

(d) Each Plan is and has been operated in all material respects in accordance with its terms and the requirements of all applicable Laws including, without limitation, ERISA and the Code. The Company and its Subsidiaries have performed all material obligations required to be performed by them under, and are not in any material respect in default under or in violation of, and the Company has no knowledge of any material default or violation by any party to, any Plan. No Action is pending or, to the knowledge of the Company, threatened with respect to any Plan (other than claims for benefits in the ordinary course) and, to the knowledge of the Company, no fact or event exists that could give rise to any such Action.

 

(e) All reports, forms and other documents required to be filed with any Governmental Authority or furnished to employees with respect to any Plan (including without limitation, summary plan descriptions, Forms 5500 and summary annual reports) have been timely filed or furnished and are materially accurate.

 

(f) All expenses and liabilities relating to the Plans have been, and will on the Closing be, fully and properly accrued on the Company’s books and records and disclosed in accordance with GAAP and in Plan financial statements.

 

(g) Each of the Plans that is intended to qualify under Section 401(a) of the Code has been timely amended to incorporate the applicable provisions of the Uruguay Round Agreements Act of 1994, the Uniformed Services Employment and Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996, the Taxpayers’ Relief Act of 1997, the IRS Restructuring and Reform Act of 1998, the Community Renewal Tax Relief Act of 2000, the Economic Growth and Tax Relief Reconciliation Act of 2001, and subsequent legislation enacted through the date hereof and is the subject of a favorable determination, notification, or opinion letter issued by the Internal Revenue Service after January 1, 1997 approving each such Plan as so amended. Each trust maintained pursuant to any such Plan has been determined by the Internal Revenue Service to be exempt from taxation under Section 501 of the Code. Nothing has occurred since the date of the Internal Revenue Service’s favorable determination letter that could reasonably be expected to adversely affect the qualification of the Plan and its related trust.

 

(h) There has not been any prohibited transaction (within the meaning of Sections 406 or 407 of ERISA or Section 4975 of the Code) with respect to any Plan.

 

(i) All contributions, premiums or payments required to be made with respect to any Plan have been made on or before their due dates. All such contributions are or were fully deductible for federal income tax purposes and no such deduction has been challenged or disallowed by any Governmental Authority and, to the knowledge of the Company, no fact or event exists which could give rise to any such challenge or disallowance.

 

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(j) All of the Plans, to the extent applicable, are in compliance with the continuation of group health coverage provisions contained in Section 4980B of the Code and Sections 601 through 608 of ERISA, the requirements of the Family Medical Leave Act of 1993, as amended, the requirements of the Health Insurance Portability and Accountability Act of 1996 (including the regulations set forth in Parts 160, 162, and 164 of Title 45 of the Code of Federal Regulations), the requirements of the Women’s Health and Cancer Rights Act of 1998, the requirements of the Newborns’ and Mothers’ Health Protection Act of 1996, and any amendment to each such act, or any similar state law requirements.

 

(k) Each of the Plans can be amended, terminated or otherwise discontinued after the Closing Date in accordance with its terms, without any liability to the Company, Purchaser or any of its Affiliates other than with respect to accrued obligations and medical and welfare claims incurred prior to such amendment or termination.

 

(l) Neither the Company nor any of its ERISA Affiliates currently maintains or has maintained in the six (6) years preceding the Closing Date any material employee benefit plan, program, or arrangement that is not subject to United States law or that covers individuals who are not employed in the United States.

 

3.11 Labor and Employment Matters .

 

(a) There are no controversies pending or, to the knowledge of the Company, threatened between the Company or any of its Subsidiaries and any of their respective employees which could reasonably be expected to have a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is a party to any collective bargaining agreement, work council agreement, work force agreement or any other labor union contract applicable to persons employed by the Company or any of its Subsidiaries, nor, to the knowledge of the Company, are there any activities or proceedings of any labor union to organize any such employees. Neither the Company nor any of its Subsidiaries has breached or otherwise failed to comply with any provision of any such agreement or contract, and there are no grievances outstanding against the Company or any of its Subsidiaries under any such agreement or contract. There are no unfair labor practice complaints pending against the Company or any of its Subsidiaries before the National Labor Relations Board or any other court or tribunal or any current union representation questions involving employees of the Company or any of its Subsidiaries. There is no strike, slowdown, work stoppage or lockout, or, to the knowledge of the Company, threat thereof, by or with respect to any employees of the Company or any of its Subsidiaries. The consent of any labor union is not required to consummate the Transactions. There is no obligation to inform, consult or obtain consent whether in advance or otherwise of any works council, employee representatives or other representative bodies in order to consummate the Transactions.

 

(b) The Company and its Subsidiaries are in compliance with all applicable Laws relating to the employment of labor, including those related to wages, hours, collective bargaining, individual and collective consultation, notice of termination, redundancy and the payment and withholding of taxes and other sums as required by the appropriate Governmental Authority and have withheld and paid to the appropriate Governmental Authority or are holding for payment not yet due to such Governmental Authority all amounts required to be withheld

 

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from employees of the Company or any of its Subsidiaries and are not liable for any arrears of wages, taxes, penalties or other sums for failure to comply with any of the foregoing. To the knowledge of the Company, the Company and its Subsidiaries have paid in full to all employees or adequately accrued for in accordance with GAAP consistently applied all wages, salaries, commissions, bonuses, benefits and other compensation due to or on behalf of such employees and there is no claim with respect to payment of wages, salary or overtime pay that has been asserted or is now pending or threatened before any Governmental Authority with respect to any persons currently or formerly employed by the Company or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries is a party to, or otherwise bound by, any consent decree with, or citation by, any Governmental Authority relating to employees or employment practices. There is no charge or proceeding with respect to a violation of any occupational safety or health standards that has been asserted and is now pending or, to the Company’s knowledge, threatened with respect to the Company. There is no charge of discrimination in employment or employment practices, for any reason, including, without limitation, age, gender, race, religion or other legally protected category, which has been asserted and is now pending or, to the Company’s knowledge, threatened before the United States Equal Employment Opportunity Commission, or any other Governmental Authority in any jurisdiction in which the Company or any of its Subsidiaries have employed or employ any person. No inquiry or investigation affecting the Company or any of its Subsidiaries has been made and is now pending or, to the Company’s knowledge, threatened by the Commission for Racial Equality, the Equal Opportunities Commission or any similar body.

 

(c) The employment of each of the employees of the Company or any of its Subsidiaries is terminable at will, without cause or prior notice. Neither the consummation of the Transactions nor any termination of employment of any employees of the Company or any of its Subsidiaries will result in or give rise to (i) any liability to make any severance, retention, termination, change of control, “golden parachute,” or any other payment to present or former employees; or (ii) the acceleration of any other rights or benefits to any present or former employee, whether pursuant to a Plan, Law, contract or otherwise. There are no customs, established practices or discretionary arrangements of the Company or, to the knowledge of the Company, any of its Subsidiaries in relation to the termination of employment of any of its employees (whether voluntary or involuntary). Neither the Company nor, to the knowledge of the Company, any of its Subsidiaries has any outstanding liability to pay compensation for loss of office or employment or a redundancy payment to any present or former employee. There is no term of employment of any employee of the Company or any of its Subsidiaries which shall entitle that employee to treat the consummation of the Transactions as amounting to a breach of his contract of employment or entitling him to any payment or benefit whatsoever or entitling him to treat himself as redundant or otherwise dismissed or released from any obligation.

 

3.12 Information in Registration Statement and Proxy Statement . The information relating to and provided by the Company and its Subsidiaries, or their respective representatives, to be contained in the registration statement on Form S-4 to be filed with the SEC by Parent for the purpose of registering the shares of Parent Stock to be issued in the Merger (the “ Registration Statement ”) and the joint proxy statement to be distributed in connection with the Parent Stockholders’ Meeting and the Company Shareholders’ Meeting to vote upon this Agreement (such joint proxy statement, as amended or supplemented, being referred to herein as

 

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the “ Proxy Statement ”), shall not, at the date the Proxy Statement (or any amendment or supplement thereto) is first mailed to shareholders of the Company and at the time of the Company Shareholders’ Meeting, with respect to the Proxy Statement, and, at the date it is declared effective, with respect to the Registration Statement, contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances in which they were made, not false or misleading. The Proxy Statement and the Registration Statement shall comply in all material respects as to form with the requirements of the Exchange Act and the Securities Act, as applicable, and the rules and regulations thereunder. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information supplied by Parent or Purchaser or any of their representatives for inclusion in the Proxy Statement or the Registration Statement.

 

3.13 Property and Leases .

 

(a) Section 3.13(a) of the Company Disclosure Schedule lists all of the real property owned or currently leased by the Company (the “ Owned Property ” and the “ Leased Property ,” respectively). All such real property is in all material respects adequate for the uses for which it is currently devoted. Company has good and insurable title in fee simple absolute to the Owned Property indicated on Section 3.13(a) of the Company Disclosure Schedule to be owned by it, and to the buildings, structures and improvements therein, free and clear of any and all Liens, except Permitted Liens.

 

(b) All leases of the Leased Property leased for the use or benefit of the Company or any of its Subsidiaries to which the Company or any of its Subsidiaries is a party, and all amendments and modifications thereto, are in full force and effect and have not been modified or amended, and there exists no default under any such lease by the Company or any of its Subsidiaries, nor any event which, with notice or lapse of time or both, would constitute a default thereunder by the Company or any of its Subsidiaries, except as would not prevent or materially delay consummation of the Merger and would not have a Material Adverse Effect.

 

(c) The current use of the facilities located on the Owned Property and the Leased Property does not violate any applicable local zoning or similar land use or government regulations of any Governmental Authority in any material respect.

 

(d) The Owned Property is not subject to any outstanding purchase options nor has the Company or any of its Subsidiaries entered into any outstanding contracts, agreements, commitments, letters of intent or similar written understandings as of the date hereof with others for the sale, mortgage, pledge, hypothecation, assignment, sublease, lease or other transfer of all or any part of the Owned Property, and no person has any right or option to acquire, or right of first refusal with respect to, the Company’s interest in the Owned Property or any part thereof.

 

(e) Neither the Owned Property nor the Leased Property violates any material provisions of any applicable building code, fire, health or safety regulations, or other governmental ordinances, orders or regulations, of any Governmental Authority, and the

 

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Company and its Subsidiaries are in material compliance with all applicable Laws relating to the Owned Property or the Leased Property or any part thereof.

 

(f) The Company has delivered to Purchaser true, correct and complete copies of all leases relating to the Leased Property and all amendments and modifications thereof (“ Leases ”). All such Leases are valid, binding and in full force and effect and are enforceable by the Company or its Subsidiaries in accordance with their terms, except (i) that such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws, now or hereafter in effect, affecting creditors’ rights generally; and (ii) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. The Company and its Subsidiaries have performed all material obligations required to be performed by them to date under each such Lease, and there has been no material breach or default under any such leases by the Company or any of its Subsidiaries, or, to the knowledge of the Company, any other party thereto, nor any such breach or default by the Company or any of its Subsidiaries, or, to the knowledge of the Company, any other party thereto which with notice or lapse of time or both would co