UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
|
Date
of Report (Date of earliest event reported)
|
August
12, 2008
|
TURBOCHEF
TECHNOLOGIES, INC.
(Exact
Name of Registrant as Specified in Charter)
|
Delaware
|
001-32334
|
48-1100390
|
||
|
(State
or Other Jurisdiction
of
Incorporation)
|
(Commission
File
Number)
|
(IRS
Employer
Identification
No.)
|
|
Six
Concourse Parkway, Suite 1900, Atlanta, Georgia
|
30328
|
|
|
(Address
of Principal Executive Offices)
|
(Zip
Code)
|
|
Registrant’s
telephone number, including area code:
|
(678)
987-1700
|
Not
Applicable
(Former
Name or Former Address, if Changed Since Last Report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General
Instruction A.2. below):
|
ý
|
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
|
|
¨
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
¨
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
|
¨
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
|
Item
1.01.
|
Entry
Into a Material Definitive
Agreement.
|
On August
12, 2008, TurboChef Technologies, Inc., a Delaware corporation (“TurboChef”), entered
into an Agreement and Plan of Merger (the “Merger Agreement”)
with The Middleby Corporation, a Delaware corporation (“Middleby”) and its
wholly owned subsidiary, Chef Acquisition Corp., a Delaware corporation (“Merger Sub” and,
together with Middleby, “Purchasers”). The
Merger Agreement provides that, upon the terms and conditions set forth in the
Merger Agreement, TurboChef will merge with and into Merger Sub (the “Merger”), and Merger
Sub will continue as the surviving corporation in the Merger as a wholly owned
subsidiary of Middleby. The Merger, the Merger Agreement and the
transactions contemplated thereby have been unanimously approved by the Boards
of Directors of TurboChef and Middleby.
At the
effective time of the Merger (the “Effective Time”),
each issued and outstanding share of TurboChef’s common stock, par value $0.01
per share (“TurboChef
Common Stock”), will be automatically converted into the right to receive
0.0486 shares (the “Exchange Ratio”) of
the common stock of Middleby, $0.01 par value per share (“Middleby Common
Stock”) and $3.67 in cash (the “Cash Consideration”,
and together with Middleby Common Stock, the “Merger
Consideration”) for a total value of $6.47 based on Middleby’s closing
stock price of $57.60 on August 11, 2008, the last trading date prior to the
announcement of the contemplated transaction. No fractional shares of
Middleby Common Stock will be issued in connection with the Merger, and holders
of TurboChef Common Stock will be entitled to receive cash in lieu
thereof.
Each
vested and unvested option to purchase shares of TurboChef Common Stock under
TurboChef’s 2003 Stock Option Plan that is outstanding immediately prior to the
Effective Time (“TurboChef Option”)
will be canceled and converted into the right to receive for each share of
TurboChef Common Stock subject to such TurboChef Option, a cash payment equal to
the excess, if any, of the Cash Consideration plus the Exchange Ratio multiplied
by the average of the volume weighted averages of the trading prices of
Middleby’s Common Stock for each of the ten trading days ending on the third
trading day prior to the Closing minus the applicable exercise
price. Middleby will assume all outstanding options under TurboChef’s
former 1994 Stock Option Plan and TurboChef’s outstanding
warrants. Each vested and unvested restricted stock award evidencing
the right to receive shares of TurboChef Common Stock that is outstanding
immediately prior to the Effective Time (“Restricted Stock”)
and each outstanding preferred unit exchange right evidencing the right to
receive shares of TurboChef Common Stock that is outstanding immediately prior
to the Effective Time (“Exchange Right”) will
be automatically converted into the right to receive the Merger Consideration at
the Effective Time.
TurboChef
and Middleby have made customary representations, warranties and covenants in
the Merger Agreement. The Merger Agreement contains a “no shop” restriction on,
among other things, TurboChef’s ability to solicit third party proposals,
provide information, engage in discussions and negotiations with unsolicited
third parties or enter into any agreements with respect to another proposal. The
no shop provision is subject to a “fiduciary out” provision that generally
allows TurboChef to furnish nonpublic information to such third party and engage
in discussions and negotiations with such third party if TurboChef’s Board of
Directors determines in good faith, after consultation with its legal and
financial advisors that the proposal presented by such third party would
reasonably be likely to result in a Superior Proposal (as defined in the Merger
Agreement).
The
Merger Agreement is terminable as follows: (i) either TurboChef or Middleby may
terminate if (a) the Merger is not consummated by December 31, 2008, (b) the
Merger is permanently enjoined or otherwise prohibited or (c) the requisite
stockholder vote of TurboChef’s stockholders is not obtained; (ii) TurboChef may
terminate if (a) it enters into an agreement related to a Superior Proposal, (b)
TurboChef’s Board of Directors has made an Adverse Recommendation Change because
of an Intervening Event with respect to Middleby (each as defined in the Merger
Agreement) or (c) Middleby or Merger Sub breach any representations and
warranties or covenants (subject to an opportunity to cure), resulting in a
failure to satisfy the related closing condition; and (iii) Middleby may
terminate if (a) TurboChef’s Board of Directors has made an Adverse
Recommendation Change or fails to expressly reaffirm the Company Board
Recommendation after a request by Middleby to do so, (b) TurboChef breaches any
representations and warranties or covenants (subject to an opportunity to cure),
resulting in a failure to satisfy the related closing condition or (c) TurboChef
materially breaches its “no shop” restrictions. In connection with
certain terminations, TurboChef may be required to pay a termination fee to
Middleby equal to $7 million pursuant to the terms of the Merger
Agreement.
Consummation
of the Merger is subject to various conditions, including antitrust approvals,
effectiveness of the registration statement relating to the Middleby Common
Stock, the approval of TurboChef’s stockholders and other customary closing
conditions. The transaction is expected to close in the fourth quarter of
2008.
In
connection with the transactions contemplated by the Merger Agreement, certain
officers and directors of TurboChef, collectively representing approximately 20%
of TurboChef’s outstanding shares, entered into a voting and support agreement
(the “Voting
Agreement”) with Middleby. Pursuant to the Voting Agreement,
these stockholders have agreed, among other things, to vote their shares in
favor of the adoption and approval of the Merger Agreement and the
Merger. All obligations to vote in favor of the adoption and
approval of the Merger Agreement and the Merger will terminate if the Merger
Agreement is terminated. Approval by Middleby’s stockholders is not
required.
The
foregoing descriptions of the Merger Agreement and the Voting Agreement, which
are attached hereto as Exhibits 2.1 and 10.1, respectively, are qualified in
their entirety by reference to the text thereof and are incorporated herein by
reference.
On August
12, 2008, TurboChef issued a press release announcing its entry into the Merger
Agreement. A copy of the press release is furnished herein as Exhibit
99.1.
Cautionary
Statements
The
Merger Agreement has been included to provide investors with information
regarding its terms. Except for its status as a contractual document
that establishes and governs the legal relations among the parties thereto with
respect to the transactions described above, the Merger Agreement is not
intended to be a source of factual, business or operational information about
the parties.
The
Merger Agreement contains representations and warranties made by the parties to
each other regarding certain matters. The assertions embodied in the
representations and warranties are as of specific dates and are qualified by
information in confidential disclosure schedules that the parties have exchanged
in connection with signing the Merger Agreement. The disclosure
schedules contain information that modifies, qualifies and creates exceptions to
the representations and warranties. Moreover, certain representations and
warranties may not be complete or accurate as of a particular date because they
are subject to a contractual standard of materiality and/or were used for the
purpose of allocating risk among the parties rather than establishing certain
matters as facts. Information concerning the subject matter of the
representations and warranties may change after the date of the Merger
Agreement, which subsequent information may or may not be fully reflected in
TurboChef’s or Middleby’s public disclosures. Accordingly, you should
not rely on the representations and warranties as characterizations of the
actual state of facts at the time they were made or otherwise.
Additional
Information and Where You Can Find It
Middleby
intends to file with the Securities and Exchange Commission (“SEC”) a Registration
Statement on Form S-4, which will include a proxy statement/prospectus of
TurboChef and Middleby and other relevant materials in connection with the
proposed transaction. The proxy statement/prospectus will be mailed
to the stockholders of TurboChef. Investors and stockholders are
urged to read the proxy statement/prospectus and Registration Statement, and any
and all amendments or supplements thereto, when they become available because
they will contain important information about the proposed
transaction. Investors and stockholders may obtain a free copy of the
proxy statement/prospectus and Registration Statement (when available), as well
as other documents filed by TurboChef and Middleby with the SEC, at the SEC’s
website at www.sec.gov. Investors
and stockholders may also obtain a free copy of the proxy statement/prospectus
and Registration Statement and the respective filings with the SEC directly from
TurboChef by directing a request to James A. Cochran, Senior Vice President –
Investor Relations and Corporate Strategy, at (678) 987-1700.
Each of
the companies’ directors and executive officers and other persons may be deemed,
under SEC rules, to be participating in the solicitation of proxies in
connection with the proposed transaction. Information regarding
TurboChef’s directors and officers can be found in its proxy statement filed
with the SEC on June 20, 2008, and information regarding Middleby’s directors
and officers can be found in its proxy statement filed with the SEC on March 28,
2008, and amended on April 24, 2008. Additional information regarding
the participants in the proxy solicitation and a description of their direct and
indirect interest in the transaction, by security holdings or otherwise, will be
contained in the proxy statement/prospectus and other relevant materials to be
filed with the SEC.
|
Item
9.01.
|
Financial
Statements and Exhibits
|
(d) Exhibits.
|
Exhibit No.
|
Description
of Exhibits
|
|||
|
2.1
|
Agreement
and Plan of Merger, dated August 12, 2008, by and among TurboChef
Technologies, Inc., The Middleby Corporation and Chef Acquisition
Corp.
|
|||
|
10.1
|
Stockholder
Voting and Support Agreement, dated April 30, 2008, by and among The
Middleby Corporation and the stockholders named
therein.
|
|||
|
99.1
|
Press
release dated August 12, 2008.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
| TURBOCHEF TECHNOLOGIES, INC. | |||
| (Registrant) | |||
| By: | /s/ Dennis J. Stockwell | ||
| Dennis J. Stockwell | |||
| Vice President and General Counsel | |||
| Date: August 13, 2008 | |||
Index
to Exhibits
|
Exhibit No.
|
Description
of Exhibits
|
|||
|
2.1
|
Agreement
and Plan of Merger, dated August 12, 2008, by and among TurboChef
Technologies, Inc., The Middleby Corporation and Chef Acquisition
Corp.
|
|||
|
10.1
|
Stockholder
Voting and Support Agreement, dated April 30, 2008, by and among The
Middleby Corporation and the stockholders named
therein.
|
|||
|
99.1
|
Press
release dated August 12, 2008.
|
EXECUTION
COPY
Exhibit
2.1
AGREEMENT
AND PLAN OF MERGER
by and
among
THE
MIDDLEBY CORPORATION,
CHEF
ACQUISITION CORP.
and
TURBOCHEF
TECHNOLOGIES, INC.
Dated
AUGUST
12, 2008
| TABLE OF CONTENTS | ||
|
Page
|
||
|
Index
of Defined Terms
|
Index
- iv
|
|
|
ARTICLE
I
|
||
|
THE
MERGER
|
||
|
Section
1.1
|
The
Merger
|
1
|
|
Section
1.2
|
Effective
Time
|
2
|
|
Section
1.3
|
Closing
|
2
|
|
Section
1.4
|
Directors
and Officers of the Surviving Corporation
|
2
|
|
Section
1.5
|
Subsequent
Actions
|
2
|
|
ARTICLE
II
|
||
|
CONVERSION
OF SECURITIES
|
||
|
Section
2.1
|
Conversion
of Capital Stock
|
3
|
|
Section
2.2
|
Exchange
of Certificates
|
4
|
|
Section
2.3
|
Company
Equity Plans; Exchange Rights
|
7
|
|
ARTICLE
III
|
||
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
||
|
Section
3.1
|
Organization
|
9
|
|
Section
3.2
|
Subsidiaries
and Affiliates
|
10
|
|
Section
3.3
|
Capitalization
|
10
|
|
Section
3.4
|
Authorization;
Validity of Agreement; Company Action
|
12
|
|
Section
3.5
|
Board
Approvals
|
12
|
|
Section
3.6
|
Required
Vote
|
13
|
|
Section
3.7
|
Consents
and Approvals; No Violations
|
13
|
|
Section
3.8
|
Company
SEC Documents and Financial Statements
|
13
|
|
Section
3.9
|
Absence
of Certain Changes
|
16
|
|
Section
3.10
|
No
Undisclosed Liabilities
|
16
|
|
Section
3.11
|
Litigation;
Orders
|
16
|
|
Section
3.12
|
Employee
Benefit Plans; ERISA
|
16
|
|
Section
3.13
|
Taxes
|
18
|
|
Section
3.14
|
Material
Contracts
|
20
|
|
Section
3.15
|
Real
and Personal Property
|
22
|
|
Section
3.16
|
Intellectual
Property
|
23
|
|
Section
3.17
|
Labor
Matters
|
25
|
|
Section
3.18
|
Compliance
with Laws
|
26
|
|
Section
3.19
|
Condition
of Assets
|
26
|
|
Page
|
||
|
Section
3.20
|
Customers
and Suppliers
|
26
|
|
Section
3.21
|
Environmental
Matters
|
26
|
|
Section
3.22
|
Insurance
|
29
|
|
Section
3.23
|
Certain
Business Practices
|
29
|
|
Section
3.24
|
Information
Supplied
|
30
|
|
Section
3.25
|
Opinion
of Financial Advisor
|
30
|
|
Section
3.26
|
Brokers
|
30
|
|
Section
3.27
|
State
Takeover Statutes
|
30
|
|
ARTICLE
IV
|
||
|
REPRESENTATIONS
AND WARRANTIES
|
||
|
OF
PARENT AND MERGER SUB
|
||
|
Section
4.1
|
Organization
|
31
|
|
Section
4.2
|
Authorization;
Validity of Agreement; Necessary Action
|
31
|
|
Section
4.3
|
Consents
and Approvals; No Violations
|
31
|
|
Section
4.4
|
Capitalization
|
32
|
|
Section
4.5
|
Parent
SEC Documents and Financial Statements
|
33
|
|
Section
4.6
|
Information
Supplied
|
35
|
|
Section
4.7
|
Brokers
|
35
|
|
Section
4.8
|
Interim
Operations of Merger Sub
|
36
|
|
Section
4.9
|
Parent-Owned
Shares of Company Common Stock
|
36
|
|
Section
4.10
|
Adequate
Funds and Stock
|
36
|
|
ARTICLE
V
|
||
|
CONDUCT
OF BUSINESS PENDING THE MERGER
|
||
|
Section
5.1
|
Interim
Operations of the Company
|
36
|
|
Section
5.2
|
No
Solicitation
|
39
|
|
Section
5.3
|
Right
to Make Adverse Recommendation Change Due to Intervening
|
|
|
Event.
|
42
|
|
|
ARTICLE
VI
|
||
|
ADDITIONAL
AGREEMENTS
|
||
|
Section
6.1
|
Company
Stockholder Meeting; Form S-4 and Proxy Statement
|
43
|
|
Section
6.2
|
Notification
of Certain Matters
|
44
|
|
Section
6.3
|
Access;
Confidentiality
|
45
|
|
Section
6.4
|
Publicity
|
45
|
|
Section
6.5
|
Insurance
and Indemnification
|
45
|
|
Section
6.6
|
Further
Action; Reasonable Best Efforts
|
46
|
|
Section
6.7
|
State
Takeover Laws
|
47
|
|
Section
6.8
|
Stockholder
Litigation
|
47
|
|
Section
6.9
|
Financial
Information and Cooperation
|
47
|
ii
|
Page
|
||
|
Section
6.10
|
SEC
Reports
|
48
|
|
Section
6.11
|
Tax-Free
Reorganization Treatment
|
48
|
|
Section
6.12
|
NASDAQ
Listing
|
48
|
|
Section
6.13
|
Employee
Benefits
|
48
|
|
Section
6.14
|
Section
16 Matters
|
50
|
|
Section
6.15
|
Pay-Off
Letter
|
50
|
|
ARTICLE
VII
|
||
|
CONDITIONS
|
||
|
Section
7.1
|
Conditions
to Each Party's Obligations to Effect the Merger
|
50
|
|
Section
7.2
|
Additional
Conditions to Obligation of Parent and Merger Sub to
Effect
|
|
|
the
Merger
|
51
|
|
|
Section
7.3
|
Additional
Conditions to Obligation of the Company to Effect the
Merger
|
53
|
|
ARTICLE
VIII
|
||
|
TERMINATION
|
||
|
Section
8.1
|
Termination
|
53
|
|
Section
8.2
|
Notice
of Termination; Effect of Termination
|
55
|
|
ARTICLE
IX
|
||
|
MISCELLANEOUS
|
||
|
Section
9.1
|
Amendment
and Modification
|
55
|
|
Section
9.2
|
Non-Survival
of Representations and Warranties
|
56
|
|
Section
9.3
|
Expenses
|
56
|
|
Section
9.4
|
Certain
Definitions
|
56
|
|
Section
9.5
|
Notices
|
59
|
|
Section
9.6
|
Interpretation
|
60
|
|
Section
9.7
|
Jurisdiction
|
60
|
|
Section
9.8
|
Service
of Process
|
60
|
|
Section
9.9
|
Specific
Performance
|
61
|
|
Section
9.10
|
Counterparts
|
61
|
|
Section
9.11
|
Entire
Agreement; No Third-Party Beneficiaries
|
61
|
|
Section
9.12
|
Severability
|
61
|
|
Section
9.13
|
Governing
Law
|
62
|
|
Section
9.14
|
Assignment
|
62
|
|
Section
9.15
|
Obligation
of Parent
|
62
|
|
Schedules
|
||
|
Schedule
1
|
Persons
Executing Voting and Support Agreements
|
|
|
Schedule
2
|
Treatment
of Outstanding 1994 Plan Options
|
|
|
Schedule
3
|
MSLO
Warrant Waiver, Amendment and Assumption
|
iii
| Index of Defined Terms | ||
|
Defined
Term
|
Page
|
|
|
401(k)
Plan
|
50
|
|
|
Acquisition
Agreement
|
41
|
|
|
Acquisition
Proposal
|
56
|
|
|
Adverse
Recommendation Change
|
40
|
|
|
Agreement
|
1
|
|
|
Benefit
Plans
|
17
|
|
|
Business
Day
|
57
|
|
|
Cash
Consideration
|
3
|
|
|
CERCLIS
|
28
|
|
|
Certificate
|
3
|
|
|
Closing
|
2
|
|
|
Closing
Date
|
2
|
|
|
COBRA
|
18
|
|
|
Code
|
57
|
|
|
Company
|
1
|
|
|
Company
Board of Directors
|
1
|
|
|
Company
Board Recommendation
|
13
|
|
|
Company
Disclosure Schedule
|
9
|
|
|
Company
Employees
|
49
|
|
|
Company
Financial Advisor
|
30
|
|
|
Company
Material Adverse Effect
|
9
|
|
|
Company
SEC Documents
|
14
|
|
|
Company
Stockholder Approval
|
13
|
|
|
Company
Stockholder Meeting
|
43
|
|
|
Company
Subsidiary
|
10
|
|
|
Confidentiality
Agreement
|
40
|
|
|
Contract
|
13
|
|
|
Credit
Agreement
|
50
|
|
|
D&O
Insurance
|
46
|
|
|
Delaware
Courts
|
61
|
|
|
DGCL
|
57
|
|
|
Dissenters'
Excess Cash
|
4
|
|
|
Dissenting
Shares
|
4
|
|
|
Effective
Time
|
2
|
|
|
Encumbrances
|
10
|
|
|
End
Date
|
54
|
|
|
Environmental
Claim
|
29
|
|
|
Environmental
Laws
|
29
|
|
|
ERISA
|
17
|
|
|
ERISA
Affiliate
|
18
|
|
|
Exchange
Act
|
57
|
|
Index -
iv
|
Exchange
Agent
|
4
|
|
Exchange
Fund
|
5
|
|
Exchange
Ratio
|
3
|
|
Exchange
Right
|
8
|
|
Financial
Statements
|
14
|
|
Financing
|
47
|
|
Form
S-4
|
43
|
|
GAAP
|
14
|
|
Global
Asset Purchase Agreement
|
37
|
|
Governmental
Entity
|
13
|
|
Hazardous
Substances
|
29
|
|
HSR
Act
|
13
|
|
Intellectual
Property
|
57
|
|
knowledge
|
57
|
|
Law
|
57
|
|
Leased
Real Property
|
23
|
|
Lender
|
50
|
|
Material
Contracts
|
22
|
|
Material
Licenses
|
22
|
|
Merger
|
1
|
|
Merger
Consideration
|
3
|
|
Merger
Sub
|
1
|
|
Merger
Sub Common Stock
|
3
|
|
MSLO
Warrant
|
57
|
|
Multiemployer
Pension Plans
|
17
|
|
NPL
|
28
|
|
Option
|
7
|
|
Option
Plans
|
7
|
|
Order
|
57
|
|
Outside
Date
|
54
|
|
Outstanding
1994 Plan Options
|
7
|
|
Parent
|
1
|
|
Parent
401(k) Plan
|
50
|
|
Parent
Common Stock
|
3
|
|
Parent
Disclosure Schedule
|
31
|
|
Parent
Financial Statements
|
34
|
|
Parent
Plan
|
49
|
|
Parent
Reference Price
|
57
|
|
Parent
SEC Documents
|
33
|
|
Pension
Plans
|
17
|
|
Permitted
Encumbrances
|
58
|
|
Person
|
10
|
|
Proxy
Statement
|
43
|
|
Real
Property Lease
|
23
|
|
Reinstated
Recommendation
|
43
|
|
Reportable
Transaction
|
20
|
Index -
v
|
Representatives
|
39
|
|
Restricted
Stock Unit
|
7
|
|
Sarbanes-Oxley
Act
|
14
|
|
SEC
|
58
|
|
Securities
Act
|
58
|
|
Shares
|
1
|
|
Stock
Consideration
|
3
|
|
Subsidiary
|
10
|
|
Superior
Proposal
|
41
|
|
Surviving
Corporation
|
1
|
|
Tail
Policy
|
46
|
|
Tax
|
58
|
|
Tax
Return
|
59
|
|
Taxable
|
58
|
|
Taxes
|
58
|
|
Taxing
Authority
|
59
|
|
Termination
Fee
|
56
|
|
Voting
and Support Agreement
|
59
|
|
Voting
Debt
|
11
|
|
WARN
Act
|
26
|
Index -
vi
AGREEMENT
AND PLAN OF MERGER
AGREEMENT
AND PLAN OF MERGER (hereinafter referred to as this "Agreement"), dated
August 12, 2008, by and among The Middleby Corporation, a Delaware corporation
("Parent"),
Chef Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Merger
Sub"), and TurboChef Technologies, Inc., a Delaware corporation (the
"Company").
WHEREAS,
the Board of Directors of each of Parent, Merger Sub and the Company has
unanimously approved and declared advisable the acquisition of the Company by
Parent by means of the merger of the Company with and into Merger Sub upon the
terms and subject to the conditions set forth herein and have approved and
declared advisable this Agreement;
WHEREAS,
the Board of Directors of the Company (the "Company Board of
Directors") has unanimously determined that the Merger Consideration (as
defined in Section
2.1(c)) to be received by holders of shares of common stock, par value
$0.01 per share, of the Company (the "Shares") is fair to
the holders of such Shares from a financial point of view and has resolved to
recommend that the holders of Shares adopt this Agreement, upon the terms and
subject to the conditions set forth herein; and
WHEREAS,
concurrently with the execution of this Agreement, and as a condition and
inducement to Parent's willingness to enter into this Agreement, each director,
executive officer and stockholder of the Company set forth on Schedule 1 hereto has
executed a Voting and Support Agreement in respect of Shares beneficially owned
by such director, officer or stockholder, the forms of which are attached hereto
as an exhibit to Schedule
1.
NOW,
THEREFORE, in consideration of the foregoing and the mutual representations,
warranties, covenants and agreements contained in this Agreement, and subject to
the conditions set forth herein, the parties hereto agree as
follows:
ARTICLE
I
THE
MERGER
Section
1.1 The Merger
(a) . (a) Upon
the terms and subject to the conditions set forth in this Agreement, at the
Effective Time, the Company and Merger Sub shall consummate a merger (the
"Merger")
pursuant to which (i) the Company shall be merged with and into Merger Sub and
the separate corporate existence of the Company shall thereupon cease, (ii)
Merger Sub shall be the successor or surviving corporation in the Merger and
shall continue to be governed by the Laws of the State of Delaware, and (iii)
the separate corporate existence of Merger Sub with all its rights,
privileges, immunities, powers and franchises shall continue unaffected by the
Merger. The corporation surviving the Merger is sometimes hereinafter
referred to as the "Surviving
Corporation." The Merger shall have the effects set forth in
the DGCL.
1
(b) The
Certificate of Incorporation of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation, until thereafter amended as provided by Law and such Certificate of
Incorporation.
(c) The
Bylaws of Merger Sub, as in effect immediately prior to the Effective Time,
shall be the Bylaws of the Surviving Corporation, until thereafter amended as
provided by Law, the Certificate of Incorporation of the Surviving Corporation
and such Bylaws.
Section
1.2 Effective
Time. Subject
to the provisions of this Agreement, on the Closing Date (as defined in Section 1.3), the
parties shall (i) file the appropriate Certificate of Merger in such form as is
required by and executed in accordance with the relevant provisions of the DGCL
and (ii) make all other filings or recordings required under the
DGCL. The Merger will become effective at such time as the
Certificate of Merger is duly filed with the Secretary of State of the State of
Delaware, or at such subsequent date or time as the Company and Merger Sub agree
and specify in the Certificate of Merger (such time hereinafter referred to as
the "Effective
Time").
Section
1.3 Closing. The
closing of the Merger (the "Closing") will take
place at 10:00 a.m., Chicago time, as soon as practicable, but in any event no
later than the second Business Day after satisfaction or waiver of all of the
conditions set forth in Article VII (the
"Closing
Date"), at the offices of Skadden, Arps, Slate, Meagher & Flom LLP,
333 West Wacker Drive, Chicago, Illinois 60606, unless another date or place is
agreed to in writing by the parties hereto.
Section
1.4 Directors and Officers of
the Surviving Corporation. The
directors of Merger Sub immediately prior to the Effective Time shall, from and
after the Effective Time, be the directors of the Surviving Corporation, and the
officers of the Company immediately prior to the Effective Time shall, from and
after the Effective Time, be the officers of the Surviving Corporation, in each
case until their respective successors shall have been duly elected, designated
or qualified, or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and
Bylaws.
Section
1.5 Subsequent
Actions. If
at any time after the Effective Time the Surviving Corporation shall determine,
in its reasonable discretion, that any actions are necessary or desirable to
vest, perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or assets
of either of the Company or Merger Sub acquired or to be acquired by the
Surviving Corporation as a result of, or in connection with, the Merger or
otherwise to carry out this Agreement, then the officers and directors of the
Surviving Corporation shall be authorized take all such actions as may be
necessary or desirable to vest all right, title or interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
2
ARTICLE
II
CONVERSION
OF SECURITIES
Section
2.1 Conversion of Capital
Stock. As
of the Effective Time, by virtue of the Merger and without any action on the
part of the holders of any Shares or the holders of the common stock, par value
$0.01 per share, of Merger Sub (the "Merger Sub Common
Stock"):
(a) Each
outstanding share of Merger Sub Common Stock shall remain outstanding and
shall constitute the only issued and outstanding shares of common stock of the
Surviving Corporation.
(b) All
Shares that are owned by the Company as treasury stock and any Shares owned by
Parent, Merger Sub or any other wholly-owned Subsidiary of Parent shall be
cancelled and retired, and no consideration shall be delivered in exchange
therefor.
(c) Subject
to Section
2.1(e) below, each outstanding Share, (other than Shares to be cancelled
in accordance with Section 2.1(b) and
other than Dissenting Shares) shall be converted into the right to receive: (i)
0.0486 (the "Exchange Ratio") of a
validly issued, fully paid and nonassessable share of the common stock, par
value $0.01 per share, of Parent ("Parent Common Stock")
(the "Stock
Consideration"), and (ii) $3.67 in cash, without interest (the "Cash Consideration",
and together with the Stock Consideration, the "Merger
Consideration"). At the Effective Time, all Shares converted
into the right to receive the Merger Consideration pursuant to this Section 2.1(c) shall
no longer be outstanding and shall automatically be cancelled and shall cease to
exist, and each holder of a certificate (or, in the case of uncertificated
Shares, evidence of such Shares in book-entry form) which immediately prior to
the Effective Time represented any such Shares (each, a "Certificate") shall
cease to have any rights with respect thereto, except the right to receive the
Merger Consideration and cash in lieu of any fractional shares payable pursuant
to Section
2.2(d), in each case to be
issued or paid in consideration therefor upon surrender of such
Certificate (or, in the case of uncertificated Shares, evidence of
such Shares in book-entry form) in accordance with this Section 2.2(b), without
interest. Notwithstanding the foregoing, if between the date of this
Agreement and the Effective Time, the shares of outstanding Parent Common Stock
shall have been changed into a different number of shares or a different class,
by reason of the occurrence or record date of any stock dividend, subdivision,
reclassification, recapitalization, split, combination, exchange of shares or
similar transaction, then the Exchange Ratio shall be appropriately adjusted to
reflect such action. The right of any holder of a Certificate to receive the
Merger Consideration and cash in lieu of any fractional shares payable pursuant
to Section
2.2(d) shall, to the
extent provided in Section 2.2(i), be subject to and
reduced by the amount of any withholding that is required under applicable Tax
Law.
(d) Dissenting
Shares.
(i) Shares
that are issued and outstanding immediately prior to the Effective Time and
which are held by holders who have not voted in favor of or consented to the
Merger and who are entitled to demand and have properly demanded their rights to
be paid the fair value of such Shares in accordance with Section 262 of the DGCL
(the "Dissenting
Shares") shall not be cancelled and converted into the right to receive
the Merger Consideration, and the holders thereof shall be entitled to only such
rights as are granted by Section 262 of the DGCL; provided, however, that if
any such stockholder of the Company shall fail to perfect or shall effectively
waive, withdraw or lose such stockholder's rights under Section 262 of the DGCL,
such stockholder's Dissenting Shares in respect of which the stockholder would
otherwise be entitled to receive fair value under Section 262 of the DGCL shall
thereupon be deemed to have been cancelled, at the Effective Time, and the
holder thereof shall be entitled to receive the Merger Consideration (payable
without any interest thereon) as compensation for such
cancellation.
3
(ii) The
Company shall give Parent (A) prompt notice of any notice received by the
Company of intent to demand the fair value of any Shares, withdrawals of such
notices and any other instruments or notices served pursuant to Section 262 of
the DGCL and (B) the opportunity to direct all negotiations and proceedings with
respect to the exercise of appraisal rights under Section 262 of the
DGCL. The Company shall not, except with the prior written consent of
Parent or as otherwise required by an Order, (x) make any payment or other
commitment with respect to any such exercise of appraisal rights, (y) offer to
settle or settle any such rights or (z) waive any failure to timely deliver a
written demand for appraisal or timely take any other action to perfect
appraisal rights in accordance with the DGCL.
(e) Notwithstanding
anything in this Article II to the contrary, the Stock Consideration and the
Cash Consideration paid for each Share converted pursuant to Section 2.1(c) shall be adjusted
in the manner set forth herein to account for the excess cash paid to holders of
Dissenting Shares pursuant to Section 2.1(d) over the amount
of cash such holders would have received had the Dissenting Shares been
converted pursuant to Section 2.1(c) (the "Dissenters' Excess
Cash", which shall be equal to 40% of the total cash paid in exchange for
the Dissenting Shares). First, the Cash Consideration payable for
each Share shall be reduced pro rata by an aggregate amount equal to the
Dissenters’ Excess Cash. Second, the Stock Consideration (and the
Exchange Ratio) payable for each Share shall be increased pro rata by an
aggregate amount equal to the Dissenters’ Excess Cash (based on the per share
value of the Parent Common Stock as of the day immediately preceding the date of
this Agreement). Nothing in this Section 2.1(e) is intended to
result in a change to the aggregate amount of cash and the aggregate number of
shares of Parent Common Stock payable in exchange for the Shares (including
Dissenting Shares) as of the date of this Agreement pursuant to this Article
II.
Section
2.2 Exchange of
Certificates.
(a) Exchange
Agent. At the Effective Time, Parent shall deposit, or cause
the Surviving Corporation to deposit with a bank or trust company designated by
Parent and reasonably satisfactory to the Company (the "Exchange Agent"), for
the benefit of the holders of Certificates (or, in the case of uncertificated
Shares, evidence of such Shares in book-entry form), certificates representing
Parent Common Shares in an amount sufficient to pay the Stock Consideration and
cash in an amount sufficient to pay the Cash Consideration required to be paid
pursuant to Section
2.1(c) in the aggregate amount equal to the number of shares of Parent
Common Stock and amount of cash into which such Shares have been converted (in
each case, other than Dissenting Shares). In addition, Parent shall
deposit with the Exchange Agent, as necessary from time to time after the
Effective Time, cash in lieu of any fractional shares payable pursuant to Section
2.2(d). All cash and shares of Parent Common Stock deposited
with the Exchange Agent pursuant to this Section 2.2(a) shall
hereinafter be referred to as the "Exchange
Fund".
4
(b) Exchange
Procedures. Promptly after the Effective Time, but in any
event no later than the fifth Business Day after the Effective Time, Parent
shall cause the Exchange Agent to mail to each holder of record of a Certificate
(or, in the case of uncertificated Shares, evidence of such Shares in book-entry
form) whose Shares were converted into the right to receive the Merger
Consideration and cash in lieu of any fractional shares payable pursuant to
Section 2.2(d)
(i) a form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent and which shall be in
customary form and contain customary provisions including customary provisions
with respect to delivery of an "agent's message" with respect to
Shares held in book-entry form) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration and cash
in lieu of any fractional shares payable pursuant to Section 2.2(d). Each holder of
record of one or more Certificates shall, upon surrender to the Exchange Agent
of such Certificate or Certificates (or, if applicable, delivery of an "agent's message"), together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by the Exchange
Agent, be entitled to receive in exchange therefor (i) the amount of cash to
which such holder is entitled pursuant to Section 2.1(c), (ii)
a certificate or certificates representing that number of whole shares of Parent
Common Stock (after taking into account all Certificates surrendered by such
holder) to which such holder is entitled pursuant to Section 2.1(c) and
(iii) cash in lieu of any fractional shares payable pursuant to Section 2.2(d), and
the Certificates so surrendered shall forthwith be cancelled. In the
event of a transfer of ownership of Shares which is not registered in the
transfer records of the Company, payment of the Merger Consideration may be made
to a person other than the person in whose name the Certificate so surrendered
is registered if such Certificate shall be properly endorsed or otherwise be in
proper form for transfer and the person requesting such payment shall pay any
transfer or other Taxes required by reason of the transfer or establish to
the reasonable satisfaction of Parent that such Taxes have been paid or are not
applicable. Until surrendered as contemplated by this Section 2.2(b), each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration and cash
in lieu of any fractional shares payable pursuant to Section 2.2(d). No
interest shall be paid or will accrue on any payment to holders of Certificates
or holders of Shares in book-entry form pursuant to the provisions of this
Article II.
(c) No Further Ownership Rights
in Shares. The Merger Consideration and cash in lieu of any
fractional shares payable pursuant to Section 2.2(d) paid
upon the surrender of Certificates (or, if applicable, delivery of an "agent's message") in accordance with the terms of this Article II
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the Shares formerly represented by such Certificates. At the close
of business on the day on which the Effective Time occurs, the share transfer
books of the Company shall be closed, and there shall be no further registration
of transfers on the share transfer books of the Surviving Corporation of the
Shares that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, any Certificate is presented to the Surviving Corporation
for transfer, it shall be cancelled against delivery of and exchanged as
provided in this Article II.
5
(d) No Fractional
Shares. No certificates or scrip representing fractional
shares of Parent Common Stock shall be issued upon the surrender for exchange of
Certificates or holders of Shares in book-entry form (or, if applicable,
delivery of an "agent's message"), and such fractional share
interests shall not entitle the owner thereof to vote or to any rights of a
stockholder of Parent. Each holder of Shares who otherwise would have
been entitled to a fraction of a share of Parent Common Stock shall receive in
lieu thereof cash equal to the product obtained by multiplying (A) the
fractional share interest to which such holder (after taking into account all
Shares formerly represented by all Certificates surrendered by such holder)
would otherwise be entitled by (B) the per share closing price of the Parent
Common Stock on the last trading day immediately prior to the Closing Date, as
such price is reported on the NASDAQ Stock Market (as reported by Bloomberg
Financial Markets or such other source as the parties shall agree in
writing).
(e) Termination of the Exchange
Fund. Any portion of the Exchange Fund that remains undistributed to the
holders of the Certificates or holders of Shares in book-entry form for six
months after the Effective Time shall be delivered to Parent, upon demand, and
any holders of the Certificates or holders of Shares in book-entry form who have
not theretofore complied with this Article II shall thereafter look only to
Parent for, and Parent shall remain liable for, payment of their claim for the
Merger Consideration and cash in lieu of any fractional shares payable pursuant
to Section
2.2(d) in accordance with this Article II.
(f) No Liability. None of
Parent, Merger Sub, the Company, the Surviving Corporation or the Exchange Agent
shall be liable to any person in respect of any shares of Parent Common Stock or
other distributions from the Exchange Fund properly delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
Law.
(g) Investment of Exchange
Fund. The Exchange Agent shall invest the cash included in the Exchange
Fund as directed by Parent (i) direct obligations of or guaranteed by
the United States of America, (ii) commercial paper rated the highest quality by
either Moody's Investors Services, Inc. or Standard & Poor's Rating Group, a
division of The McGraw Hill Companies, Inc. or (iii) money market, bank
repurchase agreements or bankers' acceptances of commercial banks with capital
exceeding $3 billion, or any of the foregoing and, in any such case, no such
investment shall be subject to an extended maturity that would prohibit
immediate liquidation and access to such funds. Any interest and other
income resulting from such investments shall be paid to and be income of Parent.
If for any reason (including losses) the cash in the Exchange Fund shall be
insufficient to fully satisfy all of the payment obligations to be made in cash
by the Exchange Agent hereunder, Parent shall promptly deposit cash into the
Exchange Fund in an amount which is equal to the deficiency in the amount
of cash required to fully satisfy such cash payment obligations.
(h) Lost Certificates. If
any Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent, the posting by such person of a
bond in such reasonable amount as Parent may direct as indemnity against any
claim that may be made against it with respect to such Certificate, the Exchange
Agent shall deliver in exchange for such lost, stolen or destroyed Certificate
the Merger Consideration and cash in lieu of any fractional shares payable
pursuant to Section
2.2(d), in each case
pursuant to this Article II.
6
(i) Withholding Rights.
Parent, the Surviving Corporation or the Exchange Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement such amounts as Parent, the Surviving Corporation or the Exchange
Agent determine are required to be deducted and withheld with respect to the
making of such payment under Code, or any provision of state, local or foreign
Tax Law. To the extent that amounts are so withheld and paid over to the
appropriate Taxing Authority by Parent, the Surviving Corporation or the
Exchange Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of Certificates or holder of shares
in book-entry form in respect of which such deduction and withholding was made
by Parent, the Surviving Corporation or the Exchange Agent.
(j) Exchange Agent
Expenses. Except as otherwise provided herein, Parent shall pay all
charges and expenses, including those of the Exchange Agent, in connection with
the exchange of the Merger Consideration for Certificates.
Section
2.3 Company Equity
Plans; Exchange
Rights.
(a) Effective
as of the Effective Time, the Company shall terminate the Company's 2003 Stock
Incentive Plan and any predecessor plans thereto, each as amended through the
date of this Agreement (collectively, the "Option
Plans"). Each holder of an option to purchase shares of common
stock of the Company granted under the Option Plans or otherwise (each, an
"Option") that
is outstanding and unexercised at the Effective Time whether or not vested
pursuant to the terms of the applicable Option Plan, other than holders of an
Option to purchase shares of common stock of the Company granted under the
Company’s former 1994 Stock Option Plan (the "Outstanding 1994 Plan
Options") shall be entitled to receive from the Surviving
Corporation as soon as reasonably practicable after the Effective Time, in
exchange for the cancellation of such Option, a payment in cash, payable in U.S.
dollars and without interest, equal to the product of (i) (A) the excess, if
any, of (1) the Cash Consideration plus (2) (x) the Exchange Ratio multiplied by
(y) the Parent Reference Price over (B) the per share exercise price of such
Option, multiplied by (ii) the number of Shares subject to such Option as of the
Effective Time. Any such payments shall be subject to Section 2.3(d). The
Surviving Corporation shall assume the Outstanding 1994 Plan Options as options
to purchase shares of Parent Common Stock, upon the terms and subject to the
conditions set forth on Schedule 2
hereto. The Surviving Corporation shall assume the MSLO Warrant upon
the terms and subject to the conditions set forth in that certain Waiver,
Amendment and Assumption, dated August 12, 2008, among the Company, Parent
and Martha Stewart Living Omnimedia, Inc., a copy of which is attached hereto in
Schedule
3.
(b) Immediately
prior to the Effective Time, each restricted stock unit award evidencing the
right to receive shares of common stock of the Company granted under the Option
Plans or otherwise (each, a "Restricted Stock
Unit") that is outstanding immediately prior thereto shall become fully
vested as to the number of shares of common stock of the Company that are the
subject thereof as of the Effective Time and shall by virtue of the Merger and
without any action on the part of any holder of any Restricted Stock Unit be
cancelled and converted into the right to receive from the Surviving Corporation
as soon as reasonably practicable after the Effective Time the Merger
Consideration in respect of such number of shares of common stock of the Company
that are the subject thereof. Any such payments shall be subject to
Section
2.3(d).
7
(c) Immediately
prior to the Effective Time, the Company shall take all actions necessary to
cause each Enersyst Development Center, L.L.C. preferred unit exchange right
(each, an "Exchange
Right") granted pursuant to that certain Preferred Unit Exchange
Agreement dated May 21, 2004 that is outstanding and unexercised at the
Effective Time to be cancelled, and each such holder of Exchange Rights shall be
entitled to receive from the Surviving Corporation as soon as reasonably
practicable after the Effective Time, in exchange for the cancellation of such
Exchange Rights, the Merger Consideration in respect of such number of shares of
common stock of the Company that are the subject thereof. Any such payments shall
be subject to Section
2.3(d).
(d) The
Surviving Corporation shall be entitled to deduct and withhold from the amounts
otherwise payable pursuant to Sections 2.3(a)-(c) to any holder of
Options, Restricted Stock Units and Exchange Rights such amounts as the Company
is required to deduct and withhold with respect to the making of such payment
under the Code or any provision of state, local or foreign tax Law, and shall
deposit such amounts with the appropriate taxing authority on behalf of the
applicable holder. To the extent that amounts are so deducted and
withheld by the Surviving Corporation, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
Options, Restricted Stock Units or Exchange Rights in respect of which such
deduction and withholding was made by the Surviving Corporation.
(e) Prior
to the Effective Time, the Company shall take all necessary action (i) (in
accordance with that certain SEC no-action letter, dated January 12, 1999, to
Skadden, Arps, Slate, Meagher & Flom LLP) to provide that the treatment of
Options pursuant to Section 2.3(a) will qualify for
exemption under Rule 16b-3(d) or (e), as applicable, under the Exchange Act, and
(ii) to effect the treatment of the Option Plans and Options, Restricted Stock
Units and Exchange Rights set forth in this Section 2.3,
including obtaining any and all necessary consents.
(f) Prior
to the Effective Time, Parent, the Company and Exchange Agent shall mutually
agree on the mechanics for the payment (as promptly as practicable following the
Effective Time) of the consideration to be received under this Section 2.3 to
holders of Options, Restricted Stock Units and Exchange Rights.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
8
Except as
set forth on the disclosure schedule, dated the date hereof, delivered by the
Company to Parent (the "Company Disclosure
Schedule"), with specific reference to the particular Section or
subsection of this Agreement to which the limitation set forth in such Company
Disclosure Schedule relates (it being understood that any information set forth
in a particular Section or subsection of the Company Disclosure Schedule shall
be deemed to apply to and qualify each other Section or subsection thereof or
hereof to the extent that it is readily apparent on its face that such
information is relevant to such other Section or subsection thereof or hereof),
the Company represents and warrants to Parent and Merger Sub as set forth
below.
Section
3.1 Organization. (a) The
Company is a corporation duly organized, validly existing and in good standing
under the Laws of the State of Delaware and has full corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted.
(b) The
Company is duly qualified or licensed to do business as a foreign corporation
and in good standing in each jurisdiction where such qualification or licensing
is necessary, except where the failure to be so qualified or licensed or in good
standing could not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect. As used in this Agreement,
"Company Material
Adverse Effect" means any change, circumstance, development,
occurrence, event, fact or effect that, when considered either individually or
in the aggregate, is or is reasonably likely to be materially adverse to (A) the
business, properties, assets, liabilities, consolidated results of operations or
condition (financial or otherwise) of the Company and the Company Subsidiaries,
taken as a whole, or (B) the ability of the Company to perform any of its
obligations under or consummate the transactions contemplated by this Agreement;
provided, however, that in the case of
clause (A) only, none of the following shall be deemed to be, and shall not be
taken into account when determining whether there has been, a Company Material
Adverse Effect: changes, circumstances, developments, occurrences, events, facts
or effects resulting from (i) changes affecting the industries in which the
Company and its Company Subsidiaries operate; (ii) any conditions affecting the
economy or the financial, debt, credit, or securities markets in the United
States, including as a result of changes in geopolitical conditions; (iii) acts
of war (whether or not declared), armed hostilities and acts of terrorism, or
developments or changes therein; (iv) any conditions resulting from natural
disasters; (v) compliance by the Company and its Company Subsidiaries with the
covenants contained in this Agreement; (vi) any failure by the Company to meet
any published analyst estimates or expectations of the Company's revenue,
earnings or other financial performance or results of operations for any period
ending on or after the date of this Agreement (it being understood that the
exception in this clause (vi) is strictly limited to any such failure in and of
itself and shall not prevent or otherwise affect a determination that any
change, circumstance, development, occurrence, event, fact or effect underlying
such failure has resulted in or contributed to a Company Material Adverse
Effect); (vii) any action taken or omitted to be taken by or at the written
request or with the written consent of Parent; (viii) changes in GAAP or
authoritative interpretations thereof; unless, in the case of clauses (i), (ii)
or (iii), such change, circumstance, development, occurrence, event, fact or
effect has a materially disproportionate effect on the Company compared with
other companies operating in the industries in which the Company operates; or
(ix) any announcement of this Agreement or the transactions contemplated hereby,
in each case, solely to the extent due to such announcement. The
Company has heretofore delivered to Parent complete and correct copies of the
Certificate of Incorporation and Bylaws (or similar organizational documents) of
the Company and each Company Subsidiary as presently in effect.
9
Section
3.2 Subsidiaries and
Affiliates. (a) Section 3.2(a)(i) of
the Company Disclosure Schedule sets forth the name, jurisdiction of
incorporation or organization and authorized and outstanding capital of each
Company Subsidiary. Other than with respect to the Company
Subsidiaries, the Company does not own, directly or indirectly, any capital
stock or other equity securities of any Person or have any direct or indirect
equity or ownership interest in any business. No Shares are held by a
Company Subsidiary. All of the outstanding capital stock (or similar
equity interests) of each Company Subsidiary is (or are) owned directly or
indirectly by the Company free and clear of all liens, charges, security
interests, options, claims, mortgages, pledges, or other encumbrances and
restrictions of any nature whatsoever ("Encumbrances"), and
is (or are) validly issued, fully paid and nonassessable. As used in
this Agreement: the term "Company Subsidiary"
means each Person which is a Subsidiary of the Company; the term "Subsidiary" means
with respect to any party, any corporation, partnership, limited liability
company or other organization or entity, whether incorporated or unincorporated,
of which (i) at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the board of directors
or others performing similar functions with respect to such organization is
directly or indirectly owned or controlled by such party or by any one or more
of its Subsidiaries, or by such party and one or more of its Subsidiaries or
(ii) such party or any other Subsidiary of such party is a general partner
(excluding any such partnership where such party or any Subsidiary of such party
does not have a majority of the voting interest in such partnership); and the
term "Person"
means a natural person, partnership, corporation, limited liability company,
business trust, joint stock company, trust, unincorporated association, joint
venture, Governmental Entity or other entity or organization.
(b) Each
Company Subsidiary (i) is duly organized, validly existing and in good standing
under the Laws of its jurisdiction of incorporation or organization and has full
power and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. Each Company Subsidiary is
duly qualified or licensed to do business as a foreign corporation or limited
liability company, as the case may be, and is in good standing in each
jurisdiction where such qualification or licensing is necessary, except where
the failure to be so qualified or licensed or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
Section
3.3 Capitalization. (a) The
authorized capital stock of the Company consists of (i) 100,000,000 shares of
common stock, par value $0.01 per share, and (ii) 5,000,000 shares of preferred
stock, par value $1.00 per share. As of the date of this Agreement,
(i) 30,390,471 Shares are issued and outstanding, (ii) no Shares are issued and
held in the treasury of the Company, (iii) a total of 3,596,246 Shares are
reserved for issuance upon the exercise of outstanding Options or upon the
vesting of Restricted Stock Units, (iv) a total of 2,650,744 Shares subject to
options are vested and exercisable as of the date hereof, (v) a total of 564,813
Shares are available for future grant under the Option Plans, (vi) 454,000
Shares are reserved for issuance upon the exercise of outstanding warrants and
(vii) no shares of preferred stock are issued and outstanding. All of
the outstanding shares of the Company's common stock are, and all shares that
may be issued pursuant to the exercise of outstanding Options will be, duly
authorized, validly issued, fully paid and non-assessable. The only
principal amount of outstanding indebtedness for borrowed money of the Company
and the Company Subsidiaries is $8.0 million (which amount is as of the close of
business on August 8, 2008) under the Company's Amended and Restated Credit
Agreement, dated as of February 7, 2008, among the Company, the Company
Subsidiaries and Bank of America, N.A. There is no indebtedness
having general voting rights (or convertible into securities having such rights)
("Voting Debt")
of the Company or any Company Subsidiary issued and
outstanding. There are (i) no existing options, warrants, calls,
pre-emptive rights, subscriptions or other rights, restricted stock awards,
restricted stock unit awards, agreements, arrangements, understandings or
commitments of any kind relating to the issued or unissued capital stock of, or
other equity interests in, the Company or any Company Subsidiary obligating the
Company or any Company Subsidiary to issue, transfer, register or sell or cause
to be issued, transferred, registered or sold any shares of capital
stock or Voting Debt of, or other equity interest in, the Company or any Company
Subsidiary or securities convertible into or exchangeable for such shares or
equity interests or other securities, or obligating the Company or any Company
Subsidiary to grant, extend or enter into any such option, warrant, call,
subscription or other right, restricted stock award, restricted stock unit
award, agreement, arrangement, understanding or commitment, and (ii) no
outstanding agreements, arrangements, understandings or commitments of the
Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any
Shares or the capital stock of the Company or any capital stock or other equity
interests in any Company Subsidiary or any Person or to provide funds to make
any investment (in the form of a loan, capital contribution or otherwise) in any
Company Subsidiary or any Person. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation or other
similar rights with respect to the Company or any Company
Subsidiary.
10
(b) Section 3.3(b)(i) of the Company
Disclosure Schedule sets forth, with respect to each Option outstanding as of
July 28, 2008, (i) the number of Shares issuable therefor, (ii) the
purchase price payable therefor upon the exercise of each such Option, (iii) the
date on which such Option was granted, (iv) the Option Plan under which such
Option was granted and whether such Option is an "incentive
stock option" (as defined in Section 422 of the Code) or a nonqualified stock
option, (v) for each Option, whether such Option is held by a Person who is not
an employee of the Company or any Company Subsidiary, (vi) the extent to which
such Option is vested and exercisable as of the date of this Agreement and
the extent of acceleration as a result, either alone, or together with another
event or occurrence, of the transactions contemplated by this Agreement and
(vii) the date on which such Option expires. Since May 2, 2008, the
Company has not granted or issued any Options or Restricted Stock
Units. All of the Options and Restricted Stock Units have
been granted solely to employees, consultants (who are individuals) or directors
of the Company in the ordinary course of business consistent with past
practice. All Options and Restricted Stock Units granted under the
Option Plans have been granted pursuant to option award agreements in the
substantially the form attached as an exhibit to Section 3.3(b)(i) of the Company
Disclosure Schedule. The per Share exercise price of each Option is not
(and is not deemed to be) less than the fair market value of a Share as of
the date of grant of such Option. All grants of Options were validly
issued and properly approved by the Company Board of Directors (or a duly
authorized committee or subcommittee thereof) in compliance with all applicable
Laws and recorded on the Financial Statements in accordance with GAAP, and no
such grants involved any "back dating," "forward dating," "spring loading" or
similar practices with respect to such grants. Section 3.3(b)(ii) of the Company
Disclosure Schedule sets forth, with respect to each Restricted Stock Unit award
outstanding as of July 28, 2008, (i) the number of target Shares subject to the
award, (ii) the date on which such Restricted Stock Unit was granted, (iii) the
Option Plan under which such Restricted Stock Unit was granted, (iv) for each
Restricted Stock Unit award, whether such Restricted Stock Unit is held by a
Person who is not an employee of the Company, and (v) the extent to which such
Restricted Stock Unit is vested as of the date of this Agreement and the extent
of acceleration as a result, either alone, or together with another event or
occurrence, of the transactions contemplated by this Agreement. All Restricted
Stock Unit awards granted under the Option Plans have been granted pursuant to
restricted stock unit award agreement(s) in the substantially the form attached
as an exhibit to Section 3.3(b)(ii) of the Company
Disclosure Schedule.
11
(c) There
are no stockholder agreements, voting trusts or other agreements or
understandings to which the Company or any Company Subsidiary is a party
relating to the voting or disposition of any shares of the capital stock of the
Company or any of the Company Subsidiaries or granting to any person or group of
persons the right to elect, or to designate or nominate for election, a director
to the board of directors of the Company or any Company Subsidiary.
(d) All
dividends or distributions on securities of the Company or any Company
Subsidiary that have been declared or authorized have been paid in
full.
Section
3.4 Authorization; Validity of
Agreement; Company Action. The
Company has all necessary corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and, subject to the
adoption of this Agreement by Company Stockholder Approval (as defined below),
to consummate the transactions provided for or contemplated by this Agreement,
including, but not limited to, the Merger. The execution, delivery
and performance by the Company of this Agreement and the consummation by it of
the transactions contemplated hereby have been duly and validly authorized by
the Company Board of Directors, and no other corporate proceeding on the part of
the Company is necessary to authorize the execution, delivery and performance by
the Company of this Agreement and the consummation by it of the transactions
contemplated hereby other than, with respect to the Merger, the approval of the
Merger and adoption of this Agreement by the Company Stockholder
Approval. This Agreement has been duly and validly executed and
delivered by the Company, and, assuming due and valid authorization, execution
and delivery of this Agreement by Parent and Merger Sub, is a valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other similar Laws relating to creditors' rights generally and to general
principles of equity.
Section
3.5 Board
Approvals. On
or prior to the date hereof, the Company Board of Directors, at a meeting duly
called and held, has unanimously (i) determined that each of the Agreement and
the Merger are advisable and fair to and in the best interests of the
stockholders of the Company as of the date hereof, (ii) duly and validly
approved, adopted and declared advisable the Merger, this Agreement and the
transactions contemplated hereby and taken all other corporate action required
to be taken by the Company Board of Directors to authorize the consummation of
the transactions contemplated hereby and (iii) resolved to recommend that the
stockholders of the Company adopt this Agreement (collectively, the "Company Board
Recommendation"), and none of the aforesaid actions by the Company Board
of Directors has been amended, rescinded or modified. The action taken by the
Company Board of Directors constitutes approval of this Agreement and the Merger
by the Company Board of Directors under Section 203 of the DGCL, and no other
state takeover statute or similar statute or regulation in any jurisdiction in
which the Company or any Company Subsidiary does business is applicable to the
Merger, this Agreement and the transactions contemplated hereby.
12
Section
3.6 Required
Vote. The
affirmative vote of the holders of a majority of the outstanding Shares (the
"Company Stockholder
Approval") is the only vote of the holders of any class or series of the
Company's capital stock necessary to adopt this Agreement.
Section
3.7 Consents and Approvals; No
Violations. None
of the execution, delivery or performance of this Agreement by the Company, the
consummation by the Company of the transactions contemplated hereby or
compliance by the Company with any of the provisions of this Agreement will (i)
conflict with or result in any breach of any provision of the Certificate of
Incorporation, the Bylaws or similar organizational documents of the Company or
any Company Subsidiary, (ii) require any filing by the Company with, or permit,
authorization, consent or approval of, any court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency, whether local, state, federal or foreign (a "Governmental
Entity"), except for (A) compliance with any applicable requirements of
the Exchange Act, (B) any filings as may be required under the DGCL in
connection with the Merger, (C) the filing with the SEC and the NASDAQ Stock
Market of the Proxy Statement and (D) any filings in connection with the
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act") or under
the antitrust or competition Laws of applicable foreign jurisdictions, (iii)
result in a violation or breach of or the loss of any benefit under, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration)
under, or result in the creation of any Encumbrance on the assets and properties
of the Company or any Company Subsidiary under, any of the terms, conditions or
provisions of any note, bond, mortgage, lien, indenture, lease, license,
contract, agreement, arrangement or understanding or other instrument or
obligation (each, a "Contract") to which
the Company or any Company Subsidiary is a party or by which any of them or any
of their respective properties or assets may be bound or (iv) assuming that all
consents, approvals, authorizations and other actions described in subsection
(ii) have been obtained and all filings and obligations in subsection (ii) have
been made or complied with, conflict with or violate any Law applicable to the
Company, any Company Subsidiary or any of their respective properties or assets,
except in the case of clauses (ii) or (iii) where (x) any failure to obtain such
permits, authorizations, consents or approvals, (y) any failure to make such
filings or (z) any such violations, breaches, defaults or Encumbrances could
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
Section
3.8 Company SEC Documents and
Financial Statements.
(a) Since
January 1, 2005, the Company has timely filed with or furnished to the SEC all
forms, reports, schedules, statements, exhibits, and other documents required by
it to be filed under the Exchange Act or the Securities Act (collectively, the
"Company SEC
Documents"). As of its filing date or, if amended prior to the
date of this Agreement, as of the date of the last such amendment, each Company
SEC Document complied in all material respects with the applicable requirements
of the Exchange Act and the Securities Act, as the case may be, and the
applicable rules and regulations of the SEC thereunder. As of its
filing date or, if amended prior to the date of this Agreement, as of the
date of the last such amendment, each Company SEC Document filed pursuant to the
Exchange Act did not 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 made therein, in light of the circumstances under which they
were made, not misleading. Each Company SEC Document that is a
registration statement, as amended or supplemented, if applicable, filed
pursuant to the Securities Act, as of the date such registration statement or
amendment became effective prior to the date of this Agreement, did not 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 made
in light of the circumstances under which they were made, not
misleading. None of the Company Subsidiaries is required to file any
forms, reports or other documents with the SEC. As of its filing date
or, if amended prior to the date of this Agreement, as of the date of the last
such amendment, all of the audited consolidated financial statements and
unaudited consolidated interim financial statements of the Company included in
the Company SEC Documents (collectively, the "Financial
Statements") (i) complied in all material respects with the
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, (ii) have been prepared in accordance with
United States generally accepted accounting principles ("GAAP") applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto and except, in the case of the unaudited interim statements, as
may be permitted under Form 10-Q of the Exchange Act) and (iii) fairly present
in all material respects the consolidated financial position and the
consolidated results of operations and cash flows (subject, in the case of
unaudited interim financial statements, to normal and recurring year-end
adjustments) of the Company and its consolidated Company Subsidiaries as of the
times and for the periods referred to therein.
13
(b) The
Company has heretofore furnished to Parent complete and correct copies of all
comment letters from the SEC since January 1, 2005 through the date of this
Agreement with respect to any of the Company SEC Documents. 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 any of the Company
SEC Documents.
(c) The
Company is in compliance in all material respects with the applicable provisions
of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley
Act") and the applicable listing and governance rules and
regulations of the NASDAQ Stock Market.
(d) The
Company maintains a system of internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to
provide reasonable assurance (i) that the Company maintains records that in
reasonable detail accurately and fairly reflect its transactions and
dispositions of assets, (ii) that transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP, (iii) that
receipts and expenditures are executed only in accordance with authorizations of
management and the Board of Directors and (iv) regarding prevention or timely
detection of the unauthorized acquisition, use or disposition of the Company's
assets that could have a material effect on the Company's consolidated financial
statements. The Company has evaluated the effectiveness of the Company's
internal control over financial reporting and, to the extent required by
applicable Law, presented in any applicable Company SEC Document that is a
report on Form 10-K or Form 10-Q or any amendment thereto its conclusions about
the effectiveness of the internal control over financial reporting as of the end
of the period covered by such report or amendment based on such evaluation. The
Company has disclosed, based on the most recent evaluation of internal control
over financial reporting, to the Company's auditors and the audit committee of
the Board of Directors (and made available to Parent a summary of the
significant aspects of such disclosure) (A) all significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting that are reasonably likely to adversely affect the Company's
ability to record, process, summarize and report financial information and (B)
any fraud, whether or not material, that involves management or other employees
who have a significant role in the Company's internal control over financial
reporting. Except as disclosed in the Company SEC Documents, the
Company has not identified any material weaknesses in the design or operation of
the Company's internal control over financial reporting.
14
(f) To
the knowledge of the Company, there are no SEC inquiries or investigations,
other governmental inquiries or investigations or internal investigations
pending or threatened in each case regarding any accounting practices of the
Company or any malfeasance by any director or executive officer of the
Company. Since January 1, 2005 there have been no internal
investigations regarding accounting or revenue recognition discussed with,
reviewed by or initiated at the direction of the chief executive officer, chief
financial officer, general counsel or similar legal officer, the Board or any
committee thereof.
(g) Each
of the principal executive officer of the Company and the principal financial
officer of the Company (or each former principal executive officer of the
Company and each former principal financial officer of the Company, as
applicable) has made all certifications required by Rule 13a-14 or 15d-14 under
the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act with respect
to the Company SEC Documents, and the statements contained in such
certifications are true and accurate. For purposes of this Agreement,
"principal executive officer" and "principal financial officer" shall have the meanings given to such
terms in the Sarbanes-Oxley Act. The Company does not have, and has
not arranged any, outstanding "extensions of credit"
to directors or executive officers within the meaning of Section 402 of the
Sarbanes-Oxley Act.
(h) Neither
the Company nor any Company Subsidiary is a party to, or has any commitment to
become a party to, any joint venture, off-balance sheet partnership or any
similar contract (including any contract or arrangement relating to any
transaction or relationship between or among the Company or any Company
Subsidiary, on the one hand, and any unconsolidated affiliate, including any
structured finance, special purpose or limited purpose entity or person, on the
other hand) or any "off-balance sheet arrangements" (as defined
in Item 303(a) of Regulation S-K of the SEC), where the result, purpose or
effect of such contract is to avoid disclosure of any material transaction
involving, or material liabilities of, the Company or any Company Subsidiary in
the Company's published financial statements or other Company SEC
Documents.
15
Section
3.9 Absence of Certain
Changes. Except
as specifically contemplated by this Agreement, since December 31, 2007, (a)
each of the Company and each Company Subsidiary has conducted in all material
respects its respective business only in the ordinary course of business
consistent with past practice, (b) neither the Company nor any Company
Subsidiary has (i) suffered any Company Material Adverse Effect or (ii) become
aware of any facts or circumstances that could, individually or in the
aggregate, reasonably be expected to cause the Company to suffer any Company
Material Adverse Effect, and (c) neither the Company nor any Company Subsidiary
has taken any action that, if taken after the date of this Agreement, would
constitute a breach of any of the covenants set forth in Section
5.1.
Section
3.10 No Undisclosed
Liabilities. Except
(a) as disclosed in the Company SEC Documents filed prior to the date hereof and
(b) for liabilities and obligations (i) incurred in the ordinary course of
business consistent with past practice since December 31, 2007 or (ii) as could
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect, neither the Company nor any Company Subsidiary has
incurred any liabilities or obligations of any nature, whether or not accrued,
contingent, absolute or otherwise and whether or not required to be reflected in
the Financial Statements (or in the notes thereto) in accordance with
GAAP.
Section
3.11 Litigation;
Orders. There
is no suit, claim, action, charge, proceeding, including, without limitation,
arbitration proceeding or alternative dispute resolution proceeding, or
investigation pending or, to the knowledge of the Company, threatened against,
affecting or naming as a party thereto the Company or any Company Subsidiary
that could, individually or in the aggregate, reasonably be expected to (i) have
a Company Material Adverse Effect or (ii) materially delay the consummation of
the transactions contemplated by this Agreement. No judgment, decree,
injunction, rule or order of any Governmental Entity is outstanding against the
Company or any Company Subsidiary or any of their respective properties or
assets that could, individually or in the aggregate, reasonably be expected to
(i) have a Company Material Adverse Effect or (ii) materially delay the
consummation of the transactions contemplated by this
Agreement. Except as disclosed in the Company SEC Documents filed
prior to the date of this Agreement, since January 1, 2005, the Company has not
received any written material product liability, manufacturing or design defect,
warranty, field repair or other material product-related claims by any third
party (whether based on contract or tort and whether relating to personal
injury, including death, property damage or economic loss) arising from (A)
services rendered by the Company or (B) the sale, distribution or manufacturing
of products by the Company.
Section
3.12 Employee Benefit Plans;
ERISA.
(a) Except
as disclosed in the Company SEC Documents filed with the SEC prior to the date
of this Agreement, there exists no employment, consulting, retention, change in
control, severance or termination agreement, arrangement or understanding
between the Company or any of the Company Subsidiaries and any individual
current or former employee, officer or director of the Company or any of the
Company Subsidiaries with respect to which the annual cash, noncontingent
payments thereunder exceed $100,000.
16
(b) Section 3.12(b) of
the Company Disclosure Schedule contains a correct and complete list of all (i)
"employee pension benefit plans" (as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) (sometimes
referred to herein as "Pension Plans"),
including any such Pension Plans that are "multiemployer
plans" (as such term is defined in Section 4001(a)(3) of ERISA) (collectively,
the "Multiemployer
Pension Plans"), (ii) "employee welfare benefit
plans" (as defined in Section 3(1) of ERISA), and (iii) all other benefit plans,
policies, programs, agreements or arrangements, including but not limited to,
any bonus, deferred compensation, severance pay, retention, change in control,
employment, consulting, pension, profit-sharing, retirement, insurance, stock
purchase, stock option, incentive or equity compensation or other fringe benefit
plan, program, policy, agreement, arrangement or practice maintained,
contributed to or required to be contributed to, by the Company or any of the
Company Subsidiaries, for the benefit of any current or former employees,
officers, consultants or directors of the Company or any of the Company
Subsidiaries (including individuals who perform or performed services outside of
the United States, or with respect to which the Company or any of the Company
Subsidiaries could reasonably have any liability (collectively, the "Benefit
Plans"). The Company has delivered or made available to Parent
and Merger Sub correct and complete copies of (i) each Benefit Plan (including
all amendments thereto) or written description of each Benefit Plan that is not
otherwise in writing, (ii) the three most recent annual reports on Form 5500 and
all schedules thereto filed with respect to each Benefit Plan, to the extent
applicable, (iii) the most recent summary plan description, summary of material
modifications and plan prospectus for each Benefit Plan, to the extent
applicable, (iv) each current trust agreement, insurance contract or policy or
group annuity contract to the extent applicable, (v) the most recent actuarial
report, financial statement or valuation report, to the extent applicable and
(vi) a current Internal Revenue Service favorable determination or opinion
letter, to the extent applicable.
(c) Each
Benefit Plan is and has at all times been operated and administered in
accordance with its terms and in compliance in each case in all material
respects with applicable Law, including but not limited to ERISA and the
Code. Except as set forth on Section 3.12 of the
Company Disclosure Schedule, no Benefit Plan is a "nonqualified
deferred compensation plan" subject to Section 409A of the
Code. Since January 1, 2005, each Benefit Plan has been administered
in good faith compliance with Section 409A of the Code to the extent
applicable.
(e) None
of the Benefit Plans is, and none of the Company or any of the Company
Subsidiaries, nor any trade or business, whether or not incorporated, that,
together with the Company would be deemed a "single employer"
within the meaning of Section 4001(b) of ERISA or Section 414 of the Code (each,
"ERISA
Affiliate"), has within the last six (6) years, maintained or had an
obligation to contribute to (i) a "single employer plan"
(as such term is defined in Section 4001(a)(15) of ERISA) subject to Section 412
of the Code or Title IV of ERISA, (ii) a "multiple employer
plan" or "multiple employer welfare arrangement" (as such
terms are defined in ERISA) or (iii) a funded welfare benefit plan (as such term
is defined in Section 419 of the Code). There are no unpaid contributions
due prior to the date of this Agreement with respect to any Benefit Plan that
are required to have been made under the terms of such Benefit Plan, any related
insurance contract or any applicable Law and all contributions due have been
timely made.
17
(f) None
of the Company, any of the Company Subsidiaries or any ERISA Affiliate has
engaged in a "prohibited transaction" (as such term is defined
in Section 406 of ERISA and Section 4975 of the Code) or any other breach of
fiduciary responsibility with respect to any Benefit Plan that reasonably could
be expected to subject the Company or any of the Company Subsidiaries to any
material tax or penalty.
(g) With
respect to any Benefit Plan, there is no action, suit, audit, investigation or
claim pending, or to the Company's knowledge, threatened or anticipated, other
than routine claims for benefits.
(h) None
of the Company or any of the Company Subsidiaries has any obligation to provide
any health benefits or other non-pension benefits (whether or not insured) to
retired or other former employees, directors or consultants, except as
specifically required by Part 6 of Title I of ERISA ("COBRA"), except to
the extent the sole cost of which is borne solely by such former employees,
directors or consultants.
(i) Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby, or (except as required by Law) any termination
of employment or service (or other event or occurrence) in connection therewith
will (i) entitle any current or former employee, director or consultant of the
Company or any of the Company Subsidiaries to any payment or benefit (or result
in the funding of any such payment or benefit) or result in any forgiveness of
indebtedness with respect to any such persons, (ii) increase the amount of any
compensation, severance, equity award or other benefits otherwise payable by the
Company or any Company Subsidiary or (iii) result in the acceleration of the
time of payment, funding or vesting of any compensation, equity award or other
benefits.
(j) No
amounts payable (individually or collectively and whether in cash, capital stock
of the Company or other property) under any of the Benefit Plans or any other
contract, agreement or arrangement with respect to which the Company or any
Company Subsidiary may have any liability could fail to be deductible for
federal income tax purposes by virtue of Section 162(m) or Section 280G of
the Code, as a result of the transactions contemplated hereby.
Section
3.13 Taxes. Except
as set forth in Section 3.13 of the
Company Disclosure Schedule:
18
(a) (i)
the Company and each of the Company Subsidiaries has duly and timely filed, or
will duly and timely file, all Tax Returns required to be filed by it on or
before the Closing Date, and each such Tax Return has been, or will be, prepared
in compliance with all applicable Laws and is true, correct and complete in all
material respects; (ii) the Company and each of the Company Subsidiaries has
timely paid (or the Company has timely paid on the Company Subsidiaries' behalf)
or will timely pay all Taxes shown as due on such Tax Returns and all other
Taxes due and payable prior to the Closing Date (whether or not shown as due on
any Tax Return) except such Taxes as are currently being contested in good faith
and for which adequate reserves, as applicable, have been established in the
Company's Financial Statements in accordance with GAAP; (iii) the Financial
Statements reflect an adequate reserve for all Taxes payable by the Company and
the Company Subsidiaries for all taxable periods and portions thereof through
the date of such Financial Statements; and (iv) neither the Company nor any
Company Subsidiary has incurred any liability for Taxes subsequent to
the date of such most recent Financial Statements other than in the ordinary
course of such Company's or Company Subsidiary's business.
(b) (i)
no Tax Return of the Company or any of the Company Subsidiaries is under
audit or examination by any Taxing Authority, no written notice of such an audit
or examination or any other audit or examination with respect to Taxes has been
received by the Company or any of the Company Subsidiaries, (ii) no deficiencies
for Taxes have been claimed, proposed, assessed or threatened in writing against
the Company or any Company Subsidiary by any Taxing Authority for which adequate
reserves have not been established in the Company's Financial Statements in
accordance with GAAP; (iii) there are no liens for Taxes upon the assets of the
Company or any Company Subsidiary except liens relating to current Taxes not yet
due and payable; (iv) all Taxes which the Company or any Company Subsidiary are
required by Law to withhold or to collect for payment have been duly withheld
and collected and any such amounts that are required to be remitted to any
Taxing Authority have been duly and timely remitted; (v) none of the Company or
the Company Subsidiaries has consented to extend to a date after the Closing
Date the time in which any Tax may be assessed or collected by any Taxing
Authority; (vi) no claim has been made by any Taxing Authority in a
jurisdiction where the Company or any of the Company Subsidiaries does not file
Tax Returns that the Company or Company Subsidiary is or may be subject to
taxation in that jurisdiction, and the Company is not aware of any Tax Return
filing requirement that is not being complied with; and (vii) no power of
attorney that would be in force after the Closing Date has been granted by the
Company or any Company Subsidiaries with respect to Taxes.
(c) Each
of the Company and the Company Subsidiaries has made available to Parent and
Merger Sub true, correct and complete copies of all federal income Tax Returns,
and all other material Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by any of the Company or the Company
Subsidiaries that have been filed by any of the Company or the Company
Subsidiaries for the taxable years ending December 31, 2004, 2005, 2006 and
2007.
(d) The
consolidated federal and state income Tax Returns of the Company and the
Company Subsidiaries have been filed (but not examined), and the statute of
limitations closed, with respect to all taxable years through and including
December 31, 2003.
19
(e) None
of the Company or the Company Subsidiaries (i) is or has ever been a member
of an affiliated group filing a consolidated federal income Tax Return (other
than a group the common parent of which was the Company), (ii) is a party to or
bound by any Tax allocation, sharing or indemnification agreement or other
similar arrangement with any person other than the Company and the Company
Subsidiaries or (iii) has any liability for the Taxes of any Person (other than
any of the Company or the Company Subsidiaries) under Treas. Reg. §1.1502-6 (or
any similar provision of Law), as a transferee or successor, by contract, or
otherwise.
(f) Since
January 1, 2003, neither the Company nor any Company Subsidiary has constituted
a "distributing corporation" or a "controlled corporation" in a distribution of stock purported to or
intended to be governed by Section 355 or Section 361 of the
Code.
(g) Since
January 1, 2003, neither the Company nor any Company Subsidiary has participated
in, or is currently participating in, a "reportable
transaction" within the meaning of Treas. Reg. § 1.6011-4(b) or any transaction
requiring disclosure under a corresponding or similar provision of state, local
or foreign Law ( a "Reportable
Transaction"), and to the knowledge of the Company, neither the Company
nor any Company Subsidiary has ever participated in a Reportable
Transaction.
(h) Neither
the Company nor any Company Subsidiary is or has 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.
(i) There
are no Tax rulings, requests for rulings, applications for change in accounting
methods or closing agreements that could reasonably be expected to affect
liabilities for Taxes for any period after the Effective Time.
(j) To
the knowledge of the Company, neither the Company nor any Company Subsidiary
will be required to include any item of income in, or exclude any item of
deduction from, taxable income for any taxable period (or portion thereof)
ending after the Effective Time as a result of any intercompany transactions or
excess loss account described in Treasury regulations under Section 1502 of the
Code (or any corresponding or similar provision of state, local or foreign Tax
Law). Neither the Company nor any Company Subsidiary will be required
to include any item of income in, or exclude any item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the Effective
Time as a result of: (i) any installment sale or open transaction
disposition made on or prior to the date of this Agreement; (ii) any prepaid
amount received on or prior to the Effective Time; (iii) Section 481(a) or
Section 482 of the Code (or an analogous provision of state, local, or foreign
Law), by reason of a change in accounting method or otherwise; or (iv) any other
transaction or accounting method that accelerated an item of deduction into
periods ending on or before the Effective Time or a transaction or accounting
method that deferred an item of income into periods beginning after the
Effective Time.
Section
3.14 Material Contracts.
20
(a) Neither
the Company nor any of the Company Subsidiaries is, nor, to the Company's
knowledge, is any other party, in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
Material Contract to which it is a party, except for such defaults which could
not, individually or in the aggregate, reasonably be expected to result in a
Company Material Adverse Effect; and, to the knowledge of the Company, there has
not occurred any event that, with the lapse of time or giving of notice or both,
could constitute such a default other than such events which could not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. Each of the Material Contracts is in full
force and effect and is enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
Laws relating to creditors' rights generally and to the general principles of
equity.
(b) Section 3.14(b) of the Company
Disclosure Schedule sets forth a list as of the date of this Agreement of (i)
all agreements, contracts or letters of intent regarding the acquisition of a
person or business, whether in the form of an asset purchase, merger,
consolidation or otherwise (excluding any such agreement, contract or letter of
intent that has closed or expired, unless one or more of the parties thereunder
has executory indemnification, earn-out or other liabilities) to which the
Company or any Company Subsidiary is a party, (ii) all credit agreements,
indentures, and other agreements related to any existing indebtedness or
availability for borrowed money of the Company or any Company Subsidiary (or
pursuant to which any residual liability remains), (iii) all joint venture or
other similar agreements to which the Company or any Company Subsidiary is a
party, (iv) all material lease agreements to which the Company or any Company
Subsidiary is a party, (v) contracts under which the Company or any Company
Subsidiary has advanced or loaned any other person any material amounts, (vi)
guarantees of any obligations (other than a guarantee by the Company of a
Company Subsidiary's debts or other obligations or a guarantee by a Company
Subsidiary of the Company's debts or other obligations or another Company
Subsidiary's debts or other obligations), (vii) contracts or groups of related
contracts with the same party or group of parties the performance of which
involves annual consideration in excess of $200,000 which are not cancelable
by the Company on thirty (30) days' or less notice without premium or
penalty, (viii) each exclusive sales representative or exclusive distribution
contract to which the Company or any Company Subsidiary is a party, (ix)
warranty agreements with respect to the Company's or the Company Subsidiaries'
services rendered or products sold or leased, other than pursuant to the
Company's standard warranty, a true and complete copy of which has heretofore
been provided or made available to Parent and Merger Sub, (x) agreements under
which the Company has granted any person registration rights (including demand
and piggy-back registration rights), which rights are still effective as of the
date of this Agreement or still could become effective after the date of this
Agreement, (xi) all contracts or agreements purporting to restrict or prohibit
the Company or any Company Subsidiary from engaging or competing in any business
or engaging or competing in any business in any geographic area, (xii) all
employment, consulting, retention, severance, change in control,
non-competition, termination or indemnification agreements between the Company
or any Company Subsidiary and any director or officer of the Company or any
Company Subsidiary or any other employee earning noncontingent cash compensation
in excess of $100,000 per year, (xiii) all labor agreements, collective
bargaining agreements or other labor related contracts (including work rules and
practices) to which the Company or any Company Subsidiary is a party to or
otherwise bound by with respect to any labor union, labor organization, trade
union or similar organization or association of employees, (xiv) all licenses,
consents to use, non-assertion agreements, settlement agreements and coexistence
agreements concerning Intellectual Property to which the Company or any of the
Company Subsidiaries is a party, including agreements pursuant to which the
Company or any Company Subsidiary uses software (other than non-customized
software subject to customary "shrinkwrap" or "click-through" type contracts)
(the "Material
Licenses"), (xv) any contract which provides for termination,
acceleration of payment or other special rights upon the occurrence of a change
in control of the Company and (xvi) all other contracts which are material to
the Company and the Company Subsidiaries taken as a whole (collectively,
the "Material
Contracts"). The Company has made available to Parent a correct and
complete copy of each agreement listed in Section 3.14(b) of the Company
Disclosure Schedule.
21
(c) No
Material Contract will, by its terms, terminate as a result of the transactions
contemplated hereby or require any consent from any party thereto in order to
remain in full force and effect immediately after the Effective Time, except for
any Material Contracts which, if terminated, could not reasonably be expected to
have a Company Material Adverse Effect.
(d) Section 3.14(d) of
the Company Disclosure Schedule sets forth a list, as of the date of this
Agreement, of all agreements of the Company or any Company Subsidiary with any
executive officer or director of the Company or any other Company
Subsidiary. No officer or director of the Company, or any "associate" (as such term is defined in Rule 14a-1 under the
Exchange Act) of any such officer or director, has any interest in any contract
or property (real or personal, tangible or intangible), used in, or pertaining
to the business of the Company or any of the Company Subsidiaries which interest
would be required to be disclosed pursuant to Item 404(a) of Regulation S-K
promulgated by the SEC.
Section
3.15 Real and Personal
Property.
(a) Each
of the Company and the Company Subsidiaries has good and valid title to, or
valid leasehold interests in, all its properties and assets, free and clear of
all Encumbrances, except for Permitted Encumbrances that could not, individually
or in the aggregate, reasonably be expected to have a Company Material Adverse
Effect. Except for the Permitted Encumbrances, each of the Company
and the Company Subsidiaries enjoys peaceful and undisturbed possession under
all Real Property Leases (as defined below) to which it is a party, except as
could not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
(b) Neither
the Company nor any Company Subsidiary owns any real property.
(c) Section 3.15(c) of
the Company Disclosure Schedule sets forth a true and complete list
of all real property leased, subleased, licensed or otherwise occupied (whether
as tenant, subtenant or pursuant to other occupancy arrangements) by the Company
or any Company Subsidiary (collectively, including the improvements thereon, the
"Leased Real Property"), and
for each Leased Real Property, identifies the street address of such Leased Real
Property. True and complete copies of all agreements (and any amendments
thereto) under which the Company or any Company Subsidiary is the landlord,
sublandlord, tenant, subtenant, or occupant (each a "Real Property Lease")
that have not been terminated or expired as of the date hereof have been made
available to Parent. Each Real Property Lease is a valid and binding obligation
of the Company or a Subsidiary and is in full force and effect. The
Company or the Company Subsidiary which is a party to a Real Property Lease has
not received any written notice of any default under such Real Property lease
which remains uncured and there is no default under any Real Property Lease
either by the Company or the Company Subsidiaries party thereto or, to the
Company's knowledge, by any other party thereto, and no event has occurred that,
with the lapse of time or the giving of notice or both, would constitute a
default by the Company or any Company Subsidiary thereunder, except for such
defaults as could not, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect.
22
(d) Except
for Permitted Encumbrances, neither the Company nor any Company Subsidiary is a
party to any lease, sublease, license or other agreement granting to any third
party a right to the use, occupancy or enjoyment of any Owned Real Property or
Leased Real Property or any portion thereof.
(e) There
are no disputes, oral agreements or forbearance programs in effect with respect
to any Real Property Lease.
Section
3.16 Intellectual
Property.
(a) Section 3.16 of the
Company Disclosure Schedule sets forth a complete list, as of the date of this
Agreement, of all:
(i) applications
and registrations for Intellectual Property, in each case that are owned by the
Company or any Company Subsidiary, including, with respect to each, the title or
mark, the application or registration number, the application or registration
date and the jurisdiction; and
(ii) material
unregistered Intellectual Property owned by the Company or any Company
Subsidiary.
(b) Except
as set forth in Section 3.16(b) of
the Company Disclosure Schedule, and except as could not, individually or in the
aggregate, reasonably be expected to be material to the Company:
(i) the
Company and the Company Subsidiaries own, free and clear of all Encumbrances, or
have a valid right to use, all Intellectual Property used in, or necessary for
or otherwise material to, the conduct of their business as it is currently
conducted and as presently contemplated to be conducted;
(ii) with
respect to the applications and registrations for Intellectual Property set
forth in Section
3.16(a) of the Company Disclosure Schedule, (v) the Company or the
applicable Company Subsidiary is the sole and exclusive owner of such
applications and registrations, (w) the Company or the applicable Company
Subsidiary is the record owner of such applications and registrations, (x) such
registrations and applications have been duly maintained, are subsisting, valid,
in full force and effect, and have not been cancelled, expired, or abandoned,
(y) there are no facts or circumstances, including prior art, that would render
such applications and registrations invalid or unenforceable and (z) such
applications have been prosecuted in accordance with all applicable rules,
practices and procedures of the U.S. Patent and Trademark Office or the foreign
equivalent, as applicable;
23
(iii) the
conduct by the Company and each Company Subsidiary of its business as it is
currently conducted and as presently contemplated to be conducted does not
infringe, misappropriate, or otherwise violate the intellectual property rights
of any third party and neither the Company nor any Company Subsidiary has
received notice of any pending or threatened claim of the
foregoing and, to the knowledge of the Company, there is no valid basis for
such a claim;
(iv) to
the knowledge of the Company, no third party is challenging the validity or
enforceability of any Intellectual Property owned by the Company or any Company
Subsidiary;
(v) no
third party is infringing, misappropriating, or otherwise violating the
Intellectual Property owned by the Company or any Company
Subsidiary;
(vi) to
the knowledge of the Company, no funding, facilities or personnel of any
Governmental Entity or other public institution were used, directly or
indirectly, to develop or create, in whole or in part, any Intellectual Property
owned by the Company or any Company Subsidiary;
(vii) no
Intellectual Property owned by the Company or any Company Subsidiary is being
used or enforced by the Company or any Company Subsidiary in a manner that could
reasonably be expected to result in the abandonment, cancellation or
unenforceability of such Intellectual Property;
(viii) the
Company and the Company Subsidiaries have taken commercially reasonable steps to
preserve the confidentiality of their trade secrets, their confidential,
proprietary manufacturing processes, formulas and other confidential,
proprietary information, and each current and, to the knowledge of the Company,
former employee, officer and contractor of the Company or the Company
Subsidiaries has executed a proprietary information and inventions agreement
assigning to the Company or the applicable Company Subsidiary all Intellectual
Property made in connection with such employment with or engagement by the
Company or the applicable Company Subsidiary; and
(ix) the
consummation of the transactions contemplated by this Agreement will not result
in the loss or impairment of or payment of any additional amounts with respect
to, nor require the consent of any other Person in respect of, the Company's or
any Company Subsidiary's right to own, use, or hold for use any of the
Intellectual Property material to the Company's conduct of its business as
owned, used, or held for use in the conduct of its business as it is currently
conducted or presently contemplated to be conducted.
24
Section
3.17 Labor
Matters.
(a) Except
as set forth in Section 3.17(a) of the Company
Disclosure Schedule, as of the date of this Agreement (i) there is no labor
strike, dispute, slowdown, stoppage or lockout pending, or to the knowledge of
the Company, threatened against or affecting the Company or any of the Company
Subsidiaries, nor has there been any such action or event during the three years
prior to the date of this Agreement, (ii) neither the Company nor any of the
Company Subsidiaries is a party to, bound by or in the process of negotiating
any collective bargaining or similar agreement with any labor union, labor
organization, trade union or similar organization or employee association, or
work rules or practices agreed to with any labor union, labor organization,
trade union or similar organization or employee association, in each case
applicable to employees of the Company or any of the Company Subsidiaries, (iii)
there are no material grievances or material arbitration proceedings arising out
of or under any of the collective bargaining agreements or similar agreements
set forth in Section
3.17(a) of the Company Disclosure Schedule, and (iv) none of the
employees of the Company or any of the Company Subsidiaries is represented by
any labor union, labor organization, trade union or similar organization or
employee association with respect to their employment with the Company or any of
the Company Subsidiaries and, to the knowledge of the Company, there are not any
union organizing activities, either by or on behalf of any employee or union or
similar labor organization or association with respect to employees of the
Company or the Company Subsidiaries.
(b) The
Company and each Company Subsidiary is and has been in compliance with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work, disability, discrimination,
employee whistleblowing, employee leaves, workers compensation, labor relations,
classification of employees, immigration, equal opportunity and workplace safety
and health, except in each case where the failure to so comply would not,
individually or in the aggregate, reasonably be expected to result in a Company
Material Adverse Effect.
(c) To
the knowledge of the Company, no executive officer or other key employee of the
Company or any Company Subsidiary (i) is subject to any noncompete,
nonsolicitation, nondisclosure, confidentiality, employment, consulting or
similar agreement with any other person or entity affecting or in conflict with
the present and proposed business activities of the Company and the Company
Subsidiaries, except agreements between the Company or a Company Subsidiary and
its present and former officers or employees or (ii) intends to terminate his or
her employment with the Company or any Company Subsidiary.
(d) Neither
the Company nor any Company Subsidiary has (i) taken any action within the past
three (3) years requiring notice to employees under the Worker Adjustment and
Retraining Notification Act of 1988, as amended (the "WARN Act"), or any
similar state or local Law and (ii) incurred any liability or obligation under
the WARN Act or any similar state or local Law that remains
unsatisfied.
25
Section
3.18 Compliance with
Laws. Except
as could not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect, (a) the Company and the Company Subsidiaries
have complied in a timely manner with all Laws which affect the business,
properties or assets of the Company or the Company Subsidiaries, (b) no
unresolved notice, charge, claim, action or assertion has been received by the
Company or any Company Subsidiary or has been filed, commenced or, to the
Company's knowledge, threatened against the Company or any Company Subsidiary
alleging any violation of any of the foregoing, (c) the Company and the Company
Subsidiaries possess all licenses, permits and approvals required under such
Laws and such licenses, permits and approvals are in full force and effect and
(d) there is no action, proceeding or investigation pending or, to the knowledge
of the Company, threatened regarding the suspension, revocation or cancellation
of any such licenses, permits and approvals.
Section
3.19 Condition of
Assets. The
property, plant and equipment of the Company and the Company Subsidiaries has
been maintained in reasonable operating condition and repair, ordinary wear and
tear excepted, and is in all material respects sufficient to permit the Company
and each Company Subsidiary to conduct their operations in the ordinary course
of business in a manner consistent with their past practices.
Section
3.20 Customers and
Suppliers. Section 3.20 of the
Company Disclosure Schedule sets forth a true, correct and complete list of the
20 largest suppliers to and customers of the Company for the twelve month period
ended June 30, 2008 (determined on the basis of the total dollar amount of
purchases or sales, as the case may be) showing the total dollar amount of
purchases from or sales to, as the case may be, each such supplier during such
period. Since June 30, 2007, there has been no termination,
cancellation or material curtailment of the business relationship of the Company
or any Company Subsidiary with any material customer or supplier or group of
affiliated customers or suppliers nor, to the knowledge of the Company, has any
material customer, supplier or group of affiliated customers or suppliers
indicated an intent to so terminate, cancel or materially curtail its business
relationship with the Company or any Company Subsidiary.
Section
3.21 Environmental
Matters.
(a) Except
as could not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect:
(i) the
Company and each Company Subsidiary has been and is in compliance with all
applicable Environmental Laws, including, but not limited to, possessing all
permits, authorizations, licenses, exemptions and other governmental
authorizations required under applicable Environmental Laws, and in compliance
with the terms and conditions thereof;
(ii) neither
the Company nor any Company Subsidiary has received any unresolved communication
(written or oral), whether from a Governmental Entity, citizens group, employee
or otherwise, alleging that the Company or any Company Subsidiary is not in
compliance with all applicable Environmental Laws, and there are no present or,
to the knowledge of the Company, past actions, activities, circumstances or
conditions that may prevent or interfere with such compliance in the
future;
26
(iii) there
is no pending or threatened Environmental Claim, lawsuit, or administrative
proceeding against the Company or any Company Subsidiary or against any person
or entity whose liability for any Environmental Claim the Company or a Company
Subsidiary has or may have retained or assumed either contractually or by
operation of law, under or pursuant to any Environmental Law, and there are no
facts, conditions or circumstances which could form the basis of any such
Environmental Claim, lawsuit or administrative proceeding;
(iv) with
respect to the real property that is currently owned, leased or operated by the
Company or any Company Subsidiary, there have been no spills, discharges,
releases or threatened releases (as such term is defined by the Comprehensive
Environmental Response, Compensation and Liability Act, 42, U.S.C. 9601, et seq.) of Hazardous
Substances or any other contaminant or pollutant on or underneath any of such
real property that requires or is likely to require Cleanup or could form the
basis of any Environmental Claim under applicable Environmental
Laws;
(v) with
respect to real property that was formerly owned, leased or operated by the
Company or any Company Subsidiary or any of their predecessors in interest,
there were no spills, discharges or releases (as such term is defined by the
Comprehensive Environmental Response, Compensation and Liability Act, 42, U.S.C.
9601, et seq.) of Hazardous Substances or any other contaminant or pollutant on
or underneath any of such real property during or prior to the Company's or any
Company Subsidiary's ownership, lease or operation of such real property that
requires or is likely to require Cleanup or could form the basis of any
Environmental Claim under applicable Environmental Laws; and
(vi) neither
the Company nor any Company Subsidiary has disposed or arranged for the disposal
of Hazardous Substances (or any waste or substance containing Hazardous
Substances) at any location that is: (x) listed on the Federal National
Priorities List ("NPL") or identified
on the Comprehensive Environmental Response, Compensation, and Liability
Information System ("CERCLIS"), each
established pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act, 42, U.S.C. 9601, et seq.; (y) listed on any state or foreign
list of hazardous waste sites that is analogous to the NPL or CERCLIS; or (z) to
the knowledge of the Company has been subject to environmental investigation or
remediation.
27
(b) Neither
the Company nor any Company Subsidiary has entered into any written agreement
that requires them to indemnify or hold harmless a third party from or against
any liabilities or costs arising out of or relating to the operation of the
business or the disposal or release of Hazardous Substances from the business
under Environmental Laws.
(c) The
Company and each Company Subsidiary has delivered or otherwise made available
for inspection to Parent true, complete and correct copies and results of any
reports, studies, analyses, tests or monitoring possessed or initiated by the
Company or any Company Subsidiary pertaining to Hazardous Substances in, on,
from, beneath, or adjacent to any property currently or formerly owned, operated
or leased by the Company or any Company Subsidiary, or regarding the Company's
or any Company Subsidiary's compliance with applicable Environmental
Laws.
(d) Except
as sent forth on Section 3.21(d) of
the Company Disclosure Schedule, no additional permits or other governmental
authorizations under Environmental Laws, will be required to permit Parent to
conduct the business of the Company and any Company Subsidiary in full
compliance with all applicable Environmental Laws immediately following the
Closing Date, as conducted by the Company and any Company Subsidiary immediately
prior to the Closing Date. To the extent that transfers or additional
permits and other governmental authorizations are required, the Company and
the Company Subsidiaries agree to cooperate with Parent to effect such transfers
and obtain such permits and other governmental authorizations prior to the
Closing Date.
(e) The
following terms shall have the following meanings for the purposes of this
Agreement:
(ii) "Environmental
Laws" means all federal, state, local, foreign and common Laws and
regulations relating to pollution or protection of human health or the
environment, including without limitation, laws relating to the exposure to, or
releases or threatened releases of, Hazardous Substances or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, release,
transport or handling of Hazardous Substances and all laws and regulations with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Substances and all laws and regulations relating to
endangered or threatened species of fish, wildlife and plants and the management
or use of natural resources.
28
(iii) "Environmental Claim"
shall mean any claim, action, cause of action, investigation or notice (written
or oral) by any person or entity alleging potential liability (including,
without limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resource damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from (a)
the presence, release or threatened release, of a Hazardous Substance at any
location, whether or not owned, leased or operated by the Company or any Company
Subsidiary or (b) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
(iv) "Hazardous Substances"
shall mean (a) any petrochemical or petroleum products, radioactive materials,
asbestos, urea formaldehyde foam insulation, transformers or other equipment
that contain dielectric fluid containing polychlorinated biphenyls; (b) any
chemicals, materials or substances defined by any Environmental Law as, or
included in the definition of, "hazardous
substances," "hazardous wastes," "hazardous materials," "restricted
hazardous materials," "extremely hazardous
substances," "toxic substances," "contaminants" or "pollutants" or words of
similar meaning and regulatory effect; or (c) any other chemical, material or
substance, exposure to which is prohibited, limited, or regulated by any
applicable Environmental Law.
Section
3.22 Insurance. Section 3.22 of the
Company Disclosure Schedule (i) lists all material insurance policies maintained
by or on behalf of the Company and the Company Subsidiaries as of the date
hereof and (ii) includes a description of any self-insurance arrangements in
effect as of the date hereof with respect to the Company and the Company
Subsidiaries (such arrangements, together with all similar arrangements in
respect of the Company and the Company Subsidiaries covering earlier periods,
being referred to herein as the "Self-Insurance
Arrangements"). The Company has heretofore made available to
Parent true, correct and complete copies of all such insurance
policies. The Company and the Company Subsidiaries have policies of
insurance of the type and in amounts customarily carried by Persons conducting
businesses or owning assets similar to those of the Company and the Company
Subsidiaries. All such policies and the Self-Insurance Arrangements
are in full force and effect and will not terminate by virtue of the
transactions contemplated hereby, all premiums due thereon have been paid by the
Company or the Company Subsidiaries, and the Company and the Company
Subsidiaries are otherwise in compliance in all material respects with the terms
and provisions of such policies. Furthermore, as of the date of this
Agreement, (a) neither the Company nor any Company Subsidiary has received any
notice of cancellation or non-renewal of any such policy or arrangement nor, to
the knowledge of the Company, is the termination of any such policies or
arrangements threatened, (b) there is no claim pending under any of such
policies or arrangements as to which coverage has been denied or disputed by the
underwriters of such policies or arrangements, (c) neither the Company nor any
Company Subsidiary has received any notice from any of its insurance carriers
that any insurance coverage presently provided for will not be available to the
Company or any Company Subsidiary in the future on substantially the same terms
as now in effect and (d) none of such policies or arrangements provides for any
retrospective premium adjustment, experienced-based liability or loss sharing
arrangement affecting the Company or any Company Subsidiary.
29
Section
3.23 Certain Business
Practices. Neither
the Company nor any Company Subsidiary, and no director, officer, agent or
employee of the Company or any Company Subsidiary, has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity or (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or any other federal, foreign or state anti-corruption or
anti-bribery Law or requirement applicable to the Company or the Company
Subsidiaries.
Section
3.24 Information Supplied. None
of the information supplied or to be supplied by or on behalf of the Company for
inclusion or incorporation by reference (i) in the Form S-4 will, at the time
the Form S-4 is filed with the SEC and at the time it becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit 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 are made, not
misleading or (ii) the Proxy Statement will, at the date it is first mailed to
the stockholders of the Company and at the time of the Company Stockholders'
Meeting, contain any untrue statement of a material fact or omit 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 are made, not
misleading, except that, in each case, no representation or warranty is made by
or on behalf of the Company with respect to statements made or incorporated by
reference therein based on information supplied by or on behalf of Parent or
Merger Sub specifically for inclusion or incorporation by reference in the Form
S-4 or the Proxy Statement. The Proxy Statement will comply as to
form in all material respects with the requirements of the Exchange
Act.
Section
3.25 Opinion of Financial
Advisor. The
Company has received the written opinion of Goldman, Sachs & Co. (the "Company Financial
Advisor"), dated August 12, 2008, to the effect that, as of such date and
based upon and subject to the factors and assumptions set forth therein, the
Merger Consideration to be received by the holders of Shares, taken in the
aggregate pursuant to this Agreement is fair from a financial point of view to
such holders, and a copy of such opinion will be delivered to Parent and Merger
Sub promptly after the date of this Agreement. The Company has been
authorized by the Company Financial Advisor to permit the inclusion of such
opinion in its entirety and a discussion of the Company Financial Advisor's
analysis in preparing such opinion in the Proxy Statement.
Section
3.26 Brokers. No
broker, investment banker, financial advisor or other person, other than the
Company Financial Advisor, the fees and expenses of which will be paid by the
Company, is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the
Company. True and correct copies of all agreements between the
Company and the Company Financial Advisor, including, without limitation, any
fee arrangements, have been delivered to Parent prior to the date of this
Agreement.
Section
3.27 State Takeover
Statutes. The
Company has taken all action necessary to exempt the Merger, this Agreement and
the transactions contemplated hereby from Section 203 of the DGCL, and,
accordingly, neither such Section 203 nor any other antitakeover or similar
statute or regulation applies or purports to apply to any such
transactions. As a result of the foregoing actions, the only
additional corporate action required to authorize the Merger is the Company
Stockholder Approval and no further action is required to authorize the
transactions contemplated by this Agreement. No other "control share acquisition," "fair price,"
"moratorium" or other antitakeover laws enacted under U.S.
state or federal laws apply to this Agreement or the transactions contemplated
hereby.
30
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES
OF PARENT
AND MERGER SUB
Except as
set forth on the disclosure schedule, dated the date hereof, delivered by Parent
to the Company (the "Parent Disclosure
Schedule") with specific reference to the particular Section or
subsection of this Agreement to which the limitation set forth in such Parent
Disclosure Schedule relates (it being understood that any information set forth
in a particular Section or subsection of the Parent Disclosure Schedule shall be
deemed to apply to and qualify each other Section or subsection thereof or
hereof to the extent that it is readily apparent on its face that such
information is relevant to such other Section or subsection thereof or hereof),
the Parent and Merger Sub represent and warrant to the Company as set forth
below.
Section
4.1 Organization. Each
of Parent and Merger Sub is a corporation duly organized, validly existing and
in good standing under the Laws of the jurisdiction of its respective
incorporation and has all full corporate power and authority to own, lease and
operate its properties and to carry on its business as is now being conducted,
except where the failure to be so organized and existing or to have such power
and authority would not, individually or in the aggregate, impair in any
material respect the ability of each of Parent and Merger Sub, as the case may
be, to perform its obligations under this Agreement, or prevent or materially
delay the consummation of the transactions contemplated hereby.
Section
4.2 Authorization; Validity of
Agreement; Necessary Action. Each
of Parent and Merger Sub has all necessary corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution,
delivery and performance by Parent and Merger Sub of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by the boards of directors of each of Parent and Merger Sub, and by Parent as
the sole stockholder of Merger Sub, and no other corporate authority or approval
on the part of Parent or Merger Sub is necessary to authorize the execution and
delivery by Parent and Merger Sub of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Parent and Merger Sub and, assuming due and
valid authorization, execution and delivery hereof by the Company, is a valid
and binding obligation of each of Parent and Merger Sub enforceable against each
of them in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally and to general principles of equity.
31
Section
4.3 Consents and Approvals; No
Violations. None
of the execution, delivery or performance of this Agreement by Parent or Merger
Sub, the consummation by Parent or Merger Sub of the transactions contemplated
hereby or compliance by Parent or Merger Sub with any of the provisions hereof
will (i) conflict with or result in any breach of any provision of the
Certificate of Incorporation, the Bylaws or similar organizational documents of
Parent or Merger Sub, (ii) require any filing by Parent or Merger Sub with, or
permit, authorization, consent or approval of, any Governmental Entity except
for (A) compliance with any applicable requirements of the Exchange Act and
Securities Act, (B) any filings as may be required under the DGCL in connection
with the Merger, (C) the filing with the SEC of (1) the Form S-4 and (2) such
reports under applicable requirements of the Securities Act, the Exchange Act
and state securities and "blue sky" laws, as may be required in connection with
this Agreement and the transactions contemplated hereby, (D) any filings with or
approvals of the NASDAQ Stock Market or (E) any filings in connection with the
applicable requirements of the HSR Act or under the antitrust or competition
Laws of applicable foreign jurisdictions, (iii) result in a violation or breach
of or the loss of any benefit under, or constitute (with or without due notice
or lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration) under, or result in the creation of any
Encumbrance on the assets and properties of the Parent or any Subsidiary under,
any of the terms, conditions or provisions of any Contract to which the Parent
or any Subsidiary is a party or by which any of them or any of their respective
properties or assets may be bound or (iv) assuming that all consents, approvals,
authorizations and other actions described in subsection (ii) have been obtained
and all filings and obligations in subsection (ii) have been made or complied
with, conflict with or violate any Law applicable to the Parent, any Subsidiary
or any of their respective properties or assets, except in the case of clauses
(ii) or (iii) where (x) any failure to obtain such permits, authorizations,
consents or approvals, (y) any failure to make such filings or (z) any such
violations, breaches, defaults or Encumbrances could not, individually or in the
aggregate, reasonably be expected to impair in any material respect the ability
of each of Parent and Merger Sub to perform its obligations under this
Agreement, as the case may be, or prevent or materially delay the consummation
of any the transactions contemplated hereby.
Section
4.4 Capitalization.
(a) The
authorized capital stock of Parent consists of (i) 47,500,000 shares of
Parent Common Stock and (ii) 2,000,000 shares of preferred stock, par value
$0.01 per share. As of the date of this Agreement, (i)
16,998,785 shares of Parent Common Stock are issued and outstanding, (ii)
4,069,913 shares of Parent Common Stock are issued and held in the treasury
of Parent, (iii) a total of 788,388 shares of Parent Common Stock are
reserved for issuance upon the exercise of outstanding Parent Options and (iv)
no shares of preferred stock of Parent are issued and
outstanding. All of the outstanding shares of the Parent common stock
are, and all shares that may be issued pursuant to the exercise of outstanding
Parent Options will be, duly authorized, validly issued, fully paid and
non-assessable. Except as set forth in the Parent SEC Documents,
there are (i) no existing options, warrants, calls, pre-emptive rights,
subscriptions or other rights, restricted stock awards, restricted stock unit
awards, agreements, arrangements, understandings or commitments of any kind
(including Voting Debt) relating to the issued or unissued capital stock of, or
other equity interests in, Parent or any of its Subsidiaries obligating Parent
or any of its Subsidiaries to issue, transfer, register or sell or cause to be
issued, transferred, registered or sold any shares of capital stock
or Voting Debt of, or other equity interest in, Parent or any of its
Subsidiaries or securities convertible into or exchangeable for such shares or
equity interests or other securities, or obligating Parent or any of its
Subsidiaries to grant, extend or enter into any such option, warrant, call,
subscription or other right, restricted stock award, restricted stock unit
award, agreement, arrangement, understanding or commitment, and (ii) no
outstanding agreements, arrangements, understandings or commitments of Parent or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
Parent Common Stock or any capital stock or other equity interests in any of its
Subsidiaries or any Person or to provide funds to make any investment (in the
form of a loan, capital contribution or otherwise) in any of its Subsidiaries or
any Person. There are no outstanding or authorized stock
appreciation, phantom stock, profit participation or other similar rights with
respect to Parent or any of its Subsidiaries.
32
(b) There
are no stockholder agreements, voting trusts or other agreements or
understandings to which the Parent or any Subsidiary is a party relating to the
voting or disposition of any share of the capital stock of the Parent or any of
its Subsidiaries or granting to any person or group of persons the right to
elect, or to designate or nominate for election, a director to the board of
directors of the Parent or any Subsidiary.
(c) All
dividends or distributions on securities of the Parent or any Subsidiary that
have been declared or authorized have been paid in full.
Section
4.5 Parent SEC Documents and
Financial
Statements.
(a) Since
January 1, 2005, Parent has timely filed with the SEC all forms, reports,
schedules, statements, exhibits, and other documents required by it to be filed
under the Exchange Act or the Securities Act (collectively, the "Parent SEC Documents"). As
of its filing date or, if amended prior to the date of this Agreement, as of the
date of the last such amendment, each Parent SEC Document complied in all
material respects with the applicable requirements of the Exchange Act and the
Securities Act, as the case may be, and the applicable rules and regulations of
the SEC thereunder. As of its filing date or, if amended prior to the
date of this Agreement, as of the date of the last such amendment, each Parent
SEC Document filed pursuant to the Exchange Act did not 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 made therein, in
light of the circumstances under which they were made, not
misleading. Each Parent SEC Document that is a registration
statement, as amended or supplemented, if applicable, filed pursuant to the
Securities Act, as of the date such registration statement or amendment became
effective prior to the date of this Agreement, did not 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 made in light of the
circumstances under which they were made, not misleading. None
of Parent's Subsidiaries is required to file any forms, reports or other
documents with the SEC. As of its filing date or, if amended prior to
the date of this Agreement, as of the date of the last such amendment, all of
the audited consolidated financial statements and unaudited consolidated interim
financial statements of Parent included in the Parent SEC Documents
(collectively, the "Parent Financial Statements") (i)
comply in all material respects with the applicable accounting requirements and
with the published rules and regulations of the SEC with respect thereto, (ii)
have been prepared in accordance with GAAP applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto and
except, in the case of the unaudited interim statements, as may be permitted
under Form 10-Q of the Exchange Act) and (iii) fairly present in all material
respects the consolidated financial position and the consolidated results of
operations and cash flows (subject, in the case of unaudited interim financial
statements, to normal and recurring year-end adjustments) of Parent and its
consolidated Subsidiaries as of the times and for the periods referred to
therein.
33
(b) Parent
has heretofore furnished to the Company complete and correct copies of all
comment letters from the SEC since January 1, 2007 through the date of this
Agreement with respect to any of the Parent SEC Documents. 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 any of the Parent
SEC Documents.
(c) Parent
is in compliance in all material respects with the applicable provisions of the
Sarbanes-Oxley Act and the applicable listing and governance rules and
regulations of the NASDAQ Stock Market.
(d) Parent
maintains a system of internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide
reasonable assurance (i) that Parent maintains records that in reasonable detail
accurately and fairly reflect its transactions and dispositions of assets, (ii)
that transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP, (iii) that receipts and expenditures are
executed only in accordance with authorizations of management and its board of
directors and (iv) regarding prevention or timely detection of the unauthorized
acquisition, use or disposition of Parent's assets that could have a material
effect on Parent's consolidated financial statements. Parent has evaluated the
effectiveness of its internal control over financial reporting and, to the
extent required by applicable Law, presented in any applicable Parent SEC
Document that is a report on Form 10-K or Form 10-Q or any amendment thereto its
conclusions about the effectiveness of the internal control over financial
reporting as of the end of the period covered by such report or amendment based
on such evaluation. Parent has disclosed, based on the most recent evaluation of
internal control over financial reporting, to the Parent's auditors and the
audit committee of its board of directors (and made available to the Company a
summary of the significant aspects of such disclosure) (A) all significant
deficiencies and material weaknesses in the design or operation of internal
control over financial reporting that are reasonably likely to adversely affect
Parent's ability to record, process, summarize and report financial information
and (B) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Parent's internal control over
financial reporting. Except as disclosed in the Parent SEC Documents,
Parent has not identified any material weaknesses in the design or operation of
Parent's internal control over financial reporting.
34
(f) To
the knowledge of Parent, there are no SEC inquiries or investigations, other
governmental inquiries or investigations or internal investigations pending or
threatened in each case regarding any accounting practices of Parent or any
malfeasance by any director or executive officer of Parent. Since
January 1, 2005 there have been no internal investigations regarding accounting
or revenue recognition discussed with, reviewed by or initiated at the direction
of Parent's chief executive officer, chief financial officer, general counsel or
similar legal officer, Parent's board of directors or any committee
thereof.
(g) Each
of the principal executive officer of Parent and the principal financial officer
of Parent (or each former principal executive officer of Parent and each former
principal financial officer of Parent, as applicable) has made all
certifications required by Rule 13a-14 or 15d-14 under the Exchange Act and
Sections 302 and 906 of the Sarbanes-Oxley Act with respect to the Parent SEC
Documents, and the statements contained in such certifications are true and
accurate. For purposes of this Agreement, "principal
executive officer" and "principal financial officer" shall
have the meanings given to such terms in the Sarbanes-Oxley Act. The
Parent does not have, and has not arranged any, outstanding "extensions of credit" to directors or executive officers within
the meaning of Section 402 of the Sarbanes-Oxley Act.
(h) Neither
Parent nor any of its Subsidiaries is a party to, or has any commitment to
become a party to, any joint venture, off-balance sheet partnership or any
similar contract (including any contract or arrangement relating to any
transaction or relationship between or among Parent or any of its Subsidiaries,
on the one hand, and any unconsolidated affiliate, including any structured
finance, special purpose or limited purpose entity or person, on the other hand)
or any "off-balance sheet arrangements" (as defined in Item
303(a) of Regulation S-K of the SEC), where the result, purpose or effect of
such contract is to avoid disclosure of any material transaction involving, or
material liabilities of, Parent or any of its Subsidiaries in Parent's
published financial statements or other Parent SEC Documents.
Section
4.6 Information Supplied. None
of the information supplied or to be supplied by or on behalf of Parent or
Merger Sub for inclusion or incorporation by reference (i) in the Form S-4 will,
at the time the Form S-4 is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit 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 are made, not misleading or (ii) the Proxy Statement will, at the
date it is first mailed to the stockholders of the Company and at the time of
the Company Stockholders' Meeting, contain any untrue statement of a material
fact or omit 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 are made, not misleading, except that, in each case, no
representation or warranty is made by Parent or Merger Sub with respect to
statements made or incorporated by reference therein based on information
supplied by or on behalf of the Company specifically for inclusion or
incorporation by reference in the Form S-4 or the Proxy
Statement. The Form S-4 will comply as to form in all material
respects with the requirements of the Securities Act.
35
Section
4.7 Brokers. No
broker, investment banker, financial advisor or other Person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Merger Sub which will not be for
the sole account of Parent and/or any Subsidiary of Parent.
Section
4.8 Interim Operations of Merger
Sub. Merger
Sub was formed solely for the purpose of consummating the Merger and has not
conducted and will not conduct any activities other than in connection with the
transactions contemplated hereby.
Section
4.9 Parent-Owned Shares of
Company Common Stock. As of
the date of this Agreement, Parent, Merger Sub and their respective Subsidiaries
own no shares of the Company's common stock, or other securities convertible
into, exchangeable into or exercisable for shares of the Company's common
stock.
Section
4.10 Adequate Funds and
Stock. Parent
has sufficient funds or firm commitment letters from nationally recognized
lending institutions, and will have at the time the conditions to the Merger are
satisfied or waived and at the Effective Time sufficient funds, for the payment
of the Cash Consideration and to perform its obligations with respect to the
transactions contemplated by this Agreement. Parent has sufficient
authorized common stock and has taken all action required for issuance of the
Parent Common Stock to be issued in the Merger.
ARTICLE
V
CONDUCT
OF BUSINESS PENDING THE MERGER
Section
5.1 Interim Operations of the
Company. The
Company covenants and agrees that, except as expressly contemplated by this
Agreement, or as reflected on Schedule 5.1, after the date hereof, and prior to
the earlier of (x) the termination of this Agreement in accordance with Article
VIII and (y) the Effective Time:
(a) the
business of the Company and the Company Subsidiaries shall be conducted only in
the ordinary course of business consistent with past practice, and each of the
Company and the Company Subsidiaries shall use its reasonable best efforts to
preserve its present business organization intact, to keep available the
services of its current officers, employees and consultants, and to maintain
good relations with customers, suppliers, employees, contractors, distributors
and others having business dealings with it;
(b) neither
the Company nor any Company Subsidiary shall, (i) directly or indirectly, except
with respect to the Company, for the issuance of Shares upon the exercise
of the Options or the MSLO Warrant or upon the vesting of Restricted Stock
Units, the exercise of Exchange Rights or the final installment of consideration
payable under the Company's Asset Purchase Agreement with Global Appliance
Technologies, Inc. (the "Global Asset Purchase
Agreement") outstanding on the date of this Agreement pursuant to
the terms of such Options, MSLO Warrant, Restricted Stock Units, Exchange Rights
and Global Asset Purchase Agreement, issue, sell, modify, transfer, dispose of,
encumber or pledge any shares of capital stock of the Company or any capital
stock or other equity interests of any Company Subsidiary, securities
convertible into or exchangeable for, or options, warrants or rights of any kind
to acquire any shares of such capital stock or other equity interests or any
other ownership interest; (ii) amend or otherwise change its Certificate of
Incorporation or Bylaws or similar organizational documents; (iii) split,
combine, reclassify, subdivide or redeem, or purchase or otherwise acquire,
directly or indirectly, any of its capital stock or other equity interests; or
(iv) declare, set aside or pay any dividend or other distribution payable in
cash, stock or property with respect to its capital stock;
36
(c) neither
the Company nor any Company Subsidiary will (i) incur or assume indebtedness or
issue any debt securities, except for the incurrence of indebtedness for working
capital purposes (including payment of costs associated with the transactions
reflected by this Agreement) under the Company's or the Company Subsidiaries'
existing credit facilities, in each case as in effect on the date hereof; (ii)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other Person;
(iii) make any loans, advances or capital contributions to, or investments in,
any other Person; (iv) acquire (by merger, consolidation, acquisition of stock
or assets or otherwise) any corporation, partnership or other business
organization or division thereof or any equity interest therein; (v) transfer,
lease, license, sell, mortgage, pledge, dispose of, or encumber any of its
assets or properties, other than in the ordinary course of business consistent
with past practice, except, in the case of each of clauses (i) through (v)
above, for amounts that do not exceed $100,000 in the aggregate at any
time;
(d) neither
the Company nor any Company Subsidiary shall (i) increase the compensation or
benefits payable or to become payable to any of its officers, directors,
employees, agents or consultants; (ii) enter into, extend or amend any
employment, collective bargaining, severance, consulting, termination or other
agreement or employee benefit plan, except as required to comply with Section
409A of the Code; or (iii) (except as otherwise would be permitted under
subsection (c) above) make any loans or advances to any of its officers,
directors, employees, agents, consultants or affiliates or change its existing
borrowing or lending arrangements for or on behalf of any of such persons
pursuant to an employee benefit plan or otherwise except: (1) for changes that
are required by applicable law; or (2) to satisfy contractual obligations
existing as of the date hereof under employment, consulting, severance, change
of control or other agreements, including contractual promises to pay for 409A
penalty exposures and income tax thereon, the material amount of which is
reserved in the Company's books on the date hereof and has been disclosed to
Parent;
(e) neither
the Company nor any Company Subsidiary shall (i) pay or arrange for payment of
any pension, retirement allowance or other employee benefit pursuant to any
existing plan, agreement or arrangement to any officer, director, employee or
affiliate or pay or make any arrangement for payment to any officers, directors,
employees or affiliates of the Company of any amount relating to unused vacation
days, except payments and accruals made in the ordinary course of business
consistent with past practice or as may be required pursuant to the terms of a
Benefit Plan or applicable Laws, (ii) except as may be required pursuant to the
terms of a Benefit Plan as in effect as of the date of this Agreement or
applicable Laws, adopt or pay, grant, issue, accelerate or accrue salary or
other payments or benefits pursuant to any pension, profit-sharing, bonus, extra
compensation, incentive, deferred compensation, stock purchase, stock option,
stock appreciation right, group insurance, severance pay, retirement or other
employee benefit plan, agreement or arrangement, or any employment or consulting
agreement with or for the benefit of any director, officer or employee, whether
past or present, or (iii) amend in any material respect any such existing plan,
agreement or arrangement;
37
(f) neither
the Company nor any Company Subsidiary will, (i) modify, extend, amend or
terminate any Material Contract to which the Company or any Company Subsidiary
is a party or by which any of them or any of their respective properties or
assets may be bound (except for such modifications, extensions, amendments or
terminations which are immaterial or which are favorable to the Company); (ii)
waive, release or assign any rights or claims under any of such Contracts
(except for such waivers or releases which are immaterial or which are favorable
to the Company); or (iii) enter into any Material Contract;
(g) neither
the Company nor any Company Subsidiary shall, except in the ordinary course of
business consistent with past practice, grant or acquire, agree to grant or
acquire from any Person, or dispose of or permit to lapse any rights to, any
Intellectual Property, or disclose or agree to disclose to any Person, other
than representatives of Parent and Merger Sub, any trade secret or other
confidential information;
(h) neither
the Company nor any Company Subsidiary will (i) change any of the accounting
methods used by it except for such changes required by GAAP or applicable Law or
(ii) make any material Tax election or change any Tax election already made,
adopt any Tax accounting method, change any Tax accounting method, enter into
any closing agreement or settle any claim or assessment relating to a material
amount of Taxes or consent to any claim or assessment relating to a material
amount of Taxes or any waiver of the statute of limitations for any such claim
or assessment;
(i) neither
the Company nor any Company Subsidiary will pay, discharge or satisfy any
claims, liabilities or obligations (whether absolute, accrued, contingent or
otherwise), other than the payment, discharge or satisfaction of any such
claims, liabilities or obligations, in the ordinary course of business
consistent with past practice, or of claims, liabilities or obligations
reflected or reserved against in the Financial Statements of the Company
for the period ended December 31, 2007 (including remaining payments
required pursuant to the Global Asset Purchase Agreement) or incurred since
December 31, 2007 in the ordinary course of business consistent with past
practice;
(j) neither
the Company nor any Company Subsidiary will (i) settle or commence any action,
suit, claim, litigation or other proceeding involving an amount in excess of
$100,000 or, in the aggregate, an amount in excess of $500,000 or (ii) enter
into any consent decree, injunction or other similar restraint or form of
equitable relief in settlement of any action, suit, claim, litigation or other
proceeding;
(k) neither
the Company nor any Company Subsidiary will adopt a plan of complete or partial
liquidation, dissolution, merger, consolidation, restructuring, recapitalization
or other reorganization of the Company or any Company Subsidiary (other than
with respect to Company, the Merger);
38
(l) neither
the Company nor any Company Subsidiary will take any action that could result in
any of the conditions to the Merger set forth in Article VII not being
satisfied or that could delay the consummation of, or impair the ability of the
Company to consummate, the transactions contemplated by this Agreement in
accordance with the terms hereof;
(m) the
Company shall not, and shall not permit any of the Company Subsidiaries to,
enter into, amend, modify or supplement any agreement, transaction, commitment
or arrangement with any officer, director or other affiliate (or any affiliate
of any of the foregoing);
(n) neither
the Company nor any Company Subsidiary shall make any capital expenditure which
is not in all material respects in accordance with the annual budget for the
fiscal year 2008, a true and correct copy of which is attached to Schedule 5.1;
and
(o) neither
the Company nor any Company Subsidiary will enter into any agreement, contract,
commitment or arrangement to do any of the foregoing, or authorize, recommend,
propose or announce an intention to do any of the foregoing.
Section
5.2 No
Solicitation.
(a) From
the date of this Agreement until the earlier of the time the Company Stockholder
Approval is obtained or the termination of this Agreement, the Company shall
immediately cease and cause to be terminated all existing discussions,
negotiations and communications, if any, with any Persons with respect to any
Acquisition Proposal and shall request that any such Person (and its agents and
advisors) in possession of confidential information about the Company and the
Company Subsidiaries that was furnished by or on behalf of the Company to return
or destroy all such information. The Company agrees that
neither it nor any of the Company Subsidiaries shall, and that it shall direct
the Company’s and the Company Subsidiaries’ respective officers, directors,
employees, agents and representatives, including any investment banker,
consultant, attorney or accountant retained by the Company or any Company
Subsidiary (collectively, "Representatives") not
to, directly or indirectly (i) initiate, solicit or knowingly encourage
(including by way of furnishing information or assistance), or knowingly induce,
or take any action that is designed to or could reasonably be
expected to facilitate the making of, any inquiry, offer or proposal which
constitutes or could reasonably be expected to lead to any Acquisition Proposal,
(ii) enter into, continue or otherwise participate in any discussions or
negotiations with, furnish any non-public information relating to the Company or
any of the Company Subsidiaries to, or otherwise cooperate in any way with any
Person (other than Parent or any of its affiliates or representatives) that is
seeking to make, or has made, an Acquisition Proposal, (iii) fail to make, or
withdraw or modify in any manner adverse to Parent, the Company Board
Recommendation, or recommend, adopt or approve, or publicly propose to
recommend, adopt or approve, any Acquisition Proposal (any of the foregoing in
this clause (iii), an "Adverse
Recommendation
Change"), (iv) except as required by applicable Law, grant (other than to
Parent or any of its affiliates or representatives) any waiver or release under
any standstill or similar agreement, or (v) enter into any letter of intent or
similar document or any understanding or agreement contemplating or otherwise
relating to, or that is intended to or could reasonably be expected to lead to,
any Acquisition Proposal. The Company shall promptly (and in any
event within twenty-four hours) notify Parent if (1) any proposals are received
by the Company or (2) any information is requested from, or any negotiations or
discussions are sought to be initiated or continued with, the Company or any
Representative which could reasonably be expected to result in an Acquisition
Proposal, which notice shall identify the name of the Person making such
proposal or request or seeking such negotiations or discussions and include
copies of all correspondence and written materials provided to the Company, any
Company Subsidiary or any Representative that describe the terms and conditions
of any proposal or request (and any subsequent changes to such terms and
conditions) and summaries of any material oral communications addressing such
matters. The Company shall promptly inform Parent of any material
changes to any Acquisition Proposal.
39
(b) Notwithstanding
Section 5.2(a)
or any other provision of this Agreement, following the execution of this
Agreement but prior to the time the Company Stockholder Approval is obtained
(and in no event after the Company Stockholder Approval is obtained), the
Company may, subject to compliance with this Section 5.2, furnish
information concerning its and the Company Subsidiaries’ respective businesses,
properties or assets to any Person pursuant to a confidentiality agreement with
terms no less favorable to the Company than those contained in the
Confidentiality Agreement, dated April 15, 2008, entered into between Parent and
the Company (the "Confidentiality
Agreement") (a copy of which
shall be provided to Parent promptly after its execution) and may negotiate and
participate in discussions and negotiations (including making counterproposals)
with such Person concerning an Acquisition Proposal if, but only if, (x) such
Acquisition Proposal provides for consideration to be received by holders of
all, but not less than all, of the issued and outstanding Shares and is
reasonably likely to be consummated promptly; (y) such Person has on an
unsolicited basis, and in the absence of any violation of this Section 5.2 by the
Company or any of its Representatives, submitted a bona fide, written proposal
to the Company relating to any such transaction which the Board of Directors
determines in good faith, after receiving advice from a nationally recognized
investment banking firm, is, or would reasonably be likely to be, more favorable
to the holders of Shares from a financial point of view than the Merger or, if
applicable, any proposal by Parent to amend the terms of this Agreement, taking
into account all the terms and conditions of such proposal and this Agreement
(including the expected timing and likelihood of consummation, and taking into
account all legal, financial and regulatory aspects of the proposal and the
Person making the proposal) and which is not conditioned upon obtaining
financing or any regulatory approvals beyond or in addition to the types of
regulatory approvals required in connection with the transactions contemplated
by this Agreement, and (z) in the good faith belief of the Company Board of
Directors, after consultation with outside legal counsel to the Company, the
failure to provide such information or access or to engage in such discussions
or negotiations would be reasonably likely to cause the Company Board of
Directors’ to violate its fiduciary duties to the Company's stockholders under
applicable Law (an Acquisition Proposal which satisfies clauses (x), (y) and (z)
being referred to herein as a "Superior
Proposal"). The Company shall promptly, and in any event
within twenty-four hours, notify Parent of a Company Board of Directors
determination that an Acquisition Proposal is or would reasonably be likely to
lead to a Superior Proposal, which notice shall include the name of the Person
making such Superior Proposal and copies of all correspondence and written
materials provided to the Company or any Representative that describes any terms
and conditions of any Superior Proposal (and any subsequent changes to such
terms and conditions) and summaries of any material oral communications
addressing such matters. The Company shall promptly provide to Parent
any material non-public information regarding the Company or any Company
Subsidiary provided to any other Person which was not previously provided to
Parent, such additional information to be provided no later than the date of
provision of such information to such other Person.
40
(c) Any
violation of this Section 5.2 by any of its
Representatives, whether or not such Representative is so authorized and whether
or not such Representative is purporting to act on behalf of the Company or
otherwise, shall be deemed to be a breach of this Agreement by the
Company. Notwithstanding the foregoing, it is understood and agreed
for purposes of this Agreement that, so long as no actions inconsistent with the
Company’s obligations under this Section 5.2 are taken by the
Company, its Company Subsidiaries, or their Representatives after the date this
Agreement is executed, an Acquisition Proposal shall not be considered to have
been solicited as a result of any actions taken prior to the date of this
Agreement. In addition, nothing in this Section 5.2 shall
prohibit the Company’s outside legal counsel from contacting or otherwise
engaging in discussions with any Person after the date hereof who has submitted
an unsolicited Acquisition Proposal that did not otherwise result from a breach
of this Section
5.2 solely for the purpose of clarifying such Acquisition Proposal and
any material terms and the conditions thereof so as to assist the Company Board
of Directors in determining whether such Acquisition Proposal is or would
reasonably be likely to lead to a Superior Proposal.
(d) Prior
to the time the Company Stockholder Approval is obtained (and in no event after
the Company Stockholder Approval is obtained), neither the Company Board of
Directors nor any committee thereof shall (i) make an Adverse Recommendation
Change or (ii) authorize the Company to enter into any agreement with respect to
any Superior Proposal (an "Acquisition
Agreement"), unless and until the Company shall have delivered to Parent
the written notice required by Section 5.2(e) below and all
rights of the Parent to propose adjustments to the terms
and conditions of this Agreement as set forth in said Section 5.2(e) shall have
expired. Any such Adverse Recommendation Change or the entry by the
Company into any Acquisition Agreement shall not change the approval of the
Company Board of Directors for purposes of causing any state takeover statute or
other state Law to be applicable to the Merger, this Agreement and the
transactions contemplated hereby.
(e) The
Company Board of Directors may make an Adverse Recommendation Change and
authorize the Company to terminate this Agreement if (i) the Company first
provides Parent with written notice that it intends to do so pursuant to this
Section
5.2(e), identifying the
Superior Proposal then determined to be more favorable and the parties thereto
and delivering to Parent a copy of the Acquisition Agreement for such Superior
Proposal in the form to be entered into and (ii) within a period of five full
Business Days following the delivery of the notice referred to in clause (i)
above, Parent shall not have proposed adjustments in the terms and
conditions of this Agreement which, after having caused its financial and legal
advisors to negotiate with Parent in good faith such proposed adjustments in the
terms and conditions of this Agreement, the Company Board of Directors
determines in its good faith judgment (after considering the advice of its
financial advisor) to be as favorable to the Company's stockholders as such
Superior Proposal. If the conditions of the immediately preceding
sentence are satisfied in all respects, the Company shall be free to
deliver to the Parent, pursuant to this Section 5.2(e) and
Section
8.1(d)(i), at least five full Business Days after the Company has
provided the notice referred to in clause (i) above, (A) a written notice of
termination of this Agreement pursuant to this Section 5.2(e) and Section 8.1(d)(i) and
(B) within the time specified in Section 8.2(b), a wire transfer of
immediately available funds in the amount of the Termination Fee (it being
understood and agreed that any amendment to the financial terms or any other
material term of such Superior Proposal shall require a new written notice to
Parent pursuant to clause (i) above and a new five Business Day
period).
41
(f) Nothing
contained in this Agreement shall prohibit the Company or the Company Board of
Directors from taking and disclosing to its stockholders a position with respect
to a tender offer by a third party pursuant to Rules 14d-9 and 14e-2(a)
promulgated under the Exchange Act or from making such disclosure to the
Company’s stockholders which, in the good faith judgment of the Company Board of
Directors, after consultation with outside counsel to the Company, is required
by applicable Law or the failure to take such action would cause the Company
Board of Directors to violate its fiduciary duties to the Company's stockholders
under applicable Law.
Section
5.3 Right to Make Adverse
Recommendation Change Due to Intervening Event. In
addition, and notwithstanding any provision to the contrary in this Agreement,
at any time prior to the time the Company Stockholder Approval is obtained the
Company Board of Directors may, in response to a fact, event, change,
development or set of circumstances with respect to or otherwise affecting
Parent or any of its Subsidiaries or its or their business, properties, assets,
liabilities, results of operation or condition (financial or otherwise)
occurring or arising after the date hereof that is materially adverse to Parent
and its Subsidiaries taken as a whole and that was not known to the Company
Board of Directors prior to the execution of this Agreement (such fact, event,
change, development or set of circumstances, an “Intervening Event”), make an
Adverse Recommendation Change if the Company Board of Directors determines in
good faith, after consultation with its outside legal counsel, that, in light of
such Intervening Event, the failure to take such action would or would be
reasonably likely to cause the Company Board of Directors to violate its
fiduciary duties to the Company stockholders under applicable Law; provided that (1) no fact,
event, change, development or set of circumstances shall constitute an
Intervening Event if such fact, event, change, development or set of
circumstances resulted from or arose out of any action taken or omitted to be
taken by the Parent or any of its Subsidiaries at the written request or with
the written consent of the Company given after the date hereof and (2) any
decrease in the market price of the Parent Common Stock shall not constitute an
Intervening Event (it being understood that the exception in this clause (2) is
strictly limited to any such decrease in and of itself and shall not prevent or
otherwise affect a determination that an Intervening Event has occurred); and provided, further, that
the Company Board of Directors shall not be entitled to exercise its right to
make an Adverse Recommendation Change pursuant to this Section 5.3 unless
the Company has (A) given Parent and Merger Sub at least five Business Days’
prior written notice advising Parent and Merger Sub that the Company Board of
Directors intends to take such action and specifying the facts underlying the
Company Board of Directors’ determination that an Intervening Event has
occurred, and the reasons for the Adverse Recommendation Change, in reasonable
detail, and (B) during such five Business Day period, if requested by Parent,
engaged in good faith negotiations with Parent to amend this Agreement in such
manner that obviates the need for such an Adverse Recommendation Change as a
result of the Intervening Event. For the avoidance of doubt, (i) in
no event shall the receipt, existence or terms of an Acquisition Proposal or any
matter relating thereto or the consequences thereof constitute an Intervening
Event and (ii) the Company Board of Directors has considered and understands
that the announcement of both this Agreement and the transactions contemplated
hereby (and limited to the announcement of both this Agreement and the
transactions contemplated hereby) could affect the value of the Stock
Consideration.
42
ARTICLE
VI
ADDITIONAL
AGREEMENTS
Section
6.1 Company Stockholder Meeting; Form S-4 and Proxy
Statement
(a) Subject
to the Company's right to terminate this Agreement pursuant to Sections 8.1(d)(i)
and 8.1(d)(ii),
the Company shall, as promptly as practicable after the execution of this
Agreement and in accordance with applicable Law, establish a record date for,
duly call, give notice of, convene and hold a special meeting of its
stockholders for the purpose of considering and taking action upon this
Agreement (the "Company Stockholder Meeting") and
shall, through the Company Board of Directors, recommend to its stockholders the
adoption of this Agreement and shall include the Company Board Recommendation in
the Proxy Statement. Without limiting the generality of the
foregoing, subject to its right to terminate this Agreement, the Company's
obligations pursuant to the first sentence of this Section 6.1(a) shall
not be affected by (i) the commencement, public proposal, public disclosure or
communication to the Company of any Acquisition Proposal or (ii) any Adverse
Recommendation Change. If an Adverse Recommendation Change shall have
occurred and thereafter the Company Board of Directors shall recommend this
Agreement and the Merger (the "Reinstated
Recommendation"), the Company shall not hold or adjourn the Company
Stockholder Meeting until not less than ten (10) calendar days after the date of
such Reinstated Recommendation.
(b) As
promptly as practicable after the execution of this Agreement, the Company and
Parent shall prepare and Parent shall file with the SEC a Registration Statement
on Form S-4 in connection with the issuance of shares of Parent Common Stock in
the Merger (as may be amended or supplemented from time to time, the "Form S-4"), in which
the proxy statement relating to the adoption by the stockholders of the Company
of this Agreement (as may be amended or supplemented from time to time, the
"Proxy Statement") will
be included. Each of the Company and Parent shall use its reasonable best
efforts to have the Form S-4 declared effective under the Securities Act as
promptly as practicable after such filing. The Company shall use its
reasonable best efforts to cause the Proxy Statement to be mailed to the
stockholders of the Company as promptly as practicable after the Form S-4 is
declared effective under the Securities Act. Parent shall also take
any action required to be taken under any applicable state securities laws in
connection with the issuance of shares of Parent Common Stock in the Merger, and
each of Parent and the Company shall furnish all information as may be
reasonably requested by the other in connection with any such action and
the preparation, filing and distribution of the Form S-4 will be made by Parent,
and no filing of, or amendment or supplement to, the Proxy Statement will made
by the Company, in each case without providing Parent a reasonable opportunity
to review and comment thereon. If at any time prior to the Effective
Time any information relating to the Company or Parent, or any of their
respective Affiliates, directors or officers, should be discovered by the
Company or Parent which should be set forth in an amendment or supplement to
either the Form S-4 or the Proxy Statement, so that either such document would
not include any misstatement of material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading, the party which discovers such information
shall promptly notify the other parties hereto and an appropriate amendment or
supplement describing such information shall be promptly filed with the SEC and,
to the extent required by applicable Law or the SEC, disseminated to the
stockholders of the Company. The parties shall notify each other promptly of the
time when the Form S-4 has become effective, of the issuance of any stop order
or suspension of the qualification of the Parent Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or of the
receipt of any comments from the SEC or the staff of the SEC for amendments or
supplements to the Proxy Statement or the Form S-4 or for additional information
and shall supply each other with copies of (i) all correspondence between it or
any of its Representatives, on the one hand, and the SEC or staff of the SEC, on
the other hand, with respect to the Proxy Statement, the Form S-4 or the Merger
and (ii) all orders of the SEC relating to the Form S-4.
43
(c) The
Company shall use its reasonable best efforts to solicit from holders of Shares
proxies in favor of the adoption of this Agreement and take all actions
reasonably necessary or, in the reasonable opinion of Parent, advisable to
secure the approval of stockholders required by the DGCL, the Company's
Certificate of Incorporation and any other applicable Law to effect the Merger,
unless, pursuant to Section 5.2(d) or Section 5.3, the Company Board
of Directors determines in its good faith opinion, after consultation with
outside legal counsel to the Company, that taking such actions would or would be
reasonably likely to cause the Company Board of Directors to violate its
fiduciary duties to the Company's stockholders under applicable
Law.
Section
6.2 Notification of Certain
Matters. The
Company shall give prompt written notice to Parent of (i) any claims, actions,
proceedings or governmental investigations commenced or, to its knowledge,
threatened, involving or affecting the Company or any Company Subsidiary or any
of their property or assets and (ii) any notice of, or other communication
relating to, a default or event which, with notice or lapse of time or both,
would become a default, received by the Company or any of Company Subsidiary
subsequent to the date of this Agreement and prior to the Effective Time, under
any Material Contract or any Contract entered into after the date of this
Agreement that if in effect on the date hereof would be a Material Contract, to
which the Company or any Company Subsidiary is a party or is subject. The
Company, on the one hand, and Parent, on the other hand, shall give prompt
written notice to the other party of (a) any notice or other communication from
any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated hereby or (b) any
Material Adverse Effect to the Company. The Company shall give prompt written
notice to Parent, and Parent shall give prompt written notice to the Company, of
(i) the occurrence, or failure to occur, of any event that would be likely to
cause any representation or warranty made by such party contained in this
Agreement to be untrue or inaccurate in any material respect and (ii) any
material failure of the Company, Parent or Merger Sub, as the case may be, or of
any officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder. Notwithstanding anything in this Agreement to the contrary, no such
notification shall affect the representations, warranties or covenants of the
parties or the conditions to the obligations of the parties
hereunder. The Company and Parent shall, to the extent permitted by
Law, promptly provide the other with copies of all filings made by such party
with any Governmental Entity in connection with this Agreement and the
transactions contemplated hereby, other than the portions of such filings that
include confidential or proprietary information not directly related to the
transactions contemplated hereby.
44
Section
6.3 Access;
Confidentiality. From
the date hereof until the Effective Time, subject to the terms of the
Confidentiality Agreement, the Company shall (and shall cause each of the
Company Subsidiaries to) afford to the officers, employees, accountants,
counsel, financing sources and other Representatives of Parent and Merger Sub,
regular access, during normal business hours and with prior notice to all of its
officers, employees, agents, properties, books, contracts and records and,
during such period, the Company shall (and shall cause each of the Company
Subsidiaries to) furnish promptly to Parent and Merger Sub (a) a copy of each
report, schedule, registration statement and other document filed by it pursuant
to the requirements of federal securities laws and (b) all other reasonably
available information concerning its business, properties and personnel as
Parent or Merger Sub may reasonably request. Parent and Merger Sub
will hold any information obtained pursuant to this Section 6.3 in
accordance with the terms of the Confidentiality Agreement. Notwithstanding the
foregoing, none of the Company, any Company Subsidiary or any of their
Representative shall be required to provide access to or disclose information
where such access or disclosure (a) the Company reasonably determines would
cause the loss of any the attorney-client privilege of the Company or any
Company Subsidiary or (b) would contravene any Law or order of any Governmental
Entity. No investigation pursuant to this Section 6.3 shall
affect any representation or warranty made by the parties
hereunder.
Section
6.4 Publicity. Each
of Parent and the Company shall consult with the other regarding their initial
press releases with respect to the execution of this
Agreement. Thereafter, so long as this Agreement is in effect,
neither the Company nor Parent, nor any of their respective affiliates, shall
issue any press release or other announcement with respect to this Agreement and
the transactions contemplated hereby without the prior consent of the other
party (such consent not to be unreasonably withheld), except as such press
release or other announcement may be required by Law or the rules of a national
securities exchange or trading market, in which case the party required to make
the release or announcement shall use its reasonable best efforts to provide the
other party with a reasonable opportunity to review and comment on such release
or announcement in advance of its issuance.
Section
6.5 Insurance and
Indemnification. (a) The
Bylaws of the Surviving Corporation shall contain provisions no less favorable
with respect to indemnification than are set forth in the Bylaws of the Company,
which provisions shall not be amended, repealed or otherwise modified for a
period of at least six years from the Effective Time in any manner that would
affect adversely the rights of individuals, who were directors, officers,
employees or agents of the Company at or prior to the Effective Time, unless
such modification shall be required by Law.
(b) Prior
to the fifth Business Day preceding the Effective Time, Parent shall have the
right, but not the obligation, to purchase a six-year prepaid "tail policy" on
terms and conditions (in both amount and scope) providing substantially
equivalent benefits as the current policies of officers' and directors'
liability insurance covering acts or omissions occurring at or prior to the
Effective Time ("D&O Insurance")
maintained by the Company, covering without limitation the transactions
contemplated hereby (the "Tail
Policy"). If Parent has not purchased the Tail Policy by such
fifth Business Day preceding the Effective Time, the Company shall have the
right to purchase the Tail Policy prior to the Closing on terms reasonably
acceptable to Parent. In the absence of any such Tail Policy, Parent and
the Surviving Corporation shall maintain the Company's existing D&O
Insurance for a period of not less than six years after the Effective Time;
provided, however, that Parent may substitute therefor policies of substantially
equivalent coverage and amounts containing terms no less favorable to such
former directors or officers; provided that Parent and the Surviving Corporation
shall use their respective reasonable best efforts to ensure that any
substitution or replacement of existing policies shall not result in any gaps or
lapses of coverage with respect to facts, events, acts or omissions occurring at
or prior to the Effective Time; provided, further, that if the existing D&O
Insurance expires or is terminated or cancelled during such period, then Parent
or the Surviving Corporation shall obtain substantially similar D&O
Insurance; provided further, however, that in no event shall Parent or Merger
Sub be required to pay annual premiums for insurance under this Section 6.5(b) in excess of 150%
of the current annual premiums paid by the Company for such
insurance.
45
(c) Notwithstanding
anything herein to the contrary, if any claim, action, suit, proceeding or
investigation (whether arising before, at or after the Effective Time) is made
against any individual who is now, or who has been at any time prior to the date
hereof, or who becomes prior to the Effective Time, a director, officer,
employee or agent of the Company, on or prior to the sixth anniversary of the
Effective Time, the provisions of this Section 6.5 shall continue
in effect until the final disposition of such claim, action, suit, proceeding or
investigation.
(d) The
covenants contained in this Section 6.5 are
intended to be for the benefit of, and shall be enforceable by, each of the
indemnified parties and their respective heirs and legal Representatives and
shall not be deemed exclusive of any other rights to which an indemnified party
is entitled, whether pursuant to Law, contract or otherwise. Parent
shall pay all expenses, including reasonable attorneys' fees, that may be
incurred by the persons referred to in this Section 6.5 in
connection with their successful enforcement of their rights provided in this
Section
6.5.
(e) In
the event that the Parent or the Surviving Corporation or any of its successors
or assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers or conveys all or substantially all of its properties
and assets to any person, then, and in each such case, proper provision shall be
made so that the successors or assigns of the Parent or the Surviving
Corporation, as the case may be, shall succeed to the obligations set forth in
this Section
6.5.
Section
6.6 Further Action; Reasonable Best
Efforts. Upon
the terms and subject to the conditions of this Agreement, Parent, Merger Sub
and the Company agree to use their respective reasonable best efforts to (i)
make promptly (and in any event within ten (10) Business Days after execution of
this Agreement) its respective filings, and thereafter make any other required
submissions, under the HSR Act and the antitrust or competition Laws of
applicable foreign jurisdictions with respect to the transactions contemplated
by this Agreement and (ii) take, or cause to be taken, all actions, and to do,
or cause to be done, all things necessary, proper or advisable under applicable
Laws and regulations to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable including, but not
limited to, using their respective reasonable best efforts to obtain any
requisite approvals, consents, authorizations, orders, exemptions or waivers by
any third Person or Governmental Entity in connection with the transactions
contemplated by this Agreement and to fulfill the conditions to the
Merger.
46
Section
6.7 State Takeover
Laws. If
any state takeover statute becomes or is deemed to become applicable to the
Company or the transactions contemplated by this Agreement, then the Company
Board of Directors shall take all actions necessary to render such statutes
inapplicable to the foregoing.
Section
6.8 Stockholder
Litigation. The
Company shall give Parent the opportunity to participate in the defense or
settlement of any stockholder litigation against the Company and/or its
directors or executive officers relating to the transactions contemplated by
this Agreement, whether commenced prior to or after the execution and delivery
of this Agreement. The Company agrees that it shall not settle or
offer to settle any litigation commenced prior to or after the date hereof
against the Company or any of its directors or executive officers by any
stockholder of the Company relating to the Merger, this Agreement or any other
transaction contemplated hereby or otherwise, without the prior written consent
of Parent (which consent shall not be unreasonably withheld or
delayed).
Section
6.9 Financial Information and
Cooperation. During
the period prior to the Effective Time, the Company shall provide to Parent
consolidated and consolidating monthly financial statements and the complete
monthly internal financial reporting package no later than twenty (20) calendar
days following the end of each fiscal month. Further, the Company
shall provide, and shall cause the Company Subsidiaries and representatives of
the Company to provide, all reasonable cooperation in connection with the
arrangement and consummation of any financing to be obtained by Parent or Merger
Sub or the Surviving Corporation in connection with the transactions
contemplated by this Agreement (the "Financing") including
(a) subject to the Confidentiality Agreement, promptly providing to Parent's or
Merger Sub's financing sources all material financial information in their
possession with respect to the Company and the transactions contemplated by this
Agreement reasonably requested by Parent, including information prepared by the
Company relating to the Company and the transactions contemplated by this
Agreement, (b) causing the Company's senior officers and other Company
representatives to be reasonably available to Parent's or Merger Sub's financing
sources in connection with such Financing, to reasonably participate in due
diligence sessions and to reasonably participate in presentations related to the
Financing, including presentations to rating agencies, and (c) reasonably
assisting, and using its commercially reasonable efforts to cause the Company
representatives to reasonably assist Parent's or Merger Sub's financing sources
in preparing and delivering appropriate marketing and closing materials, in each
case to be used in connection with the Financing. Notwithstanding the
foregoing, neither the Company nor any Company Subsidiary shall be required to
pay any commitment or similar fee in connection with the Financing and the
covenants, obligations and agreements of the Company in this Section 6.9 shall be
the only covenants, obligations or agreements by the Company relating to the
Financing prior to the Effective Time. For the avoidance of doubt,
any failure to consummate a Financing shall not relieve Parent and Merger Sub of
their obligations to consummate the Merger and the transactions contemplated
hereby to the extent all conditions set forth in Section 7.2 are
otherwise satisfied on or prior to the Closing Date.
47
Section
6.10 SEC
Reports. From
the date of this Agreement to the Effective Time, the each of the Company and
Parent shall file or furnish on a timely basis all Company SEC Reports and
Parent SEC Reports required to be filed or furnished by it with the SEC under
the Exchange Act, the Securities Act and the published rules and regulations of
the SEC under either of the foregoing applicable to such Company SEC Reports and
Parent SEC Reports, which Company SEC Reports and Parent SEC Reports shall
comply in all material respects with the requirements of the Exchange Act and
the Securities Act, each as applicable to such Company SEC Reports and Parent
SEC Reports.
Section
6.11 Tax-Free Reorganization
Treatment. Each
of Parent, Merger Sub and the Company shall use its reasonable best efforts to
cause the Merger to qualify as a reorganization under the provisions of Section
368 of the Code and to obtain the opinions of Counsel referred to in Sections 7.2(h) and
7.3(d). Parent
and the Company hereby adopt this Agreement as a plan of reorganization within
the meaning of Treasury Regulations Sections 1.368-2(g) and
1.368-3(a). None of Parent, Merger Sub or the Company shall take any
action that may reasonably be expected to cause the Merger to fail to qualify as
a reorganization with the meaning of Section 368(a) of the Code.
Section
6.12 NASDAQ
Listing. Parent
shall use reasonable best efforts to cause the Parent Common Stock issuable
under Article II, and those shares of Parent Common Stock required to be
reserved for issuance in connection with the Merger, to be authorized for
listing on the NASDAQ, upon official notice of issuance.
Section
6.13 Employee Benefits.
(a) Parent
intends that, during the period commencing at the Effective Time and ending on
the first anniversary thereof or, if sooner, upon the termination of employment
of the applicable Company Employee, each employee of the Company or any Company
Subsidiary immediately before the Effective Time who remains an employee of the
Surviving Corporation or any of its Subsidiaries following the Effective Time
(the "Company
Employees") will be provided with, at Parent's election, compensation and
benefits substantially comparable, in the aggregate, to either (i) the
compensation and benefits provided by Parent (or a Subsidiary thereof) to its
similarly situated employees or (ii) the compensation and benefits provided by
the Company and any Company Subsidiary to Company Employees under the
Benefit Plans listed in Section 3.12(b) of the Company
Disclosure Schedule as in effect immediately before the Effective Time
(excluding defined benefit pension plans, plans providing for retiree medical
benefits, incentive pay plans, plans that provide equity-based compensation and
plans that provide for payments or benefits upon a change in
control).
(b) Neither
this Section 6.13 nor any other
provision of this Agreement shall (i) limit the ability or right of the Company
or any of the Company Subsidiaries to terminate the employment of any of their
respective employees on or after the Closing Date (subject to any rights of any
such employees pursuant to any contract, agreement, arrangement, policy, plan or
commitment), (ii) limit the ability or right of Parent, the Company, the
Surviving Corporation or any of their Subsidiaries on or after the Closing Date
to modify, amend, suspend or terminate any employee benefit plan, program or
arrangement they may maintain or establish or to establish any such plan,
program or arrangement or (iii) provide third party beneficiary rights to
Company employees, officers and directors.
48
(c) For
purposes of all employee benefit plans, programs and arrangements maintained by
or contributed to by Parent or its Subsidiaries (including, after Closing, the
Surviving Corporation) in which Company Employees participate after Closing,
other than any equity or other incentive compensation plans, programs or
arrangements or any sabbatical plans, programs or arrangements, Parent shall, or
shall cause its Subsidiaries to cause each such plan, program or arrangement to
treat service with the Company or its Subsidiaries of any Company Employee (to
the same extent such service is recognized under analogous plans, programs
or arrangements of the Company or its affiliates prior to the closing) as
service rendered to Parent or its Subsidiaries (including, after Closing, the
Surviving Corporation), as the case may be, for purposes of vesting and
eligibility, but not for any other purposes, including, without limitation,
benefit accrual or determination of level of benefits; provided, however, that such
crediting of service shall not operate to duplicate any benefit or the funding
of such benefit under any plan. Company Employees shall also be given
credit for any deductible or co-payment amounts paid in respect of the plan year
in which the Closing occurs, to the extent that, following the Closing, they
participate in any other comparable plan for which deductibles or co-payments
are required. Parent shall also cause each Parent Plan (as
hereinafter defined below) that is a welfare benefit plan in which Company
Employees participate on or following the Closing, to waive any preexisting
condition or waiting period that was waived or satisfied under the terms of any
comparable Benefit Plan immediately prior to the Closing. For
purposes of this Agreement, a "Parent Plan" shall
mean such employee benefit plan, as defined in Section 3(3) of ERISA, or a
nonqualified employee benefit or deferred compensation plan, stock option, bonus
or incentive plan or other employee benefit or fringe benefit program, that may
be in effect generally for employees of Company and the Company Subsidiaries
from time to time.
(d) Effective
as of no later than the day immediately preceding the Closing Date, each of the
Company, the Company Subsidiaries and any ERISA Affiliates shall, unless Parent
provides written notice to the Company to the contrary no later than five
Business Days prior to the Closing Date, terminate any and all Benefit Plans
intended to include a Code Section 401(k) arrangement (each a "401(k) Plan"),
subject to the condition subsequent that the transactions contemplated by this
Agreement shall be consummated. Unless Parent provides such written
notice, then the Company shall provide Parent with evidence that such 401(k)
Plan(s) have been terminated (effective as of no later than the day immediately
preceding the Closing Date and subject to the condition subsequent that the
transactions contemplated by this Agreement will be consummated) pursuant to
resolutions of the Company Board of Directors, the Company Subsidiaries or such
ERISA Affiliates, as the case may be. The form and substance of such
resolutions and related plan amendments shall be subject to review and approval
by Parent, which approval shall not be unreasonably withheld or
delayed. The Company also shall take such other actions in
furtherance of terminating such 401(k) Plan(s) as Parent may reasonably require.
Parent shall cause a tax-qualified defined contribution plan with a Code Section
401(k) arrangement established or maintained by Parent or an affiliate (the
"Parent 401(k) Plan") to
accept direct rollovers of eligible rollover distributions (as defined in
Section 402(c)(4) of the Code) by Company Employees. To the extent the rollover
of loans is permitted under the Company 401(k) Plans, rollover of outstanding
loans under such plan will be permitted by the Parent 401(k) Plan.
49
Section
6.14 Section 16
Matters. Prior
to the Effective Time, each of the Company and Parent shall take all such steps
as may be required (to the extent permitted under applicable Law) to cause any
dispositions of Shares or acquisitions of Parent Common Stock (including, in
each case, derivative securities) resulting from the transactions contemplated
hereby by each individual who is subject to the reporting requirements of
Section 16(a) of the Exchange Act with respect to the Company or any employee or
director of the Company who may become an officer or director of Parent to be
exempt under Rule 16b-3 promulgated under the Exchange Act.
Section
6.15 Pay-Off
Letter. No
later than two (2) Business Days prior to the Closing Date, the Company shall
deliver to Parent a pay-off letter from the Lender (as defined below) under the
Company’s Amended and Restated Credit Agreement, dated as of February 7, 2008,
among the Company, Enersyst Development Center, L.L.C. and Bank of America, N.A.
(the "Lender")
(such agreement, the "Credit Agreement"),
in form and substance reasonably satisfactory to Parent, addressed to the
Company and Parent and signed by the Lender, (i) setting forth the amounts
required to pay off in full at the Closing the Obligations (under and as defined
in the Credit Agreement) owing to the lender (including, without limitation, the
outstanding principal, accrued and unpaid interest and any prepayment or other
penalties) and (ii) stating that, upon payment of such amounts, the commitments
of the lender to make loans or other extensions of credit under the Credit
Agreement shall be terminated and the Surviving Corporation shall be released
from all of its obligations under the Credit Agreement and all related
documents, agreements and instruments and all liens and security interests under
the Credit Agreement and each other documents and agreement related thereto
shall be released, which pay-off letter shall be updated, as necessary, on the
Closing Date to specify the aggregate amount of Obligations outstanding as of
immediately prior to the Closing, and shall specifically authorize the Company
and Parent to file termination statements and release and discharge documents
(including, without limitation, termination statements of any and all UCC
financing statements filed by the lender) with respect to any Encumbrance
existing pursuant to the Credit Agreement. Such pay-off letter shall
also indicate that prior notice of prepayment is waived. The Company
shall use commercially reasonable efforts to cooperate with and assist Parent to
file or cause to be filed any UCC termination statements, releases or other
documents required to effect the release of any Encumbrances under the Credit
Agreement.
ARTICLE
VII
CONDITIONS
Section
7.1 Conditions to Each
Party's Obligations to Effect the
Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction on or prior to the Closing Date of each of the following
conditions, any and all of which may be waived in whole or in part by Parent,
Merger Sub and the Company, as the case may be, to the extent permitted by
applicable Law:
50
(a) the
Company Stockholder Approval shall have been obtained;
(b) any
applicable waiting periods under the HSR Act and the antitrust or competition
Laws of applicable foreign jurisdictions relating to the Merger shall have
expired or been terminated and all material consents, approvals and
authorizations required to be obtained or notices required to be given prior to
the consummation of the Merger by the parties hereto from Governmental Entities
to consummate the Merger, shall have been made, given or obtained, as the case
may be;
(c) the
shares of Parent Common Stock issuable to stockholders of the Company and to
holders of Restricted Stock Units or Exchange Rights shall have been approved
for listing on the NASDAQ Stock Market, subject to official notice of
issuance;
(d) the
Form S-4 shall have been declared effective by the SEC under the Securities Act
and shall not be the subject of any stop order or proceedings seeking a stop
order;
(e) no
Law shall prohibit consummation of the Merger; and
(f) the
Certificate of Merger shall have received preclearance as to form acceptable for
filing by the Secretary of State of Delaware.
Section
7.2 Additional Conditions to
Obligation of Parent and Merger Sub to Effect the
Merger. The
obligations of Parent and Merger Sub to consummate the Merger shall also be
subject to the satisfaction at or prior to the Effective Time of the following
additional conditions, any and all of which may be waived in whole or in part by
Parent and Merger Sub:
(a) There
shall not be pending any suit, action or proceeding by or before any
Governmental Entity against Merger Sub, Parent, the Company or any Company
Subsidiary (i) seeking to restrain or prohibit Parent's or Merger Sub's
ownership or operation (or that of any of their respective Subsidiaries or
affiliates) of all or a material portion of their or the Company's and the
Company Subsidiaries' businesses or assets, or to compel Parent or Merger Sub or
their respective Subsidiaries and affiliates to dispose of or hold separate any
material portion of the business or assets of the Company or Parent and their
respective Subsidiaries, (ii) seeking to restrain or prohibit or make materially
more costly the consummation of the Merger or the performance of any of the
other transactions contemplated by this Agreement, or seeking to obtain from the
Company, Parent or Merger Sub any material damages, (iii) seeking to impose
limitations on the ability of Merger Sub or Parent to acquire or hold, or
exercise full rights of ownership of the Shares; or (iv) which otherwise may
reasonably be expected to have a Company Material Adverse Effect.
(b) There
shall not be any statute, rule, regulation, judgment, order or injunction
enacted, entered, enforced, promulgated or deemed applicable, to the Merger, nor
shall any other action be taken, that is reasonably likely to result, directly
or indirectly, in any of the consequences referred to in clauses (i) through
(iv) of paragraph (a) above.
(c) (i)
the representations and warranties of the Company contained in Section 3.3(a) shall
be true and correct in all respects (except for any de minimis inaccuracy), (ii) the
representations and warranties of the Company in Sections 3.3(b),
3.3(c), 3.3(d), 3.4, 3.5, 3.6, 3.8(a), 3.8(d), 3.8(e), 3.9(b) or 3.24 that are
qualified as to materiality or by reference to Company Material Adverse Effect
shall be true and correct in all respects, or any such representation and
warranty that is not so qualified shall be true and correct in all material
respects, in each case as of the date of the Agreement and as of the Closing as
if made at and as of such date (except that any such representation or warranty
that is made as of a specified date that is qualified as to materiality or by
reference to Company Material Adverse Effect or Company shall be true and
correct in all respects as of such specified date, and any such representation
and warranty that is made as of a specified date that is not so qualified shall
be true and correct in all material respects as of such specified date) and
(iii) any other representation and warranty of the Company in the Agreement
(without regard to materiality or Company Material Adverse Effect qualifiers
contained therein) shall be true and correct in all respects, as of the date of
the Agreement and as of the Closing as if made at and as of such date (other
than any such representation or warranty that is made as of a specified date,
which shall be true and correct in all respects as of such specified date),
except where the failure to be so true and correct, either individually or in
the aggregate, has not had and would not reasonably be expected to have a
Company Material Adverse Effect.
51
(d) The
Company shall have performed and complied in all material respects with all
agreements and covenants required to be performed or complied with by it under
the Agreement on or before the Effective Time.
(e) The
Company shall have obtained all of the consents and approvals from third parties
under the Contracts identified in Section 7.2(e) of the
Company Disclosure Schedule.
(f) The
Company shall have delivered an officers' certificate, duly executed by the
Company's Chief Executive Officer and Chief Financial Officer, stating that the
conditions set forth in Sections 7.2(c) and (d) above have been
satisfied.
(g) The
Company shall have delivered a certificate, in form and substance reasonably
satisfactory to Parent to Merger Sub, establishing that the Company is not a "United States real property holding corporation" within the
meaning of Section 897(c)(2) of the Code, and has not been such a United States
real property holding corporation within the five year period ending on the
Closing Date.
(h) Parent
shall have received from Skadden, Arps, Slate, Meagher & Flom LLP, counsel
to Parent, on the date on which the Form S-4 is filed with the SEC and on the
Closing Date, an opinion, in each case dated as of such respective dates and to
the effect that: (i) the Merger will qualify for U.S. Federal income tax
purposes as a "reorganization" within the meaning of Section
368(a) of the Code and (ii) Parent, Merger Sub and the Company will each be a
"party to the reorganization" within the meaning of Section
368(b) of the Code; provided
that if Skadden, Arps, Slate, Meagher & Flom LLP does not render such
opinion to Parent, this condition shall nonetheless be deemed satisfied if Paul,
Hastings, Janofsky & Walker LLP renders such opinion to Parent (it being
agreed that Parent and the Company shall each provide reasonable cooperation to
Skadden, Arps, Slate, Meagher & Flom LLP or Paul, Hastings, Janofsky
& Walker LLP, as the case may be, to enable them to render such
opinion). In rendering such opinion, Skadden, Arps, Slate, Meagher
& Flom LLP or Paul, Hastings, Janofsky & Walker LLP, as the case may be,
shall be entitled to require and rely upon letters acceptable to them and
customary for transactions of this type setting forth factual statements and
representations regarding the facts in existence at the applicable time,
including from officers from Parent, Merger Sub and the Company, and upon
assumptions regarding the facts in existence at the applicable
time.
52
Section
7.3 Additional Conditions to
Obligation of the Company to Effect the
Merger. The
obligations of the Company to consummate the Merger shall also be subject to the
satisfaction at or prior to the Effective Time of the following conditions, any
and all of which may be waived in whole or in part by the Company:
(a) The
representations and warranties of Parent and Merger Sub set forth in this
Agreement shall be true and correct in all material respects as of the date of
the Agreement and as of the Closing Date as though made on the Closing Date,
except to the extent such representations and warranties expressly relate to an
earlier date, in which case as of such earlier date.
(b) Parent
and Merger Sub shall have performed and complied in all material respects with
all agreements and covenants required to be performed or complied with by them
on or before the Effective Time.
(c) Parent
and Merger Sub shall have delivered an officers' certificate, duly executed by
Parent's Chief Executive Officer and Chief Financial Officer, stating that the
conditions set forth in Sections 7.3(a) and (b) above have been
satisfied.
(d) The
Company shall have received from Paul, Hastings, Janofsky & Walker LLP,
counsel to the Company, on the date on which the Form S-4 is filed with the SEC
and on the Closing Date, an opinion, in each case dated as of such respective
dates and to the effect that: (i) the Merger will qualify for U.S. Federal
income tax purposes as a "reorganization" within the meaning of
Section 368(a) of the Code and (ii) Parent, Merger Sub and the Company will each
be a "party to the reorganization" within the meaning of
Section 368(b) of the Code; provided
that if Paul, Hastings, Janofsky & Walker LLP does not render such opinion
to the Company, this condition shall nonetheless be deemed satisfied if Skadden,
Arps, Slate, Meagher & Flom LLP renders such opinion to the Company (it
being agreed that the Company and Parent shall each provide reasonable
cooperation to Skadden, Arps, Slate, Meagher & Flom LLP or Paul, Hastings,
Janofsky & Walker LLP, as the case may be, to enable them to render such
opinion). In rendering such opinion, Skadden, Arps, Slate, Meagher
& Flom LLP or Paul, Hastings, Janofsky & Walker LLP, as the case may be,
shall be entitled to require and rely upon letters acceptable to them and
customary for transactions of this type setting forth factual statements and
representations regarding the facts in existence at the applicable time,
including from officers from Parent, Merger Sub and the Company, and upon
assumptions regarding the facts in existence at the applicable
time.
ARTICLE
VIII
TERMINATION
53
Section
8.1 Termination. This
Agreement may be terminated and the Merger may be abandoned at any time before
the Effective Time:
(a) By
mutual written agreement of Parent and the Company;
(b) By
either Parent or the Company, if:
(i) the
Merger has not been consummated on or before December 31, 2008 (the "End Date"); provided, however, that the
right to terminate this Agreement pursuant to this Section 8.1(b)(i)
shall not be available to any party whose breach of any provision of this
Agreement results in the failure of the Merger to be consummated by such time;
and provided,
further, that
in the event that as of the End Date all conditions to Closing set forth in
Article VII have been satisfied or waived (other than such conditions that are
satisfied at or immediately prior to the Closing) other than the condition set
forth in Section
7.1(b) (Regulatory Approval), the termination date may be extended from
time to time by either Company or Parent by up to an aggregate of ninety (90)
days (such date, including any such permitted extensions thereof, the "Outside
Date");
(ii) there
shall be any Law that (A) makes the consummation of the Merger illegal or
otherwise prohibited or (B) enjoins the Company or Parent from consummating the
Merger and such enjoinment shall have become final and nonappealable;
or
(iii) at
the Company Stockholder Meeting (including any adjournment or postponement
thereof), the Company Stockholder Approval shall not have been
obtained;
(c) By
Parent, if:
(i) (A)
an Adverse Recommendation Change shall have occurred, other than in relation to
an Intervening Event or (B) the Company Board of Directors shall have failed to
publicly confirm the Company Board Recommendation within ten (10) Business Days
of a written request by Parent that it do so;
(ii) the
Company shall have breached any representation, warranty, covenant or other
agreement contained in this Agreement which (A) would cause a condition set
forth in Section
7.2(c)
or (d) not to be satisfied
and (B) cannot be or has not been cured, in all material respects, within 20
days after the giving of written notice to the Company; or
(iii) the
Company shall have breached in any material respect any of its obligations under
Section
5.2;
(d) By
the Company:
(i) pursuant
to and in compliance with Section 5.2(e);
54
(ii) if
prior to the receipt of the Company Stockholder Approval, the Company Board of
Directors makes an Adverse Recommendation Change because of an Intervening Event
in compliance with Section 5.3;
or
(iii) if
Parent or Merger Sub shall have breached any representation, warranty, covenant
or other agreement contained in this Agreement which (A) would cause a condition
set forth in Section
7.3(a) or (b) not to be
satisfied and (B) cannot be or has not been cured, in all material respects,
within 20 days after the giving of written notice to Parent and Merger
Sub.
Section
8.2 Notice of Termination;
Effect of Termination. (a) In
the event of the termination of this Agreement as provided in Section 8.1, written
notice thereof shall forthwith be given to the other party or parties specifying
the provision hereof pursuant to which such termination is made, and this
Agreement shall forthwith become null and void (except for Sections 9.3, 9.5, 9.6, 9.7, 9.8, 9.9 and 9.13 which shall
survive such termination) and there shall be no liability on the part of Parent,
Merger Sub or the Company, except (i) as set forth in Sections 6.3 and
8.2, and (ii)
nothing herein shall relieve any party from liability for any breach of this
Agreement.
(b) If:
(i) Parent
shall have terminated this Agreement pursuant to Section 8.1(c)(i) or
(c)(iii);
(ii) the
Company shall have terminated this Agreement pursuant to Section 8.1(d)(i);
or
(iii) (A)
this Agreement is terminated pursuant to Section 8.1(b)(i),
8.1(b)(iii) or 8.1(c)(ii), (B) prior
to termination of this Agreement pursuant to Section 8.1(b)(i),
8.1(b)(iii) or 8.1(c)(ii), a
Person made an Acquisition Proposal or expressed any interest publicly or
to the Company with respect to the making of an Acquisition Proposal and (C)
within six months after any such termination either (1) the Company enters into
an agreement with respect to any Acquisition Proposal or (2) any Acquisition
Proposal is consummated;
then the
Company shall pay to Parent a termination fee of $7,000,000 (the "Termination Fee"),
(A) within one business day after the conditions set forth in Section 8.2(b)(iii)
are met, (B) concurrently with such termination in the case of a termination
pursuant to Section
8.1(d)(i) and (C) within two Business Days after such termination in all
other cases. The Termination Fee shall be paid by wire transfer of
immediately available funds to such account as Parent may designate in writing
to the Company.
(c) The
Company acknowledges that the provisions contained in this Section 8.2 are an
integral part of the transactions contemplated by this Agreement, and that,
without these provisions, Parent and Merger Sub would not enter into this
Agreement.
55
ARTICLE
IX
MISCELLANEOUS
Section
9.1 Amendment and
Modification. Subject
to applicable Law and as otherwise provided herein, this Agreement may be
amended, modified and supplemented in any and all respects, whether before or
after any vote of the stockholders of the Company contemplated hereby, by
written agreement of the parties hereto, by action taken by their respective
Boards of Directors, but, after the approval of this Agreement by the
stockholders, no amendment shall be made which by Law requires further approval
by such stockholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
Section
9.2 Non-Survival of Representations
and Warranties. None
of the representations and warranties in this Agreement or in any schedule,
instrument or other document delivered pursuant to this Agreement shall survive
the Effective Time.
Section
9.3 Expenses. Except
as set forth in Section 8.2(b) or
otherwise provided herein, whether or not the Merger is consummated, all fees,
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees,
costs and expenses.
Section
9.4 Certain
Definitions. As
used in this Agreement, the following terms shall have the meanings indicated
below.
"Acquisition Proposal"
means any bona fide proposal made by any Person or "group" (as defined in
Section 13(d) of the Exchange Act) (other than Parent, Merger Sub or any
affiliate thereof) relating to any direct or indirect acquisition or purchase of
at least a 20% portion of the assets of the Company or any Company Subsidiary or
of over 20% of any class of equity securities of the Company or any Company
Subsidiary, (ii) any tender offer or exchange offer involving any class of
equity securities of the Company or any Company Subsidiary, (iii) any merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving the Company or any Company Subsidiary or (iv)
any other transaction similar to any of the foregoing with respect to the
Company or any Company Subsidiary, in each case other than any transactions to
be effected pursuant to this Agreement.
"Business Day" shall
mean a day other than Saturday or Sunday and on which commercial banks are open
for business in New York, New York.
"Code" shall mean the
Internal Revenue Code of 1986, as amended.
"DGCL" means the
General Corporation Law of the State of Delaware.
"Exchange Act" means
the Securities Exchange Act of 1934, as amended (including the rules and
regulations promulgated thereunder).
"Intellectual
Property" means all intellectual property throughout the world,
including: (i) all patents, utility models and industrial designs, including
without limitation any continuations, divisionals, continuations-in-part,
renewals, provisionals, reissues, re-examinations, extensions and applications
for any of the foregoing; (ii) all trade secrets and other confidential or
proprietary information, technology, know-how, inventions, processes, formulae,
algorithms, models and methodologies; (iii) all copyrights, including without
limitation moral rights and copyrights in computer programs and Internet sites;
(iv) all computer programs (whether in source code or object code form),
databases, compilations and data, and all documentation related to any of the
foregoing; (v) all trademarks, service marks, trade names, domain names, other
similar designations of source or origin and general intangibles of like nature,
together with the goodwill of the business symbolized by any of the foregoing;
(vi) all rights of publicity and rights to personal information; (vii) similar
or equivalent rights to any of the foregoing; and (vii) all registrations and
applications for any of the foregoing.
56
"knowledge" of any
Person which is not an individual means the actual knowledge, after due inquiry,
of such Person's officers and directors.
"Law" shall mean with
respect to any Person, any federal, state, foreign, local, municipal or other
law, statute, constitution, principle of common law, ordinance, code, permit,
rule, regulation, policy, guideline, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Entity or securities exchange or
securities quotation system, and any orders, writs, injunctions, binding awards
of a court or arbitrator, judgments and decrees applicable to such Person or its
subsidiaries, their business or any of their respective assets or
properties.
"MSLO Warrant" shall
mean the Agreement, dated as of April 28, 2008 between TurboChef Technologies,
Inc. and Martha Stewart Living Omnimedia, Inc.
"Order" shall mean any
writ, judgment, injunction, consent, order, decree, stipulation, award or
executive order of or by any Governmental Entity.
"Parent Reference
Price" means the average of the volume weighted averages of the trading
prices of Parent Common Stock as reported on the consolidated transaction
reporting system for securities traded on the NASDAQ Stock Market (as reported
in Bloomberg Financial Markets or, if not reported thereby, such other
authoritative source as the parties shall agree in writing) for each of the 10
consecutive full trading days ending on the third trading day prior to the
Closing Date.
"Permitted
Encumbrances" means any (a) mechanics', carriers', workers' and other
similar liens arising in the ordinary course of business and which in the
aggregate are not substantial in amount, and do not interfere in any material
respect with the present use of the assets of the Company relating to amounts
not yet due and payable or amounts being contested in good faith and in
accordance with appropriate proceedings by the Company; (b) liens for current
Taxes and assessments, both general and special, and other governmental charges
not yet due and payable as of the Closing; (c) liens for Taxes, assessments and
governmental charges due in the ordinary course of business and being duly
contested in good faith by the Company and in accordance with appropriate
proceedings; (d) liens securing outstanding indebtedness as of the date of this
Agreement; (e) all land use restrictions (including environmental, endangered
species and wetlands), building and zoning codes and ordinances, and other laws,
ordinances, regulations, rules, orders, licenses or determinations of any
Governmental Entity, now or hereafter enacted, made or issued by any such
Governmental Entity affecting the property or assets of the Company; (f) all
usual and customary easements affecting the Leased Real Property (including
conservation easements and public trust easements, rights-of-way, road use
agreements, covenants, conditions, restrictions, reservations, licenses,
agreements and other matters of record all of which do not materially interfere
with the operations currently conducted at any property); (g) all encroachments,
overlaps, overhangs, unrecorded easements, variations in area or measurement,
rights of parties in possession, lack of access or any other matters not of
record affecting the Leased Real Property which would be disclosed by an
accurate survey or physical inspection of the properties and assets of the
Company, all of which do not materially interfere with the operations currently
conducted at any property; (h) all electric power, telephone, gas, sanitary
sewer, storm sewer, water and other utility lines, pipelines service lines and
facilities of any nature on, over or under the Leased Real Property, and all
related licenses, easements, rights-of-way and other similar agreements
affecting the Leased Real Property; (i) all existing public and private roads
and streets (whether dedicated or undedicated) including all rights of the
public to use such roads and streets, and all railroad lines located on the
Leased Real Property; (j) prior reservations or conveyances of mineral rights or
mineral leases of every kind and character affecting the Leased Real Property;
(k) water rights (whether asserted by any Governmental Entity or private party)
affecting the Leased Real Property; and (l) with respect to any asset that is a
leasehold or other possessory interest in real property, all encumbrances,
covenants, imperfections in title, easements, restrictions and other title
matters (whether or not they are recorded) to which the underlying fee estate in
such real property is subject which were not created or incurred by the Company
and which do not currently materially interfere with Company's operations as
conducted on such property.
57
"SEC" means the United
States Securities and Exchange Commission.
"Securities Act" means
the U.S. Securities Act of 1933, as amended (including the rules and regulations
promulgated thereunder).
"Tax" (and, with
correlative meaning, "Taxes" and "Taxable") means (i)
any income, alternative or add-on minimum tax, gross income, estimated, gross
receipts, sales, use, ad valorem, value added, transfer, franchise, capital
stock, profits, license, registration, withholding, payroll, social security (or
equivalent), employment, unemployment, disability, excise, severance, stamp,
occupation, premium, property (real, tangible or intangible), environmental or
windfall profit tax, custom duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever (including, for the avoidance of
doubt, any amounts owed to any Governmental Entity or other Person in respect of
unclaimed property or escheat Laws), together with any interest or any penalty,
addition to tax or additional amount (whether disputed or not) imposed by any
Governmental Entity responsible for the imposition of any such tax (domestic or
foreign) (each, a "Taxing Authority"),
(ii) any liability for the payment of any amounts of the type described in
clause (i) of this sentence as a result of being a member of an affiliated,
consolidated, combined, unitary or aggregate group for any taxable period and
(iii) any liability for the payment of any amounts of the type described in
clause (i) or (ii) of this sentence as a result of being a transferee of or
successor to any Person or as a result of any express or implied obligation to
assume such Taxes or to indemnify any other Person.
58
"Tax Return" shall
mean any return, statement, report, form or other document (including estimated
Tax returns and reports, withholding Tax returns and reports, any schedule or
attachment, information returns and reports and any amendment to any of the
foregoing) filed or required to be filed with respect to Taxes.
"Voting and Support
Agreement" shall mean the Voting and Support Agreement, executed by each
director, executive officer or stockholder of the Company set forth on Schedule 1 hereto,
the forms of which are attached as an exhibit to Schedule
1.
Other
capitalized terms defined elsewhere in this Agreement and not defined in this
Section 9.4
shall have the meanings assigned to such terms in this Agreement.
Section
9.5 Notices. All
notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally, electronically or by facsimile (which is
confirmed) or sent by a nationally recognized overnight courier service, such as
Federal Express (providing proof of delivery), to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if
to Parent or Merger Sub, to:
The
Middleby Corporation
1400
Toastmaster Drive
Elgin, IL
60120
Facsimile: (847)
741-1689
Attention: Timothy
J. FitzGerald
with a
copy to:
Skadden,
Arps, Slate, Meagher & Flom LLP
333 West
Wacker Drive
Chicago,
IL 60606
(312)
407-0700
Facsimile:
(312) 407-0411
Attention: Shilpi
Gupta
and
59
(b) if
to the Company, to:
TurboChef
Technologies, Inc.
Six
Concourse Parkway, Suite 1900
Atlanta,
Georgia 30328
Facsimile: (678)
987-1700
Attention: Richard
E. Perlman, Chairman
with a
copy to:
Paul,
Hastings, Janofsky & Walker LLP
600
Peachtree Street, N.E., Suite 2400
Atlanta,
Georgia 30308
Facsimile:
(404) 815-2424 and (404) 685-5227
Attention:
Reinaldo Pascual
Section
9.6 Interpretation. When
a reference is made in this Agreement to Sections, such reference shall be to a
Section of this Agreement unless otherwise indicated. Whenever the
words "include", "includes" or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." As
used in this Agreement, the term "affiliates" shall have
the meaning set forth in Rule 12b-2 of the Exchange Act. The words
describing the singular number shall include the plural and vice
versa. The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provisions
of this Agreement. Headings of the Articles and Sections of this
Agreement, the Table of Contents and the Index of Defined Terms are for the
convenience of the parties only and shall be given no substantive or
interpretive effect whatsoever. The phrase "delivered to
Parent" or words of similar import shall mean that the subject documents were
posted to the "Project Thunderbird" data room hosted by
Merrill Corporation or were either delivered to Parent or its counsel by mail or
courier delivery, facsimile or other electronic transmission.
Section
9.7 Jurisdiction. Each of
Parent, Merger Sub and the Company hereby expressly and irrevocably submits to
the exclusive personal jurisdiction of the United States District Court for the
District of Delaware and to the jurisdiction of any other competent court of the
State of Delaware (collectively, the "Delaware Courts"),
preserving, however, all rights of removal to such federal court under 28 U.S.C.
Section 1441, in connection with all disputes arising out of or in connection
with this Agreement or the transactions contemplated hereby and agrees not to
commence any litigation relating thereto except in such courts. Each
such party hereby waives the right to any other jurisdiction or venue for any
litigation arising out of or in connection with this Agreement or the
transactions contemplated hereby to which any of them may be entitled by reason
of its present or future domicile. Notwithstanding the foregoing,
each such party agrees that each of the other parties shall have the right to
bring any action or proceeding for enforcement of a judgment entered by the
Delaware Courts in any other court or jurisdiction.
60
Section
9.8 Service of
Process. Each
of Parent, Merger Sub and the Company irrevocably consents to the service of
process outside the territorial jurisdiction of the courts referred to in Section 9.7 of this
Agreement in any such action or proceeding by mailing copies thereof by
registered United States mail, postage prepaid, return receipt requested, to its
address as specified in or pursuant to Section 9.5 of this
Agreement. However, the foregoing shall not limit the right of a
party to effect service of process on the other party by any other legally
available method.
Section
9.9 Specific
Performance. Each
of Parent, Merger Sub and the Company acknowledges and agrees that in the event
of any breach of this Agreement, each non-breaching party would be irreparably
and immediately harmed and could not be made whole by monetary
damages. It is accordingly agreed that the parties hereto (a) will
waive, in any action for specific performance, the defense of adequacy of a
remedy at Law and (b) shall be entitled, in addition to any other remedy to
which they may be entitled at Law or in equity, to compel specific performance
of this Agreement. Nothing in this Section 9.9 shall
affect a party's right to terminate (subject in all respects to payment of any
fees specified in Section 8.2 hereof)
this Agreement pursuant to Section 8.1
hereof.
Section
9.10 Counterparts. This
Agreement may be executed manually or by facsimile by the parties hereto, in any
number of counterparts, each of which shall be considered one and the same
agreement and shall become effective when a counterpart of this Agreement shall
have been signed by each of the parties and delivered to the other parties. This
Agreement and any document executed and delivered in connection with this
Agreement, and any amendments hereto or thereto, to the extent signed and
delivered by means of a facsimile machine or as an attachment to an electronic
mail message in "pdf" or similar format, shall be treated in
all manner and respects as an original agreement or instrument and shall be
considered to have the same binding legal effect as if it were the original
signed version thereof delivered in person. At the request of any party to any
such agreement or instrument, each other party hereto or thereto shall
re-execute original forms thereof and deliver them to all other parties. No
party to any such agreement shall raise the use of a facsimile machine or
electronic mail attachment in "pdf" or similar format to
deliver a signature or the fact that any signature or agreement or instrument
was transmitted or communicated through the use of a facsimile machine or as an
attachment to an electronic mail message as a defense to the formation of a
contract and each such party forever waives any such defense. A facsimile
signature or electronically scanned copy of a signature shall constitute and
shall be deemed to be sufficient evidence of a party's execution of this
Agreement, without necessity of further proof. Each such copy shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
product or account for more than one such counterpart.
Section
9.11 Entire Agreement; No
Third-Party Beneficiaries. This
Agreement and the Confidentiality Agreement constitute the entire agreement
among the parties with respect to the subject matter hereof and thereof and
supersedes all other prior agreements and understandings, both written and oral,
among the parties or any of them with respect to the subject matter hereof and
thereof (provided that the provisions of this Agreement shall supersede any
conflicting provisions of the Confidentiality Agreement). Except as provided in
Section 6.5,
nothing in this Agreement, express or implied, is intended to confer upon any
Person other than the parties hereto any rights or remedies
hereunder.
61
Section
9.12 Severability. If
any term or other provision of this Agreement is invalid, illegal or incapable
of being enforced by rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
by this Agreement are fulfilled to the extent possible.
Section
9.13 Governing Law. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware without giving effect to the principles of conflicts of law
thereof.
Section
9.14 Assignment. This
Agreement shall not be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties, except that Merger Sub may assign any or all of its rights, interests
and obligations hereunder to Parent, one or more direct or indirect wholly-owned
Subsidiaries of Parent, or a combination thereof. Subject to the
foregoing, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and permitted assigns.
Section
9.15 Obligation of
Parent. Whenever
this Agreement requires Merger Sub to take any action, such requirement shall be
deemed to include an undertaking on the part of Parent to cause Merger Sub to
take such action.
62
IN WITNESS WHEREOF, Parent, Merger Sub
and the Company have caused this Agreement to be signed by their respective
officers thereunto duly authorized as of the date first written
above.
| THE MIDDLEBY CORPORATION | |||
|
|
By:
|
/s/ Timothy J. FitzGerald | |
| Name: Timothy J. FitzGerald | |||
| Title: Vice President and Chief | |||
| Financial Officer | |||
| CHEF ACQUISITION CORP. | |||
|
|
By:
|
/s/ Timothy J. FitzGerald | |
| Name: Timothy J. FitzGerald | |||
| Title: Vice President and Chief | |||
| Financial Officer | |||
| TURBOCHEF TECHNOLOGIES, INC. | |||
|
|
By:
|
/s/ Richard E. Perlman | |
| Name: Richard E. Perlman | |||
| Title: Chairman | |||
63
Exhibit
10.1
STOCKHOLDER
VOTING AND SUPPORT AGREEMENT
This
STOCKHOLDER VOTING AND SUPPORT AGREEMENT, dated as of August 12, 2008 (this
“Agreement”),
is by and among The Middleby Corporation, a Delaware corporation (the “Parent”), and the
holder of capital stock of TurboChef Technologies, Inc., a Delaware corporation
(the “Company”)
set forth on the signature page hereto (the “Stockholder”).
RECITALS
WHEREAS,
the board of directors of the Company has determined it is in the best interests
of the stockholders of the Company for the Company to enter into an Agreement
and Plan of Merger, by and among Parent, the Company and Chef Acquisition Corp.,
a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger Sub”), dated
as of August 12, 2008 (as in effect on the date hereof, the “Merger Agreement”),
pursuant to which the Company will merge with and into Merger Sub (the “Merger”), with Merger
Sub surviving as a wholly-owned subsidiary of Parent;
WHEREAS,
the Stockholder holds of record and Beneficially Owns the shares of Common Stock
set forth opposite such Stockholder’s name on Schedule A hereto
(such shares, together with any shares of Common Stock that are hereafter issued
to or otherwise acquired or owned by such Stockholder prior to the termination
of this Agreement being referred to herein as the “Subject
Shares”);
WHEREAS,
as a condition to entering into the Merger Agreement, Parent desires that the
Stockholder enter, and the Stockholder is willing to enter, into this Agreement;
and
WHEREAS,
capitalized terms used but not otherwise defined herein shall have the
respective meanings attributed to them in the Merger Agreement.
NOW,
THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Parent and the Stockholder, intending to be legally bound, hereby agree as
follows:
(1) Certain Definitions.
In addition to the terms defined elsewhere herein, capitalized terms used and
not defined herein have the respective meanings ascribed to them in the Merger
Agreement. In addition, for purposes of this Agreement:
(a)
“Beneficially
Own” or “Beneficial Ownership”
with respect to any securities means having “beneficial ownership” of such
securities as determined pursuant to Rule 13d-3 under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”),
including pursuant to any agreement, arrangement or understanding, whether or
not in writing.
(b) “Common Stock” means
(i) shares of common stock, par value $0.01 per share, of the Company and (ii)
any change in such shares by reason of any stock dividend, split-up,
recapitalization, combination, conversion of securities, exchange of shares or
the like.
(2) Voting of Subject
Shares.
(a) The
Stockholder hereby agrees that, until the termination of this Agreement, at any
duly called meeting of the stockholders of the Company (or any adjournment or
postponement thereof), and in any action by written consent of the stockholders
of the Company, such Stockholder shall, vote or cause to be voted the Subject
Shares:
(i)
in favor of (A) adopting the Merger Agreement and thereby approving the Merger
and any other matters contemplated by the Merger Agreement that are necessary
for consummation of the Merger and (B) approval of any proposal to adjourn or
postpone the meeting to a later date if there are not sufficient votes for the
adoption of the Merger Agreement on the date on which such meeting is
held;
(ii) against
(A) any agreement or arrangement related to or in furtherance of any Acquisition
Proposal (other than the Merger) or (B) any corporate action the consummation of
which would reasonably be expected to impede, interfere with, prevent or
materially delay the consummation of the transactions contemplated by the Merger
Agreement;
and in connection therewith to execute
any documents reasonably requested by Parentthat are necessary or appropriate in
order to effectuate the foregoing.
(b) In
order to implement the provision of Section 2(a), the
Stockholder covenants and agrees that it will, upon the written request of
Parent, not later than three (3) Business Days prior to the Company Stockholder
Meeting or, if applicable, the date when written consents must be submitted to
the Company, deliver to the Company a duly completed and executed proxy in favor
of adopting the Merger Agreement and thereby approving the Merger, and any other
matters which are necessary for consummation of the Merger.
(3) Treatment Under Merger
Agreement. The Stockholder acknowledges and agrees to the treatment,
payments, terms and conditions applicable to the Common Stock under the Merger
Agreement, including, without limitation, Sections 2.1 through
2.3 of the
Merger Agreement.
(4) Grant of Proxy; Appointment
of Proxy.
(a) The
Stockholder, revoking (or causing to be revoked) any proxies that it has
heretofore granted, hereby irrevocably grants to, and appoints, the Parent as
proxy and attorney-in-fact (with full power of substitution), for and in the
name, place and stead of the Stockholder, to vote the Subject Shares in
accordance with the provisions of Section 2 hereof,
whether in person at a Company Stockholder Meeting, by proxy, or by written
Consent, in the event the Stockholder has not delivered a proxy or a written
consent in respect of all the Subject Shares in accordance with Section
2.
2
(b) The
Stockholder understands and acknowledges that Parent is entering into the Merger
Agreement in reliance upon the proxy set forth in Subsection 4(a)
hereof. The Stockholder hereby affirms (i) that the proxy set forth in Subsection 4(a)
hereof is given to secure the performance of the duties of the Stockholder under
Section 2 of
this Agreement and (ii) that the proxy is irrevocable during the term of this
Agreement and is coupled with an interest and may under no circumstances be
revoked during the term of this Agreement; provided that such proxy, as well as
any proxy delivered as set forth in Subsection 2(b), will
be automatically revoked upon termination of the Merger Agreement, as set forth
in Section
10. Such irrevocable proxy is executed and intended to
be irrevocable in accordance with the provisions of Section 212 of the
DGCL.
(5) No Ownership
Interest. Nothing contained in this Agreement shall be deemed to vest in
Parent or any of its Affiliates any direct ownership or incidence of ownership
of or with respect to the shares of Common Stock held of record or Beneficially
Owned by Stockholder. All rights, ownership and economic benefits of and
relating to the shares of Common Stock shall remain vested in and belong to the
Stockholder, and Parent shall not acquire by this Agreement any authority to
manage, direct, restrict, regulate, govern, or administer any of the policies or
operations of the Company or exercise any power or authority to direct the
Stockholder in the voting of any of the shares of Common Stock, except as
otherwise provided herein, or in the performance of the Stockholder’s duties or
responsibilities with respect to the Company.
(6) Representations and
Warranties of the Stockholder and Parent.
(a) The
Stockholder hereby represents and warrants to, and agrees with, Parent as
follows:
(i) The shares of Common Stock set
forth below the Stockholder’s name on the signature page hereof are owned by the
Stockholder, free and clear of any Encumbrance that would materially and
adversely affect Stockholder’s ability to exercise his voting power as provided
in Section 2,
grant the proxy pursuant to Section 4, or
otherwise comply with the terms hereof.
(ii)
Other than as provided in the Merger Agreement, (A) there are no options,
warrants, rights, subscriptions, convertible or exchangeable securities or other
agreements or commitments obligating the Stockholder to transfer, sell,
purchase, return or redeem, or cause the issuance, transfer, sale, return or
redemption of the shares of Common Stock set forth below the Stockholder’s name
on the signature page hereof and (B) there are no voting trusts, proxies,
registration rights agreements or other agreements to which the Stockholder is a
party with respect to the voting or transfer of capital stock of the
Company.
(iii) The
Stockholder has all requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby and has duly
and validly executed and delivered this Agreement. This Agreement
constitutes the legal, valid and binding obligation of the Stockholder,
enforceable against the Stockholder in accordance with its terms (assuming the
due authorization, execution and delivery of this Agreement by Parent), except
as such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors’ rights generally and by equitable
principles.
3
(iv) The
execution, delivery and performance by the Stockholder of this Agreement and the
consummation of the transactions contemplated hereby do not and will not (i)
violate any organizational documents of the Stockholder (as applicable), (ii)
violate any Law applicable to the Stockholder, (iii) require any consent or
other action by any Person under, constitute a default under, or give rise to
any right of termination, cancellation or acceleration or to a loss of any
benefit to which the Stockholder is entitled under any Law or any provision of
any agreement or other instrument binding on the Stockholder or (iv) result in
the imposition of any Encumbrance on any asset of the Stockholder, except in the
case of each of clauses (ii) through (iv) as would not materially and adversely
affect the Stockholder’s ability to perform its obligations
hereunder.
(v) There
is no action, suit, investigation or proceeding pending against, or, to the
knowledge of the Stockholder, threatened against or affecting, the Stockholder
or any of its properties or assets (including the Stockholder’s Subject Shares)
that impairs or restricts in any material respect or prohibits (or, if
successful, would impair, restrict or prohibit) the ability of the Stockholder
to perform its obligations hereunder or to consummate the transactions
contemplated hereby on a timely basis.
(vi) The
Stockholder has had the opportunity to review this Agreement and the Merger
Agreement with counsel of its own choosing. The Stockholder
understands and acknowledges that Parent is entering into the Merger Agreement
in reliance upon the Stockholder’s execution, delivery and performance of this
Agreement.
(b) Parent
hereby represents and warrants to, and agrees with, the Stockholder that Parent
has all requisite power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby and has duly and validly
executed and delivered this Agreement. This Agreement constitutes the legal,
valid and binding obligation of Parent, enforceable against Parent in accordance
with its terms (assuming the due authorization, execution and delivery of this
Agreement by the Stockholder), except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors’ rights generally and by
equitable principles.
4
(7) Transfers. Other
than as contemplated by this Agreement, and until the termination of this
Agreement, the Stockholder shall not (A) sell, transfer, pledge, assign or
otherwise dispose of (including by gift) (collectively, “Transfer”), or enter
into any contract, option or other arrangement (including any profit sharing
arrangement) with respect to the Transfer of, any Subject Shares to any Person
other than pursuant to the Merger, (B) enter into any voting arrangement,
whether by proxy, voting agreement or otherwise, with respect to any Subject
Shares or (C) commit or agree to take any of the foregoing actions; provided
that nothing in this Agreement shall prohibit the Stockholder from Transferring
any of the Subject Shares to any Person that agrees in a writing reasonably
satisfactory to Parent to be bound by the terms of this Agreement.
(8) Fiduciary
Responsibilities. Notwithstanding any other provision of this
Agreement to the contrary, nothing contained in this Agreement shall limit the
rights and obligations of the Stockholder in his capacity as a director or
officer of the Company from taking any action solely in his capacity as a
director or officer of the Company, and no action taken by the Stockholder in
any such capacity shall be deemed to constitute a breach of any provision of
this Agreement.
(9) Street Name Subject
Shares. The Stockholder shall deliver a letter to each
financial intermediary or other Person through which the Stockholder holds
Subject Shares that informs such Person of the Stockholder’s obligations under
this Agreement and that informs such Person that such Person may not act in
disregard of such obligations without the prior written consent of
Parent.
(10) Termination. Except
as otherwise provided herein, this Agreement and the covenants and agreements
contained herein (including, without limitation, the appointments pursuant to
Section 2(b)
and Section
4) shall terminate, and no party shall have any rights or obligations
hereunder, upon the earlier of (i) the termination of the Merger Agreement
pursuant to Article VIII thereof, (ii) the Effective Time, (iii) the date of any
change or amendment to the Merger Agreement (including a waiver or forbearance
by the parties to the Merger Agreement that has the effect of a change or
amendment) that adversely affects the Stockholder in any material respect; (iv)
the date of any change or amendment of the Merger Agreement that (including a
waiver or forbearance by the parties to the Merger Agreement that has the effect
of a change or amendment) that results in a decrease in the Merger Consideration
or that results in a change in the form of consideration to be paid by the
Parent other than as contemplated by the terms of the Merger Agreement; and (iv)
the written agreement of the parties to terminate this
Agreement. Notwithstanding the foregoing, nothing set forth in this
Section 10 or
elsewhere in this Agreement shall relieve either party hereto from liability, or
otherwise limit the liability of either party hereto, for any breach of this
Agreement.
(11) Waiver of Appraisal
Rights. The
Stockholder hereby waives and agrees not to exercise any appraisal rights the
Stockholder may have pursuant to the DGCL relating to the Merger and the Merger
Agreement.
(12) Miscellaneous.
5
(a) Amendment. This Agreement may
not be amended, changed, supplemented, waived or otherwise modified or
terminated, except upon the execution and delivery of a written agreement
executed by the parties hereto affected by such amendment.
(b) Notices. Any notice, request,
instruction or other document to be given hereunder by a party hereto shall be
in writing and shall be deemed to have been given, (i) on the date when received
in hand if given in person or by courier or a courier service, (ii) on the date
of transmission if sent by facsimile with confirmed receipt, or if transmitted
after 5 p.m. local time of the recipient or on a non-Business Day, then on the
next Business Day, or (iii) on the next Business Day if sent by a nationally
recognized overnight delivery service, such as Federal Express, charges prepaid:
(A) if to the Stockholder, to the address set forth for the Stockholder on the
signature page to this Agreement, and (B) if to the Company or Parent, in
accordance with the provisions of the Merger Agreement, or to such other
individual or address as a party hereto may designate for itself by notice given
as herein provided.
(c) Waivers. The failure of a
party hereto at any time or times to require performance of any provision hereof
shall in no manner affect its right at a later time to enforce the same. No
waiver by a party of any condition or of any breach of any term, covenant,
representation or warranty contained in this Agreement shall be effective unless
in writing, and no waiver in any one or more instances shall be deemed to be a
further or continuing waiver of any such condition or breach in other instances
or a waiver of any other condition or breach of any other term, covenant,
representation or warranty.
(d) Counterparts. This Agreement
may be executed in counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. A facsimile
transmission of an executed counterpart signature page shall be deemed an
original.
(e) Interpretation. The headings
preceding the text of Sections included in this Agreement are for convenience
only and shall not be deemed part of this Agreement or be given any effect in
interpreting this Agreement. The use of the masculine, feminine or
neuter gender herein shall not limit any provision of this Agreement. The use of
the terms “including” or “include” shall in all cases herein mean “including,
without limitation” or “include, without limitation,”
respectively. Underscored references to Sections shall refer to those
portions of this Agreement. Time is of the essence of each and every covenant,
agreement and obligation in this Agreement.
(f) APPLICABLE
LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY AND
INTERPRETED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF THE STATE OF
DELAWARE WITHOUT REGARD TO ITS RULES OF CONFLICTS OF LAW.
(g) Binding Agreement. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. No party may assign its rights or
obligations under this Agreement without the prior written consent of the other
parties hereto.
6
(h) Third Party Beneficiaries.
This Agreement is solely for the benefit of the parties hereto and no provision
of this Agreement shall be deemed to confer upon third parties any remedy,
claim, liability, reimbursement, cause of action or other right.
(i) Enforcement. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Therefore, Parent shall,
in addition to any other claims or actions for damages or other remedies, be
entitled to seek specific performance, injunction or other equitable remedies in
connection with any breach or violation by Stockholder of this
Agreement.
(j) Entire Understanding. This
Agreement sets forth the entire agreement and understanding of the parties
hereto and supersedes any and all prior agreements, arrangements and
understandings among the parties.
(k) JURISDICTION OF DISPUTES;
WAIVER OF JURY TRIAL. IN THE EVENT ANY PARTY TO THIS AGREEMENT COMMENCES
ANY LITIGATION, PROCEEDING OR OTHER LEGAL ACTION IN CONNECTION WITH OR RELATING
TO THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY MATTERS DESCRIBED OR
CONTEMPLATED HEREIN OR THEREIN, WITH RESPECT TO ANY OF THE MATTERS DESCRIBED OR
CONTEMPLATED HEREIN OR THEREIN, THE PARTIES TO THIS AGREEMENT HEREBY
(A) AGREE UNDER ALL CIRCUMSTANCES ABSOLUTELY AND IRREVOCABLY TO INSTITUTE
ANY LITIGATION, PROCEEDING OR OTHER LEGAL ACTION IN THE COURT OF CHANCERY OF THE
STATE OF DELAWARE, 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
FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE STATE OF DELAWARE;
(B) AGREE THAT IN THE EVENT OF ANY SUCH LITIGATION, PROCEEDING OR ACTION,
SUCH PARTIES WILL CONSENT AND SUBMIT TO PERSONAL JURISDICTION IN ANY SUCH COURT
DESCRIBED IN CLAUSE (A) OF THIS SECTION AND TO SERVICE OF PROCESS UPON THEM IN
ACCORDANCE WITH THE RULES AND STATUTES GOVERNING SERVICE OF PROCESS;
(C) AGREE TO WAIVE TO THE FULL EXTENT PERMITTED BY LAW ANY OBJECTION THAT
THEY MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH LITIGATION, PROCEEDING
OR ACTION IN ANY SUCH COURT OR THAT ANY SUCH LITIGATION, PROCEEDING OR ACTION
WAS BROUGHT IN AN INCONVENIENT FORUM; AND (D) AGREE THAT MAILING OF PROCESS
OR OTHER PAPERS IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING IN THE MANNER
PROVIDED IN SECTION 12(b) OR IN SUCH OTHER
MANNER AS MAY BE PERMITTED BY LAW SHALL BE VALID AND SUFFICIENT SERVICE THEREOF.
EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY DISPUTE IN
CONNECTION WITH OR RELATING TO THIS AGREEMENT OR ANY MATTERS DESCRIBED OR
CONTEMPLATED HEREIN, AND AGREE TO TAKE ANY AND ALL ACTION NECESSARY OR
APPROPRIATE TO EFFECT SUCH WAIVER.
7
(l) Severability. Any term or
provision of this Agreement that is invalid or unenforceable in any situation in
any jurisdiction shall not affect the validity of enforceability of the
remaining terms and provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any other situation or
in any other jurisdiction. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(m) Construction. The language
used in this Agreement will be deemed to be the language chosen by the parties
to express their mutual intent, and no rule of strict construction shall be
applied against any party. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires
otherwise.
[Remainder
of page intentionally left blank]
8
IN
WITNESS WHEREOF, Parent and the Stockholder have caused this Agreement to be
duly executed as of the day and year first above written.
|
THE
MIDDLEBY CORPORATION
|
|||
|
|
By:
|
/s/ Timothy J. FitzGerald | |
| Name: | Timothy J. FitzGerald | ||
| Title: | Vice President and Chief Financial Officer | ||
[Parent
Signature Page to Stockholder Voting and Support Agreement]
9
| STOCKHOLDERS | |||
|
|
|
/s/ Richard E. Perlman | |
| Richard E. Perlman | |||
| OvenWorks LLLP | |||
| By: | /s/ Richard E. Perlman | ||
| Richard E. Perlman, Manager | |||
| /s/ James K. Price | |||
| James K. Price | |||
| /s/ J. Thomas Presby | |||
| J. Thomas Presby | |||
| /s/ William A. Shutzer | |||
| William A. Shutzer | |||
| /s/ Raymond H. Welsh | |||
| Raymond H. Welsh | |||
| /s/ Anthony Stuart Jolliffe | |||
| Sir Anthony Stuart Jolliffe | |||
| /s/ James W. DeYoung | |||
| James W. DeYoung | |||
| /s/ Paul P. Lehr | |||
| Paul P. Lehr | |||
| /s/ J. Miguel Fernandez De Castro | |||
| J. Miguel Fernandez De Castro | |||
| /s/ Stephen J. Beshara | |||
| Stephen J. Beshara | |||
| /s/ Dennis J. Stockwell | |||
| Dennis J. Stockwell | |||
10
SCHEDULE
A
|
Stockholder
|
Shares
Directly
Owned*
|
Shares
Not Directly Owned
but
for which Stockholder has
sole
voting power
|
Voting
Percentage
**
|
|
Richard
E. Perlman
|
1,688,187
|
432,185
(through OvenWorks
LLLP);
32,693 (through Oven
Management,
Inc.)
|
7.08%
|
|
James
K. Price
|
1,720,879
|
5.66%
|
|
|
J.
Thomas Presby
|
118,928
|
.39%
|
|
|
William
A. Shutzer
|
1,748,484
|
5.75%
|
|
|
Raymond
H. Welsh
|
40,431
|
.13%
|
|
|
Sir
Anthony Jolliffe
|
17,630
|
.06%
|
|
|
James
W. DeYoung
|
2,500
|
291,840
(through a family
limited
partnership
|
.98%
|
|
Paul
P. Lehr
|
0
|
0%
|
|
|
J.
Miguel Fernandez de Castro
|
31,583
|
.10%
|
|
|
Stephen
J. Beshara
|
32,984
|
.11%
|
|
|
Dennis
J. Stockwell
|
17,435
|
.06%
|
|
|
0
|
|||
|
Total
|
5,419,041
|
756,718
|
20.32%
|
* Does
not include shares underlying options or restricted stock units which have not
been issued as of the date of this Agreement
** Based
on 30,390,471 shares outstanding as of the date of this Agreement
11
Exhibit 99.1
TurboChef
Announces Agreement to Merge with The Middleby Corporation
Company
Reports Results for 2008 Second Quarter;
Customer
Relationships and Competitive Position Remain Strong
Atlanta,
Georgia, August 12, 2008 – TurboChef Technologies, Inc. (NASDAQ-GM: OVEN) and
The Middleby Corporation (NASDAQ: MIDD) today announced they have entered into
an agreement of merger. In the proposed transaction, holders of common stock of
the Company will receive $3.67 cash per share and .0486 shares of Middleby
common stock. Based on closing prices as of August 11th, the
consideration would equate to $6.47 per share, a premium of 30.3% to TurboChef’s
20-day trading average price. The acquisition is subject to the approval of the
stockholders of the Company and regulatory approval. Consummation of the
transaction is also subject to other customary closing conditions. The Company
anticipates closing the transaction in 2008.
Richard
Perlman, Chairman, and Jim Price, President, commented, “We have long admired
and respected The Middleby Corporation and its management team and believe this
transaction is in the best long-term interests of TurboChef shareholders. We
believe Middleby’s manufacturing and operational expertise, global reach and
installed customer base matches up extraordinarily well with TurboChef’s leading
edge speed cook technology, R&D capability and industry leading customer
service. We think this is a great transaction for TurboChef employees and
TurboChef shareholders as they now have the opportunity to potentially benefit
from holding Middleby stock.”
In
addition, TurboChef last evening reported financial results for the three and
six months ended June 30, 2008.
Significant
Items:
|
|
·
|
Second
quarter 2008 revenue was $21.2 million, an 8% decrease from the year-ago
quarter revenue of $23.0 million, reflecting a difficult external economic
environment. A number of customers have pushed out their orders reflecting
concerns about their own business results, prospects and credit conditions
which are slowing the opening of new stores. The number of current
customers and potential new customers that are evaluating and testing the
Company’s new commercial ovens continues to grow with the Company
receiving very positive feedback from the ongoing evaluations to date. The
current quarter’s revenue included $499,000 attributable to the Company’s
Residential segment, a 53% increase over the first quarter of 2008. In
addition, overall gross margins were 41% for the quarter, 180 basis points
improved over the year-ago quarter. Beyond the impact of current economic
conditions, revenues were somewhat less than anticipated because a portion
of orders that had been expected for the quarter came in with certain
provisions that precluded revenue recognition in the current quarter but
which will be recognized in subsequent quarters. Despite the current
quarter results, total revenues for the six months ended June 30, 2008
were 11% above the results for the year-ago
period.
|
|
|
·
|
The
Commercial segment posted operating income of $1.8 million or 8.7% for the
second quarter of 2008. For the year-ago quarter, the Commercial segment
operating income was $3.1 million or 13% on revenues that were 11%
greater. Commercial segment operating income in the current quarter was
negatively impacted by a $469,000 increase in legal costs primarily
related to patent litigation.
|
|
|
·
|
Diversification
of the Commercial customer base continues as the Company’s two largest
contract customers accounted for only approximately 29% of the quarter’s
revenue, while the third most significant contract customer added
approximately 5%. One of the Company’s important customers has recently
announced it will continue its breakfast sandwich program in the U.S. with
a reformulated and expanded menu. The Company views this as a positive
development for continued and expanded business with this customer. Approximately
$14.0 million, or 66% of the second quarter’s revenue, was from sales to
other than these three contract customers, an increase of 77% over the
year-ago quarter and, notably, an important indication of continued broad
adoption of speed cook technology.
|
|
|
·
|
The
Company’s role in the successful rollout of Dunkin’ Brands new
Oven-Toasted menu powered by the TurboChef® Tornado® oven was recognized
when Dunkin’ Brands recently honored the Company as its 2007 Supplier of
the Year, citing “a technology that has revolutionized the Dunkin’ Donuts
product offering . . .” and, “[t]he TurboChef group far exceeded our
expectations . . .”. Management believes that the Company’s focus on
service and support enhances the value proposition for its customers and
is a major differentiator for TurboChef in the
marketplace.
|
|
|
·
|
The
Residential segment reported an operating loss of $5.3 million for the
quarter. Excluding the impact of the largely non-cash costs recognized in
the quarter related to the previously announced realignment of the
Residential business ($1.2 million) and the wholly non-cash costs
associated with accounting for the equity consideration for the multi-year
marketing services agreement recently signed with Martha Stewart Living
Omnimedia, Inc. (MSLO) ($1.3 million), the segment’s operating loss would
have been $2.8 million on a non-GAAP basis, approximately $1.1 million, or
28%, less than the year-ago quarter. This operating loss comparison for
the segment reflects only a partial benefit of the Company’s previously
announced cost-reduction initiatives to realign its Residential business
in light of current market
conditions.
|
|
|
·
|
The
Company’s Commercial segment continues to provide ovens, service and
consumables to its three major contract customers around the globe and
continues to experience impressive growth in the non-contract portion of
the Commercial business including positive response to its recent release
of new products, floor model and countertop conveyor ovens and the i5
speed cook batch oven. The Company believes there are a number of positive
factors regarding its Commercial business and remains relatively
optimistic regarding the Commercial business
overall.
|
Financial
Review
For the
three months ended June 30, 2008, total revenue was $21.2 million compared with
$23.0 million in the year-ago quarter. Unit sales to contract customers
decreased in the second quarter which had been expected as a result of last
quarter’s completion of the domestic portion of the oven roll-out to one major
customer, Dunkin’ Brands. Sales to this customer will continue to international
locations and for new store expansion. The decrease in unit sales to contract
customers was partly offset by a significant increase in unit sales to
non-contract customers; however, a portion of orders which had been expected
from certain of these customers for the quarter came in with certain provisions
that precluded their recognition in the current quarter. For the six months
ended June 30, 2008, total revenue was $45.7 million compared with $41.3 million
for the year-ago period.
As a
percentage of total sales, cost of product sales for the second quarter was
58.9% as compared with 60.7% for the year-ago quarter.
Selling,
general and administrative (SG&A) expenses for the quarter were $12.8
million, including approximately $1.3 million in non-cash cost related to the
MSLO marketing agreement and $1.2 million in costs related to the previously
announced realignment of the Residential business. Excluding these costs,
aggregate SG&A for the second quarter were $10.3 million on a non-GAAP
basis. SG&A for the year-ago quarter was $13.2 million or, on a non-GAAP
basis, $10.0 million excluding $3.2 million related to the Company’s
investigation of stock option practices ongoing at the time. The Company
implemented cost-reduction initiatives in the second quarter 2008 which are
anticipated to achieve annualized savings of approximately $3.0 million
commencing in the second half of the year.
The
Company reported a net loss of $6.8 million or $0.22 per share for the second
quarter of 2008 compared with a net loss of $6.5 million or $0.22 per share in
the year-ago quarter. Excluding the effects described in the preceding paragraph
of the costs incurred to realign the Residential business and the costs
associated with the MSLO agreement (both largely non-cash), on a non-GAAP basis,
the second quarter 2008 net loss would have been $4.3 million or $0.14 per
share.
Non-GAAP
Disclosure
In
addition to the GAAP results provided in this release, the Company provides
information for non-GAAP operating loss, SG&A, net loss and loss per share
(non-GAAP EPS) for the second quarter of 2008 and non-GAAP SG&A for the
second quarter of 2007. These non-GAAP financial measures are not in accordance
with, or an alternative for, generally accepted accounting principles in the
United States. The GAAP measures most directly comparable to non-GAAP operating
loss, SG&A, net loss and loss per share are operating loss, SG&A, net
loss and net loss per share.
Non-GAAP
operating loss, SG&A, net loss and loss per share for the second quarter
2008 exclude costs associated with realigning the Residential business and the
cost associated with the MSLO agreement, both largely non-cash. Management
believes that providing these non-GAAP financial measures better enables
investors to understand and evaluate the Company's current operating
performance. More specifically, management excludes the realignment costs
because it believes that these costs do not reflect expected future operating
expenses and do not contribute to a meaningful evaluation of the Company's
future operating performance or comparisons to the Company's past operating
performance. Management believes that exclusion of the MSLO costs enables
investors to better understand the cash requirements for the Residential
business and make a more meaningful comparison to this business’ past operating
performance. SG&A for the second quarter 2007 excludes costs related to the
Company’s investigation of stock option practices ongoing at the time.
Management believes that exclusion of the stock option investigation costs
facilitates a comparison of SG&A costs in the periods
presented.
These
non-GAAP financial measures may have limitations as analytical tools, and should
not be considered in isolation or as a substitute for analysis of the Company's
results as reported under GAAP. Other companies may calculate non-GAAP EPS
differently than the Company does, limiting the usefulness of those measures for
comparative purposes.
Commentary
Richard
Perlman, Chairman, said, “Since we reported our first quarter results, we’ve
seen the economy have a dampening effect on our commercial revenues. While our
customer relationships remain very strong, our customers are also being affected
by the economy in this challenging environment.”
Jim
Price, President, added, “In light of the current housing situation and overall
economic conditions, the Company is scaling back its residential marketing and
promotional spend and will scale back the entire residential business in keeping
with the realities of current conditions. We were pleased to have seen an
increase in our residential oven sales particularly in this environment. We are
now shipping the Single Wall Oven, the newest addition to our product line and
continue development on additional products to enhance the residential
offerings. We are confident that the business will be positioned to capture the
upturn when the residential market recovers.”
About
TurboChef
TurboChef
Technologies, Inc. is a leading provider of equipment, technology and services
focused on the high-speed preparation of food products for the worldwide
commercial primary cooking equipment market and offers equipment for residential
markets through the application of its high-speed cooking technologies, as well.
TurboChef’s user-friendly speed cook ovens employ proprietary combinations of
heating technologies to cook a variety of food products at speeds faster than,
and to quality standards that it believes are comparable or superior to, that of
conventional heating methods. The address of TurboChef’s principal
executive offices is Six Concourse Parkway, Suite 1900, Atlanta, GA 30328.
Visit TurboChef at www.turbochef.com.
The
Company’s previously announced conference call to discuss its second quarter
results rescheduled for Tuesday, August 12, 2008, at 8:00 a.m. EDT has now been
cancelled.
For
more information, contact:
James A.
Cochran
Senior
Vice President – Investor Relations and Corporate Strategy
TurboChef
Technologies, Inc.
Six
Concourse Parkway
Suite
1900
Atlanta,
Georgia 30328
(678)
987-1700
Important
Information
In
connection with the proposed merger, the parties intend to file relevant
materials with the Securities Exchange Commission ("SEC"), including a joint
proxy statement/prospectus regarding the proposed transaction. Such documents,
however, are not currently available. INVESTORS ARE URGED TO READ THE JOINT
PROXY STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION WHEN IT BECOMES
AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. Investors will be able
to obtain a free copy of the joint proxy statement/prospectus, as well as other
filings containing information about TurboChef and Middleby without charge, at
the SEC’s website (http://www.sec.gov) once such documents are filed with the
SEC. Copies of the joint proxy statement/prospectus can also be obtained,
without charge, once they are filed with the SEC, by directing a request to
TurboChef Technologies, Inc., Attention: Investor Relations, Six Concourse
Parkway, Suite 1900, Atlanta, GA 30328 (678) 987-1700.
TurboChef
and its directors, executive officers and other employees may be deemed to be
participants in the solicitation of proxies from the security holders of
TurboChef in connection with the proposed transaction. Information about
TurboChef’s directors and executive officers is available in TurboChef’s proxy
statement, dated June 11, 2008, for its 2008 annual meeting of stockholders.
Additional information about the interests of potential participants will be
included in the joint proxy statement/prospectus and the other relevant
documents filed with the SEC when they become available. This document shall not
constitute an offer to sell or the solicitation of an offer to buy any
securities, nor shall there be any sale of securities in any jurisdiction in
which such offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such jurisdiction. No offering
of securities shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
Forward-Looking
Statements
Certain
statements in this release, and other written or oral statements made by or on
behalf of TurboChef, are “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995. Statements regarding future
events and developments and our future performance, as well as management’s
expectations, beliefs, plans, guidance, estimates or projections relating to the
future, are forward-looking statements within the meaning of these laws. These
forward-looking statements are subject to a number of risks and uncertainties.
These risks and uncertainties include, but are not limited to, the following:
the uncertainty of market acceptance and demand for the Company’s products, the
ability to obtain additional financing necessary to expand operations, the
uncertainty of consumer acceptance of new products or technologies that may be
offered by TurboChef, the dependence on a limited number of customers,
relationships with and dependence on third-party equipment manufacturers and
suppliers, impact of competitive products and pricing, and the results of
government inquiries and possible regulatory action or private litigation
regarding the Company’s stock option grants and practices. The words
“looking forward,” “believe,” “expect,” “likely,” “should” and similar
expressions identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only for
the date the statement was made. TurboChef Technologies, Inc. undertakes no
obligation to publicly update any forward-looking statements, whether as a
result of future events, new information or otherwise.