ARTICLE I THE MERGER 2 Section 1.1. The Merger 2 Section 1.2. Closing 2 Section 1.3. Effective Time 2 Section 1.4. Effects of the Merger 2 Section 1.5. Certificate of Incorporation and Bylaws of the Surviving Corporation 3 Section 1.6. Directors and...
EXHIBIT 2.1
EXECUTION COPY
among
TU
HOLDINGS, INC.,
TU
MERGER, INC.
and
MERISEL,
INC.
Dated as
of March 28, 2008
TABLE OF
CONTENTS
|
PAGE
|
||
|
ARTICLE
I
|
THE
MERGER
|
2
|
|
Section
1.1.
|
The
Merger
|
2
|
|
Section
1.2.
|
Closing
|
2
|
|
Section
1.3.
|
Effective
Time
|
2
|
|
Section
1.4.
|
Effects
of the Merger
|
2
|
|
Section
1.5.
|
Certificate
of Incorporation and Bylaws of the Surviving Corporation
|
3
|
|
Section
1.6.
|
Directors
and Officers of the Surviving Corporation
|
3
|
|
Section
1.7.
|
Effect
on Capital Stock
|
3
|
|
Section
1.8.
|
Exchange
of Certificates
|
4
|
|
Section
1.9.
|
Equity
Awards
|
7
|
|
Section
1.10.
|
Convertible
Preferred Stock
|
7
|
|
ARTICLE
II
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
7
|
|
Section
2.1.
|
Qualification;
Organization, Subsidiaries, etc
|
8
|
|
Section
2.2.
|
Capitalization
|
9
|
|
Section
2.3.
|
Corporate
Authority Relative to This Agreement; No Violation
|
10
|
|
Section
2.4.
|
SEC
Reports and Financial Statements
|
11
|
|
Section
2.5.
|
No
Undisclosed Liabilities
|
13
|
|
Section
2.6.
|
Absence
of Certain Changes or Events
|
13
|
|
Section
2.7.
|
Compliance
with Law; Permits
|
14
|
|
Section
2.8.
|
Material
Contracts
|
15
|
|
Section
2.9.
|
Environmental
Laws and Regulations
|
17
|
|
Section
2.10.
|
Employee
Benefit Plans
|
17
|
|
Section
2.11.
|
Labor
Matters
|
19
|
|
Section
2.12.
|
Investigations;
Litigation
|
20
|
|
Section
2.13.
|
Tax
Matters
|
21
|
|
Section
2.14.
|
Intellectual
Property
|
22
|
|
Section
2.15.
|
Real
Property
|
23
|
|
Section
2.16.
|
Assets;
Personal Property
|
24
|
|
Section
2.17.
|
Customers
and Suppliers
|
24
|
|
Section
2.18.
|
Key
Salespersons
|
24
|
|
Section
2.19.
|
Information
in Proxy Statement
|
25
|
TABLE OF CONTENTS
(continued)
|
PAGE
|
||
|
Section
2.20.
|
Insurance
|
25
|
|
Section
2.21.
|
Required
Vote of the Company Stockholders
|
25
|
|
Section
2.22.
|
Affiliate
Transactions
|
25
|
|
Section
2.23.
|
Finders
or Brokers
|
25
|
|
Section
2.24.
|
Opinion
of Financial Advisors
|
26
|
|
Section
2.25.
|
State
Anti-Takeover Statutes
|
26
|
|
Section
2.26.
|
Additional
Payments; Other Matters
|
26
|
|
Section
2.27.
|
Outstanding
Net Debt
|
27
|
|
Section
2.28.
|
Transaction
Expenses
|
27
|
|
Section
2.29.
|
No
Additional Representations
|
27
|
|
ARTICLE
III
|
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
|
27
|
|
Section
3.1.
|
Qualification;
Organization, Subsidiaries, etc
|
27
|
|
Section
3.2.
|
Corporate
Authority Relative to This Agreement; No Violation
|
28
|
|
Section
3.3.
|
Investigations;
Litigation
|
29
|
|
Section
3.4.
|
Financing
|
29
|
|
Section
3.5.
|
Commitment
Agreement
|
29
|
|
Section
3.6.
|
Capitalization
of Merger Sub; No Prior Activities
|
29
|
|
Section
3.7.
|
Information
in Proxy Statement
|
29
|
|
Section
3.8.
|
Finders
or Brokers
|
29
|
|
Section
3.9.
|
Lack
of Ownership of Company Common Stock
|
30
|
|
Section
3.10.
|
Solvency
|
30
|
|
Section
3.11.
|
No
Additional Representations
|
30
|
|
Section
3.12.
|
Acknowledgement
Regarding Company Representations
|
30
|
|
ARTICLE
IV
|
ADDITIONAL
AGREEMENTS
|
31
|
|
Section
4.1.
|
Conduct
of Business by the Company and Parent
|
31
|
|
Section
4.2.
|
Access
to Information; Confidentiality
|
34
|
|
Section
4.3.
|
No
Solicitation of Transactions
|
34
|
|
Section
4.4.
|
Company
Board Recommendation
|
36
|
|
Section
4.5.
|
Proxy
Statement
|
37
|
ii
TABLE OF CONTENTS
(continued)
|
PAGE
|
||
|
Section
4.6.
|
Company
Meeting
|
37
|
|
Section
4.7.
|
Employee
Matters
|
38
|
|
Section
4.8.
|
Reasonable
Best Efforts to Complete
|
39
|
|
Section
4.9.
|
Takeover
Statute
|
40
|
|
Section
4.10.
|
Section
16 Matters
|
40
|
|
Section
4.11.
|
Certain
Notices
|
40
|
|
Section
4.12.
|
Public
Announcements
|
41
|
|
Section
4.13.
|
Indemnification
and Insurance
|
41
|
|
Section
4.14.
|
Debt
Payoff Letters
|
43
|
|
Section
4.15.
|
Cooperation
with Financing
|
43
|
|
Section
4.16.
|
Cooperation
on Letters of Credit
|
43
|
|
Section
4.17.
|
Obligations
of Merger Sub
|
44
|
|
Section
4.18.
|
Adoption
of Agreement by Merger Sub
|
44
|
|
ARTICLE
V
|
CONDITIONS
TO THE MERGER
|
44
|
|
Section
5.1.
|
Conditions
to Each Party’s Obligation to Effect the Merger
|
44
|
|
Section
5.2.
|
Conditions
to Obligation of the Company to Effect the Merger
|
44
|
|
Section
5.3.
|
Conditions
to Obligations of Parent and Merger Sub to Effect the
Merger
|
45
|
|
Section
5.4.
|
Frustration
of Closing Conditions
|
46
|
|
ARTICLE
VI
|
TERMINATION,
AMENDMENT AND WAIVER
|
46
|
|
Section
6.1.
|
Termination
|
46
|
|
Section
6.2.
|
Notice
of Termination; Effect of Termination
|
48
|
|
Section
6.3.
|
Termination
Fees; Limitation of Liability
|
48
|
|
Section
6.4.
|
Procedure
for Termination
|
49
|
|
ARTICLE
VII
|
MISCELLANEOUS
|
50
|
|
Section
7.1.
|
No
Survival of Representations and Warranties
|
50
|
|
Section
7.2.
|
Expenses
|
50
|
|
Section
7.3.
|
Notices
|
50
|
|
Section
7.4.
|
Amendments
|
51
|
|
Section
7.5.
|
Waivers
|
51
|
iii
TABLE OF
CONTENTS
(continued)
|
PAGE
|
||
|
Section
7.6.
|
Assignment;
Binding Effect
|
52
|
|
Section
7.7.
|
Entire
Agreement; No Third-Party Beneficiaries
|
52
|
|
Section
7.8.
|
Severability
|
52
|
|
Section
7.9.
|
Governing
Law
|
52
|
|
Section
7.10.
|
Jurisdiction;
Enforcement
|
52
|
|
Section
7.11.
|
Waiver
of Jury Trial
|
53
|
|
Section
7.12.
|
Headings
|
53
|
|
Section
7.13.
|
Interpretation
|
53
|
|
Section
7.14.
|
Required
Approvals of the Special Committee
|
54
|
|
Section
7.15.
|
Counterparts;
Effectiveness
|
54
|
|
Section
7.16.
|
Definitions
|
54
|
EXHIBITS
Exhibit A
– Form of Voting, Support and Redemption Agreement
Exhibit B
– Form of Certificate of Incorporation of the Surviving Corporation
Exhibit C
– Form of Commitment Agreement
iv
AGREEMENT AND PLAN OF MERGER,
dated as of March 28, 2008 (the “Agreement”), among
TU HOLDINGS, INC., a
Delaware corporation (“Parent”), TU MERGER, INC., a Delaware
corporation and a direct wholly owned subsidiary of Parent (“Merger Sub”), and
MERISEL, INC., a
Delaware corporation (the “Company”). Each
of Parent, Merger Sub and the Company is referred to herein as a “Party” and together
they are referred to herein as “Parties”).
WHEREAS, the Parties intend
that Merger Sub will be merged with and into the Company (the “Merger”), with the
Company surviving the Merger as a wholly-owned subsidiary of Parent in
accordance with the General Corporation Law of the State of Delaware (the “DGCL”);
WHEREAS, a Special Committee
of independent directors of the Company (the “Special Committee”)
has (i) determined that this Agreement and the transactions contemplated hereby,
including the Merger, are advisable and fair to, and in the best interests of,
the Company and its stockholders, (ii) approved and declared advisable this
Agreement and the transactions contemplated hereby, including the Merger, and
resolved to recommend to the Board of Directors of the Company (the “Company Board”) that
it approve and declare advisable this Agreement and the transactions
contemplated hereby, including the Merger, (iii) resolved to recommend that the
holders of Company Common Stock adopt this Agreement and (iv) directed that this
Agreement be submitted to the Company Board for its approval and recommendation
that the holders of Company Common Stock adopt this Agreement;
WHEREAS, the Company Board
(following the recommendation of the Special Committee) has unanimously (i)
determined that this Agreement and the transactions contemplated hereby,
including the Merger, are advisable and fair to, and in the best interests of,
the Company and its stockholders, (ii) approved this Agreement and the
transactions contemplated hereby, including the Merger, (iii) directed that this
Agreement be submitted to the holders of Company Common Stock for their adoption
and (iv) resolved to recommend that the holders of Company Common Stock adopt
this Agreement;
WHEREAS, (i) the Board of
Directors of Parent has unanimously approved this Agreement, (ii) the Board of
Directors of Merger Sub has unanimously approved and declared advisable this
Agreement and (iii) Parent, as the sole stockholder of Merger Sub, will adopt
this Agreement and the transactions contemplated hereby, including the Merger,
promptly after the execution hereof in accordance with the terms
hereof;
WHEREAS, as a condition and
inducement to Parent’s and Merger Sub’s willingness to enter into this
Agreement, simultaneously with the execution of this Agreement, a certain
stockholder of the Company is entering into a voting, support and redemption
agreement with Parent and the Company substantially in the form of Exhibit A attached
hereto (the “Support
Agreement”); and
WHEREAS, the Company, Parent
and Merger Sub each desire to make certain representations, warranties,
covenants and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger, as set forth herein.
1
NOW, THEREFORE, in
consideration of the premises, and of the representations, warranties, covenants
and agreements contained herein, the Parties agree as follows:
ARTICLE
I
THE MERGER
Section
1.1. The
Merger. At the Effective Time, upon the terms and subject to
the conditions set forth in this Agreement, and in accordance with the
applicable provisions of the DGCL, Merger Sub shall be merged with and into the
Company, whereupon the separate corporate existence of Merger Sub shall cease
and the Company shall continue as the surviving corporation of the Merger (the
“Surviving
Corporation”) and a wholly owned subsidiary of Parent.
Section
1.2. Closing. The
closing of the Merger (the “Closing”) shall take
place on a day that is a Business Day at the offices of Weil, Gotshal &
Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx at 10:00 a.m., local time,
on a date to be specified by the Parties, which shall be no later than the third
Business Day after the satisfaction or waiver (to the extent permitted by
applicable Law) of the conditions set forth in ARTICLE V (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or waiver of such conditions), or at such other
place, date and time as the Company and Parent may agree in
writing. The date on which the Closing shall occur is referred to
herein as the “Closing
Date”.
Section
1.3. Effective
Time. Subject to the provisions of this Agreement, at the
Closing, the Company will cause a certificate of merger (the “Certificate of
Merger”) to be executed, acknowledged and filed with the Secretary of
State of the State of Delaware in accordance with Section 251 of the
DGCL. The Merger will become effective at such time as the
Certificate of Merger has been duly filed with the Secretary of State of the
State of Delaware or at such later date or time as may be agreed by the Company
and Merger Sub in writing and specified in the Certificate of Merger in
accordance with the DGCL (the effective time of the Merger being hereinafter
referred to as the “Effective
Time”).
Section
1.4. Effects of the
Merger. The effects of the Merger shall be as provided in this
Agreement and in the applicable provisions of the DGCL. Without
limiting the generality of the foregoing, at the Effective Time, all the
property, rights, privileges, powers and franchises of the Company and Merger
Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation, all as provided under the DGCL and the
other applicable Laws of the State of Delaware. At and after the
Effective Time, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of the Company or
Merger Sub, any deeds, bills of sale, assignments or assurances and to take and
do, in the name and on behalf of the Company or Merger Sub, any other actions
and things to vest, perfect or confirm of record or otherwise in the Surviving
Corporation any and all right, title and interest in, to and under any of the
rights, properties or assets of the Company.
2
Section
1.5. Certificate of Incorporation
and Bylaws of the Surviving Corporation.
(a) The
certificate of incorporation of the Surviving Corporation shall be amended at
the Effective Time to read in the form attached hereto as Exhibit B, until
thereafter amended in accordance with the provisions thereof and the provisions
of this Agreement and applicable Law, in each case consistent with the
obligations set forth in Section
4.13.
(b) The
bylaws of Merger Sub as in effect at the Effective Time shall be the bylaws of
the Surviving Corporation until thereafter amended in accordance with the
provisions thereof and the provisions of this Agreement and applicable Law, in
each case consistent with the obligations set forth in Section
4.13.
Section
1.6. Directors and Officers of
the Surviving Corporation. Subject to applicable Law, the
directors of Merger Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold office in
accordance with the certificate of incorporation and bylaws of the Surviving
Corporation. The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, to
hold office until their respective successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the certificate of incorporation and bylaws of the Surviving
Corporation.
Section
1.7. Effect on Capital
Stock. At the Effective Time, by virtue of the Merger and
without any action on the part of the Company, Merger Sub or the holders of any
securities of the Company or Merger Sub:
(a) Conversion
of Company Common Stock. Subject to Section 1.7(b) and
Section 1.7(d),
each issued and outstanding share of common stock, par value $0.01 per share, of
the Company (“Company
Common Stock”) outstanding immediately prior to the Effective Time (for
the avoidance of doubt, including each Restricted Share in accordance with and
subject to the terms of Section 1.9), other
than any Cancelled Shares and any Dissenting Shares, shall thereupon be
converted automatically into and shall thereafter represent the right to receive
the Merger Consideration, without any interest thereon. All shares of
Company Common Stock that have been converted into the right to receive the
Merger Consideration as provided by this Section 1.7(a) shall
be automatically cancelled and shall cease to exist, and the holders of
certificates which immediately prior to the Effective Time represented such
shares of Company Common Stock shall cease to have any rights with respect to
such shares of Company Common Stock other than the right to receive the Merger
Consideration.
(b) Parent and Merger Sub-Owned
Shares. Each share of Company Common Stock that is owned,
directly or indirectly, by Parent or Merger Sub immediately prior to the
Effective Time or held by the Company immediately prior to the Effective Time
(the “Cancelled
Shares”) shall, by virtue of the Merger and without any action on the
part of the holder thereof, be cancelled and retired and shall cease to exist,
and no consideration shall be delivered in exchange therefor.
(c) Conversion of Merger Sub
Common Stock. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof, each share of common
stock, par value $0.001 per share, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
validly issued, fully paid and nonassessable share of common stock, par value
$0.001 per share, of the Surviving Corporation with the same rights, powers and
privileges as the shares so converted and shall constitute the only outstanding
shares of capital stock of the Surviving Corporation. From and after
the Effective Time, all certificates representing the common stock of Merger Sub
shall be deemed for all purposes to represent the number of shares of common
stock of the Surviving Corporation into which they were converted in accordance
with the immediately preceding sentence.
3
(d) Dissenting
Shares.
(i) Notwithstanding
anything contained in this Agreement to the contrary, no shares of Company
Common Stock issued and outstanding immediately prior to the Effective Time the
holder of which (A) has not voted in favor of the Merger, (B) has demanded its
rights to appraisal in accordance with Section 262 of the DGCL, and (C) has not
effectively withdrawn or lost its rights to appraisal (the “Dissenting Shares”)
shall be converted into or represent a right to receive the Merger Consideration
pursuant to Section
1.7(a). By virtue of the Merger, all Dissenting Shares shall
be cancelled and shall cease to exist and shall represent only those rights
provided under the DGCL. From and after the Effective Time, a holder
of Dissenting Shares shall not be entitled to exercise any of the voting rights
or other rights of a member or equity owner of the Surviving
Corporation.
(ii) Notwithstanding
the provisions of this Section 1.7(d), if
any holder of shares of Company Common Stock who demands appraisal rights shall
effectively withdraw or lose (through failure to perfect or otherwise) the right
to dissent or its rights of appraisal, then, as of the later of the Effective
Time and the occurrence of such event, such holder’s shares of Company Common
Stock shall no longer be Dissenting Shares and shall automatically be converted
into and represent only the right to receive Merger Consideration, without any
interest thereon.
(iii) The
Company shall give Parent (A) prompt notice of any written demands for appraisal
rights of any shares of Company Common Stock, withdrawals of such demands, and
any other instruments served pursuant to the DGCL and received by the Company
which relate to any such demand for appraisal rights and (B) the opportunity to
participate in and direct all negotiations and proceedings with respect to
demands for appraisal rights under the DGCL. Prior to the Effective
Time, the Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to any demands for appraisal rights or
offer to settle or settle any such demands.
Section
1.8. Exchange of
Certificates.
(a) Paying
Agent. At the Effective Time, Parent shall deposit, or shall
cause to be deposited, with a bank or trust company that is organized and doing
business under the Laws of the United States or any state thereof, and has a
combined capital and surplus of at least $500 million, that shall be appointed
prior to the Closing Date to act as a paying agent hereunder and approved in
advance by the Company in writing (and pursuant to an agreement in form and
substance reasonably acceptable to Parent and the Company) (the “Paying Agent”), in
trust for the benefit of holders of the shares of Company Common Stock (other
than the Restricted Shares, which shall be governed by Section 1.9(b)) and
the Company Stock Options, cash in U.S. dollars sufficient to pay (i) the
amount owing for all of the shares of Company Common Stock converted pursuant to
Section 1.7(a)
(other than the Restricted Shares, which shall be governed by Section 1.9(b)) and
(ii) the Option Consideration payable pursuant to Section 1.9(a) (such
cash referred to in subsections (a)(i) and (a)(ii) being hereinafter referred to
as the “Exchange
Fund”).
4
(b) Payment
Procedures.
(i) As soon
as reasonably practicable after the Effective Time and in any event not later
than the third Business Day following the Effective Time, the Paying Agent shall
mail (x) to each holder of record of shares of Company Common Stock whose
shares of Company Common Stock were converted into the right to receive the
Merger Consideration pursuant to Section 1.7, other
than the Restricted Shares, for which the payment procedures shall be as
described in Section
1.9(b), (A) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to Certificates shall
pass, only upon delivery of Certificates (or effective affidavits of loss in
lieu thereof) or Book-Entry Shares to the Paying Agent and shall be in such form
and have such other provisions as Parent and the Company may mutually agree),
and (B) instructions for use in effecting the surrender of Certificates (or
effective affidavits of loss in lieu thereof) or Book-Entry Shares in exchange
for the Merger Consideration, as applicable, and (y) to each holder of a
Company Stock Option, a check in an amount due and payable to such holder
pursuant to Section
1.9 of this Agreement in respect of such Company Stock
Option.
(ii) Upon
surrender of the certificates that immediately prior to the Effective Time
represented shares of Company Common Stock (“Certificates”) (or
effective affidavits of loss in lieu thereof) or non-certificated shares of
Company Common Stock represented by book-entry (“Book-Entry Shares”)
to the Paying Agent together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, and such other
documents as may customarily be required by the Paying Agent, the holder of such
Certificates or Book-Entry Shares shall be entitled to receive in exchange
therefor a check in an amount equal to the product of (x) the number of shares
of Company Common Stock represented by such holder’s properly surrendered
Certificates (or effective affidavits of loss in lieu thereof) or Book-Entry
Shares multiplied by (y) the Merger Consideration. No interest will
be paid or accrued on any amount payable upon due surrender of Certificates or
Book-Entry Shares. In the event of a transfer of ownership of shares
of Company Common Stock that is not registered in the transfer records of the
Company, a check for any cash to be paid upon due surrender of the Certificate
may be paid to such a transferee if the Certificate formerly representing such
shares of Company Common Stock is presented to the Paying Agent, accompanied by
all documents required to evidence and effect such transfer and to evidence that
any applicable stock transfer Taxes have been paid or are not
applicable.
(iii) The
Paying Agent shall be entitled to deduct and withhold from the consideration
otherwise payable under this Agreement to any holder of shares of Company Common
Stock or Company Stock Options, such amounts as are required to be withheld or
deducted under the United States Internal Revenue Code of 1986, as amended (the
“Code”) or any
provision of United States state or local Tax Law or any foreign Tax Law with
respect to the making of such payment. To the extent that amounts are
so withheld or deducted and paid over to the applicable Governmental Entity,
such withheld or deducted amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company Common
Stock or Company Stock Options, in respect of which such deduction and
withholding were made.
5
(c) Closing of Transfer
Books. At the Effective Time, the stock transfer books of the
Company shall be closed, and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the shares of
Company Common Stock that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or Parent for transfer, they shall be cancelled and
exchanged for a check in the proper amount pursuant to this ARTICLE
I.
(d) Termination of Exchange
Fund. Any portion of the Exchange Fund (including the proceeds
of any investments thereof) that remains undistributed to the former holders of
shares of Company Common Stock for six months after the Effective Time shall be
delivered to the Surviving Corporation upon demand, and any former holders of
shares of Company Common Stock who have not surrendered their shares of Company
Common Stock in accordance with this Section 1.8 shall
thereafter look only to the Surviving Corporation for payment of their claim for
the Merger Consideration without any interest thereon, upon due surrender of
their shares.
(e) No
Liability. Notwithstanding anything herein to the contrary,
none of the Company, Parent, Merger Sub, the Surviving Corporation, the Paying
Agent or any other person shall be liable to any former holder of shares of
Company Common Stock for any amount properly delivered to a public official
pursuant to any applicable abandoned property, escheat or similar
Law.
(f) Investment of Exchange
Fund. The Paying Agent shall invest all cash included in the
Exchange Fund as reasonably directed by Parent; provided, however, that any
investment of such cash shall be limited to direct short-term obligations of, or
short-term obligations fully guaranteed as to principal and interest by, the
United States government. Any interest and other income resulting
from such investments shall be paid to the Surviving Corporation pursuant to
Section
1.8(d).
(g) Lost
Certificates. In the case of any Certificate that has 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 and, if
required by the Paying Agent or Parent, the posting by such person of a bond in
customary amount as indemnity against any claim that may be made against it with
respect to such Certificate, the Paying Agent will issue in exchange for such
lost, stolen or destroyed Certificate a check in the amount of the number of
shares of Company Common Stock as applicable, represented by such lost, stolen
or destroyed Certificate multiplied by the Merger Consideration.
6
Section
1.9. Equity
Awards.
(a) Effective
as of the Effective Time, each option to purchase shares of Company Common
Stock, including options granted under the Company Stock Plans (each, a “Company Stock
Option”), whether vested or unvested, that is outstanding immediately
prior to the Effective Time shall, as of the Effective Time, be cancelled in
exchange for the right to receive an amount in cash in U.S. dollars equal to the
product of (x) the total number of shares of Company Common Stock subject to
such Company Stock Option and (y) the excess, if any, of the amount of the
Merger Consideration over the exercise price per share of Company Common Stock
subject to such Company Stock Option, with the aggregate amount of such payment
rounded to the nearest cent (the aggregate amount of such cash hereinafter
referred to as the “Option
Consideration”) less such amounts as are required to be withheld or
deducted under the Code or any provision of United States state or local Tax Law
or any foreign Tax Law with respect to the making of such
payment. For the avoidance of doubt, any Company Stock Option with a
per-share exercise price that equals or exceeds the amount of the Merger
Consideration shall be cancelled and no payment shall be made in respect
thereof.
(b) (i) Effective
as of the Effective Time, each award of a share of Company Common Stock granted
under the 1997 Plan that is unvested immediately prior to the Effective Time
(the “Restricted
Shares”) shall, as of the Effective Time, subject to Section 1.9(b)(ii),
be cancelled in exchange for the right to receive the Merger Consideration in
accordance with the provisions of Section 1.7(a), less
such amounts as are required to be withheld or deducted under the Code or any
provision of United States state or local Tax Law or any foreign Tax Law
with respect to the making of such payment.
(ii) With
respect to each Restricted Share, the right to receive the Merger Consideration
shall be subject to the terms and conditions of the 1997 Plan and the applicable
Award Agreement that evidences such award, including any escrow, forfeiture and
payment provisions thereunder.
(c) Prior to
the Effective Time, the Company shall take all necessary and appropriate action
(including obtaining any required consents) to effectuate the transactions
contemplated by this Section
1.9.
Section
1.10. Convertible Preferred
Stock. On the Closing Date, the Company shall use its
reasonable best efforts to cause all the outstanding shares of the Company
Convertible Preferred Stock to be redeemed in consideration for the payment of
the Redemption Amount.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except as
disclosed (i) in the Company SEC Documents that were publicly available on or
prior to the date of this Agreement (other than disclosures in “Risk Factors”
sections thereof and any other disclosures that are predictive or forward
looking in nature) or (ii) in the disclosure schedule of even date herewith
delivered by the Company to Parent immediately prior to the execution of this
Agreement (the “Company Disclosure
Schedule”), the Company represents and warrants to Parent and Merger Sub
as follows:
7
Section
2.1. Qualification; Organization,
Subsidiaries, etc.
(a) Each of
the Company and its Subsidiaries is a legal entity duly organized, validly
existing and in good standing under the Laws of its respective jurisdiction of
organization and has all requisite corporate or similar power and authority to
own, lease and operate its properties and assets and to carry on its business as
presently conducted. Each of the Company and its Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation or
other entity in each jurisdiction where the ownership, leasing or operation of
its assets or properties or conduct of its business requires such qualification
and good standing, except where the failure to be so qualified or in good
standing, individually or in the aggregate, would not have a Company Material
Adverse Effect. The Company has made available to Parent prior to the
date of this Agreement a true and complete copy of the Company’s certificate of
incorporation (the “Company Charter”) and
the Company’s bylaws (the “Company Bylaws”),
each as amended through the date of this Agreement. The Company
Charter, the Company Bylaws and the certificate of incorporation and bylaws (or
equivalent organizational documents) of each of the Company’s Subsidiaries (the
“Subsidiary Governance
Documents”) are in full force and effect. None of the Company
or any of its Subsidiaries is in violation of any provision of the Company
Charter, the Company Bylaws or the Subsidiary Governance Documents.
(b) Section 2.1(b) of the
Company Disclosure Schedule lists each Subsidiary of the Company and its
jurisdiction of organization. All the outstanding shares of capital
stock or other ownership interests of each Subsidiary of the Company have been
validly issued and are fully paid and nonassessable and are owned by the Company
or by another Subsidiary of the Company, free and clear of all
Liens. Except for its interests in the Subsidiaries of the Company
set forth in Section
2.1(b) of the Company Disclosure Schedule, the Company does not own,
directly or indirectly, any capital stock, membership interest, partnership
interest, joint venture interest or other equity interest in any
person.
(c) As used
in this Agreement, any reference to any fact, circumstance, event, change,
effect or occurrence having a “Company Material Adverse
Effect” means any fact, circumstance, event, change, effect or occurrence
(each, an “Effect”) that,
individually or in the aggregate with all other Effects, has had or would
reasonably be expected to have a material adverse effect on the assets,
liabilities, business, results of operations or financial condition of the
Company and its Subsidiaries, taken as a whole; provided, however, that in no
event shall any of the following Effects, alone or in combination, be deemed to
constitute, or be taken into account, in determining whether there is a Company
Material Adverse Effect: (A) any change in general economic, business,
financial, credit or market conditions; (B) any action taken by the Company
that is expressly permitted or required by this Agreement; (C) any
occurrence generally affecting the graphics and visual communications services
industries or other industries in which the Company or any of its Subsidiaries
operate in the United States; (D) any change in GAAP or applicable Law or the
interpretation thereof; (E) any act of terrorism, war (whether or not declared),
national disaster or any national or international calamity affecting the United
States; (F) any change in the price or trading volume of the Company Common
Stock in and of itself (provided that the underlying causes of such change may
be taken into account in determining whether there is a Company Material Adverse
Effect); or (G) any effect resulting from the announcement of this
Agreement; or (H) any action taken at the written request of Parent or any of
its affiliates or mutually agreed to in writing by the parties to this Agreement
that, if taken without the written consent of Parent, would have been prohibited
by the terms of this Agreement; except, in the case
of the foregoing clauses (A), (C), (D) or (E), to the extent such Effect has a
disproportionate impact on the Company and its Subsidiaries, taken as a whole,
relative to the other participants in the industries in which they
operate.
8
Section
2.2. Capitalization.
(a) The
authorized capital stock of the Company consists of 30,000,000 shares of Company
Common Stock and 1,000,000 shares of preferred stock of the Company, par value
$0.01 per share, (“Company Preferred
Stock”, and collectively with the Company Common Stock, “Company Capital
Stock”). As of March 27, 2008, (i) 8,452,723 shares of Company
Common Stock were issued and 8,033,943 shares of Company Common
Stock (including 439,758 Restricted Shares) were outstanding, (ii) 418,780
shares of Company Common Stock were held in treasury, (iii) 300,000 Company
Stock Options were outstanding, the holders and exercise prices of which are set
forth in Section
2.2(a) of the Company Disclosure Schedule, (iv) 300,000 shares of Company
Common Stock were reserved for issuance upon the exercise of stock options held
by employees or directors of the Company pursuant to the employee and director
stock plans of the Company (the “Company Stock Plans”)
and (v) 267,595 shares of Company Preferred Stock, all of which were shares of
convertible preferred stock, par value $0.01 per share, of the Company (“Company Convertible
Preferred Stock”), were issued or outstanding, and related thereto, 5,352
shares of Company Convertible Preferred Stock were reserved for issuance in
respect of accrued dividends on such shares of Company Convertible Preferred
Stock, and 1,559,697 shares of Company Common Stock were reserved for issuance
upon the conversion of such shares of Company Convertible Preferred
Stock. All outstanding shares of Company Capital Stock and all shares
of Company Capital Stock reserved for issuance as noted in clauses (iv) and (v)
when issued in accordance with the respective terms thereof, are or will be duly
authorized, validly issued, fully paid and non-assessable and free of
pre-emptive rights, rights of first refusal or any similar
rights. All Restricted Shares were issued pursuant to the Company’s
1997 Stock Award and Incentive Plan (the “1997 Plan”) and the
form of the Award Agreement thereunder, copies of which are attached to Section 2.2(a) of the
Company Disclosure Schedule.
(b) Except as
set forth in subsection (a) above, as of the date of this Agreement, (i) the
Company does not have any shares of its capital stock issued or outstanding
other than shares of Company Common Stock that have become outstanding after
March 27, 2008, but were reserved for issuance as set forth in subsection (a)
above, and (ii) there are no outstanding subscriptions, options, warrants,
calls, convertible securities or other similar rights, agreements or commitments
relating to the issuance of capital stock to which the Company or any of
its Subsidiaries is a party obligating the Company or any of its Subsidiaries to
(A) issue, transfer or sell any shares of capital stock or other equity
interests of the Company or any Subsidiary of the Company or securities
convertible into or exchangeable for such shares or equity interests,
(B) grant, extend or enter into any such subscription, option, warrant,
call, convertible securities or other similar right, agreement or arrangement,
(C) redeem or otherwise acquire any such shares of capital stock or other
equity interests, or (D) provide a material amount of funds to, or make any
material investment (in the form of a loan, capital contribution or otherwise)
in, any Subsidiary.
9
(c) Neither
the Company nor any of its Subsidiaries has outstanding preferred stock, bonds,
debentures, notes or other obligations, the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the holders of the Company Common Stock on any matter in
connection with the Merger and the transactions contemplated
hereby.
(d) Pursuant
to the terms of the Support Agreement and notwithstanding anything to the
contrary set forth in the terms of the Company Convertible Preferred Stock, at
the Effective Time, the Company Convertible Preferred Stock shall be redeemed in
exchange for the payment of an amount set forth in the Support Agreement (the
“Redemption
Amount”).
(e) Except
for the Support Agreement, there are no voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries is a party with
respect to the voting of the capital stock or other equity interest of the
Company or any of its Subsidiaries.
Section
2.3. Corporate Authority Relative
to This Agreement; No Violation.
(a) The
Company has requisite corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby subject, in the case of
the consummation of the Merger, to receipt of the Company Stockholder
Approval. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Company Board (after the recommendation of the Special
Committee) and, except with respect to the Merger for the Company
Stockholder Approval, no other corporate proceedings on the part of the Company
are necessary to authorize the consummation of the transactions contemplated
hereby. This Agreement has been duly and validly executed and
delivered by the Company and, assuming this Agreement has been duly executed and
delivered by Parent and Merger Sub, constitutes the valid and binding agreement
of the Company, enforceable against the Company in accordance with its terms,
except that (i) such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar Laws, now or hereafter
in effect, relating to creditors’ rights generally and (ii) equitable
remedies 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 therefore may be brought (the “Bankruptcy and Equity
Exception”).
(b) The
Company Board has unanimously (i) determined that this Agreement and the
transactions contemplated hereby, including the Merger, are advisable and fair
to, and in the best interests of, the Company and its stockholders,
(ii) adopted and declared advisable this Agreement and the transactions
contemplated hereby, including the Merger, (iii) directed that this
Agreement be submitted to the Company’s stockholders for their approval and
(iv) resolved to recommend that the Company’s stockholders adopt this
Agreement (collectively, the “Recommendation”).
10
(c) Other
than in connection with or in compliance with (i) the DGCL and
(ii) the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or any
applicable state securities or “blue sky” Laws (collectively, the “Company Approvals”),
and subject to the accuracy of the representations and warranties of Parent and
Merger Sub in Section
3.9, no authorization, consent or approval of, or filing with, any United
States or foreign federal, state or local governmental or regulatory agency,
commission, court, body, entity or authority (each, a “Governmental Entity”)
is necessary, under applicable Law, for the consummation by the Company of the
transactions contemplated by this Agreement, except for such authorizations,
consents, approvals or filings that, if not obtained or made, would not have,
individually or in the aggregate, a Company Material Adverse
Effect.
(d) The
execution and delivery by the Company of this Agreement does not, and, except as
described in Section
2.3(c) or set forth on Section 2.3(d) of the
Company Disclosure Schedule, the consummation of the transactions contemplated
hereby and compliance by the Company with the provisions of this Agreement will
not (i) result in any material violation of, or material default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any material obligation or to the
loss of a material benefit under any loan, guarantee of indebtedness or credit
agreement, note, bond, mortgage, indenture, lease, sublease or similar
arrangement, agreement, contract, instrument, permit, concession, franchise,
right or license binding upon the Company or any of its Subsidiaries or to which
any of them is a party or result in the creation of any liens, claims,
mortgages, encumbrances, pledges, security interests, equities or charges of any
kind (each, a “Lien”), other than
any such Lien (A) for Taxes or governmental assessments, charges or claims
of payment not yet due or being contested in good faith or for which adequate
accruals or reserves have been established, (B) which is a carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s or other similar lien
arising in the ordinary course of business, (C) which is disclosed on the
most recent consolidated balance sheet of the Company or notes thereto or
securing liabilities reflected on such balance sheet) or (D) which was incurred
in the ordinary course of business since the date of the most recent
consolidated balance sheet of the Company (each of the foregoing, a “Permitted Lien”),
upon any of the properties or assets of the Company or any of its Subsidiaries,
(ii) conflict with or result in any violation of any provision of the
Company Charter or the Company Bylaws or any Subsidiary Government Document or
(iii) conflict with or violate, in any material respect, any applicable
Laws that are material to the Company and its Subsidiaries.
Section
2.4. SEC Reports and Financial
Statements.
(a) Except as
set forth on Section
2.4 of the Company Disclosure Schedule, the Company has filed or
furnished (as applicable) all reports, forms, schedules, statements,
certifications and other documents required to be filed or furnished with or to
the United States Securities and Exchange Commission (the “SEC”) from January 1,
2006 (the “Company SEC
Documents”). As of their respective dates, or, if amended, as
of the date of the last such amendment, the Company SEC Documents complied in
all material respects with the applicable requirements of the Securities Act of
1933, as amended (the “Securities Act”), and
the Exchange Act at the time they were filed (or, if amended at the time of such
amendment), as the case may be, and the applicable rules and regulations
promulgated thereunder, and none of the Company SEC Documents contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading. Except for the Company’s Form 10-K for the year ended
December 31, 2007, the Form 8-K filed on March 28, 2007 and the schedules,
statements, certifications and other documents related thereto, the Company has
not filed any reports, forms, schedules, statements, certifications and other
documents with the SEC in the two Business Days immediately preceding the date
of this Agreement.
11
(b) The
consolidated financial statements (including all related notes and schedules) of
the Company included in the Company SEC Documents (i) fairly present in all
material respects the consolidated financial position of the Company and its
consolidated Subsidiaries, as at the respective dates thereof, and the
consolidated results of their operations and their consolidated cash flows for
the respective periods then ended (subject, in the case of the unaudited
statements, to normal year-end audit adjustments and to any other adjustments
described therein, including the notes thereto) and (ii) were prepared in
conformity with United States generally accepted accounting principles (“GAAP”) (except, in
the case of the unaudited statements, as permitted by the SEC) applied on a
consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto).
(c) The
Company has made available to Parent true, correct and complete copies of the
consolidated financial statements for the month of January of 2008, and such
consolidated financial statements (i) fairly present the consolidated financial
position of the Company and its consolidated Subsidiaries, as at the respective
dates thereof, and the consolidated results of their operations and their
consolidated cash flows for the respective periods then ended (subject, in the
case of the unaudited statements, to normal year-end audit adjustments and to
any other adjustments described therein, including the notes thereto) and (ii)
were prepared in conformity with GAAP applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes
thereto).
(d) The
Company SEC Documents include all certificates required to be included therein
pursuant to Sections 302 and 906 of the Sarbanes Oxley Act of 2002, as amended,
and the rules and regulations promulgated thereunder (“SOX”), and the
internal control report and attestation of the Company’s outside auditors
required by Section 404 of SOX. To the knowledge of the Company, the
Company has implemented and maintains disclosure controls and procedures (as
defined in Rule 13a-15(e) of the Exchange Act) to ensure that material
information relating to the Company, including its consolidated Subsidiaries, is
made known to the chief executive officer and the chief financial officer of the
Company by others within those entities. The Company’s principal
executive officer and principal financial officer have no knowledge of any fraud
that involves management or other employees who have a significant role in the
Company’s internal controls over financial reporting. The Company has
not identified any material weaknesses in the design or operation of its
internal controls over financial reporting.
(e) The
Company has made available to Parent true, correct and complete copies of all
material written correspondence between the SEC, on the one hand, and the
Company and any Subsidiary of the Company, on the other hand, since December 1,
2006. As of the date of this Agreement, there are no outstanding or
unresolved comments in comment letters received from the SEC staff with respect
to the Company SEC Documents. To the knowledge of the Company, none
of the Company SEC Documents is the subject of ongoing SEC review or outstanding
SEC comment.
12
Section
2.5. No Undisclosed
Liabilities. Except (a) as reflected or reserved against
in the Company’s consolidated balance sheets (or the notes thereto) included in
the Company SEC Documents that were publicly available on or prior to the date
of this Agreement, (b) as permitted or contemplated by this Agreement,
(c) for liabilities and obligations incurred in the ordinary course of
business since December 31, 2007, (d) for liabilities or obligations which have
been discharged or paid in full in the ordinary course of business and (f) as
set forth on Section
2.5 of the Company Disclosure Schedule, as of the date of this Agreement,
neither the Company nor any Subsidiary of the Company has any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise, that
would be required by GAAP to be reflected on a consolidated balance sheet of the
Company and its Subsidiaries (or in the notes thereto).
Section
2.6. Absence of Certain Changes
or Events. From December 31, 2007 through the date of this
Agreement:
(a) except as
contemplated by this Agreement, the businesses of the Company and its
Subsidiaries have been conducted, in all material respects, in the ordinary
course of business consistent with past practice;
(b) there has
not been any event, development or state of circumstances that has had,
individually or in the aggregate, a Company Material Adverse
Effect;
(c) except as
set forth in Section
2.6 of the Company Disclosure Schedule, there has not been any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any Company Capital Stock
or any repurchase for value by the Company of any Company Capital
Stock;
(d) there has
not been any split, combination or reclassification of any Company Capital Stock
or any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of Company Capital
Stock;
(e) except as
set forth in Section
2.6 of the Company Disclosure Schedule, there has not been any
sale, lease (as lessor), assignment, license, failure to maintain or other
disposition of any material properties or assets, except in the ordinary course
of business;
(f) there
have not been any amendments to or changes in the Company Charter, Company
Bylaws or Subsidiary Governance Documents;
(g) there has
not been any change in accounting methods, principles or practices by the
Company or any Subsidiary materially affecting the consolidated assets,
liabilities or results of operations of the Company, except insofar as may have
been required by a change in GAAP;
(h) to the
knowledge of the Company, there have not been any claims, charges or grievances
filed with any Governmental Entity by any individual, or asserted or threatened
by any individual, Governmental Entity or any workers’ representative
organization, bargaining unit or union regarding any unfair labor practice,
claim of wrongful discharge or other unlawful employment or labor practice or
action with respect to the Company or any Subsidiary;
13
(i) except as
required pursuant to any existing contract set forth in Section 2.8 of the
Company Disclosure Schedule, in the ordinary course of business, or set forth in
Section 2.6 of
the Company Disclosure Schedule, there has not been any increase in or other
change to the salary, bonus or other compensation payable or to become payable
by the Company to any of its officers, directors, employees or advisors, any
execution of or amendment to any Employee Agreement, or any declaration, payment
or commitment or obligation of any kind for the payment (whether in cash or
equity) by the Company of a severance payment, change in control payment,
termination payment, bonus or other additional salary or compensation (including
any equity-based compensation) to any such person;
(j) except as
set forth in Section
2.6 of the Company Disclosure Schedule, neither the Company nor
any of its Subsidiaries has commenced, settled or, to the knowledge of the
Company, been named a party to any lawsuit, and neither the Company nor any of
its Subsidiaries has received written notice of any threat of any lawsuit or
proceeding or other investigation against the Company or any of its Subsidiaries
or relating to any of their businesses, properties or assets;
(k) except as
set forth in Section
2.6 of the Company Disclosure Schedule, there has not been any
issuance, grant, delivery, sale or purchase, or contract or agreement to issue,
grant, deliver, sell or purchase, by the Company or any of its Subsidiaries, any
shares of Company Common Stock or securities convertible into, or exercisable or
exchangeable for, shares of Company Common Stock, or any subscriptions,
warrants, options, rights or securities to acquire any of the
foregoing;
(l) except as
set forth in Section
2.6 of the Company Disclosure Schedule, there has not been any
grant by the Company or any of its Subsidiaries of any severance,
change-in-control or termination pay (in cash or otherwise) to any employee,
including any officer;
(m) to the
knowledge of the Company, there has not been any material damage to, destruction
or loss of any material asset of the Company or any of its Subsidiaries (whether
or not covered by insurance);
(n) there has
not been any revaluation by the Company or any of its Subsidiaries of any of its
assets, including the writing off of any notes or accounts receivable other than
in the ordinary course of business; and
(o) there has
not been any authorization, commitment or agreement to take, any of the
foregoing actions.
Section
2.7. Compliance with Law;
Permits.
(a) The
Company and each of its Subsidiaries are in compliance with and are not in
default under or in violation of any applicable federal, state, local,
municipal, foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, rule, regulation, ruling, judgment, order,
injunction, decree or agency requirement issued, promulgated, implemented or
otherwise put into effect by or under the authority of any Governmental Entity
(collectively, “Laws” and each, a
“Law”), except
where such non-compliance, default or violation would not be material to the
Company and its Subsidiaries, taken as a whole. Notwithstanding
anything contained in this Section 2.7, no
representation or warranty shall be deemed to be made in this Section 2.7 in
respect of the matters referenced in Section 2.4, Section 2.5 or Section 2.6 or in
respect of environmental matters (which are addressed exclusively in Section 2.9),
employee benefits matters (which are addressed exclusively in Section 2.10), labor
matters (which are addressed exclusively in Section 2.11), tax
matters (which are addressed exclusively in Section 2.13) or
intellectual property matters (which are addressed exclusively in Section
2.14).
14
(b) The
Company and its Subsidiaries are in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Entity necessary for the
Company and its Subsidiaries to own, lease and operate their properties and
assets or to carry on their businesses as they are now being conducted (the
“Company
Permits”). The Company and each of its Subsidiaries are in
compliance, in all material respects, with and are not in default under or in
violation, in all material respects, of any Company Permit. All
Company Permits are in full force and effect, except where the failure to be in
full force and effect would not have, individually or in the aggregate, a
Company Material Adverse Effect. No suspension or cancellation of any
of the Company Permits is pending or, to the knowledge of the Company,
threatened, except where such suspension or cancellation, individually or in the
aggregate, would not have a Company Material Adverse Effect.
Section
2.8. Material
Contracts.
(a) Except
for this Agreement, the Company Benefit Plans or as filed with the SEC, Section 2.8(a) of the
Company Disclosure Letter sets forth a correct and complete list of each
contract (whether written or oral) to which the Company or any of its
Subsidiaries is a party or by which any of them is bound which (all contracts of
the type described in this Section 2.8 being
referred to herein as “Company Material
Contracts”):
(i) contains
outstanding obligations in excess of two hundred fifty thousand dollars
$250,000) in any twelve (12)-month period or is otherwise material (as such term
is defined in Item 601(b)(10) of Regulation S-K under the Securities Act) to the
business of the Company and its Subsidiaries taken as a whole as currently
conducted that cannot be terminated without penalty upon sixty (60) days’ prior
written notice;
(ii) contains
covenants limiting, in any material respect, the freedom of the Company or any
of its Subsidiaries to engage in any line of business or to provide any products
or services generally or in any market segment or in any geographic area, or to
compete with any Person or restricting, in any material respect, the ability of
the Company or any of its Subsidiaries to acquire equity securities of any
Person;
(iii) provides
that the Company or any of its Subsidiaries has (A) incurred, or may incur, any
indebtedness for borrowed money or (B) given any guarantee in respect of
indebtedness for borrowed money;
15
(iv) provides
for a joint venture or partnership (without regard to legal form);
(v) is a
standby letter of credit, performance or payment bond, or surety bond of any
nature;
(vi) relates
to an acquisition, divestiture, merger or similar transaction;
(vii) obligates
the Company to make any capital commitment or expenditure (including pursuant to
any joint venture) in excess of $250,000;
(viii) is a
contract with any Material Customer or Material Supplier;
(ix) is an
agreement under which the Company or any Subsidiary of the Company (A) grants to
a third party any licenses or covenants not to xxx or (B) is granted by a third
party any licenses or covenants not to xxx, in each case with respect to any
Intellectual Property material to the Company or its Subsidiaries;
(x) is a
contract, agreement or commitment with any employee, individual consultant,
contractor, or salesperson of the Company or any of its Subsidiaries that (a)
provides for annual compensation in excess of $50,000, (b) is not terminable
at-will or (c) includes any obligation to provide severance benefits,
termination pay (in cash, equity or otherwise), indemnification or advance
notice of termination of the employment or consulting relationship;
(xi) is an
agreement or plan, including any stock option plan, stock appreciation rights
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
(xii) restricts
or prohibits, in any material respect, the Company or any Subsidiary from hiring
or soliciting for hire any individual to perform employment or consulting
services for the Company or any of its Subsidiaries; and
(xiii) was
entered into after January 1, 2005 and provides for the settlement or release of
any litigation or dispute involving the Company or any of its Subsidiaries that
is material to the Company or any of its Subsidiaries, individually or in the
aggregate.
(b) Neither
the Company nor any Subsidiary of the Company is in breach of or default under
the terms of any Company Material Contract in any material
respect. To the knowledge of the Company, no other party to any
Company Material Contract is in breach of, or default under, the terms of any
Company Material Contract in any material respect. Each Company
Material Contract is a valid and binding obligation of the Company or the
Subsidiary of the Company which is party thereto and, to the knowledge of the
Company, of each other party thereto, and is in full force and effect, subject
to the Bankruptcy and Equity Exception.
16
(c) The
Company has filed with the SEC each contract required to be filed by the Company
as a “material contract” pursuant to Item 601(b)(10) of Regulation S-K under the
Securities Act or disclosed by the Company on a Current Report on Form
8-K.
Section
2.9. Environmental Laws and
Regulations.
(a) Except as
set forth on Section
2.9 of the Company Disclosure Schedule, (i) the Company and each of its
Subsidiaries is in compliance, in all material respects, with all applicable
Environmental Laws; (ii) the Company and each of its Subsidiaries possess and
are in compliance, in all material respects, with all Company Permits required
pursuant to Environmental Laws; (iii) none of the Company or any of its
Subsidiaries has received any written claim or notice of violation from any
Governmental Entity alleging that the Company or any of its Subsidiaries is in
material violation of, or liable under, any Environmental Law that is otherwise
unresolved; and (iv) there are no Actions pending (or, to the knowledge of the
Company, threatened) against the Company or any of its Subsidiaries and there
are no Orders of, or before, any Governmental Entity which are binding upon the
Company or any of its Subsidiaries, in each case, relating to Environmental
Laws, except, in each case, as would not be material to the Company and its
Subsidiaries taken as a whole. This Section 2.9 sets
forth the sole representation and warranty of the Company relating to
environmental, health and safety matters, including those relating to
Environmental Laws.
(b) As used
herein, “Environmental
Law” means any Law relating to (i) human health or safety as related
to environmental protection or the protection or pollution of the environment
(including air, water vapor, surface water, groundwater, drinking water supply,
surface land or subsurface land) or (ii) the exposure to, or the use,
storage, recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances, in each case
as in effect at the date of this Agreement.
(c) As used
herein, “Hazardous
Substance” means any substance, material or waste that is regulated,
classified or otherwise characterized under, or pursuant to, an Environmental
Law as “hazardous,” “toxic,” a “pollutant”, a “contaminant” or a “regulated
substance.”
Section
2.10. Employee Benefit
Plans.
(a) Section 2.10(a) of
the Company Disclosure Schedule sets forth a true and complete list of each
“employee benefit plan” (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 (“ERISA”)), and each
employment, severance, consulting or similar contract, plan, arrangement or
policy and each other material employee benefit, pension, profit-sharing,
savings, deferred compensation, bonus, incentive stock option, and welfare plan
and program, whether or not subject to ERISA, of the Company or its Subsidiaries
or any person that, together with the Company or any of its Subsidiaries, is
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code
(an “ERISA
Affiliate”) for the benefit of current or former employees, directors, or
consultants of the Company or any of its Subsidiaries (the “Company Benefit
Plans”).
17
(b) The
Company has made available to Parent true and complete copies of each of the
Company Benefit Plans and related documents, including (i) each writing
constituting a part of such Company Benefit Plan (or in the case of an unwritten
Company Benefit Plan, a written description thereof), including all amendments
thereto and trust documents (if applicable), (ii) the three most recent Annual
Reports (Form 5500 Series) and accompanying schedules, if any, and (iii) the
most recent determination letter from the IRS (if applicable) for such Company
Benefit Plan. Each of the Company Benefit Plans that is intended to
be qualified under Section 401(a) of the Code and each trust established in
connection with any such Company Benefit Plan that is intended to be exempt from
federal income taxation under Section 501(a) of the Code has received a
favorable determination letter from the Internal Revenue Service (the “IRS”) and the Company
is not aware of any reason why any such determination letter should be revoked
or not be reissued.
(c) (i) Each
of the Company Benefit Plans has been operated and administered in all material
respects in accordance with its terms and the requirements of applicable Laws,
including ERISA and the Code, (ii) no “prohibited transaction” within the
meaning of Section 4975 of the Code or Sections 406 or 407 of ERISA and not
otherwise exempt under Section 408 of ERISA that would result in material
liability has occurred with respect to any Company Benefit Plan, (iii) there are
no actions pending, or, to the knowledge of the Company, threatened or
anticipated (other than routine claims for benefits in the ordinary course) by,
on behalf of or against any of the Company Benefit Plans which could reasonably
be expected to result in any material liability to the Company or any of its
Subsidiaries and (iv) no administrative investigation, audit or other
administrative proceeding by any Governmental Entity with respect to a Company
Benefit Plan is pending, in progress, or, to the knowledge of the Company,
threatened with respect to any Company Benefit Plan. In all material
respects, all contributions (including all employer contributions and employee
salary reduction contributions) required to have been made under any Company
Benefit Plan to any funds or trusts established thereunder or in connection
therewith have been timely made by the due date thereof.
(d) Neither
the Company, any of its Subsidiaries or any ERISA Affiliate has, at any time
within the last six years, maintained, contributed to, or had any obligation to
contribute to, or has any liability (fixed or contingent) with respect to, any
plan described in Section 413 of the Code, subject to Section 302 or Title IV of
ERISA or to the funding requirements of Section 412 of the Code including any
plan which constituted a “multiemployer plan” as defined in Section 3(37) or
4001(a)(3) of ERISA or a plan maintained in connection with any trust described
in Section 501(c)(9) of the Code.
(e) Except as
set forth on Section
2.10(e) of the Company Disclosure Schedule, the consummation of the
transactions contemplated by this Agreement will not, alone or in combination
with another event, (i) entitle any current or former employee, consultant,
director, or officer of the Company or any of its Subsidiaries to severance pay,
unemployment compensation or any other payment, except as expressly provided in
this Agreement or under applicable Law, (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee,
consultant, director or officer or result in any payment or funding of
compensation or benefits under any of the Company Benefit Plans, except as
expressly provided in this Agreement, or (iii) give rise to the payment of any
amount that would not be deductible pursuant to Section 280G or Section 162(m)
of the Code.
18
(f) Except as
disclosed in Section
2.10(f) of the Company Disclosure Schedule, each Company Benefit Plan
that is a “nonqualified deferred compensation plan” (as defined for purposes of
Section 409A(d)(1) of the Code) has been operated since January 1, 2005 in good
faith compliance with Section 409A of the Code and all applicable IRS guidance
promulgated thereunder.
Section
2.11. Labor
Matters.
(a) Neither
the Company nor any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization. There are no labor unions
or other or other organizations that have filed a petition with the National
Labor Relations Board or any other government entity since January 1, 2005
seeking certification as the collective bargaining representative of any
employee of the Company or any of its Subsidiaries. Since
January 1, 2005, there has not been, and there is not pending or, to the
knowledge of the Company, threatened, any (i) strike, lockout, slowdown,
picketing or work stoppage with respect to any current or former employee of the
Company or any Subsidiary or (ii) unfair labor practice charge, grievance or
complaint filed or pending against the Company or any of the
Subsidiaries. To the knowledge of the Company, there are no
organizational efforts with respect to the formation of a collective bargaining
unit presently being made or threatened involving employees of the Company or
any of its Subsidiaries.
(b) Section 2.11(b) of
the Company Disclosure Schedule contains a true and correct list of each
employee of the Company and its Subsidiaries (the “Business Employees”)
and, for each such Business Employee, Section 2.11(b)of the
Company Disclosure Schedule identifies the following information: (i)
employer; (ii) job title; (iii) job location; (iv) date of hire; (v) amount of
current base salary or hourly rate of pay (as applicable); (vi) target incentive
compensation for 2007 (commission and/or bonus, as applicable); (vii) total
compensation received in 2006; (viii) any other special compensation or
perquisites (e.g. automobile allowance); (ix) status as exempt or non-exempt
from applicable overtime Laws; (x) accrued but unused vacation or paid time off;
and (xi) whether such person is on a leave of absence and, if so, the type of
leave of absence and the expected date of return from such leave of
absence.
(c) There are
no claims pending or, to the knowledge of the Company, threatened, before any
Governmental Entity or arbitral forum against the Company or any of its
Subsidiaries asserting any breach of contract, tort, or violation of Title VII
of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of
1967, the Equal Pay Act, the Americans with Disabilities Act, the Family and
Medical Leave Act, the Fair Labor Standards Act, ERISA or any other similar
federal, state or local employment Law.
(d) Since
January 1, 2005, neither the Company nor any of its Subsidiaries has effectuated
(i) a “plant closing” (as defined in the Worker Adjustment and Retraining
Notification Act (the “WARN Act”) (or any
similar state, local or foreign law)) affecting any site of employment or one or
more facilities or operating units within any site of employment or facility of
the Company or any Subsidiary or (ii) a “mass layoff” (as defined in the WARN
Act (or any similar state, local or foreign law)) affecting any site of
employment or facility of the Company or any of the Subsidiaries.
19
(e) Except as
set forth in Section
2.11(e) of the Company Disclosure Schedule, since January 1, 2005, the
Company and each of the Subsidiaries has complied in all material respects with
all Laws relating to the hiring of employees and the employment of labor,
including provisions thereof relating to the calculation and payment of wages,
hours, classification as exempt or non-exempt from applicable minimum wage and
overtime Laws, equal opportunity, employment discrimination, harassment, and
retaliation, disability rights or benefits, employee leave issues, immigration,
occupational safety and health, collective bargaining and the payment of social
security and other Taxes.
(f) In all
material respects, the Company and each of the Subsidiaries currently, and since
January 1, 2005, has completed and maintain in its files Form I-9s with respect
to each of its employees. Since January 1, 2005, neither the Company
nor any of its Subsidiaries has received any notice from any Governmental Entity
that any of its employees has a name or social security number that does not
match the name or social security number maintained by any Governmental
Entity.
(g) The
Company and each of the Subsidiaries has no material liability for (i) any
arrears of wages, severance pay or any penalty relating thereto for failure to
comply with withholding and reporting all material amounts required by
applicable Law or by agreement to be withheld and reported with respect to
wages, salaries and other payments or (ii) with respect to any misclassification
of any person as (A) an independent contractor rather than as an employee or (B)
an employee exempt from state or federal minimum wage or overtime
Laws.
(h) Except as
set forth in Section
2.11(h) of the Company Disclosure Schedule, neither the Company nor any
Subsidiary is a party to any contract, agreement, or arrangement with any
employee or independent contractor receiving in excess of $50,000 of annual
compensation from the Company or any Subsidiary that (i) restricts the right of
the Company or any Subsidiary to terminate such person’s employment or
consulting relationship without cause or without a specified notice period, or
(ii) obligates the Company or any Subsidiary to pay severance equivalent to more
than two weeks’ of such person’s base compensation or to provide vesting
acceleration on shares, stock options, or other securities of the Company or any
Subsidiary upon either a termination of such person’s employment or consulting
relationship with the Company or any Subsidiary, or upon a change in control of
the Company or any Subsidiary.
(i) To the
knowledge of the Company, no officer, key employee, or group of employees of the
Company or any Subsidiary has as of the date hereof given notice or indicated
any intent to terminate their employment before the Closing Date or as a result
of the transactions contemplated by this Agreement.
Section
2.12. Investigations;
Litigation. Except as set disclosed on Section 2.12 of the
Company Disclosure Schedule, as of the date of this Agreement, (a) to the
knowledge of the Company, there is no investigation, inquiry or review pending
or threatened by any Governmental Entity with respect to the Company or any of
its Subsidiaries and (b)(i) there are no material Actions pending (or, to the
knowledge of the Company, threatened) against or affecting the Company or any of
its Subsidiaries, or any of their respective properties, at law or in equity,
and (ii) there are no Orders of, or before, any Governmental Entity against or
affecting the Company or any of its Subsidiaries or any of their respective
properties.
20
Section
2.13. Tax
Matters.
(a) Except as
disclosed on Section 2.13 of the Company Disclosure Schedule, (i) the Company
and each of its Subsidiaries have prepared and timely filed (taking into account
any extension of time within which to file) all income Tax Returns and other
material Tax Returns required to be filed by any of them as of the date of this
Agreement and all such tax returns are true, correct and complete in all
material respects, (ii) the Company and each of its Subsidiaries have paid all
Taxes required to be paid by it (whether or not shown on any Tax Return), except
Taxes which have not yet accrued or otherwise become due or that are being
contested in good faith by appropriate proceedings, (iii) as of the date of this
Agreement there are not pending or, threatened in writing, any audits,
examinations, investigations, claims, disputes, actions or other proceedings in
respect of Taxes against the Company or any of its Subsidiaries and since
January 1, 2003 no claim for the assessment or collection of any Taxes has been
asserted in writing against the Company or any of its Subsidiaries that has not
been settled with all amounts due having been paid, (iv) no officer responsible
for Tax matters of the Company has personal knowledge that any authority will
propose or assess any additional material Taxes with respect to the Company or
any Subsidiary (other than Taxes incurred in the ordinary course on income
accruing after the date hereof), (v) neither the Company nor any of the
Subsidiaries are presently the beneficiary of any extension of time within which
to file any Tax Return, (vi) no written claim, or written notice of claim, has
been made since January 1, 2003, by an authority in a jurisdiction where the
Company or any of the Subsidiaries do not file Tax Returns, and no officer
responsible for Tax matters of the Company has personal knowledge that the
Company or any of the Subsidiaries is or may be subject to taxation by an
authority in a jurisdiction where the Company or any of the Subsidiaries do not
file Tax Returns, (vii) there are no liens for Taxes (other than Permitted
Liens) upon any of the assets of the Company or any of the Subsidiaries, (viii)
the Company and each of the Subsidiaries have delivered to Parent true, correct
and complete copies of all Tax Returns, ruling requests, private letter rulings,
closing agreements, settlement agreements, tax opinions, examination reports and
statements of deficiencies filed or received since January 1, 2003, (ix) neither
the Company nor any of the Subsidiaries have waived any statute of limitations
in respect of material Taxes or agreed to any extension of time with respect to
any material Tax payment, assessment, deficiency or collection, (x) since
January 1, 2003, neither the Company nor any of the Subsidiaries has been a
member of an affiliated group of corporations within the meaning of Section
1504(a) of the Code filing a consolidated federal income Tax Return nor does the
Company or any of the Subsidiaries have any liability for Taxes of any other
Person under Treasury Regulations § 1.1502-6 (or any similar provision of
foreign, state or local Law), other than the consolidated group of which the
Company is currently the parent corporation, (xi) the Company has not been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code, (xii) neither the Company nor any of the
Subsidiaries is a party to any Tax allocation, indemnity or sharing arrangement
(other than agreements among the Company and any of its Subsidiaries and other
than customary Tax indemnifications contained in credit or other commercial
agreements the primary purpose of which does not relate to Taxes), (xiii) the
Company and each of the Subsidiaries has disclosed to the IRS all positions
taken on their federal income Tax Returns which could give rise to a substantial
understatement of Tax under Section 6662 of the Code and the Company and each of
the Subsidiaries have not engaged in any transaction that could give rise to a
disclosure obligation as a “listed transaction” under Section 6011 of the Code
and Treasury Regulations promulgated thereunder during the four (4) year period
ending on the date hereof, (xiv) neither the Company nor any of the Subsidiaries
has any material income or gain reportable for a taxable period ending after the
Closing Date but attributable to (A) a transaction occurring in, or (B) a change
in accounting method made for, a taxable period beginning prior to the Closing
Date which resulted in a deferred reporting of material income or gain from such
transactions, a timing difference in the reporting of material income or gain
between Tax and GAAP accounting methods or from such change in accounting
method, (xv) neither the Company nor any of the Subsidiaries has distributed
stock of another entity, and have not had its stock distributed by another
entity, in a transaction that was purported or intended to be governed in whole
or in part by Section 355 or 361 of the Code, and (xvi) neither the Company nor
any of the Subsidiaries are currently subject to a limitation pursuant to
Section 382 or 383 of the Code or similar provisions of state, local or foreign
law, other than with respect to the “ownership change” (within the meaning of
Section 382 of the Code or a similar concept under the relevant state, local or
foreign law) which occurred in 1997.
21
(b) As used
in this Agreement, (i) “Tax” or “Taxes” means (A) any
and all United States or foreign, federal, state, local or other taxes of any
kind (together with any and all interest, penalties, additions to tax and
additional amounts imposed with respect thereto) imposed by any Governmental
Entity, including taxes on or with respect to income, franchises, windfall or
other profits, gross receipts, property, sales, use, escheat, capital stock,
payroll, employment, unemployment, social security, workers’ compensation or net
worth, and taxes in the nature of excise, withholding, ad valorem or value
added, whether disputed or not and including any obligations to indemnify or
otherwise assume or succeed to the tax liability of any other person and (B) any
liability for the payment of any amount of the type described in the immediately
preceding clause (A) as a result of (1) being a “transferee” of
another person, (2) being a member of an affiliated, combined, consolidated or
unitary group, or (3) any contractual liability and (ii) “Tax Return” means any
return, report or similar filing (including the attached schedules) required to
be filed with respect to Taxes, including any information return or declaration
of estimated Taxes. It is agreed and understood that no
representation or warranty is made in respect of Tax matters in any Section of
this Agreement other than this Section
2.13.
Section
2.14. Intellectual
Property.
(a) Section 2.14(a) of
the Company Disclosure Schedule contains a list of all of the following that are
owned by either the Company or a Subsidiary of the
Company: (i) registered trademarks and applications for
registration of trademarks; (ii) issued patents and pending patent applications;
(iii) registered copyrights and (iv) Internet domain names, in each case in U.S.
and foreign jurisdictions (collectively, “Company Registered
Intellectual Property”). Section
2.14(a) of the Company Disclosure Schedule also contains a
list of any (y) proceedings or actions pending as of the date of this Agreement
before any court, arbitrator or mediator, and (z) any adversarial proceedings in
the United States Patent and Trademark Office (including inter partes
proceedings) related to any of the Company Registered Intellectual
Property.
22
(b) Either
the Company or a Subsidiary of the Company owns, or is licensed or otherwise
possesses legally enforceable rights to use, all Intellectual Property used in
their respective businesses as currently conducted (collectively, the “Company Intellectual
Property”).
(c) Except as
set forth on Section
2.14(c) of the Company Disclosure Schedule, the Company has not received
written notice of any pending claims and, to the knowledge of the Company, there
are no threatened claims by any person alleging infringement by the Company or
any of its Subsidiaries of any third-party Intellectual Property.
(d) Except as
set forth on Section
2.14(d) of the Company Disclosure Schedule, the conduct of the business
of the Company and its Subsidiaries as currently conducted does not infringe,
and the conduct of the business of the Company and its Subsidiaries has not at
any time since January 1, 2005 infringed, any Intellectual Property of any
person.
(e) Except as
set forth on Section
2.14(e) of the Company Disclosure Schedule, neither the Company, its
Subsidiaries, nor any of its or their employees or representatives has received
from any Person any (i) written notice claiming that any operation, act,
product, technology or service of the Company or its Subsidiaries (including
products, technologies and services currently under development) infringes or
misappropriates the Intellectual Property of any Person or constitutes unfair
competition or trade practices under any Law or (ii) written notice of third
party patent or other Intellectual Property rights from a putative or potential
licensor of such rights.
(f) To the
knowledge of the Company, no person is infringing any Company Intellectual
Property.
(g) The
Company and its Subsidiaries have taken commercially reasonable steps (i) to
protect and preserve ownership of all Company Intellectual Property that is
owned or purported to be owned by the Company or any of its Subsidiaries and
(ii) to protect their rights in confidential information and trade secrets of
the Company.
(h) As used
herein “Intellectual
Property” means all (i) patents and patent applications, together with
reissues, continuations, continuations-in-part, revisions, divisionals,
extensions and reexaminations thereof, (ii) trademarks, service marks, trade
dress, logos, trade names and Internet domain names, and applications,
registrations, and renewals in connection therewith, and all goodwill associated
therewith, (iii) copyrightable works, copyright registrations and applications
for registration thereof and renewals thereof), (iv) trade secrets, know-how,
improvements and inventions, and (v) computer software (including source code,
data, databases and related documentation).
Section
2.15. Real
Property. Except as set forth in Section 2.15 of the
Company Disclosure Schedule, neither the Company nor
any of its Subsidiaries owns or has owned any real property since March 1,
2005. Section 2.15 of the
Company Disclosure Schedule contains a complete and accurate list as of the date
of this Agreement of all leases, subleases or other similar arrangements
pursuant to which the Company or any of its Subsidiaries leases any interest in
real property (the “Leases“). True,
correct and complete copies of the Leases have been provided to Parent prior to
the date of this Agreement. The Company or a Subsidiary of the
Company has valid leasehold interests in all of its leased properties, free and
clear of all Liens (except for Permitted Liens and all other title exceptions,
defects, encumbrances and other matters, whether or not of record, which do not
materially affect the continued use of the property for the purposes for which
the property is currently being used by the Company or a Subsidiary of the
Company as of the date of this Agreement). The Leases constitute the
valid and binding obligations of the Company or its Subsidiaries, as applicable,
as tenants, enforceable in accordance with their terms, subject to the
Bankruptcy and Equity Exception. To the knowledge of the Company, no
condemnation or similar proceeding has been commenced or threatened against the
real property subject to the Leases. To the knowledge of the Company,
none of the real property subject to the Leases has been materially damaged or
destroyed, and the real property subject to the Leases, together with all
fixtures and improvements thereon, are in good working order and
condition. The Company and its Subsidiaries that are the applicable
tenants under the Leases (i) are not in material breach under Leases to which
they are parties, and to their knowledge, the landlords are not in material
breach under the Leases to which they are parties, (ii) have not prepaid any
rents or other amounts payable under the Leases more than 30 days in advance,
and have not paid any security deposits and (iii) have obtained all necessary
material certificates, permits, licenses and other approvals, governmental and
otherwise, necessary for the use, occupancy and operation of the leased premises
and the conduct of their business (including certificates of completion and
certificates of occupancy) and all required zoning, building code, land use and
other similar permits or approvals, all of which are in full force and effect as
of the date of this Agreement and, to the knowledge of the Company, not subject
to revocation, suspension, forfeiture or modification.
23
Section
2.16. Assets; Personal
Property. The Company or a Subsidiary of the Company is in
possession of and has good title to, or valid leasehold interests in or valid
rights under contract to use, such machinery, equipment, furniture, fixtures and
other tangible personal property and assets owned, leased or used by the Company
or its Subsidiaries that are material to the Company or its Subsidiaries, free
and clear of all Liens other than Permitted Liens.
Section
2.17. Customers and
Suppliers. Section 2.17 of the
Company Disclosure Schedule sets forth a list of names of (i) the twenty largest
customers of the Company in terms of sales for the calendar year ended December
31, 2007 (each, a “Material Customer”)
and (ii) the ten largest suppliers of the Company in terms of purchases for the
calendar year ended December 31, 2007 (each, a “Material Supplier”)
and includes the net sales or purchases by the Company attributable to each such
customer or supplier for such period. To the knowledge of the
Company, no Material Customer or Material Supplier intends or expects to (x)
cease doing business with the Company, (y) materially decrease the amount of
business it does with the Company or (z) materially and adversely modify the
nature and type of the business it does with the
Company.
Section
2.18. Key
Salespersons. Section 2.18 of the
Company Disclosure Schedule sets forth a list of names of (a) the top ten
salespersons of the Company and its Subsidiaries (determined by sales volume for
2007) in the imaging business and (b) the top ten salespersons of the Company
and its Subsidiaries (determined by sales volume for 2007) in the prototype
business (collectively, “Key Salespersons”),
together with the sales generated by each Key Salesperson for the year ended
December 31, 2007. To the knowledge of the Company, no Key
Salesperson intends or expects to cease working for the Company.
24
Section
2.19. Information in Proxy
Statement. None of the information contained or incorporated
by reference in the Proxy Statement as of the date it is first mailed to holders
of Company Common Stock, and at the time of the Company Meeting, or in any
amendment or supplement thereto, as of the date it is filed with the SEC, will
contain any untrue statement of a 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 under which they are made, not
misleading, except that no representation is made by the Company with respect to
statements made therein based on information supplied in writing by Parent or
Merger Sub for inclusion or incorporation by reference in the Proxy
Statement. The Proxy Statement will comply as to form in all material
respects with the Exchange Act.
Section
2.20. Insurance. Section 2.20 of the
Company Disclosure Schedule lists all of the Company’s and its Subsidiaries’
material insurance policies relating to the assets, business, officers or
directors of the Company and its Subsidiaries. All fire and casualty,
general liability, business interruption, product liability, sprinkler and water
damage insurance policies and other forms of insurance maintained by Company or
any of its Subsidiaries are, in all material respects, in character and amount
and with such deductibles and retained amounts as are generally carried by
persons engaged in similar businesses and subject to the same or similar perils
or hazards. Since March 1, 2005, to the knowledge of the Company, the
Company has maintained such policies and other forms of insurance continuously
and without interruption. There is no material claim pending under
any of such policies as to which, to the knowledge of the Company, coverage has
been questioned, denied or disputed by the underwriters of such policies or in
respect of which, to the knowledge of the Company, such underwriters have
reserved their rights. All premiums due and payable under all such
policies have been paid and, to the knowledge of the Company, as of the date
hereof, except as set forth on Section 2.20 of the
Company Disclosure Schedule, there are no unresolved audits or investigations by
any carrier with respect to the amount of premiums due under any
policy. The Company is in compliance in all material respects with
the terms of such policies. The Company has no knowledge of any
threatened termination of, or material premium increase with respect to, any of
such policies.
Section
2.21. Required Vote of the Company
Stockholders. Except as set forth on Section 2.21 of the
Company Disclosure Schedule, subject to the accuracy of the representations and
warranties of Parent and Merger Sub contained in ARTICLE III hereof,
the affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock on the record date for the Company Meeting to adopt this
Agreement and the Merger is the only vote of holders of securities of the
Company necessary to approve this Agreement, the Merger and the transactions
contemplated hereby (the “Company Stockholder
Approval”).
Section
2.22. Affiliate
Transactions. Except for the Support Agreement and any
employment, severance, retention or similar agreements disclosed in Section 2.8 of the
Company Disclosure Schedule, there are no transactions, agreements, arrangements
or understandings between (i) the Company or any of its Subsidiaries, on the one
hand, and (ii) any director, officer, employee, stockholder or affiliate of the
Company or any of its Subsidiaries, on the other hand.
Section
2.23. Finders or
Brokers. Except for Xxxxxx X. Xxxxx & Co. Incorporated and
Xxxxxxxx Xxxxx Xxxxxx & Xxxxx Financial Advisors, Inc., neither the Company
nor any of its Subsidiaries has employed any investment banker, broker or finder
in connection with the transactions contemplated by this Agreement who is
entitled to any fee or any commission in connection with the Merger and the
other transactions contemplated by this Agreement.
25
Section
2.24. Opinion of Financial
Advisors. The Company Board has received the written opinion
of Xxxxxx X. Xxxxx & Co. Incorporated dated March 28, 2008, substantially to
the effect that, as of such date, and based upon and subject to the assumptions,
qualifications and limitations set forth therein, the $5.75 in cash per share to
be received by the holders of Company Common Stock in the Merger (the “Merger
Consideration”) is fair to such holders (other than with respect to
Stonington Partners, Inc. and its affiliates, including funds controlled by
them) from a financial point of view. The Special Committee has
received the written opinion of Xxxxxxxx Xxxxx Xxxxxx & Xxxxx Financial
Advisors, Inc., dated March 28, 2008, substantially to the effect that, as of
such date, and based upon and subject to the assumptions, qualifications and
limitations set forth therein, the Merger Consideration is fair to the holders
of the Company Common Stock (other than with respect to Stonington Partners,
Inc. and its affiliates, including funds controlled by them) from a financial
point of view.
Section
2.25. State Anti-Takeover
Statutes. The Company Board has taken all necessary actions so
that the restrictions on business combinations set forth in Section 203 of the
DGCL, any other similar applicable Law, or in the Company Charter or Company
Bylaws, are not applicable to this Agreement and the transactions contemplated
hereby, including the Merger. No other “moratorium,” “control share
acquisition,” “business combination,” “fair price” or other form of
anti-takeover Law or regulation of any jurisdiction is, or at the Effective Time
will be, applicable to the Company, the execution and delivery of this
Agreement, the Support Agreement, the Merger or the other transactions
contemplated by this Agreement or the Support Agreement.
Section
2.26. Additional Payments; Other
Matters.
(a) Except as
set forth in Section
2.26(a) of the Company Disclosure Schedule, all earnout payments,
contingent payments, deferred payments, tax reimbursements or any other similar
payments or obligations (collectively, “Additional Payments”)
relating to the acquisitions of Color Edge, Inc., Color Edge Visual, Inc., Comp
24, LLC, Crush Creative, Inc., Xxxxxx Xxxxxx Studios, Inc., Advertising Props,
Inc. and Fuel Digital, Inc. (collectively, the “Business
Acquisitions”) with respect to periods ending on or before December 31,
2007 have been made in full and are not subject to any negotiation, claim,
reservation, arbitration, litigation or other dispute by any
Person.
(b) The
maximum amount of all Additional Payments relating to the Business Acquisitions
that may be paid with respect to periods ending after December 31, 2007 is set
forth in Section
2.26(b) of the Company Disclosure Schedule. Agreements to
settle the payment of such Additional Payments (other than with respect to Color
Edge, Inc. and Color Edge Visual, Inc.) are in full force and effect and have
been provided to Parent prior to the date of this Agreement.
(c) With
respect to the claims (“Color Edge Claims”)
by the former stockholders of Color Edge Inc. and Color Edge Visual, Inc. that
amounts are due to them pursuant to Section 2.6 of the Color Edge Agreements (as
defined below), (i) the Company is not a party to any agreement, written or
oral, with respect to the earnout amounts due to such former stockholders other
than the Color Edge Agreements, (ii) all correspondence between such former
stockholders and the Company and their respective counsel and representatives
relating to the Color Edge Claims have been provided to Parent prior to the date
hereof and (iii) the calculations set forth on Section 2.26(c) of
the Company Disclosure Schedule of the amount due to the former stockholders
pursuant to Section 2.6 of the Color Edge Agreements are true and correct in all
material respects and are consistent with the financial records of the Company
and the Color Edge Agreements. “Color Edge Agreements” means (i) that
certain asset purchase agreement by and among MCEI, LLC, the Company, Color
Edge, Inc. and certain shareholders of Color Edge, Inc. dated as of December 24,
2004, as amended on March 1, 2005 and April 17, 2006 and (ii) that certain asset
purchase agreement by and among MCEV, LLC, the Company, Color Edge Visual, Inc.,
Photobition New York, Inc. and certain shareholders dated as of December 24,
2004, as amended on March 1, 2005 and April 17, 2006.
26
Section
2.27. Outstanding Net
Debt. The aggregate amount of indebtedness outstanding as of
the date hereof of the Company and its Subsidiaries for borrowed money is not in
excess of the applicable amount set forth in Section 2.27 of the
Company Disclosure Schedule. The aggregate amount of the cash and
cash equivalents of the Company and its Subsidiaries as of the date hereof is
not less than the applicable amount set forth in Section 2.27 of the
Company Disclosure Schedule.
Section
2.28. Transaction
Expenses. Section 2.28 of the
Company Disclosure Schedule sets forth (a) the aggregate maximum amount of all
fees and expenses that may be paid or incurred by the Company or its
Subsidiaries in connection with the transactions contemplated by this Agreement,
including the maximum amount of such fees and expenses that may be paid to: (i)
Xxxxxx X. Xxxxx & Co. Inc. or Xxxxxxxx Xxxxx Xxxxxx & Xxxxx Financial
Advisors, Inc.; (ii) Weil, Gotshal & Xxxxxx LLP, Xxxxxx & Xxxxxxxxx, LLP
or any other legal counsel; (iii) any independent accountants; and (iv) any
other advisors, consultants, agents and representatives (collectively, the
“Maximum Transaction
Fee Amount”) and (b) the amount of such Maximum Transaction Fee Amount,
for each of the categories set forth in Section
2.8(a)(i)-(iv), that has been
paid by the Company on or prior to the date of this Agreement.
Section
2.29. No Additional
Representations. Other than representations or warranties made
in this ARTICLE
II, the Company makes no other representations or warranties with respect
to the transactions contemplated by this Agreement. The
representations and warranties set forth in this ARTICLE II are made
solely by the Company, and no representative of the Company or any Affiliate
thereof shall have any responsibility or liability related thereto.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
Parent
and Merger Sub represent and warrant to the Company as follows:
Section
3.1. Qualification; Organization,
Subsidiaries, etc. Each of Parent and Merger Sub is a legal
entity duly organized, validly existing and in good standing under the Laws of
its respective jurisdiction of organization and has all requisite corporate or
similar power and authority to own, lease and operate its properties and assets
and to carry on its business as presently conducted. Each of Parent
and Merger Sub is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership, leasing or operation of
its assets or properties or conduct of its business requires such qualification
and good standing, except where the failure to be so qualified or in good
standing, would not, individually or in the aggregate, prevent or materially
delay or materially impair the ability of Parent or Merger Sub to consummate the
Merger and the other transactions contemplated by this Agreement (a “Parent Material Adverse
Effect”). Parent has made available to the Company prior to
the date of this Agreement a true and complete copy of the certificate of
incorporation and bylaws or other equivalent organizational documents of Parent
and Merger Sub, each as amended through the date of this Agreement.
27
Section
3.2. Corporate Authority Relative
to This Agreement; No Violation.
(a) Each of
Parent and Merger Sub has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Boards of Directors of Parent and Merger Sub, and, except with
respect to the Merger for the adoption thereof by Parent, as the sole
stockholder of Merger Sub, which shall be obtained promptly after the execution
of this Agreement, no other corporate proceedings on the part of Parent or
Merger Sub are necessary to authorize the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by Parent and Merger Sub and, assuming this Agreement has
been duly executed and delivered by the Company, this Agreement constitutes the
valid and binding agreement of Parent and Merger Sub, enforceable against each
of Parent and Merger Sub in accordance with its terms, subject to the Bankruptcy
and Equity Exception.
(b) Other
than in connection with or in compliance with (i) the provisions of the
DGCL and (ii) the Exchange Act (collectively, the “Parent Approvals”),
no authorization, consent or approval of, or filing with, any Governmental
Entity is necessary for the consummation by Parent or Merger Sub of the
transactions contemplated by this Agreement, except for such authorizations,
consents, approvals or filings, that, if not obtained or made, would not have,
individually or in the aggregate, a Parent Material Adverse Effect.
(c) The
execution and delivery by Parent and Merger Sub of this Agreement does not, and,
except as described in Section 3.2(b), the
consummation of the transactions contemplated hereby and compliance with the
provisions of this Agreement will not (i) result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any material
obligation or to the loss of a material benefit under any loan, guarantee of
indebtedness or credit agreement, note, bond, mortgage, indenture, lease,
agreement, contract, instrument, permit, concession, franchise, right or license
binding upon Parent or any of its Subsidiaries or result in the creation of any
Lien (other than Permitted Liens) upon any of the properties or assets of Parent
or any of its Subsidiaries, (ii) conflict with or result in any violation
of any provision of the certificate of incorporation or bylaws or other
equivalent organizational document, in each case as amended, of Parent or Merger
Sub or (iii) conflict with or violate any applicable Laws, other than, in
the case of clauses (i) and (iii), any such violation, conflict, default,
termination, cancellation, acceleration, right, loss or Lien that would not
have, individually or in the aggregate, a Parent Material Adverse
Effect.
28
Section
3.3. Investigations;
Litigation. To the knowledge of Parent, (a) there is no
investigation or review pending or threatened by any Governmental Entity with
respect to Parent or any of its Subsidiaries which would have, individually or
in the aggregate, a Parent Material Adverse Effect, and (b) there are no
material actions, suits or proceedings pending (or, to Parent’s knowledge,
threatened) against or affecting Parent or its Subsidiaries, or any of their
respective properties at law or in equity before, and there are no orders,
judgments or decrees of, or before, any Governmental Entity, in each case, which
would have, individually or in the aggregate, a Parent Material Adverse
Effect.
Section
3.4. Financing. Parent
and Merger Sub have all of the funds necessary for the satisfaction of all of
Parent’s and Merger Sub’s obligations under this Agreement, including the
payment of the Merger Consideration, the Redemption Amount and the Option
Consideration (in the aggregate, and inclusive of any fees and expenses of or
payable by Parent, Merger Sub or the Surviving
Corporation).
Section
3.5. Commitment
Agreement. Concurrently with the execution of this Agreement,
American Capital Strategies, Ltd. (“ACAS”) has delivered
to the Company a commitment agreement addressed to the Company in the form
attached as Exhibit
C to this Agreement, guaranteeing certain obligations of Parent and
Merger Sub, respectively, under this Agreement (the “Commitment
Agreement”). The Commitment Agreement constitutes the legal,
valid and binding obligation of ACAS, enforceable in accordance with its
terms.
Section
3.6. Capitalization of Merger
Sub; No Prior Activities. As of the date of this Agreement,
the authorized capital stock of Merger Sub consists of 1,000 shares of common
stock, par value $0.001 per share, all of which are validly issued and
outstanding. All of the issued and outstanding capital stock of
Merger Sub is, and at the Effective Time will be, owned directly by
Parent. Merger Sub has outstanding no option, warrant, right, or any
other agreement pursuant to which any person other than Parent may acquire any
equity security of Merger Sub. Merger Sub has not conducted any
business prior to the date of this Agreement and has, and prior to the Effective
Time will have, no assets, liabilities or obligations of any nature other than
those incident to its formation and pursuant to this Agreement and the Merger
and the other transactions contemplated by this Agreement.
Section
3.7. Information in Proxy
Statement. None of the information supplied or to be supplied
in writing by Parent or Merger Sub for inclusion or incorporation by reference
in the Proxy Statement, at the date such Proxy Statement is first mailed to
holders of Company Common Stock, and at the time of the Company Meeting, or in
any amendment or supplement thereto, as of the date it is filed with the SEC,
will contain any untrue statement of a 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 under which they are made, not
misleading.
Section
3.8. Finders or
Brokers. Neither Parent nor any of its Subsidiaries has
employed any investment banker, broker or finder in connection with the
transactions contemplated by this Agreement who is entitled to any fee or any
commission in connection with the Merger and the other transactions contemplated
by this Agreement.
29
Section
3.9. Lack of Ownership of Company
Common Stock. Except for the Support Agreement, there are no
voting trusts or other agreements, arrangements or understandings to which
Parent or any of its Subsidiaries is a party with respect to the voting of the
capital stock or other equity interest of the Company or any of its Subsidiaries
nor are there any agreements, arrangements or understandings to which Parent or
any of its Subsidiaries is a party with respect to the acquisition, divestiture,
retention, purchase, sale or tendering of the capital stock or other equity
interest of the Company or any of its Subsidiaries.
Section
3.10. Solvency. Immediately
after giving effect to the transactions contemplated by this Agreement
(including any financing in connection with the transactions contemplated
hereby), (i) none of the Surviving Corporation or any of its Subsidiaries will
have incurred debts beyond its ability to pay such debts as they mature or
become due, the then present fair salable value of the assets of each of the
Surviving Corporation and each of its Subsidiaries will exceed the amount that
will be required to pay its respective probable liabilities (including the
probable amount of all contingent liabilities) and its respective debts as they
become absolute and matured, (ii) the assets of each of the Surviving
Corporation and each of its Subsidiaries, in each case at a fair valuation, will
exceed its respective debts (including the probable amount of all contingent
liabilities) and (iii) none of the Surviving Corporation or any of its
Subsidiaries will have unreasonably small capital to carry on its business as
presently conducted or as proposed to be conducted. No transfer of
property is being made and no obligation is being incurred in connection with
the transactions contemplated hereby with the intent to hinder, delay or defraud
either present or future creditors of Parent, Merger Sub, the Company or any
Subsidiary of the Company.
Section
3.11. No Additional
Representations. Other than representations or warranties made
in this ARTICLE
III, Parent and Merger Sub make no other representations or warranties as
to any matter whatsoever. The representations and warranties set
forth in this ARTICLE
III are made solely by Parent and Merger Sub, and no representative of
Parent and Merger Sub or any affiliate thereof shall have any responsibility or
liability related thereto.
Section
3.12. Acknowledgement Regarding
Company Representations. Parent acknowledges that neither the
Company nor any person has made any representation or warranty, express or
implied, as to the accuracy or completeness of any information regarding the
Company furnished or made available to Parent and its Representatives except as
expressly set forth in ARTICLE II, and
neither the Company nor any other person shall be subject to any liability to
Parent or any other person resulting from the Company’s making available to
Parent or Parent’s use of such information or any information, documents or
material made available to Parent in the due diligence materials provided to
Parent, including in the “data room,” other management presentations (formal or
informal) or in any other form in connection with the transactions contemplated
by this Agreement. Without limiting the foregoing, the Company does
not, and shall not be deemed to have made, and hereby disclaims, any
representation, warranty or guarantee, express or implied, as to any financial
forecast, revenue projection or financial model or other prospective information
made available by the Company or its Representatives to Parent, Merger Sub or
any of their respective Representatives. It is understood and agreed
that Parent and Merger Sub are solely responsible for developing for itself,
together with its Representatives, any such financial forecasts, revenue
projections and financial models and assessing any prospective events concerning
the Company in connection with the transactions contemplated
hereby.
30
ARTICLE
IV
ADDITIONAL
AGREEMENTS
Section
4.1. Conduct of Business by the
Company and Parent.
(a) From and
after the date of this Agreement until the earlier of the Effective Time and the
date, if any, on which this Agreement is terminated pursuant to Section 6.1 (the
“Termination
Date”), and except (i) as may be required by applicable Law,
(ii) as may be agreed in writing by Parent, (iii) as required by this
Agreement or (iv) as set forth in Section 4.1 of the
Company Disclosure Schedule, the Company shall, and shall cause each Subsidiary
to, conduct its business in the usual, regular and ordinary course consistent
with past practice and use all reasonable efforts to preserve intact its current
business organization, keep available the services of its and their current
officers and employees and maintain their relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them.
(b) Subject
to the exceptions contained in clauses (i) through (iv) of Section 4.1(a), but
without limiting the generality of Section 4.1(a), the
Company covenants and agrees with Parent, on behalf of itself and its
Subsidiaries, that between the date of this Agreement and the earlier of the
Effective Time and the Termination Date, the Company:
(i) shall not
declare, set aside or pay any dividends on or make any distribution with respect
to its outstanding shares of capital stock (whether in cash, assets, stock or
other securities of the Company or its Subsidiaries), except (i) dividends and
distributions paid or made to the Company by Subsidiaries and (ii) as set forth
in Section
4.1(b)(i) of the Company Disclosure Schedule;
(ii) shall
not, and shall not permit any of its Subsidiaries to, (i) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, except for any such transaction by a wholly
owned Subsidiary of the Company which remains a wholly owned Subsidiary after
consummation of such transaction, or (ii) purchase, redeem or otherwise acquire
any shares of the capital stock of the Company or any of its Subsidiaries or any
other securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(iii) except as
set forth in Section
4.1(b)(iii) of the Company Disclosure Schedule, as required by a Company
Benefit Plan or an existing agreement disclosed in Section 2.8(a)(x) of
the Company Disclosure Schedule, or as otherwise required by applicable Law
(including Section 409A of the Code), shall not, and shall not permit any of its
Subsidiaries to (A) increase the compensation or other benefits payable or
provided to the Company’s directors or officers, (B) enter into or amend any
employment, change of control, severance or retention agreement with any officer
of the Company, (C) establish, adopt, enter into or amend any collective
bargaining agreement, plan, trust, fund, policy or arrangement for the benefit
of any current or former directors, officers or employees or any of their
beneficiaries, or (D) hire or terminate any employees outside the ordinary
course of business;
31
(iv) shall
not, and shall not permit any of its Subsidiaries to, change financial
accounting policies or procedures or any of its methods of reporting income,
deductions or other items for financial accounting purposes, except as required
by GAAP, SEC rule or policy or applicable Law;
(v) shall
not, and shall not permit any of its Subsidiaries to, adopt any amendments to
its certificate of incorporation or bylaws or similar applicable charter
documents;
(vi) except as
set forth in Section
4.1(b)(vi) of the Company Disclosure Schedule, shall not, and shall not
permit any of its Subsidiaries to, issue, sell, pledge, dispose of or encumber,
or authorize the issuance, sale, pledge, disposition or encumbrance of, any
shares of its capital stock or other ownership interest in the Company or any
Subsidiaries or any securities convertible into or exchangeable for any such
shares or ownership interest, or any rights, warrants or options to acquire or
with respect to any such shares of capital stock, ownership interest or
convertible or exchangeable securities or take any action to cause to be
exercisable any otherwise unexercisable option under any existing stock option
plan (except as otherwise provided by the terms of this Agreement or the express
terms of any unexercisable options outstanding on the date of this Agreement),
other than (A) issuances of shares of Company Common Stock in respect of
any exercise of Company Stock Options outstanding on the date of this Agreement
and (B) the sale of shares of Company Common Stock pursuant to the exercise of
options to purchase Company Common Stock if necessary to effectuate an optionee
direction upon exercise or for withholding of Taxes;
(vii) except
for transactions among the Company and its wholly owned Subsidiaries or among
the Company’s wholly owned Subsidiaries and except in the ordinary course of
business consistent with past practice, shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, purchase, redeem or otherwise
acquire any shares of its capital stock or any rights, warrants or options to
acquire any such shares;
(viii) shall
not, and shall not permit any of its Subsidiaries to, incur, assume, guarantee,
prepay or otherwise become liable for any indebtedness for borrowed money
(directly, contingently or otherwise), issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or any of
its Subsidiaries, enter into any “keep well” or other agreement to maintain any
financial statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing;
(ix) except as
set forth in Section
4.1(b)(ix) of the Company Disclosure Schedule or for transactions among the
Company and its wholly owned Subsidiaries or among the Company’s wholly owned
Subsidiaries, shall not sell, lease, license, transfer, exchange or swap,
mortgage or otherwise encumber (including securitizations), or subject to any
Lien (other than Permitted Liens) or otherwise dispose of any material portion
of its material properties or assets, including the capital stock of
Subsidiaries, except (A) pursuant to existing agreements in effect prior to the
execution of this Agreement or (B) as may be required by applicable Law or any
Governmental Entity in order to permit or facilitate the consummation of the
transactions contemplated hereby;
32
(x) shall
not, and shall not permit any of its Subsidiaries to, acquire or agree to
acquire (A) by merging or consolidating with, or by purchasing a substantial
equity interest in or portion of the assets of, or by any other manner, any
business or any corporation, partnership, joint venture, association or other
business organization or division thereof or (B) any assets that are material,
individually or in the aggregate, to the Company and the Subsidiaries, taken as
a whole;
(xi) except as
set forth in Section
4.1(b)(xi) of the Company Disclosure Schedule, shall not, and shall not
permit any of its Subsidiaries to, waive, release, assign, settle or compromise
any material litigation other than settlements of, or compromises for, any
litigation where the amounts paid or to be paid are covered by insurance
coverage maintained by the Company;
(xii) shall
not, and shall not permit any of its Subsidiaries to, enter into any settlement,
conciliation or similar agreement with any Governmental Entity or that requires
payment of any material consideration after the execution date of this
Agreement;
(xiii) except as
set forth in Section 4.1(b)(xiii) of the Company Disclosure Schedule, shall not,
and shall not permit any of its Subsidiaries to, modify, amend, terminate or
waive any rights under any Company Material Contract in any material respect in
a manner which is adverse to the Company;
(xiv) shall
not, and shall not permit any of its Subsidiaries to, enter into any Company
Material Contracts other than in the ordinary course of business consistent with
past practice;
(xv) except as
set forth in Section
4.1(b)(xv) of the Company Disclosure Schedule, shall not, and shall not
permit any of its Subsidiaries to, make any capital expenditure or commitments
with respect thereto in excess of $100,000 individually or $500,000 in the
aggregate;
(xvi) shall
not, and shall not permit any of its Subsidiaries to, pay, discharge or satisfy
any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business or in accordance with their
terms, of liabilities reflected or reserved against in the most recent
consolidated financial statements (or the notes thereto) of the Company included
in the Company SEC Documents that were publicly available on or prior to date of
this Agreement or incurred in the ordinary course of business;
(xvii) shall not
make or change any Tax election not consistent with past practice, file any
amended Tax Return, enter into any closing agreement, settle or compromise any
proceeding with respect to any material Tax claim or assessment relating to the
Company, surrender any right to claim a refund of material Taxes, consent to any
extension or waiver of the limitation period applicable to any Tax claim or
assessment relating to the Company, or change an annual accounting period, adopt
or change any accounting method (including any Tax accounting method);
and
(xviii) shall
not, and shall not permit any of its Subsidiaries to, agree, in writing or
otherwise, to take any of the foregoing actions.
33
Section
4.2. Access to Information;
Confidentiality.
(a) The
Company shall afford to Parent and to its officers, employees, accountants,
consultants, legal counsel, financial advisors and agents and other
representatives (collectively, “Representatives”)
reasonable access during normal business hours upon reasonable prior notice to
the Company, throughout the period from the date of this Agreement to the
earlier to occur of the Effective Time and the Termination Date, to its and its
Subsidiaries’ Representatives, properties, contracts, commitments, books and
records and any report, schedule or other document filed or received by it
pursuant to the requirements of applicable Laws. Notwithstanding the
foregoing, the Company shall not be required to afford such access if it would
unreasonably disrupt the operations of the Company or any of its Subsidiaries,
would cause a violation of any agreement to which the Company or any of its
Subsidiaries is a party, would result in a loss of privilege to the Company or
any of its Subsidiaries or would constitute a violation of any applicable Law,
nor shall Parent or any of its Representatives be permitted to perform any
onsite procedure (including any onsite environmental study) with respect to any
property of the Company or any of its Subsidiaries.
(b) To the
extent permitted by Law, the Company shall cause its and its Subsidiaries’
officers and employees to assist, and shall use its commercially reasonable
efforts to cause its and their other Representatives to assist, Parent and its
Representatives in their planning and preparation with respect to the operation
of the business of the Company and its Subsidiaries from and after the Closing,
including with respect to budget, strategy and other matters.
(c) Parent
hereby agrees that all information provided to it or its Representatives in
connection with this Agreement and the consummation of the transactions
contemplated hereby shall be deemed to be Evaluation Material, as such term is
used in, and shall be treated in accordance with, the Confidentiality Agreement,
executed on January 9, 2007, between the Company and American Capital
Strategies, Ltd. (the “Confidentiality
Agreement”).
Section
4.3. No Solicitation of
Transactions.
(a) The
Company shall, and shall cause its Subsidiaries and shall direct the Company’s
Representatives to, immediately cease and cause to be terminated any discussions
or negotiations with any parties (other than Parent, Merger Sub and Parent’s
Representatives) that may be ongoing as of the date of this Agreement with
respect to an Alternative Proposal. The Company shall not, and shall
cause each of its Subsidiaries and shall direct the Company’s Representatives
not to, directly or indirectly, (i) solicit, initiate or knowingly encourage or
facilitate any Alternative Proposal, (ii) enter into any agreement or agreement
in principle with respect to an Alternative Proposal or enter into any agreement
requiring the Company to abandon, terminate or fail to consummate the Merger or
breach its obligations under this Section 4.3, (iii)
engage in, participate in or continue in any way any negotiations or discussions
regarding, or furnish or disclose to any third party any information with
respect to, any Alternative Proposal or (iv) provide access to its properties,
books or records or furnish any information to any person with respect to any
Alternative Proposal; provided, however, that at any
time prior to obtaining the Company Stockholder Approval, in response to an
unsolicited written Alternative Proposal that the Special Committee or the
Company Board (A) reasonably believes is bona fide and (B) determines in good
faith, after consultation with a financial advisor of nationally recognized
reputation, constitutes, or could reasonably be expected to lead to, a Superior
Proposal, the Company may, subject to compliance with Section 4.3(b), (x)
furnish information with respect to the Company and its Subsidiaries to the
person making such Alternative Proposal (and its Representatives) pursuant to an
executed confidentiality agreement that contains provisions which are no less
favorable to the Company than those contained in the Confidentiality Agreement;
provided that
all such information have previously been made available to Parent or is made
available to Parent prior to, or concurrently with, the time it is provided to
such person, and (y) participate in discussions with or negotiations with the
person making such Alternative Proposal (and its Representatives) regarding such
Alternative Proposal. Notwithstanding the foregoing, nothing in this
Section 4.3(a)
shall prohibit the Company from contacting and engaging in discussions with any
person who has made an unsolicited bona fide written Alternative Proposal after
the date of this Agreement solely for the purpose of clarifying such Alternative
Proposal and any material terms, and the conditions to consummation, thereof so
as to determine whether it could be reasonably expected for such Alternative
Proposal to lead to a Superior Proposal.
34
(b) The
Company shall promptly, and in any event within forty-eight (48) hours,
advise Parent orally and in writing of the Company’s receipt of any Alternative
Proposal or any inquiry that would reasonably be expected to lead to any
Alternative Proposal, the identity of the person making any such Alternative
Proposal and a copy of such Alternative Proposal (or, where no such copy is
available, a written description of the principal terms and conditions thereof)
prior to furnishing any information or participating in any discussions
permitted by this Section 4.3 with
respect to such Alternative Proposal. The Company shall (i) keep
Parent reasonably informed of the status (including any change to the terms and
conditions thereof) of any such Alternative Proposal and (ii) provide to Parent
promptly after receipt or delivery thereof, and in any event within forty-eight
(48) hours, with copies of all written correspondence and other written material
sent by the Company or any Representative to, or provided to the Company or any
Representative from, any person in connection with any Alternative
Proposal. Promptly upon determination by the Special Committee or the
Company Board that an Alternative Proposal constitutes a Superior Proposal in
accordance with Section 4.3(a), the
Company shall deliver to Parent a written notice advising it that the Special
Committee or the Company Board has made such determination, specifying the
material terms and conditions of such Superior Proposal and the identity of the
person making such Superior Proposal.
(i) As used
in this Agreement, “Alternative Proposal”
shall mean any proposal or offer made by any person prior to the receipt of the
Company Stockholder Approval (other than a proposal or offer by Parent or any of
its Subsidiaries) for (i) a merger, reorganization, share exchange,
consolidation, business combination, recapitalization, dissolution, liquidation
or similar transaction involving the Company, (ii) the acquisition by any person
of fifteen percent (15%) or more of the assets of the Company and its
Subsidiaries, taken as a whole or (iii) the acquisition by any person of fifteen
percent (15%) or more of the outstanding shares of Company Common
Stock.
35
(ii) As used
in this Agreement “Superior Proposal”
shall mean an Alternative Proposal (substituting 50% for the 15% thresholds set
forth in the definition of “Alternative Proposal”) made by any person (i) on
terms that the Special Committee or the Company Board determines in good faith,
after consultation with outside legal counsel and a financial advisor of
nationally recognized reputation, would, if consummated, result in a transaction
that is more favorable from a financial point of view to the holders of Company
Common Stock than the transactions contemplated by this Agreement, taking into
account (x) all the terms and conditions of such proposal and this Agreement
(including any proposal by Parent to amend the terms of this Agreement or the
transactions contemplated by this Agreement) and (y) the anticipated timing,
financing certainty, risk of non-consummation and prospects for completion of
such proposal; and (ii) that is reasonably capable of being completed, taking
into account all financial, regulatory, legal and other aspects of such proposal
as well as the then prevailing conditions in the securities, credit and
financial markets.
Section
4.4. Company Board
Recommendation.
(a) Subject
to the terms of Section 4.4(b)
hereof, the Company Board shall make the Recommendation.
(b) Notwithstanding
any provision of this Agreement to the contrary, at any time prior to obtaining
the Company Stockholder Approval, the Company Board (upon the recommendation of
the Special Committee) may (i) withdraw, modify or qualify in a manner adverse
to Parent the Recommendation, (ii) approve or recommend a Superior Proposal (any
action described in the foregoing clause (i) or this clause (ii), a “Company Adverse
Recommendation Change”), and/or (iii) enter into an agreement or
agreements regarding a Superior Proposal, if (x) in the case of an action
described in any such clause above, the Special Committee or the Company Board
has determined in good faith, after consultation with outside legal counsel,
that the failure to take such action would be inconsistent with the directors’
exercise of their fiduciary duties to the Company stockholders under applicable
Law and (y) in the case of an action described in clause (iii) above, the
Company simultaneously terminates this Agreement in accordance with the
provisions of Section
6.1(e)(ii) hereof and concurrently pays the Termination Fee in accordance
with the provisions of Section 6.3(a)(i)
hereof.
(c) Nothing
in this Agreement shall prohibit or restrict the Company, the Special Committee
or the Company Board from (i) taking and/or disclosing to the stockholders of
the Company a position contemplated by Rule 14e-2 promulgated under the Exchange
Act or complying with the provisions of Rule 14d-9 promulgated under the
Exchange Act or (ii) making any disclosure to the Company stockholders if, in
the good faith judgment of the Company Board, after consultation with outside
legal counsel, such disclosure would be reasonably necessary under applicable
Law (including in order to comply with its fiduciary duties to Company
stockholders under Delaware Law and under Rules 14d-9 and 14e-2 promulgated
under the Exchange Act).
36
Section
4.5. Proxy
Statement. Subject to the terms and conditions of this
Agreement, as soon as reasonably practicable following the date of this
Agreement, the Company and Parent shall jointly prepare, and the Company shall
file with the SEC, a proxy statement, letter to holders of Company Common Stock,
notice of meeting and form of proxy accompanying the proxy statement that will
be provided to the holders of Company Common Stock in connection with the
solicitation of proxies for use at the Company Meeting, and any schedules
required to be filed with the SEC in connection therewith (collectively, as
amended or supplemented, the “Proxy
Statement”). The Company and Parent, as the case may be, shall
promptly furnish all information concerning the Company on the one hand, or
Parent and Merger Sub on the other hand, that may be required by applicable
securities Laws or reasonably requested by the other Party hereto in connection
with the preparation and filing with the SEC of the Proxy
Statement. Subject to the terms and conditions of this Agreement and
all applicable Laws, the Company shall use commercially reasonable efforts to
cause the Proxy Statement to be disseminated to the holders of Company Common
Stock as promptly as practicable following the clearance thereof by the
SEC. If at any time prior to the Company Meeting, any information
relating to the Company, Parent, or Merger Sub, or any of their respective
directors, officers or affiliates, should be discovered by the Company or Parent
which should be set forth in an amendment or supplement to the Proxy Statement
so that the Proxy Statement would not include any misstatement of a material
fact or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, the Party which discovers such information shall promptly notify the
other Party hereto, and an appropriate amendment or supplement to the Proxy
Statement describing such information shall be promptly prepared and filed with
the SEC and, to the extent required by applicable Law, disseminated to the
holders of Company Common Stock. The Company shall provide Parent and
its counsel a reasonable opportunity to review and comment on the Proxy
Statement and any amendments or supplements thereto, prior to the filing thereof
with the SEC. The Company shall promptly advise Parent of any oral
comments received from the SEC or its staff with respect to the Proxy Statement
and shall provide to Parent and its counsel any and all written comments that
the Company or its counsel may receive from the SEC or its staff with respect to
the Proxy Statement promptly after receipt thereof.
Section
4.6. Company
Meeting.
(a) The
Company shall, in accordance with its certificate of incorporation and bylaws,
promptly and duly call, give notice of, convene and hold as soon as practicable
following the date upon which the Proxy Statement is cleared by the SEC, a
meeting of the holders of shares of Common Stock (the “Company Meeting”) for
the sole purpose of seeking the Company Stockholder Approval. Unless
the Company Board has made a Company Adverse Recommendation Change pursuant to
Section 4.4(b),
the Company Board shall recommend adoption of this Agreement and include in the
Proxy Statement the Recommendation. Notwithstanding anything to the contrary set
forth in this Agreement, the Company’s obligation to establish a record date
for, call, give notice of, convene and hold the Company Meeting pursuant to this
Section 4.6
shall not be limited to, or otherwise affected by, the commencement, disclosure,
announcement or submission to the Company of any Alternative Proposal unless
this Agreement has been terminated in accordance with the terms
hereof.
37
(i) Each of
Parent and Merger Sub shall vote all shares of Company Common Stock beneficially
owned by it or any of its respective Subsidiaries as of the applicable record
date in favor of the adoption of this Agreement in accordance with the DGCL at
the Company Meeting or otherwise.
Section
4.7. Employee
Matters.
(a) For a
period of nine (9) months following the Effective Time, Parent shall, or shall
cause the Surviving Corporation and its Subsidiaries to, provide each employee
of the Company and its Subsidiaries (“Company Employees”)
with compensation (other than equity-based compensation), welfare and retirement
benefits that are no less favorable, in the aggregate, than the compensation
(other than equity-based compensation), welfare and retirement benefits provided
to Company Employees pursuant to the Company Benefit Plans in effect immediately
prior to the Effective Time (excluding any benefits provided under a defined
benefit retirement plan and any retiree medical
benefits).
(b) For
purposes of determining vesting and eligibility to participate (but not for
accrual of benefits other than determining the level of vacation plan accrual
and severance benefits) under the employee benefit plans of Parent, Surviving
Corporation and their Subsidiaries providing benefits to any Company Employees
after the Effective Time (the “New Plans”), each
Company Employee shall be credited with his or her years of service with the
Company and its Subsidiaries and their respective predecessors before the
Effective Time, to the same extent as such Company Employee was entitled, before
the Effective Time, to credit for such service under any similar Company Benefit
Plan in which such Company Employee participated or was eligible to participate
immediately prior to the Effective Time, except to the extent such service
credit would result in any duplication of benefits. In addition, and
without limiting the generality of the foregoing, to the extent permitted by
applicable Law and the relevant insurance carriers: (i) each Company Employee
shall be immediately eligible to participate, without any waiting time, in any
and all New Plans to the extent coverage under such New Plan is comparable to a
Company Benefit Plan in which such Company Employee participated immediately
before the Effective Time (such plans, collectively, the “Old Plans”), and
(ii) for purposes of each New Plan providing medical, dental,
pharmaceutical and/or vision benefits to any Company Employee, Parent, Surviving
Corporation and their Subsidiaries shall, cause all pre-existing condition
exclusions and actively-at-work requirements of such New Plan to be waived for
such employee and his or her covered dependents, unless such conditions would
not have been waived under the comparable Old Plans of the Company or its
Subsidiaries in which such employee participated immediately prior to the
Effective Time and Parent, Surviving Corporation and their Subsidiaries shall
cause any eligible expenses incurred by such employee and his or her covered
dependents during the portion of the plan year of the Old Plan ending on the
date such employee’s participation in the corresponding New Plan begins to be
taken into account under such New Plan for purposes of satisfying all
deductible, coinsurance and maximum out-of-pocket requirements applicable to
such employee and his or her covered dependents for the applicable plan year as
if such amounts had been paid in accordance with such New Plan.
(c) Nothing
contained in this Agreement (i) shall require Parent, Surviving Corporation or
any of their Subsidiaries to continue to employ any particular Company Employee
following the Closing Date for any particular period of time or (ii) shall
constitute or be construed as an amendment of any Company Benefit
Plan.
38
Section
4.8. Reasonable Best
Efforts to
Complete.
(a) Subject
to the terms and conditions set forth in this Agreement (including for the
avoidance of doubt Section 6.3(c)), each
of the Parties hereto shall use (and cause its respective affiliates to use)
reasonable best efforts (subject to, and in accordance with, applicable Law) to
take promptly, or cause to be taken promptly, all actions, and to do promptly,
or cause to be done promptly, and to assist and cooperate with the other Parties
in doing, all things necessary, proper or advisable under applicable Laws to
consummate and make effective the transactions contemplated by this Agreement
(including the Merger), including using reasonable best efforts
in: (i) causing the conditions to the Merger set forth in ARTICLE V hereof to
be satisfied or fulfilled; (ii) obtaining all necessary actions or nonactions,
waivers, consents and approvals, including the Company Approvals and the Parent
Approvals, from Governmental Entities and making all necessary registrations and
filings and taking all steps as may be necessary to obtain an approval or waiver
from, or to avoid an action or proceeding by, any Governmental Entity; (iii)
obtaining all necessary consents, approvals or waivers from third parties; (iv)
defending any lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated by this Agreement (including the Merger) and (v)
executing and delivering any additional instruments necessary to consummate the
transactions contemplated by this Agreement (including the Merger).
(b) Subject
to the terms and conditions herein provided and without limiting the foregoing,
the Company and Parent shall (i) use reasonable best efforts to cooperate with
each other in (x) determining whether any filings are required to be made
with, or consents, permits, authorizations, waivers or approvals are required to
be obtained from, any third parties or other Governmental Entities in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby (including the Merger) and (y) timely
making all such filings and timely seeking all such consents, permits,
authorizations or approvals; (ii) use reasonable best efforts to take, or
cause to be taken, all other actions and do, or cause to be done, all other
things necessary, proper or advisable to consummate and make effective the
transactions contemplated hereby (including the Merger), and (iii) subject to
applicable legal limitations and the instructions of any Governmental Entity,
keep each other apprised of the status of matters relating to the completion of
the transactions contemplated thereby, including promptly furnishing the other
with copies of notices or other communications received by the Company or
Parent, as the case may be, or any of their respective Subsidiaries, from any
third party and/or any Governmental Entity with respect to such
transactions. The Company and Parent shall permit counsel for the
other Party reasonable opportunity to review in advance, and consider in good
faith the views of the other Party in connection with, any proposed written
communication to any Governmental Entity. Each of the Company and
Parent agrees not to participate in any substantive meeting or discussion,
either in person or by telephone, with any Governmental Entity in connection
with the proposed transactions unless it consults with the other Party in
advance and, to the extent not prohibited by such Governmental Entity, gives the
other Party the opportunity to attend and participate.
39
Section
4.9. Takeover
Statute. If any “fair price,” “moratorium,” “control share
acquisition” or other form of anti-takeover statute or regulation shall become
applicable to the transactions contemplated hereby, each of the Company and
Parent and the members of their respective Boards of Directors shall grant such
approvals and take such actions as are reasonably necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and otherwise act to eliminate or minimize the
effects of such statute or regulation on the transactions contemplated
hereby.
Section
4.10. Section 16
Matters. Prior to the Effective Time, the Company shall take
all such steps as may reasonably be necessary and permitted to cause the
transactions contemplated by this Agreement, including any dispositions of
shares of Company Common Stock (including derivative securities with respect to
such shares of Company Common Stock and including the deemed disposition and
cancellation of the Company Options in the Merger) or Company Convertible
Preferred Stock by each individual who is or will be subject to the reporting
requirements of Section 16(a) of the Exchange Act with respect to the Company,
to be exempt under Rule 16b-3 promulgated under the Exchange Act.
Section
4.11. Certain
Notices. At all times during the period commencing with the
execution and delivery of this Agreement and continuing until the earlier to
occur of the termination of this Agreement pursuant to Section 6.1 and the
Effective Time:
(a) The
Company shall give prompt notice to Parent upon becoming aware that any
representation or warranty made by it in this Agreement has become untrue or
inaccurate in any material respect, or of any failure of the Company to comply
with or satisfy in any material respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement such that either of the
conditions set forth in Section 5.3(a) could
not be satisfied as of the Outside Date; provided, however, that (i) the
terms and conditions of the Confidentiality Agreement shall apply to any
information provided to Parent pursuant to this Section 4.11(a) and
(ii) the delivery of any notice pursuant to this Section 4.11(a) shall
not cure any breach of any representation or warranty requiring disclosure of
such matter at or prior to the execution of this Agreement or otherwise limit or
affect the remedies available hereunder to the Party receiving such
notice.
(b) The
Company shall give prompt notice to Parent of (i) any notice or other
communication received by it from any third party subsequent to the date of this
Agreement and prior to the Effective Time to which the Company has knowledge
alleging any material breach of or material default under any Company Material
Contract, or (ii) any notice or other communication received by the Company from
any third party subsequent to the date of this Agreement and prior to the
Effective Time to which the Company has knowledge alleging that the consent of
such third party is or may be required in connection with the transactions
contemplated by this Agreement; provided, however, that (i) the
terms and conditions of the Confidentiality Agreement shall apply to any
information provided to Parent pursuant to this Section 4.11(b) and
(ii) the delivery of any notice pursuant to this Section 4.11(b) shall
not cure any breach of any representation or warranty requiring disclosure of
such matter at or prior to the execution of this Agreement or otherwise limit or
affect the remedies available hereunder to the Party receiving such
notice.
40
(c) Parent
shall give prompt notice to the Company upon becoming aware that any
representation or warranty made by it or Merger Sub in this Agreement has become
untrue or inaccurate in any material respect, or of any failure of Parent or
Merger Sub to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement; provided, however, that (i) the
terms and conditions of the Confidentiality Agreement shall apply to any
information provided to the Company pursuant to this Section 4.11(c) and
(ii) the delivery of any notice pursuant to this Section 4.11(c) shall
not cure any breach of any representation or warranty requiring disclosure of
such matter at or prior to the execution of this Agreement or otherwise limit or
affect the remedies available hereunder to the Party receiving such
notice.
Section
4.12. Public
Announcements. The Company and Parent (on behalf of itself and
Merger Sub) will consult with and to the extent reasonably practicable shall
provide each other the reasonable opportunity to review and comment upon any
press release or other public statement or comment prior to the issuance of such
press release or other public statement or comment relating to this Agreement or
the transactions contemplated by this Agreement and shall not issue any such
press release or other public statement or comment prior to such consultation
except as may be required by applicable Law or by obligations pursuant to any
listing agreement with any national securities
exchange.
Section
4.13. Indemnification and
Insurance. (a) Parent and Merger Sub agree that all rights to
exculpation, indemnification and advancement of expenses now existing in favor
of the current or former directors, officers or employees, as the case may be,
of the Company or its Subsidiaries as provided in their respective certificate
of incorporation or bylaws or other organization documents or in any agreement
shall survive the Merger and shall continue in full force and
effect. For a period of six (6) years after the Effective Time,
Parent shall, to the fullest extent permitted by Law, cause the Surviving
Corporation to honor all the exculpation, indemnification and advancement of
expenses provisions of the Company’s and each of its Subsidiaries’ certificates
of incorporation and bylaws or similar organization documents in effect
immediately prior to the Effective Time, or in any indemnification agreements of
the Company or its Subsidiaries with any of their respective directors and
officers in existence as of the date of this Agreement and set forth in Section 4.13 of the
Company Disclosure Schedule and for acts or omissions by such directors and
officers occurring prior to the Effective Time.
(b) From and
after the Effective Time, each of Parent and the Surviving Corporation shall, to
the fullest extent permitted under applicable Law and, without limiting the
foregoing, as required pursuant to any indemnity agreements of the Company or
any Subsidiary of the Company set forth in Section 4.13 of the
Company Disclosure Schedule, indemnify and hold harmless each current director
or officer of the Company or any of its Subsidiaries (each, together with such
person’s heirs, executors or administrators, an “Indemnified Party”)
against any costs or expenses (including advancing reasonable attorneys’ fees
and expenses in advance of the final disposition of any claim, suit, proceeding
or investigation to each Indemnified Party to the fullest extent permitted by
Law), judgments, fines, losses, claims, settlements, damages or liabilities
incurred in connection with any actual or threatened claim, arbitration, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative (an “Action”), arising out
of or pertaining to such Indemnified Party’s service as a director or officer of
the Company or any of the Company’s Subsidiaries or services performed by such
person at the request of the Company or any of the Company’s Subsidiaries,
including (i) any and all matters pending, existing or occurring at or prior to
the Effective Time, whether asserted or claimed prior to, at or after the
Effective Time, and (ii) any claim arising from the transactions contemplated
herein, and any actions taken by Parent and/or Merger Sub with respect thereto
(including any disposition of assets of the Surviving Corporation or any of its
Subsidiaries which is alleged to have rendered the Surviving Corporation and/or
any of its Subsidiaries insolvent). Without limiting the foregoing,
the Surviving Corporation shall also advance costs and expenses (including
attorneys’ fees) as incurred by any Indemnified Party as soon as reasonably
practicable after receipt by Parent of a written request for such advance to the
fullest extent permitted under applicable Law; provided that the
person to whom expenses are advanced provides an undertaking in customary form,
consistent with the practices of the Company prior to the Effective Time, to
repay such advances if it is ultimately determined that such person is not
entitled to indemnification (it being understood and agreed that the Surviving
Corporation shall not require the posting of any bond or any other security for
such undertaking). In the event of any such Action, Parent and the
Surviving Corporation shall cooperate with the Indemnified Party in the defense
of any such Action. Notwithstanding the foregoing, Parent shall not
be required to indemnify any Indemnified Party for Actions resulting from fraud
or from conduct that results in criminal conviction of such Indemnified
Party. Neither Parent nor the Surviving Corporation shall settle any
litigation or other suit, action or proceeding to which an Indemnified Party is
a party on terms obligating it to breach its obligations under this Section
4.13.
41
(c) Prior to
the Effective Time, Parent shall cause the Surviving Corporation,
effective as of the Effective Time, to obtain and fully pay the
premium for the extension of (i) the directors’ and officers’ liability
coverage of the Company’s existing directors’ and officers’ insurance policies,
and (ii) the Company’s existing fiduciary liability insurance policies, in each
case for a claims reporting or discovery period commencing with the Effective
Time and continuing for at least six (6) years from and after the Effective Time
with respect to any claim related to any period or time at or prior to the
Effective Time from an insurance carrier with the same or better credit rating
as the Company’s current insurance carrier with respect to directors’ and
officers’ liability insurance and fiduciary liability insurance (collectively,
“D&O
Insurance”) with terms, conditions, retentions and limits of liability
that are no less advantageous than the coverage provided under the Company’s
existing policies with respect to any actual or alleged error, misstatement,
misleading statement, act, omission, neglect, breach of duty or any matter
claimed against a director or officer of the Company or any of its Subsidiaries
by reason of him or her serving in such capacity that existed or occurred at or
prior to the Effective Time (including in connection with this Agreement or the
transactions or actions contemplated hereby). If the Company and the
Surviving Corporation for any reason fail to obtain such “tail” insurance
policies as of the Effective Time (or, with respect to the fiduciary liability
insurance portion of the D&O Insurance only, at the option of Parent in lieu
of the obligations set forth in the previous sentence), the Surviving
Corporation shall, and Parent shall cause the Surviving Corporation to, continue
to maintain in effect for a period of at least six (6) years from and after the
Effective Time the D&O Insurance in place as of the date of this Agreement
with terms, conditions, retentions and limits of liability that are no less
advantageous than the coverage provided under the Company’s existing policies as
of the date of this Agreement, or the Surviving Corporation shall, and Parent
shall cause the Surviving Corporation to, use reasonable best efforts to
purchase comparable D&O Insurance for such six-year period with terms,
conditions, retentions and limits of liability that are at least as favorable as
provided in the Company’s existing policies as of the date of this Agreement;
provided, however, that in no
event shall Parent or the Surviving Corporation be required to expend for such
policies pursuant to this sentence an annual premium amount in excess of 200% of
the annual premiums currently paid by the Company for such insurance; and provided, further, that if the
annual premiums of such insurance coverage exceed such amount, the Surviving
Corporation shall obtain a policy with the greatest coverage available for a
cost not exceeding such amount.
42
(d) The
obligations under this Section 4.13 shall
not be terminated, amended or otherwise modified in such a manner as to
adversely affect any Indemnified Party (or any other person who is a beneficiary
under the policies referred to in Section 4.13 hereof
(and their heirs and representatives)) (collectively, “Indemnified Persons”)
without the prior written consent of such affected Indemnified
Person. Each of the Indemnified Persons is intended to be a third
party beneficiary of this Section 4.13, with
full rights of enforcement as if a party thereto. The rights of each
Indemnified Person hereunder shall be in addition to, and not in limitation of,
any other rights such Indemnified Person may have under the certificate of
incorporation or bylaws or other organization documents of the Company or any of
its Subsidiaries or the Surviving Corporation, any other indemnification
arrangement, the DGCL or otherwise. The provisions of this Section 4.13 shall
survive the consummation of the Merger and expressly are intended to benefit,
and are enforceable by, each of the Indemnified Persons.
(e) In the
event Parent, the Surviving Corporation or any of their respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity in such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in either such case, proper provision shall be made so
that the successors and assigns of Parent or the Surviving Corporation, as the
case may be, shall assume the obligations set forth in this Section
4.13.
Section
4.14. Debt Payoff
Letters. The Company shall use reasonable best efforts to
assist Parent in obtaining payoff letters (and UCC-3 termination statements or
the equivalent or similar documentation providing for the release of security
interests) from all lenders with respect to all outstanding indebtedness of the
Company or any of its Subsidiaries for borrowed money on the Closing Date
(collectively, “Payoff
Documents”), in each case in connection with the refinancing by Parent of
any such indebtedness.
Section
4.15. Cooperation with
Financing. At the reasonable request of Parent, the Company
shall, and shall cause its Subsidiaries and its and their respective
Representatives to, reasonably cooperate with Parent and its Representatives in
connection with the arrangement and syndication of any debt financing that may
be entered into by Parent in connection with the transactions contemplated by
this Agreement, provided that such requested cooperation does not unreasonably
interfere with the ongoing operations of the Company and its
Subsidiaries.
Section
4.16. Cooperation on Letters of
Credit. The Company and Parent shall use their reasonable best
efforts to (i) cause replacement letters of credit to be issued by financial
institutions selected by Parent to the landlords under the leases for the
Company’s properties located at 000 Xxxx 00xx Xxxxxx,
Xxx Xxxx, XX, which replacement letters of credit shall be reasonably
satisfactory to such landlords, and (ii) cause such landlords to release all
amounts deposited with such landlords as security deposits under such leases, in
the case of each of clauses (i) and (ii) to be effective immediately after the
Closing.
43
Section
4.17. Obligations of Merger
Sub. Parent shall take all action necessary to cause Merger
Sub and the Surviving Corporation to perform their respective obligations under
this Agreement and to consummate the transactions contemplated by this
Agreement, including the Merger, upon the terms and subject to the conditions
set forth in this Agreement. The obligations and liability of Parent
and Merger Sub hereunder shall be joint and several.
Section
4.18. Adoption of Agreement by
Merger Sub. Immediately following the execution of this
Agreement, Parent, as sole stockholder of Merger Sub, shall adopt this Agreement
and the Merger in accordance with the terms of the DGCL.
44
ARTICLE
V
CONDITIONS
TO THE MERGER
Section
5.1. Conditions to Each Party’s
Obligation to Effect the Merger. The respective obligations of
Parent, Merger Sub and the Company to consummate the Merger shall be subject to
satisfaction or waiver (where permissible under applicable Law) at or prior to
the Effective Time of each of the following conditions:
(a) The
Company shall have obtained the Company Stockholder Approval;
(b) No
Governmental Entity of competent jurisdiction shall have (i) enacted, issued,
promulgated, entered, enforced or deemed applicable to the Merger any Law that
is in effect and has the effect of making the Merger illegal in any jurisdiction
or which has the effect of prohibiting or otherwise preventing the consummation
of the Merger or (ii) issued or granted any Law or order, judgment, writ,
stipulation, award, injunction, decree, arbitration, award, ruling, assessment,
decision or findings (collectively, “Order“) (whether
temporary, preliminary or permanent) that has the effect of making the Merger
illegal in any jurisdiction or which has the effect of prohibiting or otherwise
preventing the consummation of the Merger; and
(c) Any
Company Approvals required to be obtained for the consummation, as of the
Effective Time, of the transactions contemplated by this Agreement shall have
been obtained, except for such Company Approvals the failure to obtain which
would not have, individually or in the aggregate, a Company Material Adverse
Effect.
Section
5.2. Conditions to Obligation of
the Company to Effect the Merger. The obligation of the
Company to effect the Merger shall be subject to the satisfaction or waiver by
the Company at or prior to the Effective Time of the following additional
conditions:
(a) (i) Each
of Parent and Merger Sub shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Effective Time and (ii) the representations and warranties of Parent and
Merger Sub contained in this Agreement shall be true and correct in all respects
when made and as of the Effective Time as if made at such time (except that to
the extent such representations and warranties speak as of a specified date,
they need be true and correct in all respects only as of such specified date),
interpreted without giving effect to the words “materially” or “material” or to
any qualifications based on such terms or based on the defined term Parent
Material Adverse Effect, except where the failure of all such representations
and warranties to be true and correct, in the aggregate, has not had, and would
not reasonably be expected to have, a Parent Material Adverse Effect;
and
45
(b) The
Company shall have received a certificate of an executive officer of Parent as
to the satisfaction of the conditions set forth in Section
5.2(a).
Section
5.3. Conditions to Obligations of
Parent and Merger Sub to Effect the Merger. The obligations of
Parent and Merger Sub to effect the Merger shall be subject to the satisfaction
or waiver by Parent at or prior to the Effective Time of the following
additional conditions:
(a) (i) The
Company shall have performed in all material respects its obligations under this
Agreement required to be performed by it at or prior to the Effective Time and
(ii)(A) the representations and warranties of the Company contained in this
Agreement shall be true and correct in all respects when made and as of the
Effective Time as if made at such time (except to the extent such
representations and warranties speak as of a specified date, they need be true
and correct in all respects only as of such specified date), interpreted without
giving effect to the words “materially” or “material” or to any qualifications
based on such terms or based on the defined term Company Material Adverse
Effect, except where the failure of all such representations and warranties to
be true and correct, in the aggregate, has not had a Company Material Adverse
Effect and (B) the representations and warranties of the Company contained in
Section 2.2,
Section 2.23,
Section 2.26,
Section 2.27
and Section
2.28 shall be true and correct in all material respects when made and as
of the Effective Time as if made at such time (except that to the extent such
representations and warranties speak as of a specified date, they need be true
and correct in all material respects only as of such specified
date);
(b) Parent
and Merger Sub shall have received a certificate of the chief executive officer
and chief financial officer of the Company as to the satisfaction of the
conditions set forth in Section
5.3(a);
(c) The
Company shall have provided to Parent and Merger Sub a certificate in accordance
with Treasury Regulation Sections 1.897-2(h) and 1.1445-2(c)(3) to the effect
that the Company is not currently, and was not at any time during the specified
period in Section 897(c)(1)(A)(ii) of the Code, a “United States Real
Property Holding Corporation” as that term is defined in Section 897(c)(2) of
the Code;
(d) All the
outstanding shares of Company Convertible Preferred Stock shall be redeemed at
the Effective Time in consideration for the payment of the Redemption
Amount;
(e) The
Company shall have received the Payoff Documents set forth in Section 5.3(e) of the
Company Disclosure Letter, in form and substance reasonably satisfactory to
Parent;
(f) (i) All
Additional Payments relating to the Business Acquisitions set forth in Section 2.26(a) (only
with respect to the Crush matter) and Section 2.26(b) of
the Company Disclosure Schedule shall have been satisfied in full and shall not
be subject to any negotiation, claim, reservation, arbitration, litigation or
other dispute by any Person (other than with respect to Xxxxxx Xxxxxx Studios,
Inc.) and (ii) the amount that shall have been paid by the Company and its
Subsidiaries after the date hereof with respect to all Additional Payments
relating to the Business Acquisitions shall not be greater than the amounts set
forth in Section
2.26(a) and Section 2.26(b) of
the Company Disclosure Schedule; and
46
(g) Since the
date of this Agreement, there shall not have occurred and be continuing any
Company Material Adverse Effect.
Section
5.4. Frustration of Closing
Conditions. None of the Company, Parent or Merger Sub may
rely, either as a basis for not consummating the Merger or terminating this
Agreement and abandoning the Merger, on the failure of any condition set forth
in Section 5.1,
Section 5.2, or
Section 5.3, as
the case may be, to be satisfied if such failure was caused by such Party’s
breach of any provision of this Agreement or failure to use its reasonable best
efforts to consummate the Merger and the other transactions contemplated hereby,
as required by and subject to Section 4.8; provided
that nothing in this Section 5.4 shall be
deemed to limit Parent’s rights set forth in Section 6.1(b) and
Section
6.3(c).
ARTICLE
VI
TERMINATION,
AMENDMENT AND WAIVER
Section
6.1. Termination. This
Agreement may be terminated and the Merger contemplated hereby may be abandoned
at any time prior to the Effective Time, whether before or after the Company
Stockholder Approval is obtained:
(a) by mutual
written agreement of Parent and the Company;
(b) by either
Parent or the Company, if the Merger shall not have been consummated on or
before the date that is six (6) months (the “Outside Date”) after
the date of this Agreement (provided that the Company shall not be entitled to
so terminate this Agreement if the Merger shall not have been consummated by the
Outside Date due principally to the failure of the Company to perform any
obligations under this Agreement required to be performed by it at or prior to
the Effective Time);
(c) by either
Parent or the Company, notwithstanding the prior adoption of this Agreement by
the holders of Company Common Stock in accordance with Delaware Law, if, at any
time prior to the Effective Time, any Governmental Entity of competent
jurisdiction shall have (a) enacted, issued, promulgated, entered, enforced or
deemed applicable to any of the transactions contemplated hereby (including the
Merger) any Law that is in effect and has the effect of making the consummation
of any of the transactions contemplated hereby (including the Merger) illegal in
any jurisdiction in which Parent or the Company have material business or
operations or which has the effect of prohibiting or otherwise preventing the
consummation of any of the transactions contemplated by this Agreement
(including the Merger), or (b) issued or granted any Order that is in effect and
has the effect of making any of the transactions contemplated hereby (including
the Merger) illegal in any jurisdiction in which Parent or the Company have
material business or operations or which has the effect of prohibiting or
otherwise preventing the consummation of any of the transactions contemplated by
this Agreement (including the Merger), and such Order has become final and
non-appealable; provided, however, that the
right to terminate this Agreement pursuant to this Section 6.1(c) shall
not be available to any Party hereto whose action or failure to fulfill any
obligation under this Agreement has resulted in the imposition of such Law or
Order;
47
(d) by either
Parent or the Company if the Company Meeting (including any adjournments or
postponements thereof) shall have concluded and the Company Stockholder Approval
shall not have been obtained;
(e) by the
Company:
(i) in the
event (A) of a breach, in any material respect, of the covenants and agreements
on the part of Parent or Merger Sub set forth in this Agreement, or (B) that any
of the representations or warranties of Parent and/or Merger Sub set forth in
this Agreement shall have been inaccurate when made or shall not be capable of
being made as of the Effective Time which would reasonably be expected to result
in the condition set forth in Section 5.2(a) not
being satisfied (provided that representations and warranties which are confined
to a specified date shall speak only as of such date); provided, however, that
notwithstanding the foregoing, in the event that such breach of covenants or
agreements by Parent or Merger Sub is, or such inaccuracies in the
representations and warranties of Parent or Merger Sub are, curable by Parent or
Merger Sub through the exercise of commercially reasonable efforts, then the
Company shall not be permitted to terminate this Agreement pursuant to this
Section
6.1(e)(i) until the earlier to occur of (1) the expiration of a
forty-five (45) calendar day period after delivery of written notice from
the Company to Parent of such breach or inaccuracy, as applicable, or (2) Parent
or Merger Sub ceasing to exercise commercially reasonable efforts to cure such
breach or inaccuracy (it being understood that the Company may not terminate
this Agreement pursuant to this Section 6.1(e)(i) if
such breach or inaccuracy by Parent or Merger Sub is cured within such
forty-five (45) calendar day period); or
(ii) if the
Company shall have entered into an agreement with respect to a Superior Proposal
in accordance with Section 4.4(b)(iii)
hereof.
(f) by
Parent:
(i) in the
event (A) of a breach, in any material respect, of the covenants and agreements
on the part of the Company set forth in this Agreement or (B) that any
representation or warranty of the Company set forth in this Agreement shall have
been inaccurate when made or shall not be capable of being made as of the
Effective Time which would reasonably be expected to result in the condition set
forth in Section
5.3(a)(ii) not being satisfied (provided that representations and
warranties which are confined to a specified date shall speak only as of such
date); provided, however, that
notwithstanding the foregoing, in the event that such breach of covenants or
agreements by the Company is, or such inaccuracies in the representations and
warranties of the Company are, curable by the Company through the exercise of
commercially reasonable efforts, then Parent shall not be permitted to terminate
this Agreement pursuant to this Section 6.1(f)(i)
until the earlier to occur of (1) the expiration of a forty-five (45) calendar
day period after delivery of written notice from Parent to the Company of such
breach or inaccuracy, as applicable, or (2) the ceasing by the Company to
exercise commercially reasonable efforts to cure such breach or inaccuracy (it
being understood that Parent may not terminate this Agreement pursuant to this
Section
6.1(f)(i) if such breach or inaccuracy by the Company is cured within
such forty-five (45) calendar day period); or
48
(ii) if the
Company shall have (A) effected a Company Adverse Recommendation Change in
accordance with Section 4.4(b)(i) or
Section
4.4(b)(ii) hereof or (B) entered into an agreement with respect to a
Superior Proposal in accordance with Section 4.4(b)(iii)
hereof.
Section
6.2. Notice of Termination;
Effect of Termination. Any proper termination of this
Agreement pursuant to Section 6.1 hereof
shall be effective immediately upon the delivery of written notice of the
terminating Party to the other Party or Parties hereto, as
applicable. Subject to Section 6.3, in the
event of the termination of this Agreement pursuant to Section 6.1 hereof,
this Agreement shall be of no further force or effect without liability of any
Party or Parties hereto (or any stockholder, director, officer, employee, agent,
consultant or representative of such Party or Parties) to the other Party or
Parties hereto, as applicable, except that Section 2.23, Section 3.8, Section 4.2(c), this
ARTICLE VI and
ARTICLE VII
shall survive the termination of this Agreement. In addition to the
foregoing, no termination of this Agreement shall affect the obligations of the
Parties hereto set forth in the Confidentiality Agreement, all of which
obligations shall survive termination of this Agreement in accordance with their
terms.
Section
6.3. Termination Fees; Limitation of
Liability.
(a) Notwithstanding
any provision in this Agreement to the contrary, the Company shall pay to Parent
a fee of $2,500,000 in cash (the “Termination Fee”), in
the event that:
(i) this
Agreement is terminated by Parent pursuant to Section
6.1(f)(ii)(B) or by the Company
pursuant to Section
6.1(e)(ii), in which case the Company shall pay to Parent the Termination
Fee concurrently with such termination, payable by wire transfer of same day
funds; or
(ii) this
Agreement is terminated by Parent pursuant to Section
6.1(f)(ii)(A), in which case the Company shall pay to Parent the
Termination Fee concurrently with such termination, payable by wire transfer of
same day funds.
It is
understood that in no event shall the Company be required to pay the fee
referred to in this Section 6.3(a) on
more than one occasion.
(b) Notwithstanding
anything to the contrary in this Agreement, if this Agreement is terminated
pursuant to and in accordance with Section 6.1(e)(i) due
to (A) Parent’s and/or Merger Sub’s material breach of any covenant or
agreement on its part set forth in this Agreement (including for the avoidance
of doubt Parent’s or Merger Sub’s failure to effect the Merger in accordance
with ARTICLE I)
or (B) Parent’s and/or Merger Sub’s breach of Section 3.4, then, in
either of those instances set forth as clauses (A) and (B), Parent shall be
required to pay to the Company or as directed by the Company a fee of $3,500,000
(the “Reverse
Termination Fee”) as promptly as reasonably practicable (and, in any
event, within two (2) Business Days following such termination), payable by wire
transfer of same day funds. Under no circumstances shall the Reverse
Termination Fee be payable more than once pursuant to this Section
6.3(b).
49
(c) Anything
in this Agreement to the contrary notwithstanding, (i) the maximum aggregate
liability of Parent and Merger Sub for any loss or damage suffered in connection
with this Agreement or the transactions contemplated hereby (“Company Damages”),
including for the avoidance of doubt in connection with Parent’s or Merger Sub’s
failure to effect the Merger in accordance with ARTICLE I, shall be
limited to the amount of the Reverse Termination Fee, and in no event shall the
Company or any of its affiliates seek any other Company Damages or any other
recovery, judgment, or damages of any kind, including consequential, indirect,
or punitive damages, against Parent, Merger Sub or ACAS or any Affiliate of ACAS
in excess of the Reverse Termination Fee in connection with this Agreement or
the transactions contemplated hereby (including, without limitation, for any
failure to consummate the Merger and the other transactions contemplated by this
Agreement for any reason) and (ii) the Company acknowledges and agrees that it
has no right of recovery against, and no personal liability shall attach to, in
each case with respect to Company Damages, ACAS or the former, current or future
stockholders, controlling persons, directors, officers, employees, agents,
affiliates, members, managers, general or limited partners or assignees of ACAS
or Parent or any former, current or future stockholder, controlling person,
director, officer, employee, general or limited partner, member, manager,
affiliate, agent or assignee of any of the foregoing (each an “ACAS or Parent
Affiliate”), through Parent or otherwise, whether by or through attempted
piercing of the corporate veil, by or through a claim by or on behalf of Parent
against any ACAS or Parent Affiliate, by the enforcement of any assessment or by
any legal or equitable proceeding, by virtue of any statute, regulation or
applicable law, or otherwise, except for its rights to recover from ACAS (but
not any ACAS or Parent Affiliate (including any general partner or managing
member)) under and to the extent provided in the Commitment Agreement and
subject to the amount of the Reverse Termination Fee and the other limitations
described therein. Recourse against ACAS under the Commitment Agreement shall be
the sole and exclusive remedy of the Company and all of its affiliates against
ACAS or Parent Affiliates in respect of any liabilities or obligations arising
under, or in connection with, this Agreement or the transactions contemplated
hereby.
(d) Any
payment made pursuant to this ARTICLE VI shall be
net of any amounts as may be required to be deducted or withheld therefrom under
the Code or under any provision of state, local or foreign Tax Law.
Section
6.4. Procedure for
Termination. The Company may terminate this Agreement pursuant
to Section
6.1(e)(ii) at a time prior to receipt of the Company Stockholder Approval
only if: (1) the Company Board has received a Superior Proposal; (2)
in light of such Superior Proposal the Company Board shall have determined in
good faith, after consultation with outside legal counsel and a financial
advisor of nationally recognized reputation, that the failure of the Company
Board to terminate this Agreement and accept such Superior Proposal would be
inconsistent with its fiduciary duties under applicable Law (any such
determination, a “Superior Proposal
Determination”); (3) the Company has notified Parent in writing that it
has made a Superior Proposal Determination (any such notice, a “Superior Proposal
Notice”) and provided Parent a copy of the documents and/or agreements
providing for the Superior Proposal (including any other documents or agreements
referred to in or to be entered into in connection with the Superior Proposal);
(4) at least three (3) Business Days shall have passed following receipt by
Parent of the Superior Proposal Notice (such time period, the “Notice Period”), and
during the Notice Period the Company shall have negotiated in good faith with
Parent to permit Parent to make a proposal or to amend the terms of this
Agreement; (5) at the end of the Notice Period, and taking into account any
proposals (including any proposal to amend the terms of this Agreement) made by
Parent since receipt of the Superior Proposal Notice (a “Parent Proposal”),
such Superior Proposal remains a Superior Proposal and the Company Board has
again made a Superior Proposal Determination (it being understood and agreed
that if, in light of any Parent Proposal, the Company Board is no longer able to
make a Superior Proposal Determination with respect to such Superior Proposal,
then the Company shall immediately enter into an amendment to this Agreement
with Parent and Merger Sub that embodies the terms of such Parent Proposal); (6)
the Company is in compliance, in all material respects, with Section 4.3; (7) the
Company has concurrently paid the Termination Fee due under Section 6.3(a)(i);
and (8) the Company Board concurrently approves, and the Company concurrently
enters into, a definitive agreement providing for the implementation of such
Superior Proposal. The Company acknowledges and agrees that each
successive modification to the financial terms or other material terms of an
Alternative Proposal that is determined to be a Superior Proposal shall be
deemed to constitute a new Superior Proposal for purposes of this Section 6.4 which
shall require a new compliance with this Section 6.4 (and, for
the avoidance of doubt, shall trigger a new Notice Period).
50
ARTICLE
VII
MISCELLANEOUS
Section
7.1. No Survival of
Representations and Warranties. None of the representations
and warranties contained in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time.
Section
7.2. Expenses. Except
as set forth in ARTICLE VI or in the
Commitment Agreement, whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the Party incurring or required to incur
such expenses.
Section
7.3. Notices. Any
notice, request, demand, claim or other communication hereunder shall be in
writing, except as expressly provided herein, and sent by facsimile transmission
(provided that
any notice received by facsimile transmission or otherwise at the addressee’s
location on any Business Day after 5:00 p.m. (addressee’s local time) shall be
deemed to have been received at 9:00 a.m. (addressee’s local time) on the next
Business Day), by reliable overnight delivery service (with proof of service),
hand delivery or certified or registered mail (return receipt requested and
first-class postage prepaid), addressed as follows:
|
To
Parent or Merger Sub:
|
|
c/o
American Capital Strategies, Ltd.
000
X. Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxxxxx 00000
Telecopy: (000)
000-0000
|
|
Attention: Xxxx
Xxxxxxxx
|
|
with
copies, which shall not constitute notice, to:
|
|
O’Melveny
& Xxxxx LLP
Times
Square Tower
0
Xxxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Telecopy: (000)
000-0000
Attention: Xxxxxxx
X. Xxxxx, Xx., Esq.
|
|
To
the Company:
|
|
Merisel,
Inc.
000
Xxxx 00xx
Xxxxxx
0xx
Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Telecopy: (000)
000-0000
|
|
Attention: Xxxxxx
X. Xxxx
|
|
with
copies, which shall not constitute notice, to:
|
|
Weil,
Gotshal & Xxxxxx LLP
000
Xxxxx Xxxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Telecopy: (000)
000-0000
Attention: Xxxxxxx
X. Xxxxxx, Esq.
|
or to
such other address as any Party shall specify by written notice so given, and
such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed. Any Party to this
Agreement may notify any other Party of any changes to the address or any of the
other details specified in this paragraph; provided, however, that such
notification shall only be effective on the date specified in such notice or
five (5) Business Days after the notice is given, whichever is
later. Rejection or other refusal to accept or the inability to
deliver because of changed address of which no notice was given shall be deemed
to be receipt of the notice as of the date of such rejection, refusal or
inability to deliver.
Section
7.4. Amendments. This
Agreement may not be amended prior to the Effective Time, except by an
instrument in writing signed by the Parties hereto in accordance with applicable
Law.
Section
7.5. Waivers. At
any time prior to the Effective Time, any Party hereto may (a) extend the time
for the performance of any obligation or other act of another Party hereto,
(b) waive any inaccuracy in the representations and warranties of another
Party contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any covenant or agreement of another Party or condition to
its own obligations contained herein. Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the Party or
Parties to be bound thereby.
51
Section
7.6. Assignment; Binding
Effect. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the Parties
hereto (whether by operation of Law or otherwise) without the prior written
consent of the other Parties; provided that Parent and Merger Sub may assign
this Agreement to its lenders (including Affiliates of Parent and Merger Sub)
for collateral security purposes. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
Parties hereto and their respective successors and assigns.
Section
7.7. Entire Agreement; No
Third-Party Beneficiaries. This Agreement (including the
exhibits and schedules hereto), the Commitment Agreement and the Confidentiality
Agreement constitute the entire agreement, and supersede all other prior
agreements and understandings, both written and oral, between the parties, or
any of them, with respect to the subject matter hereof and thereof and, except
for the provisions of Section 1.7 and Section 1.8 (which,
from and after the Effective Time, shall be for the benefit of holders of the
shares of Company Common Stock and Company Stock Options as of the Effective
Time) and Section
4.13 (which shall be for the benefit of the Indemnified Parties), is not
intended to and shall not confer upon any person other than the Parties hereto
any rights or remedies hereunder. The Company acknowledges it is not
a party to, and has no rights under, the equity commitment letter entered into
between Parent and ACAS.
Section
7.8. Severability. Any
term or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the sole extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remainder of such term or provision or the remaining terms and
provisions of this Agreement in any jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only so broad as is enforceable.
Section
7.9. Governing
Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware, without giving effect to any
choice or conflict of law provision or rule (whether of the State of Delaware or
any other jurisdiction) that would cause the application of the Laws of any
jurisdiction other than the State of Delaware.
Section
7.10. Jurisdiction;
Enforcement. The Parties recognize and agree that if for any
reason any of the provisions of this Agreement are not performed by the Company
in accordance with their specific terms or are otherwise breached by the
Company, immediate and irreparable harm or injury would be caused for which
money damages would not be an adequate remedy. Accordingly, each Party agrees
that, in addition to other remedies, prior to any termination of this Agreement
pursuant to Section
6.1, Parent and Merger Sub shall be entitled to specific performance of
the terms hereof, in addition to any other remedy at law or
equity. In the event that any action shall be brought in equity by
Parent or Merger Sub to enforce the provisions of this Agreement, the Company
shall not allege, and hereby waives the defense, that there is an adequate
remedy at Law. The parties further acknowledge and agree that the
Company shall not be entitled to an injunction or injunctions to prevent
breaches of this Agreement by Parent or Merger Sub or to enforce specifically
the terms and provisions of this Agreement and that the Company’s sole and
exclusive remedy with respect to any such breach shall be the remedies available
to the Company set forth in Section 6.3(b) and
Section
6.3(c). In addition, each of the Parties hereto irrevocably
agrees that any legal action or proceeding with respect to this Agreement and
the rights and obligations arising hereunder, or for recognition and enforcement
of any judgment in respect of this Agreement and the rights and obligations
arising hereunder brought by the other Party hereto or its successors or
assigns, shall be brought and determined exclusively in the Delaware Court of
Chancery, or in the event (but only in the event) that such court does not have
subject matter jurisdiction over such action or proceeding, in the United States
District Court for the District of Delaware. Each of the Parties
hereto hereby irrevocably submits with regard to any such action or proceeding
for itself and in respect of its property, generally and unconditionally, to the
personal jurisdiction of the aforesaid courts and agrees that it will not bring
any action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than the aforesaid courts. Each of
the Parties hereto hereby irrevocably waives, and agrees not to assert, by way
of motion, as a defense, counterclaim or otherwise, in any action or proceeding
with respect to this Agreement, (a) any claim that it is not personally subject
to the jurisdiction of the above-named courts for any reason other than the
failure to serve in accordance with this Section 7.10, (b) any
claim that it or its property is exempt or immune from jurisdiction of any such
court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution
of judgment, execution of judgment or otherwise) and (c) to the fullest extent
permitted by the applicable Law, any claim that (i) the suit, action or
proceeding in such court is brought in an inconvenient forum, (ii) the venue of
such suit, action or proceeding is improper or (iii) this Agreement, or the
subject matter of this Agreement, may not be enforced in or by such
courts.
52
Section
7.11. Waiver of Jury
Trial. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
Section
7.12. Headings. Headings
of the Articles and Sections of this Agreement are for convenience of the
Parties only and shall be given no substantive or interpretive effect
whatsoever. The table of contents to this Agreement is for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
Section
7.13. Interpretation. When
a reference is made in this Agreement to an Article or Section, such reference
shall be to an Article or Section of this Agreement unless otherwise indicated,
and whenever a reference is made in this Agreement to “Company SEC Documents
that were publicly available on or prior to the date of this Agreement,” such
reference shall also include the Company’s Form 10-K for the year ended December
31, 2007 (with a filing date no later than March 31, 2008) in the form provided
to Parent on the date hereof (other than disclosures in “Risk Factors” sections
thereof and any other disclosures that are predictive or forward looking in
nature). Whenever the words “include,” “includes” or “including” are
used in this Agreement, they shall be deemed to be followed by the words
“without limitation.” The words “hereof,” “herein” and “hereunder”
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement. All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant thereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument or statute defined or
referred to herein or in any agreement or instrument that is referred to herein
means such agreement, instrument or statute as from time to time amended,
modified or supplemented, including (in the case of agreements or instruments)
by waiver or consent and (in the case of statutes) by succession of comparable
successor statutes and references to all attachments thereto and instruments
incorporated therein. Each of the Parties has participated in the
drafting and negotiation of this Agreement. If an ambiguity or
question of intent or interpretation arises, this Agreement must be construed as
if it is drafted by all the Parties, and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of authorship of any of the
provisions of this Agreement. The Parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and have participated jointly in the negotiation and drafting of this
Agreement and hereby waive the application of any Law, regulation, holding or
rule of construction providing that ambiguities in an agreement or other
document will be construed against the Party drafting such agreement or
document.
53
Section
7.14. Required Approvals of the
Special Committee. Notwithstanding anything to the contrary
set forth in this Agreement, the approval of a majority of the Special Committee
shall be required in order to (i) amend or terminate this Agreement, or agree or
consent to any amendment or termination of this Agreement, in any case on behalf
of the Company, (ii) extend the time for performance of, or waive, any of the
obligations or other acts of Parent or Merger Sub under this Agreement, (iii)
waive any of the Company’s rights under this Agreement, (iv) amend, rescind,
repeal or waive the certificate of incorporation or bylaws of the Company or (v)
make any other determination with respect to any action to be taken or not to be
taken by or on behalf of the Company relating to this Agreement or the
transactions contemplated hereby, including the Merger.
Section
7.15. Counterparts;
Effectiveness. This Agreement may be executed in two or more
consecutive counterparts (including by facsimile), each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument, and shall become effective when one or more counterparts
have been signed by each of the Parties and delivered (by telecopy, e-mail or
otherwise) to the other Parties.
Section
7.16. Definitions.
(a) References
in this Agreement to “Subsidiaries” of any
Party shall mean any corporation, partnership, association, trust or other form
of legal entity of which (i) more than 50% of the outstanding voting
securities are on the date of this Agreement directly or indirectly owned by
such Party, or (ii) such Party or any Subsidiary of such Party is a general
partner (excluding partnerships in which such Party or any Subsidiary of such
Party does not have a majority of the voting interests in such
partnership). References in this Agreement (except as specifically
otherwise defined) to “affiliates” shall
mean, as to any person, any other person which, directly or indirectly,
controls, or is controlled by, or is under common control with, such
person. As used in this definition, “control” (including,
with its correlative meanings, “controlled by” and “under common control with”)
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of management or policies of a person, whether through the
ownership of securities or partnership or other ownership interests, by contract
or otherwise. References in this Agreement (except as specifically
otherwise defined) to “person” shall mean an
individual, a corporation, a partnership, a limited liability company, an
association, a trust or any other entity, group (as such term is used in Section
13 of the Exchange Act) or organization, including, a Governmental
Entity, and any permitted successors and assigns of such person. As
used in this Agreement, “knowledge” means (i)
with respect to Parent, the actual knowledge of the executive officers of Parent
and (ii) with respect to the Company, the actual knowledge of the individuals
set forth in Section
7.16 of the Company Disclosure Schedule. As used in this
Agreement, “Business
Day” shall mean any day other than a Saturday, Sunday or a day on which
the banks in New York are required or authorized by Law or executive order to be
closed. References in this Agreement to specific laws or to specific
provisions of laws shall include all rules and regulations promulgated
thereunder. Any statute defined or referred to herein or in any
agreement or instrument referred to herein shall mean such statute as from time
to time amended, modified or supplemented, including by succession of comparable
successor statutes.
54
(b) Each of
the following terms is defined on the pages set forth opposite such
term:
|
1997
Plan
|
10
|
|
ACAS
|
30
|
|
ACAS
or Parent Affiliate
|
50
|
|
Action
|
42
|
|
Additional
Payments
|
27
|
|
affiliates
|
55
|
|
Agreement
|
2
|
|
Alternative
Proposal
|
36
|
|
Bankruptcy
and Equity Exception
|
11
|
|
Book-Entry
Shares
|
6
|
|
Business
Acquisitions
|
27
|
|
Business
Day
|
56
|
|
Business
Employees
|
20
|
|
Cancelled
Shares
|
4
|
|
Certificate
of Merger
|
3
|
|
Certificates
|
6
|
|
Closing
|
3
|
|
Closing
Date
|
3
|
|
Code
|
6
|
|
Color
Edge Claims
|
27
|
|
Commitment
Agreement
|
30
|
|
Company
|
2
|
|
Company
Adverse Recommendation Change
|
37
|
|
Company
Approvals
|
12
|
|
Company
Benefit Plans
|
18
|
|
Company
Board
|
2
|
|
Company
Bylaws
|
9
|
|
Company
Capital Stock
|
10
|
|
Company
Charter
|
9
|
|
Company
Common Stock
|
4
|
55
|
Company
Convertible Preferred Stock
|
10
|
|
Company
Damages
|
50
|
|
Company
Disclosure Schedule
|
9
|
|
Company
Employees
|
39
|
|
Company
Intellectual Property
|
23
|
|
Company
Material Adverse Effect
|
9
|
|
Company
Material Contracts
|
16
|
|
Company
Meeting
|
38
|
|
Company
Permits
|
16
|
|
Company
Preferred Stock
|
10
|
|
Company
Registered Intellectual Property
|
23
|
|
Company
SEC Documents
|
12
|
|
Company
Stock Option
|
8
|
|
Company
Stock Plans
|
10
|
|
Company
Stockholder Approval
|
26
|
|
Confidentiality
Agreement
|
35
|
|
D&O
Insurance
|
43
|
|
DGCL
|
2
|
|
Dissenting
Shares
|
5
|
|
Effect
|
9
|
|
Effective
Time
|
3
|
|
Environmental
Law
|
18
|
|
ERISA
|
18
|
|
ERISA
Affiliate
|
18
|
|
Exchange
Act
|
12
|
|
Exchange
Fund
|
6
|
|
GAAP
|
13
|
|
Governmental
Entity
|
12
|
|
Hazardous
Substance
|
18
|
|
Indemnified
Party
|
42
|
|
Indemnified
Persons
|
44
|
|
Intellectual
Property
|
24
|
|
IRS
|
18
|
|
Key
Salespersons
|
25
|
|
knowledge
|
56
|
|
Law
|
15
|
|
Laws
|
15
|
|
Leases
|
24
|
|
Lien
|
12
|
|
Material
Customer
|
25
|
|
Material
Supplier
|
25
|
|
Maximum
Transaction Fee Amount
|
28
|
|
Merger
|
2
|
|
Merger
Consideration
|
26
|
|
Merger
Sub
|
2
|
|
New
Plans
|
39
|
56
|
Notice
Period
|
51
|
|
Old
Plans
|
39
|
|
Option
Consideration
|
8
|
|
Order
|
45
|
|
Outside
Date
|
47
|
|
Parent
|
2
|
|
Parent
Approvals
|
29
|
|
Parent
Material Adverse Effect
|
28
|
|
Parent
Proposal
|
51
|
|
Parties
|
2
|
|
Party
|
2
|
|
Paying
Agent
|
5
|
|
Payoff
Documents
|
44
|
|
Permitted
Lien
|
12
|
|
person
|
55
|
|
Proxy
Statement
|
38
|
|
Recommendation
|
12
|
|
Redemption
Amount
|
11
|
|
Representatives
|
35
|
|
Restricted
Shares
|
8
|
|
Reverse
Termination Fee
|
49
|
|
SEC
|
12
|
|
Securities
Act
|
12
|
|
SOX
|
13
|
|
Special
Committee
|
2
|
|
Subsidiaries
|
55
|
|
Subsidiary
Governance Documents
|
9
|
|
Superior
Proposal
|
37
|
|
Superior
Proposal Determination
|
50
|
|
Superior
Proposal Notice
|
51
|
|
Support
Agreement
|
2
|
|
Surviving
Corporation
|
3
|
|
Tax
|
23
|
|
Tax
Return
|
23
|
|
Taxes
|
23
|
|
Termination
Date
|
32
|
|
Termination
Fee
|
49
|
|
WARN
Act
|
20
|
[Signature
Page Follows]
57
IN
WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly
executed and delivered as of the date first above written.
|
TU
HOLDINGS, INC.
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
TU
MERGER, INC.
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
|
|
MERISEL,
INC.
|
|
|
By:
|
|
|
Name:
|
|
|
Title:
|
