EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
DATED AS OF
AUGUST 29, 2005
AMONG
SMISC, LLC,
MOTORSPORTS AUTHENTICS, INC.,
AND
ACTION PERFORMANCE COMPANIES, INC.
TABLE OF CONTENTS
PAGE
ARTICLE 1 THE MERGER............................................................................................ 1
SECTION 1.01 The Merger........................................................................... 1
SECTION 1.02 Closing.............................................................................. 2
SECTION 1.03 Effective Time....................................................................... 2
SECTION 1.04 Effects of the Merger................................................................ 2
SECTION 1.05 Articles of Incorporation and Bylaws................................................. 2
SECTION 1.06 Directors............................................................................ 2
ARTICLE 2 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES... 3
SECTION 2.01 Effect on Capital Stock.............................................................. 3
SECTION 2.02 Exchange of Certificates............................................................. 3
ARTICLE 3 REPRESENTATIONS AND WARRANTIES........................................................................ 6
SECTION 3.01 Representations and Warranties of the Company........................................ 6
SECTION 3.02 Representations and Warranties of Parent Parties..................................... 25
ARTICLE 4 COVENANTS RELATING TO CONDUCT OF BUSINESS............................................................. 27
SECTION 4.01 Conduct of Business.................................................................. 27
SECTION 4.02 No Solicitation...................................................................... 32
ARTICLE 5 ADDITIONAL AGREEMENTS................................................................................. 34
SECTION 5.01 Preparation of the Proxy Statement; Shareholders' Meeting............................ 34
SECTION 5.02 Access to Information; Confidentiality............................................... 35
SECTION 5.03 Commercially Reasonable Efforts...................................................... 35
SECTION 5.04 Company Stock Options; Warrants...................................................... 36
SECTION 5.05 Indemnification, Exculpation and Insurance........................................... 37
SECTION 5.06 Fees and Expenses.................................................................... 38
SECTION 5.07 Public Announcements................................................................. 40
SECTION 5.08 Shareholder Litigation............................................................... 40
SECTION 5.09 Shareholder Agreement Legend......................................................... 40
SECTION 5.10 Benefit Plans........................................................................ 40
SECTION 5.11 Transfer Taxes....................................................................... 41
ARTICLE 6 CONDITIONS PRECEDENT.................................................................................. 42
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TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 6.01 Conditions to Each Party's Obligation to Effect the Merger........................... 42
SECTION 6.02 Conditions to Obligations of Parent and Sub.......................................... 42
SECTION 6.03 Conditions to Obligation of the Company.............................................. 44
SECTION 6.04 Frustration of Closing Conditions.................................................... 44
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER..................................................................... 44
SECTION 7.01 Termination.......................................................................... 44
SECTION 7.02 Effect of Termination................................................................ 46
SECTION 7.03 Amendment............................................................................ 46
SECTION 7.04 Extension; Waiver.................................................................... 46
SECTION 7.05 Procedure for Termination or Amendment............................................... 46
ARTICLE 8 GENERAL PROVISIONS.................................................................................... 47
SECTION 8.01 Nonsurvival of Representations and Warranties........................................ 47
SECTION 8.02 Notices.............................................................................. 47
SECTION 8.03 Definitions.......................................................................... 48
SECTION 8.04 Interpretation....................................................................... 49
SECTION 8.05 Consents and Approvals............................................................... 50
SECTION 8.06 Counterparts......................................................................... 50
SECTION 8.07 Entire Agreement; No Third-Party Beneficiaries....................................... 50
SECTION 8.08 Governing Law........................................................................ 50
SECTION 8.09 Assignment........................................................................... 50
SECTION 8.10 Specific Enforcement; Consent to Jurisdiction........................................ 50
SECTION 8.11 Severability......................................................................... 51
SECTION 8.12 Guaranty............................................................................. 51
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of August 29,
2005, among SMISC, LLC, a Delaware limited liability company ("Parent"),
Motorsports Authentics, Inc., an Arizona corporation ("Sub") and a wholly owned
indirect Subsidiary of Parent, Action Performance Companies, Inc., an Arizona
corporation (the "Company"), and, for purposes of Section 3.02 and Section 8.12
only, the members of Parent listed on the signature pages hereof (the
"Guarantors").
WHEREAS, the Board of Directors of each of the Company and Sub has adopted,
and the Board of Managers of Parent has approved, this Agreement and the merger
of Sub with and into the Company (the "Merger"), upon the terms and subject to
the conditions set forth in this Agreement, whereby each issued and outstanding
share of common stock, par value $.01 per share, of the Company ("Company Common
Stock"), other than shares of Company Common Stock directly owned by Parent, Sub
or the Company, will be converted into the right to receive $13 in cash;
WHEREAS, simultaneously with the execution and delivery of this Agreement
and as a condition to Parent's willingness to enter into this Agreement, Parent
and a certain shareholder of the Company (the "Principal Shareholder") have
entered into an agreement (the "Shareholder Agreement") pursuant to which the
Principal Shareholder has agreed to vote for, approve and adopt this Agreement
and to take certain other actions in furtherance of the consummation of the
Merger upon the terms and subject to the conditions set forth in the Shareholder
Agreement; and
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, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and subject to the
conditions set forth herein, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.01 THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Arizona Business Corporation
Act, A.R.S. Sections 10-001 et seq. (the "Arizona Code"), Sub shall be merged
with and into the Company at the Effective Time (as defined below). Following
the Effective Time, the separate corporate existence of Sub shall cease and the
Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the Arizona Code. The parties agree and
acknowledge that Parent may determine prior to the Closing Date to revise the
structure or the mechanics of the form of the merger of the Company with Sub in
a manner to be mutually agreed upon between the Company and Parent; provided,
however, such revised structure shall not reduce the Merger Consideration or the
Option and Warrant Consideration in any way or change or revise any of the other
covenants or conditions of this Agreement in any meaningful way, except to the
extent that Parent agrees to make the Company and its stockholders whole for any
such change. Each of the parties agree to use commercially reasonable efforts to
take such actions as may be reasonably requested of each such party to effect
any such revisions to the structure, including executing any amendments to this
Agreement in a form agreed upon among the parties.
SECTION 1.02 CLOSING. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. Eastern time on a date to be specified by the parties, which
shall be no later than the second business day after satisfaction or (to the
extent permitted by law) waiver of the conditions set forth in Article 6 (other
than those conditions that by their terms are to be satisfied at the Closing,
but subject to the satisfaction or (to the extent permitted by law) waiver of
those conditions), at the offices of Xxxxx Xxxxx L.L.P., 0000 Xxxxxxxxxxxx
Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, unless another time, date or place is
agreed to in writing by Parent and the Company; provided, however, that if all
the conditions set forth in Article 6 shall not have been satisfied or (to the
extent permitted by law) waived on such second business day, then the Closing
shall take place on the first business day following the day on which all such
conditions shall have been satisfied or (to the extent permitted by law) waived.
The date on which the Closing occurs is referred to in this Agreement as the
"Closing Date".
SECTION 1.03 EFFECTIVE TIME. Subject to the provisions of this Agreement,
as soon as practicable on the Closing Date, the parties shall file with the
Corporation Commission of the State of Arizona articles of merger (the "Articles
of Merger") executed and acknowledged by the parties in accordance with the
relevant provisions of the Arizona Code and, as soon as practicable on or after
the Closing Date, the Surviving Corporation shall make all other filings or
recordings required under the Arizona Code. The Merger shall become effective
upon the filing of the Articles of Merger with the Corporation Commission of the
State of Arizona, or at such other time as Parent and the Company shall agree
and shall specify in the Articles of Merger (the time the Merger becomes
effective being referred to in this Agreement as the "Effective Time").
SECTION 1.04 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Article 10-1106(A) of the Arizona Code.
SECTION 1.05 ARTICLES OF INCORPORATION AND BYLAWS.
(a) The First Amended and Restated Articles of Incorporation of the
Company (the "Company Charter"), as in effect immediately prior to the Effective
Time, shall be amended at the Effective Time to be in the form of Exhibit A and,
as so amended, such Company Charter shall be the Articles of Incorporation of
the Surviving Corporation until thereafter changed or amended as provided
therein or by applicable law.
(b) The Bylaws of Sub, as in effect immediately prior to the Effective
Time, shall be the Bylaws of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable law.
SECTION 1.06 DIRECTORS. Set forth on Schedule 1.06 of the Company
Disclosure Schedule is a list of persons who shall be the directors of the
Surviving Corporation until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the case may be.
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ARTICLE 2
EFFECT OF THE MERGER 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 member interests of Parent or 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 validly issued, fully paid
and nonassessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. Each share
of Company Common Stock that is directly owned by the Company, Parent or Sub
immediately prior to the Effective Time shall automatically be cancelled and
retired and shall cease to exist, and no consideration shall be delivered in
exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Subject to Section 2.02(e),
each share of Company Common Stock issued and outstanding immediately prior to
the Effective Time (other than shares to be cancelled in accordance with Section
2.01(b)) shall be converted into the right to receive $13.00 in cash, without
interest (the "Merger Consideration"). At the Effective Time, all such shares of
Company Common Stock shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a certificate
which immediately prior to the Effective Time represented any such shares of
Company Common Stock (each, a "Certificate") shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration. The right
of any holder of a Certificate to receive the Merger Consideration shall be
subject to and reduced by the amount of any withholding that is required under
applicable tax law.
(d) OPTIONS AND WARRANTS. In accordance with and as provided in
Section 5.04, each holder of Company Stock Options or Warrants shall be entitled
to receive the amounts specified in Section 5.04(a) and Section 5.04(b),
respectively (the "Option and Warrant Consideration").
SECTION 2.02 EXCHANGE OF CERTIFICATES.
(a) PAYING AGENT. Prior to the Effective Time, Parent shall appoint a
bank or trust company reasonably acceptable to the Company to act as paying
agent (the "Paying Agent") for the payment of the Merger Consideration and the
Option and Warrant Consideration. At the Effective Time, Parent shall deposit,
or cause the Surviving Corporation to deposit, with the Paying Agent, for the
benefit of the holders of Certificates, Company Stock Options and Warrants cash
in an amount sufficient to pay the aggregate Merger Consideration and Option and
Warrant Consideration required to be paid pursuant to Section 2.01(c) and
Section 2.01(d), respectively (such cash being hereinafter referred to as the
"Exchange Fund").
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(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, Parent shall cause the Paying Agent to mail to each holder of
record of shares of Company Common Stock entitled to receive the Merger
Consideration (i) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Paying Agent and
which shall contain other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Each holder of record of one or more Certificates
shall, upon surrender to the Paying Agent of such Certificate or Certificates,
together with such letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Paying Agent, be entitled to
receive in exchange therefor the amount of cash which the number of shares of
Company Common Stock previously represented by such Certificate shall have been
converted into the right to receive pursuant to Section 2.01(c), and the
Certificates so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, payment of the Merger Consideration in
accordance with this Section 2.02(b) 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 of the Merger Consideration to a person
other than the registered holder of such Certificate, or establish to the
reasonable satisfaction of Parent that such taxes have been paid or are not
applicable. Until surrendered as contemplated by this Section 2.02(b), each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration pursuant
to the provisions of this Article 2. No interest shall be paid or will accrue on
any cash payable to holders of Certificates pursuant to the provisions of this
Article 2. As soon as reasonably practicable after the Effective Time, Parent
shall cause the Paying Agent to make any payments required pursuant to Section
2.01(d).
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All cash paid
upon the surrender of Certificates in accordance with the terms of this Article
2 shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of Company Common Stock formerly represented by such
Certificates. At the close of business on the day on which the Effective Time
occurs, the share transfer books of the Company shall be closed, and there shall
be no further registration of transfers on the share transfer books of the
Surviving Corporation of the shares of Company Common Stock that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, any Certificate is presented to the Surviving Corporation for transfer, it
shall be cancelled against delivery of the Merger Consideration to the holder
thereof as provided in this Article 2.
(d) TERMINATION OF THE EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the holders of the Certificates for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of the Certificates who have not theretofore complied with this Article
2 shall thereafter look only to Parent for, and Parent shall remain liable for,
payment of their claim for the Merger Consideration.
(e) NO LIABILITY. None of Parent, Sub, the Company, the Surviving
Corporation or the Paying Agent shall be liable to any person in respect of any
cash from the
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Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificate shall not have
been surrendered prior to two years after the Effective Time (or immediately
prior to such earlier date on which any Merger Consideration would otherwise
escheat to or become the property of any Governmental Entity (as defined
below)), any such Merger Consideration shall, to the extent permitted by
applicable law, become the property of Parent, free and clear of all claims or
interest of any person previously entitled thereto.
(f) INVESTMENT OF EXCHANGE FUND. The Paying Agent shall invest the
cash included in the Exchange Fund as directed by Parent, in (i) securities
issued or directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that the full faith
and credit of the United States of America is pledged in support thereof), (ii)
U.S. dollar denominated (or foreign currency fully hedged) time deposits,
certificates of deposit, Eurodollar time deposits and Eurodollar certificates of
deposit of (y) any domestic commercial bank of recognized standing having
capital and surplus in excess of $250,000,000 or (z) any bank whose short-term
commercial paper rating from Standard & Poor's ("S&P") is at least A-1 or the
equivalent thereof or from Xxxxx'x Investor Services, Inc. ("Xxxxx'x") is at
least P-1 or the equivalent thereof, (iii) U.S. dollar denominated deposits in
and cash management functions with banks domiciled in the United States of
America, (iv) commercial paper and variable or fixed rate notes issued by or
guaranteed by any domestic corporation rated A-1 (or the equivalent thereof) or
better by S&P or P-1 (or the equivalent thereof) or better by Moody's, (v)
repurchase agreements with a bank or trust company or a recognized securities
dealer having capital and surplus in excess of $500,000,000 for direct
obligations issued by or fully guaranteed by the United States of America and
(vi) U.S. Security Exchange Corporation registered or unregistered money market
funds with a rating from S&P that is at least A-1 or the equivalent thereof or
from Moody's that is at least P-1 or the equivalent thereof.
(g) LOST CERTIFICATES. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent, the posting by such person of a bond in such amount as Parent may direct
as indemnity against any claim that may be made against it with respect to such
Certificate, the Paying Agent shall deliver in exchange for such lost, stolen or
destroyed Certificate the applicable Merger Consideration in respect thereof
pursuant to the provisions of this Article 2.
(h) WITHHOLDING RIGHTS. Parent, the Surviving Corporation or the
Paying Agent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of Certificates such
amounts as Parent, the Surviving Corporation or the Paying Agent is required to
deduct and withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the "Code"), or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld and
paid over to the appropriate taxing authority by Parent, the Surviving
Corporation or the Paying Agent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the Certificates
in respect of which such deduction and withholding was made by Parent, the
Surviving Corporation or the Paying Agent.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set
forth in the disclosure schedule (with specific reference to the particular
Section or subsection of this Agreement to which the information set forth in
such disclosure schedule relates) delivered by the Company to Parent prior to
the execution of this Agreement (the "Company Disclosure Schedule"), the Company
represents and warrants to Parent and Sub as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of the Company
and its Subsidiaries has been duly organized, and is validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
formation, as the case may be. Each of the Company and its Subsidiaries have all
requisite power and authority and possesses all governmental licenses, permits,
authorizations and approvals necessary to enable it to use its corporate or
other name and to own, lease or otherwise hold and operate its properties and
other assets and to carry on its business as presently conducted other than such
corporate power and authority, franchises, licenses, permits, authorizations and
approvals the lack of which, individually and in the aggregate, would not
reasonably be expected to have a Material Adverse Effect. Each of the Company
and its Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, such jurisdictions being set forth on Section 3.01(a) of
the Company Disclosure Schedule, other than in such jurisdictions where the
failure to be so qualified or licensed individually or in the aggregate would
not reasonably be expected to have a Material Adverse Effect. The Company has
made available to Parent prior to the execution of this Agreement complete and
accurate copies of the Company Charter and its Bylaws (the "Company Bylaws"),
and the comparable organizational documents of each of its Subsidiaries, in each
case as amended to the date hereof. The Company has made available to Parent
complete and accurate copies of the minutes (or, in the case of minutes that
have not yet been finalized, drafts thereof) of all meetings of the shareholders
of the Company and each of its Subsidiaries, the Board of Directors of the
Company and each of its Subsidiaries and the committees of each such Board of
Directors, in each case held since October 1, 1999 and prior to the date hereof.
(b) SUBSIDIARIES. Section 3.01(b) of the Company Disclosure Schedule
lists each of the Subsidiaries of the Company and, for each such Subsidiary, the
state of incorporation or formation and, as of the date hereof, each
jurisdiction in which such Subsidiary is qualified or licensed to do business.
Except as set forth in Section 3.01(b) of the Company Disclosure Schedule, all
the issued and outstanding shares of capital stock of, or other equity interests
in, each such Subsidiary have been validly issued and are fully paid and
nonassessable and are owned directly or indirectly by the Company free and clear
of all pledges, claims, liens, charges, encumbrances or security interests of
any kind or nature whatsoever (collectively, "Liens"), and free of any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other equity interests. Except for the capital stock of, or voting
securities or equity interests in, its Subsidiaries, the Company does not own,
directly or indirectly, any capital stock of, or other voting securities or
equity interests in, any corporation, partnership, joint venture, association or
other entity.
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(c) CAPITAL STRUCTURE.
(i) The authorized capital stock of the Company consists of
62,500,000 shares of Company Common Stock and 5,000,000 shares of preferred
stock, par value $.01 per share ("Company Preferred Stock"). At the close of
business on August 29, 2005, (i) 18,858,711 shares of Company Common Stock were
issued and outstanding, (ii) 190,000 shares of Company Common Stock were held by
the Company in its treasury, (iii) 2,144,606 shares of Company Common Stock were
subject to outstanding Company Stock Options under the Company's 1993 Stock
Option Plan, 1998 Non-Qualified Stock Option Plan, 1999 Employee Stock Purchase
Plan, and 2000 Stock Option Plan, each as amended to the date hereof (such
plans, collectively, the "Company Stock Plans") , (iv) no shares of Company
Preferred Stock were issued or outstanding or were held by the Company as
treasury shares, and (v) warrants to acquire 565,000 shares of Company Common
Stock from the Company pursuant to the warrant agreements set forth on Section
3.01(c) of the Company Disclosure Schedule and previously delivered in complete
and correct form to Parent (the "Warrants") were issued and outstanding.
(ii) Except as set forth above in this Section 3.01(c), at the
close of business on August 29, 2005, no shares of capital stock or other voting
securities or equity interests of the Company were issued, reserved for issuance
or outstanding. There are no outstanding stock appreciation rights, "phantom"
stock rights, performance units, rights to receive shares of Company Common
Stock on a deferred basis or other rights (other than Company Stock Options and
the Warrants) that are linked to the value of Company Common Stock
(collectively, "Company Stock-Based Awards"). Section 3.01(c) of the Company
Disclosure Schedule sets forth a complete and accurate list, as of August 29,
2005, of all outstanding options to purchase shares of Company Common Stock
(collectively, "Company Stock Options") under the Company Stock Plans
(including, but not limited to, the Company's 1999 Employee Stock Purchase
Plan), and all outstanding Warrants, the number of shares of Company Common
Stock (or other stock) subject thereto, the grant dates, expiration dates,
exercise or base prices (if applicable) and vesting schedules thereof and the
names of the holders thereof.
(iii) There are no outstanding shares of Company Common Stock in
respect of which the Company has a right under specified circumstances to
repurchase such shares at a fixed purchase price.
(iv) All outstanding Company Stock Options are evidenced by stock
option agreements, restricted stock purchase agreements or other award
agreements, in each case in the forms previously delivered or made available to
Parent, and no stock option agreement, restricted stock purchase agreement or
other award agreement contains terms that are materially inconsistent with such
forms.
(v) Each Company Stock Option may, by its terms, be cancelled in
connection with the transactions contemplated hereby for a lump sum payment in
accordance with and to the extent required by Section 5.04(a). All Warrants may,
by their terms, be cancelled in exchange for a lump sum cash payment in
accordance with and to the extent required by Section 5.04(b).
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(vi) All outstanding shares of capital stock of the Company are,
and all shares which may be issued prior to the Effective Time pursuant to the
Company Stock Options or the Warrants will be when issued in accordance with the
terms thereof, duly authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights.
(vii) There are no 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 shareholders
of the Company may vote.
(viii) Except as set forth above in this Section 3.01(c) or in
Section 3.01(c) of the Company Disclosure Schedule, (x) there are not issued,
reserved for issuance or outstanding (A) any shares of capital stock or other
voting securities or equity interests of the Company, (B) any securities of the
Company convertible into or exchangeable or exercisable for shares of capital
stock or other voting securities or equity interests of the Company, or (C) any
warrants, calls, options or other rights to acquire from the Company or any of
its Subsidiaries, and no obligation of the Company or any of its Subsidiaries to
issue, any capital stock, voting securities, equity interests or securities
convertible into or exchangeable or exercisable for capital stock or voting
securities of the Company and (y) there are not any outstanding obligations of
the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any such securities or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities. Neither the Company nor any of its
Subsidiaries is a party to any voting agreement with respect to the voting of
any such securities.
(ix) Except as set forth above in this Section 3.01(c) or Section
3.01(c) of the Company Disclosure Schedule, there are no outstanding (1)
securities of the Company or any of its Subsidiaries convertible into or
exchangeable or exercisable for shares of capital stock or voting securities or
equity interests of any Subsidiary of the Company, (2) warrants, calls, options
or other rights to acquire from the Company or any of its Subsidiaries, and no
obligation of the Company or any of its Subsidiaries to issue, any capital
stock, voting securities, equity interests or securities convertible into or
exchangeable or exercisable for capital stock or voting securities of any
Subsidiary of the Company or (3) obligations of the Company or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any such outstanding
securities or to issue, deliver or sell, or cause to be issued, delivered or
sold, any such securities.
(d) AUTHORITY. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and, subject to receipt of the
Shareholder Approval, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action on the part of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby, subject, in the case of the consummation of the Merger, to
the obtaining of the Shareholder Approval. This Agreement has been duly executed
and delivered by the Company and, assuming the due authorization, execution and
delivery by each of the other parties hereto, constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting
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creditors' rights, and to general equity principles. The Board of Directors of
the Company, at a meeting duly called and held at which all directors of the
Company were present, duly and unanimously adopted resolutions (i) adopting this
Agreement and approving the Merger and the other transactions contemplated by
this Agreement, (ii) determining that it is in the best interests of the
shareholders of the Company that the Company enter into this Agreement and
consummate the Merger and the other transactions contemplated by this Agreement
on the terms and subject to the conditions set forth in this Agreement, (iii)
directing that the adoption of this Agreement be submitted as promptly as
practicable to a vote at a meeting of the shareholders of the Company and (iv)
recommending that the shareholders of the Company approve this Agreement, which
resolutions have not been subsequently rescinded, modified or withdrawn in any
way.
(e) NONCONTRAVENTION. Except as set forth in Section 3.01(e) of the
Company Disclosure Schedule, the execution and delivery of this Agreement do
not, and the consummation of the Merger and the other transactions contemplated
by this Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation or breach 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 the loss of a
benefit under, or result in the creation of any Lien in or upon any of the
properties or other assets of the Company or any of its Subsidiaries under:
(i) the Company Charter or the Company Bylaws or the comparable
organizational documents of any of the Company's Subsidiaries;
(ii) any loan or credit agreement, bond, debenture, note,
mortgage, indenture, lease or other contract, agreement, obligation, commitment,
arrangement, understanding, instrument, permit, franchise or license, whether
oral or written (each, including all amendments thereto, a "Contract"), to which
the Company or any of its Subsidiaries is a party or any of their respective
properties or other assets is subject; or
(iii) subject to the governmental filings, the obtaining of the
Shareholder Approval and the other matters referred to in the following sentence
and in Section 3.01(f) below, any (A) statute, law, ordinance, rule or
regulation or (B) order, writ, injunction, decree, judgment or stipulation, in
each case applicable to the Company or any of its Subsidiaries or their
respective properties or other assets;
other than, in the case of clauses (ii) and (iii), any such conflicts,
violations, breaches, defaults, rights, losses or Liens that individually or in
the aggregate would not reasonably be expected to have a Material Adverse
Effect.
(f) CONSENTS. Except as set forth in Section 3.01(f) of the Company
Disclosure Schedule, no consent, approval, order or authorization of, action by
or in respect of, or registration, declaration or filing with, any Federal,
state, local or foreign government, any court, administrative, regulatory or
other governmental agency, commission or authority or any non-governmental
self-regulatory agency, commission or authority (each, a "Governmental Entity")
is required to be obtained or made by or with respect to the Company or any of
its Subsidiaries in connection with the execution and delivery of this Agreement
by the Company or
9
the consummation of the Merger or the other transactions contemplated by this
Agreement, except for:
(i) the filing of a premerger notification and report form by the
Company under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"), and the
receipt, termination or expiration, as applicable, of approvals or waiting
periods required under the HSR Act or any other applicable competition, merger
control, antitrust or similar law or regulation;
(ii) the filing with the United States Securities and Exchange
Commission (the "SEC") of (A) a proxy statement relating to the approval by the
shareholders of the Company of this Agreement (as amended or supplemented from
time to time, the "Proxy Statement") and (B) such reports under Section 13(a),
13(d), 15(d) or 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as may be required in connection with this Agreement and the
transactions contemplated by this Agreement;
(iii) the filing of the Articles of Merger with the Corporation
Commission of the State of Arizona and appropriate documents with the relevant
authorities of other states in which the Company or any of its Subsidiaries is
qualified to do business;
(iv) any filings required under the rules and regulations of the
New York Stock Exchange; and
(v) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect.
(g) COMPANY SEC DOCUMENTS. Except as set forth in Section 3.01(g) of
the Company Disclosure Schedule, the Company has filed all reports, schedules,
forms, statements and other documents (including exhibits and other information
incorporated therein) with the SEC required to be filed by the Company since
October 1, 2002 (the "Company SEC Documents"). As of their respective dates, the
Company SEC Documents complied in all material respects with the requirements of
the Securities Act of 1933, as amended (the "Securities Act"), or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to such
Company SEC Documents, and none of the Company SEC Documents contained any
untrue statement of a material fact or omitted 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. The
Company SEC Documents identify all transactions required to bedisclosed pursuant
to Item 404 of Regulation S-K ("Related Party Transactions"and any person
described in Item 404 of Regulation S-K, a "Related Party"). As of the date
hereof, management has not determined that it will have, as of September 30,
2005, a material weakness in its internal controls. 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
10
misleading. The consolidated financial statements (including the related notes)
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 in the United States
("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, in all material
respects, 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 and recurring year-end audit adjustments).
None of the Subsidiaries of the Company are, or have at any time been, subject
to the reporting requirements of Sections 13(a) and 15(d) of the Exchange Act.
(h) NO ADDITIONAL LIABILITIES. Except (i) as set forth in the most
recent financial statements included in the Company SEC Documents filed or
furnished by the Company during the past 12 months and publicly available prior
to the date of this Agreement (the "Filed Company SEC Documents"), (ii) incurred
since June 30, 2005 in the ordinary course of business, or (iii) set forth in
Section 3.01(h) of the Company Disclosure Schedule, neither the Company nor any
of its Subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) which individually or in the
aggregate would reasonably be expected to have a Material Adverse Effect.
(i) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by reference
in the Proxy Statement will, at the date it is first mailed to the shareholders
of the Company and at the time of the Shareholders' 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, except that no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Parent or Sub in writing specifically for inclusion or incorporation by
reference in the Proxy Statement. 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.
(j) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for liabilities
incurred in connection with this Agreement or as set forth in Section 3.01(j) of
the Company Disclosure Schedule or included in Filed Company SEC Documents,
since June 30, 2005, the Company and its Subsidiaries have conducted their
respective businesses only in the ordinary course consistent with past practice,
and from such date until the date hereof there has not been:
(i) any event, change, effect, development, condition or
occurrence that, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect, including but not limited to, other than as
referenced in any Filed Company SEC Document, any failure by the Company to
preserve intact its current business organizations, keep available the services
of its officers, employees and consultants and preserve its relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with it;
11
(ii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any
capital stock of the Company or any of its Subsidiaries, other than dividends or
distributions by a direct or indirect wholly owned Subsidiary of the Company to
its shareholders;
(iii) any purchase, redemption or other acquisition by the
Company or any of its Subsidiaries of any shares of capital stock or any other
securities of the Company or any of its Subsidiaries or of any options,
warrants, calls or rights to acquire such shares or other securities;
(iv) any split, combination or reclassification of any capital
stock of the Company or any of its Subsidiaries 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 their respective capital stock;
(v) (A) any granting by the Company or any of its Subsidiaries to
any current or former director, officer, employee or consultant of the Company
or its Subsidiaries of any increase in compensation, bonus or fringe or other
benefits or any granting of any type of compensation or benefits to any current
or former director, officer, employee or consultant not previously receiving or
entitled to receive such type of compensation or benefit, except for normal
increases in cash compensation to non-executive employees (including, with
respect to new hires, cash bonus opportunities and compensation) in the ordinary
course of business consistent with past practice or as was required under any
Company Benefit Agreement or Company Benefit Plan in effect as of the date of
the most recent financial statements included in the Filed Company SEC
Documents, (B) any granting by the Company or any of its Subsidiaries to any
current or former director, officer, employee or consultant of the Company or
any of its Subsidiaries of any right to receive any increase in severance or
termination pay, except (x) in the ordinary course of business consistent with
past practice in connection with new hires to replace departed employees and (y)
in the ordinary course of business consistent with past practice in connection
with promotions made in the ordinary course of business consistent with past
practice for non-executive employees, (C) any entry into, adoption by, amendment
by or termination by, the Company or any of its Subsidiaries of (1) any
employment, deferred compensation, severance, change of control, termination or
indemnification agreement or any other agreement, plan or policy (including the
Company Benefit Plans), or any consulting agreement with aggregate amounts paid
or payable in excess of $50,000, with or involving any current or former
director, officer, employee or consultant of the Company or any of its
Subsidiaries other than any of the foregoing entered into, adopted, amended or
terminated in the ordinary course of business consistent with past practice with
respect to non-executive employees, or (2) any agreement with any current or
former director, officer, employee or consultant of the Company or any of its
Subsidiaries the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the Company
of a nature contemplated by this Agreement (all such agreements under this
clause (C), collectively, "Company Benefit Agreements"), or (D) any payment of
any benefit under, or the grant of any award under, or any material amendment
to, or termination of, any bonus, incentive, performance or other compensation
plan or arrangement, Company Benefit Agreement or Company Benefit Plan
(including in respect of stock options, "phantom" stock, stock appreciation
rights, restricted stock, "phantom" stock rights, restricted stock units,
deferred stock
12
units, performance stock units or other stock-based or stock-related awards or
the removal or modification of any restrictions in any Company Benefit Agreement
or Company Benefit Plan or awards made thereunder) except as required to comply
with applicable law or any Company Benefit Agreement or Company Benefit Plan in
effect as of the date of the most recent audited financial statements included
in the Filed Company SEC Documents;
(vi) any sale, lease, transfer, assignment or other disposition
of any assets material to the business and operations of the Company and its
Subsidiaries as presently conducted;
(vii) any incurrence of indebtedness for borrowed money or
guarantee of any such indebtedness of another person, other than the incurrence
of indebtedness under the Amended and Restated Credit Agreement dated as of June
30, 2004 by and among the Company and certain subsidiaries and affiliates, as
guarantors, and Bank One, N.A., as amended as of the date hereof;
(viii) any transfer, assignment, disposition, material amendment,
termination or other material change to any Contract between the Company or a
Subsidiary of the Company and any driver, team owner, sanctioning body,
automobile manufacturer or other material licensor;
(ix) any damage, destruction or loss, whether or not covered by
insurance, that individually or in the aggregate would reasonably be expected to
have a Material Adverse Effect;
(x) any change in accounting methods, principles or practices by
the Company materially affecting its assets, liabilities or businesses; or
(xi) any material tax election by the Company or any settlement
or compromise of any material income tax liability by the Company.
(k) LITIGATION. Except as set forth in Section 3.01(k) of the Company
Disclosure Schedule, there is no suit, action or proceeding pending or, to the
Knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries or any of their respective assets that individually or in the
aggregate would reasonably be expected to have a Material Adverse Effect, nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against, or, to the Knowledge of the Company,
investigation by any Governmental Entity involving, the Company or any of its
Subsidiaries or, to the Company's Knowledge, any of their respective assets that
individually or in the aggregate would reasonably be expected to have a Material
Adverse Effect.
(l) CONTRACTS. Except as disclosed in the Filed Company SEC Documents,
neither the Company nor any of its Subsidiaries is a party to, and none of their
respective properties or other assets is subject to, any contract or agreement
that is of a nature required to be filed as an exhibit to a report or filing
under the Securities Act or the Exchange Act and the rules and regulations
promulgated thereunder. None of the Company, any of its Subsidiaries or, to the
Knowledge of the Company, any party thereto is in violation of or in default
under (nor does there exist any condition which upon the passage of time or the
giving of notice or both could
13
cause such a violation of or default under) any Contract to which it is a party
or by, to the Knowledge of the Company, which it or any of its properties or
other assets is bound, except for violations or defaults that individually or in
the aggregate would not reasonably be expected to have a Material Adverse
Effect. Except as set forth in Section 3.01(l) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has entered into any
Contract with any Affiliate of the Company that is currently in effect other
than agreements that are disclosed in the Filed Company SEC Documents. Except as
set forth in Section 3.01(l) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries is a party to or otherwise bound by any
agreement or covenant restricting the Company's or any of its Subsidiaries'
ability to compete or by any agreement or covenant restricting in any respect
the license, marketing, co-promotion, manufacturing, research, development,
distribution, training, sale or supply of products or services of the Company or
any of its Subsidiaries.
(m) COMPLIANCE WITH LAWS. Except with respect to Environmental Laws,
the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and
taxes, which are the subjects of Sections 3.01(n), 3.01(p) and 3.01(r),
respectively, each of the Company and its Subsidiaries is in compliance with all
statutes, laws, ordinances, rules, regulations, judgments, orders and decrees of
any Governmental Entity applicable to it, its properties or other assets or its
business or operations (collectively, "Legal Provisions"), except for instances
of noncompliance or possible noncompliance that individually or in the aggregate
would not reasonably be expected to have a Material Adverse Effect. Each of the
Company and its Subsidiaries has in effect all approvals, authorizations,
certificates, filings, franchises, licenses, notices, permits and rights of or
with all Governmental Entities (collectively, "Permits") necessary for it to
own, lease or operate its properties and other assets and to carry on its
business and operations as presently conducted, except for such Permits the
absence of which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. No default has occurred under, and
there has been no violation of, any such Permit, except for any such default or
violations that, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. The consummation of the Merger would
not cause the revocation or cancellation of any such Permit, other than where
such revocation or cancellation would not reasonably be expected to have a
Material Adverse Effect. To the Company's Knowledge, except as set forth in
Section 3.01(m) of the Company Disclosure Schedule, during the five years
immediately preceding the date hereof, neither the Company nor any of its
Subsidiaries, nor any employee of the Company or any Subsidiary of the Company,
nor any other person acting on behalf of the Company, any such Subsidiary or any
such employee, has given or agreed to give, directly or indirectly, any gift or
similar benefit to any dealer, supplier, customer, governmental employee or
other person who is or may be in a position to help or hinder the Company or any
of its Subsidiaries (or assist the Company or any of its Subsidiaries in
connection with any actual or proposed transaction), which might subject the
Company or any of its Subsidiaries to any damage or penalty in any civil,
criminal or governmental litigation or proceeding and which, if not continued in
the future, would be reasonably likely to have a Material Adverse Effect. Except
as set forth in Section 3.01(m) of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries, nor, to the Knowledge of the Company, any
director, officer, agent or employee of the Company or any of its Subsidiaries,
has taken any action which would cause the Company or any of its Subsidiaries to
be in violation of the Foreign Corrupt Practices Act of 1977 or any applicable
law of similar
14
effect, except for such violations that, individually or in the aggregate, would
not reasonably be expected to result in a criminal proceeding against the
Company.
(n) ENVIRONMENTAL MATTERS.
(i) Except for those matters that individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect:
(A) each of the Company and its Subsidiaries is, and has been, in compliance
with all applicable Environmental Laws and has obtained and complied with all
material Permits required under any Environmental Laws to own, lease or operate
its properties or other assets and to carry on its business and operations as
presently conducted; (B) there have been no Releases or threatened Releases of
Hazardous Materials in, on, from, under or affecting any properties currently or
formerly owned, leased or operated by the Company or any of its Subsidiaries
that reasonably would be expected to form the basis of any claim against, or
liability or other loss incurred by, the Company or any of its Subsidiaries or
against or by any person whose liabilities for such claims the Company or any
Subsidiary has, or may have, retained or assumed, either contractually or by
operation of law; (C) no investigation, suit, claim, action, allegation or
proceeding is pending, or to the Knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries relating to or arising under
Environmental Laws, and neither the Company nor any of its Subsidiaries has
received any written notice of any such investigation, suit, claim, action,
allegation or proceeding; and (D) neither the Company nor any of its
Subsidiaries has retained or assumed by Contract or operation of law or
otherwise, any obligation or liability that would reasonably be expected to form
the basis of any claim, liability or other loss arising under Environmental
Laws.
(ii) The term "Environmental Laws" means all Federal, state,
local and foreign laws (including the common law), statutes, rules, regulations,
codes, ordinances, orders, decrees, judgments, injunctions, notices, Permits,
treaties or binding agreements issued, promulgated or entered into by any
Governmental Entity, relating in any way to the environment, preservation or
reclamation of natural resources or threatened, endangered or other special
status species, the presence, management, Release or threat of Release of, or
exposure to, Hazardous Materials, or to human health and safety. The term
"Hazardous Materials" means (1) petroleum products and by-products, asbestos and
asbestos-containing materials, urea formaldehyde foam insulation, medical or
infectious wastes, polychlorinated biphenyls, radon gas, chlorofluorocarbons and
all other ozone-depleting substances or (2) any chemical, material, substance,
waste, pollutant or contaminant for which the use, treatment, storage,
management, release or disposal is prohibited, limited or regulated by or
pursuant to any Environmental Law. The term "Release" means any spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, disposing or migrating into or through the environment or any
natural or man-made structure.
(o) ABSENCE OF CHANGES IN COMPANY BENEFIT PLANS; LABOR RELATIONS.
Since 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 of its
Subsidiaries of any collective bargaining agreement or material employment,
bonus, pension, profit sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock appreciation, restricted stock, stock
option, "phantom" stock, performance, retirement, thrift, savings, stock bonus,
paid time
15
off, perquisite, fringe benefit, vacation, severance, disability, death benefit,
hospitalization, medical, welfare benefit or other plan, program, policy,
arrangement or understanding (whether or not legally binding) maintained,
contributed to or required to be maintained or contributed to by the Company or
any of its Subsidiaries or any other person or entity that, together with the
Company, is treated as a single employer under Section 414(b), (c), (m) or (o)
of the Code (each, a "Commonly Controlled Entity"), in each case providing
benefits to any current or former director, officer, employee or consultant of
the Company or any of its Subsidiaries (collectively, the "Company Benefit
Plans"), or any material change in any actuarial or other assumption used to
calculate funding obligations with respect to any Company Pension Plans, or any
material change in the manner in which contributions to any Company Pension
Plans are made or the basis on which such contributions are determined. Except
as disclosed in the Filed Company SEC Documents or in Section 3.01(o) of the
Company Disclosure Schedule, there exist no currently binding Company Benefit
Agreements. There are no collective bargaining or other labor union agreements
to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound. None of the employees of the
Company or any of its Subsidiaries are represented by any union with respect to
their employment by the Company or such Subsidiary. Since October 1, 2004,
neither the Company nor any of its Subsidiaries has experienced any material
labor disputes, union organization attempts or work stoppages, slowdowns or
lockouts due to labor disagreements.
(p) ERISA COMPLIANCE.
(i) Section 3.01(p)(i) of the Company Disclosure Schedule
contains a complete and accurate list of each Company Benefit Plan that is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) (sometimes
referred to herein as a "Company Pension Plan"), each Company Benefit Plan that
is an "employee welfare benefit plan" (as defined in Section 3(1) of ERISA) and
all other material Company Benefit Plans. The Company has provided or made
available to Parent complete and accurate copies of (A) each Company Benefit
Plan (or, in the case of any unwritten Company Benefit Plans, descriptions
thereof), (B) the two most recent annual reports on Form 5500 required to be
filed with the Internal Revenue Service (the "IRS") with respect to each Company
Benefit Plan (if any such report was required), (C) the most recent summary plan
description for each Company Benefit Plan for which such a summary plan
description is required and (D) each trust agreement and insurance or group
annuity contract relating to any Company Benefit Plan. Each Company Benefit Plan
has been administered in all material respects in accordance with its terms. The
Company, its Subsidiaries and all the Company Benefit Plans are all in
compliance with the applicable provisions of ERISA, the Code and all other
applicable laws, including laws of foreign jurisdictions, and the terms of all
collective bargaining agreements, except for any instances of noncompliance
that, individually or in the aggregate, would not be reasonably expected to have
a Material Adverse Effect.
(ii) All Company Pension Plans intended to be tax-qualified have
received favorable determination letters from the IRS with respect to "TRA" (as
defined in Section 1 of Rev. Proc. 93-39), and have timely filed with the IRS
determination letter applications with respect to "GUST" (as defined in Section
1 of Notice 2001-42), 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 Code, no such determination letter has been
16
revoked (nor, to the Knowledge of the Company, has revocation been threatened)
and no event has occurred since the date of the most recent determination letter
or application therefor relating to any such Company Pension Plan that would
reasonably be expected to adversely affect the qualification of such Company
Pension Plan or materially increase the costs (individually or in the aggregate)
relating thereto or require security under Section 307 of ERISA. All Company
Pension Plans required to have been approved by any foreign Governmental Entity
have been so approved, no such approval has been revoked (nor, to the Knowledge
of the Company, has revocation been threatened) and no event has occurred since
the date of the most recent approval or application therefor relating to any
such Company Pension Plan that would reasonably be expected to materially affect
any such approval relating thereto or materially increase the costs
(individually or in the aggregate) relating thereto. The Company has delivered
to Parent a complete and accurate copy of the most recent determination letter
received with respect to each Company Pension Plan, as well as a complete and
accurate copy of each pending application for a determination letter, if any.
The Company has also provided to Parent a complete and accurate list of all
amendments to any Company Pension Plan as to which a favorable determination
letter has not yet been received.
(iii) Neither the Company nor any Commonly Controlled Entity has
(A) maintained, contributed to or been required to contribute to any Company
Benefit Plan that is subject to Title IV of ERISA or (B) has any unsatisfied
liability under Title IV of ERISA.
(iv) All reports, returns and similar documents with respect to
all Company Benefit Plans required to be filed with any Governmental Entity or
distributed to any Company Benefit Plan participant have been duly and timely
filed or distributed. None of the Company or any of its Subsidiaries has
received written notice of, and to the Knowledge of the Company, there are no
investigations by any Governmental Entity pending with respect to, termination
proceedings or other claims (except claims for benefits payable in the normal
operation of the Company Benefit Plans), suits or proceedings against or
involving any Company Benefit Plan or asserting any rights or claims to benefits
under any Company Benefit Plan that would give rise to any material liability
(individually or in the aggregate).
(v) All contributions, premiums and benefit payments under or in
connection with the Company Benefit Plans that are required to have been made as
of the date hereof in accordance with the terms of the Company Benefit Plans
have been timely made or have been reflected on the most recent consolidated
balance sheet filed or incorporated by reference into the Filed Company SEC
Documents. Neither any Company Pension Plan nor any single-employer plan of any
Commonly Controlled Entity 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.
(vi) With respect to each Company Benefit Plan, (A) there has not
occurred any prohibited transaction (within the meaning of Section 406 of ERISA
or Section 4975 of the Code) in which the Company or any of its Subsidiaries or
any of their respective employees, or any trustee, administrator or other
fiduciary of such Company Benefit Plan, or any agent of the foregoing, has
engaged that would reasonably be expected to subject the Company or any of its
Subsidiaries or any of their respective employees, or, to the Knowledge of the
Company, a trustee, administrator or other fiduciary of any trust created under
any Company
17
Benefit Plan, to the tax or penalty on prohibited transactions imposed by
Section 4975 of the Code or the sanctions imposed under Title I of ERISA, except
for any such transactions that, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect and (B) neither the
Company nor any of its Subsidiaries nor, to the Knowledge of the Company, any
trustee, administrator or other fiduciary of any Company Benefit Plan nor any
agent of any of the foregoing, has engaged in any transaction or acted in a
manner, or failed to act in a manner, that could reasonably be expected to
subject the Company or any of its Subsidiaries or, to the Knowledge of the
Company, any trustee, administrator or other fiduciary, to any liability for
breach of fiduciary duty under ERISA or any other applicable law, except for any
such transactions that, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect. No Company Benefit Plan or
related trust has been terminated, nor has there been any "reportable event" (as
that term is defined in Section 4043 of ERISA) for which the 30-day reporting
requirement has not been waived with respect to any Company Benefit Plan, during
the last five years, and no notice of a reportable event will be required to be
filed in connection with the transactions contemplated by this Agreement.
(vii) Section 3.01(p)(vii) of the Company Disclosure Schedule
discloses whether each Company Benefit Plan that is an employee welfare benefit
plan is (A) unfunded or self-insured, (B) funded through a "welfare benefit
fund", as such term is defined in Section 419(e) of the Code, or other funding
mechanism or (C) insured. Each such employee welfare benefit plan may be amended
or terminated (including with respect to benefits provided to retirees and other
former employees) without material liability (individually or in the aggregate)
to the Company or any of its Subsidiaries at any time after the Effective Time.
Each of the Company and its Subsidiaries complies with the applicable
requirements of Section 4980B(f) of the Code or any similar state statute with
respect to each Company Benefit Plan that is a group health plan, as such term
is defined in Section 5000(b)(1) of the Code or such state statute, except for
any instances of noncompliance that, individually or in the aggregate, would not
be reasonably expected to have a Material Adverse Effect. Neither the Company
nor any of its Subsidiaries has any material obligations (individually or in the
aggregate) for retiree health or life insurance benefits under any Company
Benefit Plan (other than for continuation coverage required under Section
4980(f) of the Code).
(viii) Except as set forth in Section 3.01(p)(viii) of the
Company Disclosure Schedule, none of the execution and delivery of this
Agreement, the Shareholder Agreement, the obtaining of the Shareholder Approval
or the consummation of the Merger or any other transaction expressly
contemplated by this Agreement or the Shareholder Agreement (including as a
result of any termination of employment on or following the Effective Time) will
(A) entitle any current or former director, officer, employee or consultant of
the Company or any of its Subsidiaries to severance or termination pay, (B)
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
(individually or in the aggregate) pursuant to, any Company Benefit Plan or
Company Benefit Agreement or (C) result in any breach or violation of, or a
default under, any Company Benefit Plan or Company Benefit Agreement. The
Company has provided Parent with an estimate of the total amount of all payments
and the fair market value of all non-cash benefits that may become payable or
provided to any director, officer, employee or consultant of the Company or any
of its Subsidiaries under the Company Benefit Agreements (assuming for such
purpose that such
18
individuals' employment were terminated immediately following the Effective Time
as if the Effective Time were the date hereof).
(ix) Neither the Company nor any of its Subsidiaries has any
liability or obligations, including under or on account of a Company Benefit
Plan, arising out of the hiring of persons to provide services to the Company or
any of its Subsidiaries and treating such persons as consultants or independent
contractors and not as employees of the Company or any of its Subsidiaries,
except for any such liabilities or obligations that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect.
(x) No deduction by the Company or any of its Subsidiaries in
respect of any "applicable employee remuneration" (within the meaning of Section
162(m) of the Code) has been disallowed or is subject to disallowance by reason
of Section 162(m) of the Code.
(q) NO EXCESS PARACHUTE PAYMENTS. Other than payments or benefits that
may be made to the persons listed in Section 3.01(q) of the Company Disclosure
Schedule ("Primary Company Executives"), no amount or other entitlement or
economic benefit that could be received (whether in cash or property or the
vesting of property) as a result of the execution and delivery of this
Agreement, the Shareholder Agreement, the obtaining of the Shareholder Approval,
the consummation of the Merger or any other transaction contemplated by this
Agreement or the Shareholder Agreement (including as a result of termination of
employment on or following the Effective Time) by or for the benefit of any
director, officer, employee or consultant 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 Company Benefit Plan,
Company Benefit Agreement or otherwise would be set forth therein as an "excess
parachute payment" (as such term is defined in Section 280G(b)(1) of the Code),
and no such disqualified individual is entitled to receive any additional
payment from the Company or any of its Subsidiaries, the Surviving Corporation
or any other person in the event that the excise tax required by Section 4999(a)
of the Code is imposed on such disqualified individual (a "Parachute Gross Up
Payment"). The Company has provided Parent with a calculation, as Section
3.01(q) of the Company Disclosure Schedule sets forth, calculated as of the date
set forth therein of (i) the "base amount" (as such term is defined in Section
280G(b)(3) of the Code) for (A) each Primary Company Executive and (B) each
other disqualified individual (defined as set forth above) whose Company Stock
Options will vest pursuant to their terms in connection with the execution and
delivery of this Agreement, the Shareholder Agreement, the obtaining of the
Shareholder Approval, the consummation of the Merger or any other transaction
contemplated by this Agreement or the Shareholder Agreement (including as a
result of any termination of employment on or following the Effective Time) and
(ii) the estimated maximum amount, including any Parachute Gross Up Payment,
that could be paid or provided to each Primary Company Executive as a result of
the execution and delivery of this Agreement, the Shareholder Agreement, the
obtaining of the Shareholder Approval, the consummation of the Merger or any
other transaction contemplated by this Agreement or the Shareholder Agreement
(including as a result of any termination of employment on or following the
Effective Time), in each case subject to the assumptions stated therein.
(r) TAXES.
19
(i) Each of the Company, its Subsidiaries and each Company
Consolidated Group has filed or has caused to be filed in a timely manner
(within any applicable extension period) all material tax returns required to be
filed with any taxing authority pursuant to the Code (and any applicable
Treasury Regulations) or applicable state, local or foreign tax laws. All such
tax returns are complete and accurate in all material respects and have been
prepared in substantial compliance with all applicable laws and regulations.
Each of the Company, its Subsidiaries and each Company Consolidated Group has
paid or caused to be paid (or the Company has paid on its behalf) all material
taxes (individually or in the aggregate) due and owing, and, in accordance with
GAAP, the most recent financial statements contained in the Filed Company SEC
Documents reflect an adequate reserve (excluding any reserves for deferred taxes
established to reflect timing differences between book and tax income) for all
material taxes (individually or in the aggregate) payable by the Company and its
Subsidiaries for all taxable periods and portions thereof accrued through the
date of such financial statements.
(ii) No tax return of the Company or any of its Subsidiaries or
any Company Consolidated Group is under audit or examination by any taxing
authority, and no written notice of such an audit or examination has been
received by the Company or any of its Subsidiaries or any Company Consolidated
Group. Except as set forth in Section 3.01(r)(ii) of the Company Disclosure
Schedule, there is no assessed deficiency, refund litigation, proposed
adjustment or matter in controversy with respect to any material amount
(individually or in the aggregate) of taxes due and owing by the Company or any
of its Subsidiaries or any Company Consolidated Group. Except as set forth in
Section 3.01(r)(ii) of the Company Disclosure Schedule, each material assessed
deficiency resulting from any completed audit or examination relating to taxes
by any taxing authority has been timely paid (including payment of applicable
penalties or interest). No issues relating to any material amount (individually
or in the aggregate) of taxes were raised by the relevant taxing authority in
any completed audit or examination that could reasonably be expected to recur in
a later taxable period. Except as set forth in Section 3.01(r)(ii) of the
Company Disclosure Schedule, there is no currently effective agreement or other
document extending, or having the effect of extending, the period of assessment
or collection of any material taxes of the Company or its Subsidiaries or any
Company Consolidated Group, nor has any request been made by the Company, any of
its Subsidiaries or any Company Consolidated Group for any such extension, and
no power of attorney (other than powers of attorney authorizing employees of the
Company, any of its Subsidiaries or any Company Consolidated Group to act on
behalf of the Company, any of its Subsidiaries or any Company Consolidated
Group) with respect to any taxes has been executed or filed by the Company, any
of its Subsidiaries or any Company Consolidated Group with any taxing authority.
(iii) None of the Company or any of its Subsidiaries will be
required to include in a taxable period ending after the Effective Time taxable
income attributable to income that accrued (for purposes of the financial
statements of the Company included in the Filed Company SEC Documents) in a
prior taxable period (or portion of a taxable period) but was not recognized for
tax purposes in any prior taxable period as a result of (A) an open transaction
disposition made on or before the Effective Time, (B) a prepaid amount received
on or prior to the Effective Time, (C) any method of accounting for tax purposes
(including, without limitation, the installment method or the long-term contract
method of accounting) or Section 481 of the
20
Code or (D) any comparable provisions of state or local tax law, domestic or
foreign, or for any other reason.
(iv) The Company and its Subsidiaries have complied with all
applicable statutes, laws, ordinances, rules and regulations relating to the
payment and withholding of any material amount (individually or in the
aggregate) of taxes and have, within the time and the manner prescribed by law,
withheld from and paid over to the proper governmental authorities all material
amounts (individually or in the aggregate) required to be so withheld and paid
over under applicable laws.
(v) None of the Company or any of its Subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation" in
a distribution of stock qualifying or intended to qualify for tax-free treatment
(in whole or in part) under Sections 355 or 361(c) of the Code.
(vi) Neither the Company nor any of its Subsidiaries (A) is or
has been a member of an affiliated group (within the meaning of Section 1504 of
the Code) filing a consolidated federal income tax return other than an
affiliated group the common parent of which is the Company, (B) is or has been a
member of any affiliated, combined, consolidated, unitary, or similar group for
state, local or foreign tax purposes other than a group the common parent of
which is the Company, (C) is or has been a party to any tax allocation, tax
sharing, or tax indemnification agreement, or (D) has any material liability
(individually or in the aggregate) for the taxes of any person (other than any
of the Company and its Subsidiaries) under Treasury Regulations Section 1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(vii) No written claim has ever been made by any authority in a
jurisdiction where any of the Company or its Subsidiaries does not file a tax
return that it is, or may be, subject to a material amount (individually or in
the aggregate) of tax by that jurisdiction.
(viii) Neither the Company nor any of its Subsidiaries is a party
to or bound by any advance pricing agreement, closing agreement or other
agreement relating to taxes with any taxing authority.
(ix) No Liens for taxes exist with respect to any assets or
properties of the Company or its Subsidiaries, except for statutory Liens for
taxes not yet due and payable.
(x) The Company is not and has never been a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code.
(xi) Except as set forth in Section 3.01(r)(xi) of the Company
Disclosure Schedule, there are no material "deferred intercompany transactions"
or "intercompany transactions" between the Company and any of its Subsidiaries
(or any of their respective predecessors), the gain or loss in which has not yet
been taken into account under the consolidated return Treasury Regulations
currently or previously in effect, as applicable.
21
(xii) Neither the Company nor any of its Subsidiaries has
participated in a listed transaction within the meaning of Treasury Regulations
Section 1.6011-4(b)(2) or any similar listed transaction under applicable state
law.
(xiii) As used in this Agreement (A) "tax" or "taxes" shall
include (whether disputed or not) all (x) Federal, state, local and foreign
income, gross receipts, franchise, property, sales, use, excise, withholding,
payroll, employment, social security, capital gain, alternative minimum,
transfer, value added and other taxes and similar governmental charges,
including any interest, penalties and additions with respect thereto, (y)
liability for the payment of any amounts of the type described in clause (x) as
a result of being a member of an affiliated, consolidated, combined, unitary or
aggregate group and (z) liability for the payment of any amounts as a result of
being party to any tax sharing agreement or as a result of any express or
implied obligation to indemnify any other person with respect to the payment of
any amounts of the type described in clause (x) or (y); (B) "Company
Consolidated Group" means any affiliated group within the meaning of Section
1504(a) of the Code, or any other similar state, local or foreign law, in which
the Company (or any Subsidiary of the Company) is or has ever been a member or
any group of corporations with which the Company files, has filed or is or was
required to file an affiliated, consolidated, combined, unitary or aggregate tax
return; (C) "taxing authority" means any Federal, state, local or foreign
government, any subdivision, agency, commission or authority thereof, or any
quasi-governmental body exercising tax regulatory authority; (D) "tax return" or
"tax returns" means all returns, declarations of estimated tax payments,
reports, estimates, information returns and statements, including any related or
supporting information with respect to any of foregoing, filed or to be filed
with any taxing authority in connection with the determination, assessment,
collection or administration of any taxes; and (E) "Treasury Regulations" means
the regulations promulgated under the Code in effect on the date hereof and the
corresponding sections of any regulations subsequently issued that amend or
supersede such regulations.
(s) TITLE TO PROPERTIES.
(i) Except as set forth in Section 3.01(s)(i) of the Company
Disclosure Schedule, each of the Company and its Subsidiaries has good and
marketable title to, or valid leasehold interests in, all its properties and
other assets except for such as are no longer used or useful in the conduct of
its business or as have been disposed of in the ordinary course of business and
except for defects in title, easements, restrictive covenants and similar
encumbrances that individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect and that would not reasonably be
expected to materially interfere with, its ability to conduct its business as
presently conducted. Except as set forth in Section 3.01(s)(i) of the Company
Disclosure Schedule, all such properties and other assets, other than properties
and other assets in which the Company or any of its Subsidiaries has a leasehold
interest, are free and clear of all Liens, except for Liens that individually or
in the aggregate have not materially interfered with, and could not reasonably
be expected to materially interfere with, the ability of the Company or any of
its Subsidiaries to conduct their respective businesses as presently conducted.
Except as set forth in Section 3.01(s)(i) of the Company Disclosure Schedule,
the Company has good and marketable title to all memorabilia, other than
photographs, on display in its corporate headquarters in Tempe, Arizona.
22
(ii) Each of the Company and its Subsidiaries has complied with
the terms of all material leases to which it is a party and under which it is in
occupancy, except for any instances of noncompliance that, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect, and, to the Knowledge of the Company, all such leases to which the
Company is a party or under which it is in occupancy are in full force and
effect. Each of the Company and its Subsidiaries enjoys in all material respects
peaceful and undisturbed possession of the real property assets purported to be
leased under its material leases.
(t) INTELLECTUAL PROPERTY.
(i) Subject to Section 3.01(t)(i) of the Company Disclosure
Schedule, each of the Company and its Subsidiaries owns, or is validly licensed
or otherwise has the right to use all inventions, discoveries, innovations,
improvements, patents, patent applications, trademarks, trademark rights, trade
names, trade name rights, domain names, service marks, service xxxx rights,
copyrights, software, source code, tooling, manufacturing methods, technical
know-how and other proprietary intellectual property rights and computer
programs (collectively, "Intellectual Property Rights") which are material to
the conduct of the business of the Company and its Subsidiaries, taken as a
whole, in each case free and clear of all Liens. No Related Party owns or
licenses any Intellectual Property Rights used by the Company in the conduct of
its business.
(ii) Except as set forth in Section 3.01(t)(ii) of the Company
Disclosure Schedule, no suit, action or proceeding is pending or, to the
Knowledge of the Company, threatened that the Company or any of its Subsidiaries
is infringing (including with respect to the manufacture, use or sale by the
Company or any of its Subsidiaries of their respective products) the rights of
any person with regard to any Intellectual Property Right. To the Knowledge of
the Company, no person or persons are infringing the rights of the Company or
any of its Subsidiaries with respect to any Intellectual Property Right.
(iii) Except as set forth in Section 3.01(t)(iii) of the Company
Disclosure Schedule, no suit, action or proceeding is pending or, to the
Knowledge of the Company, threatened with regard to the ownership by the Company
or any of its Subsidiaries of any of their respective Intellectual Property
Rights.
(iv) Section 3.01(t)(iv) of the Company Disclosure Schedule sets
forth, as of the date hereof, a complete and accurate list of all material
patents, registered trademarks and applications therefor, common law trademarks,
domain name registrations and copyright registrations (if any) owned by or
licensed to the Company or any of its Subsidiaries. All patents and patent
applications listed in Section 3.01(t)(iv) of the Company Disclosure Schedule
are owned by or licensed to the Company or a Subsidiary of the Company free and
clear of all Liens. The patent applications listed in Section 3.01(t)(iv) of the
Company Disclosure Schedule are pending and have not been abandoned, and have
been and continue to be timely prosecuted. All material patents, registered
trademarks and applications therefor owned by or licensed to the Company or any
of its Subsidiaries have been duly registered and/or filed with or issued by
each appropriate Governmental Entity in the jurisdiction indicated in Section
3.01(t)(iv) of the Company Disclosure Schedule, all necessary affidavits of
continuing use have been filed, and all
23
necessary maintenance fees have been timely paid to continue all such rights in
effect. There are no ongoing interferences, oppositions, reissues,
reexaminations or other proceedings involving any of the patents or patent
applications listed in Section 3.01(t)(iv) of the Company Disclosure Schedule,
including ex parte and post-grant proceedings, in the United States Patent and
Trademark Office or in any foreign patent office or similar administrative
agency, other than as would not reasonably be expected to have a Material
Adverse Effect. Each of the patents and patent applications listed in Section
3.01(t)(iv) of the Company Disclosure Schedule each and every inventor of the
claims thereof as determined in accordance with the laws of the jurisdiction in
which such patent is issued or such patent application is pending. Each inventor
named on the patents and patent applications listed in Section 3.01(t)(iv) of
the Company Disclosure Schedule has executed an agreement assigning his, her or
its entire right, title and interest in and to such patent or patent
application, and the inventions embodied and claimed therein, to the Company or
a Subsidiary of the Company.
(v) Section 3.01(t)(v) of the Company Disclosure Schedule sets
forth a complete and accurate list of all options, rights, licenses or interests
of any kind relating to Intellectual Property Rights granted (i) to the Company
or any of its Subsidiaries (other than software licenses for generally available
software and except pursuant to employee proprietary inventions agreements (or
similar employee agreements), non-disclosure agreements and consulting
agreements entered into by the Company or any of its Subsidiaries in the
ordinary course of business), or (ii) by the Company or any of its Subsidiaries
to any other person, in each case that are material to the Company.
(vi) The Company and its Subsidiaries have used reasonable
efforts to maintain their material trade secrets in confidence, including
entering into licenses and contracts that generally require licensees,
contractors and other third persons with access to such trade secrets to keep
such trade secrets confidential.
(u) VOTING REQUIREMENTS. The affirmative vote of holders of a majority
of the outstanding shares of Company Common Stock at the Shareholders' Meeting
or any adjournment or postponement thereof to approve this Agreement (the
"Shareholder Approval") is the only vote of the holders of any class or series
of capital stock of the Company necessary to adopt this Agreement and approve
the transactions contemplated hereby.
(v) STATE TAKEOVER STATUTES. The Board of Directors of the Company or
a committee of such Board of Directors has unanimously approved the terms of
this Agreement and the Shareholder Agreement and the consummation of the Merger
and the other transactions contemplated by this Agreement and the Shareholder
Agreement, and such approval or approvals represent all the action necessary to
render inapplicable to this Agreement, the Shareholder Agreement, the Merger and
the other transactions contemplated by this Agreement and the Shareholder
Agreement, the limitations on business combinations contained in Sections
10-2741 through 10-2743 of the Arizona Code. No other state takeover statute or
similar statute or regulation applies to this Agreement, the Shareholder
Agreement, the Merger or the other transactions contemplated by this Agreement
or the Shareholder Agreement.
(w) BROKERS AND OTHER ADVISORS. Except as set forth in Section 3.01(w)
of the Company Disclosure Schedule, no broker, investment banker, financial
advisor or other person
24
(other than SunTrust Xxxxxxxx Xxxxxxxx, the fees and expenses of which will be
paid by the Company), is entitled to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. The Company has delivered to Parent complete and accurate copies of
all agreements under which any such fees or expenses are payable and all
indemnification and other agreements related to the engagement of the persons to
whom such fees are payable.
(x) OPINION OF FINANCIAL ADVISOR. The Company has received the opinion
of SunTrust Xxxxxxxx Xxxxxxxx, dated as of the date of the meeting of the
Company's Board of Directors referred to in Section 3.01(d) above, to the effect
that, as of such date, the Merger Consideration is fair, from a financial point
of view, to the holders of shares of Company Common Stock, a signed copy of
which opinion has been delivered to Parent.
(y) INSURANCE. Section 3.01(y) of the Company Disclosure Schedule
contains a complete and accurate list of all policies of fire, liability,
workers' compensation, title and other forms of insurance owned, held by or
applicable to the Company (or its assets or business), and the Company has
heretofore delivered to Parent a complete and accurate copy of all such
policies, including all occurrence-based policies applicable to the Company (or
its assets or business) for all periods prior to the Closing Date. All such
policies (or substitute policies with substantially similar terms and
underwritten by insurance carriers with substantially similar or higher ratings)
are in full force and effect, all premiums with respect thereto covering all
periods up to and including the Closing Date have been paid, and no written
notice of cancellation or termination has been received with respect to any such
policy except for such policies, premiums, cancellations or terminations that
individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect.
SECTION 3.02 REPRESENTATIONS AND WARRANTIES OF PARENT PARTIES. Except as
set forth in the disclosure schedule (with specific reference to the particular
Section or subsection of this Agreement to which the information set forth in
such disclosure schedule relates) delivered by the Parent Parties to the Company
prior to the execution of this Agreement (the "Parent Disclosure Schedule"),
each of the Parent Parties severally (and not jointly) represents and warrants
(and as to the Guarantors, each in proportion to its respective ownership of
Parent) to the Company, as to such Parent Party, as follows (for purposes of
this Section 3.02, the Parent Parties shall mean Parent Sub and each Guarantor):
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each Parent Party is a
limited liability company or corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is organized and
has all requisite limited liability company or corporate power and authority to
carry on its business as now being conducted. Each Parent Party is duly
qualified or licensed to do business and is in good standing in each material
jurisdiction in which the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed individually or in the aggregate would not reasonably be expected to
have a material adverse effect on Parent or Sub.
25
(b) AUTHORITY; NONCONTRAVENTION. Each Parent Party has all requisite
limited liability company or corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by each Parent Party and
the consummation by each Parent Party of the transactions contemplated by this
Agreement have been duly authorized by all necessary limited liability company
or corporate action on the part of such Parent Party and no other limited
liability company or corporate proceedings on the part of such Parent Party are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement and the transactions contemplated hereby do
not require approval of the holders of any member interests of Parent. This
Agreement has been duly executed and delivered by each Parent Party and,
assuming the due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of such Parent Party, as
applicable, enforceable against such Parent Party, as applicable, in accordance
with its terms. The execution and delivery of this Agreement do not, and the
consummation of the Merger and the other transactions contemplated by this
Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation or breach of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of, or
result in, termination, cancellation or acceleration of any obligation or to the
loss of a benefit under, or result in the creation of any Lien in or upon any of
the properties or other assets of any Parent Party under (x) the Certificate of
Formation or Limited Liability Company Agreement of Parent or the Certificate of
Incorporation or Bylaws of Sub or any Guarantor, (y) any Contract to which any
Parent Party is a party or any of their respective properties or other assets is
subject, in any way that would prevent the consummation by Parent or Sub of the
Merger or (z) subject to the governmental filings and other matters referred to
in the following sentence, any (A) statute, law, ordinance, rule or regulation
or (B) order, writ, injunction, decree, judgment or stipulation, in each case
applicable to such Parent Party or their respective properties or other assets,
and in each case, in any way that would prevent the consummation by Parent or
Sub of the Merger. No material consent, approval, order or authorization of,
action by or in respect of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to any Parent Party in
connection with the execution and delivery of this Agreement by such Parent
Party or the consummation by Parent and Sub of the Merger or the other
transactions contemplated by this Agreement, except for (1) the filing of a
premerger notification and report form by Parent or the Guarantors under the HSR
Act and the receipt, termination or expiration, as applicable, of approvals or
waiting periods required under the HSR Act or any other applicable competition,
merger control, antitrust or similar law or regulation and (2) the filing of the
Articles of Merger with the Corporation Commission of the State of Arizona.
(c) LITIGATION. There is no suit, action, investigation or proceeding
pending or, to the knowledge of any Parent Party, threatened against or
affecting a Parent Party or any of its Affiliates that would reasonably be
expected to materially impair the ability of a Parent Party to perform its
obligations hereunder or to consummate the transactions contemplated hereby on a
timely basis. To the knowledge of any Parent Party, after consultation with its
professional advisors, consummation of the transactions hereby will not violate
any rule, law or regulation.
(d) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by or on behalf of any Parent Party specifically for inclusion or
incorporation by reference in the
26
Proxy Statement will, at the date it is first mailed to the shareholders of the
Company and at the time of the Shareholders' 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.
(e) INTERIM OPERATIONS OF SUB. Sub was formed solely for the purpose
of engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
(f) CAPITAL RESOURCES. Parent has sufficient cash, or commitments from
the Guarantors, to pay the aggregate Merger Consideration.
ARTICLE 4
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.01 CONDUCT OF BUSINESS.
(a) CONDUCT OF BUSINESS BY THE COMPANY. During the period from the
date of this Agreement to the Effective Time, the Company shall, and shall cause
each of its Subsidiaries to, carry on its business in the ordinary course
consistent with past practice and in material compliance with all applicable
laws, rules, regulations and treaties and, to the extent consistent therewith,
use all commercially reasonable efforts to preserve intact its current business
organizations, keep available the services of its current officers, employees
and consultants and preserve its relationships with customers, suppliers,
licensors, licensees, distributors and others, except to the extent that the
Company's failure to use such commercially reasonable efforts would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. In addition to and without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Effective
Time, the Company shall not, and shall not permit any of its Subsidiaries to,
without Parent's prior written consent, or except as set forth in Section
4.01(a) of the Company Disclosure Schedule:
(i) (x) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, stock or property) in respect of, any of
its capital stock, other than dividends or distributions by a direct or indirect
wholly owned Subsidiary of the Company to its parent, (y) 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 (z) purchase, redeem or otherwise acquire any shares of its
capital stock or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities;
(ii) except as provided in Section 5.04, issue, deliver, sell,
grant, amend the terms of, reprice, pledge or otherwise encumber or subject to
any Lien any shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to acquire, any
such shares, voting securities or convertible securities, or any "phantom"
stock, "phantom" stock rights, stock appreciation rights or stock based
performance units, including pursuant to Contracts as in effect on the date
hereof (other than the issuance of
27
shares of Company Common Stock upon the exercise of Company Stock Options or
Warrants, in each case outstanding on the date hereof in accordance with their
terms on the date hereof);
(iii) amend the Company Charter or the Company Bylaws or other
comparable charter or organizational documents of any of the Company's
Subsidiaries;
(iv) directly or indirectly acquire (x) by merging or
consolidating with, or by purchasing assets of, or by any other manner, any
person or division, business or equity interest of any person or (y) any asset
or assets that are material to the Company and its Subsidiaries, taken as a
whole, except purchases of components, raw materials or supplies in the ordinary
course of business consistent with past practice;
(v) (x) sell, lease, license, mortgage, sell and leaseback or
otherwise encumber or subject to any Lien or otherwise dispose of any of its
material properties or other assets or any interests therein (including
securitizations), except for sales of inventory and used equipment in the
ordinary course of business consistent with past practice or pursuant to
contracts or agreements in effect as of the date hereof; or (y) enter into,
modify, renew, extend or amend any lease of material property, except for
modifications or amendments that are not adverse to the Company and its
Subsidiaries;
(vi) (x) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person (including any Related Party) (other
than any such indebtedness or guarantees under existing facilities or among the
Company and its direct or indirect wholly owned Subsidiaries or among the direct
and indirect wholly owned Subsidiaries), issue or sell any debt securities or
calls, options, warrants or other rights to acquire any debt securities of the
Company or any of its Subsidiaries, 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 or (y) make any loans, advances or
capital contributions to, or investments in, any other person (including any
Related Party), other than to or in the Company or any direct or indirect wholly
owned Subsidiary of the Company or to employees in respect of travel expenses in
the ordinary course of business consistent with past practice;
(vii) make any new capital expenditure or expenditures which,
individually, is in excess of $100,000 or, in the aggregate, are in excess of
$250,000;
(viii) (v) pay, discharge, settle or satisfy any claims,
liabilities, obligations or litigation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge,
settlement or satisfaction in the ordinary course of business consistent with
past practice or in accordance with their terms, of liabilities disclosed,
reflected or reserved against in the most recent audited financial statements
(or the notes thereto) of the Company included in the Filed Company SEC
Documents (for amounts not in excess of such reserves) or incurred since the
date of such financial statements in the ordinary course of business consistent
with past practice, (w) cancel any material note or account receivable or
discount in any material respect any material account receivable, (x) waive or
assign any claims or rights of substantial value, (y) waive any benefits of, or
agree to modify in any respect, or, subject to the terms hereof, fail to
enforce, or consent to any matter with respect to which
28
consent is required under, any standstill or similar agreement to which the
Company or any of its Subsidiaries is a party or (z) waive any material benefits
of, or agree to modify in any material respect, or, subject to the terms hereof,
fail to enforce in any material respect, or consent to any matter with respect
to which consent is required under, any material confidentiality or similar
agreement to which the Company or any of its Subsidiaries is a party;
(ix) enter into any Contracts (including any license agreements,
but excluding confidentiality agreements containing customary terms which do not
impose any obligations on the Company or its Subsidiaries other than those
relating to the treatment of confidential information) relating to the license,
marketing, co-promotion, manufacturing, research, development, distribution,
training, sale or supply by third parties of products of the Company or any
Subsidiary of the Company or products licensed by the Company or any Subsidiary
of the Company which, individually, has aggregate future payment or other
obligations with a value in excess of $100,000, or, in the aggregate, have
future payment or other obligations with a value in excess of $250,000;
(x) except to the extent permitted under Section 4.02, enter
into, modify, amend or terminate any Contract or waive, release or assign any
material rights or claims thereunder, which if so entered into, modified,
amended, terminated, waived, released or assigned would reasonably be expected
to (A) have a Material Adverse Effect, (B) impair in any material respect the
ability of the Company to perform its obligations under this Agreement or (C)
prevent or materially delay the consummation of the transactions contemplated by
this Agreement;
(xi) enter into any Contract with a value, individually or
together with all Contracts entered into pursuant to this Section 4.01(a)(xi)
and together with all Contracts entered into pursuant to Section 4.01(a)(xii)
hereof, in the aggregate, in excess of $100,000 to the extent consummation of
the transactions contemplated by this Agreement or compliance by the Company
with the provisions of this Agreement would reasonably be expected to conflict
with, or result in a violation or breach of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of, or result in,
termination, cancellation or acceleration of any obligation or to the loss of a
benefit under, or result in the creation of any Lien in or upon any of the
properties or other assets of the Company or any of its Subsidiaries under, or
give rise to any increased, additional, accelerated, or guaranteed right or
entitlements of any third party under, or result in any material alteration of,
any provision of such Contract;
(xii) enter into any Contract with a value, individually or
together with all Contracts entered into pursuant to this Section 4.01(a)(xii)
and together with all Contracts entered into pursuant to Section 4.01(a)(xi)
hereof, in the aggregate, in excess of $100,000 containing any restriction on
the ability of the Company or any of its Subsidiaries to assign its rights,
interests or obligations thereunder, unless such restriction expressly excludes
any assignment to Parent or any of its Subsidiaries in connection with or
following the consummation of the Merger and the other transactions contemplated
by this Agreement;
(xiii) sell, transfer or license to any person or otherwise
extend, amend or modify any material rights to the Intellectual Property Rights
of the Company or any of its Subsidiaries other than in the ordinary course of
business consistent with past practice;
29
(xiv) except as otherwise contemplated by this Agreement or as
required to comply with applicable law or the terms of any plan or agreement in
effect on the date hereof,
(A) adopt, enter into, terminate or amend (I) any collective
bargaining agreement or Company Benefit Plan or (II) any Company Benefit
Agreement or other material agreement, plan or policy involving the Company or
any of its Subsidiaries and one or more of their respective current or former
directors, officers, employees or consultants;
(B) increase in any manner the compensation, bonus or fringe
or other benefits of, or pay any bonus of any kind or amount whatsoever to, any
current or former director, officer, employee or consultant, other than normal
increases in compensation to non-executive employees consistent with past
practice;
(C) pay any benefit or amount not required under any Company
Benefit Plan or Company Benefit Agreement or any other benefit plan or
arrangement of the Company or any of its Subsidiaries as in effect on the date
of this Agreement other than the payment of compensation and severance in the
ordinary course of business consistent with past practice;
(D) increase in any manner the severance or termination pay
of any current or former director, officer, employee or consultant of the
Company or any of its Subsidiaries;
(E) (i) grant or amend any awards of Company Stock Options,
"phantom" stock, stock appreciation rights, "phantom" stock rights, stock based
or stock related awards, performance units or restricted stock (including the
grant or repricing of Company Stock Options, "phantom" stock, stock appreciation
rights, "phantom" stock rights, stock based or stock related awards, performance
units or restricted stock, or the removal of existing restrictions in any
Company Benefit Agreements, Company Benefit Plans or agreements or awards made
thereunder), or (ii) amend the terms of any bonus, incentive, performance or
other compensation plan or arrangement, Company Benefit Agreement or Company
Benefit Plan, other than in the ordinary course of business consistent with past
practice;
(F) amend or modify any Company Stock Option or Warrant;
(G) take any action to fund or in any other way secure the
payment of compensation or benefits under any employee plan, agreement, contract
or arrangement or Company Benefit Plan or Company Benefit Agreement;
(H) take any action to reprice or accelerate the vesting or
payment of any compensation or benefit under any Company Benefit Plan or Company
Benefit Agreement; or
(I) materially change any actuarial or other assumption used
to calculate funding obligations with respect to any Company Pension Plan or
change the manner in which contributions to any Company Pension Plan are made or
the basis on which such contributions are determined;
30
(xv) revalue any material assets of the Company or any of its
Subsidiaries or make any change in accounting methods, principles or practices,
other than any such changes required to comply with GAAP or applicable law;
provided, that the Company shall notify and consult with Parent with respect to
any such revaluation or change prior to its implementation;
(xvi) enter into or modify any Related Party Transaction; or
(xvii) authorize any of, or commit, resolve, propose or agree to
take any of, the foregoing actions.
(b) OTHER ACTIONS. The Company, Parent and Sub shall not, and shall
not permit any of their respective Subsidiaries to, take any action that would,
or that would reasonably be expected to, result in any of the conditions to the
Merger set forth in Article 6 not being satisfied, except any action permitted
by Section 4.02 or Section 7.01.
(c) ADVICE OF CHANGES; FILINGS. The Company and Parent shall promptly
advise the other party orally and in writing of (i) any representation or
warranty made by it (and, in the case of Parent, made by Sub) contained in this
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 of it
(and, in the case of Parent, of Sub) to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement; provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements of the parties
(or remedies with respect thereto) or the conditions to the obligations of the
parties under this Agreement. The Company and Parent shall promptly provide the
other copies of all filings made by such party with any Governmental Entity in
connection with this Agreement and the transactions contemplated hereby, other
than the portions of such filings that include confidential information not
directly related to the transactions contemplated by this Agreement.
(d) CERTAIN TAX MATTERS. During the period from the date of this
Agreement to the Effective Time, the Company shall, and shall cause each of its
Subsidiaries to, (i) timely file (without extensions) all tax returns
("Post-Signing Returns") required to be filed by or on behalf of each such
entity; (ii) timely pay all taxes due and payable in respect of such
Post-Signing Returns that are so filed; (iii) accrue a reserve in the books and
records and financial statements of any such entity in accordance with past
practice for all taxes payable by such entity for which no Post-Signing Return
is due prior to the Effective Time; (iv) promptly notify Parent of any suit,
claim, action, investigation, proceeding or audit (collectively, "Actions")
pending against or with respect to the Company or any of its Subsidiaries in
respect of any material amount (individually or in the aggregate) of tax and not
settle or compromise any such Action without Parent's consent; provided, that
Parent's consent shall not be unreasonably withheld; provided, further, that
Parent must respond to the Company within ten business days following the
receipt by Parent of written notice of any proposed settlement or compromise of
any Action by the Company; (v) not make (other than in the ordinary course of
business consistent with past practice), amend or revoke any material tax
election or settle or compromise any material tax liability, other than as
required by applicable law or with Parent's consent; (vi) not execute any waiver
of restrictions on assessment or collection of any tax, other than with Parent's
consent;
31
and (vii) cause all existing tax sharing agreements, tax indemnity obligations
and similar agreements, arrangements or practices with respect to taxes to which
the Company or any of its Subsidiaries is or may be a party or by which the
Company or any of its Subsidiaries is or may otherwise be bound to be terminated
as of the Closing Date so that after such date neither the Company nor any of
its Subsidiaries shall have any further rights or liabilities thereunder. Any
tax returns described in this Section 4.01(d) shall be complete and correct in
all material respects and shall be prepared on a basis consistent with past
practice. The Company shall promptly provide Parent with copies of any
Post-Signing Returns, as Parent may reasonably request.
SECTION 4.02 NO SOLICITATION.
(a) Subject to Section 4.02(b), from the date hereof until the earlier
of the Effective Time or the termination of this Agreement pursuant to Article
7, the Company shall not, nor shall it authorize or permit any of its
Subsidiaries or any of their respective directors, officers or employees or any
investment banker, financial advisor, attorney, accountant or other advisor,
agent or representative (collectively, "Representatives") retained by it or any
of its Subsidiaries to, directly or indirectly through another person, (i)
solicit, initiate or encourage, or knowingly take any other action designed to,
or which could reasonably be expected to, facilitate, any inquiries or the
making of any proposal that constitutes, or could reasonably be expected to lead
to, a Takeover Proposal or (ii) enter into, continue or otherwise participate in
any discussions or negotiations regarding, or furnish to any person any
information or knowingly cooperate with respect to, any Takeover Proposal.
Without limiting the foregoing, it is agreed that any violation of the
restrictions set forth in the preceding sentence by any Representative of the
Company or any of its Subsidiaries, whether or not such person is purporting to
act on behalf of the Company or any of its Subsidiaries or otherwise, shall be a
breach of this Section 4.02(a) by the Company. The Company shall, and shall
cause its Subsidiaries to, immediately cease and cause to be terminated all
existing discussions or negotiations with any person conducted heretofore with
respect to any Takeover Proposal and request the prompt return or destruction of
all confidential information previously furnished.
(b) Notwithstanding the foregoing, at any time prior to obtaining the
Shareholder Approval, in response to a bona fide written Takeover Proposal that
the Board of Directors of the Company determines in good faith (after
consultation with outside counsel and a financial advisor of nationally
recognized reputation) constitutes or is reasonably likely to lead to a Superior
Proposal, and which Takeover Proposal was unsolicited and made after the date
hereof and did not otherwise result from a breach of Section 4.02(a), the
Company may, if its Board of Directors determines in good faith (after
consultation with outside counsel) that it is required to do so in order to
comply with its fiduciary duties to the shareholders of the Company under
applicable law, and subject to compliance with Section 4.02(d) and after giving
Parent written notice of such determination, (x) furnish information with
respect to the Company and its Subsidiaries to the person making such Takeover
Proposal (and its Representatives) pursuant to a customary confidentiality
agreement not less restrictive of such person than the Confidentiality
Agreement, the terms of which do not hinder or prohibit the Company from
fulfilling its duties to Parent under this Section 4.02, provided that all such
non-public information has previously been provided to Parent or is provided to
Parent prior to or substantially concurrently with the time it is provided to
such person, and (y) participate in discussions or negotiations with the person
making such Takeover Proposal (and its Representatives) regarding such Takeover
Proposal.
32
The term "Takeover Proposal" means any inquiry, proposal or offer from any
person (other than Parent) relating to, or that could reasonably be expected to
lead to, any direct or indirect acquisition or purchase, in one transaction or a
series of transactions, of assets or businesses that constitute 15% or more of
the revenues, net income or the fair market value of the assets of the Company
and its Subsidiaries, taken as a whole, or 15% or more of any class of equity
securities of the Company or any of its Subsidiaries, any tender offer or
exchange offer that if consummated would result in any person beneficially
owning 15% or more of any class of equity securities of the Company or any of
its Subsidiaries, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution, joint venture, binding share
exchange or similar transaction involving the Company or any of its Subsidiaries
pursuant to which any person or the shareholders of any person would own 15% or
more of any class of equity securities of the Company or any of its Subsidiaries
or of any resulting parent company of the Company, other than the transactions
contemplated by this Agreement and the Shareholder Agreement.
The term "Superior Proposal" means any bona fide offer made by a third
party that if consummated would result in such person (or its shareholders)
owning, directly or indirectly, all or substantially all of the shares of
Company Common Stock then outstanding (or of the surviving entity in a merger or
the direct or indirect parent of the surviving entity in a merger) or all or
substantially all the assets of the Company, which the Board of Directors of the
Company determines in good faith (after consultation with a financial advisor of
nationally recognized reputation) to be (i) more favorable to the shareholders
of the Company from a financial point of view than the Merger (taking into
account all the terms and conditions of such proposal and this Agreement
(including any changes to the financial terms of this Agreement proposed by
Parent in response to such offer or otherwise as of the date of such
determination)) and (ii) reasonably capable of being completed, taking into
account all financial, legal, regulatory and other aspects of such proposal.
(c) Subject to Section 7.01(f), neither the Board of Directors of the
Company nor any committee thereof shall (i) (A) withdraw (or modify in a manner
adverse to Parent), or propose to withdraw (or modify in a manner adverse to
Parent), the approval, recommendation or adoption by such Board of Directors or
any such committee thereof of this Agreement, the Merger or the other
transactions contemplated by this Agreement or (B) recommend, adopt or approve,
or propose to recommend, adopt or approve, any Takeover Proposal (any action
described in this clause (i) being referred to as a "Company Adverse
Recommendation Change") or (ii) approve or recommend, or propose to approve or
recommend, or allow the Company or any of its Subsidiaries to execute or enter
into, any letter of intent, memorandum of understanding, agreement in principle,
merger agreement, acquisition agreement, option agreement, joint venture
agreement, partnership agreement or other similar agreement constituting or
related to, or that is intended to or could reasonably be expected to lead to,
any Takeover Proposal (other than a confidentiality agreement referred to in
Section 4.02(b)) (an "Acquisition Agreement"). Notwithstanding the foregoing, at
any time prior to obtaining the Shareholder Approval, the Board of Directors of
the Company may, in response to a Superior Proposal that was unsolicited and
made after the date hereof and that did not otherwise result from a breach of
this Section 4.02, make a Company Adverse Recommendation Change if such Board of
Directors determines in good faith (after consultation with outside counsel)
that it is
33
required to do so in order to comply with its fiduciary duties to the
shareholders of the Company under applicable law.
(d) In addition to the obligations of the Company set forth in
paragraphs (a) and (c) of this Section 4.02, the Company shall promptly (and in
any event within two business days after receipt thereof) advise Parent orally
and in writing of any Takeover Proposal or any inquiry with respect to or that
could reasonably be expected to lead to any Takeover Proposal, the material
terms and conditions of any such Takeover Proposal or inquiry (including any
changes thereto) and the identity of the person making any such Takeover
Proposal or inquiry. The Company shall (i) keep Parent fully informed of the
status and details (including any change to the terms thereof) of any such
Takeover Proposal or inquiry, and (ii) provide to Parent as soon as practicable
after receipt or delivery thereof copies of all relevant portions of
correspondence and other written material sent or provided to the Company or any
of its Subsidiaries from any person that describes any of the terms or
conditions of any Takeover Proposal.
(e) Nothing contained in this Section 4.02 shall prohibit the Company
from (x) taking and disclosing to its shareholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or (y) making any required
disclosure to the shareholders of the Company if, in the good faith judgment of
the Board of Directors of the Company (after consultation with outside counsel)
failure to so disclose would constitute a violation of applicable law.
ARTICLE 5
ADDITIONAL AGREEMENTS
SECTION 5.01 PREPARATION OF THE PROXY STATEMENT; SHAREHOLDERS' MEETING.
(a) As promptly as practicable following the date of this Agreement,
the Company and Parent shall prepare, and the Company shall file with the SEC,
the Proxy Statement. Each of Parent and the Company shall use its commercially
reasonable efforts to respond as promptly as practicable to any comments from
the SEC or the staff of the SEC with respect to the Proxy Statement, and the
Company shall use its commercially reasonable efforts to cause the Proxy
Statement to be mailed to the shareholders of the Company as promptly as
practicable following the date of this Agreement. The Company shall promptly
notify Parent upon the receipt of any comments from the SEC or the staff of the
SEC or any request from the SEC or the staff of the SEC for amendments or
supplements to the Proxy Statement or for additional information, and shall
provide Parent with copies of all correspondence between it or any of its
Representatives, on the one hand, and the SEC or the staff of the SEC, on the
other hand. Notwithstanding the foregoing, prior to filing or mailing the Proxy
Statement (or any amendment or supplement thereto) or responding to any comments
from the SEC or the staff of the SEC with respect thereto, the Company shall (i)
provide Parent an opportunity to review and comment on such document or response
and (ii) include in such document or response all comments proposed by Parent
and reasonably acceptable to the Company.
34
(b) The Company shall, as soon as practicable following the date of
this Agreement, establish a record date for, duly call, give notice of, convene
and hold a meeting of its shareholders (the "Shareholders' Meeting") solely for
the purpose of obtaining the Shareholder Approval. Subject to Section 4.02(c),
the Company shall, through its Board of Directors, recommend to its shareholders
approval of this Agreement and shall include such recommendation in the Proxy
Statement. Without limiting the generality of the foregoing, the Company's
obligations pursuant to the first sentence of this Section 5.01(b) shall not be
affected by (i) the commencement, public proposal, public disclosure or
communication to the Company of any Takeover Proposal or (ii) the withdrawal or
modification by the Board of Directors of the Company or any committee thereof
of such Board of Directors' or such committee's approval or recommendation of
this Agreement, the Merger or the other transactions contemplated by this
Agreement.
SECTION 5.02 ACCESS TO INFORMATION; CONFIDENTIALITY. Subject to compliance
with applicable law, the Company shall afford to Parent, and to Parent's
officers, employees, accountants, counsel, financial advisors and other
Representatives, reasonable access (including for the purpose of coordinating
integration activities and transition planning with the employees of the Company
and its Subsidiaries) during normal business hours during the period prior to
the Effective Time or the termination of this Agreement to all its and its
Subsidiaries' properties, books, contracts, commitments, personnel and records
and, during such period, the Company shall 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 and its Subsidiaries'
business, properties and personnel as Parent may reasonably request and receive
consistent with applicable law and agreements. Without limiting the generality
of the foregoing, the Company will afford to Parent and its Representatives
access to, and facilitate and participate in discussions with, all drivers, team
owners, sanctioning bodies, automobile manufacturers and other licensors for
purposes of discussing such parties' license agreements and other Contracts with
the Company and its Subsidiaries; provided, that all such discussions shall be
arranged by the Company and shall be undertaken jointly by the Parent and the
Company unless the Parent and the Company otherwise agree. Except for
disclosures expressly permitted by the terms of the Confidentiality Agreement
dated as of June 17, 2005 between Parent and the Company (as it may be amended
from time to time, the "Confidentiality Agreement"), Parent shall hold, and
shall cause its officers, employees, accountants, counsel, financial advisors
and other Representatives to hold, all information received from the Company,
directly or indirectly, in confidence in accordance with the Confidentiality
Agreement. No investigation pursuant to this Section 5.02 or information
provided or received by any party hereto pursuant to this Agreement will affect
any of the representations or warranties of the parties hereto contained in this
Agreement or the conditions hereunder to the obligations of the parties hereto.
SECTION 5.03 COMMERCIALLY REASONABLE EFFORTS. Upon the terms and subject to
the conditions set forth in this Agreement, each of the parties agrees to use
its commercially reasonable 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 contemplated by this Agreement and the Shareholder Agreement,
including using commercially reasonable efforts to accomplish the following: (i)
the taking of all acts
35
necessary to cause the conditions to Closing to be satisfied as promptly as
practicable, (ii) 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) and the taking of all steps as may be necessary to obtain an approval
or waiver from, or to avoid an action or proceeding by, any Governmental Entity
and (iii) the obtaining of all necessary consents, approvals or waivers from
third parties. In connection with and without limiting the foregoing, the
Company and Parent shall duly file with the U.S. Federal Trade Commission and
the Antitrust Division of the Department of Justice the notification and report
forms (the "HSR Filing") required under the HSR Act with respect to the
transactions contemplated by this Agreement as promptly as practicable. Each
party shall cooperate with the other party to the extent necessary to assist the
other party in the preparation of its HSR Filing and, if requested, to promptly
amend or furnish additional information thereunder and shall use their
commercially reasonable efforts to (A) take such actions as are necessary or
advisable to obtain prompt approval of the consummation of the Transactions by
any Governmental Entity; and (B) to resolve any objections and challenges,
including by contest through litigation on the merits (such litigation to be
directed by Parent, with any litigation costs incurred by the Company in
connection with its participation therein in excess of $100,000 to be borne by
Parent), negotiation or other action, that may be asserted by any Governmental
Entity or third party with respect to the transaction contemplated by this
Agreement under the HSR Act or any other antitrust or unfair competition law,
rule or regulation; provided, however, that Parent shall not be required to
initiate or continue such contest through litigation and shall be entitled to
terminate this Agreement pursuant to Section 7.01(g) if (x) Parent shall
determine that the litigation cost to Parent and its Affiliates (including any
litigation costs of the Company that Parent would bear pursuant to this Section
5.03) are reasonably likely to exceed $1,000,000, or (y) Parent shall determine
in good faith (after consultation with outside counsel) that Parent, the Company
or one of their Affiliates will be required to proffer, divest or hold separate
any material assets or any material portion of any business of Parent, the
Company or any of their Affiliates in connection with resolving any such
objection or challenge; and provided, further, that no settlement in respect of
any such litigation which will in any way affect the consideration to be
received by the holders of the Company Common Stock, Company Stock Options or
Warrants hereunder shall be approved by Parent without the Company's prior
consent. The Company and its Board of Directors shall (1) take all action
necessary to ensure that no state takeover statute or similar statute or
regulation is or becomes applicable to this Agreement, the Shareholder
Agreement, the Merger or any of the other transactions contemplated by this
Agreement or the Shareholder Agreement and (2) if any state takeover statute or
similar statute becomes applicable to this Agreement, the Shareholder Agreement,
the Merger or any of the other transactions contemplated by this Agreement or
the Shareholder Agreement, take all action necessary to ensure that the Merger
and the other transactions contemplated by this Agreement and the Shareholder
Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and the Shareholder Agreement and otherwise to
minimize the effect of such statute or regulation on this Agreement, the
Shareholder Agreement, the Merger and the other transactions contemplated by
this Agreement and the Shareholder Agreement.
SECTION 5.04 COMPANY STOCK OPTIONS; WARRANTS.
(a) As soon as practicable following the date of this Agreement, the
Board of Directors of the Company (or, if appropriate, any committee thereof
administering the Company
36
Stock Plans) shall adopt such resolutions or take such other actions as may be
required to effect the following:
(i) adjust the terms of all outstanding Company Stock Options,
whether vested or unvested, as necessary to provide that, at the Effective Time,
each Company Stock Option outstanding immediately prior to the Effective Time
shall be cancelled and the holder thereof shall then become entitled to receive,
as soon as practicable following the Effective Time, a single lump sum cash
payment equal to (A) the product of (1) the number of shares of Company Common
Stock for which such Company Stock Option shall not theretofore have been
exercised and (2) the Merger Consideration, minus (B) the product of (1) the
number of shares of Company Common Stock for which such Company Stock Option
shall not theretofore have been exercised and (2) the per share exercise price
of such Company Stock Option (provided that if such calculation results in a
negative number, the lump sum cash payment shall be deemed to be $0); and
(ii) make such other changes to the Company Stock Plans as the
Company and Parent may agree in writing are appropriate to give effect to the
Merger.
(b) As soon as practicable following the date of this Agreement, the
Board of Directors of the Company shall adopt such resolutions or take such
other actions (if any) as may be required to provide that each Warrant
outstanding immediately prior to the Effective Time shall be cancelled in
exchange for a lump sum cash payment equal to (i) the product of (A) the number
of shares of Company Common Stock subject to such Warrant and (B) the Merger
Consideration, minus (ii) the product of (A) the number of shares of Company
Common Stock subject to such Warrant and (B) the per share exercise price of
such Warrant (provided that if such calculation results in a negative number,
the lump sum cash payment shall be deemed to be $0). As of the Closing, the
Company will have obtained all consents of the holders of the Warrants necessary
to effectuate the foregoing.
(c) All amounts payable to holders of the Company Stock Options or
Warrants pursuant to Section 5.04(a) and (b) shall be subject to any required
withholding of Taxes and shall be paid without interest as soon as practicable
following the Effective Time.
(d) The Company shall ensure that following the Effective Time, no
holder of a Company Stock Option (or former holder of a Company Stock Option),
nor any participant in any Company Stock Plan, Company Benefit Plan or Company
Benefit Agreement, shall have any right thereunder to acquire any capital stock
of the Company or the Surviving Corporation or any other equity interest therein
(including "phantom" stock or stock appreciation rights). In addition, the
Company shall, subject to receiving applicable consents and contingent upon the
Closing, amend the 1999 Employee Stock Purchase Plan ("ESPP") to (i) provide
that as of the date of this Agreement, no participant in the ESPP may increase
his or her payroll deductions or contributions to such plan, and (ii) terminate
the ESPP and provide that the "Offering Termination Date" (as such term is
defined in Section 4.1 of the ESPP) for the offering beginning August 1, 2005,
shall be the date prior to the Closing Date.
SECTION 5.05 INDEMNIFICATION, EXCULPATION AND INSURANCE.
37
(a) Parent shall, to the fullest extent permitted by law, cause the
Surviving Corporation to assume all of the Company's obligations with respect to
all rights to indemnification and exculpation from liabilities for acts or
omissions occurring at or prior to the Effective Time now existing in favor of
the current or former directors or officers of the Company as provided in the
Company Charter, the Company Bylaws or any indemnification agreement between
such directors or officers and the Company (in each case, as in effect on the
date hereof), without further action, as of the Effective Time, and such
obligations shall survive the Merger and shall continue in full force and effect
in accordance with their terms.
(b) To the extent not advanced by applicable insurance carriers,
Parent shall, to the fullest extent permitted by applicable law, cause the
Surviving Corporation to advance funds for expenses (including reasonable
attorney's fees) incurred by a director in defending a civil or criminal action,
suit or proceeding relating to the indemnification obligations referenced in the
immediately preceding sentence in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
such director to repay such amount if it shall be ultimately determined that he
or she is not entitled to the indemnification referenced in the immediately
preceding sentence.
(c) For a period of six years after the Effective Time, Parent shall
cause to be maintained in effect the current policies of directors' and
officers' liability insurance maintained by the Company (provided that Parent
may substitute therefor policies provided or extended by Parent or the Surviving
Corporation, at the sole election of Parent, with reputable and financially
sound carriers of at least the same coverage and amounts containing terms and
conditions which are no less advantageous in the aggregate) with respect to
claims arising from or related to facts or events which occurred at or before
the Effective Time; provided, however, that Parent or the Surviving Corporation
shall not be obligated to make annual premium payments for such insurance to the
extent such premiums exceed 300% of the annual premiums paid as of the date
hereof by the Company for such insurance (such 300% amount, the "Maximum
Premium"). If such insurance coverage cannot be obtained at all, or can only be
obtained at an annual premium in excess of the Maximum Premium, Parent shall
maintain the most advantageous policies, or as determined by Parent in good
faith, of directors' and officers' insurance obtainable for an annual premium
equal to the Maximum Premium.
(d) The provisions of this Section 5.05 (i) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her heirs
and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
SECTION 5.06 FEES AND EXPENSES.
(a) Except as provided in this Section 5.06, all fees and expenses
incurred in connection with this Agreement, the Merger and the other
transactions contemplated by this Agreement shall be paid by the party incurring
such fees or expenses, whether or not the Merger is consummated, except for all
filing fees paid in respect of filings made by the Company and Parent pursuant
to the HSR Act in connection with the Merger, with such filing fees to be borne
by Parent. If this Agreement is terminated by Parent pursuant to Section
7.01(c)(i), Section 7.01(e) or Section 7.01(h), the Company shall, promptly
following such termination, pay to
38
Parent by wire transfer of same-day funds an amount equal to all documented,
third-party, out-of-pocket expenses incurred by Parent in connection with the
transactions contemplated by this Agreement, such amount not to exceed
$1,550,000 (the "Parent Expense Reimbursement"). If this Agreement is terminated
(i) by the Company pursuant to Section 7.01(d), (ii) by Parent pursuant to
Section 7.01(g), or (iii) by Parent pursuant to either Section 7.01(b)(ii) or
Section 7.01(c)(ii), in each case, where the Restraint at issue is related to
any antitrust or unfair competition law, rule or regulation, then Parent shall,
promptly following such termination, pay to the Company by wire transfer of
same-day funds an amount equal to all documented, third-party, out-of-pocket
expenses incurred by the Company in connection with the transactions
contemplated by this Agreement, including but not limited to expenses incurred
by the Company in connection with printing, mailing and filing the Proxy
Statement, such amount not to exceed $1,550,000 (the "Company Expense
Reimbursement").
(b) In the event that (i) this Agreement is terminated by Parent
pursuant to Section 7.01(e), (ii) (A) after the date hereof and prior to the
termination of this Agreement pursuant to Article 7, a Takeover Proposal shall
have been made to the Company or shall have been made directly to the
shareholders of the Company generally or shall have otherwise become publicly
known or any person shall have publicly announced an intention (whether or not
conditional) to make a Takeover Proposal, (B) this Agreement is terminated by
either Parent or the Company pursuant to Section 7.01(b)(i) (but only if a vote
to obtain the Shareholder Approval or the Shareholders' Meeting has not been
held) or Section 7.01(b)(iii) (but only if a Takeover Proposal is publicly
announced at or prior to the time of the Shareholders Meeting) and (C) within 12
months after such termination, the Company enters into a definitive agreement to
consummate, or consummates, the transactions contemplated by any Takeover
Proposal, or (iii) the Company terminates this Agreement pursuant to 7.01(f)
then the Company shall pay Parent a fee equal to $7,000,000 (the "Termination
Fee"), plus the Parent Expense Reimbursement, by wire transfer of same-day funds
on the first business day following (x) in the case of a payment required by
clause (i) or (iii) above, the date of termination of this Agreement and (y) in
the case of a payment required by clause (ii) above, the date of the first to
occur of the events referred to in clause (ii)(C). Solely for purposes of clause
(ii) hereof, the term "Superior Proposal" shall have the meaning assigned to
such term in Section 4.02(b), except that all references to "15%" shall be
changed to "32%".
(c) The parties hereto acknowledge and agree that the agreements
contained in Section 5.06(a) and (b) 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 a party fails promptly to
pay the amount due pursuant to Section 5.06(a) or (b), and, in order to obtain
such payment, the other party commences a suit that results in a judgment
against the Company for the Termination Fee and/or the Parent Expense
Reimbursement or against Parent for the Company Expense Reimbursement, as
applicable, the party against which such judgment is obtained shall pay to the
other party its costs and expenses (including attorneys' fees and expenses) in
connection with such suit, together with interest on the amount of the
Termination Fee, the Parent Expense Reimbursement and/or the Company Expense
Reimbursement, as applicable, from the date such payment was required to be made
until the date of payment at the prime rate of Wachovia Bank, N.A. in effect on
the date such payment was required to be made. The Company further acknowledges
and agrees that the Termination Fee represents a reasonable estimate of future
damages, which are uncertain and difficult to
39
quantify, and does not constitute a penalty. The remedies set forth in this
Section 5.06 shall not preclude assertion by any party of any other rights or
the seeking of any other remedies against any other party.
SECTION 5.07 PUBLIC ANNOUNCEMENTS. Parent and the Company shall use their
respective reasonable efforts to consult with each other before issuing, and, to
the extent reasonably feasible, give each other the opportunity to review and
comment upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement and the Shareholder Agreement,
including the Merger, 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 or national securities quotation
system. The parties agree that the initial press release to be issued with
respect to the transactions contemplated by this Agreement shall be in the form
heretofore agreed to by the parties.
SECTION 5.08 SHAREHOLDER LITIGATION. The Company shall give Parent the
opportunity, at Parent's own cost, to participate in the defense or settlement
of any shareholder litigation against the Company and/or its directors relating
to the transactions contemplated by this Agreement or the Shareholder Agreement.
No such settlement in respect of any such litigation shall be agreed to without
Parent's prior written consent to the extent such settlement is for an amount
which exceeds the Company's insurance coverage plus the applicable deductible.
SECTION 5.09 SHAREHOLDER AGREEMENT LEGEND. The Company will inscribe upon
any Certificate representing Subject Shares tendered by a Shareholder (as such
terms are defined in the Shareholder Agreement) for such purpose the following
legend: "THE SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE, OF ACTION
PERFORMANCE COMPANIES, INC. REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
SHAREHOLDER AGREEMENT DATED AS OF AUGUST 29, 2005, AND ARE SUBJECT TO THE TERMS
THEREOF. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT THE PRINCIPAL EXECUTIVE
OFFICES OF ACTION PERFORMANCE COMPANIES, INC.".
SECTION 5.10 BENEFIT PLANS.
(a) From the Effective Time through December 31, 2006, except as set
forth below, Parent shall provide or cause the Surviving Corporation to provide
to employees of the Company and its Subsidiaries who remain employed by the
Surviving Corporation and its subsidiaries compensation and employee benefits
that, taken as a whole, are comparable in the aggregate to those provided to
such employees immediately prior to the Effective Time; provided, however, that
for this purpose, all bonus arrangements and equity compensation arrangements
shall be disregarded, except as set forth in Section 5.10(d). Parent and the
Company agree and acknowledge that consummation of the transactions contemplated
by this Agreement shall constitute a "change of control" for purposes of each
applicable Company Benefit Plan and Company Benefit Agreement. Nothing herein
shall be construed to prohibit Parent or the Surviving Corporation from amending
or terminating any Company Benefit Plan in accordance with the terms thereof and
with applicable law, so long as they comply with the requirements of this
Section 5.10.
40
(b) From and after the Effective Time, Parent shall, and shall cause
the Surviving Corporation to, honor in accordance with their respective terms
(as in effect on the date of this Agreement), all the Company Benefit Plans and
Company Benefit Agreements disclosed in the Company Disclosure Schedule
(subject, in each case, to the right of Parent or the Surviving Corporation to
amend or terminate any Company Benefit Plan or Company Benefit Agreement in
accordance with the terms thereof and with applicable law). For purposes of
eligibility and vesting (but not benefit accrual) under the employee benefit
plans of Parent and its subsidiaries providing benefits after the Effective Time
to any employee of the Company or any Subsidiary immediately prior to the
Effective Time (all such plans, collectively, the "New Plans"), each such
employee shall be credited with all years of service for which such employee was
credited before the Effective Time under any comparable Company Benefit Plans,
except where such crediting would lead to a duplication of benefits or to the
extent such service credit is not provided under a newly adopted plan to
similarly situated employees of Parent who were never employees of the Company
and its affiliates. In addition and without limiting the generality of the
foregoing, Parent shall use its commercially reasonable efforts to (i) cause
each employee of the Company or any Subsidiary as of the Effective Time to be
immediately eligible to participate, without any waiting period, in any and all
New Plans to the extent coverage under any such New Plan replaces coverage under
a comparable Company Benefit Plan in which such employee participated
immediately prior to the Effective Time (all such plans, collectively, the "Old
Plans"), (ii) for purposes of each New Plan providing medical, dental,
pharmaceutical and/or vision benefits to any such employee, to cause all
pre-existing condition exclusions, limitations and actively-at-work requirements
of such New Plan to be waived for such employee and his or her covered
dependents (to the extent such exclusions, limitations and actively-at-work
requirements were waived or satisfied as of the Effective Time under the
corresponding Old Plan) and (iii) cause all deductibles, coinsurance and maximum
out-of-pocket expenses incurred by such employee and his or her covered
dependents under any Old Plan during the portion of the plan year of such Old
Plan ending on the date such employee's participation in the corresponding New
Plan begins to be taken into account under such New Plan for purposes of
satisfying all deductible, co-insurance and maximum out-of-pocket requirements
applicable to such employee and his or her covered dependents for the applicable
plan year as if such amounts had been paid in accordance with such New Plan.
(c) Nothing contained herein shall be construed as requiring Parent or
the Surviving Corporation to continue the employment of any specific person.
(d) In the event that the Closing Date occurs prior to payment of
annual bonuses for the 2005 calendar year, Parent shall cause the Surviving
Corporation to continue to maintain and honor the Company's 2005 annual bonus
plans set forth in the Company Disclosure Schedule (the "2005 Bonus Plans") for
the 2005 calendar year and to pay Company employees the bonus amounts due under
such 2005 Bonus Plans pursuant to the objective formulae set forth therein
(including formulae approved thereunder by the Company or the Board of Directors
of the Company, or a committee thereof, prior to the date of this Agreement and
previously provided to Parent), based on the performance of the Company and its
operating units, without adjusting such total for individual performance unless
required by such 2005 Bonus Plan.
SECTION 5.11 TRANSFER TAXES. All stock transfer, real estate transfer,
documentary, stamp, recording and other similar taxes (including interest,
penalties and additions
41
to any such taxes) incurred in connection with the transactions contemplated
hereby shall be paid by the Surviving Corporation.
ARTICLE 6
CONDITIONS PRECEDENT
SECTION 6.01 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 (to the extent permitted by law) waiver on or prior to the
Closing Date of the following conditions:
(a) SHAREHOLDER APPROVAL. The Shareholder Approval shall have been
obtained.
(b) HSR ACT. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(c) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other judgment or order issued by any
court of competent jurisdiction or other statute, law, rule, legal restraint or
prohibition (collectively, "Restraints") shall be in effect (i) preventing the
consummation of the Merger or (ii) which otherwise would reasonably be expected
to have a Material Adverse Effect.
SECTION 6.02 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The obligations
of Parent and Sub to effect the Merger are further subject to the satisfaction
or (to the extent permitted by law) waiver on or prior to the Closing Date of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and warranties of
the Company contained in this Agreement that are not so qualified shall be true
and correct in all material respects, in each case 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 as of such earlier date. Parent shall have received a
certificate signed on behalf of the Company by the chief executive officer,
chief operating 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, chief operating officer and the chief financial officer of
the Company to such effect.
(c) NO LITIGATION. Except as set forth in Section 3.01(k) of the
Company Disclosure Schedule, there shall not be pending, or to the knowledge of
any party hereto no overt, written, credible threat of, any suit, action or
proceeding by any Governmental Entity, or by any other person, having a
reasonable likelihood of success, (i) challenging the acquisition by Parent or
Sub of any shares of Company Common Stock, seeking to restrain or prohibit the
42
consummation of the Merger, or seeking to place limitations on the ownership of
shares of Company Common Stock (or shares of common stock of the Surviving
Corporation) by Parent or Sub or seeking to obtain from the Company, Parent or
Sub any damages that are material in relation to the Company, (ii) seeking to
prohibit or materially limit the ownership or operation by the Company, Parent
or any of their respective Subsidiaries of any portion of any business or of any
assets of the Company, Parent or any of their respective Subsidiaries, or to
compel the Company, Parent or any of their respective Subsidiaries to divest or
hold separate any portion of any business or of any assets of the Company,
Parent or any of their respective Subsidiaries, as a result of the Merger, or
(iii) seeking to prohibit Parent or any of its Subsidiaries from effectively
controlling in any material respect the business or operations of the Company or
any of its Subsidiaries.
(d) RESTRAINTS. No Restraint that could reasonably be expected to
result, directly or indirectly, in any of the effects referred to in clauses (i)
through (iii) of paragraph (c) of this Section 6.02 shall be in effect.
(e) FAIRNESS OPINION. Parent shall have received an executed copy of
the opinion of SunTrust Xxxxxxxx Xxxxxxxx referred to in Section 3.01(x).
(f) [Reserved]
(g) RELATED PARTY TRANSACTIONS. All Contracts between the Company
and any Related Party listed on Section 6.02(g) of the Company Disclosure
Schedule shall have been cancelled or terminated, and the Company shall have no
further liability or obligation with respect to any such Contract.
(h) NO MATERIAL ADVERSE CHANGE. Except as disclosed in the Company
Disclosure Schedule, no Material Adverse Effect shall have occurred since the
date of this Agreement.
(i) AUDITED FINANCIAL STATEMENTS. The Company shall have delivered
to Parent audited financial statements, including an unqualified opinion of the
Company's independent auditors as to its financial statements. For purposes of
clarification, such auditor's report need not address (or need not be
unqualified with respect to) the Company's internal controls.
(j) INTERNAL CONTROLS. The Company shall have provided a written
representation to Parent setting forth any and all deficiencies, significant
deficiencies, and/or material weaknesses noted in the Company's compliance
efforts with Section 404 of the Xxxxxxxx-Xxxxx Act of 2002, as amended to date,
and a separate written description of remediation and/or proposed remediation
plans for such deficiencies, significant deficiencies, and/or material
weaknesses, which remediation or proposed remediation plan with respect to any
identified material weakness would not reasonably be expected to prevent a
Material Adverse Effect.
(k) CONSENTS. The Company will obtain (i) the consents set forth on
Schedule 6.02(k)(1) of the Company Disclosure Schedule in a form substantially
similar to the attached,
43
and (ii) the certificates from the Persons set forth on Schedule 6.02(k)(2) in a
form substantially similar to the attached.
SECTION 6.03 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of
the Company to effect the Merger is further subject to the satisfaction or (to
the extent permitted by law) waiver on or prior to the Closing Date of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Parent and Sub contained in this Agreement that are qualified as
to materiality shall be true and correct, and the representations and warranties
of Parent and Sub contained in this Agreement that are not so qualified shall be
true and correct in all material respects, in each case 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 as of such earlier date. The Company shall have received a
certificate signed on behalf of Parent by an executive officer 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 required to be
performed by them under this Agreement at or prior to the Closing Date, and the
Company shall have received a certificate signed on behalf of Parent by an
executive officer of Parent to such effect.
SECTION 6.04 FRUSTRATION OF CLOSING CONDITIONS. None of the Company,
Parent or Sub may rely on the failure of any condition set forth in Section
6.01, 6.02 or 6.03, as the case may be, to be satisfied if such failure was
caused by such party's failure to act in good faith or to use its commercially
reasonable efforts to consummate the Merger and the other transactions
contemplated by this Agreement, as required by and subject to Section 5.03.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after receipt of the Shareholder
Approval:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company:
(i) if the Merger shall not have been consummated on or before
December 31, 2005 (the "Outside Date"); provided, however, that the right to
terminate this Agreement under this Section 7.01(b)(i) shall not be available to
any party whose breach of a representation or warranty in this Agreement or
whose action or failure to act has been a principal cause of or resulted in the
failure of the Merger to be consummated on or before such date;
(ii) if any Restraint having any of the effects set forth in
Section 6.01(c) shall be in effect and shall have become final and
nonappealable; provided, however, that, if such Restraint relates to any
antitrust or unfair competition law, rule or
44
regulation, Parent may only terminate this Agreement under this Section
7.01(b)(ii) if Parent is in compliance with its obligations under Section 5.03;
or
(iii) if the Shareholder Approval shall not have been obtained
at the Shareholders' Meeting duly convened therefor or at any adjournment or
postponement thereof;
(c) by Parent (i) if the Company shall have breached or failed to
perform any of its representations, warranties, covenants or agreements set
forth in this Agreement, which breach or failure to perform (A) would give rise
to the failure of a condition set forth in Section 6.02(a) or 6.02(b) and (B) is
incapable of being cured, or is not cured, by the Company by the Outside Date
(provided that neither Parent nor Subsidiary is in material breach of any
representation, warranty, covenant or agreement set forth in this agreement) or
(ii) if any Restraint having the effects referred to in clauses (i) through
(iii) of Section 6.02(c) shall be in effect and shall have become final and
nonappealable; provided, however, that, if such Restraint relates to any
antitrust or unfair competition law, rule or regulation, Parent may only
terminate this Agreement under this Section 7.01(c)(ii) if Parent is in
compliance with its obligations under Section 5.03;
(d) by the Company, if Parent or Sub shall have breached or failed
to perform any of its representations, warranties, covenants or agreements set
forth in this Agreement, which breach or failure to perform (A) would give rise
to the failure of a condition set forth in Section 6.03(a) or 6.03(b) and (B) is
incapable of being cured by Parent or Sub (as applicable), or is not cured, by
the Outside Date (provided that the Company is not then in material breach of
any representation, warranty, covenant or agreement set forth in this Agreement;
(e) by Parent, in the event that (i) a Company Adverse
Recommendation Change shall have occurred, (ii) the Board of Directors of the
Company fails publicly to reaffirm its recommendation of this Agreement, the
Merger or the other transactions contemplated by this Agreement within five
business days of receipt of a written request by Parent to provide such
reaffirmation following the receipt by the Company of a Takeover Proposal, or
(iii) if the Company gives Parent the notification referred to in Section
7.05(b)(iii);
(f) by the Company prior to receipt of the Shareholder Approval in
accordance with Section 7.05(b); provided, however, that the Company shall have
complied with all provisions thereof, including the notice provisions therein;
(g) by Parent, if Parent is entitled to terminate pursuant to
Section 5.03;
(h) by Parent, if the Company shall have not satisfied the
conditions set forth in Section 6.02(i) or Section 6.02(j) by the Outside Date;
or
(i) by Parent, if the aggregate of all of the amounts required to
obtain the consents and certificates set forth in Section 6.02(k) exceed, in the
aggregate, $1,000,000; provided that expenses, settlement amounts, or damages,
in each case, arising out of litigation relating to this transaction shall be
excluded; provided, further, that nothing herein shall affect the separate
conditions set forth in Section 6.01(c) or Section 6.02(c).
45
SECTION 7.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.01, 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 the
provisions of Section 3.01(w), the penultimate sentence of Section 5.02, Section
5.06, this Section 7.02 and Article 8, which provisions shall survive such
termination, and except to the extent that such termination results from the
willful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
SECTION 7.03 AMENDMENT. This Agreement may be amended by the parties
hereto at any time before or after receipt of the Shareholder Approval;
provided, however, that after such approval has been obtained, there shall be
made no amendment that by law requires further approval by the shareholders of
the Company or the approval of the shareholders of Parent without such approval
having been obtained. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
SECTION 7.04 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) to the extent permitted by
law, waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto or (c) subject to the
proviso to the first sentence of Section 7.03 and to the extent permitted by
law, waive compliance with any of the agreements or conditions contained herein.
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 7.05 PROCEDURE FOR TERMINATION OR AMENDMENT.
(a) A termination of this Agreement pursuant to Section 7.01 or an
amendment of this Agreement pursuant to Section 7.03 shall, in order to be
effective, require, in the case of Parent or the Company, action by its Board of
Managers or Board of Directors or, with respect to any amendment of this
Agreement pursuant to Section 7.03, the duly authorized committee of its Board
of Managers or Board of Directors to the extent permitted by law.
(b) The Company may terminate this Agreement pursuant to Section
7.01(f) only if (i) the Board of Directors of the Company has received an
unsolicited, bona fide, written Takeover Proposal which constitutes a Superior
Proposal, (ii) in light of such Superior Proposal a majority of the
disinterested directors of the Company shall have determined in good faith,
after consultation with outside counsel, that the failure to withdraw or modify
its recommendation of the Merger and this Agreement would violate the Board of
Director's fiduciary duties to the Company's stockholders under applicable law,
(iii) the Company has notified Parent in writing of the determinations described
in clause (ii) above, (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 since receipt of the notice referred to in
clause (iii) above, such Superior Proposal remains a Superior Proposal and a
majority of the disinterested directors of the Company has again made the
determinations referred to in clause (ii) above, (v) the Company is in
compliance, in all material respects, with Section 4.02, (vi) the
46
Company has previously paid the fee and reimbursement, as applicable, due under
Section 5.06(a) and Section 5.06(b), (vii) the Board of Directors of the Company
concurrently approves, and the Company concurrently enters into, a definitive
agreement providing for the implementation of such Superior Proposal and (viii)
Parent is not at such time entitled to terminate this Agreement pursuant to
Section 7.01(c) (assuming for purposes of this clause (viii) that the Outside
Date is the date of termination of this Agreement by the Company, except where
the applicable breach or failure to perform is not willful and material and is
capable of being cured prior to the Outside Date).
ARTICLE 8
GENERAL PROVISIONS
SECTION 8.01 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 8.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 8.02 NOTICES. Except for notices that are specifically required by
the terms of this Agreement to be delivered orally, all notices, requests,
claims, demands and other communications hereunder shall be in writing and shall
be deemed given if delivered personally, telecopied (which is confirmed) or sent
by overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
if to Parent or Sub, to:
c/o International Speedway Corporation
0000 X Xxxxxxxxxxxxx Xxxxxxxx Xxxx.
Xxxxxxx Xxxxx, XX 00000-0000
Telecopy No. (000) 000-0000
Attention: Xxxxx Xxxxxxx, Esquire
and
c/o Speedway Motorsports, Inc.
0000 Xxxxxxx Xxxxxxx Xxxxx,
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx, Esquire
with a copy to:
Three Wachovia Center
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx, XX 00000
Telecopy No. (000) 000-0000
47
Attention: Xxxx X. Xxxxxxxx, Esquire
with a copy to:
Xxxxx Xxxxx L.L.P.
The Warner
0000 Xxxxxxxxxxxx Xxx., XX
Xxxxxxxxxx, XX 00000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx X. Gold, Esq.
if to the Company, to:
Action Performance Companies, Inc.
0000 Xxxxx Xxxxxxx Xxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxxx
with a copy to:
Xxxxx & Xxxxxx L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Telecopy No.: 000-000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
SECTION 8.03 DEFINITIONS. For purposes of this Agreement:
(a) 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; provided, that the National
Association for Stock Car Auto Racing, Inc. and its Affiliates shall not be
deemed to be Affiliates of Parent for any purpose hereunder;
(b) "Knowledge" of any person that is not an individual means, with
respect to any matter in question, the knowledge of such person's executive
officers and other officers, executives and managers having primary
responsibility for such matter, in each case after due inquiry;
(c) "Material Adverse Effect" means any (i) event, (ii) occurrence,
(iii) state of facts or (iv) development or developments which individually or
in the aggregate would reasonably be expected to result in any change or effect,
that (A) is materially adverse to the business, properties, assets (including
license agreements), liabilities (contingent or otherwise), financial condition
or results of operations of the Company and its Subsidiaries, taken as
48
a whole, or (B) would reasonably be expected to prevent or materially impede,
interfere with, hinder or delay the consummation by the Company of the Merger or
the other transactions contemplated by this Agreement; provided, however, that a
Material Adverse Effect with respect to the Company shall not include any event,
occurrence, state of facts or development arising out of or relating to (1)
general economic conditions in the United States of America, (2) conditions
generally affecting industries in which any of the Company or its Subsidiaries
operates (except, in the case of clauses (1) and (2) above, if the event,
change, effect, development, condition or occurrence disproportionately impacts
the business, assets or financial condition of the Company and its Subsidiaries,
taken as a whole), (3) the public announcement of this Agreement or the
consummation of the transactions contemplated hereby (including, without
limitation, any loss of customers, employees, suppliers, licensees or
distributors of the Company or any Subsidiary as a result thereof, or changes
arising out of, or attributable to, any such loss) or (4) conditions
specifically identified in the Filed Company SEC Documents the effect of which
is reasonably determinable from the information contained therein; and provided,
further, that (x) any change in the Company's stock price or trading volume or
(y) any failure, in and of itself, of the Company to meet its internal financial
projections or published analysts' forecasts relating to it, or any other amount
of revenues or earnings of the Company shall each not, individually or
collectively, be deemed to constitute a Material Adverse Effect (it being
understood that the circumstances giving rise to any such failure may constitute
a Material Adverse Effect); provided, further, that for purposes of analyzing
whether any event, occurrence, state of facts or development constitutes a
"Material Adverse Effect" under this definition, the parties agree that (x)
Parent will be deemed to have no knowledge of any state of facts, effect,
condition, development, event or occurrence that is not (A) disclosed in Section
3.01(j) of the Company Disclosure Schedule or (B) specifically identified in the
Filed Company SEC Documents the effect of which is reasonably determinable from
the information contained therein, (y) the analysis of materiality shall not be
limited to either a long-term or a short-term perspective, and (z) each of the
terms contained in clauses (i) through (iv) above are intended to be separate
and distinct;
(d) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity; and
(e) a "Subsidiary" of any person means another person, an amount of
the voting securities, other voting rights 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 8.04 INTERPRETATION. When a reference is made in this Agreement to
an Article, a Section, Exhibit or Schedule, such reference shall be to an
Article of, a Section of, or an Exhibit or Schedule to, 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". The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. References to "this Agreement" shall include the Company
49
Disclosure Schedule and the Parent Disclosure Schedule. All terms defined in
this Agreement shall have the defined meanings when used in any certificate or
other document made or delivered pursuant hereto unless otherwise defined
therein. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such term. Any agreement, instrument or
statute defined or referred to herein or in any agreement or instrument that is
referred to herein means such agreement, instrument or statute as from time to
time amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.
SECTION 8.05 CONSENTS AND APPROVALS. For any matter under this Agreement
requiring the consent or approval of any party to be valid and binding on the
parties hereto, such consent or approval must be in writing.
SECTION 8.06 COUNTERPARTS. This Agreement may be executed in one or more
counterparts (including by facsimile), 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 8.07 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement, the Shareholder Agreement and the Confidentiality Agreement (a)
constitute the entire agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement, the Shareholder Agreement and the
Confidentiality Agreement and (b) except for the provisions of Article 2 upon,
but not before, the completion of the Merger, and Section 5.05, are not intended
to confer upon any person other than the parties any legal or equitable rights
or remedies.
SECTION 8.08 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Arizona, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 8.09 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder 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, and any assignment without such consent shall be
null and void, except that either of Parent or Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations under this
Agreement to an Affiliate it directly or indirectly wholly owns or by which it
is directly or indirectly wholly owned, but no such assignment shall relieve
Parent or Sub of any of its obligations hereunder. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
SECTION 8.10 SPECIFIC ENFORCEMENT; CONSENT TO JURISDICTION. The parties
agree that irreparable damage would occur and that the parties would not have
any adequate remedy at law in the event that any of the provisions of this
Agreement were not performed in accordance
50
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any Federal court located in the State of Arizona or in any
state court in the State of Arizona, this being in addition to any other remedy
to which they are entitled at law or in equity. In addition, each of the parties
hereto (a) consents to submit itself to the personal jurisdiction of any Federal
court located in the State of Arizona or of any state court located in the State
of Arizona in the event any dispute arises out of this Agreement or the
transactions contemplated by this Agreement, (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 and (c) agrees that it will not bring any action
relating to this Agreement or the transactions contemplated by this Agreement in
any court other than a Federal court located in the State of Arizona or a state
court located in the State of Arizona.
SECTION 8.11 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. 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 to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 8.12 GUARANTY.
(a) Each Guarantor hereby unconditionally and irrevocably guarantees
severally, but not jointly, to the Company the due and punctual performance of
each of the obligations and the undertakings of Parent and Sub under this
Agreement when and to the extent the same are required to be performed and
subject to all of the terms and conditions hereof; provided, however, that each
Guarantor's liability under this Agreement shall be limited to the portion of
such liability equal to its pro rata percentage ownership of Parent as listed on
Section 8.12 of the Parent Disclosure Schedule; and provided, further that no
Guarantor shall have any liability whatsoever under this guaranty after the
Closing, whether based upon events occurring prior to or after the Closing. If
Parent or Sub shall fail to perform fully and punctually any obligation or
undertaking of Parent or Sub under this Agreement when and to the extent the
same is required to be performed, subject to the first sentence of this Section
8.12(a), each Guarantor will, upon written demand from the Company, forthwith
perform or cause to be performed such obligation or undertaking, as the case may
be. The obligations of each Guarantor under this guaranty shall constitute an
absolute and unconditional present and continuing guarantee of performance to
the extent provided herein, and shall not be contingent upon any attempt by the
Company to enforce performance by Parent or Sub.
(b) Subject to 8.12(a), the obligations of each Guarantor under this
guaranty are absolute and unconditional, are not subject to any counterclaim,
set off, deduction, abatement or defense based upon any claim a Guarantor may
have against the Company (except for any defense Parent or Sub may have against
the Company under the terms of this Agreement), and shall remain in full force
and effect without regard to (i) any agreement or modification to any of the
terms of this Agreement or any other agreement which may hereafter be made
relating
51
thereto; (ii) any exercise, non-exercise, or waiver by the Company of any right,
power, privilege or remedy under or in respect of this Agreement; (iii) any
insolvency, bankruptcy, dissolution, liquidation, reorganization or the like of
Parent or Sub at or prior to the Closing; (iv) absence of any notice to, or
knowledge by, a Guarantor of the existence or occurrence of any of the matters
or events set forth in the foregoing clauses (i) through (iii); (v) any transfer
of shares of capital stock of Parent or Sub, or any assignment by Parent or Sub
of its rights and obligations under this Agreement, to a wholly-owned subsidiary
of Parent or Sub or a Guarantor; or (vi) any other circumstance, whether similar
or dissimilar to the foregoing.
(c) Each Guarantor unconditionally waives (i) any and all notice of
default, non-performance or non-payment by Parent or Sub under this Agreement,
and (ii) all notices which may be required by statute, rule of law or otherwise
to preserve intact any rights of the Company against a Guarantor, including,
without limitation, any demand, presentment or protest, or proof of notice of
non-payment under this Agreement.
52
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers hereunto duly authorized,
all as of the date first written above.
SMISC, LLC
/s/ Xxxxxx X. Xxxxx
_________________________________
By: Xxxxxx X. Xxxxx
Title: Vice President
MOTORSPORTS AUTHENTICS, INC.
/s/ Xxxxx X. Xxxxxxx
_________________________________
By: Xxxxx X. Xxxxxxx
Title: Authorized Officer
ACTION PERFORMANCE COMPANIES, INC.
/s/ Xxxx Xxxxxxxxx
_________________________________
By: Xxxx Xxxxxxxxx
Title: Chief Executive Officer
[Signature Page to Agreement and Plan of Merger]
53
Guarantors:
SPEEDWAY MOTORSPORTS, INC.
/s/ Xxxxxx X. Xxxxx
_________________________________
By: Xxxxxx X. Xxxxx
Title: Executive Vice President,
National Sales & Marketing
INTERNATIONAL SPEEDWAY CORPORATION
/s/ Xxxxx X. Xxxxxxx
_________________________________
By: Xxxxx X. Xxxxxxx
Title: Vice President and Chief
Counsel Operations
[Signature Page to Agreement and Plan of Merger]
54
ANNEX I
TO THE MERGER AGREEMENT
INDEX OF DEFINED TERMS
2005 Bonus Plan......................................... Section 5.10(d)
Acquisition Agreement................................... Section 4.02(c)
Actions................................................. Section 4.01(d)
Affiliate............................................... Section 8.03(a)
Agreement............................................... Preamble
Arizona Code............................................ Section 1.01
Articles of Merger...................................... Section 1.03
Certificate............................................. Section 2.01(c)
Closing................................................. Section 1.02
Closing Date............................................ Section 1.02
Code.................................................... Section 2.02(h)
Commonly Controlled Entity.............................. Section 3.01(o)
Company................................................. Preamble
Company Adverse Recommendation Change................... Section 4.02(c)
Company Benefit Agreements ............................. Section 3.01(j)
Company Benefit Plans................................... Section 3.01(o)
Company Bylaws.......................................... Section 3.01(a)
Company Charter......................................... Section 1.05(a)
Company Common Stock.................................... Preamble
Company Consolidated Group.............................. Section 3.01(r)
Company Disclosure Schedule............................. Section 3.01
Company Expense Reimbursement .......................... Section 5.06(a)
Company Pension Plan ................................... Section 3.01(p)
Company Preferred Stock................................. Section 3.01(c)
Company SEC Documents................................... Section 3.01(g)
Company Stock-Based Awards.............................. Section 3.01(c)
Company Stock Options................................... Section 3.01(c)
Company Stock Plans..................................... Section 3.01(c)
Confidentiality Agreement .............................. Section 5.02
Contract................................................ Section 3.01(e)
Effective Time.......................................... Section 1.03
Environmental Laws...................................... Section 3.01(n)
ERISA................................................... Section 3.01(m)
Exchange Act............................................ Section 3.01(f)
Exchange Fund........................................... Section 2.02(a)
Filed Company SEC Documents............................. Section 3.01(h)
GAAP.................................................... Section 3.01(g)
Governmental Entity..................................... Section 3.01(f)
Hazardous Materials..................................... Section 3.01(n)
HSR Act................................................. Section 3.01(f)
HSR Filing.............................................. Section 5.03
Intellectual Property Rights ........................... Section 3.01(t)
IRS..................................................... Section 3.01(p)
Knowledge............................................... Section 8.03(b)
Legal Provisions........................................ Section 3.01(m)
Liens................................................... Section 3.01(b)
Material Adverse Effect................................. Section 8.03(c)
Maximum Premium......................................... Section 5.05(c)
Merger.................................................. Preamble
Merger Consideration.................................... Section 2.01(c)
Xxxxx'x ................................................ Section 3.2.02(f)
New Plans .............................................. Section 5.10(b)
Old Plans............................................... Section 5.10(b)
Option and Warrant Consideration........................ Section 2.01(d)
Outside Date ........................................... Section 7.01(b)
Parachute Gross Up Payment.............................. Section 3.01(q)
Parent.................................................. Preamble
Parent Disclosure Schedule.............................. Section 3.02
Parent Expense Reimbursement............................ Section 5.06(a)
Paying Agent............................................ Section 2.02(a)
Permits................................................. Section 3.01(m)
person.................................................. Section 8.03(d)
Post-Signing Returns.................................... Section 4.01(d)
Primary Company Executives.............................. Section 3.01(q)
Principal Shareholders.................................. Preamble
Proxy Statement......................................... Section 3.01(f)
Related Party........................................... Section 3.01(g)
Related Party Transaction............................... Section 3.01(g)
Release................................................. Section 3.01(n)
Representatives......................................... Section 4.02(a)
Restraints.............................................. Section 6.01(c)
S&P .................................................... Section 2.02(f)
SEC..................................................... Section 3.01(f)
Securities Act.......................................... Section 3.01(g)
Shareholder Agreement................................... Preamble
Shareholder Approval.................................... Section 3.01(u)
Shareholders' Meeting................................... Section 5.01(b)
Sub..................................................... Preamble
Subsidiary ............................................. Section 8.03(e)
Superior Proposal....................................... Section 4.02(b)
Surviving Corporation................................... Section 1.01
Takeover Proposal....................................... Section 4.02(b)
tax returns............................................. Section 3.01(r)
taxes................................................... Section 3.01(r)
taxing authority........................................ Section 3.01(r)
2
Termination Fee......................................... Section 5.06(b)
Treasury Regulations.................................... Section 3.01(r)
Warrants................................................ Section 3.01(c)
3
EXHIBIT A
TO THE MERGER AGREEMENT
ARTICLES OF INCORPORATION
OF THE SURVIVING CORPORATION
FIRST: The name of the corporation (hereinafter called the "Corporation")
is Motorsports Authentics, Inc.
SECOND: The name and address of the statutory agent of the Corporation is
Corporation Trust Company, [Address]. This address will also be the
corporation's known place of business.
THIRD: The character of business that the Corporation initially intends to
conduct in the State of Arizona is manufacturing, licensing and selling
motorsports and other collectibles and consumer items, and all manner of
activity related thereto.
FOURTH: The aggregate number of shares which the Corporation shall have
authority to issue is 1,000 shares of Common Stock, par value $.01 per share.
FIFTH: To the fullest extent permitted by the Arizona Business Corporation
Act as it now exists and as it may hereafter be amended, no director of the
Corporation shall be personally liable to the Corporation or any of its
stockholders for monetary damages for any action taken or any failure to take
any action as a director,; provided, however, that nothing contained in this
Article FIFTH shall eliminate or limit the liability of a director or officer
for (a) the amount of a financial benefit received by a director to which the
director is not entitled, (b) an intentional infliction of harm on the
corporation or the shareholders, (c) a violation of section A.R.S. Section
10-833, or (d) an intentional violation of criminal law. No amendment to or
repeal of this Article FIFTH shall apply to or have any effect on the liability
or alleged liability of any director of the Corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment or
repeal.
SIXTH: The Corporation shall, to the fullest extent permitted by A.R.S.
Sections 10-850 through 10-858, as the same may be amended and supplemented,
indemnify any and all persons whom it shall have power to indemnify under said
Sections from and against any and all of the expenses, liabilities, or other
matters referred to in or covered by said Sections. Such indemnification shall
be mandatory and not discretionary. The indemnification provided for herein
shall not be deemed exclusive of any other rights to which those indemnified may
be entitled under any Bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding such office, and shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors, and administrators of such a
person. Any repeal or modification of this Article SIXTH shall not adversely
affect any right to indemnification of any persons existing at the time of such
repeal or modification with respect to any matter occurring prior to such repeal
or modification.
SEVENTH: Unless and except to the extent that the Bylaws of the
Corporation shall so require, the election of directors of the Corporation need
not be by written ballot.
EIGHTH: The initial board of directors shall consist of four members. The
names and addresses of the persons who are to serve as the members of the board
of directors until their successors are elected and qualify are:
Xxxx France Xxxxxxx
c/o International Speedway Corporation
0000 X. Xxxxxxxxxxxxx Xxxxxxxx Xxxx.
Xxxxxxx Xxxxx, XX 00000
Xxxx X. Xxxxxxxx
c/o International Speedway Corporation
0000 X. Xxxxxxxxxxxxx Xxxxxxxx Xxxx.
Xxxxxxx Xxxxx, XX 00000
Xxxx X. Xxxxxxx
c/o Speedway Motorsports, Inc.
0000 Xxxxxxx Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
Xxxxxx Xxxxx
c/o Speedway Motorsports, Inc.
0000 Xxxxxxx Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
NINTH: The name and address of the incorporator is:
Name: _______________________________________ Address: ___________
All powers, duties and responsibilities of the incorporator shall cease at
the time of delivery of these Articles of Incorporation to the Arizona
Corporation Commission.
EXECUTED this 28th day of August 2005 by
___________________
Name: ___________________
2
