Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
KI NUTRICARE, INC.
LONGHORN ACQUISITION CORP.
AND
ALLERGY RESEARCH GROUP, INC.
DATED AS OF AUGUST 8, 2008
TABLE OF CONTENTS
PAGE
ARTICLE 1 THE OFFER AND THE MERGER...................................................................2
Section 1.1 The Offer.........................................................................2
Section 1.2 Company Actions...................................................................4
Section 1.3 Option to Acquire Additional Shares...............................................5
ARTICLE 2 THE MERGER................................................................................7
Section 2.1 The Merger........................................................................7
Section 2.2 Merger Closing....................................................................7
Section 2.3 Effect of Merger; Organizational Documents; Directors and Officers................7
Section 2.4 Conversion of Merger Sub Capital Stock............................................8
Section 2.5 Conversion of Shares..............................................................8
Section 2.6 Appraisal Rights..................................................................9
Section 2.7 Exchange of Certificates..........................................................9
Section 2.8 Further Action...................................................................11
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................................11
Section 3.1 Organization.....................................................................11
Section 3.2 Capitalization...................................................................12
Section 3.3 Authorization; No Conflict.......................................................14
Section 3.4 Subsidiary.......................................................................15
Section 3.5 SEC Reports and Financial Statements.............................................16
Section 3.6 Absence of Material Adverse Changes, etc.........................................17
Section 3.7 Litigation.......................................................................18
Section 3.8 Information Supplied.............................................................18
Section 3.9 Broker's or Finder's Fees........................................................18
Section 3.10 Employee Plans...................................................................18
Section 3.11 Taxes............................................................................21
Section 3.12 Environmental Matters............................................................23
Section 3.13 Compliance With Laws.............................................................23
Section 3.14 Intellectual Property............................................................24
Section 3.15 Employment Matters...............................................................25
-i-
TABLE OF CONTENTS
(continued)
Section 3.16 Insurance........................................................................26
Section 3.17 Material Contracts...............................................................26
Section 3.18 Real Property....................................................................27
Section 3.19 Anti-Takeover Statutes...........................................................27
Section 3.20 Products Liability...............................................................27
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...................................28
Section 4.1 Organization.....................................................................28
Section 4.2 Merger Sub.......................................................................28
Section 4.3 Authorization; No Conflict.......................................................28
Section 4.4 Information Supplied.............................................................29
Section 4.5 Availability of Funds............................................................30
Section 4.6 Ownership of Company Common Stock................................................30
Section 4.7 Broker's or Finder's Fees........................................................30
Section 4.8 Litigation.......................................................................30
ARTICLE 5 CONDUCT OF BUSINESS.......................................................................30
Section 5.1 Conduct of Business by the Company Pending the Acceptance Time...................30
Section 5.2 Conduct of Business by Parent and Merger Sub Pending the Merger..................33
ARTICLE 6 ADDITIONAL AGREEMENTS.....................................................................33
Section 6.1 Preparation of Proxy Statement; Stockholders Meetings............................33
Section 6.2 State Takeover Laws..............................................................34
Section 6.3 Rule 14d-10(d)...................................................................34
Section 6.4 Public Statements................................................................35
Section 6.5 Standard of Efforts..............................................................35
Section 6.6 Notification of Certain Matters..................................................35
Section 6.7 Access to Information; Confidentiality...........................................36
Section 6.8 No Solicitation..................................................................36
Section 6.9 Indemnification and Insurance....................................................38
Section 6.10 Section 16 Matters...............................................................39
-ii-
TABLE OF CONTENTS
(continued)
Section 6.11 Employee Matters................................................................40
Section 6.12 FIRPTA Certificate...............................................................41
Section 6.13 De-registration..................................................................41
Section 6.14 Employment Agreements............................................................41
ARTICLE 7 CONDITIONS................................................................................41
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.......................41
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER.........................................................42
Section 8.1 Termination......................................................................42
Section 8.2 Effect of Termination............................................................43
Section 8.3 Fees and Expenses................................................................44
Section 8.4 Amendment........................................................................45
Section 8.5 Waiver...........................................................................45
Section 8.6 Procedure for Termination, Amendment, Extension or Waiver........................45
ARTICLE 9 GENERAL PROVISIONS........................................................................45
Section 9.1 Notices..........................................................................45
Section 9.2 Nonsurvival of Representations, Warranties and Agreements........................47
Section 9.3 Interpretations..................................................................47
Section 9.4 Governing Law; Jurisdiction; Waiver of Jury Trial................................47
Section 9.5 Counterparts; Facsimile Transmission of Signatures...............................48
Section 9.6 Assignment; No Third Party Beneficiaries.........................................48
Section 9.7 Severability.....................................................................48
Section 9.8 Entire Agreement.................................................................48
Section 9.9 Enforcement......................................................................49
Section 9.10 Disclosure Letter................................................................49
-iii-
TABLE OF DEFINED TERMS
SECTION
ACCEPTANCE TIME Exhibit A
AFFILIATE Exhibit A
AGREEMENT Opening Paragraph
APPRAISAL SHARES Section 2.6
BANKRUPTCY AND EQUITY EXCEPTION Section 3.3(a)
BENEFIT PLAN Section 3.10
BOARD RECOMMENDATION Section 3.3(d)
BOOK-ENTRY SHARES Section 2.7(b)
BUSINESS DAYS Exhibit A
CERTIFICATE Section 2.7(b)
CERTIFICATE OF MERGER Section 2.2(b)
CLOSING Section 2.2(a)
CLOSING DATE Section 2.2(a)
CODE Exhibit A
COMPANY Opening Paragraph
COMPANY ADVERSE RECOMMENDATION CHANGE Section 6.8(d)
COMPANY AFFILIATES Section 3.21(a)
COMPANY BOARD Introduction
COMPANY CHARTER DOCUMENTS Section 3.1(b)
COMPANY COMMON STOCK Introduction
COMPANY DISCLOSURE LETTER ARTICLE 3
COMPANY FINANCIAL STATEMENTS Section 3.5(b)
COMPANY INTELLECTUAL PROPERTY Section 3.14(b)
COMPANY LEASES Section 3.18(b)
COMPANY MATERIAL ADVERSE EFFECT Exhibit A
COMPANY MATERIAL CONTRACT Section 3.17(a)
COMPANY PREFERRED STOCK Section 3.2(a)
COMPANY SEC REPORTS Section 3.5(a)
COMPANY SPECIAL COMMITTEE Introduction
COMPANY STOCKHOLDERS MEETING Section 6.1(b)
COMPANY SUBSIDIARY Section 3.4(a)
COMPANY VOTING PROPOSAL Section 6.1(b)
CONFIDENTIALITY AGREEMENT Section 6.7(b)
CONSTITUENT CORPORATIONS Section 2.1
CONTRACT Exhibit A
D&O INSURANCE Section 6.9(c)
DOL Section 3.10
DSHEA Section 3.13(b)
EFFECTIVE TIME Section 2.2(b)
ENVIRONMENTAL LAWS Exhibit A
ERISA Section 3.10
-iv-
ERISA AFFILIATE Section 3.10
EXCHANGE ACT Section 1.1(a)
EXCHANGE AGENT Section 2.7(a)
EXCHANGE FUND Section 2.7(a)
FBCA Introduction
FCPA Section 3.5(f)
FDA Section 3.13(b)
FDA ACT Section 3.13(b)
GAAP Section 3.5(b)
GOVERNMENTAL AUTHORITY Section 3.3(c)
HAZARDOUS SUBSTANCES Exhibit A
INDEMNIFIED PARTY Section 6.9(a)
INDEMNIFYING PARTIES Section 6.9(b)
INFORMATION STATEMENT Section 3.3(c)
INTELLECTUAL PROPERTY Section 3.14(a)
IRS Section 3.10
JUDGMENT Section 3.3(b)
KNOWLEDGE Exhibit A
LAW Section 3.3(b)
LIEN Exhibit A
MAXIMUM AMOUNT Section 6.9(c)
MERGER Introduction
MERGER CONSIDERATION Section 2.5(a)
MERGER SUB Opening Paragraph
MINIMUM CASH AMOUNT Annex A
MINIMUM TENDER CONDITION Annex A
NOTE Section 1.3
OFFER Introduction
OFFER CONDITIONS Section 1.1(a)
OFFER DOCUMENTS Section 1.1(f)
OFFER PRICE Introduction
OPTIONS Exhibit A
ORDINARY COURSE OF BUSINESS Exhibit A
PARENT Opening Paragraph
PARENT MATERIAL ADVERSE EFFECT Exhibit A
PERMITS Section 3.1(a)
PERMITTED LIENS Exhibit A
PERSON Exhibit A
POLICIES Section 3.16
PRE-CLOSING PERIOD Section 5.1
PROXY STATEMENT Section 3.3(c)
REGISTERED IP Section 3.14(c)
REPRESENTATIVES Section 6.8(a)
REQUIRED COMPANY STOCKHOLDER VOTE Section 3.3(a)
RESTRICTED STOCK Exhibit A
XXXXXXXX-XXXXX ACT Section 3.5(d)
-v-
SCHEDULE 14D-9 Section 1.2(b)
SEC Exhibit A
SECURITIES ACT Section 3.5(a)
SHARE Introduction
SHARES Introduction
SPECIAL COMMITTEE 3.2(g)
STOCK PLANS Exhibit A
SUBSEQUENT OFFERING PERIOD Section 1.1(d)
SUBSIDIARY Exhibit A
SUBSIDIARY DOCUMENTS Section 3.1(b)
SUPERIOR PROPOSAL Exhibit A
SUPERIOR PROPOSAL NOTICE Section 8.1 (d)(iii)
SURVIVING CORPORATION Section 2.1
TAKEOVER PROPOSAL Exhibit A
TAX AUTHORITY OR TAXING AUTHORITY Exhibit A
TAX OR TAXES Exhibit A
TAX RETURNS Exhibit A
TENDER AND SUPPORT AGREEMENT Introduction
TERMINATION FEE Section 8.3(b)
TOP-UP OPTION Section 1.3
TOP-UP OPTION SHARES Section 1.3
TRANSACTIONS Section 1.2(a)
WALK AWAY DATE Section 8.1(b)(i)
WARN ACT Section 3.1(c)
-vi-
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (this "AGREEMENT"), dated as of August 8,
2008, among KI NutriCare, Inc., a New York corporation ("PARENT"), Longhorn
Acquisition Corp., a Florida corporation and wholly-owned subsidiary of Parent
("MERGER SUB"), and Allergy Research Group, Inc., a Florida corporation (the
"COMPANY").
INTRODUCTION
The respective Boards of Directors of Parent, Merger Sub and the
Company have approved and declared advisable and in the best interests of each
of their respective corporations this Agreement, including the Offer and the
Merger, on the terms and subject to the conditions set forth in this Agreement.
In furtherance of such acquisition, Parent has agreed, on the terms and
subject to the conditions set forth in this Agreement, to cause Merger Sub to
commence a cash tender offer (as it may be amended from time to time as
permitted under this Agreement, the "OFFER") to purchase all the shares of
common stock, par value $0.001 per share, of the Company (the "COMPANY COMMON
STOCK") issued and outstanding (each share of Company Common Stock, a "SHARE"
and, collectively, the "SHARES"), at a price per Share of $1.33 (such amount, or
any higher amount per Share paid pursuant to the Offer in accordance with this
Agreement, the "OFFER PRICE"), subject to any required withholding of Taxes (as
provided in SECTION 2.7(G)), net to the seller in cash (without interest), on
the terms and subject to the conditions set forth in this Agreement.
Following consummation of the Offer, subject to the terms and
conditions of this Agreement, Parent shall cause Merger Sub to merge with and
into the Company (the "MERGER"), with the Company surviving the Merger as a
wholly owned subsidiary of Parent, in accordance with the Florida Business
Corporation Act (the "FBCA"). Each Share that is not tendered and accepted
pursuant to the Offer, other than certain Shares as provided in SECTION 2.5(B)
and SECTION 2.6, will thereupon be cancelled and converted in the Merger into
the right to receive cash in an amount equal to the Offer Price on the terms and
subject to the conditions set forth herein.
The Board of Directors of the Company (the "COMPANY BOARD"), at a
meeting duly called and held following unanimous recommendation by a special
committee consisting of only independent directors (the "COMPANY SPECIAL
COMMITTEE"), has duly and unanimously adopted resolutions (i) declaring that
this Agreement and the Transactions, including the Offer and the Merger, are
fair and reasonable to and in the best interests of the Company and its
stockholders, (ii) approving and declaring advisable this Agreement and the
Transactions, including the Offer and the Merger (such approval having been made
in accordance with the FBCA), and (iii) recommending that the Company's
stockholders accept the Offer, tender their Shares to Merger Sub pursuant to the
Offer and adopt this Agreement.
Each of Parent and the Board of Directors of Merger Sub has approved,
and the Board of Directors of the Company has determined that this Agreement and
the Transactions, including the Offer and the Merger, are advisable.
Concurrently with the execution and delivery of this Agreement, and as
a condition and inducement to Parent's and Merger Sub's willingness to enter
into this Agreement, certain of the Company's stockholders are entering into a
Tender and Support Agreement with Parent and Merger Sub substantially in the
form attached as EXHIBIT B (the "TENDER AND SUPPORT AGREEMENT").
In consideration of the foregoing and of the representations,
warranties, covenants and agreements set forth in this Agreement and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
THE OFFER AND THE MERGER
Section 1.1 THE OFFER.
(a) Provided that nothing shall have occurred that, had the Offer been
commenced, would give rise to a right to terminate the Offer pursuant to any of
the conditions set forth in ANNEX A, as promptly as reasonably practicable after
the date of this Agreement, Merger Sub shall commence the Offer, within the
meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended
("EXCHANGE ACT"), to purchase any and all outstanding Shares at a price equal to
the Offer Price. The obligations of Merger Sub to, and of Parent to cause Merger
Sub to, purchase, accept for payment, and pay for, Shares tendered pursuant to
the Offer are subject to the satisfaction or waiver of each of the conditions
set forth in ANNEX A (the "OFFER CONDITIONS").
(b) The initial expiration date of the Offer shall be the twentieth
(20th) Business Day following the commencement of the Offer (determined using
Rules 14d-1(g)(3) and 14d-2 under the Exchange Act). Notwithstanding the
foregoing, if, on the initial expiration date or any subsequent date as of which
the Offer is scheduled to expire, all of the Offer Conditions have not been
satisfied or waived by Merger Sub, then Merger Sub shall have the right to, in
its sole discretion, extend (and re-extend) the Offer and its expiration date
beyond the initial expiration date or such other date for one or more periods,
until a date as of which all of the Offer Conditions, including the Minimum
Tender Condition, are satisfied or waived. Notwithstanding the foregoing, Merger
Sub shall, and Parent shall cause Merger Sub to, extend the Offer for any period
required by any rule, regulation, interpretation or position of the SEC or the
staff thereof applicable to the Offer or any period required by any other Law.
The Offer may not be terminated prior to its expiration date (as such expiration
date may be extended and re-extended in accordance with this Agreement), unless
this Agreement is validly terminated in accordance with ARTICLE 8. Nothing in
this SECTION 1.1(B) shall affect any termination rights in ARTICLE 8; and in the
event of any conflict between the provisions of this SECTION 1.1(B) and ARTICLE
8, ARTICLE 8 shall be controlling.
(c) Subject to the terms and conditions of this Agreement, Merger Sub
shall (and Parent shall cause Merger Sub to) accept for payment and promptly pay
-2-
for all Shares validly tendered and not withdrawn pursuant to the Offer as
promptly as practicable following the later of: (i) the earliest date as of
which Merger Sub is permitted under applicable Law to accept for payment Shares
tendered pursuant to the Offer and (ii) the earliest date as of which each of
the Offer Conditions shall have been satisfied or waived.
(d) Following the expiration of the Offer, Merger Sub may, in its
discretion, elect to provide for a subsequent offering period (and one or more
extensions thereof) in accordance with Rule 14d-11 under the Exchange Act (each
a "SUBSEQUENT OFFERING PERIOD") following the Acceptance Time if at the
commencement of any Subsequent Offering Period (or extension thereof) the number
of Shares owned by Parent, Merger Sub and their respective Subsidiaries
(including any Shares beneficially owned by any of the foregoing) represent less
than 80% of the outstanding Shares on a fully-diluted basis. Subject to the
terms and conditions set forth in this Agreement and the Offer, Parent shall
cause Merger Sub to, and Merger Sub shall, accept for payment and pay for all
Shares validly tendered and not withdrawn during such Subsequent Offering Period
as promptly as practicable after any such Shares are tendered during any
Subsequent Offering Period and in any event in compliance with Rule 14d-11(c)
under the Exchange Act.
(e) Parent and Merger Sub expressly reserve the right to waive any
condition to the Offer, to increase the Offer Price and/or to modify the other
terms of or conditions to the Offer, except that unless otherwise provided in
this Agreement, without the consent of the Company, Parent and Merger Sub shall
not do any of the following:
(i) reduce the number of Shares subject to the Offer;
(ii) reduce the Offer Price;
(iii) change or waive the Minimum Tender Condition; or
(iv) change the form of consideration payable in the Offer.
(f) On the date of commencement of the Offer (within the meaning of
Rule 14d-2 under the Exchange Act), Merger Sub shall file with the SEC, pursuant
to Regulation M-A under the Exchange Act, a Tender Offer Statement on Schedule
TO with respect to the Offer, which Tender Offer Statement shall contain an
offer to purchase and a related letter of transmittal and summary advertisement
(such Schedule TO and the documents included therein pursuant to which the Offer
will be made, together with any supplements or amendments thereto, being
referred to as the "OFFER DOCUMENTS"). The Company shall promptly upon request
of Parent provide Parent with all information concerning the Company that is
required to be included in the Offer Documents. Parent and Merger Sub shall
cause the Offer Documents to comply in all material respects with the
requirements of the Exchange Act and, on the date first filed with the SEC and
on the date first published, sent or given to the holders of Shares, and not to
contain any untrue statement of a material fact or omit to state any material
-3-
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no covenant is made by Parent or Merger Sub with respect
to information supplied by the Company for inclusion or incorporation by
reference in the Offer Documents. Each of Parent, Merger Sub and the Company
shall promptly correct any information provided by it for use in the Offer
Documents if and to the extent necessary such that the Offer Documents do not
contain an 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. Each of Parent and Merger Sub shall take all steps necessary to
amend or supplement the Offer Documents and to cause the Offer Documents as so
amended or supplemented to be filed with the SEC and disseminated to the holders
of Shares, in each case as and to the extent required by the Exchange Act.
Parent and Merger Sub shall provide to the Company and its counsel copies of any
written comments or telephonic notification of any oral comments Parent, Merger
Sub or their counsel may receive from the SEC or its staff with respect to the
Offer Documents promptly after the receipt of such comments, and shall provide
the Company with copies of all written responses and telephonic notification of
any oral responses thereto of Parent or Merger Sub or their counsel.
(g) The Offer Price shall be adjusted to reflect fully the effect of
any reclassification, stock split, reverse split, stock dividend (including any
dividend or distribution of securities convertible into Company Common Stock),
cash dividend, reorganization, recapitalization combination, or other like
change with respect to Company Common Stock occurring (or for which a record
date is established) on or after the date of this Agreement and prior to the
payment by Merger Sub for the Shares validly tendered and not withdrawn in
connection with the Offer; PROVIDED, HOWEVER, the provisions of this SECTION
1.1(G) are not authority for the Company to take any action referenced in
SECTION 5.1(B), and in the event of any conflict between the provisions of
SECTION 5.1(B) and this SECTION 1.1(G), the provision of SECTION 5.1(B) shall be
controlling.
Section 1.2 COMPANY ACTIONS.
(a) The Company hereby approves of and consents to the Offer, the
Merger and the other transactions contemplated by this Agreement (collectively,
the "TRANSACTIONS"). The Company hereby consents to the inclusion of a statement
in the Offer Documents that to the Knowledge of the Company all directors and
executive officers of the Company intend to tender all of their respective
Shares, if they hold any, in the Offer.
(b) Contemporaneously with the commencement of the Offer, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 with respect to the Offer (such Schedule 14D-9, as amended and
supplemented from time to time, the "SCHEDULE 14D-9") and shall disseminate the
Schedule 14D-9, to the extent required by Rule 14D-9 promulgated under the
Exchange Act and any other applicable Laws, to the holders of Shares. Except and
to the extent otherwise permitted pursuant to SECTION 6.8 below, the Offer
Documents and the Schedule 14D-9 shall contain the Board Recommendation, and the
Company hereby consents to the inclusion in the Offer Documents of such
recommendation. The Schedule 14D-9 shall comply in all material respects with
the requirements of applicable U.S. federal securities laws and on the date
first filed with the SEC and on the date first published, sent or given to the
Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that the Company makes no
covenant, agreement, representation or warranty with respect to information
supplied by Parent or Merger Sub in writing specifically for inclusion in the
Schedule 14D-9. Each of the Company, Parent and Merger Sub shall promptly
correct any information provided by it for use in the Schedule 14D-9 if and to
-4-
the extent necessary such that the Schedule 14D-9 does not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Company shall
take all steps necessary to amend or supplement the Schedule 14D-9 and to cause
the Schedule 14D-9 as so amended or supplemented to be filed with the SEC and
disseminated to the holders of Shares, in each case as and to the extent
required by the Exchange Act.
(c) Parent and its counsel shall be afforded a reasonable opportunity
to review and comment upon the Schedule 14D-9 before it is filed with the SEC
and disseminated to holders of Shares. The Company shall provide Parent and its
counsel copies of any written comments or telephonic notification of any oral
comments the Company or its counsel may receive from the SEC or its staff with
respect to the Schedule 14D-9 promptly after the receipt of such comments, shall
consult with Parent and its counsel prior to responding to any such comments and
shall provide Parent with copies of all written responses and telephonic
notification of any oral responses thereto of the Company and its counsel.
(d) In connection with the Offer, the Company shall instruct its
transfer agent to furnish Parent and Merger Sub promptly with mailing labels
containing the names and addresses of the record holders of Shares as of a
recent date and of those persons becoming record holders subsequent to such
date, together with copies of all lists of stockholders, security position
listings and computer files and all other information in the Company's
possession or control regarding the beneficial owners of Shares, and shall
furnish to Parent and Merger Sub such information and assistance (including
updated lists of stockholders, security position listings and computer files) as
Parent may reasonably request for the purpose of communicating the Offer to the
holders of Shares. Subject to the requirements of applicable Law and except for
such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer, the Merger and the other
Transactions, Parent and Merger Sub shall, until consummation of the Offer, hold
in confidence the information contained in any of such labels and lists in
accordance with the Confidentiality Agreement, shall use such information only
in connection with the Offer, the Merger and the other Transactions and, if this
Agreement shall be terminated in accordance with SECTION 8.1, shall deliver to
the Company all copies of such information then in their possession or under
their control.
Section 1.3 OPTION TO ACQUIRE ADDITIONAL SHARES. The Company hereby
grants to Merger Sub an irrevocable option (the "TOP-UP OPTION"), exercisable in
accordance with this SECTION 1.3, to purchase the number of Shares (the "TOP-UP
OPTION SHARES") equal to the number of shares of Company Common Stock that, when
added to the number of shares of Company Common Stock owned by Merger Sub
immediately prior to the exercise of the Top-Up Option (which such shares of
Company Common Stock owned by Merger Sub shall not be less than the Minimum
Tender Condition) shall constitute one share more than 80% of the number of
Shares then outstanding (after giving effect to the issuance of the Top-Up
Option Shares) for a purchase price per Top-Up Option Share equal to the Offer
Price. The Top-Up Option may be exercised by Merger Sub in whole but not in
part; PROVIDED, HOWEVER, that Merger Sub agrees that it will exercise the Top-Up
Option only if doing so would allow it to consummate the Merger pursuant to
Section 607.1104 of the FBCA. In no event shall the Top-Up Option be exercisable
for a number of Shares in excess of the Company's then authorized and unissued
-5-
Shares (including as authorized and unissued shares of Common Stock, for
purposes of this SECTION 1.3, any Shares reserved for issuance, upon the
exercise of any outstanding Option or with respect to any other outstanding
security convertible into or exercisable or exchangeable for Shares). The Top-Up
Option may be exercised by Merger Sub at any time at or after the Acceptance
Time and the expiration of any subsequent offering period and on or prior to the
tenth (10th) Business Day after the later of (i) the expiration date of the
Offer or (ii) the expiration of any Subsequent Offering Period; PROVIDED,
HOWEVER, that the obligation of the Company to deliver Top-Up Option Shares upon
the exercise of the Top-Up Option is subject to the conditions, unless waived by
the Company, that (A) no provision of any applicable Law, and no temporary
restraining order, preliminary or permanent injunction or other judgment or
order issued by a court of competent jurisdiction or other Governmental
Authority of competent jurisdiction, shall prohibit the exercise of the Top-Up
Option or the delivery of the Top-Up Option Shares in respect of such exercise,
(B) after issuance of the Top-Up Option Shares upon exercise, the number of
Shares owned by Parent or Merger Sub or any wholly owned Subsidiary of Parent or
Merger Sub constitutes one share more than 80% of the number of Shares that will
be outstanding immediately after the issuance of the Top-Up Option Shares, and
(C) upon exercise of the Top-Up Option, Merger Sub covenants to cause the
Closing to occur as soon as practicable thereafter; and, provided, FURTHER, that
the Top-Up Option shall terminate concurrently with the termination of this
Agreement. The parties shall cooperate to ensure that the issuance of the Top-Up
Option Shares is accomplished in a manner consistent with all applicable Law,
including compliance with an applicable exemption from registration of the
Top-Up Option Shares under the Securities Act. If Merger Sub wishes to so
exercise the Top-Up Option, Merger Sub shall give the Company written notice
thereof specifying a place and time (which, subject to applicable Law and any
required regulatory approvals, shall be at least two (2), but not more than five
(5), Business Days after the date of delivery of such written notice) for the
closing of such purchase. At such closing, (i) the purchase price in respect of
the Top-Up Option Shares purchased upon such exercise of the Top-Up Option
(which shall equal the product of (x) the number of Top-Up Option Shares being
purchased pursuant to the Top-Up Option and (y) the Offer Price) shall be paid
to the Company, at Merger Sub's election, either (A) in immediately available
funds by wire transfer to an account designated by the Company or (B) by paying
in cash an amount equal to not less than the aggregate par value of such Top-Up
Option Shares and by delivering Parent's unsecured, non-negotiable,
non-transferable promissory note (the "NOTE") in the principal amount of the
balance of such purchase price, which promissory note shall bear interest at the
rate of 3% per annum, shall mature on the first anniversary of the date thereof
and may be prepaid in whole or in part without premium or penalty, and (ii) the
Company shall deliver to Merger Sub a certificate or certificates representing
the number of Top-Up Option Shares so purchased. Parent and Merger Sub
acknowledge that the Top-Up Option Shares that Merger Sub may acquire upon
exercise of the Top-Up Option will not be registered under the Securities Act,
and will be issued in reliance upon an exemption thereunder for transactions not
involving a public offering. Parent and Merger Sub represent and warrant to the
Company that Merger Sub is, or will be upon the purchase of the Top-Up Option
Shares, an "accredited investor", as defined in Rule 501 of Regulation D under
the Securities Act. Merger Sub agrees that the Top-Up Option and the Top-Up
Option Shares to be acquired upon exercise of the Top-Up Option are being and
will be acquired by Merger Sub for the purpose of investment and not with a view
to, or for resale in connection with, any distribution thereof in violation of
the Securities Act.
-6-
ARTICLE 2
THE MERGER
Section 2.1 THE MERGER. Subject to the terms and conditions of this
Agreement and in compliance with the FBCA, Merger Sub shall be merged with and
into the Company, the separate existence of Merger Sub shall cease, and the
Company shall continue as the surviving corporation. For purposes of this
Agreement, (i) the corporation surviving the Merger after the Effective Time is
sometimes referred to as the "SURVIVING CORPORATION" and (ii) the Company and
Merger Sub are collectively referred to as the "CONSTITUENT CORPORATIONS".
Section 2.2 MERGER CLOSING.
(a) The Merger shall be consummated (the "CLOSING") at 10:00 a.m. (San
Francisco time) on a date to be specified by the parties, which shall be no
later than the fifth (5th) Business Day after satisfaction or (to the extent
permitted by applicable Law) waiver of the conditions set forth in ARTICLE 7
(other than any such conditions that by their nature cannot be satisfied until
the Closing Date, which shall be required to be so satisfied or (to the extent
permitted by applicable Law) waived on the Closing Date), at the offices of
O'Melveny & Xxxxx LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000,
unless another time, date or place is agreed to in writing by the parties hereto
(such date upon which the Closing occurs, the "CLOSING DATE").
(b) At the Closing, the parties hereto shall cause the Merger to be
consummated by filing with the Secretary of State of the State of Florida a
certificate of merger or a certificate of ownership and merger, as the case may
be (in any such case, the "CERTIFICATE OF MERGER"), in such form as required by,
and executed in accordance with, the relevant provisions of the FBCA and shall
make all other filings or recordings required under the FBCA. The Merger shall
become effective at such time as the Certificate of Merger is duly filed with
the Secretary of State of the State of Florida, or at such later time as Parent
and the Company shall agree and specify in the Certificate of Merger (the time
the Merger becomes effective being the "EFFECTIVE TIME").
Section 2.3 EFFECT OF MERGER; ORGANIZATIONAL DOCUMENTS; DIRECTORS
AND OFFICERS.
(a) The Merger shall have the effects set forth in Section 607.11101 of
the FBCA.
(b) The articles of incorporation of the Surviving Corporation shall at
the Effective Time be amended in its entirety to read the same as the articles
of incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, except that all references to the name of Merger Sub therein shall be
changed to refer to the name of the Company, until thereafter amended as
provided therein and under the FBCA. In addition, subject to SECTION 6.9 hereof,
Parent shall cause the bylaws of the Surviving Corporation to be amended and
restated in their entirety so that, immediately following the Effective Time,
they are identical to the bylaws of Merger Sub as in effect immediately prior to
the Effective Time, except that all references to the name of Merger Sub therein
shall be changed to refer to the name of the Company, and, as so amended and
restated, such bylaws shall be the bylaws of the Surviving Corporation, until
further amended in accordance with the FBCA. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation and shall serve until the earlier of their resignation or
-7-
removal or their respective successors are duly elected or appointed and
qualified, as the case may be. The officers of the Company immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation
and shall serve until the earlier of their resignation or removal or until their
respective successors have been duly elected or appointed and qualified, as the
case may be.
(c) If requested by Parent prior to the Effective Time, the Company
shall cause the directors of the Company Subsidiary to tender their resignations
as directors, effective as of the Effective Time, and to deliver to Parent
written evidence of such resignations at the Effective Time.
Section 2.4 CONVERSION OF MERGER SUB CAPITAL STOCK. At the Effective
Time, by virtue of the Merger and without any action on the part of Parent,
Merger Sub, the Company or any holder of shares of Merger Sub capital stock,
each share of Merger Sub capital stock shall be converted into and become one
fully paid and nonassessable share of common stock, par value $0.001 per share,
of the Surviving Corporation.
Section 2.5 CONVERSION OF SHARES. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, the Company
or any holder of Shares, the following shall occur:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than (i) any Shares to be canceled or remain outstanding
pursuant to SECTION 2.5(B) and (ii) any Appraisal Shares) shall at the Effective
Time be canceled and converted automatically into the right to receive an amount
in cash equal to the Offer Price (the "MERGER CONSIDERATION"). As of the
Effective Time, all such Shares shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each holder of a
certificate previously representing any such Shares shall cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration upon surrender of such certificate in accordance with SECTION 2.7,
without interest.
(b) Each Share held in the treasury of the Company and each Share owned
by Parent (other than Shares held by any direct or indirect wholly-owned
subsidiary of Parent or of the Company, which shall remain outstanding except
that the number of such Shares shall be adjusted in the Merger to maintain
relative ownership percentages) immediately prior to the Effective Time shall be
canceled without any conversion thereof and no payment or distribution shall be
made with respect thereto.
(c) The Merger Consideration shall be adjusted to reflect fully the
effect of any reclassification, stock split, reverse split, stock dividend
(including any dividend or distribution of securities convertible into Company
Common Stock), reorganization, recapitalization or other like change with
respect to Company Common Stock occurring (or for which a record date is
established) after the date hereof and prior to the Effective Time; PROVIDED,
HOWEVER, the provisions of this SECTION 2.5(C) are not authority for the Company
to take any action referenced in SECTION 5.1(B), and in the event of any
conflict between the provisions of SECTION 5.1(B) and this SECTION 2.5(C), the
provisions of SECTION 5.1(B) shall be controlling.
-8-
Section 2.6 APPRAISAL RIGHTS. Notwithstanding anything in this
Agreement to the contrary, Shares that are outstanding immediately prior to the
Effective Time and that are held by any Person who is entitled to demand and
properly demands appraisal of such Shares ("APPRAISAL SHARES") pursuant to, and
who complies in all respects with, Section 607.1322 of the FBCA shall not be
converted into the right to receive Merger Consideration as provided in SECTION
2.5(A), but rather the holders of Appraisal Shares shall be entitled to payment
of the fair value of such Appraisal Shares in accordance with Section 607.1302
of the FBCA (and at the Effective Time, such Appraisal Shares shall no longer be
outstanding and shall automatically be cancelled and shall cease to exist, and
such holders shall cease to have any right with respect thereto, except the
right to receive the fair value of such Appraisal Shares in accordance with
Section 607.1302 of the FBCA); PROVIDED, HOWEVER, that if any such holder shall
fail to perfect or otherwise shall waive, withdraw or lose the right to
appraisal under Section 607.1302 of the FBCA, then the right of such holder to
be paid the fair value of such holder's Appraisal Shares shall cease and such
Appraisal Shares shall be deemed to have been converted as of the Effective Time
into, and to have become exchangeable solely for the right to receive, Merger
Consideration as provided in SECTION 2.5(A). The Company shall promptly notify
Parent in writing of any written demands received by the Company for appraisal
of any Shares, and Parent shall have the right to participate in all
negotiations and proceedings with respect to such demands. Prior to the
Effective Time, the Company shall not, without the prior written consent of
Parent, make any payment with respect to, or settle or offer to settle, any such
demands, or agree to do any of the foregoing. Any portion of the Merger
Consideration made available to the Exchange Agent pursuant to SECTION 2.7(a) to
pay for Shares that are instead paid fair value in an appraisal proceeding
pursuant to Section 607.1302 of the FBCA shall be returned to Parent upon
demand.
Section 2.7 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Effective Time, Parent shall appoint
an agent (the "EXCHANGE Agent"), which shall provide for the payment of Merger
Consideration in accordance with the terms of this SECTION 2.7. At the Effective
Time, Parent shall, or shall take all steps necessary to enable and cause the
Merger Sub to, deposit with the Exchange Agent at or prior to the Effective
Time, for the benefit of the holders of Shares outstanding immediately prior to
the Effective Time, for payment by the Exchange Agent in accordance with this
ARTICLE 2, the cash necessary to pay for the Shares converted into the right to
receive Merger Consideration (the "EXCHANGE FUND"). The Exchange Fund shall not
be used for any other purpose. The Exchange Fund shall, pending its disbursement
to such holders, be invested by the Exchange Agent as directed by Parent.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable (and in any
event within ten (10) Business Days) after the Effective Time, Parent shall
cause the Exchange Agent to mail to each Person who was a holder of record of
Shares immediately prior to the Effective Time, whose Shares were converted into
the right to receive the Merger Consideration pursuant to SECTION 2.5, (i) the
form of letter of transmittal for use in effecting the surrender of stock
certificates that immediately prior to the Effective Time represented Shares
(each, a "CERTIFICATE") or non-certificated Shares represented by Book-Entry
("BOOK-ENTRY SHARES") (which transmittal letter shall be in customary form and
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
-9-
Agent) and (ii) instructions for use in surrendering the Certificates or
Book-Entry Shares in exchange for the Merger Consideration. The parties hereby
acknowledge and agree that the ten (10) Business Day period set forth in the
previous sentence will be tolled for each Business Day the Exchange Agent has
not received the necessary stockholder records from the Company's transfer
agent. Upon surrender of a Certificate or a Book-Entry Share for cancellation to
the Exchange Agent, together with such letter of transmittal, duly executed, and
such other documents as may reasonably be required by the Exchange Agent, the
holder of such Certificate or Book-Entry Share shall be paid promptly in
exchange therefor, and Parent shall cause the Exchange Agent to pay to such
holder, the Merger Consideration in respect of the Shares previously represented
by such Certificate or Book-Entry Share, and the Certificate or Book-Entry
Shares so surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Shares that is not registered in the transfer records of the
Company, payment may be made to a Person other than the Person in whose name the
Certificate so surrendered is registered if such Certificate shall be properly
endorsed or otherwise be in proper form for transfer and the Person requesting
such issuance shall pay any transfer or other Taxes required by reason of the
payment to a Person other than the registered holder of such Certificate or
establish to the satisfaction of Parent that such Tax has been paid or is not
applicable. Each Certificate and Book-Entry Share shall be deemed at all times
from and after the Effective Time to represent only the right to receive upon
surrender in accordance with this SECTION 2.7 the Merger Consideration in
respect of the Shares previously represented by such Certificate or Book-Entry
Share. No interest shall be paid or shall accrue on any cash payable to holders
of Certificates or Book Entry Shares pursuant to the provisions of this ARTICLE
2.
(c) NO FURTHER OWNERSHIP RIGHTS IN SHARES. The Merger Consideration
paid upon the surrender for exchange of Certificates and Book Entry Shares 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 previously represented
by such Certificates and Book Entry Shares. From and after the Effective Time,
the Surviving Corporation shall not permit any further registration of transfers
on the stock transfer books of the Company of the Shares that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates or Book Entry Shares are presented to the Surviving Corporation or
the Exchange Agent for any reason, they shall be canceled and exchanged as
provided in this ARTICLE 2, except as otherwise provided by Law.
(d) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund that
remains undistributed to the holders of Shares for 180 days after the Effective
Time shall be delivered to Parent, upon demand, and any holders of Certificates
or Book Entry Shares who have not theretofore complied with this ARTICLE 2 shall
thereafter only be entitled to receive from Parent (subject to abandoned
property, escheat or similar Laws, as general creditors thereof) payment of
their claim for Merger Consideration.
(e) NO LIABILITY. To the extent permitted by applicable Law, none of
Parent, Merger Sub, the Company or the Exchange Agent shall be liable to any
Person in respect of any cash from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar Law.
(f) 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 requested by
-10-
Parent or the Exchange Agent, the posting by such Person of a bond in such
reasonable amount as Parent or the Exchange Agent may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent shall issue in exchange for such lost, stolen or destroyed
Certificate the applicable Merger Consideration with respect thereto pursuant to
this Agreement.
(g) WITHHOLDING RIGHTS. Notwithstanding any provision of this Agreement
to the contrary, each of Parent, the Surviving Corporation and the Exchange
Agent shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement such amounts as it is required to deduct and
withhold with respect to the making of such payment under any applicable Law. To
the extent that amounts are so withheld by Parent, the Surviving Corporation or
the Exchange Agent, as applicable, such amount shall be treated for all purposes
of this Agreement as having been paid to the Person in respect of which such
deduction and withholding was made.
Section 2.8 FURTHER ACTION. If at any time after the Effective Time,
any further action is necessary or desirable to vest the Surviving Corporation
with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of either of the Constituent Corporations, the
officers and directors of the Surviving Corporation are fully authorized in the
name of each Constituent Corporation, or otherwise, to take, and shall take, all
such lawful and necessary action.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the disclosure letter (each section of which
qualifies (i) the correspondingly numbered representation and warranty or
covenant and (ii) other sections of this Agreement to the extent it is
reasonably apparent solely from a reading of the disclosure that such disclosure
is applicable to such other sections without any independent knowledge on the
part of the reader regarding the matter(s) so disclosed) previously delivered by
the Company to Parent (the "COMPANY DISCLOSURE LETTER"), the Company hereby
represents and warrants to Parent and Merger Sub as follows:
Section 3.1 ORGANIZATION.
(a) Each of the Company and the Company Subsidiary is a corporation or
company limited by shares duly organized, validly existing and, where
applicable, in good standing under the laws of the jurisdiction of its
organization. Each of the Company and the Company Subsidiary has all requisite
corporate power and authority necessary to enable it to own, operate and lease
its properties and to carry on its business as now conducted. Each of the
Company and the Company Subsidiary possesses all licenses, franchises, permits,
certificates, approvals and authorizations from Governmental Authorities, or
required by Governmental Authorities to be obtained, in each case necessary for
the lawful conduct of their respective businesses as now conducted
(collectively, "PERMITS"), except for such Permits, the lack of which,
individually or in the aggregate, has not had and would not reasonably be likely
to have a Company Material Adverse Effect.
-11-
(b) The copies of the articles of incorporation and bylaws of the
Company (the "COMPANY CHARTER DOCUMENTS") that are incorporated by reference as
exhibits to the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2007 are complete and correct copies of such documents and contain
all amendments thereto as in effect on the date of this Agreement. The Company
has delivered or made available to Parent complete and correct copies of the
articles of incorporation and by-laws of the Company Subsidiary (the "SUBSIDIARY
Documents"), as amended to the date of this Agreement. All such Company Charter
Documents and Subsidiary Documents are in full force and effect and neither the
Company nor the Company Subsidiary is in violation of any of their respective
provisions. The Company has made available to Parent complete copies of all
material minutes (or, in the case of minutes that have not yet been finalized, a
brief summary of the meeting) of all meetings of stockholders, the Company Board
and each committee of the Company Board; PROVIDED that the Company shall not be
obligated to make available to Parent any minutes for portions of any meetings
that discuss the Transactions or any current or prior alternatives thereto
considered by the Company Board or any such committee.
Section 3.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of (i)
100,000,000 shares of Company Common Stock and (ii) 1,000,000 shares of
preferred stock, par value $0.25 per share ("COMPANY PREFERRED STOCK"). As of
the date hereof: (A) 14,666,200 shares of Company Common Stock were issued and
outstanding; (B) no shares of Company Preferred Stock were issued or
outstanding; (C) 439,155 Shares were held by the Company in its treasury; (D)
there were no Shares or Shares of Preferred Stock reserved for issuance, (E) no
outstanding Options or warrant to purchase Shares and (F) 656,250 Shares were
reserved for issuance under the Stock Plans. Such issued and outstanding Shares
have been duly authorized and validly issued, are fully paid and nonassessable,
and are free of preemptive or similar rights under any provision of the FBCA and
the Company's certificate of incorporation or bylaws or any agreement to which
the Company is a party or by which the Company is otherwise bound.
(b) SECTION 3.2 of the Company Disclosure Letter sets forth a complete
and accurate list, as of the date hereof, of all Stock Plans, indicating for
each Stock Plan, as of such date, (i) the number of shares of Company Common
Stock issued under such Stock Plan, (ii) the number of shares of Company Common
Stock subject to outstanding Options under such Stock Plan, (iii) the number of
shares of Company Common Stock reserved for future issuance under such Stock
Plan, (iv) the number of shares of Company Common Stock vested under such Stock
Plan, (v) the number of shares of Company Common Stock unvested under such Stock
Plan, (vi) the average exercise price of the outstanding Options under such
Stock Plan, (vii) the aggregate number of shares of Restricted Stock that are
subject to repurchase by the Company pursuant to restricted stock or similar
agreements with the Company, (viii) the number of shares of formerly Restricted
Stock that are vested, (ix) the number of shares of Restricted Stock that are
unvested and (x) the average repurchase price relating to the shares of
Restricted Stock. The Company has made available to Parent complete and accurate
copies of all (x) Stock Plans, (y) forms of stock option agreements evidencing
Options and (z) forms of agreements evidencing shares of Restricted Stock.
-12-
(c) There are no outstanding or authorized stock appreciation rights,
phantom stock awards or other rights that are linked in any way to the price of
the Shares or the value of the Company or any part or division thereof.
(d) The Company has not declared or paid any dividend, or declared or
made any distribution on, or authorized the creation or issuance of, or issued,
or authorized or effected any split-up or any other recapitalization of, any of
its capital stock, or directly or indirectly redeemed, purchased or otherwise
acquired any of its outstanding capital stock, other than as a result of any
cashless exercise of any Option or the acquisition of any shares of Restricted
Stock from employees of the Company or the Company Subsidiary whose employment
has terminated with the Company or the Company Subsidiary. There are no
outstanding contractual obligations of the Company to redeem, purchase or
otherwise acquire any outstanding shares of capital stock of the Company.
(e) Other than shares of Company Common Stock, there are no outstanding
bonds, debentures, notes or other indebtedness or securities of the Company
having the right to vote which are convertible into, or exchangeable for,
securities having the right to vote on any matters on which stockholders of the
Company may vote.
(f) Except as described in this SECTION 3.2, as of the date hereof, (i)
no shares of capital stock or other voting securities of the Company are issued,
reserved for issuance or outstanding, and (ii) there are no outstanding
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or the Company
Subsidiary is a party or by which any of them is bound obligating the Company or
the Company Subsidiary, whether upon the exercise, exchange or conversion
thereof or otherwise, to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting securities
or equity interests of the Company or of the Company Subsidiary or obligating
the Company or the Company Subsidiary to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement, arrangement
or undertaking.
(g) In addition to approval by the Company Board as a whole, the
Company Board committee comprised solely of the Company's director who is
independent within the meaning of the rules of the Nasdaq Stock Market listing
standards (the "SPECIAL COMMITTEE") has taken, at a duly convened meeting
thereof, all such actions as may be required to cause to be exempted under Rule
14d-10(d)(2) under the Exchange Act, any and all employment compensation,
severance and employee benefit agreements and arrangements that have been
entered into or granted by the Company or the Company Subsidiary with or to
current or future directors, officers, or employees of the Company and the
Company Subsidiary, to ensure that all such agreements and arrangements satisfy
the non-exclusive safe harbor provisions of Rule 14d-10(d)(2) of the Exchange
Act. All Options were granted at an exercise price at least equal to the fair
market value (within the meaning of Section 409A of the Code) of a Share on the
date of grant and no Option has been extended, amended or repriced since the
date of the grant, except for any such pricing, extensions, amendments or
repricings that, individually or in the aggregate, have not had and would not
reasonably be likely to have a Company Material Adverse Effect.
-13-
Section 3.3 AUTHORIZATION; NO CONFLICT.
(a) The Company has the requisite corporate power and authority to
enter into and deliver this Agreement and, subject to the adoption of this
Agreement by the Company's stockholders under the FBCA to the extent required by
applicable Law in the case of the Merger, to carry out its obligations
hereunder. Assuming the accuracy of the representations and warranties of Parent
set forth in SECTION 4.6, the execution and delivery of this Agreement by the
Company, the performance by the Company of its obligations hereunder and the
consummation by the Company of the Transactions have been duly authorized and
approved by the Company Board. Assuming the accuracy of the representations and
warranties of Parent set forth in SECTION 4.6, no other corporate proceedings on
the part of the Company is necessary to authorize the execution and delivery of
this Agreement, the performance by the Company of its obligations hereunder and
the consummation by the Company of the Transactions, except, in the case of the
Merger (to the extent required by the FBCA), for the adoption of this Agreement
by the holders of a majority of the issued and outstanding Shares (the "REQUIRED
COMPANY STOCKHOLDER VOTE"). This Agreement has been duly executed and delivered
by the Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
similar Laws of general application affecting or relating to the enforcement of
creditors rights generally and equitable principles of general applicability,
whether considered in a proceeding at law or in equity (the "BANKRUPTCY AND
EQUITY EXCEPTION").
(b) Neither the execution and delivery of this Agreement by the Company
nor the performance or consummation by the Company of the Transactions will (i)
result in a violation or breach of or conflict with the Company Charter
Documents or the Subsidiary Documents, (ii) result in a violation or breach of
or conflict with any provisions of, or result in the loss of any material
benefit under or constitute a default (or an event that, with notice or lapse of
time or both, would constitute a default) under, or result in the termination or
cancellation of, or give rise to a right of purchase (including pursuant to any
right of first refusal or the like) under, or accelerate the performance
required by, or result in a right of termination or acceleration under, or
result in the creation of any Lien upon any of the properties or assets owned or
operated by the Company or the Company Subsidiary under any of the terms,
conditions or provisions of any Contract to which the Company or the Company
Subsidiary is a party or by which the Company or the Company Subsidiary or any
of their respective properties or assets may be bound or (iii) subject to
receipt of the Required Company Stockholder Vote (to the extent required by the
FBCA) and obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in SECTION 3.3(C) below,
violate any judgment, ruling, order, writ, injunction or decree of any
Governmental Authority ("JUDGMENT") or any statute, code, decree, law,
ordinance, rule, regulation or order of any Governmental Authority ("LAW"), in
each case applicable to the Company, the Company Subsidiary or any of their
respective properties or assets, other than, with respect to events described in
the foregoing clauses (ii) and (iii), any such event or events that,
individually or in the aggregate, has not had and would not reasonably be likely
to have a Company Material Adverse Effect.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any United States Federal, state or local
governmental or regulatory authority, court, body or instrumentality or any
-14-
governmental or regulatory authority, court, body or instrumentality outside of
the United States (each, a "GOVERNMENTAL AUTHORITY") is necessary to be obtained
or made by the Company or the Company Subsidiary in connection with the
Company's execution and delivery of this Agreement or the consummation by the
Company of the Transactions, except for (i) the filing of the Articles of Merger
with the Florida Secretary of State and appropriate corresponding documents with
the appropriate authorities of other states in which the Company is qualified as
a foreign corporation to transact business, (ii) the filing with the SEC of (A)
the Offer Documents and Schedule 14D-9, (B) if necessary, a proxy statement in
definitive form relating to the Company Stockholders Meeting (as defined in
SECTION 6.1(B)) (such proxy statement, as amended or supplemented from time to
time, (the "PROXY STATEMENT")) and compliance with other applicable requirements
of the Exchange Act, (C) any information statement required by Rule 14f-1
promulgated by the SEC under the Exchange Act (the "INFORMATION STATEMENT") in
connection with the Offer and (D) such reports under Section 13 or 16 of the
Exchange Act and the rules and regulations promulgated thereunder, as may be
required in connection with this Agreement and the Transactions, and (iv)
compliance with the "blue sky" laws of various states.
(d) The Special Committee at a meeting duly called and held, has duly
and unanimously adopted resolutions determining the Merger Agreement and the
Transactions, including the Offer and the Merger, are fair and reasonable and in
the best interests of the Company and Company's unaffiliated stockholders, and
the Company Board, at a meeting duly called and held, has duly and unanimously
adopted resolutions (i) declaring that this Agreement and the Transactions,
including the Offer and the Merger, are fair and reasonable to and in the best
interests of the Company and its stockholders, (ii) approving and declaring
advisable this Agreement and the Transactions, including the Offer and the
Merger (such approval having been made in accordance with the FBCA), and (iii)
recommending that the Company's stockholders accept the Offer, tender their
Shares to Merger Sub pursuant to the Offer and adopt this Agreement (such
recommendations, the "BOARD RECOMMENDATION").
Section 3.4 SUBSIDIARY.
(a) Nutricology, Inc., a California corporation (the "COMPANY
SUBSIDIARY") is the only Subsidiary of the Company. Other than the Company
Subsidiary, the Company does not own or control, directly or indirectly, any
membership interest, partnership interest, joint venture interest, other equity
interest or any other capital stock of any Person, other than securities held
for investment by the Company or the Company Subsidiary and consisting of less
than 5% of the outstanding capital stock or other ownership interest of such
Person.
(b) All of the outstanding shares of capital stock or other equity
securities of, or other ownership interests in, the Company Subsidiary is duly
authorized, validly issued, fully paid and nonassessable, and the Company is the
record and beneficial owner of such shares, securities or interests, free and
clear of any Liens or limitations on voting rights. All such shares of capital
stock, equity securities and other ownership interests have been duly and
validly issued and are fully paid and nonassessable. There are no subscriptions,
options, warrants, calls, rights, convertible securities or other agreements or
commitments to which the Company or the Company Subsidiary is a party or by
which they are bound and that provide for the issuance, transfer, sales,
delivery, voting or redemption (including any rights of conversion or exchange
under any outstanding security or other instrument) for any of the capital stock
or other equity interests of, or other ownership interests in the Company
Subsidiary. There are no agreements requiring the Company or the Company
Subsidiary to make contributions to the capital of, or lend or advance funds to,
the Company Subsidiary.
-15-
Section 3.5 SEC REPORTS AND FINANCIAL STATEMENTS.
(a) The Company has, to its Knowledge, filed with or furnished to the
SEC all forms, reports, schedules, certifications, registration statements,
definitive proxy statements and other documents required to be filed or
furnished by the Company with or to the SEC. All such registration statements,
forms, reports, schedules, certifications, registration statements, definitive
proxy statements and other documents (including those that the Company may file
after the date hereof until the Closing) are referred to herein as the "COMPANY
SEC REPORTS." As of their respective dates, and giving effect to any amendments
or supplements thereto filed prior to the date of this Agreement, to the
Knowledge of the Company (i) the Company SEC Reports filed prior to the date of
this Agreement complied, and the Company SEC Reports to be filed after the date
of this Agreement will comply, in all material respects with the requirements of
the Securities Act of 1933, as amended (the "SECURITIES ACT") and the Exchange
Act, as the case may be, and the respective rules and regulations of the SEC
promulgated thereunder applicable to such Company SEC Reports, (ii) none of such
Company SEC Reports that is not a registration statement contained (or, in the
case of Company SEC Reports to be filed after the date of this Agreement, will
contain) any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. To the Knowledge of the Company, each Company SEC Report
that is a registration statement, as amended or supplemented, if applicable,
filed pursuant to the Securities Act, as of the date such registration statement
or amendment became effective, did not, and each such Company SEC Report filed
subsequent to the date of this Agreement and prior to the consummation of the
Offer will not, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading. The Company has made available to Parent
copies of all comment letters received by the Company from the SEC since January
1, 2003 relating to the Company SEC Reports, together with all written responses
of the Company thereto. As of the date of this Agreement, there are no
outstanding or unresolved comments received from the SEC Staff with respect to
the Company SEC Reports. To the Knowledge of the Company, none of the Company
SEC Reports is the subject of ongoing SEC review or investigation.
(b) The consolidated balance sheets and the related consolidated
statements of operations, consolidated statements of stockholders' equity and
consolidated statements of cash flows (including, in each case, any related
notes and schedules thereto) for the past five (5) fiscal years (collectively,
the "COMPANY FINANCIAL STATEMENTS") of the Company contained or to be contained
in the Company SEC Reports complied or will 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 or will be prepared in
conformity with United States generally accepted accounting principles ("GAAP")
(except as may be indicated in the notes to such financial statements or, in the
case of unaudited interim financial statements, as permitted by the SEC on Form
10-Q under the Exchange Act) applied on a consistent basis during the periods
involved (except as otherwise noted therein) and present or will present fairly
in all material respects the consolidated financial position and the
consolidated results of operations and cash flows of the Company and the Company
Subsidiary as of the dates or for the periods presented therein (subject, in the
case of unaudited statements, to normal and recurring year end adjustments). To
the Knowledge of the Company, except as disclosed in the Company Financial
-16-
Statements as of and for the period ended December 31, 2007 or included in the
Company SEC Reports filed after that date and prior to the date of this
Agreement, the Company and the Company Subsidiary do not have any liabilities of
any nature (whether accrued, absolute, contingent or otherwise) required by GAAP
to be reflected on a consolidated balance sheet of the Company and the Company
Subsidiary.
(c) Neither the Company nor the Company Subsidiary is a party to, or
has any commitment to become a party to, any joint venture, off-balance sheet
partnership or any similar contract (including any contract or arrangement
relating to any transaction or relationship between or among the Company and the
Company Subsidiary, on the one hand, and any unconsolidated Affiliate,
including, any structured finance, special purpose or limited purpose entity or
Person, on the other hand, or any "off-balance sheet arrangements" (as defined
in Item 303(a) of Regulation S-K of the SEC)), where the results, purpose or
effect of such contract is to avoid disclosure of any material transaction
involving, or material liabilities of, the Company or the Company Subsidiary in
the Company SEC Reports.
(d) To the Knowledge of the Company, the Company is in compliance in
all material respects with the applicable provisions of the Xxxxxxxx-Xxxxx Act
of 2002 (the "XXXXXXXX-XXXXX ACT") currently applicable to smaller reporting
companies. Each required form, report and document containing financial
statements that has been filed with or submitted to the SEC since March 31, 2003
was accompanied by the certifications required to be filed or submitted by the
Company's chief executive officer and chief financial officer pursuant to the
Xxxxxxxx-Xxxxx Act and, at the time of filing or submission of each such
certification, such certification complied in all material respects with the
applicable provisions of the Xxxxxxxx-Xxxxx Act and the rules and regulations
promulgated thereunder.
(e) The Company maintains disclosure controls and procedures required
by Rule 13a-15 or 15d-15 under the Exchange Act as currently applicable to
smaller reporting companies. Such disclosure controls and procedures are
effective to ensure that all material information concerning the Company and the
Company Subsidiary, taken as a whole, is made known on a timely basis to the
individuals responsible for the preparation of the Company's filings with the
SEC and other public disclosure documents.
(f) To the Knowledge of the Company, the Company and the Company
Subsidiary have not violated the provisions of the Foreign Corrupt Practices Act
of 1977, as amended, and the rules and regulations thereunder (the "FCPA"),
except for any such violations that, individually or in the aggregate, have not
had and would not reasonably be likely to have a Company Material Adverse
Effect. The Company has disclosed to Parent all internal investigations and, to
the Knowledge of the Company, all external, governmental or other regulatory
investigations, in each case regarding any action or any allegation of any
action prohibited by the FCPA, except for any such investigations that,
individually or in the aggregate, have not had and would not reasonably be
likely to have a Company Material Adverse Effect.
Section 3.6 ABSENCE OF MATERIAL ADVERSE CHANGES, ETC. Since December
31, 2007, there has not been or occurred any event, change, occurrence or
development of a state of facts that, to the Knowledge of the Company,
individually or in the aggregate, has had or would reasonably be likely to have
a Company Material Adverse Effect. From December 31, 2007 until the date of this
-17-
Agreement, except as contemplated hereby, (a) the business of the Company and
the Company Subsidiary, taken as a whole, has been conducted in the Ordinary
Course of Business and (b) there has not been any action or event that would
have required the consent of Parent under SECTION 5.1 of this Agreement (other
than paragraphs (b)(vii), (viii) and (xiii) of SECTION 5.1) had such action or
event occurred after the date of this Agreement.
Section 3.7 LITIGATION. Except as disclosed in SECTION 3.7 of the
Company Disclosure Letter, there are no suits, actions, claims or legal,
administrative, arbitration or other proceedings or governmental or regulatory
investigations pending or, to the Knowledge of the Company, threatened, to which
the Company or the Company Subsidiary is a party, or, to the Knowledge of the
Company, that materially affects the business or assets of the Company or the
Company Subsidiary. There are no material Judgments outstanding (or, to the
Knowledge of the Company, threatened to be imposed) against the Company or the
Company Subsidiary.
Section 3.8 INFORMATION SUPPLIED. The information to be supplied by or
on behalf of the Company for inclusion or incorporation by reference in the
Offer Documents, on the date the Offer Documents are first published, sent or
given to holders of Shares, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
in which they shall be made, not misleading. If at any time prior to the
Acceptance Time any fact or event relating to the Company or any of its
Affiliates should be discovered by the Company that should be set forth in a
supplement to the Offer Documents, the Company shall, promptly after becoming
aware thereof, inform Parent of such fact or event.
Section 3.9 BROKER'S OR FINDER'S FEES. Except as disclosed in SECTION
3.9 of the Company Disclosure Letter, no agent, broker, investment banker, or
similar Person or firm acting on behalf of the Company or the Company Subsidiary
or under the Company's or the Company Subsidiary's authority is or will be
entitled to any advisory, commission or broker's or finder's fee or similar fee
or commission or reimbursement of expenses from any of the parties hereto in
connection with any of the Transactions. The Company has heretofore made
available to Parent a complete and correct copy of the Company's engagement
letter with each of the parties listed in SECTION 3.9 of the Company Disclosure
Letter, which letters describe all fees payable to such Persons in connection
with the Transactions, all agreements under which any such fees or any expenses
are payable and all indemnification and other agreements related to the
engagement of such Persons.
Section 3.10 EMPLOYEE PLANS.
(a) Section 3.10 of the Disclosure Schedule sets forth a true and
complete list of each "employee benefit plan," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and each
other material written, unwritten, formal or informal plan, agreement, program,
policy or other arrangement involving direct or indirect compensation to
employees or other service providers (other than workers' compensation,
unemployment compensation and other government programs), including employment,
severance, consulting, disability benefits, supplemental unemployment benefits,
vacation benefits, retirement benefits, deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation rights, other forms of incentive
compensation, post-retirement insurance benefits, or other benefits, entered
-18-
into, maintained or contributed to by the Company or the Company Subsidiary or
with respect to which the Company or the Company Subsidiary has or may in the
future have any liability (contingent or otherwise). Each such plan, agreement,
program, policy or arrangement required to be set forth on the Disclosure
Schedule pursuant to the foregoing is referred to herein as a "BENEFIT PLAN."
(b) The Company has made available the following documents to Parent
with respect to each Benefit Plan: (1) correct and complete copies of all
documents embodying such Benefit Plan, including (without limitation) all
amendments thereto, and all related trust documents, (2) a written description
of any Benefit Plan that is not set forth in a written document, (3) the most
recent summary plan description together with the summary or summaries of
material modifications thereto, if any, (4) the three most recent annual
actuarial valuations, if any, (5) all Internal Revenue Service ("IRS") or
Department of Labor ("DOL") determination, opinion, notification and advisory
letters, (6) the three most recent annual reports (Form Series 5500 and all
schedules and financial statements attached thereto), if any, (7) all material
correspondence to or from any Governmental Authority received in the last three
years, (8) all discrimination tests for the most recent three plan years, and
(9) all material written agreements and contracts currently in effect, including
(without limitation) administrative service agreements, group annuity contracts,
and group insurance contracts.
(c) Each Benefit Plan has been maintained and administered in all
material respects in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations (foreign and
domestic), including (without limitation) ERISA and the Code, which are
applicable to such Benefit Plans. All contributions, reserves or premium
payments required to be made or accrued as of the date hereof to the Benefit
Plans have been timely made or accrued. Each Benefit Plan intended to be
qualified under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code is so qualified and either: (1) has obtained a
currently effective favorable determination notification, advisory and/or
opinion letter, as applicable, as to its qualified status (or the qualified
status of the master or prototype form on which it is established) from the IRS
covering the amendments to the Code effected by the Tax Reform Act of 1986 and
all subsequent legislation for which the IRS will currently issue such a letter,
and no amendment to such Benefit Plan has been adopted since the date of such
letter covering such Benefit Plan that would adversely affect such favorable
determination; or (2) still has a remaining period of time in which to apply for
or receive such letter and to make any amendments necessary to obtain a
favorable determination.
(d) No plan currently or ever in the past six (6) years maintained,
sponsored, contributed to or required to be contributed to by the Company, any
of its Subsidiaries, or any of their respective current or former ERISA
Affiliates is or ever in the past six (6) years was (1) a "multiemployer plan"
as defined in Section 3(37) of ERISA, (2) a plan described in Section 413 of the
Code, (3) a plan subject to Title IV of ERISA, (4) a plan subject to the minimum
funding standards of Section 412 of the Code or Section 302 of ERISA, or (5) a
plan maintained in connection with any trust described in Section 501(c)(9) of
the Code. The term "ERISA AFFILIATE" means any Person that, together with the
Company or any of its Subsidiaries, would be deemed a "single employer" within
the meaning of Section 414(b), (c), (m) or (o) of the Code.
-19-
(e) Neither the Company nor any of its Subsidiaries is subject to any
material liability or penalty under Sections 4975 through 4980B of the Code or
Title I of ERISA. The Company and its Subsidiaries have complied in all material
respects with all applicable health care continuation requirements in Section
4980B of the Code and in ERISA. No "Prohibited Transaction," within the meaning
of Section 4975 of the Code or Sections 406 or 407 of ERISA and not otherwise
exempt under Section 408 of ERISA, has occurred with respect to any Benefit
Plan.
(f) No Benefit Plan provides, or reflects or represents any liability
to provide, benefits (including, without limitation, death or medical benefits),
whether or not insured, with respect to any former or current employee, or any
spouse or dependent of any such employee, beyond the employee's retirement or
other termination of employment with the Company and its Subsidiaries other than
(1) coverage mandated by Part 6 of Title I of ERISA or Section 4980B of the
Code, (2) retirement or death benefits under any plan intended to be qualified
under Section 401(a) of the Code, (3) disability benefits that have been fully
provided for by insurance under a Benefit Plan that constitutes an "employee
welfare benefit plan" within the meaning of Section (3)(1) of ERISA, or (4)
benefits in the nature of severance pay with respect to one or more of the
employment contracts set forth on Section 3.10(a) of the Disclosure Schedule.
(g) There is no contract, plan or arrangement covering any employee or
former employee of the Company or any of its Subsidiaries that, individually or
collectively, could give rise to the payment as a result of the transactions
contemplated by this Agreement of any amount that would not be deductible by the
Company or such Subsidiary by reason of Section 280G of the Code. For purposes
of the foregoing sentence, the term "payment" shall include (without limitation)
any payment, acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement (alone or together with any other event which, standing alone, would
not by itself trigger such entitlement or acceleration) will not (1) entitle any
Person to any payment, forgiveness of indebtedness, vesting, distribution, or
increase in benefits under or with respect to any Benefit Plan, (2) otherwise
trigger any acceleration (of vesting or payment of benefits or otherwise) under
or with respect to any Benefit Plan, or (3) trigger any obligation to fund any
Benefit Plan.
(h) No action, suit or claim (excluding claims for benefits incurred in
the ordinary course) has been brought or is pending or, to the Knowledge of the
Company, threatened against or with respect to any Benefit Plan or the assets or
any fiduciary thereof (in that Person's capacity as a fiduciary of such Benefit
Plan). To the Knowledge of the Company, there are no audits, inquiries or
proceedings pending or threatened by the IRS, DOL, or other Governmental
Authority with respect to any Benefit Plan.
(i) Each Benefit Plan that is a "nonqualified deferred compensation
plan" (as defined for purposes of Section 409A(d)(1) of the Code) (1) has been
operated since January 1, 2005 in good faith compliance with Section 409A of the
Code and all applicable IRS guidance promulgated thereunder to the extent such
plan is subject to Section 409A of the Code, and (2) as to any such plan in
existence prior to January 1, 2005 and not subject to Section 409A of the Code,
has not been "materially modified" (within the meaning of IRS Notice 2005-1) at
any time after October 3, 2004. No Company Stock Option (whether currently
outstanding or previously exercised) is, has been or would be, as applicable,
subject to any tax, penalty or interest under Section 409A of the Code.
-20-
(j) No Benefit Plan is maintained outside the jurisdiction of the
United States, or covers any employee residing or working outside the United
States.
Section 3.11 TAXES.
(a) All Tax Returns for the past six (6) fiscal years with respect to
the Company and the Company Subsidiary have been duly and timely filed, and all
such Tax Returns are true, correct and complete. Each of the Company and the
Company Subsidiary has paid on a timely basis all Taxes due and owing (whether
or not shown to be due on any such Tax Returns). There are no Liens on any of
the assets, rights or properties of the Company or the Company Subsidiary with
respect to Taxes (other than Liens for Taxes not yet due and payable).
(b) To the Knowledge of the Company, each of the Company and the
Company Subsidiary has withheld from its employees, independent contractors,
creditors, stockholders and other third parties all amounts required to be
deducted and withheld under applicable Tax laws, and, to the extent due and
payable, have properly paid such amounts to the appropriate Tax Authority.
(c) The Company has made available to Parent correct and complete
copies of all income Tax Returns and any associated examination reports and
statements of deficiencies assessed against or agreed to by the Company or the
Company Subsidiary since January 1, 2003. The income Tax Returns of each of the
Company and the Company Subsidiary either have been audited by the IRS or other
relevant Taxing Authority or are closed by the applicable statute of limitations
for all taxable years through the taxable year specified in SECTION 3.12(B) of
the Company Disclosure Letter. No examination, audit or other proceeding with
respect to any Taxes or any Tax Return of the Company or the Company Subsidiary
is currently in progress or threatened in writing.
(d) To the Knowledge of the Company, neither the Company nor the
Company Subsidiary has ever been a party to a "reportable transaction" within
the meaning of United States Treasury Regulation Section 1.6011-4(b) or any
similar provision of state, local or foreign Law.
(e) Neither the Company nor the Company Subsidiary: (i) has made any
payments, is obligated to make any payments, or is a party to any agreement that
could obligate it to make any payments that will be treated as an "excess
parachute payment" under Section 280G of the Code; (ii) has any actual or
potential liability for any Taxes of any Person (other than the Company and the
Company Subsidiary) under Treasury Regulation Section 1.1502-6 (or any similar
provision of law in any jurisdiction), or as a transferee or successor, by
contract or otherwise; or (iii) is a party to any agreement relating to the
sharing, allocation or indemnification of Taxes.
(f) There are no outstanding waivers or extensions of any statutory
period of limitations applicable to the collection or assessment of Taxes due
from the Company or the Company Subsidiary, and no such waiver or extension has
been requested.
-21-
(g) Neither the Company nor the Company Subsidiary is the subject of
any private letter ruling or comparable ruling of any other Tax Authority or has
executed or entered into a closing agreement pursuant to Section 7121 of the
Code (or any similar provision of state, local or foreign law).
(h) No claim has been made by a Tax Authority in a jurisdiction where
the Company or the Company Subsidiary does not file Tax Returns that the Company
or the Company Subsidiary is or may be subject to taxation by that jurisdiction.
(i) Neither the Company nor the Company Subsidiary has been a United
States real property holding company within the meaning of Section 897(c) of the
Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
(j) Neither the Company nor the Company Subsidiary (i) has applied for,
been granted, or agreed to any accounting method change for which it will be
required to take into account any adjustment under Section 481 of the Code or
any similar provision of the Code or corresponding Tax Laws of any Tax Authority
or (ii) will be required to include any amount as income, or exclude any item of
deduction from taxable income, for any taxable period or portion thereof
beginning after the Closing Date as a result of (A) an installment sale or open
transaction disposition made in any taxable period ending on or before the
Closing Date or (B) any agreement with any Tax Authority with respect to such
period (or portion thereof).
(k) Neither the Company nor the Company Subsidiary is a party to any
joint venture, partnership or other arrangement or contract that would be
treated as a partnership for Federal income tax purposes.
(l) To the Knowledge of the Company, since December 31, 2007, each of
the Company and the Company Subsidiary has only incurred liabilities for Taxes
arising in the Ordinary Course of Business.
(m) Neither the Company nor the Company Subsidiary has distributed
stock of another Person, or has had its stock distributed by another Person, in
a transaction that was purported or intended to be governed in whole or in part
by Sections 355 or 361 of the Code (i) in the two years prior to the date of
this Agreement or (ii) in a distribution that could otherwise constitute part of
a "plan" or "series of related transactions" (within the meaning of Section
355(e) of the Code) that includes the Transactions.
(n) Neither the Company nor the Company Subsidiary is a party to any
agreement, contract, arrangement or plan that has resulted, separately or in the
aggregate, in the payment of any amount that will not be fully deductible as a
result of Section 162(m) of the Code.
(o) To the Knowledge of the Company, there are no limitations on the
use of the net operating losses of the Company or the Company Subsidiary under
Section 382 or 383 of the Code, or otherwise (other than limitations incurred in
connection with the Merger).
-22-
Section 3.12 ENVIRONMENTAL MATTERS.
(a) To the Knowledge of the Company, the Company and the Company
Subsidiary are and have for the past five (5) years been in compliance with all
applicable Environmental Laws, which compliance includes obtaining, maintaining
and complying with all permits, notices, approvals and authorizations, if any,
required under Environmental Laws in connection with the operation of the
Company's and the Company Subsidiary's businesses or leased real property.
(b) There are no pending or, to the Knowledge of the Company,
threatened, demands, claims, investigations, proceedings, information requests,
or notices against the Company or the Company Subsidiary or, to the Knowledge of
the Company, any property currently or formerly leased by the Company or the
Company Subsidiary alleging non-compliance with or liability under any
Environmental Law.
(c) To the Knowledge of the Company, there are no conditions associated
with the Company or the Company Subsidiary or its operations or any real
property currently or formerly leased or operated by the Company or the Company
Subsidiary or any other property, including any property to which the Company or
the Company Subsidiary or any person working at the request or direction of the
Company or the Company Subsidiary has arranged for the disposal or treatment of
Hazardous Substances, which would reasonably be expected to give rise to any
violation of any Environmental Laws or result in the Company or the Company
Subsidiary incurring Environmental Liabilities.
(d) Neither the Company nor the Company Subsidiary has assumed by
contract or other binding agreement or by operation of Law any liabilities of a
third party arising under or pursuant to any Environmental Law or has agreed to
indemnify, defend or hold harmless any third party for any liabilities arising
under or pursuant to any Environmental Law.
Section 3.13 COMPLIANCE WITH LAWS.
(a) To the Knowledge of the Company, each of the Company and the
Company Subsidiary is in compliance with, and is not in violation of, any
applicable Law with respect to the conduct of its business, or the ownership or
operation of its properties or assets, except for failures to comply or
violations that, individually or in the aggregate, have not had and would not
reasonably be likely to have a Company Material Adverse Effect.
(b) Each of the products of the Company or the Company Subsidiary that
is currently being sold by or on behalf of the Company or the Company
Subsidiary, and each of the products that is currently being developed by the
Company or the Company Subsidiary, is being, and at all times has been,
developed, tested, manufactured and stored, as applicable, in material
compliance with (i) the Federal Food, Drug and Cosmetic Act of 1938, as amended
(the "FDA ACT"), the Dietary Supplement, Health and Education Act of 1944, as
amended (the "DSHEA"), and applicable regulations issued and guidances by the
Food and Drug Administration (the "FDA"), including those requirements relating
to good manufacturing practices, good laboratory practices and good clinical
practices, (ii) all United States Laws regarding promotional practices and (iii)
any equivalent Laws of any applicable foreign jurisdiction.
-23-
(c) None of the Company and the Company Subsidiaries is subject to any
investigation that is pending and of which the Company has been notified or, to
the Company's Knowledge, which has been threatened, in each case by (i) the FDA,
(ii) the Department of Health and Human Services Office of Inspector General or
Department of Justice pursuant to the Federal Healthcare Program Anti-Kickback
Statute (42 U.S.C. Section 1320a-7b(b)), the Federal False Claims Act (31 U.S.C.
Section 3729), or the FDA Act, (iii) any State Attorney General pursuant to any
equivalent state statute, or (iv) any equivalent Governmental Authority pursuant
to any Laws of any applicable foreign jurisdiction.
Section 3.14 INTELLECTUAL PROPERTY.
(a) The Company and the Company Subsidiary exclusively own or possess
legally enforceable rights to use all Intellectual Property necessary to conduct
the business of the Company and the Company Subsidiary, taken as a whole, as
currently conducted or currently contemplated to be conducted; provided that,
Parent and Merger Sub acknowledge that the Company's ability to protect its
product formulations and specifications is limited by the regulatory atmosphere
of the industry in which it does business and, as a result, the Company has
limited ability to obtain exclusive rights to Intellectual Property. For
purposes of this Agreement, the term "INTELLECTUAL PROPERTY" means (i) patents,
copyrights, trademarks, trade names, domain names, designs and trade secrets,
(ii) applications for and registrations of such patents, trademarks, service
marks, trade names, domain names, copyrights and designs, (iii) processes,
formulae, methods, schematics, technology, know-how, computer software programs
and applications, and (iv) other tangible or intangible proprietary or
confidential information and materials.
(b) The execution and delivery of this Agreement by the Company and the
consummation by the Company of the Merger will not result in the breach of, or
create on behalf of any third party the right to terminate or modify, (i) any
license, sublicense or other agreement relating to any Intellectual Property
owned by the Company or the Company Subsidiary (the "COMPANY INTELLECTUAL
PROPERTY"), or (ii) any license, sublicense and other agreement as to which the
Company or the Company Subsidiary is a party and pursuant to which the Company
or the Company Subsidiary is authorized to use any third party Intellectual
Property. The consummation by the Company of the Merger will not alter,
restrict, encumber, impair or extinguish any rights in any Intellectual Property
owned or licensed by the Company or the Company Subsidiary, nor result in the
forfeiture or termination of, or give rise to a right of forfeiture or
termination of, rights in any such Intellectual Property.
(c) Section 3.14(c) of the Company Disclosure Letter sets forth a list
of all issued patents and registrations for trademarks, service marks, domain
names and copyrights, and all pending application for any of the foregoing,
included in the Company Intellectual Property ("REGISTERED IP"). To the
Knowledge of the Company, each item of Registered IP is valid and subsisting and
have not expired, have not been held invalid or unenforceable and have not been
cancelled. To the Knowledge of the Company, each item of Registered IP is in
material compliance with all formal legal requirements related to the
registration and maintenance thereof, including without limitation payment of
any filing, examination and maintenance fees.
-24-
(d) The conduct of the business of the Company and the Company
Subsidiary, taken as a whole, as currently conducted or currently contemplated
to be conducted, does not, to the Company's Knowledge, infringe, violate or
constitute a misappropriation of any Intellectual Property of any third party,
and neither the Company nor the Company Subsidiary has received any written
claim or notice from any Person (i) alleging any such infringement, violation or
misappropriation, or (ii) advising that such Person is challenging or
threatening to challenge the ownership, use, validity or enforceability of any
Company Intellectual Property.
(e) Neither the Company nor the Company Subsidiary has granted an
exclusive license or right to any Company Intellectual Property or its products
to any third party.
(f) The Company and the Company Subsidiary have implemented
commercially reasonable measures to maintain the confidentiality of the Company
Intellectual Property of a nature that the Company intends to keep confidential.
The Company has established measures to require every current and former
consultant, independent contractor or employee of the Company or the Company
Subsidiary to enter into a written agreement that (i) requires each such
consultant, independent contractor or employee to assign to the Company or the
Company Subsidiary, as applicable, all rights, title and interest in any
Intellectual Property created by such person in the course of his or her
employment or engagement with the Company or the Company Subsidiary and (ii)
requires each such consultant, independent contractor or employee to keep
confidential any trade secrets, proprietary data or other confidential or
proprietary business information of the Company and the Company Subsidiary.
(g) To the Company's Knowledge, no third party is infringing, violating
or misappropriating any of the Company Intellectual Property, and no such claims
have been made against a third party by the Company or the Company Subsidiary.
Section 3.15 EMPLOYMENT MATTERS.
(a) Neither the Company nor the Company Subsidiary is a party to any
collective bargaining agreements and there are no labor unions or other
organizations representing any employee of the Company or the Company
Subsidiary. There are no labor unions or other organizations which have filed a
petition with the National Labor Relations Board or any other Governmental
Agency seeking certification as the collective bargaining representative of any
employee of the Company or the Company Subsidiary, and to the Knowledge of the
Company no labor union or organization is engaged in any organizing activity
with respect to any employee of the Company or the Company Subsidiary. In the
three (3) years prior to the Closing Date there has not been, and there is not
now pending or, to the Knowledge of the Company, threatened, (i) any strike,
lockout, slowdown, picketing, or work stoppage with respect to the employees of
the Company or the Company Subsidiary or (ii) any unfair labor practice charge
against the Company or the Company Subsidiary.
(b) The Company and the Company Subsidiary have each materially
complied, and are presently in material compliance with all statutes, laws,
ordinances, rules or regulations, or any orders, rulings, decrees, judgments or
arbitration awards of any court, arbitrator or any government agency relating to
employment, equal opportunity, nondiscrimination, immigration, wages, hours,
-25-
benefits, collective bargaining, the payment of social security and similar
taxes, income tax withholding, occupational safety and health, and/or privacy
rights of employees.
(c) In the three (3) years prior to the Closing Date, neither the
Company nor the Company Subsidiary has effectuated (i) a "plant closing" as
defined in the Worker Adjustment and Retraining Notification Act, 29 U.S.C.
xx.xx. 2101 ET SEQ. (the "WARN ACT") (or any similar state, local or foreign
law) affecting any site of employment or one or more facilities or operating
units within any site of employment or facility of the Company or any of its
Subsidiaries or (ii) a "mass layoff" as defined in the WARN Act (or any similar
state, local or foreign law) affecting any site of employment or facility of the
Company or any of its Subsidiaries.
(d) Schedule 3.16 lists the name of each person employed or engaged by
the Company and the Company Subsidiary and the annual salary or hourly wage rate
of each such employee.
(e) Dr. Xxxxxxx Xxxxxx and Xxxxx Xxxxxx have entered into an Employment
Separation and General Release Agreement, a Consulting Agreement, and a
Non-Competition Agreement in a form approved by Parent, and such agreements
shall come into full force and effect on the Closing Date only in the event of
the Closing.
(f) Each of the individuals set forth on EXHIBIT C has entered into an
Employment Agreement in a form approved by Parent, and each of such agreements
with the individuals set forth on EXHIBIT C shall come into force and effect on
the Closing Date only in the event of the Closing.
Section 3.16 INSURANCE. SECTION 3.16 of the Company Disclosure Letter
sets forth a correct and complete list as of the date of this Agreement of all
insurance policies (including information on the scope and amount of the
coverage provided thereunder) maintained by the Company or the Company
Subsidiary (the "POLICIES"). As of the date of this Agreement (a) the Policies
are in full force and effect and (b) no notice of cancellation or termination
has been received by the Company with respect to any of the Policies.
Section 3.17 MATERIAL CONTRACTS.
(a) The Company has provided or made available to Parent a true and
correct copy of each Company Material Contract in effect as of the date of this
Agreement, each of which is listed in SECTION 3.18(A) of the Disclosure Letter.
As used in this Agreement, "COMPANY MATERIAL CONTRACT" means (i) any agreement,
contract or commitment in connection with which or pursuant to which the Company
or the Company Subsidiary is reasonably likely to spend or receive, in the
aggregate, more than $40,000 with respect to any such agreement, contract or
commitment during 2008 or any subsequent year, (ii) any non-competition or other
agreement that prohibits or otherwise restricts, in any material respect, the
Company or the Company Subsidiary from freely engaging in business anywhere in
the world and (iii) any "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) with respect to the Company and the
Company Subsidiary.
(b) Each Company Material Contract is binding and enforceable on the
Company or the Company Subsidiary, as the case may be, and, to the Knowledge of
the Company, each other party thereto, and is in full force and effect except to
-26-
the extent it has previously expired in accordance with its terms. Neither the
Company nor the Company Subsidiary nor, to the Company's Knowledge, any other
party to any Company Material Contract 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, would cause such a violation of or default under) any
Company Material Contract.
(c) Neither the Company nor the Company Subsidiary has entered into any
transaction that would be subject to proxy statement disclosure pursuant to Item
404 of Regulation S-K that has not been disclosed in the Company SEC Reports.
Section 3.18 REAL PROPERTY.
(a) Neither the Company nor the Company Subsidiary owns a fee interest
in any real property, nor has the Company or the Company Subsidiary ever owned a
fee interest in any real property.
(b) SECTION 3.18(B) of the Company Disclosure Letter sets forth a
complete and accurate list as of the date of this Agreement of all real property
leased, subleased or licensed by the Company or the Company Subsidiary and
material to the conduct of the business of the Company and the Company
Subsidiary, taken as a whole, as currently conducted (collectively "COMPANY
LEASES"), and the location of the premises leased, subleased or licensed
pursuant to such Company Leases. The Company, or the Company Subsidiary, holds a
valid leasehold interest in each Company Lease. No party has a right to occupy
any of the premises subject to a Company Lease except for the Company or the
Company Subsidiary. As of the date of this Agreement, there are not pending or,
to the Knowledge of the Company, threatened, condemnation or eminent domain
actions or proceedings, or any special assessments or other activities of any
public or quasi-public body, with respect to any Company Lease.
Section 3.19 ANTI-TAKEOVER STATUTES. Assuming the accuracy of the
representations and warranties of Parent and Merger Sub in SECTION 4.6, the
Company Board (or any committee thereof) has taken all actions necessary so that
(i) the restrictions contained in Section 607.0902 of the FBCA applicable to a
"control-share acquisition" (as defined in Section 607.0902 of the FBCA), (ii)
the restrictions contained in Section 607.0901 on "affiliated transactions" (as
defined in 6.07.0901 of the FBCA), (iii) other similar anti-takeover statute or
regulations, or (iv) any anti-takeover provision in the Company Charter
Documents, shall not apply to the execution, delivery or performance of this
Agreement or the consummation of the Offer, the Top-up Option, the receipt of
the Note, the Merger or the Transactions, and, accordingly, none of the
foregoing anti-takeover or similar statute or regulations or any anti-takeover
provision in the Company Charter Documents applies to the Offer, the Merger or
any of the other Transactions contemplated by this Agreement.
Section 3.20 PRODUCTS LIABILITY. Each of the Company and the Company
Subsidiary has no known liability (and to the best of the Knowledge of the
Company there is no basis for any liability) arising out of any injury to
individuals or property as a result of the ownership, possession, use or
consumption of any product manufactured, sold or delivered by the Company or the
Company Subsidiary.
-27-
Section 3.21 RELATED PARTY TRANSACTIONS.
(a) Except as contemplated by this Agreement or the Transactions or as
disclosed in the Company SEC Reports, since January 1, 2004 through the date
hereof, there have been no transactions, agreements, arrangements or
understandings between the Company or the Company Subsidiary, on the one hand,
and any director, officer or other Affiliate of the Company or the Company
Subsidiary or any of such Person's Affiliates, or any entity in which any such
Person has a direct or indirect material interest (collectively, the "COMPANY
AFFILIATES"), on the other hand, that would be required to be disclosed under
Item 404 of Regulation S-K under the Securities Act (except for amounts due as
normal salaries and bonuses and in reimbursements of expenses in the ordinary
course of business).
(b) As of the date hereof, no Company Affiliate is an officer,
director, employee or consultant of, any Person which is a material competitor,
lessor, lessee, customer or supplier of the businesses of the Company and the
Company Subsidiary, as currently conducted. No Company Affiliate (i) has any
right, title, or interest in any technology or intellectual property used or
held for use in the conduct of the businesses of the Company and the Company
Subsidiary, as currently conducted; (ii) has, as of the date hereof, commenced
any proceeding or made any claim against the Company or the Company Subsidiary,
except for immaterial claims for accrued vacation pay, accrued benefits under
any Company Plan and similar matters and agreements existing on the date hereof;
(iii) has, as of the date hereof, made, on behalf of the Company or the Company
Subsidiary, any payment or commitment to pay any commission, fee or other amount
to, or to purchase or obtain or otherwise contract to purchase or obtain any
goods or services from, any other Person of which any Company Affiliate, or, to
a relative of any Company Affiliate, is a partner or stockholder (except stock
holdings solely for investment purposes in securities of publicly held and
traded companies); or (iv) as of the date hereof, is party to or bound by any
Contract (written or oral and whether or not material) with the Company or the
Company Subsidiary.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company as follows:
Section 4.1 ORGANIZATION. Each of Parent and Merger Sub is a
corporation organized, validly existing and in good standing under the laws of
the jurisdiction of its organization.
Section 4.2 MERGER SUB. Merger Sub is a direct, wholly owned subsidiary
of Parent that was formed solely for the purpose of engaging in the
Transactions. Since the date of its incorporation and prior to the Effective
Time, Merger Sub has not carried, and will not carry, on any business or conduct
any operations other than the execution of this Agreement, the performance of
its obligations hereunder and matters ancillary thereto.
Section 4.3 AUTHORIZATION; NO CONFLICT.
(a) Each of Parent and Merger Sub has the requisite corporate power and
authority to enter into and deliver this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by Parent
-28-
and Merger Sub, the performance by Parent and Merger Sub of their respective
obligations hereunder and the consummation by Parent and Merger Sub of the
Transactions have been duly authorized by the respective Boards of Directors of
Parent and Merger Sub, and no other corporate proceedings on the part of Parent
or Merger Sub are necessary to authorize the execution and delivery of this
Agreement, the performance by Parent and Merger Sub of their respective
obligations hereunder and the consummation by Parent and Merger Sub of the
Transactions. This Agreement has been duly executed and delivered by Parent and
Merger Sub and constitutes a valid and binding obligation of each of Parent and
Merger Sub, enforceable against each of Parent and Merger Sub in accordance with
its terms, subject to the Bankruptcy and Equity Exception.
(b) Neither the execution and delivery of this Agreement by Parent or
Merger Sub nor the performance or consummation by Parent or Merger Sub of the
Transactions will (i) result in a violation or breach of or conflict with the
certificate or articles of incorporation or bylaws of Parent or Merger Sub, (ii)
result in a violation or breach of or conflict with any provisions of, or result
in the loss of any material benefit under or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination, cancellation of, or give rise to a right of
purchase (including pursuant to any right of first refusal or the like) under,
or accelerate the performance required by, or result in a right of termination
or acceleration under, or result in the creation of any Lien upon any of the
properties or assets owned or operated by Parent or Merger Sub under any of the
terms, conditions or provisions of any material Contract to which Parent or
Merger Sub is a party or by which Parent or Merger Sub or any of their
respective properties or assets may be bound or (iii) violate any Judgment or
Law applicable to Parent or Merger Sub or any of their respective properties or
assets other than any such event or events described in items (i), (ii) or (iii)
that, individually or in the aggregate, have not had and would not reasonably be
likely to have a Parent Material Adverse Effect. The copies of the certificate
of incorporation and bylaws of Merger Sub that have been provided to the Company
are complete and correct copies of such documents and contain all amendments
thereto as in effect on the date of this Agreement.
Section 4.4 INFORMATION SUPPLIED. None of the information supplied or
to be supplied by Parent or Merger Sub specifically for inclusion or
incorporation by reference in (i) the Offer Documents, the Schedule 14D-9 or the
Information Statement will, at the time such document is filed with the SEC, at
any time it is amended or supplemented or at the time it is first published,
sent or given to the holders of Shares, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading and (ii) the Proxy
Statement (if any) will, at the date it is first mailed to the holders of Shares
or at the time of the Company Stockholders Meeting (if such a meeting is held),
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 the light of the circumstances under which they are made, not
misleading. The Offer Documents will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder. No representation or warranty is made by Parent or Merger Sub with
respect to statements made or incorporated by reference therein based on
information supplied by the Company in writing specifically for inclusion or
incorporation by reference in the Offer Documents.
-29-
Section 4.5 AVAILABILITY OF FUNDS. Parent has, and will cause Merger
Sub to have, available and will have available through the expiration of the
Offer and the Effective Time, cash and cash equivalents sufficient to accept for
payment and pay for all of the Shares pursuant to the Offer and consummate the
Merger and the other Transactions.
Section 4.6 OWNERSHIP OF COMPANY COMMON STOCK. None of Parent or any of
Parent's Affiliates directly or indirectly owns any of the outstanding Company
Common Stock.
Section 4.7 BROKER'S OR FINDER'S FEES. All negotiations relating to
this Agreement and the transactions contemplated hereby have been carried on
without the intervention of any Person acting on behalf of Parent or Merger Sub
or any of their respective Affiliates or "associates" (as defined in Rule 405
under the Securities Act) in such manner as to give rise to any valid claim
against the Company or any stockholder of the Company for any brokerage or
finder's commission, fee or similar compensation.
Section 4.8 LITIGATION. There are no actions, suits, claims,
investigations, arbitrations or proceedings pending or, to Parent's knowledge,
threatened against Parent or Merger Sub before or by any court, arbitrator or
Governmental Entity that, either individually or in the aggregate, would
materially and adversely affect Parent's or Merger Sub's ability to consummate
the Offer, the Merger or any other transaction contemplated by this Agreement.
ARTICLE 5
CONDUCT OF BUSINESS
Section 5.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE ACCEPTANCE
TIME. The Company covenants and agrees that during the period commencing on the
date of this Agreement and ending at the Acceptance Time or such earlier date as
this Agreement may be terminated in accordance with its terms (the "PRE-CLOSING
PERIOD"), unless in the case of each of SECTIONS 5.1(A) and 5.1(B) below, (1)
Parent shall otherwise consent in writing or (2) such action is expressly
permitted or required pursuant to this Agreement or set forth on SECTION 5.1 of
the Company Disclosure Letter:
(a) The Company and the Company Subsidiary shall use their respective
reasonable best efforts to (i) conduct their business in the Ordinary Course of
Business and (ii) maintain and preserve intact the material aspects of their
respective business organizations, to maintain their significant beneficial
business relationships with material suppliers, contractors, distributors,
customers, licensors, licensees and others having material business
relationships with them, to retain the services of their present officers and
key employees and to comply in all material respects with all applicable Laws
and the requirements of all Material Contracts.
(b) Without limiting the generality of the foregoing SECTION 5.1(A),
but subject to the limitations and qualifications set forth in the introduction
to this SECTION 5.1, the Company shall not, and shall not permit the Company
Subsidiary to, do any of the following:
(i) other than in Ordinary Course of Business, purchase or
otherwise acquire, sell, lease, transfer or dispose of or encumber in any
material respect any assets of the Company and the Company Subsidiary that are
material to the Company and the Company Subsidiary taken as a whole;
-30-
(ii) acquire by merging or consolidating with or by purchasing
all or a substantial equity interest in or a substantial portion of the assets
of, or by any other manner, any business, corporation, partnership, association
or other business organization or division thereof that, in any such case, would
be material in the aggregate to the Company and the Company Subsidiary, taken as
a whole;
(iii) amend or publicly propose to amend its certificate of
incorporation or bylaws or, in the case of the Company Subsidiary, the
Subsidiary Documents;
(iv) declare, set aside or pay any dividend or other
distribution payable in cash, capital stock, property or otherwise with respect
to any shares of its capital stock;
(v) purchase, redeem or otherwise acquire, or authorize or
agree to purchase, redeem or acquire, any shares of its capital stock, other
equity securities, other ownership interests or any options, warrants or rights
to acquire any such stock, securities or interests, other than (A) from holders
of Options in full or partial payment of the exercise price and any applicable
Taxes payable by such holder upon exercise of Options to the extent required or
permitted under the terms of such Options or (B) from former employees,
directors and consultants in accordance with agreements providing for the
repurchase of shares at their original issuance price in connection with any
termination of services to the Company or the Company Subsidiary;
(vi) split, combine, subdivide or reclassify its outstanding
securities;
(vii) except as provided in clause (ix) below, and except for
Shares issuable upon the exercise of the Top-Up Option, issue, sell, grant,
dispose of, pledge or otherwise encumber or authorize, publicly propose or agree
to the issuance, sale or disposition by the Company or the Company Subsidiary
of, any shares of, or any options, warrants, calls, commitments or rights or any
other agreements to acquire any shares of, or any securities convertible into or
exchangeable for any shares of, its capital stock of any class, or any voting
securities or equity interests or any other securities in respect of, in lieu
of, or in substitution for any class of its capital stock outstanding on the
date of this Agreement;
(viii) incur any indebtedness for borrowed money (other than
trade payables) or guarantee any such indebtedness (other than letters of credit
or similar arrangements issued to or for the benefit of suppliers and
manufacturers in the Ordinary Course of Business) or enter into a "make well" or
similar agreement or issue or sell any debt securities or options, warrants,
calls or other rights to acquire any debt securities of the Company or the
Company Subsidiary;
(ix) except as required by Law or agreements, plans or
arrangements existing on the date hereof, (A) grant or increase any severance or
termination pay to any current or former director, officer, employee, agent or
consultant of the Company or the Company Subsidiary, (B) execute any employment,
deferred compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer, employee, agent or consultant of
the Company or any Company Subsidiary, except in the Ordinary Course of Business
and only if such agreement is terminable on 60 days' or less notice without
either a penalty or a termination payment, (C) increase the benefits payable
under any existing severance or termination pay policies or employment
-31-
agreements, (D) increase the compensation, bonus or other benefits of any
current or former director, officer, employee, agent or consultant of the
Company or any Company Subsidiary, (E) adopt or establish any new employee
benefit plan or amend in any material respect any existing employee benefit
plan, (F) provide any material benefit to a current or former director, officer,
employee, agent or consultant of the Company or any Company Subsidiary not
required by any existing agreement or employee benefit plan, or (G) amend,
modify or terminate any of the agreements referred to in Sections 3.15(e) and
(f) hereof;
(x) (a) make, change or rescind any material Tax election,
settle or compromise any material Tax liability or amend any material Tax
return, or make any material changes in its reporting for Taxes or accounting
methods, principles or practices (or change an annual accounting period or the
Company's fiscal year); (b) surrender any right to claim a refund with respect
to a material amount of Taxes; (c) settle or compromise any material Tax
liability or enter into any closing agreement; or (d) waive or extend any
statute of limitations in respect of material Taxes;
(xi) settle or compromise any litigation or other legal
proceedings material to the Company and the Company Subsidiary taken as a whole,
other than any settlement or compromise where the amount paid or to be paid by
the Company or any Company Subsidiary (A) is covered by insurance coverage
maintained by the Company or a Company Subsidiary, and (B) is less than or equal
to the amount reserved therefor or reflected on the balance sheet included in
the Company Financial Statements;
(xii) make or commit to make capital expenditures for the
Company and the Company Subsidiary, other than as included in the Company's
budget for capital expenditures previously made available to Parent;
(xiii) enter into any agreement, arrangement or commitment
that materially limits or otherwise materially restricts the Company or any
Company Subsidiary, or upon completion of the Transactions, Parent, Merger Sub
or any of their respective Subsidiaries or Affiliates, from engaging or
competing in any line of business or in any geographic area material to either
the Company and the Company Subsidiary, taken as a whole, or, upon completion of
the Transactions, Parent, Merger Sub and their respective Subsidiaries or
Affiliates, taken as a whole;
(xiv) enter into any material lease or sublease of real
property (whether as lessor, sublessor, lessee or sublessee) or materially
modify, materially amend, terminate or fail to exercise any right to renew any
Company Lease;
(xv) except as required by applicable Law, amend, modify or
terminate any Material Contract, or knowingly waive, release or assign any
rights, claims or benefits under any Material Contract, which amendment,
modification, termination, waiver, release or assignment would be material to
the Company and the Company Subsidiary, taken as a whole, or enter into any new
Contract that, if entered into prior to the date of this Agreement, would
constitute a Material Contract;
-32-
(xvi) fail to use reasonable best efforts to maintain existing
insurance policies or comparable replacement policies, in each case to the
extent available for a reasonable cost;
(xvii) take any action that would cause any employment
compensation, severance or other employee benefit arrangement to which the
Company or any Company Subsidiary is a party, or payments made or to be made or
benefits granted or to be granted by the Company or any Company Subsidiary
according to such an arrangement, to fail to satisfy the requirements of the
non-exclusive safe harbor in Rule 14d-10(d)(2) under the Exchange Act; or
(xviii) agree or commit to take any of the actions precluded
by SECTION 5.1(B).
Section 5.2 CONDUCT OF BUSINESS BY PARENT AND MERGER SUB PENDING THE
MERGER. Parent and Merger Sub agree that, between the date of this Agreement and
the Effective Time, except as contemplated by this Agreement, they shall not,
directly or indirectly, without the prior written consent of the Company, take
or cause to be taken any action that would reasonably be expected to materially
delay, impair or prevent the consummation of the transactions contemplated by
this Agreement, or propose, announce an intention, enter into any agreement or
otherwise make a commitment to take any such action, provided that nothing in
this SECTION 5.2 shall preclude Parent or Merger Sub from exercising any rights
under this Agreement, including the right to terminate this Agreement in
accordance with the provisions of SECTION 8.1.
ARTICLE 6
ADDITIONAL AGREEMENTS
Section 6.1 PREPARATION OF PROXY STATEMENT; STOCKHOLDERS
MEETINGS.
(a) If the adoption of this Agreement by the holders of Shares is
required by Law, the Company shall, at Parent's request, as soon as practicable
following the Acceptance Time, prepare and file with the SEC the Proxy Statement
in preliminary form, and each of the Company and Parent shall use its reasonable
best efforts to respond as promptly as practicable to any comments of the SEC
and its staff with respect thereto. The Company shall notify Parent promptly of
the receipt of any comments from the SEC or its staff and of any request by the
SEC or its staff for amendments or supplements to the Proxy Statement or for
additional information and shall supply Parent with copies of all correspondence
between the Company or any of its representatives, on the one hand, and the SEC
or its staff, on the other hand, with respect to the Proxy Statement. The
Company shall give Parent and its counsel the opportunity to review the Proxy
Statement if a Company Stockholders Meeting is required prior to its being filed
with the SEC and shall give Parent and its counsel the opportunity to review all
amendments and supplements to the Proxy Statement if a Company Stockholders
Meeting is required, and all responses to requests for additional information
and replies to comments prior to their being filed with, or sent to, the SEC. If
at any time prior to receipt of the Required Company Stockholder Vote there
shall occur any event that should be set forth in an amendment or supplement to
the Proxy Statement, the Company shall promptly prepare and mail to its
stockholders such an amendment or supplement. The Company shall use its
reasonable best efforts to cause the Proxy Statement and all required amendments
and supplements thereto to be mailed to the holders of Shares as promptly as
practicable after filing with the SEC and resolution of any comments thereon
from the SEC or its staff.
-33-
(b) If the adoption of this Agreement by the holders of Shares is
required by Law, the Company, acting through the Company Board, shall at
Parent's request, as soon as practicable following the Acceptance Time, duly
call, give notice of, convene and hold a meeting of its stockholders (the
"COMPANY STOCKHOLDERS Meeting") for the purpose of seeking the Required Company
Stockholder Vote. Subject to SECTION 6.8, (i) the Company Board shall recommend
adoption of this Agreement (the "COMPANY VOTING PROPOSAL") by the stockholders
of the Company and include such recommendation in the Proxy Statement and (ii)
the Company Board shall not withhold, withdraw or modify, or publicly propose or
resolve to withhold, withdraw or modify in a manner adverse to Parent, the
recommendation of the Company Board that the Company's stockholders vote in
favor of the Company Voting Proposal. Subject to SECTION 6.8, the Company shall
take all action that is both reasonable and lawful to solicit from its
stockholders proxies in favor of the Required Company Stockholder Vote and shall
take all other action reasonably necessary or advisable to secure the vote or
consent of the stockholders of the Company required by the rules of FBCA to
obtain such approvals. Without limiting the generality of the foregoing, the
Company's obligations under SECTION 6.1(A) 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 of the Company
Board of its approval or recommendation of this Agreement, the Offer or the
Merger. Notwithstanding anything to the contrary contained in this Agreement,
the Company, after consultation with Parent, may adjourn or postpone the Company
Stockholders Meeting (A) to the extent necessary to ensure that any required
supplement or amendment to the Proxy Statement is provided to the Company's
stockholders, (B) if as of the time for which the Company Stockholder's Meeting
is originally scheduled (as set forth in the Proxy Statement) there are
insufficient Shares represented (either in person or by proxy) to constitute a
quorum necessary to conduct the business of the Company Meeting, or (C) for the
purpose of soliciting additional proxies. Notwithstanding the foregoing, if
Parent, Merger Sub and any other Parent or Parent Subsidiary shall collectively
acquire at least 80% of the outstanding Shares, Parent and Merger Sub shall take
all necessary and appropriate action to cause the Merger to become effective as
soon as practicable (and in any event within five (5) Business Days) after the
expiration of the Offer (including any "subsequent offering" period) without a
stockholders meeting in accordance with the FBCA.
(c) At the Company Stockholders Meeting, if the same is required,
Parent shall cause all Shares purchased pursuant to the Offer and all other
Shares beneficially owned by Parent, Merger Sub or any Subsidiary of Parent to
be present so as to be counted for quorum purposes and voted in favor of the
adoption of this Agreement.
Section 6.2 STATE TAKEOVER LAWS. If any "fair price," "business
combination," "affiliated transaction" or "control share acquisition" statute or
other similar statute or regulation is or may become applicable to any
Transaction, the parties shall use reasonable best efforts to (a) take such
actions as are reasonably necessary so that the transactions contemplated
hereunder may be consummated as promptly as practicable on the terms
contemplated hereby and (b) otherwise take all such actions as are reasonably
necessary to eliminate or minimize the effects of any such statute or regulation
on such Transaction.
Section 6.3 RULE 14D-10(D). Prior to the Acceptance Time, the Company
(acting through the Special Committee) shall take all such steps as may be
required to cause each employment compensation, severance and employee benefit
-34-
agreement, arrangement or understanding entered into by the Company or the
Company Subsidiary on or after the date of this Agreement with any of its
officers, directors or employees pursuant to which consideration is paid to such
officer, director or employee to satisfy the requirements of the non-exclusive
safe-harbor set forth in Rule 14d-10(d)(2) of the Exchange Act.
Section 6.4 PUBLIC STATEMENTS. Subject to SECTION 6.8, the Company and
Parent shall use reasonable best efforts to consult with each other prior to
issuing, and to provide each other with the opportunity to review and comment
upon, any public announcement, statement or other disclosure with respect to
this Agreement or the Transactions, except as may be required by Law or any
listing agreement or the listing rules of the Tokyo or Osaka Stock Exchange or
trading market; PROVIDED, HOWEVER, that these restrictions shall not apply to
any Company communications regarding either (a) a Takeover Proposal that the
Company Board determines in good faith (after consultation with outside counsel
and its financial advisor) constitutes or is reasonably likely to lead to a
Superior Proposal, or (b) a Company Adverse Recommendation Change. The parties
shall issue a joint press release, mutually acceptable to the Company and
Parent, promptly upon execution and delivery of this Agreement.
Section 6.5 STANDARD OF EFFORTS. Except as otherwise specified herein,
each of the Company, Parent and Merger Sub agrees to use its reasonable best
efforts to take, or cause to be taken (and Parent shall cause Merger Sub to take
or cause to be taken), all action, 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 Offer, the Merger and the other Transactions, including (i)
obtaining all consents, approvals, authorizations and actions or nonactions
required for the consummation by the parties hereto of the Offer, the Merger and
the other Transactions, (ii) the taking of all steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, a
Governmental Authority, (iii) the obtaining of all necessary consents from third
parties and (iv) the execution and delivery of any additional instruments
necessary to consummate the Transactions and to fully carry out the purposes of
this Agreement. The Company, Parent and Merger Sub agree that they shall consult
with each other with respect to the obtaining of all such necessary permits,
consents, approvals and authorizations of all third parties and Governmental
Authorities.
Section 6.6 NOTIFICATION OF CERTAIN MATTERS. The Company shall provide
prompt notice to Parent and Merger Sub, and Parent and Merger Sub shall provide
prompt notice to the Company, of (a) the occurrence, or failure to occur, of any
event, which occurrence or failure to occur is reasonably likely to cause any
representation or warranty of such party contained in this Agreement to be
untrue or inaccurate in any material respect, in each case at any time from and
after the date of this Agreement until the Acceptance Time, or (b) any material
failure of Parent and Merger Sub or the Company, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement; PROVIDED, HOWEVER, that the delivery of
any notice pursuant to this SECTION 6.6 shall not (i) cure any breach of, or
non-compliance with, any other provision of this Agreement or (ii) limit the
remedies available to the party receiving such notice. Each of the Company,
Parent and Merger Sub shall give prompt notice to the other parties hereto of
any notice or other communications from any third party alleging that the
-35-
consent of such third party is or may be required in connection with the
Transactions.
Section 6.7 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) During the Pre-Closing Period, the Company shall afford, and shall
cause the Company Subsidiary and the officers, directors and employees of the
Company and the Company Subsidiary to afford, the officers, employees and agents
of Parent and Merger Sub reasonable access during normal business hours upon
reasonable written notice and in a manner that does not unreasonably disrupt or
interfere with business operations, to the Company's and the Company
Subsidiary's officers, employees, properties, facilities, books, records,
correspondence (in each case, whether in physical or electronic form), contracts
and other assets as Parent shall reasonably request, and shall promptly furnish
Parent and Merger Sub (i) a copy of each report, schedule and other document
filed or submitted by it pursuant to the requirements of Federal or state
securities Laws and a copy of any communication (including "comment letters")
received by the Company from the SEC concerning compliance with securities laws
with respect to matters unrelated to the Transactions and (ii) all other
information concerning its and the Company Subsidiary's business, properties and
personnel, in each case (A) as Parent through its officers, employees or agents
may reasonably request, (B) that are in the possession, custody or control of
the Company or the Company Subsidiary, and (C) the disclosure of which would not
violate any Law, cause to be waived the attorney-client privilege or other
similar privilege with respect to any material matter (PROVIDED that such
privilege cannot in the Company's good faith judgment be reasonably sufficiently
protected using a joint defense or other similar agreement), result in the
disclosure of any trade secrets of third parties or violate any obligation of
the Company or the Company Subsidiary with respect to confidentiality (provided
that the Company will have used reasonable best efforts to obtain the consent of
such third party to such access or disclosure). Parent, Merger Sub and their
respective officers, employees and agents will hold any such information that is
non-public in confidence in accordance with the Confidentiality Agreement. No
additional investigations or disclosures shall affect the Company's
representations and warranties contained herein, or limit or otherwise affect
the remedies available to Parent and Merger Sub pursuant to this Agreement.
(b) Until the Effective Time, the provisions of the Mutual
Nondisclosure Agreement dated March 12, 2008 between Kikkoman Corporation and
the Company (the "CONFIDENTIALITY AGREEMENT") shall remain in full force and
effect in accordance with its terms and shall be applicable to Parent and Merger
Sub.
Section 6.8 NO SOLICITATION.
(a) The Company and the Company Subsidiary shall, and shall cause their
respective directors, officers, employees, investment bankers, financial
advisors, attorneys, brokers, accountants, agents and other agents, advisors or
representatives (collectively, "REPRESENTATIVES") to, (i) immediately cease and
cause to be terminated any discussions or negotiations that commenced prior to
the date of this Agreement with respect to a Takeover Proposal and (ii) promptly
request that all such Persons with whom the Company had discussions or
negotiations regarding a Takeover Proposal during the prior year return or
destroy all copies of confidential information previously provided to such
parties by the Company, the Company Subsidiary or Representatives to the extent
-36-
any confidentiality agreement with such Person so provides or allows. Nothing in
this SECTION 6.8(A) shall in any way limit or modify any of the Company's rights
under the other provisions of this SECTION 6.8.
(b) Except as set forth in this SECTION 6.8, from the date of this
Agreement until the Effective Time or, if earlier, the termination of this
Agreement in accordance with its terms, the Company shall not, and shall cause
the Company Subsidiary and their respective Representatives not to, nor shall it
authorize or permit any Representative to, directly or indirectly, (i) solicit,
initiate, knowingly facilitate or knowingly encourage the submission of any
Takeover Proposal, (ii) enter into any agreement, agreement-in-principle or
letter of intent providing for or accept any Takeover Proposal, or (iii)
participate. engage in, or continue any discussions or negotiations regarding,
or furnish to any Person any non-public information for the purpose of
encouraging or facilitating, any Takeover Proposal; PROVIDED, HOWEVER, that (A)
the Company may refer any third party to this SECTION 6.8 and (B) if in response
to a BONA FIDE written Takeover Proposal made after the date of this Agreement
that did not result from a breach of this SECTION 6.8, and subject to compliance
with SECTION 6.8(C), the Company Board determines in good faith (after
consultation with outside counsel and its financial advisor) that such Takeover
Proposal constitutes or is reasonably likely to lead to a Superior Proposal and
such action is likely to be required in order for the directors to comply with
their fiduciary duties under applicable law, then the Company may at any time
prior to the Acceptance Time (but in no event after such time) do any or all of
the following: (X) furnish information with respect to the Company and the
Company Subsidiary to the Person making such Takeover Proposal and its
Representatives, but only pursuant to a confidentiality agreement not materially
less restrictive with respect to confidentiality of the other party than the
Confidentiality Agreement (except that such confidentiality agreement shall
contain additional provisions that expressly permit the Company to comply with
the provisions of SECTION 6.8(C)), PROVIDED that (1) such confidentiality
agreement may not include any provision calling for an exclusive right to
negotiate with the Company and (2) concurrently with its delivery to such
Person, the Company delivers or makes available to Parent all such information
not previously provided to Parent; (Y) participate or engage in discussions or
negotiations (including the solicitation of revised Takeover Proposals) with
such Person and its Representatives and its potential financing sources
regarding such Takeover Proposal or (Z) amend, or grant a waiver or release
under, any standstill or similar agreement with respect to any Company Common
Stock with any such Person. The Company shall be deemed to be in breach of the
provisions of this SECTION 6.8 upon the breach of any such provisions by the
Company Subsidiary or the Company's Representatives.
(c) The Company shall as promptly as practicable, and in any event
within 24 hours, advise Parent orally and in writing of the Company's receipt of
any written Takeover Proposal, and shall, in any such notice to Parent, indicate
the identity of the Person making such Takeover Proposal and the material terms
and conditions of such Takeover Proposal (and shall include with such notice
copies of any written materials received from or on behalf of such Person
relating to such Takeover Proposal), and thereafter shall promptly keep Parent
reasonably informed of all material developments affecting the status and terms
of any such Takeover Proposal (and the Company shall provide or make available
to Parent copies of any additional material documents regarding such Takeover
Proposal received by the Company from the Person making such Takeover Proposal
or such Person's Representatives).
-37-
(d) Except as set forth in this SECTION 6.8, neither the Company Board
nor any committee thereof shall (i) withdraw or modify, or propose publicly to
withdraw or modify, the Board Recommendation or (ii) approve or recommend, or
propose publicly to approve or recommend, any Takeover Proposal (it being
understood that taking a neutral position or no position with respect to any
Takeover Proposal that is a tender offer after five (5) Business Days after the
commencement of such tender offer shall be considered an adverse modification)
(any action described in clause (i) or (ii) being referred to as a "COMPANY
ADVERSE RECOMMENDATION CHANGE"). Notwithstanding anything to the contrary set
forth in this Agreement, the Company or the Company Board may, prior to the
Acceptance Time (A) withdraw or modify, or publicly propose to withdraw or
modify, the Board Recommendation, (B) approve or recommend, or publicly propose
to approve or recommend, a Takeover Proposal that constitutes a Superior
Proposal and that did not result from a material breach of this SECTION 6.8, or
(C) enter into a binding written agreement concerning a transaction that
constitutes a Superior Proposal, if, in any such case, the Company Board
determines in good faith, after consulting with outside counsel, that failure to
do so would be inconsistent with its fiduciary obligations under applicable Law.
(e) Nothing in this SECTION 6.8 or in SECTION 6.4 or elsewhere in this
Agreement shall prohibit the Company or the Company Board from (i) taking and
disclosing to the Company's stockholders a position contemplated by Rule
14e-2(a), Rule 14d-9 or Item 1012(a) of Regulation M-A under the Exchange Act,
or from issuing a "stop, look and listen" statement pending disclosure of its
position thereunder, or (ii) from making any disclosure to the Company's
stockholders if in each case under this clause (ii) the Company Board determines
in good faith, after consultation with outside counsel, that failure to do so
would be inconsistent with its fiduciary obligations under applicable Law;
PROVIDED, HOWEVER, that in no event shall the Company Board or other committee
thereof take any action prohibited by SECTION 6.8(D) except as permitted by the
terms of SECTION 6.8(D).
Section 6.9 INDEMNIFICATION AND INSURANCE.
(a) Parent and Merger Sub agree that all rights to advancement of
expenses, indemnification and exculpation by the Company now existing in favor
of each person who is now, or has been at any time prior to the date of this
Agreement or who becomes prior to the Effective Time, an officer or director of
the Company or the Company Subsidiary (each an "INDEMNIFIED PARTY") as provided
in the Company's certificate of incorporation or bylaws, in each case as in
effect on the date of this Agreement, or pursuant to any other agreements in
effect on the date of this Agreement, accurate and complete copies of which have
been provided or made available to Parent, shall survive the Merger. >From the
Effective Time through the sixth (6th) anniversary of the date on which the
Effective Time occurs, the certificate of incorporation and bylaws of the
Surviving Corporation shall contain, and Parent shall cause the certificate of
incorporation and bylaws of the Surviving Corporation to so contain, provisions
no less favorable with respect to indemnification, advancement of expenses and
exculpation of each Indemnified Party than are set forth in the certificate of
incorporation and bylaws of the Company as in effect on the date of this
Agreement.
(b) For six (6) years after the Effective Time, to the full extent
permitted under applicable Law, Parent and the Surviving Corporation (the
"INDEMNIFYING PARTIES") shall, jointly and severally, indemnify, defend and hold
-38-
harmless each Indemnified Party against all losses, claims, damages,
liabilities, fees, expenses, judgments or fines arising in whole or in part out
of actions or omissions in their capacity as such occurring at or prior to the
Effective Time (including in respect of this Agreement and the Transactions),
whether asserted or claimed prior to, at or after the Effective Time, and shall
advance each Indemnified Party within twenty (20) Business Days of receipt by
Parent or the Surviving Corporation from the Indemnified Party of a request
therefor for any reasonable legal or other expenses incurred by such Indemnified
Party in connection with investigating or defending any such losses, claims,
damages, liabilities, fees, expenses, judgments or fines as such expenses are
incurred, but subject to the Indemnifying Parties' receipt of an unsecured
undertaking, to the extent required by the FBCA, by or on behalf of the
Indemnified Party to repay such expenses if it is ultimately determined that
such Indemnified Party is not entitled to indemnification hereunder; PROVIDED
that nothing herein shall impair any rights to indemnification of any
Indemnified Party referred to in clause (a) above.
(c) Parent and the Surviving Corporation shall, jointly and severally,
cause the individuals who have served as officers and directors of the Company
prior to the Effective Time who are then covered by the directors' and officers'
liability insurance policy currently maintained by the Company (a correct and
complete copy of which has been delivered or made available to Parent) (the "D&O
INSURANCE"), to be covered under a directors' and officers' liability insurance
policy on terms and conditions no less advantageous to such individuals than the
Company's existing directors' and officers' liability insurance policy for a
period of not less than six (6) years after the Effective Time, but only to the
extent related to actions or omissions of such officers and directors at or
prior to the Effective Time (including in respect of this Agreement and the
Transactions) in their capacities as such, whether asserted or claimed prior to,
at or after the Effective Time; PROVIDED, that in no event shall Parent or the
Surviving Corporation be required to expend more than an amount per year equal
to 125% of the current annual premiums paid by the Company for such insurance
(the "MAXIMUM Amount") to maintain or procure insurance coverage pursuant
hereto; PROVIDED, FURTHER, that if the amount of the annual premiums necessary
to maintain or procure such insurance coverage exceeds the Maximum Amount,
Parent and the Surviving Corporation shall procure and maintain for such
six-year (6) period as much coverage as is available for the Maximum Amount.
Parent shall have the right to cause coverage to be extended under the D&O
Insurance by obtaining a six (6) year "tail" policy on terms and conditions no
less advantageous to such former directors or officers than the D&O Insurance,
and such "tail" policy shall satisfy the provisions of this SECTION 6.9(C).
(d) Notwithstanding any other provision of this SECTION 6.9, Parent,
Merger Sub, the Company and their Affiliates shall have no obligation to
indemnify, defend or hold harmless or advance expenses and exculpate any person
for matters for which a director or officer of the Company has agreed to
indemnify the Company, including pursuant to the Employment Separation and
General Release Agreement.
Section 6.10 SECTION 16 MATTERS. Prior to the Effective Time, Parent,
Merger Sub and the Company shall take all such steps as may be required to cause
the transactions contemplated by SECTION 2.8 and any other dispositions of
equity securities of the Company (including derivative securities) in connection
with this Agreement by each individual who is subject to the reporting
requirements of Section 16(a) of the Exchange Act with respect to the Company to
-39-
be exempt under Rule 16b-3 under the Exchange Act in accordance with that
certain No-Action Letter dated January 12, 1999 issued by the SEC regarding such
matters.
Section 6.11 EMPLOYEE MATTERS.
(a) TERMINATION OF 401(K) PLAN. If requested by Parent at least five
Business Days prior to the consummation of the Offer, the Company will terminate
any and all Employee Plans intended to qualify as a qualified cash or deferred
arrangement under Section 401(k) of the Code, effective as of the day
immediately preceding the date the Company becomes a member of the same
Controlled Group of Corporations (as defined in Section 414(b) of the Code) as
Parent. The Company shall provide Parent evidence that such resolutions to
terminate the 401(k) plan(s) of the Company and the Company Subsidiary have been
adopted by the Company Board or the board of directors of the Company
Subsidiary, as applicable. The form and substance of such resolutions shall be
subject to the reasonable approval of Parent. The Company shall also take such
other actions in furtherance of terminating any such 401(k) plans as Parent may
reasonably request. Immediately prior to such termination, the Company will make
(or cause to be made) all necessary payments to fund the contributions (i)
necessary or required to maintain the tax-qualified status of any such 401(k)
Plan, (ii) for elective deferrals made pursuant to any such 401(k) Plan for the
period prior to termination, and (iii) for employer matching contributions (if
any) for the period prior to termination; PROVIDED THAT all such payments shall
be excluded for purposes of calculating the Minimum Cash Amount.
(b) EMPLOYEE ELIGIBILITY FOR BENEFITS. Each of Parent and Merger Sub
agrees that each employee of the Company who continues employment with the
Company or the Company Subsidiary after the Closing shall be provided health and
welfare benefits that are not materially less favorable, in the aggregate, than
those provided to similarly situated employees of Parent and its Subsidiaries
under Parent's employee benefit plans. In the event that any current plan
(including but not limited to the Company's current 401(k) plan) of the Company
or the Company Subsidiary is terminated by Parent following the Closing, Parent
shall give employees of the Company and the Company Subsidiary credit for
purposes of eligibility and vesting under the corresponding benefit plan
maintained by Parent or any Subsidiary for such employees' service with the
Company and the Company Subsidiary prior to the Closing Date, except to the
extent that such crediting would result in duplication of benefits. Subject in
each case to the provisions of the applicable welfare benefit plan, Parent shall
(i) waive all limitations as to preexisting conditions exclusions and waiting
periods with respect to participation and coverage requirements applicable to
such employees under any welfare benefit plans that such employees may be
eligible to participate in after the Effective Time, other than limitations or
waiting periods that are already in effect with respect to such employees and
that have not been satisfied as of the Effective Time under any welfare plan
maintained for such employees immediately prior to the Closing, and (ii) provide
each such employee with credit for any co-payments and deductibles paid in the
plan year in which the Closing Date occurs in satisfying any applicable
co-payment and deductible requirements for the applicable plan year under any
welfare plans that such employees are eligible to participate in after the
Effective Time. As of the Closing Date, Parent shall credit to such employees
the amount of vacation time that such employees had accrued under the Company's
Benefit Plans as of the Closing Date. In the event that Parent determines that
the terms of the Company's 401(k) plan are more favorable to participants than
the terms of a 401(k) plan maintained by Parent or its Subsidiaries in which an
-40-
employee of the Company participates immediately after the Closing, Parent shall
determine, in its sole discretion, whether adjustments to the salary paid to
such employee following the Closing are appropriate in the circumstances and, if
so, the extent of any such adjustments. Nothing in this Agreement (i) shall
require Parent, Merger Sub or any of their Subsidiaries to continue to employ
any particular Company employee following the Closing Date, or (ii) shall be
construed to prohibit Parent, the Merger Sub or any of their Subsidiaries from
amending or terminating any Benefit Plan.
Section 6.12 FIRPTA CERTIFICATE. On or prior to the Closing Date, the
Company shall deliver to Parent a properly executed statement in a form
reasonably acceptable to Parent for purposes of satisfying Parent's obligations
under Treasury Regulation Section 1.1445-2(c)(3).
Section 6.13 DE-REGISTRATION. Prior to the Closing Date, the Company
shall cooperate with Parent and use reasonable best efforts to take, or cause to
be taken, all actions, and do or cause to be done all things, reasonably
necessary, proper or advisable on its part under applicable laws and rules the
deregistration of the Shares under the Exchange Act as promptly as practicable
after the Effective Time.
Section 6.14 EMPLOYMENT AGREEMENTS. Prior to the Closing Date, the
Company shall use its best efforts to cause each of the individuals set forth on
EXHIBIT D to enter into an Employment Agreement in a form approved by Parent,
and each such agreement with the individuals set forth on EXHIBIT D shall come
into force and effect on the Closing Date only in the event of the Closing.
ARTICLE 7
CONDITIONS
Section 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger are subject to the
satisfaction or, to the extent permitted by applicable Law, waiver on or prior
to the Closing Date of each of the following conditions:
(a) STOCKHOLDER APPROVAL. If required by Law, this Agreement shall have
been duly adopted at the Company Stockholder Meeting by the Required Company
Stockholder Vote.
(b) NO INJUNCTIONS OR RESTRAINTS. No Judgment issued by a court of
competent jurisdiction or by a Governmental Authority, nor any Law or other
legal restraint or prohibition, shall be in effect that would make the Merger
illegal or otherwise prevent or prohibit the consummation thereof.
(c) COMPLETION OF THE OFFER. Parent or Merger Sub shall have accepted
for payment and paid for all Shares validly tendered and not withdrawn pursuant
to the Offer (including any "subsequent offering" period).
(d) FAILURE OF CONDITIONS. Neither Company, Parent nor Merger Sub shall
be entitled to assert the failure of any condition if, in breach of this
Agreement or the terms of the Offer, such failure was caused by such party's
failure to act in good faith in a manner consistent with the terms of this
Agreement.
-41-
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 TERMINATION. This Agreement may be terminated and
the Offer, Merger and other Transactions may be abandoned as follows:
(a) by mutual written consent of Parent, Merger Sub and the Company at
any time prior to the Acceptance Time; or
(b) by either the Company or Parent as follows:
(i) if the Acceptance Time shall not have occurred on or
before September 30, 2008 (the "WALK AWAY DATE"); PROVIDED, HOWEVER, that the
right to terminate this Agreement under this SECTION 8.1(B)(I) shall not be
available to any party if the failure of the Acceptance Time to occur on or
before the Walk Away Date was caused by or resulted from the failure of such
party (or any Affiliate of such party) to fulfill any of its obligations under
this Agreement; or
(ii) if any Judgment issued by a court of competent
jurisdiction or by a Governmental Authority, or Law or other legal restraint or
prohibition, in each case making the consummation of the Offer or Merger illegal
or permanently restraining, enjoining or otherwise preventing the consummation
thereof shall be in effect and shall have become final and nonappealable;
PROVIDED that the party seeking the right to terminate this Agreement pursuant
to this SECTION 8.1(B)(II) shall have used reasonable best efforts to resist,
lift or resolve such Judgment, Law or other legal restraint and the right to
terminate pursuant to this Section 8.1(b)(ii) shall not be available if the
issuance of such Judgment, legal restraint or prohibition was caused by or
resulted from the failure of such party (or any Affiliate of such party) to
perform in any material respect any covenant in this Agreement required to be
performed by such party (or any Affiliate of such party); or
(c) by Parent, prior to the purchase of any Shares pursuant to the
Offer, if there shall have occurred a Company Adverse Recommendation Change; or
(d) by the Company, if each of the following conditions is satisfied:
(i) the Company has not breached SECTION 6.8;
(ii) the Company has received a Takeover Proposal that the
Company Board has determined in good faith (after consultation with outside
counsel and its financial advisor) constitutes a Superior Proposal;
(iii) the Company has provided Parent with not less than five
(5) Business Days' written notice that it intends to enter into a definitive
agreement implementing such Superior Proposal, attaching to such notice the most
current version of such agreement as of the date of such written notice (a
"SUPERIOR PROPOSAL NOTICE") (it being agreed that, by itself, any determination
by the Company Board (or a committee thereof) to send a Superior Proposal Notice
shall not constitute a breach of SECTION 6.8 or a termination event under this
SECTION 8.1);
-42-
(iv) the Company pays to Parent in immediately available funds
the Termination Fee in accordance with SECTION 8.3(B)(II) within the applicable
period therefor; and
(v) the Company Board concurrently with such termination
approves, and the Company concurrently with such termination enters into, a
definitive agreement providing for the implementation of such Superior Proposal;
or
(e) by Parent, prior to the purchase of any Shares pursuant to the
Offer, if the Company shall have materially breached SECTION 6.8; or
(f) by Parent, prior to the purchase of any Shares pursuant to the
Offer, if there has been a breach of or failure to perform any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement, which breach or failure to perform (i) would cause the conditions set
forth in clauses 2(b) or 2(c) of ANNEX A not to be satisfied, and (ii) shall not
have been cured within twenty (20) days following receipt by the Company of
written notice of such breach or failure to perform from Parent; PROVIDED that
neither Parent nor Merger Sub is then in material breach of any representation,
warranty or covenant under this Agreement; or
(g) by the Company, prior to the purchase of any Shares pursuant to the
Offer, if there has been a breach of or failure to perform any representation,
warranty, covenant or agreement on the part of Parent or Merger Sub set forth in
this Agreement, which breach or failure to perform shall have had or is
reasonably likely to have, individually or in the aggregate, a Parent Material
Adverse Effect and shall not have been cured within twenty (20) days following
receipt by Parent of written notice of such breach or failure to perform from
the Company; PROVIDED that the Company is not then in material breach of any
representation, warranty or covenant under this Agreement; or
(h) by the Company (A) if, for any reason, Merger Sub shall have failed
to commence the Offer by the date that is ten (10) Business Days after the date
of this Agreement, or (B) upon two (2) Business Days notice to Parent, if, for
any reason, Merger Sub shall have breached its obligation hereunder to purchase
all Shares validly tendered (and not withdrawn) as of the expiration of the
Offer (as it may be extended).
The party desiring to terminate this Agreement shall deliver written
notice of such termination to the other party, setting forth in such notice the
provision of this SECTION 8.1 pursuant to which such party is terminating this
Agreement.
Section 8.2 EFFECT OF TERMINATION. Upon the termination of this
Agreement pursuant to SECTION 8.1, this Agreement shall forthwith become null
and void except for the provisions of (a) this SECTION 8.2, (b) SECTION 8.3
(Fees and Expenses) and (c) ARTICLE 9 (General Provisions), which shall survive
such termination, and except under such aforementioned provisions (a), (b) and
(c), none of Parent, Merger Sub, the Company or their respective Affiliates
shall have any liability or obligation of any nature whatsoever hereunder or in
connection with the transactions contemplated hereby; PROVIDED that nothing
herein shall relieve any party from liability for any willful breach of, or act
of fraud in connection with, this Agreement, except as set forth in SECTION
8.3(C). The Confidentiality Agreement shall not be affected by the termination
of this Agreement and shall continue in full force and effect in accordance with
its terms.
-43-
Section 8.3 FEES AND EXPENSES.
(a) Except as set forth in this SECTION 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such fees and expenses, whether or
not the Offer or the Merger is consummated.
(b) The Company shall pay Parent a termination fee of $250,000 plus all
fees and expenses incurred by Parent, Merger Sub or their Affiliates in
connection with this Agreement and the transactions contemplated hereby,
provided that such fees and expenses shall not exceed $750,000 (the "TERMINATION
FEE"), in the event that this Agreement is terminated:
(i) by Parent pursuant to SECTION 8.1(C);
(ii) by the Company pursuant to SECTION 8.1(D);
(iii) by Parent pursuant to SECTION 8.1(E), by Parent pursuant
to Section 8.1(b)(i) if the failure of the Acceptance Time to have occurred
prior to the Walk Away Date was caused by or resulted from the failure of the
Company (or any Affiliate of the Company) to fulfill any of its obligations
under this Agreement, or by the Company pursuant to SECTION 8.1(B)(I), if, in
any such case, (A) before the date of such termination, the Company Board shall
have received a written Takeover Proposal that has not been withdrawn as of the
date of such termination and (B) within twelve (12) months after the date of
termination, the Company shall have entered into a definitive agreement for any
Takeover Proposal (regardless of whether made before or after the termination of
this Agreement), which Takeover Proposal is ultimately consummated; or
(iv) by Parent pursuant to SECTION 8.1(F) as a result of a
knowing and material breach of representations, warranties, covenants or
agreements by the Company, if (A) before the date of such termination, the
Company Board shall have received a written Takeover Proposal that has not been
withdrawn as of the date of such termination and (B) within twelve (12) months
after the date of termination, the Company shall have entered into a definitive
agreement for any Takeover Proposal (regardless of whether made before or after
the termination of this Agreement), which Takeover Proposal is ultimately
consummated;
PROVIDED, HOWEVER, that, for purposes of this SECTION 8.3(B), all references to
"20%" in the definition of "Takeover Proposal" shall be deemed to be references
to "50%." Any fee due under SECTION 8.3(B)(I) or (ii) shall be paid to Parent by
wire transfer of same-day funds within five (5) Business Days after the date of
termination of this Agreement. Any fee due under SECTION 8.3(B)(III) or (iv)
shall be paid to Parent by wire transfer of same-day funds within five (5)
Business Days after the date on which the transaction referenced therein is
consummated. If the Company fails to promptly pay the amount due pursuant to
SECTION 8.3(G)(I) or (II), and, in order to obtain such payment, Parent or
Merger Sub commences a suit that results in a judgment against the Company for
the fee set forth in SECTION 8.3(B) or any portion of such fee, the Company
shall pay to Parent and Merger Sub its costs and expenses (including attorneys'
fees) in connection with such suit, together with interest on the amount of the
Termination Fee at the prime rate of Citibank, N.A. in effect on the date such
payment was required to be made through the date of payment. Notwithstanding any
other provision of this Agreement, in no event shall the Company be obligated to
-44-
pay the Termination Fee on more than one occasion. Except to the extent required
by applicable law, the Company shall not withhold any Taxes on any payment under
this SECTION 8.3.
(c) The parties acknowledge that the agreements contained in this
SECTION 8.3 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the parties would not enter into
this Agreement, and that, if such payment is accepted by Parent, such payment
would constitute liquidated damages and shall be the sole and exclusive remedy
of Parent and Merger Sub hereto.
Section 8.4 AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after adoption of this Agreement and the Transactions by
the respective Boards of Directors or stockholders of the parties hereto;
PROVIDED, HOWEVER, that after any such adoption by the holders of Shares, no
amendment shall be made that, by applicable Law, requires further approval of
such stockholders, without the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
Section 8.5 WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party. Such extension
or waiver shall not apply to any time for performance, inaccuracy in any
representation or warranty, or noncompliance with any agreement or condition, as
the case may be, other than that which is specified in the extension or waiver.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of such rights.
Section 8.6 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER.
A termination of this Agreement pursuant to SECTION 8.1, an amendment,
modification or supplement of this Agreement pursuant to SECTION 8.4 or an
extension or waiver of this Agreement pursuant to SECTION 8.5 shall, in order to
be effective, require, in the case of Merger Sub or the Company, action by its
Board of Directors or the duly authorized designee of its Board of Directors.
ARTICLE 9
GENERAL PROVISIONS
Section 9.1 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly delivered (i) four (4)
Business Days after being sent by registered or certified mail, return receipt
requested, postage prepaid, (ii) one (1) Business Day after being sent for next
Business Day delivery, fees prepaid, via a reputable nationwide overnight
courier service, or (iii) on the date of confirmation of receipt (or, the first
-45-
(1st) Business Day following such receipt if the date of such receipt is not a
Business Day) of transmission by facsimile, in each case to the intended
recipient as set forth below:
if to the Company:
Allergy Research Group, Inc.
0000 Xxxxx Xxxx Xxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xx Xxxx
00 Xxxxx Xxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
with copies to (which shall not constitute notice):
Law Offices of Xxxxxxxx Xxxxx, APC
0000 Xxxxxxxxxx Xxx
Xxxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxx
Facsimile: (000) 000-0000
Montgomery, McCracken, Xxxxxx & Xxxxxx, LLP
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxxxx 00000-0000
Attention: X. Xxxxxxx Xxxx
Facsimile: (000) 000-0000
if to Parent or Merger Sub:
KI NutriCare, Inc.
000 Xxxxxxxxxx Xxxxx Xxxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxxxxxx Xxxxxxx
Facsimile: (000) 000-0000
with copies to (which shall not constitute notice):
O'Melveny & Xxxxx LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx Xxxxxxx, Esq.
and Xxxx Xxxxxxx, Esq.
Facsimile: 000-000-0000
-46-
Any party to this Agreement may give any notice or other communication hereunder
using any other means (including personal delivery, messenger service, telex,
ordinary mail or electronic mail), but no such notice or other communication
shall be deemed to have been duly given unless and until it actually is received
by the party for whom it is intended. Any party to this Agreement may change the
address to which notices and other communications hereunder are to be delivered
by giving the other parties to this Agreement notice in the manner herein set
forth.
Section 9.2 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
None of the representations, warranties and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 9.2 shall not limit any covenant or agreement of any of the
parties hereto that by its terms contemplates performance after the Effective
Time.
Section 9.3 INTERPRETATIONS. When a reference is made in this Agreement
to Sections or Exhibits, such reference shall be to a Section or Exhibit to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The 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 context may require, any pronouns
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural, and vice versa. Any reference to any federal, state, local or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The parties
hereto agree that they have been represented by counsel during the negotiation,
drafting, preparation and execution of this Agreement and, therefore, waive the
application of any Law or rule of construction providing that ambiguities in an
agreement or other document will be construed against the party drafting such
agreement or document.
Section 9.4 GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL.
(a) This Agreement shall be governed by, and construed in accordance
with, the Laws of the State of New York without regard to the conflict or choice
of laws provisions thereof that would give rise to the application of the
domestic substantive law of any other jurisdiction.
(b) Each of the parties to this Agreement (i) consents to submit itself
to the exclusive personal jurisdiction of a federal court sitting in the
Northern District of California, or any California state court sitting in such
district, in any action or proceeding arising out of or relating to this
Agreement or any of the Transactions, (ii) agrees that all claims in respect of
such action or proceeding shall be heard and determined in any such court, (iii)
agrees that it shall not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, and (iv) agrees not to
bring any action or proceeding arising out of or relating to this Agreement or
any of the Transactions in any other court. Each of the parties hereto waives
-47-
any defense of inconvenient forum to the maintenance of any action or proceeding
so brought and waives any bond, surety or other security that might be required
of any other party with respect thereto. Any party hereto may make service on
another party by sending or delivering a copy of the process to the party to be
served at the address and in the manner provided for the giving of notices in
SECTION 9.1. Nothing in this SECTION 9.4, however, shall affect the right of any
party to serve legal process in any other manner permitted by Law.
(c) EACH OF THE PARTIES TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS.
Section 9.5 COUNTERPARTS; FACSIMILE TRANSMISSION OF SIGNATURES. This
Agreement may be executed in any number of counterparts (including by facsimile
or.pdf) and by different parties hereto in separate counterparts, and delivered
by means of facsimile transmission or other electronic transmission, each of
which when so executed and delivered shall be deemed to be an original and all
of which when taken together shall constitute one and the same agreement. This
Agreement may be executed and delivered by facsimile or .pdf transmission.
Section 9.6 ASSIGNMENT; NO THIRD PARTY BENEFICIARIES.
(a) This Agreement and all of the provisions hereto shall be binding
upon and inure to the benefit of, and be enforceable by, the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests or obligations set forth herein shall be
assigned by any party hereto without the prior written consent of the other
parties hereto and any purported assignment without such consent shall be void.
(b) Nothing in this Agreement shall be construed as giving any Person,
other than the parties hereto and their heirs, successors, legal representatives
and permitted assigns, any right, remedy or claim under or in respect of this
Agreement or any provision hereof. Notwithstanding the foregoing, from and after
the Acceptance Time, SECTION 6.9 (with respect to which the Indemnified Parties
shall be third party beneficiaries) is for the benefit of the Persons named
therein and such Persons may specifically enforce such provisions.
Section 9.7 SEVERABILITY. If any provision of this Agreement shall be
held to be illegal, invalid or unenforceable under any applicable Law, then such
contravention or invalidity shall not invalidate the entire Agreement. Such
provision shall be deemed to be modified to the extent necessary to render it
legal, valid and enforceable, and if no such modification shall render it legal,
valid and enforceable, then this Agreement shall be construed as if not
containing the provision held to be invalid, and the rights and obligations of
the parties shall be construed and enforced accordingly.
Section 9.8 ENTIRE AGREEMENT. This Agreement (including the Company
Disclosure Letter, the Exhibits hereto and the documents and instruments
referred to herein that are to be delivered at Closing) and the Confidentiality
Agreement contain all of the terms of the understandings of the parties hereto
with respect to the subject matter hereof and supersedes any prior
understandings, agreements or representations by or among the parties hereto, or
any of them, written or oral, with respect to the subject matter hereof, and the
-48-
parties hereto specifically disclaim reliance on any such prior understandings,
agreements or representations to the extent not embodied in this Agreement.
Section 9.9 ENFORCEMENT. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not preclude
the exercise of any other remedy. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. 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 without posting a bond or
undertaking, this being in addition to any other remedy to which they are
entitled at law or in equity.
Section 9.10 DISCLOSURE LETTER. The inclusion of any information in the
Company Disclosure Letter shall not be deemed to be an admission or
acknowledgment, in and of itself, that such information is required by the terms
hereof to be disclosed, is material, has resulted in or is reasonably likely to
result in a Company Material Adverse Effect or is outside the Ordinary Course of
Business.
* * * * *
[End of text--the next page is the signature page]
-49-
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above.
KI NUTRICARE, INC.
By: /s/ Xxxxxxx Xxxxx
---------------------------------
Name: Xxxxxxx Xxxxx
Title: President
LONGHORN ACQUISITION CORP.
By: /s/ Xxxxxxx Xxxxx
---------------------------------
Name: Xxxxxxx Xxxxx
Title: President
ALLERGY RESEARCH GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------
Name: Dr. Xxxxxx Xxxxxx
Title: Chairman, Chief Executive
Officer and Chief
Financial Officer
[Signature Page to Agreement and Plan of Merger]
-50-
ANNEX A
CONDITIONS OF THE OFFER
Capitalized terms used in this ANNEX A but not defined herein have the
meanings assigned to such terms in the Agreement and Plan of Merger (the
"AGREEMENT") of which this ANNEX A is a part.
1. Notwithstanding any other term of the Offer or the Agreement,
Merger Sub shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-l(c) under the
Exchange Act (relating to Merger Sub's obligation to pay for or return tendered
Shares promptly after the termination or withdrawal of the Offer), to pay for
any Shares tendered pursuant to the Offer, and may, subject to the provisions of
the Agreement, delay the acceptance for payment of or the payment for, any
tendered Shares, and (subject to the provisions of the Agreement) may terminate
the Offer and not accept for payment any tendered Shares, unless immediately
prior to the expiration of the Offer (as extended in accordance with the
Agreement), the number of Shares validly tendered (including by guaranteed
delivery) and not properly withdrawn, together with any Shares beneficially
owned by Parent or any Subsidiary of Parent, equals at least 67% of the Shares
outstanding on a fully diluted basis on the date of purchase (where "on a fully
diluted basis" means the number of Shares outstanding, plus the number of Shares
issuable upon the exercise of all then outstanding Options) (the "MINIMUM TENDER
CONDITION").
2. Furthermore, Merger Sub shall not be required to accept for
payment or, subject to any applicable rules and regulations of the SEC,
including Rule 14e-l(c) under the Exchange Act (relating to Merger Sub's
obligation to pay for or return tendered Shares promptly after the termination
or withdrawal of the Offer), to pay for any Shares tendered pursuant to the
Offer, and may, subject to the provisions of the Agreement, delay the acceptance
for payment of or the payment for, any tendered Shares, and (subject to the
provisions of the Agreement) may terminate the Offer and not accept for payment
any tendered Shares, if at any time on or after the date of the Agreement and
before the expiration of the Offer, any of the following shall have occurred and
be continuing unless, if any of the following have occurred and are continuing,
they shall have resulted from the breach by Parent or Merger Sub of any of their
obligations under the Agreement:
(a) any Governmental Authority of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any order, executive
order, stay, decree, judgment or injunction (preliminary or permanent) or
statute, rule or regulation which has the effect of prohibiting the consummation
of the Offer or making the Merger illegal or otherwise prohibiting consummation
of the Offer, the Merger or the other Transactions; PROVIDED, that in no event
shall this condition be satisfied, and neither the Offer nor the Merger shall be
consummated, if a Japanese court or other Japanese Governmental Authority of
competent jurisdiction shall have issued an order, stay, decree, judgment or
injunction (preliminary or permanent) to an Affiliate of Parent, directing any
such Affiliate to not consummate, or to not allow Parent or Merger Sub to
consummate, the Offer or the Merger, or making illegal, or restraining or
preventing, any of such consummation;
(b) (i) any of the Company's representations or warranties set
forth in SECTION 3.2, SECTION 3.3 or SECTION 3.19 of the Agreement shall not be
true and correct in all but DE MINIMUS respects as of the date made and the
Acceptance Time or (ii) any of the Company's other representations and
warranties set forth in this Agreement that (A) are not made as of a specific
date are not true and correct in all material respects as of the date made and
the Acceptance Time, or (B) are made as of a specific date are not true and
correct in all material respects as of such date;
Annex A - 1
(c) the Company shall have failed to perform in any material
respect any covenant or obligation required to be performed or complied with by
it under the Agreement at or prior to the Acceptance Time;
(d) Parent and Merger Sub shall not have received a
certificate executed by the Company's Chief Executive Officer and Chief
Financial Officer confirming on behalf of the Company that the conditions set
forth in clauses (b) and (c) of paragraph (2) of this ANNEX A are duly satisfied
immediately prior to the Acceptance Time and setting forth the Company's current
amount of cash and cash equivalents determined in accordance with GAAP (after
taking into account the deductions discussed in Section 2(e) of this ANNEX A);
(e) the Company shall not have at least $4,000,000 of cash and
cash equivalents determined in accordance with GAAP, after deducting any (i)
unpaid broker's or finder's fees, attorney's fees, advisory fees (including fees
to Duff & Xxxxxx) or any other fees or commissions or reimbursements of expenses
owed to any Person arising out of or in connection with the Transactions, and
(ii) outstanding amounts owed under the Company's line of credit (the "MINIMUM
CASH AMOUNT");
(f) any change or development shall have occurred following
the date of this Agreement that has had or would reasonably be expected to have,
individually or in the aggregate, a Company Material
Adverse Effect;
(g) the Agreement shall have been validly terminated in
accordance with ARTICLE 8 of the Agreement.
The foregoing conditions are for the sole benefit of Parent and Merger
Sub and may be waived only by Parent or Merger Sub, and then, in whole or in
part, at any time and from time to time in the sole discretion of Parent or
Merger Sub (except for the Minimum Tender Condition, which pursuant to SECTION
1.1(E) of the Agreement, may only be waived with the Company's consent). The
failure by Parent or Merger Sub at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right, the waiver of any such
right with respect to particular facts and circumstances shall not be deemed a
waiver with respect to any other facts and circumstances and each such right
shall be deemed an ongoing right that may be asserted at any time and from time
to time in accordance with the terms of the Agreement.
Annex A - 2
EXHIBIT A
DEFINITIONS
"ACCEPTANCE TIME" means the time at which payment for all Shares
tendered in the Offer has been made.
"AFFILIATE" means, as to any Person, any other Person that, directly or
indirectly, controls, or is controlled by, or is under common control with, such
Person. For this purpose, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") means the possession, directly
or indirectly, of the power to direct or cause the direction of management or
policies of a Person, whether through the ownership of securities or partnership
or other ownership interests, by contract or otherwise.
"BUSINESS DAYS" means "Business Days" as defined in Rule 14d-1(g)(3)
promulgated by the SEC under the Exchange Act.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"COMPANY MATERIAL ADVERSE EFFECT" means any change, event, occurrence
or development that has, or could reasonably be expected to have, a material
adverse effect on the business, condition (financial or otherwise) or results of
operations or prospects of the Company and the Company Subsidiary, taken as a
whole; PROVIDED, however, that none of the following, or any change, event,
occurrence or development resulting or arising from the following, shall
constitute, or shall be considered in determining whether there has occurred, a
Company Material Adverse Effect:
(a) changes in conditions in the U.S. or global economy or
capital or financial markets generally, including changes in interest or
exchange rates (PROVIDED that such changes do not affect the Company and the
Company Subsidiary, taken as a whole, in a disproportionate manner);
(b) changes in general legal, tax, regulatory, political or
business conditions in the countries in which the Company or the Company
Subsidiary operates (PROVIDED that such changes do not affect the Company and
the Company Subsidiary, taken as a whole, in a disproportionate manner);
(c) actions contemplated by the parties in connection
with this Agreement;
(d) the negotiation, execution, announcement, pendency or
performance of this Agreement or the transactions contemplated hereby, the
consummation of the transactions contemplated by this Agreement or any public
communications by Parent or Merger Sub regarding this Agreement or the
transactions contemplated hereby, including, in any such case, the impact
thereof on relationships, contractual or otherwise, with customers, suppliers,
vendors, lenders, investors, venture partners or employees;
A - 1
(e) changes in generally accepted accounting principles
or the interpretation thereof;
(f) any action taken pursuant to or in accordance with
this Agreement (including SECTION 6.4);
(g) any regulatory, banking, legal, accounting and other
professional fees or expenses incurred in connection with the transactions
contemplated by this Agreement; and
(h) any natural disaster or other acts of God, acts of war,
armed hostilities, sabotage or terrorism, or any escalation or worsening of any
such acts of war, armed hostilities, sabotage or terrorism threatened or
underway as of the date of this Agreement (PROVIDED that such conditions do not
affect the Company and the Company Subsidiary, taken as a whole, in a
disproportionate manner).
"CONTRACT" means any loan or credit agreement, debenture, note, bond,
mortgage, indenture, deed of trust, license, lease, contract or other agreement,
instrument or obligation.
"ENVIRONMENTAL LAWS" means any national, super-national, regional,
Federal, foreign, state, provincial or local Law or legal requirement, including
regulations, orders, permits, licenses, approvals, ordinances, directives and
the common law, pertaining to (i) pollution, the environment, natural resources,
and the protection of the environment or human health and safety or (ii) the
presence of, use, handling, recycling, generation, treatment, storage,
transportation or disposal of or employee exposure to or the labeling or
registration of Hazardous Substances.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"HAZARDOUS SUBSTANCES" means any materials, substances, chemicals or
wastes (including, but not limited to biologic agents or vectors, living or
genetically modified materials, culture, serum, wastes or off spec products)
that are listed, classified, regulated, or characterized as hazardous,
biohazardous, toxic, dangerous, explosive, radioactive, reactive, infectious,
contagious, bioaccumulative, special, or as a pollutant, contaminant or words of
similar meaning or effect under Environmental Laws or would otherwise form the
basis of liability under such Environmental Laws, including, but not limited to,
asbestos, bloodborne pathogens, radiation and radioactive materials,
polychlorinated biphenyls, petroleum and petroleum products and by-products,
lead, pesticides, natural gas, nuclear fuel, bacteria or fungi and medical
waste.
"KNOWLEDGE" and similar phrases mean the knowledge of each of (a) in
the case of the Company, Dr. Xxxxxxx Xxxxxx, Xxxxx Xxxxxx, Xxxxxxx Xxxxxxx,
Xxxxx Xxxxxxx, and Xxxxxxx Xxxxxx, provided that such Persons shall have made
due and diligent inquiry of those employees whom such Persons reasonably believe
would have knowledge of the matters represented, and (b) in the case of Parent
or Merger Sub, Xxxxxxx Xxxxx or Xxxxx Xxxx.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest, claim or encumbrance in respect of such asset.
A - 2
"OPTIONS" means any option granted, and, immediately before the
Effective Time not exercised, expired or terminated, to a current or former
employee, director or independent contractor of the Company or the Company
Subsidiary or any former subsidiary of the Company or predecessor thereof to
purchase Shares pursuant to the Stock Plans.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business as
currently conducted and consistent with past practice.
"PARENT MATERIAL ADVERSE EFFECT" means any change, event, occurrence or
development that would reasonably be expected to prevent, or materially impair
or delay, the ability of either Parent or Merger Sub to perform its obligations
under this Agreement or to consummate the Offer, the Merger and the other
Transactions.
"PERMITTED LIENS" means: (i) liens for taxes not yet due and payable;
(ii) liens, encumbrances or imperfections of title, other than mortgages and
other voluntary monetary liens and encumbrances, that have arisen in the
Ordinary Course of Business and that do not materially adversely affect the
current use or value of the properties or assets subject thereto or affected
thereby; (iii) liens or encumbrances disclosed in the Company SEC Reports; and
(iv) liens, pledges or encumbrances arising from or otherwise relating to
transfer restrictions under the Securities Act and the securities laws of the
various states of the United States or foreign jurisdictions.
"PERSON" includes any individual, corporation, association, partnership
(general or limited), joint venture, trust, estate, limited liability company,
or other legal entity or organization.
"RESTRICTED STOCK" means any award of restricted Shares outstanding
immediately before the Effective Time with respect to which the restrictions
have not lapsed, and which award shall not have previously expired or
terminated, to a current or former employee, director or independent contractor
of the Company or the Company Subsidiary or any predecessor thereof pursuant to
any applicable Stock Plan or any other contract or agreement entered into by the
Company or the Company Subsidiary.
"SEC" means the United States Securities and Exchange Commission.
"STOCK PLANS" means the Company's 1998 Stock Option Plan.
"SUBSIDIARY" means, with respect to any party, any corporation,
partnership, trust, limited liability company or other non-corporate business
enterprise in which such party (or another Subsidiary of such party) holds stock
or other ownership interests representing (a) more than 50% of the voting power
of all outstanding stock or ownership interests of such entity or (b) the right
to receive more than 50% of the net assets of such entity available for
distribution to the holders of outstanding stock or ownership interests upon a
liquidation or dissolution of such entity.
"SUPERIOR PROPOSAL" means any bona fide written offer obtained after
the date of this Agreement to acquire more than a majority of the outstanding
equity securities or consolidated assets of the Company and the Company
Subsidiary on terms that the Company Board determines in its good faith judgment
A - 3
(after consultation with its financial advisor and outside counsel), taking into
account all the terms and conditions of such proposal and this Agreement
(including any offer by Parent to amend the terms of this Agreement), (i) would,
if consummated, result in a transaction that is more favorable to the holders of
Shares than the Transactions and (ii) is reasonably capable of being completed
on the terms proposed, including with regard to any financing contemplated
thereby.
"TAKEOVER PROPOSAL" shall mean, other than the Transactions, any
proposal or offer from any Person (other than Parent, Merger Sub or any of their
Affiliates) or "group" (as defined in Section 13(d) of the Exchange Act) for (i)
the direct or indirect acquisition (whether in a single transaction or a series
of related transactions) of assets of the Company and the Company Subsidiary
(including securities of the Company Subsidiary) equal to 20% or more of the
Company's consolidated assets, (ii) the acquisition from the Company (whether in
a single transaction or a series of related transactions) of 20% or more of the
equity securities of the Company or the Company Subsidiary, (iii) a tender offer
or exchange offer that if consummated would result in any Person or "group" (as
defined in Section 13(d) of the Exchange Act) beneficially owning 20% or more of
the equity securities of the Company (if not a Person or "group" owning 20% or
more of the equity securities of the Company prior to such tender offer or
exchange offer) or (iv) a merger, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company (other than (1) mergers, consolidations,
recapitalizations, share exchanges or other business combinations involving
solely the Company and/or the Company Subsidiary and (2) mergers,
consolidations, recapitalizations, share exchanges or other business
combinations that if consummated would result in the holders of the outstanding
shares of Company Common Stock immediately prior to such transaction owning more
than 85% of the equity securities of the Company, or any successor or acquiring
entity, immediately thereafter, or any transaction between or among the Company
and parent or any Affiliates of Parent) or (vi) any combination of the
foregoing.
"TAX" or "TAXES" means (i) all taxes, fees, imposts, duties or other
assessments in the nature of a tax including income, franchise, profits,
corporation, goods and services, advance corporation, gross receipts, transfer,
excise, property, sales, use, value-added, ad valorem, license, capital, wage,
employment, payroll, withholding, social security, unemployment, severance,
occupation, import, custom, stamp, capital, alternative, add-on minimum or other
governmental taxes, imposed by any Federal, state, county, local or foreign
government or subdivision or agency thereof, including any interest, penalties
or additions to tax applicable or related thereto whether disputed or not and
(ii) any obligations to indemnify or otherwise assume or succeed to the
liability of any other Person for items described in (i) above as a result of
Treasury Regulation section 1.1502-6 (or similar provision of state, local or
foreign law), by contract or otherwise.
"TAX AUTHORITY" or "TAXING AUTHORITY" means any Governmental Authority
exercising any authority to impose, regulate or administer the imposition of
Taxes.
"TAX RETURN" means any return, election, report, claim for refund,
declaration, statement, certificate, xxxx, schedule or other document, together
with all amendments, attachments and supplements thereto, required to be filed
with respect to Taxes.
A - 4
EXHIBIT B
TENDER AND SUPPORT AGREEMENT
ATTACHED HERETO
B-1
EXHIBIT C
INDIVIDUALS TO ENTER INTO EMPLOYMENT AGREEMENTS
Xxxxxxx Xxxxxxx
Xxxxx Xxxxxxx
Xxxxxxx Xxxxxx
C-1
EXHIBIT D
INDIVIDUALS THE COMPANY WILL USE BEST EFFORTS
TO ENTER INTO EMPLOYMENT AGREEMENTS
Xxxxx Xxxxx
Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxx
Xxxxxx Xxxxxxxxx
Xxxx Xxxxxx
D-1
