EXHIBIT 99.1
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AGREEMENT AND PLAN OF MERGER
Dated as of June 7, 2006
Among
WT ACQUISITION HOLDINGS, LLC,
WT ACQUISITION CORP.
And
WARRANTECH CORPORATION
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TABLE OF CONTENTS
Page
ARTICLE I
The Merger
SECTION 1.01. Company Actions.............................................1
SECTION 1.02. The Merger..................................................1
SECTION 1.03. Closing.....................................................2
SECTION 1.04. Effective Time..............................................2
SECTION 1.05. Effects.....................................................2
SECTION 1.06. Articles of Incorporation and By-laws.......................2
SECTION 1.07. Directors...................................................2
SECTION 1.08. Officers....................................................3
SECTION 1.09. Legal Opinions..............................................3
ARTICLE II
Effect on the Capital Stock of the Constituent Corporations; Exchange of
Certificates
SECTION 2.01. Effect on Capital Stock.....................................3
SECTION 2.02. Exchange of Certificates....................................4
SECTION 2.03. Effect of the Merger on Company Stock Options...............6
ARTICLE III
Representations and Warranties of the Company
SECTION 3.01. Organization, Standing and Power............................7
SECTION 3.02. Company Subsidiaries; Equity Interests......................7
SECTION 3.03. Capital Structure...........................................7
SECTION 3.04. Authority; Execution and Delivery, Enforceability...........8
SECTION 3.05. No Conflicts; Consents......................................9
SECTION 3.06. SEC Documents; Undisclosed Liabilities.....................10
SECTION 3.07. Information Supplied.......................................11
SECTION 3.08. Absence of Certain Changes or Events.......................12
SECTION 3.09. Taxes......................................................12
SECTION 3.10. Absence of Changes in Benefit Plans........................13
SECTION 3.11. ERISA Compliance; Excess Parachute Payments................14
SECTION 3.12. Litigation.................................................15
SECTION 3.13. Compliance with Applicable Laws............................15
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TABLE OF CONTENTS
(continued)
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SECTION 3.14. Intellectual Property......................................16
SECTION 3.15. Real Property..............................................17
SECTION 3.16. Personal Property..........................................17
SECTION 3.17. Insurance..................................................18
SECTION 3.18. Labor Matters..............................................18
SECTION 3.19. Contracts..................................................19
SECTION 3.20. Brokers; Schedule of Fees and Expenses.....................20
SECTION 3.21. Opinion of Financial Advisor...............................20
SECTION 3.22. Environmental Matters......................................20
SECTION 3.23. Related Party Transactions.................................21
ARTICLE IV
Representations and Warranties of Parent and Sub
SECTION 4.01. Organization, Standing and Power...........................21
SECTION 4.02. Sub........................................................21
SECTION 4.03. Authority; Execution and Delivery, Enforceability..........21
SECTION 4.04. No Conflicts; Consents.....................................22
SECTION 4.05. Information Supplied.......................................22
SECTION 4.06. Brokers....................................................22
SECTION 4.07. Financing..................................................22
ARTICLE V
Covenants Relating to Conduct of Business
SECTION 5.01. Conduct of Business........................................22
SECTION 5.02. No Solicitation............................................25
ARTICLE VI
Additional Agreements
SECTION 6.01. Preparation of Proxy Statement; Stockholders Meeting.......27
SECTION 6.02. Access to Information; Confidentiality.....................28
SECTION 6.03. Reasonable Best Efforts; Notification......................28
SECTION 6.04. Fees and Expenses..........................................29
SECTION 6.05. Public Announcements.......................................30
SECTION 6.06. Transfer Taxes.............................................30
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TABLE OF CONTENTS
(continued)
Page
SECTION 6.07. Stockholder Litigation.....................................30
SECTION 6.08. Transaction Financing Cooperation..........................30
SECTION 6.09. Indemnification............................................31
SECTION 6.10. White Agreement............................................31
ARTICLE VII
Conditions Precedent
SECTION 7.01. Conditions to Each Party's Obligation To Effect The Merger.31
SECTION 7.02. Conditions to Obligations of Parent and Sub................32
SECTION 7.03. Condition to Obligation of the Company.....................33
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.01. Termination................................................33
SECTION 8.02. Effect of Termination......................................35
SECTION 8.03. Amendment..................................................35
SECTION 8.04. Extension: Waiver..........................................35
SECTION 8.05. Procedure for Termination, Amendment, Extension or Waiver..35
ARTICLE IX
General Provisions
SECTION 9.01. Nonsurvival of Representations and Warranties..............36
SECTION 9.02. Notices....................................................36
SECTION 9.03. Definitions................................................37
SECTION 9.04. Interpretation; Disclosure Letters.........................38
SECTION 9.05. Severability...............................................38
SECTION 9.06. Counterparts...............................................38
SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries.............38
SECTION 9.08. Governing Law..............................................39
SECTION 9.09. Assignment.................................................39
SECTION 9.10. Enforcement; Jurisdiction; WAIVER OF JURY TRIAL............39
SECTION 9.11. Mutual Drafting............................................39
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AGREEMENT AND PLAN OF MERGER dated as of June 7, 2006, among
WT Acquisition Holdings, LLC, a Delaware limited liability company ("Parent"),
WT Acquisition Corp., a Nevada corporation ("Sub"), and a wholly owned
subsidiary of Parent, and Warrantech Corporation, a Nevada corporation (the
"Company").
WHEREAS the respective Boards of Directors of Sub and the
Company have approved and recommended to their stockholders, and the Board of
Managers of Parent has approved, the acquisition of the Company by Parent on the
terms and subject to the conditions set forth in this Agreement;
WHEREAS the respective Boards of Directors of Sub and the
Company have approved and recommended to their stockholders, and the Board of
Managers of Parent has approved, this Agreement and the merger (the "Merger") of
Sub with and into the Company, or (at the election of Parent) the Company with
and into Sub, on the terms and subject to the conditions set forth in this
Agreement, whereby each issued share of common stock, par value $0.007 per
share, of the Company (the "Company Common Stock") not owned by Parent, Sub or
the Company shall be converted into the right to receive $0.75 in cash;
WHEREAS the respective Boards of Directors of Sub and the
Company have determined that the Merger is fair to, and in the best interests
of, Sub and the Company, and their respective stockholders;
WHEREAS simultaneously with the execution and delivery of this
Agreement Parent and certain stockholders of the Company (the "Principal Company
Stockholders") are entering into an agreement (the "Company Stockholder
Agreements" and, together with this Agreement, the "Transaction Agreements")
pursuant to which the Principal Company Stockholders will, among other things,
agree to take specified actions in furtherance of the Merger;
WHEREAS Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
The Merger
SECTION 1.01. Company Actions. The Company hereby approves
of and consents to the Merger and the other transactions contemplated by the
Transaction Agreements (collectively, the "Transactions").
SECTION 1.02. The Merger. On the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Chapters 78
and 92A of the Nevada Revised Statutes (the "NCL"), Sub shall be merged with and
into the Company at the Effective Time (as defined in Section 1.04). At the
Effective Time, the separate corporate existence of Sub shall cease and the
Company shall continue as the surviving corporation (the "Surviving
Corporation"). Notwithstanding the foregoing, Parent may elect at any time prior
to the Merger, instead of merging Sub with and into the Company as provided
above, to merge the Company with and into Sub; provided, however, that the
Company shall not be deemed to have breached any of its representations,
warranties or covenants set forth in this Agreement solely by reason of such
election. In such event, the parties shall execute an appropriate amendment to
this Agreement in order to reflect the foregoing. At the election of Parent, any
direct or indirect wholly owned subsidiary of Parent may be substituted for Sub
as a constituent corporation in the Merger. In such event, the parties shall
execute an appropriate amendment to this Agreement in order to reflect the
foregoing.
SECTION 1.03. Closing. The closing (the "Closing") of the
Merger shall take place at the offices of ▇▇▇▇▇▇▇▇▇ Will & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ at 10:00 a.m. on the second business day
following the satisfaction (or, to the extent permitted by Law (as defined in
Section 3.05), waiver by all parties) of the conditions set forth in Section
7.01, or, if on such day any condition set forth in Section 7.02 or 7.03 has not
been satisfied (or, to the extent permitted by Law, waived by the party or
parties entitled to the benefits thereof), as soon as practicable after all the
conditions set forth in Article VII have been satisfied (or, to the extent
permitted by Law, waived by the parties entitled to the benefits thereof), or at
such other place, time and date as shall be agreed in writing between Parent and
the Company. The date on which the Closing occurs is referred to in this
Agreement as the "Closing Date".
SECTION 1.04. Effective Time. Prior to the Closing, Parent
shall prepare, and on the Closing Date or as soon as practicable thereafter and
the parties shall execute and file with the Secretary of State of the State of
Nevada, articles of merger or other appropriate documents (in any such case, the
"Articles of Merger") executed in accordance with the relevant provisions of the
NCL and shall make all other filings or recordings required under the NCL to
complete the Merger. The Merger shall become effective at such time as the
Articles of Merger are duly filed with such Secretary of State, or at such other
time as Parent and the Company shall agree and specify in the Articles of Merger
(the time the Merger becomes effective being the "Effective Time").
SECTION 1.05. Effects. The Merger shall have the effects
set forth in the NCL (including, without limitation, Section 92A.250 thereof).
SECTION 1.06. Articles of Incorporation and By-laws. (a)
The Articles of Incorporation of the Surviving Corporation in effect immediately
prior to the Effective Time shall be the Articles of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable Law.
(b) The By-laws of Sub as in effect immediately prior to the
Effective Time shall be the By-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable Law.
SECTION 1.07. Directors. The directors of Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
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Corporation, until the earlier of their death, resignation or removal or until
their respective successors are duly elected and qualified, as the case may be.
SECTION 1.08. Officers. The officers of the Company
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, until the earlier of their death, resignation or removal
or until their respective successors are duly elected or appointed and
qualified, as the case may be.
SECTION 1.09. Legal Opinions. On the date hereof, the
Company has delivered to Parent the legal opinion of Kummer, Kaempfer, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇ regarding certain matters of Nevada law.
ARTICLE II
Effect on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock. At the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any shares of Company Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of common stock, par value $0.01 per share, of the Surviving
Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock.
Each share of Company Common Stock that is owned by the Company, Parent, Sub or
any Company Subsidiary shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and no consideration shall be
paid, delivered or deliverable in exchange therefor.
(c) Conversion of Company Common Stock. Subject to Sections
2.01(b) and 2.01(d), each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into the right to
receive $0.75 in cash (the "Merger Consideration"). As of the Effective Time,
all shares of Company Common Stock issued and outstanding immediately prior to
the Effective Time shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive Merger Consideration
upon surrender of such certificate in accordance with Section 2.02, without
interest.
(d) Dissenter's Rights. Notwithstanding anything in this
Agreement to the contrary, shares ("Dissenting Shares") of Company Common Stock
that are issued and outstanding immediately prior to the Effective Time and that
are held by any person who is entitled to demand and properly demands payment of
the fair value of such Dissenting Shares pursuant to, and who complies in all
respects with, Section 92A.300 to 92A.500 inclusive, of the NCL ("Section
92A.300 et. seq.) shall not be converted into Merger Consideration as provided
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in Section 2.01(c), but rather the holders of Dissenting Shares shall be
entitled to payment for such Dissenting Shares in accordance with Section
92A.300 et. seq.; provided, however, that if any such holder shall fail to
perfect or otherwise shall waive, withdraw or lose the right to receive payment
under Section 92A.300 et. seq., then the right of such holder to be paid the
fair value of such holder's Dissenting Shares shall cease and such Dissenting
Shares shall be deemed to have been converted as of the Effective Time into, and
to have become exchangeable solely for the right to receive, Merger
Consideration, without interest, as provided in Section 2.01(c). The Company
shall give Parent prompt notice of any demands received by the Company for
appraisal of any shares of Company Common Stock, withdrawal of demand for
appraisal and any other communication received in connection with Section
92A.300 et. seq., and Parent shall have the right to participate in and direct
all negotiations, discussions and proceedings with respect to such demands.
Prior to the Effective Time, the Company shall not, without the prior written
consent of Parent, make any payment with respect to, or settle or offer to
settle, any such demands, or agree to do any of the foregoing.
(e) Certain Adjustments. In the event that prior to the
Effective Time, solely as a result of a reclassification, stock split (including
a reverse stock split), combination or exchange of shares, stock dividend or
stock distribution which in any such event is made on a pro rata basis to all
holders of Company Common Stock, there is a change in the number of shares of
Company Common Stock outstanding or issuable upon the conversion, exchange or
exercise of securities or rights convertible or exchangeable or exercisable for
shares of Company Common Stock, then the Merger Consideration payable with
respect to each share of Company Common Stock shall be equitably adjusted to
reflect such event.
SECTION 2.02. Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time, (i) Parent
shall select a bank or trust company with a capital and surplus of at least
$100,000,000 to act as paying agent (the "Paying Agent") for the payment of the
Merger Consideration upon surrender of certificates representing Company Common
Stock and (ii) Parent and the Company shall enter into an agreement with the
Paying Agent providing for the matters set forth in this Section 2.02. The
Surviving Corporation shall provide to the Paying Agent on or prior to the
Effective Time, cash necessary to pay for the shares of Company Common Stock
converted into the right to receive cash pursuant to Section 2.01(c) (such cash
being hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedure. As soon as reasonably practicable
after the Effective Time, the Paying Agent shall mail to each holder of record
of a certificate or certificates (the "Certificates") that immediately prior to
the Effective Time represented outstanding shares of Company Common Stock whose
shares were converted into the right to receive Merger Consideration pursuant to
Section 2.01, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Paying Agent and shall be in such
form and have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for Merger Consideration. Upon surrender of a Certificate for cancellation to
the Paying Agent or to such other agent or agents as may be appointed by Parent,
together with such letter of transmittal, duly executed, and such other
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documents as may reasonably be required by the Paying Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor the amount of cash
into which the shares of Company Common Stock theretofore represented by such
Certificate shall have been converted pursuant to Section 2.01, and the
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Company Common Stock that is not registered in the
transfer records of the Company, payment 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 payment to a person other than the registered
holder of such Certificate or establish to the satisfaction of Parent that such
tax has been paid or is not applicable. No interest will be payable on the
Merger Consideration. Until surrendered as contemplated by this Section 2.02,
each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the amount of cash,
without interest, into which the shares of Company Common Stock theretofore
represented by such Certificate have been converted pursuant to Section 2.01. No
interest shall be paid or accrue on the cash payable upon surrender of any
Certificate.
(c) No Further Ownership Rights in Company Common Stock. The
Merger Consideration paid in accordance with the terms of this Article II upon
conversion of any shares of Company Common Stock shall be deemed to have been
paid in full satisfaction of all rights pertaining to such shares of Company
Common Stock. After the Effective Time there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of shares of
Company Common Stock that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, any certificates formerly representing
shares of Company Common Stock are presented to the Surviving Corporation or the
Paying Agent for any reason, they shall be canceled and exchanged as provided in
this Article II.
(d) Termination of Exchange Fund. Any portion of the Exchange
Fund that remains undistributed to the holders of Company Common Stock for six
months after the Effective Time shall be delivered to the Surviving Corporation,
upon demand, and any holder of Company Common Stock who has not theretofore
complied with this Article II shall thereafter look only to the Surviving
Corporation for payment of its claim for Merger Consideration.
(e) No Liability. None of Parent, Sub, the Company or the
Paying Agent shall be liable to any person in respect of any cash from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law. If any Certificate has not been
surrendered prior to five years after the Effective Time (or immediately prior
to such earlier date on which Merger Consideration in respect of such
Certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 3.05)), any such shares, cash,
dividends or distributions in respect of such Certificate shall, to the extent
permitted by applicable Law, become the property of the Surviving Corporation,
free and clear of all claims or interest of any person previously entitled
thereto.
(f) Investment of Exchange Fund. The Paying Agent shall invest
any cash included in the Exchange Fund, as directed by the Surviving
Corporation, on a daily basis. Any interest and other income resulting from such
investments shall be paid to Parent.
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(g) Withholding Rights. The Surviving Corporation shall be
entitled to deduct and withhold from the consideration otherwise payable to any
holder of Company Common Stock pursuant to this Agreement such amounts as may be
required to be deducted and withheld with respect to the making of such payment
under the Code (as defined in Section 3.11), or under any provision of state,
local or foreign tax Law. 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
Company Common Stock in respect of which such deduction and withholding was made
by the Surviving Corporation.
(h) Lost Certificates. If any certificate representing shares
of Company Common Stock shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact and an indemnity by the person claiming such
certificate to be lost, stolen or destroyed, the Surviving Corporation will
deliver in exchange for such lost, stolen or destroyed certificate, the
appropriate amount of Merger Consideration, as contemplated by this Article II.
SECTION 2.03. Effect of the Merger on Company Stock
Options.
(a) Prior to the Effective Time, the Board of Directors of the
Company or any committee administering the Company's stock option plans,
programs and arrangements, including, without limitation, the Warrantech
Corporation 1998 Stock Plan (collectively, the "Stock Plans") shall take all
actions necessary so that (i) all outstanding options to acquire shares of
Company Common Stock (the "Company Stock Options") shall be cancelled at the
Effective Time and (ii) at the Effective Time, each holder of each Company Stock
Option, whether or not then vested or exercisable, shall be entitled to receive
in cancellation and settlement therefore, a payment in cash, payable without
interest, equal to the product of (i) the excess, if any, of (x) the per share
Merger Consideration over (y) the exercise price per share of Company Common
Stock subject to such Company Stock Option, multiplied by (ii) the number of
shares of Company Common Stock for which such Company Stock Option shall not
theretofore have been exercised, whether or not then vested or exercisable. The
Surviving Corporation shall pay the holders of Company Stock Options the cash
payments described in this Section 2.03(a) on or as soon as reasonably
practicable after the Closing Date.
(b) The Stock Plans shall terminate as of the Effective Time,
and the provisions in any other agreement, arrangement or benefit plan providing
for the issuance, transfer or grant of any capital stock of the Company or any
interest in respect of any capital stock of the Company shall be deleted as of
the Effective Time, and the Company shall take all such action as is necessary,
and obtain all necessary consents, to ensure the foregoing and that, after the
Effective Time, no holder of a Company Stock Option or any participant in or a
party to any Stock Plan or other agreement, arrangement or benefit plan shall
have any right thereunder to acquire any capital stock or any interest in
respect of any capital stock of the Surviving Corporation.
(c) The Surviving Corporation shall be entitled to deduct and
withhold from the amounts otherwise payable pursuant to this Section 2.03 to any
holder of Company Stock Options such amounts as the Surviving Corporation 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 the Surviving
Corporation shall make any required filings with and payments to tax authorities
relating to any such deduction or withholding. To the extent that amounts are so
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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 Company Stock Options in respect of which such deduction and withholding
was made by the Surviving Corporation.
ARTICLE III
Representations and Warranties of the Company
The Company represents and warrants to Parent and Sub that,
except as set forth in the letter, dated as of the date of this Agreement, from
the Company to Parent and Sub (the "Company Disclosure Letter"):
SECTION 3.01. Organization, Standing and Power. Each of
the Company and each of its subsidiaries (the "Company Subsidiaries") is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has full corporate power and authority
to enable it to own, lease or otherwise hold its properties and assets and to
conduct its businesses as presently conducted. The Company and each Company
Subsidiary is duly qualified to do business in each jurisdiction where the
nature of its business or their ownership or leasing of its properties make such
qualification necessary or the failure to so qualify has not had or would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. The Company has delivered to Parent true and complete
copies of the certificates of incorporation of the Company, as amended to the
date of this Agreement (as so amended, the "Company Charter"), and the By-laws
of the Company, as amended to the date of this Agreement (as so amended, the
"Company By-laws"), and the comparable charter and organizational documents of
each Company Subsidiary, in each case as amended through the date of this
Agreement.
SECTION 3.02. Company Subsidiaries; Equity Interests. (a)
The Company Disclosure Letter lists each Company Subsidiary and its jurisdiction
of organization. All the outstanding shares of capital stock of each Company
Subsidiary have been validly issued and are fully paid and nonassessable and are
owned by the Company, by another Company Subsidiary or by the Company and
another Company Subsidiary, free and clear of all pledges, liens, voting
agreements, proxies, transfer restrictions, charges, mortgages, encumbrances and
security interests of any kind or nature whatsoever (collectively,
"Encumbrances").
(b) Except for its interests in the Company Subsidiaries, the
Company does not own, directly or indirectly, any capital stock, membership
interest, partnership interest, joint venture interest or other equity interest
in any person.
SECTION 3.03. Capital Structure. The authorized capital
stock of the Company consists of 50,000,000 shares of Company Common Stock and
10,000,000 shares of preferred stock, par value $0.007 per share (the "Company
Preferred Stock" and together with the Company Common Stock, the "Company
Capital Stock"). As of the date of this Agreement, (i) 16,694,614 shares of
Company Common Stock and no shares of Company Preferred Stock were issued and
outstanding, (ii) 1,187,606 shares of Company Common Stock were held by the
Company in its treasury, and (iii) 1,502,446 shares of Company Common Stock were
subject to outstanding Company Stock Options and 1,139,541 additional shares of
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Company Common Stock were reserved for issuance pursuant to the Company Stock
Plans. Section 3.03 of the Disclosure Letter contains a schedule as of the date
of this Agreement setting forth the number of, exercise price, vesting date (or
dates) and the expiration date of each Company Stock Option. There are no
preemptive rights on the part of any holder of any class of securities of the
Company or any Company Subsidiary. Except as set for above or in the Company
Disclosure Letter, as of the date of this Agreement, no shares of capital stock
or other voting securities of the Company were issued, reserved for issuance or
outstanding. All outstanding shares of Company Capital Stock are, and all such
shares that may be issued prior to the Effective Time will be when issued, duly
authorized, validly issued, fully paid and nonassessable and not subject to or
issued in violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision of
the NCL, the Company Charter, the Company By-laws or any Contract (as defined in
Section 3.05) to which the Company is a party or otherwise bound. There are not
any bonds, debentures, notes or other indebtedness of the Company having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which holders of Company Common Stock may vote
("Voting Company Debt"). Except as set forth above or in the Company Disclosure
Letter, as of the date of this Agreement, there are not any options, warrants,
call rights, convertible or exchangeable securities, "phantom" stock rights,
stock appreciation rights, stock-based performance units, commitments,
Contracts, arrangements or undertakings of any kind to which the Company or any
Company Subsidiary is a party or by which any of them is bound (i) obligating
the Company or any Company Subsidiary to issue, deliver, sell or transfer or
repurchase, redeem or otherwise acquire, or cause to be issued, delivered, sold
or transferred or repurchased, redeemed or otherwise acquired, additional shares
of capital stock of, or other equity interests in, or any security convertible
or exercisable for or exchangeable into any capital stock of or other equity
interest in, the Company or of any Company Subsidiary or any Voting Company
Debt, (ii) obligating the Company or any Company Subsidiary to issue, grant,
extend or enter into any such option, warrant, call, right, security,
commitment, Contract, arrangement or undertaking, (iii) that give any person the
right to receive any economic benefit or right similar to or derived from the
economic benefits and rights occurring to holders of Company Capital Stock or
(iv) relating to the voting of any Company Capital Stock.
SECTION 3.04. Authority; Execution and Delivery,
Enforceability. (a) The Company has all requisite corporate power and authority
to execute and deliver the Transaction Agreements to which it is a party and to
consummate the Transactions; provided, that consummation of the Merger is
subject to receipt of Company Stockholder Approval (as defined in Section
3.04(c)). The execution and delivery by the Company of each Transaction
Agreement to which it is a party and the consummation of the Transactions have
been duly authorized by all necessary corporate action on the part of the
Company, subject, in the case of the Merger, to receipt of the Company
Stockholder Approval. The Company has duly executed and delivered each
Transaction Agreement to which it is a party, and each Transaction Agreement to
which it is a party constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforcement of
creditors' rights and (ii) the application of general principles of equity,
whether such enforceability is considered in a proceeding in equity or in law;
provided, that consummation of the Merger is subject to receipt of Company
Stockholder Approval.
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(b) The special committee of the Company Board (the "Special
Committee"), at a meeting duly called and held, has, by unanimous vote of all of
its members, approved this Agreement and the other Transaction Agreements and
has determined that the Merger is fair to, and in the best interests of, the
holders of Company Common Stock. The Board of Directors of the Company (the
"Company Board"), at a meeting duly called and held, acting on the unanimous
recommendation of the Special Committee, duly and unanimously adopted
resolutions (i) adopting and approving this Agreement and the other Transaction
Agreements, the Merger and the other Transactions, (ii) determining that the
terms of the Merger and the other Transactions are fair to and in the best
interests of the Company and its stockholders, and (iii) recommending that the
Company's stockholders approve this Agreement. Such resolutions are sufficient
to render the provisions of Sections 78.411-78.444 and Section 78.378 of the NCL
inapplicable to Parent and Sub and this Agreement and the other Transaction
Agreements (including the acquisition of shares by Parent pursuant to the
Company Stockholders Agreements), the Merger and the other Transactions. No
other state takeover statute or similar statute or regulation applies or
purports to apply to the Company with respect to this Agreement and the other
Transaction Agreements, the Merger or any other Transaction.
(c) The only vote of holders of any class or series of Company
Capital Stock necessary to approve this Agreement and the Merger is the approval
of this Agreement by the holders of a majority of the outstanding Company Common
Stock (the "Company Stockholder Approval"). The affirmative vote of the holders
of Company Capital Stock, or any of them, is not necessary to approve any
Transaction Agreement other than this Agreement or consummate any Transaction
other than the Merger.
SECTION 3.05. No Conflicts; Consents. (a) The execution
and delivery by the Company of each Transaction Agreement to which it is a party
do not, and the consummation of the Merger and the other Transactions and
compliance with the terms hereof and thereof will not, conflict with, or result
in any violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or to
increased, additional, accelerated or guaranteed rights or entitlements of any
person under, or result in the creation of any Encumbrance upon any of the
properties or assets of the Company or any Company Subsidiary under, any
provision of (i) the Company Charter, the Company By-laws or the comparable
charter or organizational documents of any Company Subsidiary, (ii) any Material
Contract (as defined in Section 3.19) or Permit (as defined in Section 3.13),
except as set forth on Schedule 7.02(e) or (iii) subject to the filings and
other matters referred to in Section 3.05(b), any judgment, order or decree
("Judgment") or statute, law, ordinance, rule or regulation ("Law") applicable
to the Company or any Company Subsidiary or their respective properties or
assets.
(b) No consent, approval, license, permit, order or
authorization ("Consent") of, or registration, declaration or filing with, or
permit from, any Federal, state, local or foreign government or any court of
competent jurisdiction, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (a "Governmental
Entity") is required to be obtained or made by or with respect to the Company or
any Company Subsidiary in connection with the execution, delivery and
performance of any Transaction Agreement to which it is a party or the
consummation of the Transactions, other than (i) the filing with the SEC of a
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proxy statement relating to the approval of this Agreement by the Company's
stockholders (the "Proxy Statement"), and (ii) the filing of the Articles of
Merger with the Secretary of State of the State of Nevada and appropriate
documents with the relevant authorities of the other jurisdictions in which the
Company is qualified to do business.
SECTION 3.06. SEC Documents; Undisclosed Liabilities. (a)
The Company has filed all reports, schedules, forms, statements and other
documents required to be filed by the Company with the SEC since April 1, 2002
(including all amendments thereto, the "Company SEC Documents").
(b) Except with respect to the Company's initial filings on
Form 10-K for the fiscal year ended March 31, 2005 and Form 10-Q for the
quarters ended June 30, 2005, September 30, 2005 and December 31, 2005 to the
extent the information contained in such filings has been amended by the filings
on Form 10-K/A and 10-Q/A for the periods then ended, as of its respective date,
each Company SEC Document complied in all material respects with the
requirements of the Exchange Act, the Securities Act of 1933, as amended (the
"Securities Act") and the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (the "▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act"),
and the rules and regulations of the SEC promulgated thereunder applicable to
such Company SEC Document, and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Except to the extent that
information contained in any Company SEC Document has been revised or superseded
by a later filed Company SEC Document, none of the Company SEC Documents
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except with respect to the Company's initial filings on Form 10-K
for the fiscal year ended March 31, 2005 and Form 10-Q for the quarters ended
June 30, 2005, September 30, 2005 and December 31, 2005 to the extent the
information contained in such filings has been amended by the filings on Form
10-K/A and 10-Q/A for the periods then ended, the consolidated financial
statements of the Company included in the Company SEC Documents comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles ("GAAP")
(except, in the case of unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods shown (subject, in the case of unaudited statements, to normal year-end
audit adjustments).
(c) Except as set forth in the Company SEC Documents, filed
and publicly available prior to the date of this Agreement (the "Filed Company
SEC Documents"), neither the Company nor any Company Subsidiary has any material
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) required by GAAP to be set forth on a consolidated balance sheet
of the Company and its consolidated subsidiaries or in the notes thereto.
(d) The chief executive officer and chief financial officer of
the Company have made all certifications required by the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, and
the statements contained in any such certifications are complete and correct;
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and the Company is otherwise in compliance in all material respects with all
applicable effective provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act and the applicable
listing and corporate governance rules of any securities exchange or quotation
system in which the Common Stock is admitted for trading. The composition of all
committees of the Company's Board of Directors are, and have at all times been,
in compliance with their respective charters, and all proceedings and actions of
such committees have been conducted in compliance with such charters. The
Company (i) maintains disclosure controls and procedures (as defined in Rule
13a-15(e) of the Exchange Act) to ensure that material information relating to
the Company, including its consolidated Subsidiaries, is made known to the
management of the Company by others within those entities, (ii) has evaluated
the effectiveness of its disclosure controls and procedures and internal control
over financial reporting, each as required by Rule 13a-15 under the Exchange
Act, as 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 its disclosure controls and
procedures as of the end of the period covered by such report or amendment on
such evaluation and (iii) has disclosed, based on its most recent evaluation
prior to the date hereof, to the Company's auditors and the audit committee of
the Company's Board of Directors (A) any significant deficiencies in the design
or operation of internal controls that has materially affected, or is reasonably
likely to materially affect, the Company's ability to record, process, summarize
and report financial data and have identified for the Company 's auditors any
material weaknesses in internal controls and (B) any fraud, whether or not
material, that involves management or other employees who have a significant
role in the Company's internal controls. The Company has delivered to Parent a
summary of any such disclosure described in the foregoing sentence made by
management to the Company's auditors and audit committee since January 1, 2002.
The Company has delivered to Parent copies of all written notifications is has
received since January 1, 2002 of a "reportable condition" or "material
weakness" (as such terms are defined in the Statement of Accounting Standards
No. 60, as in effect on the date hereof) in the Company's or any Company
Subsidiary's internal controls. Since the enactment of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act,
neither the Company nor any of its Affiliates has directly or indirectly
extended or maintained credit, arranged for the extension of credit, renewed an
extension of credit or materially modified an extension of credit in the form of
personal loans to an executive officer or director (or the equivalent thereof)
of the Company or any Company Subsidiary in violation of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
(e) None of the Company Subsidiaries is, or has at any time
been, subject to the reporting requirements of Sections 13(a) and 15(d) of the
Exchange Act.
SECTION 3.07. Information Supplied. None of the
information contained in the Proxy Statement and none of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in the Proxy Statement will, at the date it is first mailed to the
Company's stockholders or at the time of the Company Stockholders Meeting (as
defined in Section 6.01), contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations thereunder, except that no representation is made by the Company
with respect to statements made or incorporated by reference therein based on
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information supplied by Parent or Sub in writing for inclusion or incorporation
by reference therein.
SECTION 3.08. Absence of Certain Changes or Events. Since
March 31, 2005, the Company has conducted its business only in the ordinary
course, and during such period , except as set forth in the Company Disclosure
Letter, there has not been:
(a) any event, change, effect or development that,
individually or in the aggregate, has had or could reasonably be expected to
have a Company Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to any
Company Capital Stock or any repurchase for value by the Company of any Company
Capital Stock, other than withholding of shares with respect to the exercise
stock options or the payment of the exercise price of any stock options with
Company Capital Stock;
(c) any split, combination or reclassification of any Company
Capital Stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of Company
Capital Stock;
(d) (i) any granting by the Company or any Company Subsidiary
to any director, officer or employee of the Company or any Company Subsidiary of
any increase in compensation, except in the ordinary course of business in
amounts consistent with prior practice or as was required under employment
agreements included in or described in the Filed Company SEC Documents, (ii) any
granting by the Company or any Company Subsidiary to any such director, officer
or employee of any increase in severance or termination pay, except as was
required under any employment, severance or termination agreements in effect as
of the date of the most recent financial statements included in or described in
the Filed Company SEC Documents, or (iii) any entry by the Company or any
Company Subsidiary into, or any amendment of, any employment, severance or
termination agreement with any such director, officer or employee;
(e) any change in accounting methods, principles or practices
by the Company or any Company Subsidiary materially affecting the consolidated
assets, liabilities or results of operations of the Company, except insofar as
may have been required by a change in GAAP;
(f) any material elections with respect to Taxes (as defined
in Section 3.09) by the Company or any Company Subsidiary or settlement or
compromise by the Company or any Company Subsidiary of any material Tax
liability or refund; or
(g) any forgiveness, waiver or cancellation of any debt,
liability or other obligation owed to the Company or any Company Subsidiary.
SECTION 3.09. Taxes. (a) The Company and each Company
Subsidiary has timely filed, or has caused to be timely filed on its behalf, all
Tax Returns required to be filed by it, and all such Tax Returns are true,
complete and accurate in all material respects. All Taxes shown to be due on
such Tax Returns, or otherwise owed, have been timely paid.
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(b) The most recent financial statements contained in the
Filed Company SEC Documents reflect an adequate reserve for all Taxes payable by
the Company and the Company Subsidiaries (in addition to any reserve for
deferred Taxes to reflect timing differences between book and Tax items) for all
Taxable periods and portions thereof through the date of such financial
statements. To the Company's knowledge, no deficiency with respect to any Taxes
has been proposed, asserted or assessed against the Company or any Company
Subsidiary, and no requests for waivers of the time to assess any such Taxes are
pending.
(c) The Federal income Tax Returns of the Company and each
Company Subsidiary consolidated in such Tax Returns have been examined by and
settled with the United States Internal Revenue Service, or have closed by
virtue of the expiration of the relevant statute of limitations, for all years
through March 31, 2002. All material assessments for Taxes due with respect to
such completed and settled examinations or any concluded litigation have been
fully paid.
(d) There are no material Encumbrances for Taxes (other than
for current Taxes not yet due and payable) on the assets of the Company or any
Company Subsidiary. Neither the Company nor any Company Subsidiary is bound by
any agreement with respect to Taxes.
(e) For purposes of this Agreement:
"Taxes" includes all forms of taxation, whenever created or
imposed, and whether of the United States or elsewhere, and whether imposed by a
local, municipal, governmental, state, foreign, Federal or other Governmental
Entity, or in connection with any agreement with respect to Taxes, including all
interest, penalties and additions imposed with respect to such amounts.
"Tax Return" means all Federal, state, local, provincial and
foreign Tax returns, declarations, statements, reports, schedules, forms and
information returns and any amended Tax return relating to Taxes.
SECTION 3.10. Absence of Changes in Benefit Plans. From
the date of the most recent audited financial statements included in the Filed
Company SEC Documents to the date of this Agreement, there has not been any
adoption or amendment in any material respect by the Company or any Company
Subsidiary of any collective bargaining agreement or any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other plan, arrangement
or understanding (whether or not legally binding) providing benefits to any
current or former employee, officer or director of the Company or any Company
Subsidiary (collectively, "Company Benefit Plans"). Except as disclosed in the
Company's most recent proxy statement included in the Filed Company SEC
Documents or the Company Disclosure Letter, as of the date of this Agreement
there are not any employment, consulting, indemnification, severance or
termination agreements or arrangements between the Company or any Company
Subsidiary and any current or former employee, officer or director of the
Company or any Company Subsidiary (collectively, the "Company Benefit
Agreements"), nor does the Company or any Company Subsidiary have any general
severance plan or policy.
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SECTION 3.11. ERISA Compliance; Excess Parachute Payments.
(a) The Company Disclosure Letter contains a list and brief description of all
"employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) ("Company Pension
Plans"), "employee welfare benefit plans" (as defined in Section 3 (1) of ERISA)
and all other Company Benefit Plans maintained, or contributed to, by the
Company or any Company Subsidiary for the benefit of any current or former
employees, consultants, officers or directors of the Company or any Company
Subsidiary. Each Company Benefit Plan has been administered in compliance with
its terms in all material respects. The Company has delivered to Parent true,
complete and correct copies of (i) each Company Benefit Plan (or, in the case of
any unwritten Company Benefit Plan, a description thereof), (ii) the most recent
annual report on Form 5500 filed with the Internal Revenue Service with respect
to each Company Benefit Plan (if any such report was required), (iii) the most
recent summary plan description for each Company Benefit Plan for which such
summary plan description is required and (iv) each trust agreement and group
annuity contract relating to any Company Benefit Plan.
(b) All Company Pension Plans have been the subject of
determination letters from the Internal Revenue Service to the effect that such
Company Pension Plans are qualified and exempt from Federal income taxes under
Sections 401(a) and 501(a), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code"), and no such determination letter has been revoked nor,
to the knowledge of the Company, has revocation been threatened, nor has any
such Company Pension Plan been amended since the date of its most recent
determination letter or application therefor in any respect that would adversely
affect its qualification or materially increase its costs.
(c) Except as disclosed in the Company Disclosure Letter, no
Company Pension Plan, including any Company Pension Plan that is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA (a
"Company Multiemployer Pension Plan"), had, as of the respective last annual
valuation date for each such Company Pension Plan, an "unfunded benefit
liability" (as such term is defined in Section 4001(a)(18) of ERISA), based on
actuarial assumptions that have been furnished to Parent. None of the Company
Pension Plans has an "accumulated funding deficiency" (as such term is defined
in Section 302 of ERISA or Section 412 of the Code), whether or not waived. None
of the Company, any Company Subsidiary, any officer of the Company or any
Company Subsidiary or any of the Company Benefit Plans which are subject to
ERISA, including the Company Pension Plans, any trusts created thereunder or any
trustee or administrator thereof, has engaged in a "prohibited transaction" (as
such term is defined in Section 406 of ERISA or Section 4975 of the Code) or any
other breach of fiduciary responsibility that could subject the Company, any
Company Subsidiary or any officer of the Company or any Company Subsidiary to
the tax or penalty on prohibited transactions imposed by such Section 4975 or to
any liability under Section 502(i) or 502(1) of ERISA. None of such Company
Benefit Plans and trusts has been terminated, nor has there been any "reportable
event" (as that term is defined in Section 4043 of ERISA) with respect to any
Company Benefit Plan during the last five years. Neither the Company nor any
Company Subsidiary has incurred a "complete withdrawal" or a "partial
withdrawal" (as such terms are defined in Sections 4203 and 4205, respectively,
of ERISA) since the effective date of such Sections 4203 and 4205 with respect
to any Multiemployer Pension Plan. There has been no event or circumstance that
has resulted in any material liability (other than the payment of benefits in
the ordinary course of business) either directly or indirectly as a result of
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any indemnification obligation to the Company or any related person under or
pursuant to Title I or IV of ERISA, or the penalty, excise Tax or joint and
several liability provisions of the Code relating to any Company Benefit Plan.
(d) With respect to any Company Benefit Plan that is an
employee welfare benefit plan, except as disclosed in the Company Disclosure
Letter, (i) no such Company Benefit Plan is unfunded or funded through a
"welfare benefits fund" (as such term is defined in Section 419(e) of the Code),
(ii) each such Company Benefit Plan that is a "group health plan" (as such term
is defined in Section 5000(b)(1) of the Code), complies with the applicable
requirements of Section 4980B(f) of the Code and (iii) each such Company Benefit
Plan (including any such Plan covering retirees or other former employees) may
be amended or terminated without material liability to the Company and the
Company Subsidiary on or at any time after the Effective Time.
(e) Any amount that could be received (whether in cash or
property or the vesting of property) as a result of the Merger or any other
Transaction by any employee, officer or director of the Company or any of its
Affiliates who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any employment, severance
or termination agreement, other compensation arrangement or Company Benefit Plan
currently in effect will not be characterized as an "excess parachute payment"
(as defined in Section 280G(b)(1) of the Code).
(f) Except as described in the Company Disclosure Letter, the
execution and delivery by the Company of each Transaction Agreement to which it
is a party do not, and the consummation of the Merger and the other Transactions
and compliance with the terms hereof and thereof will not, (i) entitle any
employee, officer or director of the Company or any Company Subsidiary to
severance pay, (ii) accelerate the time of payment or vesting or trigger any
payment or funding (through a grantor trust or otherwise) of compensation or
benefits under, increase the amount payable or trigger any other material
obligation pursuant to, any Company Benefit Plan or Company Benefit Agreement or
(iii) result in any breach or violation of, or a default under, any Company
Benefit Plan or Company Benefit Agreement. SECTION 3.12. Litigation. Except as
disclosed in the Filed Company SEC Documents or in the Company Disclosure
Letter, there is no material suit, investigation, action or proceeding pending
or, to the knowledge of the Company, threatened against or affecting the Company
or any Company Subsidiary (and the Company is not aware of any basis for any
such suit, action or proceeding) (collectively, the "Company Proceedings"), nor
is there any material Judgment outstanding against the Company or any Company
Subsidiary. The Company Disclosure Letter sets forth a list of all material
developments with respect to each Company Proceeding since January 1, 2006.
SECTION 3.13. Compliance with Applicable Laws. The Company
and the Company Subsidiaries are and have been in compliance in all material
respects with all applicable Laws, including those relating to occupational
health and safety and the environment. Neither the Company nor any Company
Subsidiary has received any written communication during the past two years from
a Governmental Entity that alleges that the Company or a Company Subsidiary is
not in compliance in any material respect with any applicable Law. Each of the
Company and the Company Subsidiaries, hold and have held all material federal,
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state and foreign permits, approvals, licenses, authorizations, certificates,
rights, exemptions and orders from all Governmental Entities (the "Permits")
that are necessary for the operation of the business of the Company and the
Company Subsidiaries as now conducted and there has not occurred any material
default under any such Permit.
SECTION 3.14. Intellectual Property.
(a) Except as has not had and could not reasonably be expected
to have a Company Material Adverse Effect:
(i) With respect to all patents, inventions, trade
secrets, technology, ideas, processes, methods, algorithms, know-how,
data, databases, computer programs, works, mask works, copyrights, mask
work rights, data rights, privacy rights, publicity rights, moral
rights, design rights, trademarks, trade names, service marks, brand
names, trade dress, domain names, and all other proprietary materials
and rights of any kind or nature, in any form, throughout the world
(collectively, "Intellectual Property") owned by the Company or one of
its Subsidiaries, including any registrations thereof and pending
applications therefore, that are owned by the Company or a Company
Subsidiary ("Company Owned Intellectual Property"), the Company or a
Company Subsidiary is the owner of the entire right, title and interest
in and to such Company Owned Intellectual Property, free and clear of
all Encumbrances, and has the sole right to use such Company Owned
Intellectual Property in the continued operation of its respective
business;
(ii) With respect to each item of Intellectual Property
other than Company Owned Intellectual Property used in the businesses
of the Company or any Company Subsidiary pursuant to a license or other
agreement ("Company Licensed Intellectual Property"), the Company or a
Company Subsidiary has and will continue to have the right to use such
Company Licensed Intellectual Property in the continued operation of
its respective business in accordance with the terms of the license or
other similar agreement governing such Company Licensed Intellectual
Property (with which terms the Company or applicable Company Subsidiary
are in full compliance and, to the knowledge of the Company, the other
parties thereto are in full compliance), all of which licenses or other
agreements are binding on all parties thereto and in full force and
effect, and no person has advised the Company or any Company Subsidiary
of any claimed violation of the terms of any such licenses or
agreements; and
(iii) The conduct of the business of the Company and the
Company Subsidiaries as currently conducted and the use or exploitation
of any Company Intellectual Property does not conflict with, infringe
upon, violate or constitute a misappropriation of any right, title,
interest or goodwill in any Intellectual Property of any other person,
and no person has advised the Company or any Company Subsidiary that
the conduct of such business or the use or exploitation of any Company
Intellectual Property constitutes such a conflict, infringement,
violation, interference or misappropriation. To the knowledge of the
Company, there has been no conflict, infringement, violation,
interference or misappropriation of any Company Owned Intellectual
Property by any other person.
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SECTION 3.15. Real Property. The Company Disclosure Letter
contains a complete and accurate listing of all real property owned by the
Company and any Company Subsidiary (the "Company Owned Real Property"). The
Company or a Company Subsidiary has good, valid and marketable title to all of
the Company Owned Real Property, in each case free and clear of all
Encumbrances, except for (i) imperfections of title and encumbrances that are
not material in character, amount or extent and that do not, in any material
respect, detract from the value of, or, in any material respect, interfere with
the present use of, such properties or assets, (ii) Encumbrances for Taxes not
yet due and payable or being contested in good faith by appropriate proceedings,
and (iii) statutory or common law Encumbrances in favor of carriers,
warehousemen, mechanics and materialmen and other statutory or common law
Encumbrances to secure claims for labor, materials or supplies. There are no
leases, subleases, occupancy agreements, options to purchase or rights of first
refusal with respect to the Company Owned Real Property and there are no parties
in possession of the Company Owned Real Property other than the Company and the
Company Subsidiaries. The Company or a Company Subsidiary has a good and valid
leasehold interest in each parcel of real property leased by the Company or any
of its Subsidiaries (the "Company Leased Property"). The Company Disclosure
Letter contains a complete and accurate list of all leases which the Company or
a Company Subsidiary is a party relating to the Company Leased Property and all
amendments thereto. With respect to the Company Leased Property, (i) the Company
or a Company Subsidiary has the right to use and occupancy of the Company Leased
Property for the full term of the lease or sublease relating thereto, (ii) each
such lease or sublease is a legal, valid and binding agreement, enforceable in
accordance with its terms, of the Company or a Company Subsidiary and of the
other parties thereto and there is no, nor has the Company or any Company
Subsidiary received notice of, any material default (or any condition or event,
which, after notice or a lapse of time or both could constitute a material
default thereunder), and (iii) neither the Company nor any Company Subsidiary
has assigned its interest under any such lease or sublease or sublet any part of
the premises covered thereby. Each Company Owned Property and, to the knowledge
of the Company, each Company Leased Property has received all approvals of
government authorities (including licenses and permits) required in connection
with the ownership and operation thereof and have been operated and maintained
in compliance thereof, except where such non-compliance has not had, or would
not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. To the Company's knowledge, there are no pending or
threatened condemnation proceedings with respect to the Company Leased Real
Property, that would materially adversely affect the use, occupancy or value
thereof.
SECTION 3.16. Personal Property. The Company and each
Company Subsidiary has good and valid title to, or in the case of leased
properties and assets, valid leasehold interests in, (a) all of its material
tangible personal properties and assets, including all the material properties
and assets reflected on the most recent balance sheet included in the Filed
Company SEC Documents, except for such properties or assets which have been sold
or otherwise disposed of in the ordinary course of business since the date of
such balance sheet, and (b) all material tangible personal properties and assets
purchased or acquired by the Company or any Company Subsidiary since the date of
such balance sheet, except for such properties or assets which have been sold or
otherwise disposed of in the ordinary course of business, in each case free and
clear of all Encumbrances. The assets held by the Company and its Subsidiaries
are sufficient to conduct the business of the Company and its Subsidiaries as
currently conducted.
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SECTION 3.17. Insurance.
(a) All valid service warranty claims under the extended
service plans and warranties offered by the Company and the Company Subsidiaries
are either (i) fully covered under the insurance policies set forth in the
Company Disclosure Letter, which schedule also includes the A.M. Best rating of
such insurance companies or (ii) self-insured by the Company as described in
(and in the amounts set forth in) the Company Disclosure Letter. The Company and
its Subsidiaries have never paid any claim under any warranty or service plan
that was not reimbursed under an insurance policy, other than (i) claims paid as
a concession to retail consumers in the ordinary course of business, which have
averaged less than $50,000 per year during the two years prior to the date
hereof, (ii) claims paid on service contracts or warranties insured by Reliance
Insurance Company which were paid by the Company and totaled $32,602,226 or
(iii) claims paid under the programs which are described in the Company
Disclosure Letter as being self-insured (the "Self-Insured Programs"), which
amounted to $243,880.39 in the 22 months ended May 31, 2006. The Company does
not expect that the claims to be paid under the Self-Insured Programs or any
other programs which the Company self-insures after the date hereof will exceed
$3,000,000 in the twelve months after the date hereof.
(b) The Company and the Company Subsidiaries are covered by
valid and currently effective insurance policies issued in favor of the Company
and the Company Subsidiaries (all such insurance policies, together with the
policies referred to in paragraph (a) above, the "Company Insurance Policies")
that are customary in all material respects for companies of similar size and
financial condition in the Company's industry. All Company Insurance Policies
are in full force and effect, all premiums due and payable thereon have been
paid and the Company and the Company Subsidiaries have complied in all material
respects with the provisions of such policies. None of the Company or any
Company Subsidiary has been advised of any denial of coverage, defense to
coverage or reservation of rights in connection with any material claim to
coverage asserted or noticed by the Company or any Company Subsidiary under or
in connection with any Company Insurance Policy. None of the Company or any
Company Subsidiary has received any written notice from or on behalf of any
insurance carrier issuing any Company Insurance Policy that there will be a
cancellation or non-renewal of existing policies or binders or a material
decrease in coverage or a material increase in premiums, deductible or self
insurance retention. Each Company Insurance Policy will continue to be legal,
valid and binding, enforceable and in full force and effect on identical terms
following the consummation of the Merger and the Transactions. There are no
historical gaps in the insurance coverage of the Company and the Company
Subsidiaries in the types of coverages provided by the Company Insurance
Policies. To the Company's knowledge, all providers of insurance to the Company
and the Company Subsidiaries are solvent under applicable state insurance law.
No coverage limits of any Company Insurance Policy have been exhausted.
SECTION 3.18. Labor Matters. None of the Company or any
Company Subsidiary is a party to, or is bound by, any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization. Neither the Company nor any Company Subsidiary has received
notice of, and to the knowledge of the Company, there has not been, any demand
by a labor organization or union for a collective bargaining agreement. None of
the Company or any Company Subsidiary is the subject of a proceeding asserting
that the Company or any Company Subsidiary has committed an unfair labor
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practice (within the meaning of the National Labor Relations Act) or seeking to
compel the Company or any Company Subsidiary to bargain with any labor
organization as to wages and conditions of employment. Since January 1, 2005 (i)
no strike or material labor dispute, slowdown or stoppage has occurred or, to
the knowledge of the Company, been threatened against the Company or any Company
Subsidiary and (ii) to the knowledge of the Company, no union certification
petition has been filed with respect to the employees of the Company or any
Company Subsidiary. None of the Company or any Company Subsidiary has received
written notice of the intent of any Governmental Entity responsible for the
enforcement of labor or employment Laws to conduct an investigation with respect
to or relating to employees of the Company or any Company Subsidiary and, to the
knowledge of the Company, no such investigation is in progress. The Company and
each Company Subsidiary have properly classified all individuals (including,
without limitation, independent contractors and leased employees) under
applicable Law, except where the failure to do so would not result in a material
liability to the Company.
SECTION 3.19. Contracts. Except as set forth in the
Company Disclosure Letter or with respect to Contracts which have been filed as
exhibits to the Company Filed SEC Documents, neither the Company nor any Company
Subsidiary is a party to or bound by any contract, lease, license, indenture,
insurance policy or agreement, note, agreement, license, concession, franchise
or other instrument (a "Contract") of the following nature (together with those
Contracts which have been filed as exhibits to the Company Filed SEC Documents,
the "Material Contracts"):
(a) Contracts with any current or former employee, director or
officer of the Company or any Company Subsidiary (other than any such employee
or officer who receives or received (during his or her last year of employment
with the Company or any Company Subsidiary) less than $100,000 in total annual
cash compensation from the Company or any Company Subsidiary);
(b) Contracts (i) for the sale of any assets of the Company or
any Company Subsidiary involving aggregate consideration of $50,000 or more, or
(ii) for the grant to any person of any preferential rights to purchase any such
amount of its assets;
(c) Contracts which restrict the Company or any of its
Affiliates from competing in any line of business or with any person in any
geographical area, or which restrict any other person from competing with the
Company or any of its Affiliates in any line of business or in any geographical
area;
(d) Contracts involving (i) the acquisition, merger or
purchase of all or substantially all of the assets or business of a third party,
involving aggregate consideration of $50,000 or more, or (ii) the purchase,
lease or sale of assets, or a series of purchases, leases or sales of assets,
involving aggregate consideration of $50,000 or more;
(e) Contracts which contain a "change in control" or similar
provision;
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(f) Contracts to be performed relating to capital expenditures
with a value in excess of $25,000 in any calendar year, or in the aggregate
capital expenditures with a value in excess of $100,000;
(g) Contracts which contain restrictions with respect to the
payment of dividends or any other distribution in respect of the capital stock
of the Company or any Company Subsidiary;
(h) Contracts containing covenants purporting to restrict the
Company or any of its Affiliates from hiring or terminating any individual or
group of individuals;
(i) Contracts relating to any joint venture, partnership,
strategic alliance or similar arrangement;
(j) Contracts involving revenues or payments in excess of
$100,000 per year; and
(k) Contracts which are otherwise material to the business or
operations of the Company or any Company Subsidiary.
Except as set forth in the Company Disclosure Letter, neither the Company nor
any of the Company Subsidiaries is in material violation of or in material
default under (nor does there exist any condition which upon the passage of time
or the giving of notice would cause such a violation of or default under), and,
to the knowledge of the Company, the other party thereto is not in material
violation of or in material default under (nor does there exist any condition
which upon the passage of time or the giving of notice would cause such a
violation of or default under) any Material Contract. No party has given notice
of its intent to terminate or materially amend any Material Contract.
SECTION 3.20. Brokers; Schedule of Fees and Expenses.
Except as set forth in the Company Disclosure Letter, no broker, investment
banker, financial advisor or other person, the fees and expenses of which will
be paid by the Company or any Company Subsidiary, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the Merger and the other Transactions based upon arrangements made by or on
behalf of the Company or any Company Subsidiary. The estimated fees and expenses
incurred and to be incurred by the Company or any Company Subsidiary in
connection with the Merger and the other Transactions (including the fees of the
Company's legal counsel) are set forth in the Company Disclosure Letter.
SECTION 3.21. Opinion of Financial Advisor. The Company
has received the opinion of Imperial Capital, dated the date of this Agreement,
to the effect that, as of such date, the consideration to be received in the
Merger by the holders of Company Common Stock is fair from a financial point of
view, a true and correct copy of which opinion has been made available to
Parent. The Company has been authorized by Imperial Capital to permit the
inclusion of such fairness opinion (or a reference thereto) in the Proxy
Statement.
SECTION 3.22. Environmental Matters. The Company and each
of the Company Subsidiaries possess all permits, licenses and authorizations
required by Environmental Laws for the conduct of its respective business
(collectively, "Environmental Permits"), except where, individually or in the
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aggregate, the failure to have such permits, licenses or authorizations has not
had or would not reasonably be expected to have a Company Material Adverse
Effect. The Company and each of the Company Subsidiaries is and has been in
compliance with all applicable Environmental Laws and Environmental Permits,
except for such failures to comply which, individually or in the aggregate, have
not had or would not reasonably be expected to have a Company Material Adverse
Effect. There are no claims or proceedings pending or, to the knowledge of the
Company, threatened in writing against the Company or the Company Subsidiaries
alleging the material violation of or noncompliance with any applicable
Environmental Laws.
SECTION 3.23. Related Party Transactions. Except as set
forth in the Company Disclosure Letter or in the most recent proxy statement
included in the Filed Company SEC Documents, there are no agreements,
arrangements, understandings or other transactions between the Company or any
Company Subsidiary, on the one hand, and any current or former directors or
officers of the Company or any Company Subsidiary (or any of their Affiliates)
or any record or beneficial holder or 5% or more of the Company's voting
securities (or any of their Affiliates) on the other hand.
ARTICLE IV
Representations and Warranties of Parent and Sub
Parent and Sub, jointly and severally, represent and warrant
to the Company that:
SECTION 4.01. Organization, Standing and Power. Each of
Parent and Sub, is duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is organized and has full corporate or
limited liability company power and authority, as the case may be, and possesses
all material governmental franchises, licenses, permits, authorizations and
approvals necessary to enable it to own, lease or otherwise hold its properties
and assets and to conduct its businesses as presently conducted.
SECTION 4.02. Sub. Since the date of its incorporation,
Sub has not carried on any business or conducted any operations other than the
execution of the Transaction Agreements to which it is a party, the performance
of its obligations hereunder and thereunder and matters ancillary thereto.
SECTION 4.03. Authority; Execution and Delivery,
Enforceability. Each of Parent and Sub has all requisite corporate power and
authority, as the case may be, to execute and deliver each Transaction Agreement
to which it is a party and to consummate the Transactions. The execution and
delivery by each of Parent and Sub of each Transaction Agreement to which it is
a party and the consummation by it of the Transactions have been duly authorized
by all necessary corporate or limited liability company action, as the case may
be, as the part of Parent and Sub. Parent, as sole stockholder of Sub, has
approved this Agreement. Each of Parent and Sub has duly executed and delivered
each Transaction Agreement to which it is a party, and each Transaction
Agreement to which it is a party constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms.
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SECTION 4.04. No Conflicts; Consents. The execution and
delivery by each of Parent and Sub of each Transaction Agreement to which it is
a party, do not, and the consummation of the Merger and the other Transactions
and compliance with the terms hereof and thereof will not, conflict with, or
result in any violation of or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or to
increased, additional, accelerated or guaranteed rights or entitlements of any
person under, or result in the creation of any Encumbrance upon any of the
properties or assets of Parent or under, any provision of (i) the charter or
organizational documents of Parent or Sub or (ii) any material Contract to which
Parent is a party or by which any of their respective properties or assets is
bound, any Judgment or Law applicable to Parent or any of its subsidiaries or
their respective properties or assets.
SECTION 4.05. Information Supplied. None of the
information supplied or to be supplied by Parent or Sub for inclusion or
incorporation by reference in the Proxy Statement will, at the date it is first
mailed to the Company's stockholders or 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 in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
SECTION 4.06. Brokers. No broker, investment banker,
financial advisor or other person, other than Nomura Securities, the fees and
expenses of which will be paid by Parent, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
Merger and the other Transactions based upon arrangements made by or on behalf
of Parent.
SECTION 4.07. Financing. At Closing, Parent will have
sufficient funds to pay the Merger Consideration and to consummate the Merger.
ARTICLE V
Covenants Relating to Conduct of Business
SECTION 5.01. Conduct of Business. (a) Conduct of Business
by the Company. From the date of this Agreement to the Effective Time the
Company shall, and shall cause each Company Subsidiary to, conduct its business
in the usual, regular and ordinary course in substantially the same manner as
previously conducted and use all reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and keep good relationships with customers, suppliers,
licensors, licensees, distributors and others having business dealings with
them. In addition, and without limiting the generality of the foregoing, from
the date of this Agreement to the Effective Time, the Company shall not, and
shall not permit any Company Subsidiary to, do any of the following without the
prior written consent of Parent:
(i) (A) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of its capital stock,
(B) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of its capital stock, or (C) purchase,
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redeem or otherwise acquire any shares of capital stock of the Company
or any Company Subsidiary or any other securities thereof or any
rights, warrants or options to acquire any such shares or other
securities, other than withholding of shares with respect to the
exercise of any stock options outstanding on the date hereof or the
payment of the exercise price of any stock options outstanding on the
date hereof with Company Capital Stock.;
(ii) issue, deliver, sell or grant (A) any shares of its
capital stock, (B) any Voting Company Debt or other voting securities,
(C) any securities convertible into or exchangeable for, or any
options, warrants or rights to acquire, any such shares, Voting Company
Debt, voting securities or convertible or exchangeable securities or
(D) any "phantom" stock, "phantom" stock rights, stock appreciation
rights or stock-based performance units, other than the issuance of
Company Common Stock upon the exercise of Company Stock Options
outstanding on the date of this Agreement and in accordance with their
present terms;
(iii) amend or propose to amend its articles of
incorporation, by-laws or other comparable charter or organizational
documents;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial equity interest in
or portion of the assets of, or by any other manner, any business or
any corporation, partnership, joint venture, association or other
business organization or division thereof or (B) any assets that are
material, individually or in the aggregate, to the Company and the
Company Subsidiaries, taken as a whole;
(v) (A) grant to any employee, officer or director of the
Company or any Company Subsidiary any increase in compensation or
benefits, except in the ordinary course of business and in amounts
consistent with prior practice or to the extent required under
employment agreements included or described in the Filed Company SEC
Documents, (B) grant to any employee, executive officer or director of
the Company or any Company Subsidiary any increase in severance or
termination pay, (C) enter into any employment, bonus, consulting,
indemnification, severance or termination agreement with any employee,
officer or director or amend or modify any existing agreement, (D)
establish, adopt, enter into, amend or in any material respect or
terminate any collective bargaining agreement or Company Benefit Plan
or (E) take any action to accelerate any payment rights or benefits, or
make any material determinations not in the ordinary course of business
consistent with prior practice, under any collective bargaining
agreement, Contract or Company Benefit Plan;
(vi) make any change in accounting methods, principles or
practices materially affecting the reported consolidated assets,
liabilities or results of operations of the Company, except insofar as
may have been required by a change in GAAP;
(vii) sell, lease (as lessor), license or otherwise dispose
of or subject to any Encumbrance any properties or assets other than
sales of assets in the ordinary course that, in the aggregate, have a
fair market value of less than $50,000;
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(viii) (A) incur or assume any indebtedness or guarantee any
such indebtedness of another person, issue or sell any debt securities
or warrants or other rights to acquire any debt securities of the
Company or any Company Subsidiary, guarantee any debt securities of
another person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or enter
into any arrangement having the economic effect of any of the
foregoing, except for short-term borrowings incurred in the ordinary
course of business consistent with past practice, or (B) make any
loans, advances or capital contributions to, or investments in, any
other person, other than to or in the Company or any direct or indirect
wholly owned subsidiary of the Company;
(ix) make or agree to make any new capital expenditure or
expenditures that, individually, is in excess of $50,000 or, in the
aggregate, are in excess of $100,000;
(x) make or change any material Tax election or settle or
compromise any material Tax liability or refund;
(xi) terminate, cancel, amend or modify any Company
Insurance Policy which is not replaced by a comparable amount of
insurance coverage with comparable terms and conditions;
(xii) settle or compromise any action, suit, claim,
litigation, proceeding, arbitration, investigation, audit or
controversy involving claims, liabilities or obligations in excess of
$100,000 or otherwise material to the Company and the Company
Subsidiaries, taken as a whole (each a "Proceeding"), or enter into any
consent, decree, injunction or similar restraint or form of equitable
relief in settlement of any such Proceeding;
(xiii) other than in the ordinary course of business
consistent with past practice, (i) modify, amend or terminate any
Material Contract, (ii) enter into any successor agreement to an
expiring Material Contract that changes the terms of the expiring
Material Contract in a manner that is materially adverse to the Company
or any Company Subsidiary, or (iii) modify, amend or enter into any new
agreement that would have been considered a Material Contract if it
were entered into prior to the date hereof;
(xiv) (A) pay, discharge or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the payment, discharge or satisfaction, in
the ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) of the Company included in the Filed
Company SEC Documents or incurred in the ordinary course of business
consistent with past practice, (B) cancel or forgive any material
indebtedness (individually or in the aggregate) or amend or modify the
terms thereof or release any collateral or security therefor or waive
any claims or rights of substantial value or (C) waive the benefits of,
or agree to modify in any manner, any confidentiality, standstill or
similar agreement to which the Company or any Company Subsidiary is a
party; or
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(xv) authorize any of, or commit or agree to take any of,
the foregoing actions.
(b) Other Actions. The Company and Parent shall not, and shall
not permit any of their respective subsidiaries to, take any action that would,
or that could reasonably be expected to, result in (i) any of the
representations and warranties of such party set forth in any Transaction
Agreement to which it is a party that is qualified as to materiality becoming
untrue, (ii) any of such representations and warranties that is not so qualified
becoming untrue in any material respect, (iii) except as otherwise permitted by
Section 5.02, any condition to the Merger set forth in Article VII, not being
satisfied, or (iv) materially impair the ability of the Company or Parent to
consummate the Merger and the Transactions in accordance with the terms hereof,
including, without limitation, adopting any resolution of the Board of Directors
which would have the effect of requiring the approval of this Agreement and the
Merger by the holders of more than a majority of the outstanding Company Common
Stock.
(c) Advice of Changes. The Company shall promptly advise
Parent orally and in writing of any change or event that, individually or in the
aggregate, has or could reasonably be expected to have a Company Material
Adverse Effect.
SECTION 5.02. No Solicitation. (a) The Company shall not,
nor shall it authorize or permit any Company Subsidiary to, nor shall it
authorize or permit any officer, director or employee of, or any investment
banker, attorney or other advisor or representative (collectively,
"Representatives") of, the Company or any Company Subsidiary to, (i) directly or
indirectly solicit, initiate or encourage the submission of any Company Takeover
Proposal (as defined in Section 5.02(d)), or take any action designed to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Company Takeover Proposal, (ii) enter
into any agreement with respect to any Company Takeover Proposal or that may
reasonably be expected to lead to any Company Takeover Proposal or (iii)
directly or indirectly enter into, participate in or continue any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or otherwise cooperate with or take any action to facilitate any Company
Takeover Proposal; provided, however, that prior to the Company Stockholders
Meeting, the Company may, to the extent required by the fiduciary obligations of
the Company Board, as determined in good faith by it after consultation with
outside counsel, in response to a bona fide, written Company Takeover Proposal
that is made by a person the Company Board determines, in good faith, after
consultation with outside counsel and its independent financial advisor, is
reasonably capable of making a Superior Company Proposal and that the Company
Board determines, in good faith, after consultation with the Company's
independent financial advisor, is reasonably likely to result in a Superior
Company Proposal that was not solicited by the Company and that did not
otherwise result from a breach or a deemed breach of this Section 5.02(a), and
subject to compliance with Section 5.02(c), for a twenty (20) day period
commencing with the first notification to Parent under Section 5.02(c) of
receipt of such Company Takeover Proposal, (x) furnish information with respect
to the Company to the person making such Company Takeover Proposal and its
Representatives pursuant to a customary confidentiality agreement; provided,
that such confidentiality agreement shall not contain any provisions that would
prevent the Company from complying with its obligations to Parent under this
Agreement; provided, further, that any information provided to such person is
concurrently provided to Parent, and (y) participate in discussions or
negotiations with such person and its Representatives regarding such Company
Takeover Proposal. Without limiting the foregoing, it is agreed that any
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violation of the restrictions set forth in the preceding sentence by any
Representative or Affiliate of the Company or any Company Subsidiary shall be
deemed to be a breach of this Section 5.02(a) by the Company. The Company may
only rely on the proviso to the first sentence of this Section 5.02 (a) with
respect to one twenty (20) day period with respect to each person who makes a
Company Takeover Proposal. The Company shall, and shall cause its
Representatives to, cease immediately all existing discussions, activities and
negotiations conducted prior to the date of this Agreement regarding any
proposal that constitutes, or may reasonably be expected to lead to, a Company
Takeover Proposal and request the prompt return or destruction of all
confidential information previously provided by the Company.
(b) Neither the Company Board nor any committee thereof shall,
directly or indirectly, (i) withdraw or modify, or propose publicly to withdraw
or modify, the approval or recommendation by the Company Board or any such
committee of this Agreement or the Merger, (ii) approve any letter of intent,
agreement in principle, acquisition agreement or similar agreement relating to
any Company Takeover Proposal (other than this Agreement and the Merger) or
(iii) approve or recommend, or propose publicly to approve or recommend, any
Company Takeover Proposal (other than this Agreement and the Merger).
Notwithstanding the foregoing, if, prior to the Company Stockholders Meeting,
the Company Board receives a Superior Company Proposal (as defined in Section
5.02(d)) and as a result thereof the Company Board determines in good faith,
after consultation with outside counsel, that it is necessary to do so in order
to comply with their fiduciary obligations, the Company Board may withdraw or
modify its approval or recommendation of the Merger and this Agreement and, in
connection therewith, approve or recommend such Superior Company Proposal;
provided, that the Company Board may not withdraw or modify its approval or
recommendation unless (i) the Company Board shall have first provided prior
written notice to Parent that it is prepared to withdraw or modify its approval
or recommendation in response to a Superior Company Proposal, which notice shall
describe the terms of the transaction that constitutes such Superior Company
Proposal and shall attach the most current version of any written agreement
relating thereto, and (ii) Parent does not make, within five business days after
the receipt of such notice, a proposal that the Company Board determines in good
faith, after consultation with outside counsel and its independent financial
advisor, is at least as favorable to the stockholders of the Company as such
Superior Company Proposal. The Company agrees that, during the five business day
period prior to its effecting a withdrawal or modification of its approval or
recommendation, the Company (as directed by the Company Board) and its
representatives shall negotiate in good faith with Parent regarding any
revisions to the terms of the transaction contemplated by this Agreement
proposed by Parent.
(c) The Company shall as promptly as practical advise Parent
orally and in writing of any Company Takeover Proposal or any inquiry with
respect to or that could reasonably be expected to lead to any Company Takeover
Proposal, and the identity of the person making any such Company Takeover
Proposal or inquiry and the material terms of any such Company Takeover Proposal
or inquiry. The Company shall keep Parent fully informed on a current basis of
the status of any such Company Takeover Proposal or inquiry and shall as
promptly as practical notify Parent orally and in writing of any modification to
the financial or other terms of such Company Takeover Proposal or inquiry and
shall as promptly as practical provide to Parent a copy of all written material
or correspondence (including e-mail) subsequently provided to or by the Company
in connection with such Company Takeover Proposal or inquiry.
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(d) For purposes of this Agreement:
"Company Takeover Proposal" means any proposal or offer (i)
for a merger, share exchange, business combination, consolidation,
liquidation, dissolution, recapitalization, reorganization or other
similar transaction involving the Company or any Company Subsidiary,
(ii) for the issuance by the Company or any Company Subsidiary of over
10% of its equity securities as consideration for the assets or
securities of another person, (iii) to acquire in any manner, directly
or indirectly, over 10% of the equity securities of the Company or any
Company Subsidiary or (iv) to acquire, lease, exchange, mortgage,
pledge, dispose of or otherwise transfer, in any manner, directly or
indirectly, over 10% of the consolidated total assets of the Company or
any Company Subsidiary, in a single transaction or a series of related
transactions, in each case other than the Transactions and other than
any acquisition transaction permitted by Section 5.01.
"Superior Company Proposal" means any written proposal made by
a third party to acquire at least 75% of the equity securities or
assets of the Company, pursuant to a tender or exchange offer, a
merger, a consolidation, a liquidation or dissolution, a
recapitalization, or a sale of its assets, (i) on terms which the
Company Board determines in good faith after consultation with outside
counsel to be superior from a financial point of view to the holders of
Company Common Stock than the Transactions (based on the written
opinion, with only customary qualifications, of the Company's
independent financial advisor), taking into account all the terms and
conditions of such proposal and this Agreement (including any proposal
by Parent to amend the terms of the Transactions or this Agreement) and
(ii) that is reasonably capable of being completed, taking into account
all financial, regulatory, legal and other aspects of such proposal.
ARTICLE VI
Additional Agreements
SECTION 6.01. Preparation of Proxy Statement; Stockholders
Meeting. (a) The Company shall, as soon as practicable after the date hereof but
in no event later than ten (10) business days after the date hereof, prepare and
file with the SEC the Proxy Statement in preliminary form, and the Company shall
use its reasonable best efforts to respond as promptly as practicable to any
oral or written comments of the SEC with respect thereto. The Company shall as
promptly as practical notify Parent of the receipt of any oral or written
comments from the SEC or its staff and of any request by the SEC or its staff
for amendments or supplements to the Proxy Statement or for additional
information and shall supply Parent with copies of all correspondence between
the Company or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Proxy Statement. The Company shall
use its reasonable best efforts to prepare and file as promptly as practical
with the SEC the definitive Proxy Statement and to cause the definitive Proxy
Statement to be mailed to the Company's stockholders, in each case as promptly
as practicable following the filing of the preliminary Proxy Statement with the
SEC. If at any time prior to receipt of the Company Stockholder Approval there
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shall occur any event that should be set forth in an amendment or supplement to
the Proxy Statement, the Company shall promptly prepare and mail to its
stockholders such an amendment or supplement. Notwithstanding the foregoing,
prior to filing or mailing the preliminary or definitive Proxy Statement (or any
amendment or supplement thereto) or responding to the comments of the SEC with
respect thereto, the Company (i) shall provide Parent a reasonable opportunity
to review and comment on such document or response, (ii) shall include in such
document or response all reasonable comments proposed by Parent and (iii) shall
not file or mail such document or respond to the SEC prior to receiving the
approval of Parent, which approval shall not be unreasonably withheld.
(b) The Company shall, as soon as practicable after the date
hereof, establish a record date (which will be as promptly as practicable after
the date hereof) for, duly call, give notice of, convene and hold a meeting of
its stockholders (the "Company Stockholders Meeting") for the purpose of seeking
the Company Stockholder Approval provided that the Company Board shall not have
withdrawn or modified its approval or recommendation of this Agreement, or the
Merger as permitted by Section 5.02(b). The Company shall, through the Company
Board, recommend to its stockholders that they give the Company Stockholder
Approval, except to the extent that the Company Board shall have withdrawn or
modified its approval or recommendation of this Agreement, or the Merger as
permitted by Section 5.02(b). Without limiting the generality of the foregoing,
the Company agrees that its obligations pursuant to the first sentence of this
Section 6.01(b) shall not be affected by the commencement, public proposal,
public disclosure or communication to the Company of any Company Takeover
Proposal.
SECTION 6.02. Access to Information; Confidentiality. The
Company shall, and shall cause each of its subsidiaries to, afford to Parent,
and to Parent's officers, employees, accountants, counsel, financial advisors
and other representatives, reasonable access during normal business hours during
the period prior to the Effective Time to all their respective properties,
books, contracts, commitments, personnel and records and, during such period,
the Company shall, and shall cause each of its subsidiaries to, furnish promptly
to Parent (a) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of Federal
or state securities laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request.
SECTION 6.03. Reasonable Best Efforts; Notification. (a)
Upon the terms and subject to the conditions set forth in this Agreement, each
of the parties shall use its reasonable best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other Transactions, including (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from Governmental
Entities and the making of all necessary registrations and filings (including
filings with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entity, (ii) the obtaining of all
necessary consents, approvals or waivers from third parties, (iii) the defending
of any lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or any other Transaction Agreement or the
consummation of the Transactions, including seeking to have any stay or
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temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, (iv) the Company obtaining the insurance coverage referred
to in Section 7.02(g) and (v) the execution and delivery of any additional
instruments necessary to consummate the Transactions and to fully carry out the
purposes of the Transaction Agreements. In connection with and without limiting
the foregoing, the Company and the Company Board shall (i) take all action
necessary to ensure that no state takeover statute or similar statute or
regulation is or becomes applicable to any Transaction or this Agreement or any
other Transaction Agreement and (ii) if any state takeover statute or similar
statute or regulation becomes applicable to this Agreement or any other
Transaction Agreement, take all action necessary to ensure that the Merger and
the other Transactions may be consummated as promptly as practicable on the
terms contemplated by the Transaction Agreements and otherwise to minimize the
effect of such statute or regulation on the Merger and the other Transactions.
Notwithstanding the foregoing, the Company shall not be prohibited under this
Section 6.03(a) from taking any action permitted by Section 5.02(b).
(b) The Company shall give prompt notice to Parent, and Parent
or Sub shall give prompt notice to the Company, of (i) any representation or
warranty made by it contained in any Transaction Agreement that is qualified as
to materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under any Transaction Agreement; provided,
however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under the Transaction Agreements.
SECTION 6.04. Fees and Expenses. (a) Except as provided
below, all fees and expenses incurred in connection with the Merger and the
other Transactions shall be paid by the party incurring such fees or expenses,
whether or not the Merger is consummated.
(b) The Company shall pay to Parent a fee of $1,250,000 if:
(i) the Company terminates this Agreement pursuant to Section 8.01(e); (ii)
Parent terminates this Agreement pursuant to Section 8.01(d) or (iii) this
Agreement is terminated (other than termination pursuant to Section 8.01(e)) and
within twelve (12) months of such termination the Company enters into a
definitive agreement to consummate, or consummates, the transactions
contemplated by a Company Takeover Proposal. Any fee due under this Section
6.04(b) shall be paid by wire transfer of same-day funds on the date of
termination of this Agreement (except that in the case of termination pursuant
to clause (iii) above such payment shall be made on the date of execution of
such definitive agreement or, if earlier, consummation of such transactions).
(c) The Company shall reimburse Parent and Sub for all their
out-of-pocket expenses actually incurred in connection with this Agreement and
the other Transaction Agreements, the Merger and the other Transactions if this
Agreement is terminated pursuant to Section 8.01(c), Section 8.01(d) or Section
8.01(e), but not more than $500,000.
(d) The Parent shall pay the Company a fee of $250,000 and
shall reimburse the Company for all of its out-of-pocket expenses actually
incurred by the Company in connection with this Agreement and the Merger in an
amount not to exceed $500,000 if (i) the conditions set forth in Section 7.01
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and 7.02 are satisfied or would be satisfied upon the Company's performance of
its obligations at Closing and (ii) Parent and Sub fail to close notwithstanding
the Company's confirmation that it remains ready, willing and able to proceed
with the Closing.
(e) The parties agree that the agreements contained in this
Section 6.04 are an integral part of the transactions contemplated by this
Agreement and that, without these agreements, the parties would not enter into
this Agreement; accordingly, if either party fails to pay as promptly as
practical any amounts due under this Section 6.04 and, in order to obtain such
payment, the other party commences a suit that results in a judgment against the
defaulting party for such amounts, the defaulting party shall pay interest on
such amounts from the date payment of such amounts were due to the date of
payment at the prime rate as quoted by JPMorgan Chase as in effect on the date
such payment was due, together with the cost and expenses of the other party
(including reasonable legal fees and expenses) in connection with such suit.
(f) The payments made by the parties in this Section 6.04
shall represent the sole and exclusive remedy at Law or in equity to which the
parties or their respective officers, directors, representatives, shareholders
or Affiliates shall be entitled with respect to the circumstances contemplated
by paragraphs (a) through (d) above. The parties shall be precluded from
pursuing any other remedies available to them, whether in contract, tort or
otherwise.
SECTION 6.05. Public Announcements. Parent and Sub, on the
one hand, and the Company, on the other hand, shall consult with each other
before issuing, and provide each other the opportunity to review and comment
upon, any press release or other public statements with respect to the Merger
and the other Transactions and shall not issue any such press release or make
any such public statement prior to such consultation, except as may be required
by applicable Law, court process or by obligations pursuant to any listing
agreement with any national securities exchange.
SECTION 6.06. Transfer Taxes. All stock transfer, real
estate transfer, documentary, stamp, recording and other similar Taxes
(including interest, penalties and additions to any such Taxes) ("Transfer
Taxes") incurred in connection with the Transactions shall be paid by either
Merger Sub or the Surviving Corporation, and the Company shall cooperate with
Merger Sub and Parent in preparing, executing and filing any Tax Returns with
respect to such Transfer Taxes.
SECTION 6.07. Stockholder Litigation. The Company shall
give Parent the opportunity to participate in the defense or settlement of any
stockholder litigation against the Company and its directors relating to any
Transaction; provided, however, that no such settlement shall be agreed to
without Parent's consent, which consent shall not be unreasonably withheld,
unless (i) the claim only involves the payment of money, (ii) the settlement
amount is within the policy limits of the Company's directors and officers
insurance coverage and (iii) the Company's directors and officers insurance
carrier has approved the settlement and has agreed in writing to pay the
settlement amount..
SECTION 6.08. Transaction Financing Cooperation. The
Company agrees to provide, and will cause the Company Subsidiaries and its and
their respective officers, employees and advisers to provide, upon the
reasonable request of Parent, and at Parent's expense, all cooperation
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reasonably necessary in connection with the arrangement of any financing to be
consummated contemporaneously with or at or after the Closing in respect of the
transactions contemplated by this Agreement, including participation in
meetings, due diligence sessions, road shows, the preparation of offering
memoranda, private placement memoranda, prospectuses and similar documents, the
execution and delivery of any commitment letters, underwriting or placement
agreements, pledge and security documents, other definitive financing documents,
or other requested certificates or documents, including a certificate of the
chief financial officer of the Company with respect to solvency matters, comfort
letters of accountants and legal opinions as are customary for transactions of
this type and as may be reasonably requested by Parent and taking such other
actions as are customary for transactions of this type and as are reasonably
required to be taken by the Company in connection with Parent's financing of the
transactions contemplated hereby. In addition, in connection with the obtaining
of any such financing, the Company agrees, at the reasonable request of Parent,
to call for prepayment or redemption, or to prepay, redeem and/or renegotiate,
as the case may be, any then existing indebtedness of the Company or the Company
Subsidiaries; provided, that no such prepayment, redemption or renegotiation
shall be effective or consummated prior to the Effective Time.
SECTION 6.09. Indemnification. Parent and Sub agree that
all rights to indemnification for acts or omissions occurring prior to the
Effective Time now existing in favor of the current or former directors or
officers of the Company and its subsidiaries as provided in their respective
certificates of incorporation or by-laws shall survive the Merger and shall
continue in full force and effect in accordance with their terms for a period of
not less than six years from the Effective Time. The Surviving Corporation shall
purchase a "tail" directors' and officers' liability insurance policy to the
current policy of the Company for a one year period commencing at the Effective
Time, with respect to matters occurring prior to or at the Effective Time and
having a $1,000,000 coverage limit.
SECTION 6.10. White Agreement. Promptly after the date
hereof, (i) the Company shall deliver to the Estate of ▇▇▇▇ ▇. ▇▇▇▇▇ the notice
of a closing contemplated by Section 3 of the Agreement dated March 14, 2006
(the "White Agreement") between the Company and the Estate of ▇▇▇▇ ▇. ▇▇▇▇▇ and
(ii) the Company shall complete the transfer of the shares of Company Common
Stock held by the Estate of ▇▇▇▇ ▇. ▇▇▇▇▇ to the Company such that the shares of
Company Common Stock held by the Estate of ▇▇▇▇ ▇. ▇▇▇▇▇ will not be issued and
outstanding as of the record date for the Company Stockholders Meeting.
ARTICLE VII
Conditions Precedent
SECTION 7.01. Conditions to Each Party's Obligation To
Effect The Merger. The respective obligation of each party to effect the Merger
is subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. The Company Stockholder Approval
shall have been obtained.
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(b) No Injunctions or Restraints. No temporary judgment issued
by any court of competent jurisdiction or other Law preventing the consummation
of the Merger shall be in effect; provided, however, that prior to asserting
this condition, each of the parties shall have used its reasonable best efforts
to prevent the entry of any such injunction or other order and to appeal as
promptly as possible any such judgment that may be entered.
SECTION 7.02. Conditions to Obligations of Parent and Sub.
The obligations of Parent and Sub to effect the Merger are further subject to
the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of the Company in this Agreement that are
qualified as to materiality or Material Adverse Effect shall be true and correct
and those not so qualified shall be true and correct in all material respects,
as of the date of this 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 such representations and
warranties qualified as to materiality or Material Adverse Effect shall be true
and correct, and those not so qualified shall be true and correct in all
material respects, on and as of such earlier date). Parent shall have received a
certificate signed on behalf of the Company by the chief executive officer and
the chief financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and Parent
shall have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such effect.
(c) No Litigation. There shall not be pending or threatened
any suit, action or proceeding by any Governmental Entity or any other person,
in each case that has a reasonable likelihood of success, (i), seeking to
restrain or prohibit the consummation of the Merger or any other Transaction or
seeking to obtain from the Company, Parent or Sub any damages that are material
in relation to the Company and the Company Subsidiaries taken as a whole, (ii)
seeking to prohibit or limit the ownership or operation by the Company, Parent
or any of their respective subsidiaries of any material portion of the business
or assets of the Company, Parent or any of their respective subsidiaries of any
material portion of the business or assets of the Company, Parent or any of
their respective subsidiaries, or to compel the Company, Parent or any of their
respective subsidiaries to dispose of or hold separate any material portion of
the business or assets of the Company, Parent or any of their respective
subsidiaries, as a result of the Merger or any other Transaction, (iii) seeking
to prohibit Parent or any of its subsidiaries from effectively controlling in
any material respect the business or operations of the Company and the Company
Subsidiaries or (iv) which otherwise is reasonably likely to have a Company
Material Adverse Effect.
(d) Absence of Company Material Adverse Effect. Except as set
forth on the Company Disclosure Letter, since March 31, 2005, there shall not
have been any event, change, effect or development that, individually or in the
aggregate, has had or could reasonably be expected to have a Company Material
Adverse Effect.
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(e) Consents. The Company shall have received all written
consents, waivers and authorizations necessary to provide for the continuation
in full force and effect after the Effective Time of all contracts, agreements,
commitments, leases, licenses, arrangements, instruments and obligations of the
Company and its Subsidiaries (i) listed on Schedule 7.02(e) hereof or (ii)
which, if not so continued as a result of the consummation of the Merger, could
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(f) Dissenting Shares. The total number of Dissenting Shares
shall not exceed 5% of the issued and outstanding shares of Company Common Stock
as of the Effective Time.
(g) Replacement Auto Coverage. The Company shall have obtained
insurance coverage with a replacement insurance carrier, or carriers, rated A-
or better by S&P, to replace the existing policies with Great American Insurance
Company, with comparable coverage, including policy limits, deductibles, scope
of coverage and other terms and conditions, and without any material increase in
premiums, to provide insurance coverage for all motor vehicle extended service
plans and extended warranties sold and managed by the Company and the Company
Subsidiaries, which coverage shall be satisfactory to Parent in its reasonable
discretion, or Great American Insurance Company shall have agreed in writing on
terms reasonably satisfactory to Parent to extend such coverage until December
31, 2006.
SECTION 7.03. Condition to Obligation of the Company. The
obligations of the Company to effect the Merger are further subject to the
following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of Parent and Sub in this Agreement that are
qualified as to materiality or Material Adverse Effect shall be true and correct
and those not so qualified shall be true and correct in all material respects,
as of the date of this 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 such representations and
warranties qualified as to materiality or Material Adverse Effect shall be true
and correct, and those not so qualified shall be true and correct in all
material respects, on and as of such earlier date). The Company shall have
received a certificate signed on behalf of Parent to such effect.
(b) Performance of Obligations of Parent and Sub. Parent and
Sub shall have performed in all material respects all obligations to be
performed by them under this Agreement at or prior to the Closing Date.
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.01. Termination. This Agreement may be
terminated at any time prior to the Effective Time, whether before or after
receipt of Company Stockholder Approval:
(a) by mutual written consent of Parent, Sub and the Company;
(b) (i) by either Parent or the Company if the Merger is not
consummated on or before the later of (A) October 5, 2006 or (B) 60
days after the date that the Proxy Statement is cleared by the SEC;
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provided, that, notwithstanding the foregoing, either Parent or the
Company may terminate the Agreement if the Merger is not consummated on
or before December 31, 2006; provided, further, that the right to
terminate the Agreement pursuant to this Section 8.01(b)(i) shall not
be available to any party whose failure to perform any of its
obligations under this Agreement has been the primary cause of the
failure of the Merger to be consummated by such time;
(ii) by either Parent or the Company if any Governmental
Entity issues an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the Merger
and such order, decree, ruling or other action shall have become final
and nonappealable;
(iii) by either Parent or the Company if, upon a vote at a
duly held meeting to obtain the Company Stockholder Approval, the
Company Stockholder Approval is not obtained; provided, that the right
to terminate the Agreement pursuant to this Section 8.01(b)(iii) shall
not be available to the Company if it has materially breached its
obligations under Section 5.02;
(c) by Parent, if the Company breaches or fails to perform in
any material respect any of its representations, warranties or covenants
contained in any Transaction Agreement, which breach or failure to perform (i)
would give rise to the failure of a condition set forth in Section 7.02(a) or
7.02(b), and (ii) cannot be or has not been cured within 15 days after the
giving of written notice to the Company of such breach;
(d) by Parent prior to receipt of the Company Stockholder
Approval:
(i) if the Company Board or any committee thereof withdraws
or modifies, or proposes publicly to withdraw or modify, its approval
or recommendation of this Agreement, or the Merger, fails to recommend
that the Company's stockholders give the Company Stockholder Approval
or approves or recommends, or proposes publicly to approve or
recommend, any Company Takeover Proposal;
(ii) if the Company Board fails to reaffirm publicly its
recommendation to the Company's stockholders that give the Company
Stockholder Approval within 5 days of Parent's written request to do so
(which request may be made at any time following public disclosure of a
Company Takeover Proposal); or
(iii) if (A) the Company or any of its officers, directors,
employees, representatives or agents shall have breached Section 5.02,
(B) the Company shall have breached in any material respect its
obligations under Section 6.01, (C) the Company shall have failed to
convene and hold the Company Stockholders Meeting within forty-five
(45) days of the date that the Proxy Statement is cleared by the SEC
unless the Company fails to hold such meeting pursuant to Sections
92A.120(3) and (5) of the NCL following the Company Board's withdrawal
of its recommendation of the Agreement and the Merger, or (D) the
Company gives Parent the notification contemplated by Section 8.05(b)
(iii); or
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(e) by the Company prior to receipt of the Company Stockholder
Approval in accordance with Section 8.05(b); provided, however, that the Company
shall have complied with all provisions thereof, including the notice provisions
therein.
SECTION 8.02. Effect of Termination. In the event of
termination of this Agreement by either the Company or Parent as provided in
Section 8.01, this Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of Parent, Sub or the Company,
other than Section 6.04, Section 6.05, this Section 8.02 and Article IX, which
provisions shall survive such termination; provided, that no party shall be
relieved or released from any liability or obligation arising from a breach by
such party of any representation, warranty or covenant set forth in any
Transaction Agreement.
SECTION 8.03. Amendment. This Agreement may be amended by
the parties at any time before or after receipt of the Company Stockholder
Approval; provided, however, that after receipt of the Company Stockholder
Approval, this Agreement may only be amended in accordance with Section
92A.120(9) of the NCL. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties.
SECTION 8.04. Extension: Waiver. At any time prior to the
Effective Time, the parties may (a) extend the time for the performance of any
of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 8.03, waive compliance with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
SECTION 8.05. Procedure for Termination, Amendment,
Extension or Waiver. (a) A termination of this Agreement pursuant to Section
8.01, an amendment of this Agreement pursuant to Section 8.03 or an extension or
waiver pursuant to Section 8.04 shall, in order to be effective, require in the
case of Parent, Sub or the Company, action by its Board of Managers or Board of
Directors or the duly authorized designee of its Board of Managers or Board of
Directors, as the case may be.
(b) The Company may terminate this Agreement pursuant to
Section 8.01(e) only if: (i) the Company Board has received a Superior Company
Proposal; (ii) in light of such Superior Company Proposal the Company Board
shall have determined in good faith, after consultation with outside counsel and
independent financial advisors, that it is necessary for the Company Board to
withdraw or modify its approval or recommendation of this Agreement or the
Merger in order to comply with its fiduciary duty under applicable Law; (iii)
the Company has notified Parent in writing of the determinations described in
clause (ii) above and provided Parent a copy of the documents providing for the
Superior Company Proposal; (iv) at least five business days following receipt by
Parent of the notice referred to in clause (iii) above, and taking into account
any revised proposal made by Parent (including any proposal to amend the terms
of the Transactions or this Agreement) since receipt of the notice referred to
in clause (iii) above, such Superior Company Proposal remains a Superior Company
-35-
Proposal and the Company Board has again made the determinations referred to in
clause (ii) above; (v) the Company is in compliance with Section 5.02; (vi) the
Company has previously paid or contemporaneously therewith pays the fee due
under Section 6.04, (vii) the Company Board concurrently approves, and the
Company concurrently enters into, a definitive agreement providing for the
implementation of such Superior Company Proposal; and (viii) Parent is not at
such time entitled to terminate this Agreement pursuant to Section 8.01(c). The
Company acknowledges and agrees that each successive material modification of a
Company Takeover Proposal that is determined to be a Superior Company Proposal
shall be deemed to constitute a new Superior Company Proposal for purposes of
this Section 8.05(b).
ARTICLE IX
General Provisions
SECTION 9.01. Nonsurvival of Representations and
Warranties. None of the representations and warranties in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 9.01 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
SECTION 9.02. Notices. All notices, requests, claims,
demands and other communications under this Agreement shall be in writing and
shall be deemed given if delivered personally or sent by fax or overnight
delivery service or upon receipt by 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 Sub, to
Attention:
WT Acquisition Holdings, LLC
c/o H.I.G. Capital, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
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(b) if to the Company, to
Attention:
Warrantech Corporation
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇ Helpern Syracuse & Hirschtritt LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Facsimile: 212-371-1084
SECTION 9.03. Definitions. For purposes of this Agreement:
An "Affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person.
A "Company Material Adverse Effect" means (i) any change,
effect, event, occurrence or state of facts that is or is reasonably likely to
be materially adverse to the business, assets, condition (financial or
otherwise), or results of operations of the Company and the Company
Subsidiaries, taken as a whole , other than effects relating to (A) changes,
effects, events, occurrences or circumstances that generally affect the
industries in which the Company operates, and that do not have a materially
disproportionate impact on the Company and the Company Subsidiaries, taken as a
whole, or (B) general economic, financial or securities market conditions in the
United States or elsewhere, (ii) any insurance carrier issuing a Company
Insurance Policy referenced in Section 3.17(a) of the Disclosure Letter shall
have terminated or withdrawn coverage under, or materially and adversely
modified any term (including premiums payable) of any such Company Insurance
Policy, or (iii) the occurrence of any material adverse development in the case
Lloyd's et. al. v. Warrantech Corporation et. al., (iv) any material customer or
group of customers shall have ceased or threatened to cease to do business with
the Company or any Company Subsidiary, materially reduced or threatened to
materially reduce the amount of business such customer or customers do with the
Company or any Company Subsidiary, or materially and adversely modified any term
of such customer or customer's existing agreements with the Company or any
Company Subsidiary or (v) there shall have occurred any change, effect, event
occurrence or state of facts that is or is reasonably likely to have a material
adverse effect on the cash flow of the Company and the Company Subsidiaries,
taken as a whole, (vi) the Company or the Company Subsidiaries' ability to sell
their products and services shall have been materially and adversely affected by
any change in regulatory requirements or insurance laws or the failure to obtain
any regulatory approvals necessary to consummate the Merger and the other
Transactions, (vii) any change, effect, event, occurrence or state of facts that
is or is reasonably likely to be materially adverse to the ability of the
Company and the Company Subsidiaries to conduct their operations immediately
after the Effective Time in substantially the same manner as such operations are
being conducted prior to the Effective Time or (viii) a material adverse effect
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on the ability of the Company to perform its obligations hereunder or which
would prevent or materially delay the consummation of the Merger and the other
Transactions.
A "person" means any individual, firm, corporation,
partnership, company, limited liability company, trust, joint venture,
association, Governmental Entity or other entity.
A "subsidiary" of any person means another person, an amount
of the voting securities, other voting ownership or voting partnership interests
of which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person.
SECTION 9.04. Interpretation; Disclosure Letters. When a
reference is made in this Agreement to a Section, such reference shall be to a
Section of this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include", "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". Any matter
disclosed in any section of the Company Disclosure Letter shall be deemed
disclosed only for the purposes of the specific Sections of this Agreement to
which such section of the Company Disclosure Letter specifically refers.
SECTION 9.05. Severability. If any term or other provision
of this Agreement is invalid, illegal or incapable of being enforced by any rule
or Law, or public policy, all other terms, 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 materially 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 transactions contemplated
hereby are fulfilled to the extent possible.
SECTION 9.06. Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
SECTION 9.07. Entire Agreement; No Third-Party
Beneficiaries. The Transaction Agreements, taken together with the Company
Disclosure Letter, (a) constitute the entire agreement, and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the Transactions, including that certain letter of intent dated April
17, 2006 and (b) are solely for the benefit of the Company, Parent and Sub and
are not intended to confer upon any person other than the parties hereto any
rights, remedies, claims or cause of action of any nature whatsoever.
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SECTION 9.08. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of Nevada,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
SECTION 9.09. Assignment. Neither this Agreement nor any
of the rights, interests or obligations under this Agreement shall be assigned,
in whole or in part, by operation of law or otherwise by any of the parties
without the prior written consent of the other parties, except that Sub may
assign, in its sole discretion, any of or all its rights, interests and
obligations under this Agreement to Parent or to any direct or indirect wholly
owned subsidiary of Parent, but no such assignment shall relieve Sub of any of
its obligations under this Agreement. Any purported assignment without such
consent shall be void. Subject to the preceding sentences, this Agreement will
be binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
SECTION 9.10. Enforcement; Jurisdiction; WAIVER OF JURY
TRIAL. The parties agree that irreparable damage would occur in the event that
any of the provisions of any Transaction Agreement were not performed in
accordance with their specific terms or were otherwise breached. In addition,
each of the parties hereto (a) consents to submit itself to the personal
jurisdiction of any Florida state court or any Federal court located in the
State of Florida (in each case, located in Miami-Dade county) or any Nevada
state court or any Federal court located in the State of Nevada (in each case,
located in ▇▇▇▇▇ county) in the event any dispute arises out of any Transaction
Agreement or any Transaction, (b) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (c) agrees that it will not bring any action relating to any
Transaction Agreement or any Transaction in any court other than any Florida
state court or any Federal court sitting in the State of Florida (in each case,
located in Miami-Dade county) or any Nevada state court or any Federal court
located in the State of Nevada (in each case, located in ▇▇▇▇▇ county) and (d)
WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION RELATED TO OR
ARISING OUT OF ANY TRANSACTION AGREEMENT OR ANY TRANSACTION.
SECTION 9.11. Mutual Drafting. Each party hereto has
participated in the drafting of this Agreement, which each party acknowledges is
the result of extensive negotiations between the parties.
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IN WITNESS WHEREOF, Parent, Sub and the Company have duly executed this
Agreement, all as of the date first written above.
WT ACQUISITION HOLDINGS, LLC
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
WT ACQUISITION CORP.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
WARRANTECH CORPORATION
By /s/ ▇▇▇▇ SAN ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇ San Antonio
Title: Chief Executive Officer
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