Exhibit 10.1

EXECUTION VERSION

 

 

AGREEMENT AND PLAN OF MERGER

by and among

OWENS & MINOR, INC.,

MONGOOSE MERGER SUB INC.

and

MEDICAL ACTION INDUSTRIES INC.

June 24, 2014

 

 

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TABLE OF CONTENTS

 

          Page   ARTICLE I    THE MERGER  

Section 1.1

  

The Merger; Effective Time of the Merger

     1  

Section 1.2

  

Closing

     1  

Section 1.3

  

Effect of the Merger

     2  

Section 1.4

  

Certificate of Incorporation and Bylaws

     2  

Section 1.5

  

Directors and Officers

     2   ARTICLE II   

EFFECT OF THE MERGER ON THE CAPITAL STOCK

OF THE COMPANY AND MERGER SUB; EXCHANGE OF CERTIFICATES

  

 

Section 2.1

  

Effect of the Merger on Capital Stock

     2  

Section 2.2

  

Appraisal Rights

     3  

Section 2.3

  

Treatment of Company Stock Options

     4  

Section 2.4

  

Treatment of Restricted Company Common Stock

     4  

Section 2.5

  

Payment for Securities

     4   ARTICLE III    REPRESENTATIONS AND WARRANTIES  

Section 3.1

  

Representations and Warranties of the Company

     7  

Section 3.2

  

Representations and Warranties of Parent and Merger Sub

     27   ARTICLE IV      

COVENANTS RELATING TO CONDUCT

OF BUSINESS PENDING THE MERGER

  

Section 4.1

  

Conduct of Business by the Company Pending the Merger

     30  

Section 4.2

  

No Solicitation

     33   ARTICLE V    ADDITIONAL AGREEMENTS  

Section 5.1

  

Preparation of Proxy Statement

     36  

Section 5.2

  

Access to Information

     36  

Section 5.3

  

Stockholders’ Meeting

     37  

Section 5.4

  

HSR and Other Approvals

     38  

 

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Section 5.5   

Employee Matters

     40  

Section 5.6

  

Indemnification; Directors’ and Officers’ Insurance

     41  

Section 5.7

  

Agreement to Defend

     43  

Section 5.8

  

Public Announcements

     43  

Section 5.9

  

Advice of Changes; SEC Filings

     43  

Section 5.10

  

Conveyance Taxes

     44  

Section 5.11

  

Investigation by Parent and Merger Sub; No Other Representations or Warranties

     44  

Section 5.12

  

Anti-Takeover Statutes

     45  

Section 5.13

  

Prepayment of Debt under the Existing Credit Facilities

     45   ARTICLE VI    CONDITIONS PRECEDENT  

Section 6.1

  

Conditions to Each Party’s Obligation to Effect the Merger

     45  

Section 6.2

  

Additional Conditions to Obligations of Parent and Merger Sub

     46  

Section 6.3

  

Additional Conditions to Obligations of the Company

     46   ARTICLE VII    TERMINATION AND AMENDMENT  

Section 7.1

  

Termination

     47  

Section 7.2

  

Effect of Termination

     49  

Section 7.3

  

Expenses and Other Payments

     49  

Section 7.4

  

Extension; Waiver

     50  

Section 7.5

  

Return of Information

     51   ARTICLE VIII    GENERAL PROVISIONS  

Section 8.1

  

Schedule Definitions

     51  

Section 8.2

  

Nonsurvival of Representations, Warranties and Agreements

     51  

Section 8.3

  

Notices

     51  

Section 8.4

  

Rules of Construction

     52  

Section 8.5

  

Counterparts

     53  

Section 8.6

  

Entire Agreement; No Third Party Beneficiaries

     54  

Section 8.7

  

Governing Law; Venue; Waiver of Jury Trial

     54  

Section 8.8

  

Specific Performance

     55  

Section 8.9

  

No Remedy in Certain Circumstances

     55  

Section 8.10

  

Assignment

     55  

Section 8.11

  

Joint Liability

     55  

Section 8.12

  

Amendment

     56  

Section 8.13

  

Waiver

     56  

 

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INDEX OF DEFINED TERMS

 

Definition

  

Section

Acquisition Proposal

   4.2(f)

Adverse Recommendation Change

   5.3

Affiliate

   3.1(w)(i)

Agreement

   Preamble

Antitrust Authority

   5.4(b)

Antitrust Laws

   5.4(b)

Appraisal Shares

   2.2

Board

   3.1(d)(ii)

Book-Entry Shares

   2.5(b)(iii)

Business Day

   1.2

Certificates

   2.5(b)(i)

Certificate of Merger

   1.1

Closing

   1.2

Closing Date

   1.2

CMS

   3.1(z)

Code

   3.1(l)(iv)

Company

   Preamble

Company Bylaws

   3.1(a)

Company Certificate of Incorporation

   3.1(a)

Company Common Stock

   2.1(b)(i)

Company Contracts

   3.1(v)

Company Disclosure Schedule

   3.1

Company Employees

   5.5(a)

Company Intellectual Property

   3.1(o)

Company Litigation

   3.1(k)

Company Material Adverse Effect

   3.1(a)

Company Permits

   3.1(j)

Company Preferred Stock

   3.1(b)

Company Recommendation

   5.3

Company Restricted Share

   2.4

Company SEC Documents

   3.1(e)(i)

Company Stock Option

   2.3

Company Stock Plans

   2.3

Confidentiality Agreement

   5.2

DGCL

   1.1

DHHS

   3.1(z)

Divestiture Action

   5.4(c)

Effective Time

   1.1

Employee Benefit Plan

   3.1(m)(i)

Employment Loss List

   5.5(f)

 

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Definition

  

Section

Encumbrances    3.1(b) Environmental Laws    3.1(q)(i)(A) ERISA    3.1(m)(i)
Exchange Act    3.1(d)(iv) Existing Credit Facilities    5.13 FDA    3.1(z) GAAP
   3.1(e)(ii) Governmental Entity    3.1(d)(iii) Governmental Official   
3.1(x)(ii) Hazardous Materials    3.1(q)(i)(B) HSR Act    3.1(d)(iv) Indemnified
Liabilities    5.6(a) Indemnified Persons    5.6(a) Knowledge    3.1(j) Letter
of Transmittal    2.5(b)(i) Merger    Recitals Merger Consideration    2.1(b)(i)
Merger Sub    Preamble Option Consideration    2.3 Parent    Preamble Parent
Disclosure Schedule    3.2 Parent Material Adverse Effect    3.2(a) Parent
Parties    7.3(f) Parties    Preamble Paying Agent    2.5(a) Payment Fund   
2.5(a) PBGC    3.1(m)(iii) Permitted Encumbrances    3.1(p)(i) Person   
2.5(b)(ii) Premerger Notification Rules    5.4(b) Proxy Materials    5.3 Proxy
Statement    3.1(d)(iv) Real Property    3.1(p)(ii) Release    3.1(q)(i)(C)
Representatives    5.2 Requisite Stockholder Vote    3.1(d)(i) SEC    3.1(e)(i)
Section 203    3.1(w) Securities Act    3.1(e)(i) Structures    3.1(p)(iii)
Subsidiary    3.1(a) Superior Proposal    4.2(f)

 

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Definition

  

Section

Surviving Corporation    1.3 Taxes    3.1(l)(viii) Tax Returns    3.1(l)(viii)
Terminable Breach    7.1(b)(iii) Termination Date    7.1(b)(ii) Termination Fee
   7.3(b) Voting Agreement    Preamble Voting Debt    3.1(b) Warn Act   
3.1(n)(vi)

 

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AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of June 24, 2014 (this “Agreement”), by
and among Owens & Minor, Inc., a Virginia corporation (“Parent”), Mongoose
Merger Sub Inc., a Delaware corporation and a direct wholly-owned subsidiary of
Parent (“Merger Sub”), and Medical Action Industries Inc., a Delaware
corporation (the “Company” and together with Parent and Merger Sub,
collectively, the “Parties”).

WHEREAS, the respective boards of directors of the Company, Parent and Merger
Sub have each approved and declared advisable this Agreement and the merger of
Merger Sub with and into the Company (the “Merger”), with the Company surviving
as the surviving corporation and a wholly-owned subsidiary of Parent, on the
terms and subject to the conditions provided for in this Agreement;

WHEREAS, simultaneously with the execution of this Agreement, a certain
stockholder of the Company is entering into an agreement with Parent (the
“Voting Agreement”) pursuant to which, subject to the terms thereof, such
stockholder has agreed, among other things, to vote its shares of Company Common
Stock in favor of the adoption of this Agreement; and

WHEREAS, Parent, Merger Sub and the Company each desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger.

NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties and agreements herein contained, the Parties hereby agree as follows:

ARTICLE I

THE MERGER

Section 1.1 The Merger; Effective Time of the Merger. Upon the terms and subject
to the conditions of this Agreement, at the Effective Time, Merger Sub shall be
merged with and into the Company, with the Company as the surviving corporation
and a wholly-owned subsidiary of Parent, in accordance with provisions of the
General Corporation Law of the State of Delaware (the “DGCL”). At the Closing,
the Parties shall cause the Merger to be consummated by filing a certificate of
merger prepared and executed in accordance with the relevant provisions of the
DGCL (the “Certificate of Merger”) with the Office of the Secretary of State of
the State of Delaware. The Merger shall become effective upon the filing of the
Certificate of Merger with the Office of the Secretary of State of the State of
Delaware, or at such later time as shall be agreed upon by Parent and the
Company and specified in the Certificate of Merger (the “Effective Time”).

Section 1.2 Closing. The closing of the Merger (the “Closing”) shall take place
at 9:00 a.m., New York, New York time, on a date to be specified by the Parties,
which shall be no later than the second Business Day after satisfaction (or
waiver in accordance with this Agreement) of the last to occur of the conditions
set forth in Article VI (other than any such conditions which 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 in accordance

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with this Agreement on the Closing Date), at the offices of Vinson & Elkins LLP,
666 Fifth Avenue, New York, New York, unless another date or place is agreed to
in writing by the Parties (such date on which the Closing occurs, the “Closing
Date”). “Business Day” means any day other than a day on which banks in the
State of New York or the State of Delaware are authorized or obligated to be
closed.

Section 1.3 Effect of the Merger. At the Effective Time, Merger Sub shall be
merged with and into the Company and the separate existence of Merger Sub shall
cease and the Company shall continue its existence under the laws of the State
of Delaware as the surviving corporation (in such capacity, the Company is
sometimes referred to herein as the “Surviving Corporation”). The Merger shall
have the effects set forth in this Agreement and the applicable provisions of
the DGCL.

Section 1.4 Certificate of Incorporation and Bylaws. At the Effective Time, the
certificate of incorporation and bylaws of the Company in effect immediately
prior to the Effective Time shall continue to be the certificate of
incorporation and bylaws of the Surviving Corporation, until thereafter amended,
subject to Section 5.6(b), in accordance with their respective terms and
applicable law.

Section 1.5 Directors and Officers. From and after the Effective Time, the
directors and officers of Merger Sub shall be the directors and officers of the
Surviving Corporation, and such directors and officers shall serve until their
successors have been duly elected or appointed and qualified or until their
death, resignation or removal in accordance with the certificate of
incorporation and bylaws of the Surviving Corporation.

ARTICLE II

EFFECT OF THE MERGER ON THE CAPITAL STOCK

OF THE COMPANY AND MERGER SUB; EXCHANGE OF CERTIFICATES

Section 2.1 Effect of the Merger on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of any Party, any Person
or any holder of any securities of any Person:

(a) Capital Stock of Merger Sub. Each share of capital stock of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully-paid and non-assessable share of common
stock, par value $0.001 per share, of the Surviving Corporation, so that, after
the Effective Time, Parent shall be the holder of all of the issued and
outstanding shares of the Surviving Corporation’s common stock.

(b) Capital Stock of the Company.

(i) Subject to the other provisions of this Article II, each share of common
stock of the Company, par value $0.001 per share (“Company Common Stock”),
issued and outstanding immediately prior to the Effective Time (excluding any
shares of Company Common Stock described in clauses (ii) and (iii) of this
Section 2.1(b) and any Appraisal Shares) shall be converted only into the right
to receive $13.80 in cash payable to the holder thereof, without interest
thereon (the “Merger Consideration”). All such

 

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shares of Company Common Stock, when so converted, shall cease to be outstanding
and shall automatically be canceled and cease to exist (subject to the right to
receive Merger Consideration as described herein). Each holder of a Certificate
previously representing any such shares or Book-Entry Shares shall cease to have
any rights with respect thereto, except the right to receive the Merger
Consideration, without interest, to be paid in consideration thereof upon the
surrender of such Certificates in accordance with Section 2.5, in the case of
certificated shares, and automatically, in the case of Book-Entry Shares.

(ii) All shares of Company Common Stock held by the Company as treasury shares
or by Parent or Merger Sub immediately prior to the Effective Time shall
automatically be canceled and cease to exist as of the Effective Time and no
consideration shall be delivered or deliverable therefor.

(iii) All shares of Company Common Stock held by any Subsidiary of any of
Parent, Merger Sub or the Company shall remain outstanding following the
Effective Time and no Merger Consideration shall be delivered with respect to
such shares of Company Common Stock.

(c) Impact of Stock Splits, etc. In the event of any change in the number of
outstanding shares of Company Common Stock between the date of this Agreement
and the Effective Time by reason of any stock split, stock dividend,
subdivision, reclassification, recapitalization, combination, exchange of shares
or the like, the Merger Consideration to be paid for each share of Company
Common Stock as provided in this Agreement shall be appropriately adjusted to
reflect such change.

Section 2.2 Appraisal Rights. Notwithstanding anything to the contrary (but
subject to this Section 2.2), shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time that are held by any record
holder who has not voted in favor of or consented to the Merger and who is
entitled to demand and has properly demanded to be paid fair value of such
shares of Company Common Stock in accordance with Section 262 of the DGCL (the
“Appraisal Shares”) shall not be converted into the right to receive the Merger
Consideration payable pursuant to Section 2.1(b), but instead at the Effective
Time the holders of Appraisal Shares shall be entitled to only such rights as
are granted by Section 262 of the DGCL. Notwithstanding the foregoing, if any
such holder fails to perfect or otherwise waives, withdraws or loses the right
to appraisal under Section 262 of the DGCL or a court of competent jurisdiction
shall determine that such holder is not entitled to the relief provided by
Section 262 of the DGCL, then the right of such holder to be paid the fair value
of such holder’s Appraisal Shares under Section 262 of the DGCL shall be
forfeited and cease and each of such holder’s Appraisal Shares shall be deemed
to have been converted at the Effective Time into, and shall have become, the
right to receive, without interest thereon, the Merger Consideration. The
Company shall deliver prompt notice to Parent of any demands for appraisal of
any shares of Company Common Stock and provide Parent with the opportunity to
reasonably participate in all negotiations and proceedings with respect to
demands for appraisal under Section 262 of the DGCL. Prior to the Effective
Time, the Company shall not, without the prior written consent of Parent (not to
be unreasonably withheld, delayed or conditioned) make any payment with respect
to, or settle or offer to settle, or waive any failure to timely deliver a
written demand for appraisal or timely take any other action to perfect
appraisal rights with respect to any such demands.

 

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Section 2.3 Treatment of Company Stock Options. Each of Parent and the Company
shall take all such actions as are reasonably necessary, to cause at the
Effective Time each option for the purchase of Company Common Stock (“Company
Stock Option”) then outstanding, whether or not exercisable, whether under the
Company’s 1994 Stock Incentive Plan, 1989 Non-Qualified Stock Option Plan or
1996 Non-Employee Director Stock Option Plan (together, the “Company Stock
Plans”) or otherwise, to become fully exercisable (if not then fully
exercisable), and such options shall thereafter represent only the right to
receive the following consideration: for each share of Company Common Stock
subject to such Company Stock Option, an amount in cash equal to the excess, if
any, of (i) the Merger Consideration payable in respect of a share of Company
Common Stock over (ii) the per share exercise price of such Company Stock Option
(such amount in cash as described above, the “Option Consideration”). Each
Company Stock Option with a per share exercise price in excess of the Merger
Consideration payable in respect of a share of Company Common Stock shall be
cancelled without consideration. The actions described in the preceding sentence
shall occur at the Effective Time without any action on the part of Merger Sub,
Parent or any of their respective stockholders. For the avoidance of doubt, the
Board or applicable committee administering each Company Stock Plan shall use
their interpretative authority pursuant to the Company Stock Plans to allow for,
and adopt any resolutions reasonably necessary to effectuate, the foregoing.
Parent shall, or shall cause the Surviving Corporation to, pay the Option
Consideration to the holders of Company Stock Options as soon as practicable
(and no later than thirty (30) days) following the Closing Date.

Section 2.4 Treatment of Restricted Company Common Stock. Immediately prior to
the Effective Time, the restrictions applicable to each share of restricted
Company Common Stock issued pursuant to the Company Stock Plans (a “Company
Restricted Share”) shall immediately lapse, and, at the Effective Time, each
share of such Company Common Stock shall be converted into the right to receive
the Merger Consideration in accordance with the terms hereof. For the avoidance
of doubt, the Board or applicable committee administering each Company Stock
Plan shall use their interpretative authority pursuant to the Company Stock
Plans to allow for, and adopt any resolutions reasonably necessary to
effectuate, the foregoing.

Section 2.5 Payment for Securities.

(a) Paying Agent; Payment Fund. Prior to the Effective Time, Parent shall enter
into an agreement with the Company’s transfer agent (or another entity
reasonably acceptable to the Company) to act as agent for the holders of Company
Common Stock in connection with the Merger (the “Paying Agent”) and to receive
the Merger Consideration to which such holders shall become entitled pursuant to
this Article II. On the Closing Date and prior to the filing of the Certificate
of Merger, Parent shall deposit, or cause to be deposited, with the Paying
Agent, for the benefit of the former holders of shares of Company Common Stock,
for payment in accordance with this Article II through the Paying Agent, cash in
an amount sufficient to permit payment of the aggregate Merger Consideration
payable pursuant to Section 2.1 (the “Payment Fund”). The Paying Agent shall,
pursuant to irrevocable instructions, deliver the Merger Consideration payable
pursuant to Section 2.1, in each case, out of the Payment Fund. The

 

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Payment Fund shall be invested as reasonably directed by Parent. If for any
reason (including losses) the Payment Fund is inadequate to pay any of the
amounts to which holders of shares of Company Common Stock shall be entitled
under Section 2.1, Parent shall cause the Surviving Corporation promptly to
deposit in trust additional cash with the Paying Agent sufficient to make all
payments required under this Agreement, and Parent and the Surviving Corporation
shall in any event be liable for prompt payment thereof. The Payment Fund shall
not be used for any other purpose other than to fund payments due pursuant to
Section 2.1. The Surviving Corporation shall pay all charges and expenses,
including those of the Paying Agent, in connection with the exchange of shares
for the Merger Consideration and the surrender of Company Stock Options for the
Option Consideration. Any interest or other income resulting from investment of
the Payment Fund shall be payable to the Surviving Corporation or its designee,
as the Surviving Corporation directs.

(b) Payment Procedures.

(i) As soon as practicable after the Effective Time, Parent shall cause the
Paying Agent to deliver to each record holder, as of the Effective Time, of an
outstanding certificate or certificates that immediately prior to the Effective
Time represented shares of Company Common Stock (the “Certificates”) a letter of
transmittal (“Letter of Transmittal”) (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Paying Agent and which shall be
in a customary form and agreed to by Parent and the Company prior to the
Closing) and instructions for use in effecting the surrender of the Certificates
for payment of the Merger Consideration set forth in Section 2.1(b)(i).

(ii) Upon surrender to the Paying Agent of a Certificate, together with the
Letter of Transmittal, completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
(and Parent shall cause the Paying Agent to promptly deliver to such holder) in
exchange therefor the Merger Consideration for each share formerly represented
by such Certificate and such Certificate shall then be canceled. No interest
shall be paid or accrued for the benefit of holders of the Certificates on the
Merger Consideration payable in respect of the Certificates. If payment of the
Merger Consideration is to be made to an individual, partnership, limited
liability company, corporation, joint stock company, trust, estate, joint
venture, association or unincorporated organization, or any other form of
business or professional entity (excluding a Governmental Entity, “Person”),
other than the Person in whose name the surrendered Certificate is registered,
it shall be a condition of payment that the Certificate so surrendered shall be
properly endorsed or shall be otherwise in proper form for transfer and that the
Person requesting such payment shall have paid any transfer and other Taxes
required by reason of the payment of the Merger Consideration to a Person other
than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such Taxes
either have been paid or are not applicable. Until surrendered as contemplated
by this Section 2.5(b)(ii), each Certificate shall be deemed at any time after
the Effective Time to represent only the right to receive upon such surrender
the Merger Consideration as contemplated by this Article II.

(iii) Notwithstanding anything to the contrary contained in this Agreement
(A) any holder of shares of Company Common Stock represented by book-entry
(“Book-Entry Shares”) shall not be required to deliver a Certificate or an
executed letter of transmittal to the Paying Agent to receive the Merger
Consideration that such holder is entitled to receive pursuant to this Article
II and (B) Parent shall cause the Paying Agent to promptly deliver to each
holder of a Book-Entry Share the Merger Consideration for each of such holder’s
Book-Entry Shares.

 

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(c) Termination of Rights. All Merger Consideration paid upon the surrender for
exchange of shares of Company Common Stock in accordance with the terms hereof
shall be deemed to have been paid in full satisfaction of all rights pertaining
to such Company Common Stock. After the close of business on the date of the
Effective Time, there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common
Stock that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates (other than certificates evidencing shares
described in clause (ii) of Section 2.1(b)) are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged for the Merger
Consideration payable in respect of the shares of Company Common Stock
previously represented by such Certificates as provided in this Article II.

(d) Termination of Payment Fund. Any portion of the Payment Fund that remains
undistributed to the former stockholders or optionholders of the Company on the
first anniversary of the date on which the Effective Time occurs shall be
delivered to the Surviving Corporation, upon demand, and any former common
stockholders of the Company who have not theretofore received the Merger
Consideration to which they are entitled under this Article II shall thereafter
look only to the Surviving Corporation and Parent for payment of any such
amounts.

(e) No Liability. Neither the Surviving Corporation nor Parent shall be liable
to any holder of Company Common Stock or Company Stock Option for any amount of
Merger Consideration or Option Consideration, as applicable, delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.

(f) Lost, Stolen, or Destroyed Certificates. If any Certificate (other than a
Certificate evidencing shares described in clause (ii) of Section 2.1(b)) shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the Person claiming such Certificate to be lost, stolen or destroyed
and, if required by the Surviving Corporation, the posting by such Person of a
bond in such reasonable amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Paying Agent shall issue in exchange for such lost, stolen or
destroyed Certificate the amount of Merger Consideration payable in respect of
the number of shares of Company Common Stock formerly represented by such
Certificate pursuant to the provisions of this Article II.

(g) Withholding Taxes. Notwithstanding anything in this Agreement to the
contrary, Parent, the Surviving Corporation and the Paying Agent shall be
entitled to deduct and withhold from the consideration otherwise payable to any
holder of Company Common Stock or Company Stock Options pursuant to this
Agreement any amount required to be deducted and

 

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withheld with respect to the making of such payment under applicable Tax laws.
To the extent that amounts are so properly withheld by the Paying Agent, the
Surviving Corporation or Parent, as the case may be, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the holder
of the Company Common Stock or Company Stock Options, as applicable, in respect
of which such deduction and withholding was made by the Paying Agent, the
Surviving Corporation or Parent, as the case may be.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Section 3.1 Representations and Warranties of the Company. Except (i) as set
forth on the disclosure schedule dated as of the date hereof and delivered by
the Company to Parent and Merger Sub on or prior to the date hereof (the
“Company Disclosure Schedule”) and (ii) as disclosed in the Company SEC
Documents filed by the Company since June 13, 2013 (but excluding any
forward-looking disclosure set forth in any risk factor section, any disclosures
in any section that constitutes a forward-looking statement and any other
disclosures included therein to the extent they are non-specific, predictive,
cautionary or forward-looking in nature), the Company hereby represents and
warrants to Parent and Merger Sub as follows:

(a) Organization, Standing and Power. Each of the Company and its Subsidiaries
is a corporation or limited liability company duly organized, validly existing
and in good standing under the laws of the State of Delaware, has all requisite
corporate or limited liability company power and authority to own, lease and
operate its properties and other assets and to carry on its business as now
being conducted, and is duly qualified and in good standing to do business in
each jurisdiction in which the business it is conducting, or the operation,
ownership or leasing of its properties and other assets, makes such
qualification necessary, other than where the failure so to qualify or be in
good standing would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. The Company has heretofore made
available to Parent complete and correct copies of its certificate of
incorporation (the “Company Certificate of Incorporation”), and its amended and
restated bylaws (the “Company Bylaws”) as well as the similar organizational
documents of each Subsidiary. The respective jurisdictions of incorporation or
organization of each Subsidiary of the Company are identified on Schedule 3.1(a)
of the Company Disclosure Schedule. A “Company Material Adverse Effect” means
any occurrence, condition, change, development, circumstance, event or effect
that, individually or in the aggregate with all other occurrences, conditions,
changes, developments, circumstances, events or effects, (i) is, or would
reasonably be expected to be, materially adverse to the condition (financial or
otherwise), business, assets or results of operations of the Company and its
Subsidiaries, taken as a whole; provided, however, that in no event shall any of
the following constitute a Company Material Adverse Effect: (A) any occurrence,
condition, change, development, circumstance, event or effect resulting from or
relating to changes in general economic, regulatory, or political conditions or
worldwide financial markets; (B) any occurrence, condition, change, development,
circumstance, event or effect that generally affects any of the industries of
the Company and its Subsidiaries (including changes in commodity prices, general
market prices and regulatory changes generally affecting any of such
industries); (C) any occurrence, condition, change, development, circumstance,
event or effect resulting from or relating to fluctuations in the value of
currencies; (D) any occurrence, condition, change, event

 

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or effect resulting from or relating to the outbreak or escalation of
hostilities, the declaration of a national emergency or war or the occurrence of
any other calamity or crisis, including natural disasters and acts of terrorism,
in each case involving the United States and arising after the date of this
Agreement; (E) any occurrence, condition, change, development, circumstance,
event or effect resulting from or relating to the announcement or pendency of
the transactions contemplated by this Agreement; (F) any change in the trading
prices or trading volume of the Company’s capital stock (it being understood
that the facts or occurrences giving rise or contributing to such change that
are not otherwise excluded from the definition of a “Company Material Adverse
Effect” may be taken into account in determining whether there has been a
“Company Material Adverse Effect”); (G) any change in accounting requirements or
principles imposed upon the Company, its Subsidiaries or their respective
businesses or any change in law, regulation or rule or the interpretation
thereof in each case arising after the date of this Agreement; (H) any
occurrence, condition, change, event or effect resulting from or relating to
actions taken by Parent or any of its Affiliates, other than any action
reasonably taken in response to a breach of this Agreement by the Company or its
Subsidiaries; (I) the failure of the Company to meet internal or analysts’
expectations or projections (it being understood that the facts or occurrences
giving rise or contributing to such failure that are not otherwise excluded from
the definition of a “Company Material Adverse Effect” may be taken into account
in determining whether there has been a “Company Material Adverse Effect”); and
(J) compliance by the Company (directly or indirectly) with any of the terms of
this Agreement; except, with respect to clauses (A), (B), (C) and (D), to the
extent that such occurrence, condition, change, development, circumstance, event
or effect is disproportionately adverse to the Company and its Subsidiaries,
taken as a whole, as compared to other companies operating in the industries in
which the Company and its Subsidiaries operate or (ii) prevents or materially
delays or impairs the ability of the Company to consummate the Merger or the
transactions contemplated by this Agreement. “Subsidiary” means, with respect to
any Person, any corporation or other organization, whether incorporated or
unincorporated, of which: (1) such Person or any other Subsidiary of such party
is a general partner; or (2) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions with respect to such
corporation or other organization is, directly or indirectly, owned or
controlled by such Person or by any one or more of its Subsidiaries.

(b) Capital Structure. As of the date hereof, the authorized capital stock of
the Company consists of 40,000,000 shares of Company Common Stock and 5,000,000
shares of preferred stock, par value $0.001 per share (“Company Preferred
Stock”). At the close of business on June 24, 2014: (A) 16,392,503 shares of
Company Common Stock were issued and outstanding, including no Company
Restricted Shares; (B) 2,816,376 shares of Company Common Stock were reserved
for issuance pursuant to the Company Stock Plans, of which 1,621,125 shares of
Company Common Stock were subject to issuance upon exercise of outstanding
Company Stock Options; (C) no shares of Company Preferred Stock were issued and
outstanding; and (D) no Voting Debt was issued and outstanding. The term “Voting
Debt” means bonds, debentures, notes or other indebtedness or obligations having
the right to vote (or convertible into securities having the right to vote) on
any matters on which stockholders of the Company may vote. All outstanding
shares of Company Common Stock are validly issued, fully paid and non-assessable
and are not subject to preemptive rights. All outstanding shares of capital
stock of the Subsidiaries of the Company are owned by the Company, or a direct
or

 

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indirect wholly-owned Subsidiary of the Company, free and clear of all liens,
pledges, charges, encumbrances, claims, mortgages, deeds of trust, security
interests, restrictions, rights of first refusal, defects in title, or other
burdens, options or encumbrances of any kind (“Encumbrances”), except as set
forth on Schedule 3.1(b) of the Company Disclosure Schedule. Except for the
Subsidiaries set forth on Schedule 3.1(a) of the Company Disclosure Schedule,
the Company does not own, directly or indirectly, as of the date hereof, any
capital stock of, or other voting securities or equity interests in, any
corporation, partnership, joint venture, association or other entity. Except for
awards granted pursuant to the Company Stock Plans, there are outstanding:
(1) no shares of capital stock, Voting Debt or other voting securities of the
Company; (2) no securities of the Company or any Subsidiary of the Company
convertible into or exchangeable or exercisable for shares of capital stock,
Voting Debt or other voting securities of the Company or any Subsidiary of the
Company; and (3) no options, warrants, calls, subscriptions, rights (including
preemptive rights), commitments or agreements to which the Company or any
Subsidiary of the Company is a party or by which it is bound in any case
obligating the Company or any Subsidiary of the Company to issue, deliver, sell,
purchase, redeem or acquire, or cause to be issued, delivered, sold, purchased,
redeemed or acquired, additional shares of capital stock or any Voting Debt or
other voting securities of the Company or of any Subsidiary of the Company, or
obligating the Company or any Subsidiary of the Company to grant, extend or
enter into any such option, warrant, call, right, commitment or agreement. There
are no stockholder agreements, voting trusts or other agreements or
understandings to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound relating to the voting of
any shares of the capital stock of the Company.

(c) Indebtedness. Schedule 3.1(c) of the Company Disclosure Schedule sets forth
as of the date of this Agreement a list of each agreement, indenture or contract
pursuant to which any indebtedness for borrowed money of the Company or any of
its Subsidiaries is outstanding or may be incurred. Neither the Company nor any
of its Subsidiaries has provided any guarantee with respect to indebtedness of
another person (other than the Company or any wholly-owned Subsidiary of the
Company).

(d) Authority; No Violations; Consents and Approvals.

(i) The Company has all requisite corporate power and authority to execute and
deliver this Agreement and, subject, with respect to consummation of the Merger,
to adoption of this Agreement by the stockholders of the Company in accordance
with the DGCL and the Company Certificate of Incorporation and Company Bylaws,
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company, subject, with respect to
consummation of the Merger, to adoption of this Agreement by the affirmative
vote (in person or by proxy) of the holders of a majority of the outstanding
shares of Company Common Stock entitled to vote thereon (the “Requisite
Stockholder Vote”) in accordance with the DGCL and the Company Certificate of
Incorporation and Company Bylaws. This Agreement has been duly and validly
executed and delivered by the Company and, assuming this Agreement constitutes
the valid and binding obligation of Parent and Merger Sub, constitutes a valid

 

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and binding obligation of the Company enforceable in accordance with its terms,
subject, as to enforceability, to bankruptcy, insolvency, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors’ rights and to general principles of equity.

(ii) The board of directors of the Company (the “Board”) has unanimously, by
resolutions duly adopted at a meeting duly called and held (i) determined that
it is in the best interests of the Company and its stockholders, and declared it
advisable, to enter into this Agreement, (ii) approved the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby, including the Merger, (iii) directed that the Company
submit the adoption of this Agreement to a vote of the stockholders of the
Company in accordance with the terms of this Agreement, (iv) subject to
Section 4.2 and Section 5.3, resolved to recommend that the stockholders of the
Company adopt this Agreement at the meeting of the stockholders and (v) approved
this Agreement and the Merger for purposes of Section 203 of the DGCL such that
no stockholder approval (other than the Requisite Stockholder Vote) shall be
required to consummate the Merger or the other transactions contemplated by this
Agreement or to permit the Company to perform its obligations hereunder, which
resolutions have not as of the date hereof been subsequently rescinded, modified
or withdrawn in any way.

(iii) The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of, or result in termination, modification,
cancellation or acceleration of any obligation or the loss of a benefit under,
or result in the creation of any Encumbrance upon any of the properties or
assets of the Company or any of its Subsidiaries under, any provision of (A) the
Company Certificate of Incorporation or Company Bylaws or any provision of the
comparable charter or organizational documents of any of the Company’s
Subsidiaries, (B) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, permit, franchise or license to which the Company or
any of its Subsidiaries is a party or by which it or any of its Subsidiaries or
its or their respective properties or assets are bound, assuming the consents
set forth on Schedule 3.1(d) of the Company Disclosure Schedule are duly and
timely obtained or (C) assuming the consents, approvals, orders, authorizations,
registrations, filings or permits referred to in Section 3.1(d)(iv) are duly and
timely obtained or made and the adoption of this Agreement by the stockholders
of the Company has been obtained, any judgment, order, decree, statute, law,
ordinance, rule or regulation of any court, governmental, regulatory or
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a “Governmental Entity”) applicable to the
Company or any of its Subsidiaries or any of their respective properties or
assets, except, in the case of clauses (B) and (C), other than any such
violations, defaults, acceleration, losses, or Encumbrances that would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.

(iv) No consent, approval, order or authorization of, or registration,
declaration or filing with, or permit from, any Governmental Entity, is required
to be obtained or made by the Company or any of its Subsidiaries in connection
with the execution and

 

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delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated hereby, except for: (A) the filing of a premerger
notification report by the Company under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the “HSR Act”), and the expiration or termination of
the applicable waiting period with respect thereto; (B) the filing with the SEC
of (1) a proxy statement in preliminary and definitive form relating to the
meeting of the stockholders of the Company to be held in connection with the
Merger (the “Proxy Statement”) and (2) such reports under Section 13(a) of the
Securities Exchange Act of 1934 (the “Exchange Act”), and such other compliance
with the Exchange Act and the rules and regulations thereunder, as may be
required in connection with this Agreement and the transactions contemplated
hereby; (C) the filing of the Certificate of Merger with the Office of the
Secretary of State of the State of Delaware; (D) filings with the NASDAQ Stock
Market, LLC; (E) such filings and approvals as may be required by any applicable
state securities or “blue sky” or takeover laws; (F) filings or consents set
forth on Schedule 3.1(d) of the Company Disclosure Schedule with respect to a
Governmental Entity; and (G) any such other consent, approval, order,
authorization, registration, filing, or permit that the failure to obtain or
make would not reasonably be expected to have, individually or in the aggregate,
a Company Material Adverse Effect.

(e) SEC Documents.

(i) The Company has made available to Parent (including, for the purposes of
compliance with this representation, pursuant to the SEC’s “EDGAR” system) a
true and complete copy of each form, report, statement, schedule, prospectus,
registration statement, definitive proxy statement and other documents filed or
furnished by the Company with the Securities and Exchange Commission (the “SEC”)
since January 1, 2012 (the “Company SEC Documents”), which are all the forms,
reports, statements, schedules, prospectuses, registration statements,
definitive proxy statements and other documents that the Company was required to
file with the SEC since January 1, 2012. As of its filing date, each of the
Company SEC Documents, as amended, complied all material respects with the
applicable requirements of the Securities Act of 1933 (the “Securities Act”) or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Documents, and none of the Company SEC
Documents contained, when filed or, if amended prior to the date of this
Agreement, as of the date of such amendment with respect to those disclosures
that are amended, any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of the date of this Agreement, there are no outstanding or
unresolved SEC comments. To the knowledge of the Company, as of the date of this
Agreement, none of the Company SEC Documents is the subject of ongoing SEC
review or outstanding SEC Comment.

(ii) The financial statements of the Company (including any related notes
thereto) included in the Company SEC Documents complied as to form in all
material respects with the applicable requirements and published rules and
regulations of the SEC (including Regulation S-X), were prepared in accordance
with generally accepted accounting principles in the United States (“GAAP”)
applied on a consistent basis during

 

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the periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Rule 10-01 of Regulation S-X
of the SEC) and fairly present in all material respects in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited
statements, to normal year-end audit adjustments none of which are expected to
have, individually or in the aggregate, a Company Material Adverse Effect) the
financial position of the Company and its consolidated Subsidiaries as of their
respective dates and the results of operations and the cash flows of the Company
and its consolidated Subsidiaries for the periods presented therein.

(iii) The Company has (A) designed disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) to ensure that
material information relating to the Company, including its consolidated
Subsidiaries, is made known to its principal executive officer and principal
financial officer; (B) designed internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
GAAP; (C) evaluated the effectiveness of the Company’s disclosure controls and
procedures and, to the extent required by applicable law, presented in any
applicable Company SEC Document that is a report on Form 10-K or Form 10-Q or
any amendment thereto its conclusions about the effectiveness of the disclosure
controls and procedures as of the end of the period covered by such report or
amendment based on such evaluation; and (D) to the extent required by applicable
law, disclosed in such report or amendment any change in the Company’s internal
control over financial reporting that occurred during the period covered by such
report or amendment that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial reporting.

(iv) The Company has disclosed, based on the most recent evaluation of internal
control over financial reporting, to the Company’s auditors and the audit
committee of the Board (A) all significant deficiencies and material weaknesses
in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the Company’s ability to record,
process, summarize and report financial information, and (B) any fraud, whether
or not material, that involves management or other employees who have a
significant role in the Company’s internal control over financial reporting in
connection with the Company’s financial reporting.

(v) Since January 1, 2012, (A) neither the Company nor any of its Subsidiaries,
nor, to the knowledge of the Company, any director, officer, employee, auditor,
accountant or representative of the Company or any of its Subsidiaries has
received or otherwise had or obtained knowledge of any material complaint,
allegation, assertion or claim, whether written or oral, regarding the
accounting or auditing practices, procedures, methodologies or methods of the
Company or any of its Subsidiaries or their respective internal accounting
controls, including any credible complaint, allegation, assertion or claim that
the Company or any of its Subsidiaries has engaged in questionable accounting or
auditing practices, and (B) no attorney representing the Company or any of its
Subsidiaries, whether or not employed by the Company or any of

 

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its Subsidiaries, has reported evidence of a material violation of securities
laws, breach of fiduciary duty or similar violation by the Company or any of its
Subsidiaries or their respective officers, directors, employees or agents to the
Board or any committee thereof or to any director or officer of the Company.

(vi) Since January 1, 2012, the Company has complied in all material respect
with (A) the applicable provisions of the Sarbanes-Oxley Act of 2002 (including
the rules and regulations promulgated thereunder) and (B) the applicable listing
and corporate governance rules and regulations of NASDAQ.

(f) Information Supplied. None of the information supplied or to be supplied by
the Company for inclusion or incorporation by reference in the Proxy Statement
will, at the date mailed to stockholders of the Company or at the time of the
meeting of such stockholders to be held in connection with the Merger, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement, in the form mailed to stockholders, insofar as
it relates to the Company or its Subsidiaries or other information supplied by
the Company for inclusion therein, will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder.

(g) Absence of Certain Changes or Events. Since March 31, 2014, there has not
been any Company Material Adverse Effect. Except as contemplated by this
Agreement or as set forth on Schedule 3.1(g) of the Company Disclosure Schedule,
since March 31, 2014, (i) the Company and its Subsidiaries have conducted their
respective businesses only in the ordinary course consistent with past practice,
and (ii) there has not been any action taken or committed to be taken by the
Company or any Subsidiary of the Company which, if taken following entry by the
Company into this Agreement, would have required the consent of Parent pursuant
to Section 4.1(b).

(h) No Undisclosed Material Liabilities. There are no liabilities of the Company
or any of its Subsidiaries of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, other than: (i) liabilities
adequately provided for on the balance sheet of the Company dated as of
March 31, 2014 (including the notes thereto) contained in the Company’s Annual
Report on Form 10-K for the year ended March 31, 2014; (ii) liabilities incurred
in the ordinary course of business consistent with past practice subsequent to
March 31, 2014; (iii) liabilities for fees and expenses incurred in connection
with the transactions contemplated by this Agreement; (iv) liability with
respect to contracts entered into in the ordinary course of business consistent
with past practice; and (v) liabilities which would not be reasonably expected
to have, individually or in the aggregate, a Company Material Adverse Effect.

(i) No Default. Neither the Company nor any of its Subsidiaries is in default or
violation (and no event has occurred which, with notice or the lapse of time or
both, would constitute a default or violation) of any term, condition or
provision of (i) the Company Certificate of Incorporation or Company Bylaws or
the comparable charter or organizational documents of any of the Company’s
Subsidiaries, (ii) any loan or credit agreement, note, bond,

 

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mortgage, indenture, lease, sublease or other occupancy agreement, permit,
franchise or license or any other agreement to which the Company or any of its
Subsidiaries is now a party or by which the Company or any of its Subsidiaries
or any of their respective properties or assets is bound or (iii) any judgment,
order, decree, statute, law, ordinance, rule or regulation of any Governmental
Entity applicable to the Company or any of its Subsidiaries, except with respect
to clauses (ii) and (iii), for defaults or violations which would not reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect.

(j) Compliance with Applicable Laws. The Company and its Subsidiaries hold, and
at all times since January 1, 2012, have held all permits, licenses, variances,
exemptions, orders, franchises and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses and operations
as currently conducted and as were conducted during the most recently completed
fiscal year and to own, lease or operate their respective properties and other
assets (the “Company Permits”), except where the failure to so hold would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. The Company and its Subsidiaries are, and since
January 1, 2012 in compliance with the terms of the Company Permits, except
where the failure so to comply would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. The
businesses of the Company and its Subsidiaries are not being, and since
January 1, 2012, have not been, conducted in violation of any law, ordinance or
regulation of any Governmental Entity, except for violations which would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. To the knowledge of the Company, no investigation or
review by any Governmental Entity with respect to the Company or any of its
Subsidiaries is pending or threatened, other than those the outcome of which
would not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect. For purposes of this Agreement, “knowledge,” of
any party means (i) with respect to the Company and its Subsidiaries, the actual
knowledge (after reasonable inquiry) of the individuals set forth on Schedule
3.1(j) of the Company Disclosure Schedule and (ii) with respect to Parent, the
knowledge of the individuals set forth on Schedule 3.1(j) of the Parent
Disclosure Schedule, and in each case means the knowledge such individual has
after reasonable inquiry.

(k) Litigation. Except for such matters as would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect, there
is no (i) suit, action or proceeding (including condemnation and eminent domain
proceedings) pending, or, to the knowledge of the Company, threatened against
the Company or any of its Subsidiaries and (ii) judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against the
Company or any of its Subsidiaries (such items listed under clause (i) and
clause (ii), the “Company Litigation”). Except as set forth on Schedule 3.1(k)
of the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries is subject to any Company Litigation as of the date hereof.

(l) Taxes.

(i) Except where the failure to file such Tax Returns, pay such Taxes or satisfy
such withholding Tax requirements would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, (A) all Tax
Returns that are required to be filed by or on behalf of the Company or any of
its Subsidiaries on

 

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or before the Closing Date have been or will be timely filed, and all such Tax
Returns are or will be at the time of filing true, complete and correct; (B) all
Taxes which are due on or before the Closing Date (other than Taxes being
contested in good faith by appropriate proceedings and for which adequate
reserves have been provided in accordance with GAAP) have been or will be timely
paid in full; (C) all withholding Tax requirements imposed on or with respect to
the Company or any of its Subsidiaries on or before the Closing Date have been
or will be satisfied in full; and (D) there are no Encumbrances with respect to
Taxes upon any of the assets or properties of either the Company or its
Subsidiaries, other than with respect to Taxes that are not yet due and payable

(ii) As of the date of this Agreement, no outstanding material claim, assessment
or deficiency against the Company or any of its Subsidiaries for any Taxes has
been asserted in writing by any Governmental Entity.

(iii) Neither the Company nor any of its Subsidiaries (A) is or has ever been a
member of an affiliated group filing a consolidated federal income Tax Return
(other than such a group the common parent of which is the Company) or (B) has
any liability for Taxes of any Person arising from the application of Treasury
Regulation section 1.1502-6 or any analogous provision of state, local or
foreign law, or as a transferee or successor, by contract, or otherwise (other
than the members of the affiliated group filing a consolidated federal income
Tax Return the common parent of which is the Company). None of the Company or
any of its Subsidiaries is a party to, is bound by or has any obligation under
any Tax sharing or Tax indemnity agreement or similar contract or arrangement.

(iv) None of the Company or any of its Subsidiaries has been either a
“distributing corporation” or a “controlled corporation” in a distribution
occurring during the two years prior to the date of this Agreement in which the
parties to such distribution treated the distribution as one to which
Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”), is
applicable.

(v) No closing agreement pursuant to section 7121 of the Code (or any similar
provision of state, local or foreign law) has been entered into by or with
respect to the Company or any of its Subsidiaries.

(vi) The Company will not be required to include any amounts in income, or
exclude any items of deduction, in a taxable period beginning after the Closing
Date as a result of (A) a change in method of accounting occurring prior to the
Closing Date, (B) an installment sale or open transaction arising in a taxable
period (or portion thereof) ending on or before the Closing Date, (C) a prepaid
amount received prior to the Closing Date or (D) an intercompany transaction
described in Treasury Regulations under Code Section 1502 entered into prior to
the Closing Date.

(vii) Except as set forth on Schedule 3.1(l)(vii) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is or has ever been
engaged in a trade or business through a “permanent establishment” or fixed base
within the meaning of an applicable income Tax treaty in any country other than
the country in which it is formed or organized.

 

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(viii) For purposes of this Agreement, “Taxes” means any taxes, charges, levies,
withholdings, interest, penalties, additions to tax or other assessments of any
kind, including income, gross receipts, capital, excise, property, sales, use,
license, employment, payroll, alternative or add-on minimum, ad valorem,
transfer, turnover, unclaimed property, value added, franchise and customs
duties or like assessments or charges, imposed by any Governmental Entity; and
“Tax Returns” means any return, report, declaration, statement, information
return, claim for refund or other document (including any amendment or any
related or supporting information) filed or required to be filed with any
Governmental Entity in connection with the determination, assessment, collection
or administration of any Taxes or the administration of any laws, regulations or
administrative requirements relating to any Taxes.

(m) Compensation; Benefits.

(i) Set forth on Schedule 3.1(m) of the Company Disclosure Schedule is a list of
all material Employee Benefit Plans. “Employee Benefit Plan” means any “employee
benefit plan” within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974 (“ERISA”), and any bonus, change in control,
employment, collective bargaining, employee loan, fringe benefit, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, vacation, severance, disability, death benefit,
hospitalization or insurance plan, policy, program, agreement or arrangement
(a) pursuant to which any present or former employee or contractor of the
Company or any Subsidiary has any present or future right to benefits (b) which
the Company any Subsidiary contributes to, maintains or sponsors, or
(c) pursuant to which the Company, and Subsidiary or any member of their
“Controlled Group” (defined as any organization which is a member of a
controlled group of organizations within the meaning of Section 414(b), (c),
(m) or (o) of the Code) had or has any present or future actual liability. True,
correct and complete copies of each of the material Employee Benefit Plans (or,
if applicable, a form thereof) and related trust documents and favorable
determination letters, if applicable, have been furnished or made available to
Parent or its representatives, along with the most recent report filed on Form
5500, summary plan description with respect to each Employee Benefit Plan
required to file a Form 5500 and copies of 280G calculations (whether or not
final) with respect to executive officers of the Company and its Subsidiaries in
connection with the transactions contemplated by this Agreement (together with
the underlying assumptions and documentation on which such calculations are
based).

(ii) Each Employee Benefit Plan has been maintained in compliance with its terms
and all applicable laws, except where the failure to so comply would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. Each Employee Benefit Plan which is intended to be
qualified within the meaning of Section 401(a) of the Code has received a
favorable determination letter as to its qualification, or if such Employee
Benefit Plan is a prototype plan, the opinion or notification letter for each
such Employee Benefit Plan, and to the knowledge of the

 

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Company, nothing has occurred, whether by action or failure to act, that could
reasonably be expected to cause the loss of such qualification. Except as
required under Section 601 et seq. of ERISA, no Employee Benefit Plan provides
benefits or coverage in the nature of health, life or disability insurance
following retirement. Except as set forth on Schedule 3.1(m)(ii) of the Company
Disclosure Schedule, no event has occurred and, to the knowledge of Company, no
condition exists that would subject the Company or its Subsidiaries, either
directly or indirectly by reason of their affiliation with any other member of
their Controlled Group (other than the Company and its Subsidiaries), to any
tax, fine, lien, penalty or other liability imposed by ERISA, the Code or other
applicable laws, rules and regulations.

(iii) With respect to each Employee Benefit Plan that is subject to Title IV or
Section 302 of ERISA or Section 412 or 4971 of the Code: (i) no such Employee
Benefit Plan has failed to satisfy the minimum funding standard (within the
meaning of Sections 412 and 430 of the Code or Section 302 of ERISA) applicable
to such Employee Benefit Plan, whether or not waived and no application for a
waiver of the minimum funding standard with respect to any Employee Benefit Plan
has been submitted; (ii) no liability (other than for contributions made to such
plan or premiums paid to the Pension Benefit Guaranty Corporation (the “PBGC”))
under Title IV of ERISA has been or is expected to be incurred by the Company or
any member of its Controlled Group; (iv) to the knowledge of the Company, the
PBGC has not instituted proceedings to terminate any such plan or made any
inquiry which would reasonably be expected to lead to termination of any such
plan, and no condition exists that presents a risk that such proceedings will be
instituted or which would constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any such plan;
(v) neither the Company nor any member of its Controlled Group has engaged in
any transaction described in Section 4069 or Section 4204 of ERISA; and (vi) no
Employee Benefit Plan is, or is expected to be, in “at-risk” status (as defined
in Section 303(i)(4) of ERISA or Section 430(i)(4) of the Code), except, with
respect to clauses (i), (ii), (iii), (v) and (vi), as would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect.

(iv) No Employee Benefit Plan is a “multiemployer plan” (as defined in
Section 4001(a)(3) of ERISA) and neither the Company, its Subsidiaries nor any
member of their Controlled Group has, during the past six (6) years, sponsored
or contributed to, or has or had any liability or obligation in respect of, any
multiemployer plan.

(v) To the knowledge of the Company, each Employee Benefit Plan that is or has
ever been a “nonqualified deferred compensation plan” within the meaning of
Section 409A of the Code and associated Treasury Department guidance: (i) since
January 1, 2005, has been operated in good faith compliance with Section 409A of
the Code and associated Internal Revenue Service and Treasury Department
guidance, and (ii) in existence prior to January 1, 2005 has not been
“materially modified” within the meaning of Section 409A of the Code and
associated Internal Revenue Service and Treasury Department guidance, including
Internal Revenue Service Notice 2005-1. To the knowledge of the Company, all
options to purchase equity and equity appreciation rights granted by the Company
have been granted having a per share exercise price at least

 

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equal to the fair market value of the underlying equity on the date the option
or equity appreciation right was granted, and have not otherwise been modified
within the meaning of Section 409A of the Code and associated Treasury
Department guidance.

(vi) No Employee Benefit Plan exists that, as a result of the execution of this
Agreement, shareholder approval of this Agreement, or the transactions
contemplated by this Agreement (whether alone or in connection with any
subsequent event(s)) could reasonably be expected to: (i) entitle any employee,
director, officer or independent contractor of the Company or any of its
Subsidiaries to severance pay, unemployment compensation or any other payment or
benefit, (ii) accelerate the time of payment or vesting, or increase the amount
of compensation or benefit due to any employee, director, officer or independent
contractor, (iii) directly or indirectly cause the Company to transfer or set
aside any assets to fund any benefits under any Employee Benefit Plan,
(iv) otherwise give rise to any material liability under any Employee Benefit
Plan, or (v) limit or restrict the right to amend, terminate or transfer the
assets of any Employee Benefit Plan on or following the Closing Date.

(vii) As of the date of this Agreement, with respect to any Employee Benefit
Plan, (i) there are no actions, suits or claims pending (other than routine
claims for benefits) or, to the knowledge of the Company, threatened against, or
with respect to, any of the Employee Benefit Plans and no facts or circumstances
exist that could reasonably be expected to give rise to any such actions, suits
or claims, (ii) in connection with the transactions contemplated herein, no
written or, to the knowledge of the Company, oral communication has been
received from the PBGC in respect of any Employee Benefit Plan subject to Title
IV of ERISA concerning the funded status of any such plan or any transfer of
assets and liabilities from any such plan, and (iii) no administrative
investigation, audit or other administrative proceeding by the Department of
Labor, the PBGC, the Internal Revenue Service or other governmental agencies are
pending, threatened or in progress (including, without limitation, any routine
requests for information from the PBGC), except, with respect to clauses (i) and
(iii), as would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.

(viii) There are no material unfunded benefit obligations that have not been
properly accrued for in the Company’s financial statements or disclosed in the
notes thereto in accordance with GAAP, except where the failure to do so would
not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.

(n) Labor Matters.

(i) Except as set forth on Schedule 3.1(n)(i) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is party to any
collective bargaining agreement or other current labor agreement with any labor
union or organization, and, the Company does not have knowledge of campaigns
that are being conducted to solicit cards from any of the Company’s employees to
authorize representation by any labor organization, and, to the knowledge of the
Company, no such campaigns have been conducted within the past three years.

 

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(ii) As of the date of this Agreement, there is no unfair labor practice, charge
or grievance arising out of a collective bargaining agreement or other grievance
proceeding against the Company or any of its Subsidiaries that is pending, or,
to the knowledge of the Company, threatened.

(iii) There is no strike, dispute, slowdown, work stoppage or lockout pending,
or, to the knowledge of the Company, threatened, against or involving the
Company or any of its Subsidiaries.

(iv) Except as set forth on Schedule 3.1(n)(iv) of the Company Disclosure
Schedule, there is no action, legal complaint, charge or government inquiry
pending against the Company or its Subsidiaries by or on behalf of any employee,
prospective employee, former employee, labor organization or other
representative of the Company or its Subsidiaries or, to the knowledge of the
Company, threatened.

(v) Neither the Company nor any of its Subsidiaries is a party to, or otherwise
bound by, any consent decree with, any Governmental Entity relating to employees
or employment practices.

(vi) The Company and each of its Subsidiaries is in material compliance with all
applicable employment laws, including but not limited to any obligations
pursuant to the Worker Adjustment and Retraining Notification Act of 1988 or
similar foreign, state or local laws (the “WARN Act”).

(vii) Except as set forth on Schedule 3.1(n)(vii) of the Company Disclosure
Schedule, neither Company nor any of its Subsidiaries is liable for any
severance pay or other similar payments to any employee or former employee
arising from the termination of employment, nor will the Company or any of its
Subsidiaries have any liability under any benefit or severance policy, practice,
agreement, plan, or program which exists or arises under any applicable law as a
result of the transactions contemplated hereunder and the termination of any of
the Company’s or its Subsidiaries’ employees on or prior to the Closing Date.

(viii) Neither the Company nor any of its Subsidiaries has closed any plant or
facility or effectuated any layoffs of employees covered by the WARN Act or
implemented any early retirement, separation or window program within the past
three years, nor does the Company plan to announce any such action or program
prior to Closing.

(o) Intellectual Property. The Company and its Subsidiaries own or have the
right to use all intellectual property including trademarks, trade names, trade
dress, patents, service marks, inventions, technology, discoveries, copyrights
and copyrighted works (including software and software code), domain names,
trade secrets, processes and know-how necessary for the operation of the
businesses of each of the Company and its Subsidiaries as presently conducted
(collectively, the “Company Intellectual Property”), except where the failure to

 

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own or have the right to use such properties would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect. The
Company and its Subsidiaries exclusively own material proprietary Company
Intellectual Property or have the right to use the Company Intellectual
Property, in each case, free and clear of any and all Encumbrances, except for
Permitted Encumbrances. (i) The business of each of the Company and its
Subsidiaries as presently conducted does not, and as conducted since January 1,
2012, did not conflict with, infringe upon, violate, interfere with or otherwise
misappropriate any intellectual property right of any other Person, except as
set forth on Schedule 3.1(o) of the Company Disclosure Schedule (ii) neither the
Company nor any of its Subsidiaries has received written notice of the foregoing
(including cease and desist letters or requests to take a patent license), and
(iii) to the knowledge of the Company, no other Person is infringing the Company
Intellectual Property, except, in each case, for such matters that would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. The Company and each of its Subsidiaries takes all
reasonable actions to protect the integrity, security and operation of its
material software and systems (and the data therein), and there have been no
material violations, breaches or outages of same.

(p) Properties.

(i) Except as would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect, the Company and its Subsidiaries
have good, valid and marketable fee title and leasehold title, as applicable, to
all of the Real Property (as hereinafter defined) and good, valid and marketable
title to all personal properties and assets, tangible and intangible, that they
purport to own, and the leasehold interest in all personal property that they
purport to lease, including the properties and assets reflected in the Company’s
most recent consolidated balance sheet included in the Company’s Annual Report
on Form 10-K for the year ended March 31, 2014 filed with the SEC, but excluding
any property or assets that are no longer used or useful for the conduct of the
business of the Company and its Subsidiaries as presently conducted or that have
been disposed of in the ordinary course of business. All such properties and
assets are free and clear of all Encumbrances, except for (i) routine statutory
liens securing liabilities not yet due and payable, (ii) Encumbrances that do
not materially detract from the value of the specific asset affected or
materially adversely affect the present use or, as applicable, the occupancy of
such asset, (iii) Encumbrances would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect,
(iv) Encumbrances existing or expressly permitted pursuant to credit facilities
of the Company and its Subsidiaries existing as of the date of this Agreement,
and (v) Encumbrances set forth on Schedule 3.1(p)(i) of the Company Disclosure
Schedule (collectively, “Permitted Encumbrances”).

(ii) Schedule 3.1(p)(ii) of the Company Disclosure Schedule sets forth a true a
complete list of all real property and interests in real property owned in fee
by the Company and its Subsidiaries and all real property leased, subleased,
licensed or otherwise occupied by the Company and its Subsidiaries
(collectively, the “Real Property”). The Real Property is the only real property
that is necessary or material to the business of the Company and its
Subsidiaries. The lease or sublease for each leased real property to which the
Company or one of its Subsidiaries is a party is valid, legally

 

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binding, enforceable in accordance with its terms and in full force and effect.
Except as would not be reasonably likely to have, individually or in the
aggregate, a Company Material Adverse Effect, neither the Company nor any of its
Subsidiaries is in breach or default under any lease or sublease nor, to the
knowledge of the Company as of the date of this Agreement, is any other party to
any such lease or sublease in breach or default thereunder and no event has
occurred that with notice or the passage of time, or both, would constitute a
breach or default thereunder.

(iii) All buildings, structures, fixtures, building systems and equipment
included in the Real Property (the “Structures”) are, to the knowledge of the
Company, in reasonably good condition and repair in all material respects and
sufficient for the operation of the business of the Company, subject to
reasonable wear and tear. Except as set forth in Schedule 3.1(p)(iii) of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
(A) has leased or subleased or otherwise granted to any Person any right to
occupy or possess or otherwise encumber any portion of the Real Property other
than in the ordinary course of business, (B) has vacated or abandoned any
portion of the Real Property or given notice to any third party of its intent to
do the same, (C) is a party to or obligated under any option, right of first
refusal or other contractual right to sell, dispose of or lease or sublease any
of the Real Property or any portion thereof or interest therein to any Person
(other than pursuant to this Agreement), and (D) is a party to any agreement or
option to purchase any of the Real Property or any interest therein.

(q) Environmental Matters.

(i) As used in this Agreement:

(A) “Environmental Laws” means any and all laws (including common law),
statutes, regulations, rules, orders, ordinances and legally enforceable
directives of any Governmental Entity pertaining to protection of human health
(to the extent arising from exposure to Hazardous Materials) or the environment
(including any natural resource damages or any generation, use, storage,
treatment, disposal, release, threatened release, discharge, or emission of
Hazardous Materials into the indoor or outdoor environment in effect as of or at
any relevant time prior to the Closing Date;

(B) “Hazardous Materials” means any (1) chemical, product, substance, or waste
that is defined or listed as hazardous or toxic or as a pollutant or contaminant
(or words of similar meaning) or that is otherwise regulated due to potentially
adverse impacts on the environment or on human health arising out of exposure
thereto; (2) asbestos containing materials, whether in a friable or non-friable
condition, polychlorinated biphenyls, naturally occurring radioactive materials
or radon; and (3) any petroleum hydrocarbons, petroleum products, petroleum
substances, crude oil, natural gas, and any components, fractions, or
derivatives thereof; and

(C) “Release” means any depositing, spilling, leaking, pumping, pouring,
placing, emitting, discarding, abandoning, emptying, discharging, migrating,
injecting, escaping, leaching, dumping, or disposing.

 

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(ii) Except as set forth on Schedule 3.1(q) of the Company Disclosure Schedule
and for those matters that would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect:

(A) the Company and its Subsidiaries and their respective operations and assets
are in compliance with all, and have not within the last two (2) years (nor, to
the knowledge of the Company, prior thereto within the applicable statute of
limitations) violated any, applicable Environmental Laws;

(B) the Company and its Subsidiaries hold all Permits required under applicable
Environmental Laws for the Company and its Subsidiaries to conduct their
operations as currently conducted, and timely filed any pending applications for
renewal of any such Permits, and to the knowledge of the Company there is no
reasonable basis arising out of the actions or omissions of the Company or its
Subsidiaries for any such Permit to be revoked, adversely modified or not
renewed; and there are no applications pending for any Permits under applicable
Environmental Laws that are needed to carry out any plans of the Company or any
of its Subsidiaries with respect to which the Company has received notification
from a Governmental Entity that such Permit will not be issued, or will be
issued on terms that are less favorable from those sought in any such
application, and to the knowledge of the Company there is no reasonable basis
arising out of the actions or omissions of the Company or its Subsidiaries for
any such notification;

(C) the Company and its Subsidiaries are not subject to any pending or, to the
knowledge of the Company, threatened claims, actions, suits, investigations,
inquiries or proceedings under Environmental Laws or regarding any Hazardous
Materials;

(D) neither the Company nor any of its Subsidiaries has received any written
notice asserting an alleged liability or obligation under any Environmental Laws
with respect to the investigation, remediation, removal, or monitoring of any
Hazardous Materials Released or threatened to be Released at or from any
property currently or formerly owned, operated, or otherwise used by the Company
or any of its Subsidiaries, or at or from any off-site location where Hazardous
Materials from the Company’s or any of its Subsidiaries’ operations have been
sent for treatment or disposal, or for which the Company or any of its
Subsidiaries is otherwise asserted to be responsible;

(E) neither the Company nor any of its Subsidiaries has used, managed, stored,
treated, disposed of, or arranged for disposal of, Hazardous Materials, and to
the knowledge of the Company Hazardous Materials are not otherwise present, at
any of their owned or leased properties or at any other

 

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location for which the Company or any of its Subsidiaries may be liable, in any
case that has resulted or could reasonably be expected to result in (i) any
liability, under any Environmental Laws for any remediation that may be
required, or (ii) interference with the operations of any of them; and

(F) neither the Company nor any of its Subsidiaries has assumed or retained by
contract or, to the knowledge of the Company, operation of Law, any liability
under any Environmental Laws or regarding any Hazardous Materials.

The Company has made available to Parent all material environmental audits,
assessments and similar reviews and all material correspondence with a
Governmental Entity, regarding compliance with or liability or obligations under
any Environmental Laws or regarding Hazardous Materials that may materially
affect the Company or any of its Subsidiaries, to the extent such reports or
correspondence are in the possession or control of the Company or any of its
Subsidiaries and are not subject to any applicable claim of privilege.

(r) Insurance. Set forth on Schedule 3.1(r) of the Company Disclosure Schedule,
as of the date of this Agreement, is a correct and complete list of all material
insurance policies held by the Company and each of its Subsidiaries. Except for
policies that have been, or are scheduled to be, terminated in the ordinary
course of business and in accordance with the terms thereof, each of the
insurance policies set forth on Schedule 3.1(r) of the Company Disclosure
Schedule is in full force and effect and provide insurance in such amounts and
against such risks as the management of the Company reasonably has determined to
be prudent in accordance with industry practices or as is required by applicable
law. Except as would not constitute, individually or in the aggregate, a Company
Material Adverse Effect, neither the Company nor any of its Subsidiaries is in
breach or default, and neither the Company nor any of its Subsidiaries has taken
any action or failed to take any action which, with notice or lapse of time or
both, would constitute such a breach or default, or permit a termination or
modification of any of the material insurance policies of the Company and its
Subsidiaries set forth on Schedule 3.1(r) of the Company Disclosure Schedule.

(s) Opinion of Financial Advisor. The Board has received the opinion of
Canaccord Genuity Inc. addressed to such Board to the effect that, as of the
date of this Agreement, the Merger Consideration is fair from a financial point
of view to the holders of the Company Common Stock.

(t) Vote Required. The Requisite Stockholder Vote is the only vote of the
holders of any class or series of the Company’s capital stock necessary to adopt
this Agreement.

(u) Brokers. Except for the fees and expenses payable to Canaccord Genuity Inc.,
no broker, investment banker, or other Person is entitled to any broker’s,
finder’s or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. The Company has furnished to Parent a true and complete copy of any
agreement between the Company and Canaccord Genuity Inc. pursuant to which
Canaccord Genuity Inc. could be entitled to any payment from or any right of
first offer or similar right with respect to the Company relating to the
transactions contemplated by this Agreement.

 

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(v) Certain Contracts and Arrangements. Schedule 3.1(v) of the Company
Disclosure Schedule, together with the lists of exhibits contained in the
Company SEC Documents, sets forth a correct and complete list, as of the date of
this Agreement, of (i) each agreement to which the Company or any of its
Subsidiaries is a party (other than this Agreement) that is of a type that would
be required to be included as an exhibit to a Registration Statement on Form S-1
pursuant to Items 601(b)(2), (4), (9) or (10) of Regulation S-K of the SEC if
such a registration statement was filed by the Company on the date of this
Agreement; (ii) any non-competition agreement or other agreement that purports
to limit the manner in which, or the localities in which, the Company or any of
its Subsidiaries may compete in any business; (iii) any supply or sales contract
of one year or greater remaining duration having an aggregate value, or
involving payment by or to the Company or any of its Subsidiaries of more than
$1.5 million; (iv) any contract or agreement relating to the borrowing of money
or extension of credit pursuant to which the Company or any of its Subsidiaries
has a borrowing capacity of more than $500,000 million or outstanding
indebtedness of more than $500,000; (v) any material contract or agreement with
respect to any joint venture, partnership or similar arrangements; (vi) any
contract or agreement that prohibits the payment of dividends or distributions
in respect of capital stock of the Company or any of its Subsidiaries, prohibits
the pledging of capital stock of the Company or any of its Subsidiaries or
prohibits the issuance of guarantees by the Company or any of its Subsidiaries;
(vii) any contract or agreement (or a related series of contracts or agreements)
for the acquisition or disposition by the Company or any of its Subsidiaries of
assets with a value of more than $500,000 or with respect to which the Company
or any of its Subsidiaries has continuing indemnification, “earn-out” or other
contingent payment obligations, in each case, that would reasonably be expected
to result in payments in excess of $500,000; and (viii) any Contract that would
prevent, materially delay or materially impede the Company’s ability to
consummate the Merger (collectively, the “Company Contracts”). Except as would
not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, neither the Company nor any of its Subsidiaries is in
breach or default under any Company Contract nor, to the knowledge of the
Company as of the date of this Agreement, is any other party to any such Company
Contract in breach or default thereunder. The Company has delivered or made
available to Parent prior to the date hereof true and complete copies of each
Company Contract (including an amendments, waivers or modifications thereto) in
existence (and pursuant to which the Company or any of its Subsidiaries has
further obligations after the date hereof) as of the date hereof. Each such
Company Contract is valid and in full force and effect and enforceable in
accordance with its respective terms, subject to enforceability, to bankruptcy,
insolvency, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors’ rights and to general principles of equity,
except to the extent that (A) they have previously expired in accordance with
their terms or (B) the failure to be in full force and effect, individually or
in the aggregate, has not had and would not reasonably be expected to have a
Company Material Adverse Effect. Neither the Company nor any of its Subsidiaries
is a party to any Contract, in each case, that prohibits the Company or any of
its Subsidiaries from (i) keeping Parent reasonably informed in all material
respects of the status and details (including any change to the terms thereof)
of any Acquisition Proposal and (ii) providing to Parent as soon as practicable
after receipt or delivery thereof copies of all correspondence and other written
material sent or provided to the Company or any of its Subsidiaries from any
person that describes any of the terms or conditions of any Acquisition
Proposal.

 

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(w) State Takeover Statutes. No “fair price,” “moratorium,” “control share
acquisition,” “business combination” or other similar antitakeover statute or
regulation enacted under state or federal laws in the United States (with the
exception of Section 203 of the DGCL (“Section 203”)), nor any takeover-related
provision in the Company Certificate or Company Bylaws, would (i) prohibit or
restrict the ability of the Company to perform its obligations under this
Agreement, any related agreement or the Certificate of Merger or its ability to
consummate the Merger or the other transactions contemplated hereby and thereby,
(ii) have the effect of invalidating or voiding this Agreement, or the
Certificate of Merger, or any provision hereof or thereof, or (iii) subject
Parent or Merger Sub to any impediment or condition in connection with the
exercise of any of its rights under this Agreement, the Voting Agreement or the
Certificate of Merger. The Company does not have any stockholder rights plan in
effect. Assuming the accuracy of the representations made in Section 3.2(h), the
action of the Board in approving this Agreement is sufficient to render
inapplicable to this Agreement the restrictions on “business combinations” (as
defined in Section 203) as set forth in Section 203.

(i) Affiliate Transactions. Since January 1, 2012, there have been no
transactions, agreements, arrangements or understandings between the Company or
any of its Subsidiaries on the one hand, and the Affiliates (as such term is
defined in Rule 405 under the Securities Act, an “Affiliate”) of the Company on
the other hand (other than the Company’s Subsidiaries), that would be required
to be disclosed under Item 404 under Regulation S-K under the Exchange Act and
that has not been so disclosed.

(x) FCPA.

(i) Neither the Company nor any of its Subsidiaries (including any of their
officers, directors, agents, distributors, employees or other persons acting on
their behalf) has directly or indirectly violated or taken any act in
furtherance of violating any provision of the U.S. Foreign Corrupt Practices Act
of 1977 (as amended) or any other anticorruption or anti-bribery laws applicable
to the Company or any of its Subsidiaries.

(ii) Neither the Company nor any of its Subsidiaries (including any of their
officers, directors, agents, distributors, employees or other persons acting on
their behalf) has directly or indirectly taken any act in furtherance of an
offer, payment, promise to pay, authorization or ratification of any gift,
bribe, rebate, loan, payoff, kickback, money or anything of value provided to
any (i) officer or employee of a Governmental Entity, which for purposes of this
provision also includes any instrumentality thereof and any state-owned or
state-controlled enterprise, or of a public international organization,
(ii) holder of public office, candidate for public office, political party,
official of a political party or member of a royal family or (iii) any Person
acting for or on behalf of any such Governmental Entity or instrumentality
thereof (any of the foregoing, a “Government Official”) for the purpose of
inducing such Government Official to do any act or make any decision in an
official capacity, including a decision to fail to perform an official function;
used his or her or its influence with a Governmental Entity in order to affect
any act or decision of such Governmental Entity for the purpose of assisting any
Person to obtain or retain any business; or to facilitate efforts of any Person
to transact business or for any other improper purpose.

 

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(iii) Neither the Company nor any of its Subsidiaries (including any of their
officers, directors, agents, distributors, employees or other persons acting on
their behalf) has directly or indirectly made, promised to make, or caused to be
made on behalf of the Company any bribe, kickback, or any other improper payment
to any business partner, counterparty, or any other person to induce the
recipient to provide an improper commercial benefit to the Company.

(y) Trade Compliance. Neither Company nor any of its Subsidiaries (including any
of their officers, directors, agents, distributors, employees or other persons
acting on its behalf), is now engaging in or planning to engage in, is not
contractually obligated to engage in now or at any time in the future, and has
not at any time in the past five years engaged in (i) any transaction or dealing
prohibited under any laws, executive orders or regulations administered by the
Office of Foreign Assets Control in the U.S. Department of the Treasury,
(ii) any exportation or reexportation of goods, software or technology that is
prohibited under the Export Administration Regulations administered by the U.S.
Department of Commerce or the International Traffic in Arms Regulations
administered by the U.S. Department of State; or (iii) any other violation of
any laws of the United States or any other jurisdiction that are, in each case,
applicable to the Company or any of its Subsidiaries concerning trade or
financial sanctions or export controls.

(z) FDA/CMS. Except for such matters that would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect, the
Company and its Subsidiaries are in material compliance with, and have not
engaged in any activities which are prohibited by, the laws, rules, regulations
and orders of the United States Department of Health and Human Services (“DHHS”)
and its sub-agencies (including but not limited to the United States Food and
Drug Administration (“FDA”) and the Center for Medicare & Medicaid Services
(“CMS”)) or any analogous Governmental Entity. There are no actual or, to the
knowledge of the Company, threatened investigations or material enforcement
actions, or any facts furnishing a reasonable basis for the same, by DHHS or its
sub-agencies, or any analogous federal, state, local, domestic, or international
Governmental Entity which has jurisdiction over the operations of the Company or
any of the Subsidiaries of the Company. Since January 1, 2012, neither the
Company nor any of its Subsidiaries has received written notice of any pending
or threatened material claim by DHHS, its sub-agencies or any analogous federal,
state, local, domestic or international Governmental Entity which has
jurisdiction over the operations of the Company or any of its Subsidiaries
against the Company or the Company’s Subsidiaries. Since January 1, 2012, all
material approvals, clearances, registrations, submissions, reports, documents,
claims and notices required to be filed, obtained, maintained, or furnished by
the Company or its Subsidiaries to DHHS, its sub-agencies or any analogous
federal, state, local, domestic or international Governmental Entity having
jurisdiction over the operations of the Company and its Subsidiaries have been
so filed, obtained, maintained or furnished. All such approvals, clearances,
registrations, submissions, reports, documents, claims and notices were
complete, correct and not misleading in all material respects on the date filed
(or were corrected in or supplemented by a subsequent filing) and, where
required, are currently complete, correct, not misleading, valid and in full
force and effect. To the knowledge of the Company, there are no facts,
circumstances or events that may interfere with or prevent continued material
compliance by the Company and its Subsidiaries with any laws, rules, regulations
or orders administered by DHHS, its sub-agencies or any analogous federal,
state, local, domestic or international Governmental Entity with jurisdiction
over the operations of the Company or any of its Subsidiaries.

 

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Section 3.2 Representations and Warranties of Parent and Merger Sub. Except
(i) as set forth on the disclosure schedule dated as of the date of this
Agreement and delivered by Parent and Merger Sub to the Company on or prior to
the date of this Agreement (the “Parent Disclosure Schedule”) or (ii) as
disclosed in the forms, reports, statements, schedules, prospectuses,
registration statements, definitive proxy statements and other documents filed
or furnished by Parent with the SEC since January 1, 2013 (but excluding any
forward-looking disclosure set forth in any risk factor section, any disclosures
in any section that constitutes a forward-looking statement and any other
disclosures included therein to the extent they are non-specific, predictive,
cautionary or forward-looking in nature), Parent and Merger Sub jointly and
severally hereby represent and warrant to the Company as follows:

(a) Organization, Standing and Power. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation, has all requisite corporate power and authority
to own, lease and operate its properties and other assets and to carry on its
business as now being conducted, and is duly qualified and in good standing to
do business in each jurisdiction in which the business it is conducting, or the
operation, ownership or leasing of its properties and other assets, makes such
qualification necessary, other than in such jurisdictions where the failure so
to qualify or be in good standing would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect. Parent and
Merger Sub each has heretofore made available to the Company complete and
correct copies of its certificate of incorporation or articles of incorporation,
as applicable, and bylaws, each as amended to date. “Parent Material Adverse
Effect” means any occurrence, condition, change, development, circumstance,
event or effect that prevents or materially delays or impairs the ability of
Parent and Merger Sub to consummate the transactions contemplated by this
Agreement.

(b) Authority; No Violations, Consents and Approvals.

(i) Each of Parent and Merger Sub has all requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Merger Sub and the consummation by Parent and Merger Sub of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of each of Parent and Merger Sub, and
prior to the Effective Time, will be duly and validly authorized by all
necessary stockholder by Parent as sole stockholder of Merger Sub. This
Agreement has been duly and validly executed and delivered by each of Parent and
Merger Sub, and, assuming this Agreement constitutes the valid and binding
obligation of the Company, constitutes a valid and binding obligation of each of
Parent and Merger Sub enforceable in accordance with its terms, subject as to
enforceability, to bankruptcy, insolvency, reorganization, moratorium and other
laws of general applicability relating to or affecting creditors’ rights and to
general principles of equity.

 

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(ii) The execution and delivery of this Agreement does not, and the consummation
of the transactions contemplated hereby will not result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of, or result in termination, modification, cancellation or
acceleration of any obligation or the loss of a benefit under, or result in the
creation of any Encumbrance upon any of the properties, rights or assets of
Parent or any of its Subsidiaries under any provision of (A) the certificate of
incorporation or articles of incorporation, as applicable, or bylaws of Parent
or Merger Sub or any provision of the comparable charter or organizational
documents of any of their respective Subsidiaries, (B) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement, permit,
franchise or license to which Parent or any of its Subsidiaries is a party or by
which Parent or Merger Sub or any of their respective Subsidiaries or their
respective properties or assets are bound or (C) assuming the consents,
approvals, orders, authorizations, registrations, filings, or permits referred
to in Section 3.2(b)(iii) are duly and timely obtained or made, any judgment,
order, decree, statute, law, ordinance, rule or regulation of any Governmental
Entity applicable to Parent or any of its Subsidiaries or any of their
respective properties or assets, other than, in the case of clauses (B) and (C),
any such violations, defaults, acceleration, losses or Encumbrances that would
not reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect.

(iii) No consent, approval, order or authorization of, or registration, or
filing with, or permit from, any Governmental Entity is required to be obtained
or made by Parent or any of its Subsidiaries in connection with the execution
and delivery of this Agreement by Parent and Merger Sub or the consummation by
Parent and Merger Sub of the transactions contemplated hereby except for:
(A) the filing of a premerger notification report by Parent under the HSR Act
and the expiration or termination of the applicable waiting period with respect
thereto; (B) the filing with the SEC of such reports under Section 13(a) of the
Exchange Act and such other compliance with the Exchange Act and the rules and
regulations thereunder as may be required in connection with this Agreement and
the transactions contemplated hereby; (C) the filing of the Certificate of
Merger with the Office of the Secretary of State of the State of Delaware; and
(D) any such other consent, approval, order, authorization, registration,
filing, or permit that the failure to obtain or would not reasonably be expected
to have, individually or in the aggregate, a Parent Material Adverse Effect.

(c) Information Supplied. None of the information supplied or to be supplied by
Parent for inclusion or incorporation by reference in the Proxy Statement will,
at the date mailed to stockholders of the Company or at the time of the meeting
of such stockholders to be held in connection with the Merger, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Proxy
Statement, insofar as it relates to Parent or its Subsidiaries or other
information supplied by Parent for inclusion therein, will comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.

(d) Litigation. Except for such matters as would not reasonably be expected to
have, individually or in the aggregate, a Parent Material Adverse Effect, there
is no (A) suit, action or

 

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proceeding pending, or, to the knowledge of Parent, threatened against Parent or
any of its Subsidiaries or (B) judgment, decree, injunction, rule or order of
any Governmental Entity or arbitrator outstanding against Parent or any of its
Subsidiaries.

(e) Financing. As of the date of this Agreement, Parent has, and will on the
Closing Date have, sufficient unrestricted cash on hand, lines of credit or
other sources of immediately available funds to enable it to pay all of the
Merger Consideration hereunder and to pay all other amounts required to be paid
by Parent or Merger Sub at the Closing or thereafter pursuant to the terms of
this Agreement, and all of its and its representatives’ fees and expenses
incurred in connection with the transactions contemplated by this Agreement.
Parent has no reason to believe that such cash, lines of credit or other sources
of immediately available funds shall not be available.

(f) Solvency; Surviving Corporation After the Merger. Neither Parent nor Merger
Sub is entering into the transactions contemplated by this Agreement with the
actual intent to hinder, delay or defraud either present or future creditors.
Assuming (i) satisfaction of the conditions to Parent’s obligation to consummate
the transactions contemplated hereby, or waiver of such conditions, (ii) that
the representations and warranties of the Company contained in this Agreement
are true and correct in all material respects (for such purposes, without giving
effect to any materiality or “Company Material Adverse Effect” qualification or
exception), (iii) compliance by the Company in all material respects of its
covenants contained herein and (iv) immediate prior the Effective Time, the
Company is solvent, at and immediately after the Effective Time, and after
giving effect to the Merger and the other transactions contemplated hereby, the
Surviving Corporation will be solvent. For the purposes of this Agreement, the
term “solvent” when used with respect to any Person, on a consolidated basis,
means that, as of any date of determination, (A) the fair value of its assets
will not be less than the sum of its debts and that the present fair saleable
value of its assets will not be less than the amount required to pay its
probable liability on its debts as they become absolute and matured); (B) such
Person will have adequate capital and liquidity with which to engage in its
business; and (C) such Person will not have incurred and does not plan to incur
debts beyond its ability to pay as they become absolute and matured.

(g) Vote/Approval Required. No vote or consent of the holders of any class or
series of capital stock of Parent is necessary to approve this Agreement or the
Merger or the transactions contemplated hereby. The vote or consent of Parent as
the sole stockholder of Merger Sub is the only vote or consent of the holders of
any class or series of capital stock of Merger Sub necessary to approve and
adopt this Agreement or the transactions contemplated hereby.

(h) Ownership of Company Capital Stock. Neither Parent nor Merger Sub “own”
(within the meaning of Section 203) or have, within the last three years,
“owned” any shares of Company Common Stock.

(i) No Business Conduct. Merger Sub was incorporated on June 20, 2014. Since its
inception, Merger Sub has not engaged in any activity, other than such actions
in connection with (i) its organization and (ii) the preparation, negotiation
and execution of this Agreement and the transactions contemplated hereby. Merger
Sub has no

 

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operations, has not generated any revenues and has no liabilities other than
those incurred in connection with the foregoing and in association with the
Merger as provided in this Agreement.

ARTICLE IV

COVENANTS RELATING TO CONDUCT

OF BUSINESS PENDING THE MERGER

Section 4.1 Conduct of Business by the Company Pending the Merger. Prior to the
Effective Time, except (i) as set forth on Schedule 4.1 of the Company
Disclosure Schedule, (ii) as expressly contemplated or permitted by this
Agreement, (iii) as required by any judgment, order, decree, statute, law,
ordinance, rule or regulation of any Governmental Entity (provided that, the
Company provides Parent prior written notice of any action to be taken) or
(iv) as otherwise consented to by Parent (which consent shall not be
unreasonably withheld, delayed or conditioned):

(a) Ordinary Course. The Company shall, and shall cause its Subsidiaries to,
conduct its businesses in the ordinary course consistent with past practice and
shall use commercially reasonably efforts to preserve intact its present
business organization and operations, maintain in effect all existing Company
Permits, preserve its assets, rights and properties in good repair and
condition, retain its current officers and key employees, and preserve its
relationships with its customers and suppliers and others having business
dealings with it.

(b) Dividends; Changes in Stock. Except for transactions solely among the
Company and its wholly owned Subsidiaries, the Company shall not, and shall
cause its Subsidiaries not to: (i) declare, set aside or pay any dividends on,
or make any other distribution in respect of any outstanding capital stock of,
or other equity interests in, the Company or its Subsidiaries; (ii) split,
combine or reclassify any capital stock of, or other equity interests in, the
Company; or (iii) repurchase, redeem or otherwise acquire, or offer to
repurchase, redeem or otherwise acquire, any capital stock of, or other equity
interests in, the Company, except in the case of clauses (ii) and (iii) as
required by the terms of any capital stock of, or other equity interests in, the
Company or any of its Subsidiaries outstanding on the date of this Agreement or
as contemplated by any existing director compensation plan, Employee Benefit
Plan or employment agreement of the Company (including in connection with the
payment of any exercise price or Tax withholding in connection with the exercise
or vesting of Company Stock Options and Company Restricted Shares).

(c) Issuance of Securities. The Company shall not, and shall cause its
Subsidiaries not to, offer, issue, deliver, grant or sell, or authorize or
propose to offer, issue, deliver, grant or sell, any capital stock of, or other
equity interests in, the Company or any of its Subsidiaries or any securities
convertible into, or any rights, warrants or options to acquire, any such
capital stock or equity interests, other than: (i) the issuance of Company
Common Stock upon the exercise of Company Stock Options outstanding as of the
date hereof, (ii) upon the expiration of any restrictions on any restricted
stock granted under the Company Stock Plans outstanding as of the date hereof
and (iii) issuances by a wholly-owned Subsidiary of the Company of such
Subsidiary’s capital stock or other equity interests to the Company or any other
wholly owned Subsidiary of the Company.

 

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(d) Governing Documents. The Company shall not, and shall cause its Subsidiaries
not to, amend or propose to amend the Company Certificate of Incorporation or
the Company Bylaws or organizational documents of any of the Company’s
Subsidiaries.

(e) No Acquisitions. The Company shall not, and shall cause its Subsidiaries not
to, directly or indirectly (i) merge, consolidate, combine or amalgamate with
any Person other than another wholly-owned Subsidiary of the Company,
(ii) acquire or agree to acquire by merging or consolidating with, purchasing
any equity interest in or a portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, other than acquisitions of assets in the
ordinary course of business and acquisitions as to which the purchase price is
not in excess of $500,000 individually or $500,000 in the aggregate, or
(iii) make any loans, advances or capital contributions to, or investments in,
any Person other than the Company or any wholly-owned Subsidiary or joint
venture investment of the Company except for loans, advances or capital
contributions pursuant to and in accordance with the terms of agreements or
legal obligations, in each case existing as of the date of this Agreement and
set forth on Schedule 4.1(e) of the Company Disclosure Schedule.

(f) No Dispositions. The Company shall not, and shall not permit any of its
Subsidiaries to, sell, lease or otherwise dispose of, or agree to sell, lease,
or otherwise dispose of, any material portion of its assets or properties, other
than any sale, lease or disposition (i) pursuant to agreements existing on the
date hereof and set forth on Schedule 4.1(f) of the Company Disclosure Schedule
or (ii) of inventory in the ordinary course of business.

(g) No Dissolution, Etc. The Company shall not, and shall not permit any of its
Subsidiaries to, authorize, recommend, propose or announce an intention to adopt
a plan of complete or partial liquidation, dissolution, restructuring,
recapitalization or other reorganization.

(h) Accounting. The Company shall not, and shall cause its Subsidiaries not to,
change in any material respect their material accounting methods or policies
(including such methods or policies relating to the estimation of reserves or
other liabilities), except as required by a change in GAAP.

(i) Tax Matters. Except as set forth on Schedule 4.1(i) of the Company
Disclosure Schedule, the Company shall not (i) make or rescind any material
express or deemed election relating to Taxes (including any election for any
joint venture, partnership, limited liability company or other investment where
the Company has the capacity to make such binding election), (ii) settle or
compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, (iii) change
in any material respect any of its methods of reporting income or deductions for
federal income tax purposes from those employed in the preparation of its
federal income Tax Returns that have been filed for prior taxable years;
(iv) file any amended income or other material Tax Return; (v) agree to an
extension or waiver of the statute of limitations with respect to the assessment
or determination of Taxes; (vi) enter into any closing agreement with respect to
any Tax; or (vii) surrender any right to claim a Tax refund.

 

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(j) Certain Employee Matters. Other than as required pursuant to the terms of
any Employee Benefit Plan or as set forth on Schedule 4.1(j) of the Company
Disclosure Schedule, the Company shall not, and shall not permit any of its
Subsidiaries to: (i) grant any increases in the compensation payable or to
become payable to any of its directors or employees, except, with respect to
employees below the level of executive officer, increases made in the ordinary
course of business, and provided that payments of annual or other bonuses and
commissions in the ordinary course of business consistent with past practice and
subject to clause (ix) below shall not constitute an increase in compensation;
(ii) grant to any director, employee or executive officer, whether past or
present, any material increase in pension, retirement allowance or other
employee benefits; (iii) enter into any new, or amend any existing, employment
or severance or termination agreement with any director, employee or executive
officer; (iv) establish or become obligated under any collective bargaining
agreement or Employee Benefit Plan which was not in existence prior to the date
of this Agreement, or amend any such plan or arrangement in existence on the
date of this Agreement if such amendment would have the effect of enhancing any
benefits thereunder; (v) loan or advance any money or other property to any
present or former director, employee or executive officer, other than loans or
advances to employees below the executive officer level made in the ordinary
course of business consistent with past practice; (vi) grant any equity or
equity-based awards; (vii) increase the funding obligation or contribution rate
of any Employee Benefit Plan subject to Title IV other than in the ordinary
course of business consistent with past practice; (viii) hire or terminate any
executive officer other than for “cause” or (ix) waive any performance
conditions with respect to, or increase the amount or accelerate the payment of,
any compensation payable under any Employee Benefit Plan.

(k) Related Party Agreements. Except as set forth on Schedule 4.1(k) of the
Company Disclosure Schedule, the Company shall not enter into or amend in any
manner any contract, agreement or commitment with any former or present director
or officer of the Company or any of its Subsidiaries or with any Affiliate of
any of the foregoing Persons or any other Person covered under Item 404 of
Regulation S-K under the Securities Act.

(l) Indebtedness. Except as set forth on Schedule 4.1(l) of the Company
Disclosure Schedule, the Company shall not, and shall cause its Subsidiaries not
to, (i) incur, create or assume any indebtedness for borrowed money or guarantee
any such indebtedness of another Person or issue or sell any debt securities or
rights to acquire any debt securities of the Company or any of its Subsidiaries
or guarantee any debt securities of another Person or (ii) except in the
ordinary course of business, create any Encumbrances on any property or assets
of the Company or any of its Subsidiaries in connection with any indebtedness
thereof other than Permitted Encumbrances. Notwithstanding the foregoing, clause
(i) of the immediately preceding sentence shall not restrict the incurrence of
indebtedness for borrowed money (A) under the Existing Credit Facilities made in
the ordinary course of the Company’s business, (B) for refinancings of existing
debt (including related premiums and expenses) on terms no less favorable in the
aggregate than the existing terms of such existing debt, (C) for immaterial
borrowings that, in each case, permit prepayment of such indebtedness without
penalty (other than LIBOR breakage costs) or (D) by the Company that is owed to
any wholly owned Subsidiary of the Company or by any wholly owned Subsidiary of
the Company that is owed to the Company or another wholly owned Subsidiary of
the Company.

 

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(m) Material Contracts. The Company shall not, and shall cause its Subsidiaries
not to, enter into or amend or modify in any material respect, terminate, cancel
or extend any Company Contract or expressly waive, release or assign any
material benefits or claims under any Company Contract or enter into any
contract or agreement that if in effect as of the date hereof would be a Company
Contract, except, in each case, in the ordinary course consistent with past
practice or as set forth on Schedule 4.1(m) of the Company Disclosure Schedule.

(n) Capital Expenditures. The Company shall not, and shall cause its
Subsidiaries not to, make or incur any capital expenditures in excess of
$100,000 individually or $750,000 in the aggregate, except for as set forth on
Schedule 4.1(n).

(o) Litigation. Except as set forth on Schedule 4.1(o) of the Company Disclosure
Schedule, the Company shall not, and shall cause its Subsidiaries not to,
commence, compromise, discharge or settle any material litigation or waive any
material rights with respect thereto.

(p) Insurance. The Company shall not, and shall cause its Subsidiaries not to,
fail to keep in full force and effect the Company’s or any of its Subsidiaries’
current insurance policies or other comparable insurance, in each case,
materially affecting the business of the Company or any of its Subsidiaries, or
materially reduce the amount of any insurance coverage provided by existing
insurance policies except with respect to insurance policies that will expire or
be replaced in the ordinary course of business consistent with past practice.

(q) New Business. The Company shall not, and shall cause its Subsidiaries not
to, enter into any new line of business.

(r) Agreement. The Company shall not, and shall cause its Subsidiaries not to,
authorize any of, or commit or agree to take any of the actions listed in
clauses (b) through (q).

Section 4.2 No Solicitation.

(a) From the date of this Agreement, the Company shall not, and shall cause its
Subsidiaries not to, and shall not authorize or (to the extent within its
control) permit any of its and its Subsidiaries’ Representatives to, directly or
indirectly, (i) initiate, solicit or knowingly encourage or take any other
action designed to result in or facilitate any inquiries regarding or the making
of offers or proposals that constitute an Acquisition Proposal, (ii) engage in
any discussions or negotiations regarding, or provide any non-public information
or data to, any Person (other than Parent, Merger Sub or any of their
Representatives or any of the Company or its Representatives) with respect to an
Acquisition Proposal, (iii) (x) in the case of the Company and its Subsidiaries,
approve, recommend or declare advisable any Acquisition Proposal or (y) in the
case of any of the Company’s Representatives, publicly approve, recommend or
declare advisable any Acquisition Proposal, or (iv) enter into any agreement
relating to an Acquisition Proposal (other than a confidentiality agreement
referred to below) or requiring the Company to abandon, terminate or breach its
obligations hereunder or fail to consummate the Merger. The Company shall, and
shall cause its Subsidiaries and its and their Representatives to, immediately
cease and cause to be terminated all existing discussions or negotiations
concerning an Acquisition Proposal with any Person conducted and request the
prompt return or destruction of all confidential information previously
furnished in connection with an Acquisition Proposal.

 

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(b) Notwithstanding Section 4.2(a), at any time prior to obtaining the Requisite
Stockholder Vote, in response to a bona fide written Acquisition Proposal that
the Board determines in good faith (after consultation with its outside legal
advisors and financial advisors) constitutes or reasonably be expected to lead
to a Superior Proposal, and which Acquisition Proposal was not solicited after
the date hereof by the Company, any of its Subsidiaries or Representatives and
was made after the date hereof and did not otherwise result from a breach of
Section 4.2(a), the Company may, subject to compliance with this Section 4.2,
(i) furnish information with respect to the Company and its Subsidiaries to the
person making such Acquisition Proposal (and its Representatives) pursuant to a
customary confidentiality agreement not less restrictive to such person than the
provisions of the Confidentiality Agreement; provided, however, that all such
information has previously been provided to Parent or is provided to Parent
prior to or substantially concurrent with the time it is provided to such
Person, and (ii) participate in discussions or negotiations with the Person
making such Acquisition Proposal (and its Representatives) regarding such
Acquisition Proposal, if and only to the extent that in connection with the
foregoing clauses (i) and (ii), the Board concludes in good faith, after
consultation with its outside legal advisors, that the failure to take such
action would be (or would be reasonably likely to be) inconsistent with its
fiduciary duties to the Company’s stockholders under Delaware law.

(c) Notwithstanding anything to the contrary contained herein, the Board shall
not be entitled to exercise its right to make an Adverse Recommendation Change
or terminate this Agreement under Section 7.1(d) with respect to a Superior
Proposal unless (i) the Company has complied in all material respects with this
Section 4.2, (ii) the Company promptly notifies Parent, in writing, at least
four (4) Business Days before taking that action, of its intention to do so in
response to an Acquisition Proposal that constitutes a Superior Proposal (in
which case such notification shall have attached thereto the most current
version of any proposed agreement or a detailed summary of the material terms of
any such proposal and the identity of the offeror) and (iii) during such
four-Business Day period, if requested by Parent, the Company and its
Representatives shall engage in good faith negotiations with Parent and its
Representatives to amend this Agreement in such a manner that any Acquisition
Proposal which was determined to constitute a Superior Proposal no longer is a
Superior Proposal (taking into account any changes to the financial terms of
this Agreement proposed by Parent following the notice provided pursuant to
Section 4.2(c)(ii)) (it being understood that any amendment to the financial
terms or other material terms of the Acquisition Proposal which was determined
to constitute a Superior Proposal shall require a new written notification from
the Company and the Company shall be required to comply against with this
Section 4.2(c), except that references to the four (4) Business Day period shall
be deemed references to a two-Business Day period).

(d) In addition to the obligations of the Company set forth in paragraphs (a),
(b) and (c) of this Section 4.2, the Company shall as promptly as practicable
(and in any event within 24 hours after receipt) notify Parent orally and in
writing of any Acquisition Proposal, such notice to include the identity of the
person making such Acquisition Proposal and a copy of such Acquisition Proposal,
including draft agreements or term sheets submitted in connection therewith (or,
where no such copy is available, a reasonably detailed description of such

 

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Acquisition Proposal), including any modifications thereto. The Company shall
(i) keep Parent reasonably informed in all material respects of the status and
details (including any change to the terms thereof) of any Acquisition Proposal
and (ii) provide to Parent as soon as practicable after receipt or delivery
thereof copies of all correspondence and other written material sent or provided
to the Company or any of its Subsidiaries from any person that describes any of
the terms or conditions of any Acquisition Proposal. The Company shall not, and
shall cause the Company’s Subsidiaries not to, enter into any Contract with any
person subsequent to the date of this Agreement that prohibits the Company from
providing such information to Parent.

(e) Nothing contained in this Section 4.2 shall prohibit the Company from taking
and disclosing to its stockholders a position contemplated by Rule 14e-2(a)(2)
or (3) under the Exchange Act or making a statement required under Rule 14d-9
under the Exchange Act; provided, however, that (i) any such disclosure (other
than issuance by the Company of a “stop, look and listen” or similar
communication of the type contemplated by Rule 14d-9(f) under the Exchange Act)
that addresses or relates to the approval, recommendation or declaration of
advisability by the Board with respect to an Acquisition Proposal shall be
deemed to be an Adverse Recommendation Change unless the Board, in connection
with such communication, publicly reaffirms the Company Recommendation, and
(ii) in no event shall the Company or the Board or any committee thereof take,
or agree or resolve to take, any action prohibited by Section 4.2(b).

(f) “Acquisition Proposal” means any bona fide inquiry, contract, proposal,
offer or indication of interest relating to any transaction or series of related
transactions (other than transactions with Parent or any of its Subsidiaries)
involving: (i) any merger, business combination, amalgamation, share exchange,
recapitalization, consolidation, liquidation or dissolution involving the
Company or any of its Subsidiaries; (ii) any direct or indirect acquisition by
any Person or “group” (as defined under Section 13(d) of the Exchange Act) of
any business or assets of the Company or any of its Subsidiaries (including
capital stock of or ownership interest in any Subsidiary) that generated 20% or
more of the Company’s consolidated net revenue or earnings before interest,
taxes, depreciation and amortization for the preceding twelve months or that
represents 20% or more of the consolidated assets (based on fair market value of
the Company and its Subsidiaries taken as a whole immediately prior to such
transaction, or any joint venture, license, lease or long-term supply agreement
having a similar economic effect; or (iii) any acquisition of beneficial
ownership (as defined under Section 13(d) of the Exchange Act) by any Person or
“group” of 20% or more of the voting stock of the Company or any tender or
exchange offer that if consummated would result in any person or group
beneficially owning 20% or more of the voting stock of the Company. “Superior
Proposal” means any Acquisition Proposal (with the percentages set forth in the
definition of such term changed from 20% to 50%), that in the good faith
determination of the Board, after consultation with its financial advisors and
outside legal advisors and after taking into account relevant legal, financial,
regulatory and other aspects of such proposal (including, but not limited to,
any break-up fee, expense reimbursement provisions, conditions and timing to
consummation, form of consideration and financing terms) and the Person or group
making such proposal, would, if consummated in accordance with its terms, result
in a transaction that is (A) more favorable to the stockholders of the Company
from a financial point of view than the transactions contemplated by this
Agreement (after giving effect to any changes to the financial terms of this
Agreement proposed by Parent in response to such offer or otherwise) and
(B) reasonably capable of being completed on the terms set forth in the offer.

 

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ARTICLE V

ADDITIONAL AGREEMENTS

Section 5.1 Preparation of Proxy Statement. Each of the Parties shall cooperate
with each other in the preparation of the Proxy Statement (including the
preliminary Proxy Statement) and any amendment or supplement to the preliminary
Proxy Statement. The Company shall prepare and file with the SEC as promptly as
reasonably practicable a preliminary Proxy Statement (but in no event later than
fifteen (15) Business Days after the date of this Agreement); provided, however,
that the Company shall furnish such preliminary Proxy Statement to Parent and
give Parent and its legal counsel a reasonable opportunity to review such
preliminary Proxy Statement prior to filing with the SEC and shall accept all
reasonable additions, deletions or changes suggested by Parent in connection
therewith. The Company shall notify Parent of the receipt of any comments of the
SEC staff with respect to the preliminary Proxy Statement and of any requests by
the SEC for any amendment or supplement thereto or for additional information
and shall provide to Parent as promptly as reasonably practicable copies of all
written correspondence between the Company or any representative of the Company
and the SEC with respect to the Proxy Statement. If comments are received from
the SEC staff with respect to the preliminary Proxy Statement, the Company shall
use its reasonable best efforts to respond as promptly as practicable to the
comments of the SEC and to cause the Proxy Statement in definitive form to be
cleared by the SEC. The Company shall provide Parent and its legal counsel with
a reasonable opportunity to review any amendment or supplement to the
preliminary Proxy Statement prior to filing with the SEC and shall accept all
reasonable additions, deletions or changes suggested by Parent in connection
therewith. Parent shall promptly provide the Company with such information in
its possession as may be required to be included in the Proxy Statement or as
may be reasonably required to respond to any comment of the SEC staff. After all
the comments received from the SEC have been cleared by the SEC staff and all
information required to be contained in the Proxy Statement has been included
therein by the Company, the Company shall file the definitive Proxy Statement
with the SEC and cause the Proxy Statement to be mailed (including by electronic
delivery if permitted) as promptly as practicable thereafter to its stockholders
of record, as of the record date established by the Board.

Section 5.2 Access to Information. Subject to Antitrust Laws, the Company shall
afford to Parent and its Representatives reasonable access, at reasonable times
upon reasonable prior notice, to the officers, employees, properties, offices
and other facilities of the Company and its Subsidiaries and to their books,
records, contracts and documents and shall furnish reasonably promptly to Parent
and its Representatives such information concerning the Company’s and its
Subsidiaries’ business (including financial, operating and other data),
properties, assets, contracts, records and personnel as may be reasonably
requested, from time to time, by or on behalf of Parent. Each of Parent and its
Representatives shall conduct any such activities in such a manner as not to
interfere unreasonably with the business or operations of the Company or its
Subsidiaries or otherwise cause any unreasonable interference with the prompt
and timely discharge by the employees of the Company and its Subsidiaries of
their normal duties. With respect to any person, “Representatives” shall mean,
collectively, such person’s

 

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officers, directors, employees, accountants, consultants, agents, legal counsel,
financial advisors and other representatives. Notwithstanding the foregoing
provisions of this Section 5.2, the Company shall not be required to, or to
cause any of its Subsidiaries to, grant access or furnish information to Parent
or any of its Representatives to the extent that such information is subject to
an attorney/client or attorney work product privilege or that such access or the
furnishing of such information is prohibited by law or an existing contract or
agreement (it being agreed that the Parties shall use their reasonable best
efforts to cause such information to be provided in a manner that does not cause
such jeopardization or contravention). The Confidentiality Agreement dated as of
March 11, 2014 between Parent and the Company (the “Confidentiality Agreement”),
shall survive the execution and delivery of this Agreement and, subject to
Section 7.5, shall apply to all information furnished thereunder or hereunder
and any other activities contemplated thereby.

Section 5.3 Stockholders’ Meeting. The Company shall call, hold and convene a
meeting of its stockholders to consider the adoption of this Agreement, to be
held as promptly as reasonably practicable after the date hereof. Subject to an
Adverse Recommendation Change expressly permitted pursuant to Section 4.2(c) or
this Section 5.3, (i) the Board shall recommend that the stockholders of the
Company vote in favor of the adoption of this Agreement (the “Company
Recommendation”) at the Company’s stockholders’ meeting and the Board shall use
its reasonable best efforts to solicit from stockholders of the Company proxies
in favor of the adoption of this Agreement and (ii) the Proxy Statement shall
include a statement to the effect that the Board has recommended that the
Company’s stockholders vote in favor of adoption of this Agreement at the
Company’s stockholders’ meeting. The Board shall not (i) withhold, withdraw,
modify or qualify (or publicly propose to withdraw, modify or qualify) in any
manner adverse to Parent the Company Recommendation or (ii) adopt, approve or
recommend, endorse or otherwise declare advisable the adoption of any
Acquisition Proposal (any action described in clauses (i) or (ii) being referred
to herein as a “Adverse Recommendation Change”); provided that, at any time
prior to obtaining the Requisite Stockholder Vote, the Board may make an Adverse
Recommendation Change only if the Board determines in good faith, after
consultation with its outside legal advisors, that (A) the failure to take such
action would be inconsistent with its fiduciary duties to the Company’s
stockholders under Delaware law and (B) if such Adverse Recommendation Change is
made in response to an Acquisition Proposal, the Company has complied with
Section 4.2(c); provided that no Adverse Recommendation Change may be made in
response to an Acquisition Proposal and the Company may not terminate this
Agreement pursuant to Section 7.1(d) unless the Board determines that such
Acquisition Proposal constitutes a Superior Proposal. In any case in which the
Company makes an Adverse Recommendation Change pursuant to Section 4.2, unless
this Agreement is terminated, (1) the Company shall nevertheless submit this
Agreement to a vote of its stockholders and (2) the Proxy Statement and any and
all accompanying materials (including the proxy card (which shall provide that
signed proxies which do not specify the manner in which the shares of Company
Common Stock subject thereto are to be voted shall be voted “FOR” adopting this
Agreement), the “Proxy Materials”)) shall be identical in form and content to
Proxy Materials that would have been prepared by the Company had no Adverse
Recommendation Change been made, except for appropriate changes to the
disclosure in the Proxy Statement stating that such Adverse Recommendation
Change has been made. If the Company has complied with its obligations pursuant
to Section 4.2, the Company may adjourn or postpone the Company’s stockholders’
meeting to the extent necessary to ensure that any required supplement or
amendment to the

 

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Proxy Statement is provided to the Company’s stockholders or, if as of the time
for which the Company’s stockholders’ meeting is originally scheduled (as set
forth in the Proxy Statement) there are insufficient shares of Company Common
Stock represented (either in person or by proxy) to constitute a quorum
necessary to conduct business at such meeting; provided, however, that no
adjournment may be to a date on or after three Business Days prior to the date
set forth in Section 7.1(b)(ii).

Section 5.4 HSR and Other Approvals.

(a) Except for the filings and notifications made pursuant to the Premerger
Notification Rules or other applicable Antitrust Laws to which Sections 5.4(b)
and 5.4(c), and not this Section 5.4(a), shall apply, promptly following the
execution of this Agreement, each of the Parties shall (i) proceed to prepare
and file with the appropriate Governmental Entities all authorizations,
consents, notifications, certifications, registrations, declarations and filings
that are necessary in order to consummate the transactions contemplated by this
Agreement and shall diligently and expeditiously prosecute, and shall cooperate
fully with each other in the prosecution of, such matters and (ii) use their
reasonable best efforts to obtain all required consents, approval or waivers
from third parties (other than Governmental Entities), including under any
Material Contract as may be necessary in order to consummated the transaction
contemplate by this Agreement.

(b) As promptly as reasonably practicable following the execution of this
Agreement, but in no event later than fifteen (15) Business Days following the
date of this Agreement, the Parties shall make all pre-merger notification
filings required under the HSR Act pursuant to the pre-merger notification rules
identified therein (the “Premerger Notification Rules”). Each of Parent and the
Company shall cooperate fully with each other and shall furnish to the other
such necessary information and reasonable assistance as the other may reasonably
request in connection with its preparation of any filings under any Premerger
Notification Rules. Unless otherwise agreed, Parent and the Company shall each
use its reasonable best efforts to ensure the prompt expiration of any
applicable waiting period under any Premerger Notification Rules. Parent and the
Company shall each use its reasonable best efforts to respond to and comply with
any request for information from any Governmental Entity charged with enforcing,
applying, administering, or investigating any statute, law, ordinance, rule or
regulation designed to prohibit, restrict or regulate actions for the purpose or
effect of monopolization, restraining trade or abusing a dominant position or
requiring a notification of this transaction pursuant to an Antitrust Law, HSR
Act or merger control regulation or regime (collectively, “Antitrust Laws”),
including the Federal Trade Commission, the Department of Justice, any attorney
general of any state of the United States, the European Commission, or any other
competition authority or court of any jurisdiction to enforce Antitrust Laws
(“Antitrust Authority”). Subject to applicable law and instructions from any
Governmental Entity, Parent and the Company shall keep each other apprised of
the status of any communications with, and any inquiries or requests for
additional information from any Governmental Entity, including promptly
furnishing the other with notices or other written communications received by
Parent or the Company, as the case may be, or any of their respective
Subsidiaries, from any Governmental Entity and/or third party with respect to
such transactions contemplated by this Agreement.

 

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(c) Parent shall take all action necessary (and which Parent is lawfully capable
of taking) to obtain the expiration of any applicable waiting period, obtain any
clearance or approval and to prevent any Antitrust Authority or other Person, as
the case may be, from filing any action with a Governmental Entity, which, if
the Antitrust Authority or other Person prevailed, would, permanently or
temporarily restrain, enjoin or otherwise prevent or materially delay the
consummation of the Merger beyond the Termination Date, including entering into
an agreement to (i) sell or otherwise dispose of, or hold separate and agree to
sell or otherwise dispose of, assets, categories of assets or businesses of the
Company or Parent or their respective Subsidiaries; (ii) terminate existing
relationships and contractual rights and obligations of the Company or Parent or
their respective Subsidiaries; (iii) terminate or create any relevant venture or
other arrangement; (iv) create any relationship and contractual rights and
obligations of the Company or Parent or their respective Subsidiaries; or
(v) effectuate any other change or restructuring of the Company or Parent (and,
in each case, to enter into agreements or stipulate to the entry of an order or
decree or file appropriate applications with any Antitrust Authority in
connection with any of the foregoing) (each a “Divestiture Action”). Parent or
Merger Sub must offer any Divestiture Action to an Antitrust Authority such that
all applicable waiting periods expire and all clearances and approvals are
obtained prior to the Termination Date. In the event that any action is
threatened or instituted challenging the Merger as violative of any Premerger
Notification Rule or other Antitrust Law, Parent shall take such action,
including any Divestiture Action, as may be necessary to avoid, resist or
resolve such action. Parent shall be entitled to direct (after consultation with
the Company) any Antitrust Authority or other Person relating to any of the
foregoing. Neither Parent nor Company shall initiate or participate in any
meeting or communication with an Antitrust Authority or Governmental Entity
relating to the Antitrust Laws without the participation of the other Party,
unless such participation is prohibited by the Antitrust Authority or
Governmental Entity. The Company and its Subsidiaries will use its commercially
reasonable efforts to take such actions as reasonably requested by Parent in
connection with obtaining any actions, consents, approvals or waivers with
respect to the Antitrust Laws, provided that Parent will in good faith consider
any views or input provided by the Company with respect to such matters. In
addition, in the event that any permanent or preliminary injunction or other
order is entered or becomes reasonably foreseeable to be entered in any
proceeding that would make consummation of the transactions contemplated hereby
in accordance with the terms of this Agreement unlawful or that would restrain,
enjoin or otherwise prevent or materially delay the consummation of the
transactions contemplated by this Agreement, Parent shall take promptly any and
all steps necessary to vacate, modify or suspend such injunction or order so as
to permit such consummation prior to the Termination Date.

(d) Notwithstanding the foregoing or anything contained in this Agreement that
may be to the contrary, including Section 5.4(c), (1) neither Parent nor the
Company shall be required to take any Divestiture Action that is not conditioned
upon consummation of the Merger, (2) the Company shall not agree to take any
Divestiture Action without the consent of Parent and (3) Parent shall not be
required to take (pursuant to this Section 5.4 or any other provision of this
Agreement) any action (including a Divestiture Action) to the extent such action
(including a Divestiture Action), individually or in the aggregate with all
other actions (including Divestiture Actions), would reasonably be expected to
result in a material adverse effect on the combined businesses of Parent, the
Company and their Subsidiaries, taken as a whole.

 

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Section 5.5 Employee Matters.

(a) From the Effective Time through December 31, 2015, Parent shall, and shall
cause the Surviving Corporation to, provide (x) each of the employees of the
Company and its Subsidiaries who, as of the Effective Time, remains in the
active employment of the Surviving Corporation or any of its Subsidiaries (the
“Company Employees”) with base salary and an annual cash incentive target
opportunity that, in the aggregate, are no less favorable than those provided to
such Company Employee immediately prior to the Effective Time and (y) the
Company Employees in the aggregate with employee benefits that are no less
favorable in the aggregate than those employee benefits (excluding defined
benefit pension, retiree medical and equity-based compensation) provided to
Company Employees immediately prior to the Effective Time.

(b) Parent shall, and shall cause the Surviving Corporation to, honor, in
accordance with its terms, each Employee Benefit Plan and all obligations
thereunder including any rights or benefits arising as a result of the
transactions contemplated under this Agreement (either alone or in combination
with any other event, including termination of employment); provided that the
foregoing shall not prohibit the Surviving Corporation from amending or
terminating any such arrangement in accordance with its terms, and Parent hereby
agrees and acknowledges that the consummation of the Merger constitutes a
“change of control” or a “change in control” or similar term, as the case may
be, for all purposes under the Employee Benefit Plans listed on Schedule 5.5(b)
to the Company Disclosure Schedule.

(c) With respect to any “employee benefit plan,” as defined in Section 3(3) of
ERISA, maintained by the Surviving Corporation or any of its Affiliates
(including any vacation, paid time-off and severance plans), for all purposes,
including determining eligibility to participate, level of benefits, vesting,
benefit accruals (other than for purposes of any defined benefit pension plan)
and early retirement subsidies, each Company Employee’s service with the Company
or any of its Subsidiaries (as well as service with any predecessor employer of
the Company or any such Subsidiary, to the extent service with the predecessor
employer is recognized by the Company or such Subsidiary) shall be treated as
service with the Surviving Corporation or its Affiliates to the same extent such
service was credited under similar Employee Benefit Plans prior to the Closing;
provided, however, that such service need not be recognized to the extent that
such recognition would result in any duplication of benefits.

(d) Parent shall, or shall use commercially reasonable efforts to cause the
Surviving Corporation to, waive any pre-existing condition limitations,
exclusions, actively-at-work requirements and waiting periods under any welfare
benefit plan maintained by the Surviving Corporation or any of its Affiliates in
which Company Employees (and their eligible dependents) will be eligible to
participate from and after the Effective Time, except to the extent that such
pre-existing condition limitations, exclusions, actively-at-work requirements
and waiting periods would not have been satisfied or waived under the comparable
Employee Benefit Plan immediately prior to the Effective Time. Parent shall, or
shall cause the Surviving Corporation to, recognize the dollar amount of all
co-payments, deductibles and similar expenses incurred by each Company Employee
(and his or her eligible dependents) during the calendar year in which the
Effective Time occurs for purposes of satisfying such year’s deductible and
co-payment limitations under the relevant welfare benefit plans in which they
will be eligible to participate from and after the Effective Time.

 

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(e) The Company will provide final copies of 280G calculations with respect to
employees, directors, independent contractors and stockholders of the Company
and its Subsidiaries in connection with the transactions contemplated by this
Agreement (together with the underlying assumptions and documentation on which
such calculations are based) no later than five (5) Business Days prior to the
Closing.

(f) At the Closing, the Company shall provide Parent with a true and accurate
list of all “employment losses” as that term is used in the WARN Act at the
Company or any of its Affiliates that occurred in the ninety (90) calendar days
preceding the Closing Date, showing each employee’s name, position, date of
separation, employer name, facility, operating unit and reason for separation
from employment (the “Employment Loss List”). Provided that the Employment Loss
List is supplied to Parent, Parent shall, or shall cause the Surviving
Corporation to, provide any required notice under the WARN Act, and to otherwise
comply with the WARN Act with respect to any “plant closing” or “mass layoff”
(as defined in the WARN Act) affecting the Company Employees (including as a
result of the consummation of the transactions contemplated by this Agreement)
and occurring from and after the Effective Time. Parent shall not, and shall
cause the Surviving Corporation and its Subsidiaries not to, take any action on
or after the Effective Time that would cause any termination of employment of
any employees by the Surviving Corporation or its Subsidiaries that occurs on or
prior to the Effective Time to require that notice have been given under the
WARN Act for any such employment terminations. Parent shall, or shall cause the
Surviving Corporation, to provide any required notice under the WARN Act, and to
otherwise comply with the WARN Act with respect to any such plant closing or
mass layoff affecting Company Employees and occurring prior to the Effective
Time.

(g) The provisions of this Section 5.5 are for the sole benefit of the Parties
and nothing herein, expressed or implied, is intended or shall be construed to
confer upon or give to any person (including, for the avoidance of doubt, any
current or former employees, directors, or independent contractors of any of the
Company or any of its Subsidiaries, Parent or any of its Subsidiaries, or on or
after the Effective Time, the Surviving Corporation or any of its Subsidiaries),
other than the Parties and their respective permitted successors and assigns,
any legal or equitable or other rights or remedies with respect to the matters
provided for in this Section 5.5. Nothing contained herein shall be construed as
requiring, and the Company shall take no action that would have the effect of
requiring, Parent or the Surviving Corporation to continue any specific employee
benefit plans or to continue the employment of any specific person, nor shall
any provision herein be construed as an amendment to any Employee Benefit Plan.

Section 5.6 Indemnification; Directors’ and Officers’ Insurance.

(a) Without limiting any other rights that any Indemnified Person may have
pursuant to any employment agreement, indemnification agreement or otherwise,
from and after the Effective Time, from the Effective Time until the sixth
(6th) anniversary of the date on which the Effective Time occurs, Parent shall
cause the Surviving Corporation to indemnify, defend and hold harmless 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, a director or officer of the Company
or any of its Subsidiaries or who acts as a fiduciary under any Employee Benefit
Plan of the

 

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Company or any of its Subsidiaries (the “Indemnified Persons”) against all
losses, claims, damages, costs, fines, penalties, expenses (including attorneys’
and other professionals’ fees and expenses), liabilities or judgments or amounts
that are paid in settlement with the approval of the indemnifying party (not to
be unreasonable withheld, conditioned or delayed) of or in connection with any
threatened or actual claim, action, suit, proceeding or investigation based in
whole or in part on or arising in whole or in part out of the fact that such
Person is or was a director or officer of the Company or any of its
Subsidiaries, a fiduciary under any Employee Benefit Plan of the Company or any
of its Subsidiaries or is or was serving at the request of the Company or any of
its Subsidiaries as a director, officer, employee or agent of another
corporation, partnership, limited liability company, joint venture, employee
benefit plan, trust or other enterprise or by reason of anything done or not
done by such Person in any such capacity whether pertaining to any act or
omission occurring or existing prior to, at or after the Effective Time and
whether asserted or claimed prior to, at or after the Effective Time
(“Indemnified Liabilities”), including all Indemnified Liabilities based in
whole or in part on, or arising in whole or in part out of, or pertaining to,
this Agreement or the transactions contemplated hereby, in each case to the
fullest extent permitted under applicable law (and Parent shall cause the
Surviving Corporation and its Subsidiaries to pay expenses in advance of the
final disposition of any such claim, action, suit, proceeding or investigation
to each Indemnified Person in accordance with the constituent documents of the
Surviving Corporation and its Subsidiaries). Any Indemnified Person wishing to
claim indemnification under this Section 5.6, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Surviving
Corporation (but the failure so to notify shall not relieve a Person from any
liability that it may have under this Section 5.6 except to the extent such
failure materially prejudices such Person’s position with respect to such
claims) and shall deliver to Parent and the Surviving Corporation any
undertaking required by applicable law, but without any requirement for the
posting of a bond or any other terms or conditions other than those expressly
set forth herein.

(b) From the Effective Time, Parent and the Surviving Corporation shall not
amend, repeal or otherwise modify the certificate of incorporation or bylaws of
the Surviving Corporation such that the certificate of incorporation or bylaws
of the Surviving Corporation would contain provisions less favorable with
respect to indemnification, advancement of expenses and exculpation of former or
present directors and officers than as are currently set forth in the Company’s
certificate of incorporations and bylaws. Parent shall, and shall cause the
Surviving Corporation to, fulfill and honor any indemnification agreements
between the Company and any of its directors, officers or employees existing
immediately prior to the Effective Time.

(c) Parent shall (or with Parent’s consent, the Company may) cause to be put in
place and shall fully prepay immediately prior to the Effective Time a “tail”
insurance policy with a claims period of at least six (6) years from the
Effective Time from an insurance carrier with the same or better credit rating
as the Company’s current insurance carrier with respect to directors’ and
officers’ liability insurance in an amount and scope at least as favorable as
the Company’s existing policies with respect to matters, acts or omissions
existing or occurring at or prior to the Effective Time; provided that Parent
shall not be obligated to expend, nor shall the Company be permitted to expend,
more than a single payment amount for such six (6) year period in excess of
three hundred percent (300%) of the annual premiums for the current policies of
directors’ and officer’s liability insurance maintained by the Company to
purchase such “tail” insurance.

 

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(d) In the event that Parent or the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then, in each such case, proper provisions
shall be made so that the successors and assigns of Parent or the Surviving
Corporation, as the case may be, shall assume the obligations set forth in this
Section 5.6. The provisions of this Section 5.6 are intended to be for the
benefit of, and shall be enforceable by, the Parties and each Person entitled to
indemnification or insurance coverage or expense advancement pursuant to this
Section 5.6, and his, her or their respective heirs and representatives.

Section 5.7 Agreement to Defend. In the event any claim, action, suit,
investigation or other legal or administrative proceeding by any Governmental
Entity or other Person is commenced that questions the validity or legality of
the transactions contemplated hereby or seeks damages in connection therewith,
each of the Parties shall cooperate and use its reasonable best efforts to
defend against and respond thereto. The Company shall give Parent the
opportunity to participate in the defense or settlement of any such claim,
action, suit, investigation or other legal or administrative proceeding against
the Company and/or its directors relating to the transactions contemplated by
this Agreement, and no such settlement shall be agreed to without Parent’s prior
written consent (such consent not to be unreasonably withheld, delayed or
conditioned).

Section 5.8 Public Announcements. Each of the Parties shall consult with each
other Party before issuing any press release or otherwise making any public
statements with respect to this Agreement or the transactions contemplated by
this Agreement, give each other the reasonable opportunity to review and comment
upon, any such press release or other public statements, and shall not issue any
such press release or make any such public statement prior to such consultation,
except as such Party may reasonably conclude may be required by applicable law,
court process or by obligations pursuant to any listing agreement with any
national securities exchange or national securities quotation system. The
Parties agree that the initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be in the form heretofore
agreed to by the Parties.

Section 5.9 Advice of Changes; SEC Filings. Subject to compliance with all
applicable laws, the Company and Parent, as the case may be, shall confer on a
regular basis with each other, report on operational matters and shall promptly
advise each other orally and in writing of any change or event having, or which
would be reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect or Parent Material Adverse Effect, as the case may be.
The Company and Parent shall promptly provide each other (or their respective
counsel) copies of all filings made by such Party or its Subsidiaries with the
SEC or any other Governmental Entity in connection with this Agreement and the
transactions contemplated hereby. Nothing contained in this Agreement shall give
Parent, directly or indirectly, rights to control or direct the Company’s or its
Subsidiaries’ operations prior to the Effective Time. Prior to the Effective
Time, the Company shall exercise, consistent with the terms and conditions of
this Agreement, complete control and supervision of the operations of each of
the Company and its Subsidiaries.

 

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Section 5.10 Conveyance Taxes. Each of the Company and Parent shall
(a) cooperate in the preparation, execution and filing of all Tax Returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
Taxes, any transfer, recording, registration and other fees and any similar
Taxes which become payable in connection with the transactions contemplated by
this Agreement, (b) cooperate in the preparation, execution and filing of all
applications or other documents regarding any applicable exemptions to any such
Tax or fee, and (c) pay any such Tax or fee which becomes payable by it on or
before the due date therefor.

Section 5.11 Investigation by Parent and Merger Sub; No Other Representations or
Warranties.

(a) Each of Parent and Merger Sub acknowledges and agrees that it has made its
own inquiry and investigation into, and, based thereon, has formed an
independent judgment concerning, the Company and its Subsidiaries and their
businesses and operations, and Parent and Merger Sub have requested such
documents and information from the Company as each such party considers material
in determining whether to enter into this Agreement and to consummate the
transactions contemplated in this Agreement. In connection with such
investigation, Parent, Merger Sub and their representatives have received from
the Company or its representatives certain other estimates, projections and
other forecasts for the Company and its Subsidiaries and certain estimates,
plans and budget information. Each of Parent and Merger Sub acknowledges and
agrees that there are uncertainties inherent in attempting to make such
projections, forecasts, estimates, plans and budgets; that Parent and Merger Sub
are familiar with such uncertainties; that Parent and Merger Sub are each taking
full responsibility for making their own evaluation of the adequacy and accuracy
of all estimates, projections, forecasts, plans and budgets so furnished to them
or their representatives; and that Parent and Merger Sub shall not (and shall
cause all of their respective Subsidiaries or other Affiliates or any other
Person acting on their behalf to not) assert any claim or cause of action
against the Company or any of the Company’s direct or indirect partners,
directors, officers, employees, agents, stockholders, Affiliates, consultants,
counsel, accountants, investment bankers or representatives with respect
thereto, or hold any such Person liable with respect thereto.

(b) Each of Parent and Merger Sub agrees that, except for the representations
and warranties made by the Company that are expressly set forth in Section 3.1
of this Agreement, the Company has not made and shall not be deemed to have made
any representation or warranty of any kind. Without limiting the generality of
the foregoing, each of Parent and Merger Sub agrees that none of the Company,
any holder of the Company’s securities or any of their respective Affiliates or
representatives, makes or has made any representation or warranty to Parent,
Merger Sub or any of their representatives or Affiliates with respect to:

(i) any projections, forecasts or other estimates, plans or budgets of future
revenues, expenses or expenditures, future results of operations (or any
component thereof), future cash flows (or any component thereof) or future
financial condition (or any component thereof) of the Company or any of its
Subsidiaries or the future business, operations or affairs of the Company or any
of its Subsidiaries heretofore or hereafter delivered to or made available to
Parent, Merger Sub or their respective representatives or Affiliates; or

(ii) any other information, statement or documents heretofore or hereafter
delivered to or made available to Parent, Merger Sub or their respective
representatives or Affiliates, except to the extent and as expressly covered by
a representation and warranty made by the Company and contained in Section 3.1
of this Agreement.

 

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Section 5.12 Anti-Takeover Statutes. If the restrictive provisions of any
anti-takeover statute or regulation enacted under state laws in the United
States (including Section 203 of the DGCL) is or may become applicable to this
Agreement, the Voting Agreement, the Merger or any of the other transactions
contemplated by this Agreement or the Voting Agreement (including the Merger and
the other transactions contemplated hereby), each of Parent, the Company and
Merger Sub and their respective boards of directors shall grant all such
approvals and take all such actions as are reasonably necessary so that such
transactions may be consummated as promptly as practicable hereafter on the
terms contemplated hereby and otherwise act to eliminate or minimize the effects
of such statute or regulation on such transactions.

Section 5.13 Prepayment of Debt under the Existing Credit Facilities. At or
prior to the Closing, (a) the Company shall repay any outstanding amounts under
the existing credit facilities pursuant to the Credit Agreement, dated as of
May 17, 2013, as amended by the First Amendment to Credit Agreement and Guaranty
and Security Agreement, dated as of June 2, 2014, by and among Wells Fargo Bank,
National Association, as administrative agent, the Company, as borrower, the
guarantors party thereto and the lenders party thereto (the “Existing Credit
Facilities”), (b) the Company shall terminate the Existing Credit Facilities and
(c) the Company shall, or shall cause the applicable agent under the Existing
Credit Facilities to, deliver to Parent (i) a pay-off letter, in form and
substance reasonably satisfactory to Parent, evidencing the satisfaction of all
liabilities under the Existing Credit Facilities upon receipt of the amounts set
forth in such pay-off letter and (ii) a release in customary form concurrently
with the payment of amounts specified in the pay-off letter referred to in
clause (i) above of all liens with respect to the capital stock, property and
assets of the Company and its Subsidiaries relating to the Existing Credit
Facilities.

ARTICLE VI

CONDITIONS PRECEDENT

Section 6.1 Conditions to Each Party’s Obligation to Effect the Merger. The
respective obligation of each Party to effect the Merger is subject to the
satisfaction at or prior to the Closing Date of the following conditions, any or
all of which may be waived in whole or in part by written consent executed by
Parent and the Company to the extent permitted by applicable law:

(a) Stockholder Approval. This Agreement shall have been adopted by the
Requisite Stockholder Vote in accordance with the DGCL, the Company
Certification of Incorporation and the Company Bylaws.

(b) Approvals. The waiting periods and approvals applicable to the consummation
of the Merger pursuant to the Premerger Notification Rules described in Schedule
6.1(b) of the

 

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Company Disclosure Schedule shall have expired, been terminated or been
obtained, as applicable. All other consents, approvals, permits and
authorizations required to be obtained prior to the Effective Time from any
Governmental Entity set forth on Schedule 6.1(b) of the Company Disclosure
Schedule, including any Antitrust Authority, under the Premerger Notification
Rules shall have been obtained, and any applicable waiting period shall have
expired or been terminated.

(c) No Injunctions or Restraints. No Governmental Entity having jurisdiction
over any Party shall have issued any order, decree, ruling, injunction or other
action (whether temporary, preliminary or permanent) restraining, enjoining or
otherwise prohibiting or making illegal the consummation of the Merger and no
law or regulations shall have been adopted that makes consummation of the Merger
illegal or otherwise prohibited.

Section 6.2 Additional Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction at or prior to the Closing Date of the following conditions, any or
all of which may be waived in whole or in part in writing by Parent (acting
alone):

(a) Representations and Warranties of the Company. (i) Each of the
representations and warranties of the Company set forth in Section 3.1(b),
Section 3.1(d)(i) and (ii) and the first sentence of Section 3.1(g) shall be
true and correct in all respects (except for any de minimis failures of such
representations and warranties) as of the date of this Agreement and as of the
Effective Time as though made on and as of such time (provided, that the
representations and warranties made in the last sentence of Section 3.1(k) shall
only be true as of the date of this Agreement) and (ii) each of the
representations and warranties of the Company set forth in this Agreement, other
than those specified in the foregoing clause (i), shall be true and correct
(without giving effect to any “materiality” or “Company Material Adverse Effect”
or similar qualifiers set forth therein) as of the date of this Agreement and as
of the Closing Date as though made on and as of the Closing Date (except that,
in each case, representations and warranties that speak as of a specified date
shall have been true and correct only on such date) except for failures that
would not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect.

(b) Performance of Obligations of the Company. The Company shall have performed
or complied with in all material respects all obligations required to be
performed or complied with by it under this Agreement at or prior to the Closing
Date.

(c) Compliance Certificate. Parent shall have received a certificate of the
Company signed by its Chief Executive Officer or Vice President of Finance,
dated the Closing Date, confirming that the conditions in Sections 6.2(a) and
6.2(b) have been satisfied.

Section 6.3 Additional Conditions to Obligations of the Company. The obligation
of the Company to effect the Merger is subject to the satisfaction at or prior
to the Closing Date of the following conditions, any or all of which may be
waived in whole or in part in writing by the Company (acting alone):

(a) Representations and Warranties of Parent and Merger Sub. (i) Each of the
representations and warranties of Parent and Merger Sub set forth in
Section 3.2(b)(i) and Section 3.2(b)(ii) shall be true and correct in all
respects (except for any de minimis failures of such representations and
warranties) as of the date of this Agreement and as of the Effective Time as
though made on and as of such time and (ii) each of the representations and
warranties of Parent and Merger Sub set forth in this Agreement, other than
those specified in the foregoing clause (i), shall be true and correct (without
giving effect to any “materiality” or “Parent Material Adverse Effect” or
similar qualifiers set forth therein) shall be true and correct as of the date
of this Agreement and as of the Closing Date as though made on and as of the
Closing Date (except that, in each case, representations and warranties that
speak as of specified date shall have been true and correct only on such date),
except as for failures that would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.

 

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(b) Performance of Obligations of Parent and Merger Sub. Parent and Merger Sub
each shall have performed or complied with in all material respects all
obligations required to be performed respectively by it under this Agreement at
or prior to the Closing Date.

(c) Compliance Certificate. The Company shall have received a certificate of
Parent signed by its Chief Executive Officer or Chief Financial Officer, dated
the Closing Date, confirming that the conditions in Sections 6.3(a) and 6.3(b)
have been satisfied.

ARTICLE VII

TERMINATION AND AMENDMENT

Section 7.1 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
adoption of this Agreement by the stockholders of the Company:

(a) by mutual written consent of the Company and Parent;

(b) by either the Company or Parent in writing in accordance with
Section 7.1(c):

(i) if (A) any Governmental Entity having competent jurisdiction over any Party
shall have issued any order, decree, ruling or injunction or taken any other
action permanently restraining, enjoining or otherwise prohibiting or making
illegal the consummation of the Merger and such order, decree, ruling or
injunction or other action shall have become final and nonappealable or if there
shall be adopted any applicable law or regulation that makes consummation of the
Merger illegal or otherwise prohibited; provided, however, that the right to
terminate this Agreement under this Section 7.1(b)(i)(A) shall not be available
to (x) the Company if its failure to fulfill any material covenant or agreement
under this Agreement has been the principal cause of, or resulted in, the
failure of the Merger to occur on or before such date or (y) Parent if its or
Merger Sub’s failure to fulfill any material covenant or agreement under this
Agreement has been the principal cause of, or resulted in, the failure of the
Merger to occur on or before such date; or (B) the adoption of this Agreement by
the stockholders of the Company shall not have been obtained by reason of the
failure to obtain the Requisite Stockholder Vote for such purpose, or at any
adjournment or postponement thereof;

 

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(ii) if the Merger shall not have been consummated by January 31, 2015 (the
“Termination Date”); provided, however, that the right to terminate this
Agreement under this Section 7.1(b)(ii) shall not be available to (A) the
Company if its failure to fulfill any material covenant or agreement under this
Agreement has been the principal cause of, or resulted, in the failure of the
Merger to occur on or before such date or (B) Parent if its or Merger Sub’s
failure to fulfill any material covenant or agreement under this Agreement has
been the principal cause of, or resulted in, the failure of the Merger to occur
on or before such date; or

(iii) in the event of a breach by the other Party of any representation,
warranty, covenant or other agreement contained in this Agreement that (A) would
give rise to the failure of a condition set forth in Sections 6.2(a), 6.2(b) or
6.3(a) or 6.3(b) as applicable, and (B) cannot be or has not been cured by the
earlier of 30 days after the giving of written notice to the breaching Party of
such breach and the Termination Date (a “Terminable Breach”); provided, however,
that the terminating Party (and, if the terminating Party is Parent, Merger Sub)
is not then in Terminable Breach of any representation, warranty, covenant or
other agreement contained in this Agreement;

(c) by Parent if the Board shall (i) have made an Adverse Recommendation Change,
(ii) fail to include in the Proxy Statement when mailed, the Company
Recommendation, (iii) upon any tender offer or exchange offer that is commenced
by any third party with respect to the outstanding Company Common Stock prior to
the time at which the Company receives the Requisite Stockholder Vote, fail to
recommend that the Company’s stockholders reject such tender offer or exchange
offer and not tender their Company Common Stock into such tender offer or
exchange offer within ten (10) Business Days after commencement of such tender
offer or exchange offer (provided that a “stop, look and listen” communication
to the stockholders of the Company pursuant to Rule 14d-9(f) under the Exchange
Act shall not be deemed a failure with respect to this clause (iii)), (iv) have
caused (or permitted) the Company to have breached in any material respect
Section 4.2 or (v) approve or recommend, or enter into or allow the Company or
any of its Subsidiaries to enter into, a merger agreement, letter of intent,
agreement in principle, share purchase agreement, asset purchase agreement,
share exchange agreement, option agreement or other similar agreement, in each
case, relating to an Acquisition Proposal; or

(d) by the Company if the Board determines to enter into a definitive agreement
with respect to a Superior Proposal; provided, however, that the Company may not
effect such termination pursuant to this Section 7.1(d) unless the Company has
(i) complied with Section 4.2(c) and (ii) contemporaneously with such
termination tendered payment to Parent of the Termination Fee pursuant to
Section 7.3(b).

(e) A terminating Party shall provide written notice of termination to the other
Parties specifying with particularity the reason for such termination and any
termination shall be effective immediately upon delivery of such written notice
to the other Parties.

 

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Section 7.2 Effect of Termination. In the event of termination of this Agreement
by any Party as provided in Section 7.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of any Party
except with respect to this Section 7.2, the last sentence of Section 5.2,
Section 7.3, Section 7.5 and Article VIII; provided, however, that no such
termination shall relieve any Party from liability for any damages (including,
in the case of the Company, damages based on the consideration that would have
otherwise been payable to the stockholders of the Company) for any fraud or a
willful and material breach of a representation or warranty or a breach of any
obligation hereunder. For the purposes of this Agreement, “willful and material
breach” shall mean a material breach that is a consequence of an act undertaken
by the breaching party with knowledge (actual or constructive) that the taking
of such act would, or would reasonably be expected to, cause a breach of this
Agreement.

Section 7.3 Expenses and Other Payments.

(a) Except as otherwise provided in this Agreement, each Party shall pay its own
expenses incident to preparing for entering into and carrying out this Agreement
and the consummation of the transactions contemplated hereby, whether or not the
Merger shall be consummated.

(b) If (i) Parent terminates this Agreement pursuant to Section 7.1(c) or
(ii) the Company terminates this Agreement pursuant to Section 7.1(d), then the
Company shall pay Parent a fee of $9,308,146 (the “Termination Fee”) in cash by
wire transfer of immediately available funds to an account designated by Parent.
If the Termination Fee shall be payable pursuant to clause (i) of the
immediately preceding sentence, the Termination Fee shall be paid no later than
three Business Days after notice of termination of this Agreement and if the
Termination Fee shall be payable pursuant to clause (ii) of the immediately
preceding sentence, the Termination Fee shall be paid on the date of termination
of this Agreement.

(c) If either Parent or the Company terminates this Agreement pursuant to clause
(B) of Section 7.1(b)(i) or Section 7.1(b)(ii) or Parent terminates this
Agreement pursuant to Section 7.1(b)(iii) and (i) at prior to such termination,
an Acquisition Proposal has been publicly announced, disclosed or otherwise
communicated to the Board or its stockholders or any Person shall have publicly
announced an intention (whether or not conditional) to make an Acquisition
Proposal and (ii) within twelve months after such termination, the Company
consummates a transaction with respect to an Acquisition Proposal or the Company
enters into a definitive agreement with respect of an Acquisition Proposal that
is later consummated, then at the closing or other consummation of such
Acquisition Proposal, the Company shall pay Parent the Termination Fee by wire
transfer of immediately available funds to an account designated by Parent;
provided, however, that for the purposes of clause (ii), any reference in the
definition of Acquisition Proposal to 20% shall be deemed to be a reference to
50%.

(d) If (i) either Parent or the Company terminates this Agreement pursuant to
Section 7.1(b)(i)(A) and at that time there exists any final and nonappealable
order, decree, ruling, injunction or other action permanently restraining,
enjoining or otherwise prohibiting the consummation of the Merger by any
Antitrust Authority or (ii) either Parent or the Company terminates this
Agreement pursuant to Section 7.1(b)(ii) and (A) the condition specified in
Section 6.1(b) has not been satisfied or (B) the condition specified in
Section 6.1(c) has not been

 

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satisfied because there exists any final and nonappealable order, decree,
ruling, injunction or other action (whether temporary, preliminary or permanent)
restraining, enjoining or otherwise prohibiting the consummation of the Merger
by any Antitrust Authority, then Parent shall pay to the Company the Termination
Fee in cash by wire transfer of immediately available funds to an account
designated by the Company. If the Termination Fee shall be payable pursuant to
the immediately preceding sentence as a result of a termination of this
Agreement by the Company, the Termination Fee shall be paid no later than three
Business Days after notice of termination of this Agreement, and if the
Termination Fee shall be payable pursuant to the immediately preceding sentence
as a result of a termination of this Agreement by Parent, the Termination Fee
shall be paid on the date of termination of this Agreement.

(e) In no event shall either Parent or the Company be entitled to receive more
than one payment of the Termination Fee.

(f) Notwithstanding anything in this Agreement to the contrary, except in the
case of fraud or a willful and material breach of this Agreement, in the event
that the Termination Fee becomes payable in accordance with Section 7.3(d), then
payment to Company of the Termination Fee shall be Company’s sole and exclusive
remedy as liquidated damages for any and all losses or damages of any nature
against Parent and Merger Sub and each of their respective former, current and
future directors, officers, employees, agents, general and limited partners,
managers, members, shareholders, Affiliates and assignees and each former,
current or future director, officer, employee, agent, shareholder, general or
limited partner, manager, member, shareholder, Affiliate or assignee of any of
the foregoing (collectively, the “Parent Parties”) in respect of this Agreement,
any agreement executed in connection herewith (other than Confidentiality
Agreement), and the transactions contemplated hereby and thereby, including for
any loss or damage suffered as a result of the termination of this Agreement,
the failure of the Merger to be consummated or for a breach or failure to
perform hereunder (whether intentionally, unintentionally, or otherwise) or
otherwise, and upon payment of such Termination Fee no Parent Party shall have
any further liability or obligation relating to or arising out of this Agreement
or the transactions contemplated hereby and thereby.

(g) Each of the Company and Parent acknowledges that the agreements contained in
this Section 7.3 are an integral part of the transactions contemplated by this
Agreement. In the event that the Company or Parent shall fail to pay the
Termination Fee when due, the Company or Parent, as the case may be, shall
reimburse the other party for all reasonable costs and expenses actually
incurred or accrued by such other party (including reasonable fees and expenses
of counsel) in connection with any action (including the filing of any lawsuit)
taken to collect payment of such amounts, together with interest on such unpaid
amounts at the prime lending rate prevailing during such period as published in
The Wall Street Journal, calculated on a daily basis from the date such amounts
were required to be paid to the date of actual payment.

Section 7.4 Extension; Waiver. At any time prior to the Effective Time, the
Parties, by action taken or authorized by their respective Boards, 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; (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 to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such Party.

 

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Section 7.5 Return of Information. Within ten Business Days following
termination of this Agreement in accordance with Section 7.1, Parent shall, and
shall cause each of Merger Sub and their respective Affiliates and
representatives to, return to the Company, or destroy, all Evaluation Material
(as defined in the Confidentiality Agreement) in accordance with the terms of
the Confidentiality Agreement.

ARTICLE VIII

GENERAL PROVISIONS

Section 8.1 Schedule Definitions. All capitalized terms in the Company
Disclosure Schedule and the Parent Disclosure Schedule shall have the meanings
ascribed to them herein, unless the context otherwise requires or as otherwise
defined.

Section 8.2 Nonsurvival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall terminate and be of no
further force and effect as of the Effective Time and any liability for breach
or violation thereof shall terminate absolutely, except for the agreements
contained in Article II, Section 5.6, and Article VIII.

Section 8.3 Notices. All notices, demands, waivers and other communications to
be given or delivered to any of the Parties under or by reason of the provisions
of this Agreement shall be in writing and shall be deemed to have been given
when personally delivered, sent by reputable overnight courier, transmitted by
facsimile (transmission confirmed) or email transmission (that references this
Section 8.3 and upon written confirmation of receipt), to the addresses
indicated below (unless another address is so specified in writing in accordance
with this Section 8.3):

 

  (i) if to Parent or Merger Sub, to:

Owens & Minor, Inc.

9120 Lockwood Boulevard

Mechanicsville, Virginia 23116

Facsimile:    (804) 723-7113 Attention:    Grace R. den Hartog

 

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with a required copy to (which copy shall not constitute notice):

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, New York 10017

Facsimile: (212) 455-2502

Attention:    Mario Ponce    Elizabeth Cooper Email:    mponce@stblaw.com   
ecooper@stblaw.com

 

  (ii) if to the Company, to:

Medical Action Industries Inc.

500 Expressway Drive South

Brentwood, New York 11717

Attention:    Vladimir Kleyman Facsimile:    (631) 404-3865 Attention:   
Vladimir Kleyman

with a required copy to (which copy shall not constitute notice):

Vinson and Elkins LLP

666 Fifth Avenue, 26th Floor

New York, New York 10103

Attention:    Michael Swidler Facsimile:    917-849-5367 Email:   
mswidler@velaw.com

Section 8.4 Rules of Construction.

(a) Each of the Parties has been represented by counsel of its choice throughout
all negotiations that have preceded the execution of this Agreement and that it
has executed the same with the advice of said independent counsel. Each Party
and its counsel cooperated in the drafting and preparation of this Agreement and
the documents referred to herein, and any and all drafts relating thereto
exchanged among the Parties shall be deemed the work product of the Parties and
may not be construed against any Party by reason of its preparation.
Accordingly, any rule of law or any legal decision that would require
interpretation of any ambiguities in this Agreement against any Party that
drafted it is of no application and is hereby expressly waived.

(b) The inclusion of any information in the Company Disclosure Schedule or
Parent Disclosure Schedule shall not be deemed an admission or acknowledgment,
in and of itself and solely by virtue of the inclusion of such information in
the Company Disclosure Schedule or Parent Disclosure Schedule, as applicable,
that such information is required to be listed in the Company Disclosure
Schedule or Parent Disclosure Schedule, as applicable, or that such items are
material to the Company, Parent or Merger Sub, as the case may be. The headings,
if any, of the individual sections of each of the Parent Disclosure Schedule and
Company Disclosure Schedule are inserted for convenience only and shall not be
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a part of this Agreement. The Company Disclosure Schedule and Parent Disclosure
Schedule are arranged in sections corresponding to those contained in Sections
3.1 and 3.2 merely for convenience, and the disclosure of an item in one section
of the Company Disclosure Schedule or Parent Disclosure Schedule as an exception
to a particular representation or warranty shall be deemed adequately disclosed
as an exception with respect to all other representations or warranties to the
extent that the relevance of such item to such representations or warranties is
reasonably apparent on the face of such disclosure, notwithstanding the presence
or absence of an appropriate section of the Company Disclosure Schedule or
Parent Disclosure Schedule with respect to such other representations or
warranties or an appropriate cross reference thereto; provided that the
disclosure in the Company Disclosure Schedule shall only be an exception to, or
disclosure for the purposes of, the first sentence of Section 3.1(g) to the
extent specifically referenced on Schedule 3.1(g) of the Company Disclosure
Schedule. The Parties hereto agree that any information contained in any part of
the Company SEC Filings shall only be deemed to be an exception to (or a
disclosure for purposes of) the Company’s representations and warranties if the
relevance of that information as an exception to (or a disclosure for purposes
of) such representations and warranties would be reasonably apparent to a Person
who has read that information concurrently with such representations and
warranties, without any independent knowledge on the part of the reader
regarding the matter(s) disclosed.

(c) The specification of any dollar amount in the representations and warranties
or otherwise in this Agreement or in the Company Disclosure Schedule or Parent
Disclosure Schedule is not intended and shall not be deemed to be an admission
or acknowledgment of the materiality of such amounts or items.

(d) All references in this Agreement to Schedules, Articles, Sections,
subsections and other subdivisions refer to the corresponding Schedules,
Articles, Sections, subsections and other subdivisions of this Agreement unless
expressly provided otherwise. Titles appearing at the beginning of any Articles,
Sections, subsections or other subdivisions of this Agreement are for
convenience only, do not constitute any part of such Articles, Sections,
subsections or other subdivisions, and shall be disregarded in construing the
language contained therein. The words “this Agreement,” “herein,” “hereby,”
“hereunder” and “hereof” and words of similar import, refer to this Agreement as
a whole and not to any particular subdivision unless expressly so limited. The
words “this Section,” “this subsection” and words of similar import, refer only
to the Sections or subsections hereof in which such words occur. The word
“including” (in its various forms) means “including, without limitation.” Any
reference to a law shall include any rules and regulations promulgated
thereunder, and any reference to any law, regulation, rule, agreement,
certificate or bylaw in this Agreement shall be a reference to such law,
regulation, rule, agreement, certificate or bylaw as amended. Pronouns in
masculine, feminine or neuter genders shall be construed to state and include
any other gender and words, terms and titles (including terms defined herein) in
the singular form shall be construed to include the plural and vice versa,
unless the context otherwise expressly requires. Unless the context otherwise
requires, all defined terms contained herein shall include the singular and
plural and the conjunctive and disjunctive forms of such defined terms.

Section 8.5 Counterparts. This Agreement may be executed in two or more
counterparts (including by electronic means), all of which shall be considered
one and the same agreement and shall become effective when two or more
counterparts have been signed by each of the parties and delivered to the other
parties.

 

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Section 8.6 Entire Agreement; No Third Party Beneficiaries. This Agreement
(together with the Confidentiality Agreement and any other documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof. Following the Effective Time,
the provisions of (a) Section 5.6 shall be enforceable by the Persons referred
to therein and their respective heirs and representatives and (b) each holder of
Company Common Stock shall be entitled to enforce the provisions of Article II
to the extent necessary to receive the Merger Consideration to which such holder
is entitled pursuant to Article II. Except as provided in the immediately
preceding sentence, this Agreement is not intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.

Section 8.7 Governing Law; Venue; Waiver of Jury Trial.

(a) This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, without giving effect to the principles of
conflicts of law thereof.

(b) THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE COURT OF
CHANCERY OF THE STATE OF DELAWARE AND THE FEDERAL COURTS OF THE UNITED STATES OF
AMERICA LOCATED IN THE STATE OF DELAWARE SOLELY IN RESPECT OF THE INTERPRETATION
AND ENFORCEMENT OF THE PROVISIONS OF THIS AGREEMENT AND THE DOCUMENTS REFERRED
TO IN THIS AGREEMENT OR IN RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY, AND
HEREBY WAIVE, AND AGREE NOT TO ASSERT, AS A DEFENSE IN ANY ACTION, SUIT OR
PROCEEDING FOR INTERPRETATION OR ENFORCEMENT HEREOF OR ANY SUCH DOCUMENT THAT IT
IS NOT SUBJECT THERETO OR THAT SUCH ACTION, SUIT OR PROCEEDING MAY NOT BE
BROUGHT OR IS NOT MAINTAINABLE IN SAID COURTS OR THAT VENUE THEREOF MAY NOT BE
APPROPRIATE OR THAT THIS AGREEMENT OR ANY SUCH DOCUMENT MAY NOT BE ENFORCED IN
OR BY SUCH COURTS, AND THE PARTIES HERETO IRREVOCABLY AGREE THAT ALL CLAIMS WITH
RESPECT TO SUCH ACTION, SUIT OR PROCEEDING SHALL BE HEARD AND DETERMINED
EXCLUSIVELY BY SUCH A DELAWARE STATE OR FEDERAL COURT. THE PARTIES HEREBY
CONSENT TO AND GRANT ANY SUCH COURT JURISDICTION OVER THE PERSON OF SUCH PARTIES
AND OVER THE SUBJECT MATTER OF SUCH DISPUTE AND AGREE THAT MAILING OF PROCESS OR
OTHER PAPERS IN CONNECTION WITH SUCH ACTION, SUIT OR PROCEEDING IN THE MANNER
PROVIDED IN SECTION 8.3 OR IN SUCH OTHER MANNER AS MAY BE PERMITTED BY LAW SHALL
BE VALID AND SUFFICIENT SERVICE THEREOF.

(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT

 

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SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT
(I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER; (II) SUCH PARTY UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF THE FOREGOING WAIVER; (III) SUCH PARTY
MAKES THE FOREGOING WAIVER VOLUNTARILY AND (IV) SUCH PARTY HAS BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND
CERTIFICATIONS IN THIS SECTION 8.7.

Section 8.8 Specific Performance. Irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with its specific terms or were otherwise breached. In the event of any breach
or threatened breach by any other Party of any covenant or obligation contained
in this Agreement, the non-breaching Party shall be entitled (in addition to any
other remedy that may be available to it, including monetary damages) to seek
and obtain (a) a decree or order of specific performance to enforce the
observance and performance of such covenant or obligation, and (b) an injunction
restraining such breach or threatened breach. No Party or any other Person shall
be required to obtain, furnish or post any bond or similar instrument in
connection with or as a condition to obtaining any remedy referred to in this
Section 8.8, and each Party irrevocably waives any right it may have to require
the obtaining, furnishing or posting of any such bond or similar instrument.

Section 8.9 No Remedy in Certain Circumstances. Each Party agrees that, should
any court or other competent authority hold any provision of this Agreement or
part hereof to be null, void or unenforceable, or order any Party to take any
action inconsistent herewith or not to take an action consistent herewith or
required hereby, the validity, legality and enforceability of the remaining
provisions and obligations contained or set forth herein shall not in any way be
affected or impaired thereby, unless the foregoing inconsistent action or the
failure to take an action constitutes a material breach of this Agreement or
makes this Agreement impossible to perform, in which case this Agreement shall
terminate.

Section 8.10 Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the Parties (whether by
operation of law or otherwise) without the prior written consent of each of the
other Parties; provided that each of Parent and Merger Sub may assign, each in
its own discretion, any or all of its rights, interests and obligations under
this Agreement to any direct or indirect wholly owned Subsidiary of Parent
without the prior written consent of the Company, but such assignment shall not
relieve Parent or Merger Sub, as the case may be, of any of its obligations
under this Agreement. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by each of the Parties
and their respective successors and assigns. Any purported assignment in
violation of this Section 8.10 shall be void ab initio.

Section 8.11 Joint Liability. Each representation, warranty, covenant and
agreement made by any of or both of Parent or Merger Sub in this Agreement shall
be deemed a

 

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representation, warranty, covenant and agreement made by Parent and Merger Sub
jointly and severally and all liability and obligations relating thereto shall
be deemed a joint liability and obligation of Parent and Merger Sub.

Section 8.12 Amendment. This Agreement may be amended by the Parties, by action
taken or authorized by their respective boards of directors at any time before
or after adoption of this Agreement by the stockholders of the Company, but,
after any such adoption, no amendment shall be made which by law would require
the further approval by such stockholders without first obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.

Section 8.13 Waiver. No failure or delay by any Party in exercising any right
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise of any other right
hereunder.

*        *        *         *        *

 

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IN WITNESS WHEREOF, each Party has caused this Agreement to be signed by its
respective officer thereunto duly authorized, all as of the date first written
above.

 

OWENS & MINOR, INC. By:  

/s/ Grace R. den Hartog

  Name:   Grace R. den Hartog   Title:   Senior Vice President & General Counsel
MONGOOSE MERGER SUB INC. By:  

/s/ Grace R. den Hartog

  Name:   Grace R. den Hartog   Title:   Senior Vice President, General Counsel
& Secretary MEDICAL ACTION INDUSTRIES INC. By:  

/s/ Paul D. Meringolo

  Name:   Paul D. Meringolo   Title:   Chief Executive Officer

SIGNATURE PAGE TO AGREEMENT

AND PLAN OF MERGER