AGREEMENT AND PLAN OF MERGER
AMONG
DICTAPHONE CORPORATION,
NUANCE COMMUNICATIONS, INC.
AND
PHOENIX MERGER SUB, INC.
DATED AS OF FEBRUARY 7, 2006
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS; INTERPRETATION................................................................2
Section 1.1. Definitions.......................................................................2
Section 1.2. Interpretation...................................................................19
Section 1.3. Exhibits.........................................................................21
ARTICLE 2 THE TRANSACTION...........................................................................21
Section 2.1. The Merger.......................................................................21
Section 2.2. The Closing......................................................................21
Section 2.3. Actions at the Closing...........................................................21
Section 2.4. Effect of the Merger.............................................................21
Section 2.5. Purchase Price; Merger Consideration; Conversion of Shares.......................22
Section 2.6. Working Capital; Net Available Cash; Closing Adjustment..........................25
Section 2.7. Treatment of Equity Interests....................................................27
Section 2.8. Closing of Transfer Records......................................................29
Section 2.9. Closing Deliveries...............................................................29
ARTICLE 3 DISSENTERS' RIGHTS........................................................................31
Section 3.1. Dissenters' Rights...............................................................31
ARTICLE 4 REPRESENTATIONS AND WARRANTIES REGARDING THE BUYER AND THE BUYER SUBSIDIARY...............31
Section 4.1. Organization.....................................................................31
Section 4.2. Authorization, Execution and Enforceability......................................32
Section 4.3. No Breach........................................................................32
Section 4.4. Consents.........................................................................33
Section 4.5. Financing........................................................................33
Section 4.6. Ownership of the Buyer Subsidiary; No Prior Activities...........................34
Section 4.7. Brokers; Finders.................................................................34
Section 4.8. Purchase for Investment; Access to Information...................................34
ARTICLE 5 REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY......................................35
Section 5.1. Organization.....................................................................35
Section 5.2. Authorization, Execution and Enforceability......................................35
Section 5.3. No Breach........................................................................36
Section 5.4. Consents.........................................................................36
Section 5.5. Organizational Documents.........................................................37
Section 5.6. Capitalization; Subsidiaries.....................................................37
Section 5.7. Financial Statements.............................................................40
Section 5.8. Tax Matters......................................................................41
Section 5.9. Real Property....................................................................42
Section 5.10. Personal Property................................................................44
Section 5.11. Title to Properties..............................................................44
Section 5.12. Sufficiency and Condition of Property............................................44
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TABLE OF CONTENTS
(continued)
Page
Section 5.13. Contracts........................................................................45
Section 5.14. Performance of Contracts.........................................................47
Section 5.15. Permits..........................................................................47
Section 5.16. Patents; Technology..............................................................47
Section 5.17. Trademarks; Copyrights; Other Intellectual Property Matters......................48
Section 5.18. Human Resources; Benefit Plans...................................................51
Section 5.19. Business Operations; Changes.....................................................53
Section 5.20. Compliance with Laws.............................................................54
Section 5.21. Litigation; Proceedings..........................................................54
Section 5.22. Environmental Conditions.........................................................55
Section 5.23. Health and Safety Matters........................................................56
Section 5.24. Inventory; Accounts Receivable; Backlog; Warranty Claims.........................56
Section 5.25. Certain Business Relationships...................................................57
Section 5.26. Major Customers..................................................................57
Section 5.27. Absence of Certain Business Practices............................................57
Section 5.28. Insurance........................................................................57
Section 5.29. Liabilities......................................................................58
Section 5.30. Delaware General Corporation Law; Fairness Opinion...............................58
Section 5.31. Brokers; Finders.................................................................58
Section 5.32. HIPAA Matters....................................................................58
Section 5.33. Bankruptcy Matters...............................................................59
Section 5.34. Information Systems..............................................................59
Section 5.35. Copies of Contracts and Other Documents..........................................59
ARTICLE 6 PRE-CLOSING COVENANTS.....................................................................59
Section 6.1. Conduct by the Buyer.............................................................59
Section 6.2. Conduct by the Company...........................................................60
Section 6.3. Governmental Filings.............................................................67
Section 6.4. Written Stockholder Consent; Preparation of Information Statement................67
Section 6.5. Letter of Transmittal............................................................69
Section 6.6. No Solicitation; Other Offers....................................................69
Section 6.7. Fulfillment of Conditions........................................................70
Section 6.8. Notice of Developments...........................................................71
Section 6.9. Termination of Credit Facility...................................................71
Section 6.10. Further Assurances...............................................................72
Section 6.11. Termination on Closing...........................................................72
Section 6.12. 2005 Audited Financial Statements................................................72
Section 6.13. Corporate Headquarters Lease.....................................................72
Section 6.14. Subsidiary Capital Stock.........................................................73
ARTICLE 7 CONDITIONS TO CLOSING.....................................................................73
Section 7.1. Conditions of the Buyer and the Buyer Subsidiary to Closing......................73
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TABLE OF CONTENTS
(continued)
Page
Section 7.2. Conditions of the Company to Closing.............................................74
ARTICLE 8 ADDITIONAL COVENANTS......................................................................75
Section 8.1. WARN.............................................................................75
Section 8.2. Preservation of Records..........................................................76
Section 8.3. Insurance and Indemnification....................................................76
Section 8.4. Payment of Creditors.............................................................77
ARTICLE 9 TERMINATION; SURVIVAL OF AGREEMENT........................................................77
Section 9.1. Termination......................................................................77
Section 9.2. Superior Proposal................................................................79
Section 9.3. Effect of Termination............................................................79
ARTICLE 10 MISCELLANEOUS PROVISIONS..................................................................81
Section 10.1. Publicity........................................................................81
Section 10.2. [Reserved.]......................................................................81
Section 10.3. Compliance with Restrictive Covenants............................................81
Section 10.4. Non-Survival and Limitations as to Representations and Warranties................82
Section 10.5. Notice...........................................................................83
Section 10.6. Certain Expenses; Certain Financing..............................................84
Section 10.7. Governing Law; Forum; Jury Trial.................................................85
Section 10.8. Binding Effect; Assignment; Third Party Beneficiaries............................85
Section 10.9. Entire Agreement; Confidentiality Agreement......................................85
Section 10.10. Amendments.......................................................................86
Section 10.11. Waivers..........................................................................86
Section 10.12. Remedies.........................................................................86
Section 10.13. Headings; Counterparts; Interpretation; Schedules................................86
Section 10.14. Severability.....................................................................87
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LIST OF EXHIBITS
Exhibit A Form of Certificate of Merger
Exhibit B Form of Restated Certificate of Incorporation of the
Surviving Corporation
Exhibit C Form of Bylaws of the Surviving Corporation
Exhibit D Calculation of Working Capital
Exhibit E Form of Exchange Agency Agreement
Exhibit F Form of Stockholder Agreement and Acknowledgement
Exhibit G Form of Written Consent
Exhibit H Commitment Letter
LIST OF SCHEDULES
Schedule 2.6 Non-GAAP Adjustments.
Schedule 4.7 Brokers and Finders.
Schedule 5.1 Foreign Jurisdictions.
Schedule 5.4 Consents.
Schedule 5.5 Organizational Documents; Directors and Officers.
Schedule 5.6 Capitalization; Subsidiaries; Indebtedness; Absence of
Certain Changes; Related Contracts.
Schedule 5.7 Financial Statements.
Schedule 5.8 Tax Matters.
Schedule 5.9 Real Property.
Schedule 5.10 Personal Property.
Schedule 5.11 Title to Properties.
Schedule 5.13 Material Contracts.
Schedule 5.15 Permits.
Schedule 5.16 Patents; Technology.
Schedule 5.17 Trademarks, Copyrights and Other Intellectual Property Matters.
Schedule 5.18 Labor Matters; Benefit Plans; Employee Contracts.
Schedule 5.19 Changes in Business Operations.
Schedule 5.20 Compliance with Laws.
Schedule 5.21 Litigation.
Schedule 5.22 Environmental Conditions.
Schedule 5.23 Health and Safety Matters.
Schedule 5.24 Backlog and Warranty Claims.
Schedule 5.26 Major Customers.
Schedule 5.28 Insurance.
Schedule 5.31 Broker and Finder Fees.
Schedule 5.33 Bankruptcy Matters.
Schedule 6.2 Conduct by the Company.
Schedule 6.12 Financial Statements.
Schedule 7.1 Developments and Conditions.
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AGREEMENT AND PLAN OF MERGER dated as of February 7, 2006
among Nuance Communications, Inc., a Delaware corporation (the "Buyer"), Phoenix
Merger Sub, Inc., a Delaware corporation and a direct wholly-owned subsidiary of
the Buyer (the "Buyer Subsidiary"), and Dictaphone Corporation, a Delaware
corporation (the "Company").
WITNESSETH:
WHEREAS, the Buyer Subsidiary is a wholly owned direct
subsidiary of the Buyer;
WHEREAS, the Buyer desires to acquire the Company by means of
a merger of the Buyer Subsidiary with and into the Company (the "Merger"), on
the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of the Company has (a)
determined that the Merger and the other transactions contemplated hereby are
advisable and are fair to, and in the best interests of, the holders of the
issued and outstanding shares of common stock, par value $.01 per share, of the
Company (the "Common Stock"), its only class of capital stock with shares
outstanding, (b) subject to adoption of this Agreement by the stockholders of
the Company, approved the Merger, the other transactions contemplated hereby and
various ancillary matters and adopted this Agreement and (c) recommended
approval of various ancillary matters and adoption of this Agreement by the
stockholders of the Company;
WHEREAS, the Board of Directors of the Buyer Subsidiary has
determined that the Merger and the other transactions contemplated hereby are
advisable and are fair to, and in the best interests of, the sole stockholder of
the Buyer Subsidiary, has approved the Merger and the other transactions
contemplated hereby and has recommended adoption of this Agreement by the sole
stockholder of the Buyer Subsidiary;
WHEREAS, the Board of Directors of the Company has directed
that approval of such ancillary matters and adoption of this Agreement be
submitted to the stockholders of the Company;
WHEREAS, stockholders of the Company, who in the aggregate own
a majority of the shares of Common Stock issued and outstanding on the date
hereof (the "Majority Stockholders"), have, prior to the execution and delivery
of this Agreement, entered into Stockholder Agreements and Acknowledgements
substantially in the form attached hereto as Exhibit F, copies of which as
executed by the Majority Stockholders have been delivered to the Buyer (the
"Stockholder Agreement and Acknowledgement"), pursuant to which they have stated
that, if the Merger is approved and this Agreement is adopted by the Board of
Directors of the Company and this Agreement is executed and delivered by the
Parties, they know of no reason why they would not execute and deliver written
consents in substantially the form attached hereto as Exhibit G (the "Written
Consents") that, among other things, consent to the adoption of this Agreement
and waive their dissenters' appraisal rights in respect of the Merger, on the
terms and subject to the conditions set forth therein, and represent that they
have received sufficient information to make a decision in respect thereof; and
WHEREAS, the Buyer, for itself individually and in its
capacity as the sole stockholder of the Buyer Subsidiary, has approved the
Merger and the other transactions contemplated hereby and has adopted this
Agreement;
NOW, THEREFORE, in consideration of the premises,
representations and warranties and the mutual covenants and agreements set forth
herein and other good, valuable and sufficient consideration, the receipt of
which is hereby acknowledged, the Parties, intending to be legally bound, agree
as follows:
ARTICLE 1
DEFINITIONS; INTERPRETATION
SECTION 1.1. DEFINITIONS. As used herein, the following terms
shall have the following meanings:
"2004 Audited Financial Statements" shall mean the audited
consolidated financial statements of the Company as of December 31, 2004 and
December 31, 2003 and for the years ended December 31, 2004 and December 31,
2003, the nine months ended December 31, 2002 and the three-months ended March
31, 2002.
"2005 Audited Financial Statements" shall mean the audited
consolidated financial statements of the Company as of December 31, 2005 and
December 31, 2004 and for the years ended December 31, 2005, December 31, 2004
and December 31, 2003.
"Acquisition Proposal" shall mean:
(a) prior to receipt of the Company Stockholder Approval, any
inquiry, offer or proposal by any Person or Group (other than the Buyer, the
Buyer Subsidiary or any of their Affiliates), directly or indirectly, (i) for
any acquisition or purchase of 40% or more of the consolidated assets of the
Company and the Subsidiaries or 40% or more (by voting power) of any class of
equity or voting securities of one or more of the Subsidiaries whose assets,
individually or in the aggregate, constitute 40% or more of the consolidated
assets of the Company and the Subsidiaries, (ii) for any acquisition, purchase,
tender offer (including a self-tender offer) or exchange offer or constituting
any tender offer or exchange offer, in each case, that would result in such
Person or Group Beneficially Owning 40% or more (by voting power) of any class
of equity or voting securities of the Company, (iii) for any merger,
consolidation, reorganization, recapitalization, joint venture, liquidation or
other business combination involving (A) the Company or (B) one or more of the
Subsidiaries whose assets, individually or in the aggregate, constitute 40% or
more of the consolidated assets of the Company and the Subsidiaries, in each
case, that would result in such Person or Group (I) directly or indirectly
acquiring or purchasing 40% or more of the consolidated assets of the Company
and the Subsidiaries or 40% or more (by voting power) of any class of equity or
voting securities of one or more of the Subsidiaries whose assets, individually
or in the aggregate, constitute 40% or more of the consolidated assets of the
Company and the Subsidiaries or (II) Beneficially Owning 40% or more (by voting
power) of any class of equity or voting securities of the Company or (iv) for
the issuance or acquisition of capital stock or other equity or voting
securities of the Company or any of the Subsidiaries constituting 40% or more
(by voting power) of any class of equity or voting securities of the
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Company or any of the Subsidiaries (except for the issuance of shares of Common
Stock pursuant to exercise of Equity Interests in the Company outstanding on the
date hereof and as set forth on Schedule 5.6); and
(b) from and after receipt of the Company Stockholder
Approval, any inquiry, offer or proposal by any Person or Group (other than the
Buyer, the Buyer Subsidiary or any of their Affiliates), directly or indirectly,
(i) for any acquisition or purchase of 15% or more of the consolidated assets of
the Company and the Subsidiaries or 15% or more (by voting power) of any class
of equity or voting securities of one or more of the Subsidiaries whose assets,
individually or in the aggregate, constitute 15% or more of the consolidated
assets of the Company and the Subsidiaries, (ii) for any acquisition, purchase,
tender offer (including a self-tender offer) or exchange offer or constituting
any tender offer or exchange offer, in each case, that would result in such
Person or Group Beneficially Owning 15% or more (by voting power) of any class
of equity or voting securities of the Company, (iii) for any merger,
consolidation, reorganization, recapitalization, joint venture, liquidation or
other business combination involving (A) the Company or (B) one or more of the
Subsidiaries whose assets, individually or in the aggregate, constitute 15% or
more of the consolidated assets of the Company and the Subsidiaries, in each
case, that would result in such Person or Group (I) directly or indirectly
acquiring or purchasing 15% or more of the consolidated assets of the Company
and the Subsidiaries or 15% or more (by voting power) of any class of equity or
voting securities of one or more of the Subsidiaries whose assets, individually
or in the aggregate, constitute 15% or more of the consolidated assets of the
Company and the Subsidiaries or (II) Beneficially Owning 15% or more (by voting
power) of any class of equity or voting securities of the Company, (iv) for the
issuance or acquisition of capital stock or other equity or voting securities of
the Company or any of the Subsidiaries constituting 15% or more (by voting
power) of any class of equity or voting securities of the Company or any of the
Subsidiaries (except for the issuance of shares of Common Stock pursuant to
exercise of Equity Interests in the Company outstanding on the date hereof and
as set forth on Schedule 5.6) or (v) for any transaction the effect of which
would reasonably be expected to be to impede, prevent or delay consummation of
the transactions contemplated by this Agreement or which would reasonably be
expected to be to materially dilute the benefits to the Buyer and its Affiliates
of the transactions contemplated hereby.
"Accrual Amount" shall mean an aggregate amount determined by
multiplying (a) $40,000, times (b) the number of days in the period from and
including March 1, 2006 through and including the Closing Date.
"Additional Closing Payment" shall mean (x) the Accrual
Amount, plus (y) the Final Net Available Cash, plus (z) the Final Closing
Adjustment (it being agreed and understood that (i) if either the Final Net
Available Cash or the Final Closing Adjustment is a negative number, such amount
shall reduce the Additional Closing Payment and (ii) if the Additional Closing
Payment is a negative number, it shall reduce the Merger Consideration).
"Affiliate" shall mean, with respect to any Person, any other
Person which controls, is controlled by or is under common control with,
directly or indirectly, such Person, and, if such Person is a natural person,
includes any member of such Person's immediate family,
3
or, if such Person is an entity, includes any trustee, member, general partner,
manager, director or executive officer of, or any Person performing similar
functions for, such Person.
"Agreement" shall mean this Agreement and Plan of Merger,
including the Schedules and Exhibits, in each case as amended or supplemented
from time to time.
"Analyses" shall have the meaning given to such term in the
Confidentiality Agreement.
"Ancillary Matters Schedule" shall mean the Schedule to this
Agreement entitled "Ancillary Matters" provided separately to the Buyer on the
day prior to the date hereof.
"Beneficial Ownership" shall have the same meaning as it has
under Section 13(d) of the Exchange Act, except that a Person shall be deemed to
have "Beneficial Ownership" of securities which such Person, any of its
Affiliates or any other Person who is a member of the same Group (within the
meaning of Section 13(d)(3) of the Exchange Act) has the right to acquire at any
time (and without regard to any otherwise applicable period of 60 days).
"Benefit Plan" shall mean a bonus, incentive, compensation,
severance, termination, pension, savings, profit sharing, retirement, health,
dental, disability, life insurance, loan, vacation, tuition reimbursement,
relocation, accidental death and dismemberment or other welfare plan, policy,
program, arrangement or agreement under which any employee or former employee of
the Company or any Subsidiary has any current or future rights to benefits,
other than (a) a collective bargaining agreement or other Contract with a labor
union or association, (b) a Contract relating to the appointment of a sales
agent or representative or a distributor, (c) a Contract relating to the
indemnification of a director, officer or employee, (d) a Contract relating to
the employment of any employee or the engagement of any consultant or (e) any
Organizational Document.
"Business" shall mean any business conducted by the Company or
any Subsidiary on or after the Plan Effective Date, other than CRS, EMS and
International IVS.
"Business Day" shall mean any day of the year other than (a)
any Saturday or Sunday or (b) any other day on which the banks located in the
State of New York or Connecticut are authorized or required by Law to be closed
for business.
"Buyer" shall have the meaning given to such term in the
title.
"Buyer Acquisition Proposal" shall mean any inquiry, offer or
proposal by the Buyer, directly or indirectly, (a) for any acquisition or
purchase of 40% or more of the consolidated assets of the Company and the
Subsidiaries or 40% or more (by voting power) of any class of equity or voting
securities of one or more of the Subsidiaries whose assets, individually or in
the aggregate, constitute 40% or more of the consolidated assets of the Company
and the Subsidiaries, (b) for any acquisition, purchase, tender offer (including
a self-tender offer) or exchange offer or constituting any tender offer or
exchange offer, in each case, that would result in the Buyer Beneficially Owning
40% or more (by voting power) of any class of equity or voting securities of the
Company, (c) for any merger, consolidation, reorganization, recapitalization,
joint venture, liquidation or other business combination involving (i) the
4
Company or (ii) one or more of the Subsidiaries whose assets, individually or in
the aggregate, constitute 40% or more of the consolidated assets of the Company
and the Subsidiaries, in each case, that would result in the Buyer (i) directly
or indirectly acquiring or purchasing 40% or more of the consolidated assets of
the Company and the Subsidiaries or 40% or more (by voting power) of any class
of equity or voting securities of one or more of the Subsidiaries whose assets,
individually or in the aggregate, constitute 40% or more of the consolidated
assets of the Company and the Subsidiaries or (ii) Beneficially Owning 40% or
more (by voting power) of any class of equity or voting securities of the
Company or (d) the issuance or acquisition of capital stock or other equity or
voting securities of the Company or any of the Subsidiaries constituting 40% or
more (by voting power) of any class of equity or voting securities of the
Company or any of the Subsidiaries (except for the issuance of shares of Common
Stock pursuant to exercise of Equity Interests in the Company outstanding on the
date hereof and as set forth on Schedule 5.6).
"Buyer Material Adverse Effect" means any material adverse
effect on the Buyer, the Buyer Subsidiary or any of their Affiliates, or its or
their business or affairs (including financial condition) that has or would
reasonably be expected to prevent or materially delay the ability of the Buyer
or the Buyer Subsidiary to consummate the transactions contemplated by this
Agreement.
"Buyer Payment" shall have the meaning given to such term in
Section 2.5(a).
"Buyer Subsidiary" shall have the meaning given to such term
in the title.
"Certificate of Merger" shall have the meaning given to such
term in Section 2.3.
"Cap Amount" shall have the meaning given to such term in
Section 8.3(c).
"Claim" shall mean any complaint, allegation, charge,
petition, appeal, demand, notice, filing or claim of any kind that commences,
alleges a basis to commence or threatens to commence any Proceeding by or before
any Governmental Authority or Judicial Authority or that asserts, alleges a
basis to assert or threatens to assert any right, breach, default, violation,
noncompliance, termination, cancellation or other action or omission that could
result in a Liability or Loss.
"Closing" shall have the meaning given to such term in Section
2.2.
"Closing Adjustment" shall mean the difference of (a) the sum
of (i) cash received (or deemed pursuant to Section 2.7(d) to be received on the
Closing Date) upon the exercise of options and warrants on or after Xxxxx 0,
0000, (xx) amounts paid by the Company prior to March 1, 2006, or incurred and
reflected as a current liability in the February 28 Working Capital, for which
the Buyer has a reimbursement obligation under Section 6.2(b), 6.3(a), 6.13 or
8.3(c) which has not been so reimbursed prior to March 1, 2006 and (iii) if the
Final Working Capital exceeds the Working Capital Baseline, the Working Capital
Adjustment, minus (b) the sum of (i) the Company Transaction Expenses, (ii) the
amount of the Company's portion of payroll Taxes attributable to the exercise of
options on or after March 1, 2006 or at the Effective Time, (iii) if the Final
Net Working Capital is less than the Working Capital Baseline, the Working
Capital Adjustment, (iv) the aggregate amounts paid or payable in respect of the
5
items set forth in Item 17 of the Ancillary Matters Schedule which are stated to
be deductions in the calculation of the Closing Adjustment, (v) amounts paid
pursuant to Section 6.2(e)(iv) but not reflected in the preceding clause (iv)
and (vi) amounts paid pursuant to Section 6.9. The Closing Adjustment may be a
positive or negative number.
"Closing Adjustment Estimate" shall have the meaning given to
such term in Section 2.6(b)(ii).
"Closing Date" shall have the meaning given to such term in
Section 2.2.
"Closing Documents" shall mean the certificates, instruments
and documents required to be delivered pursuant to Section 2.9 (other than the
Related Agreements).
"Code" shall mean the Internal Revenue Code of 1986.
"Commitment Letter" shall mean the commitment letter from UBS
Loan Finance LLC, UBS Securities LLC, Credit Suisse and Credit Suisse Securities
(USA) LLC to the Buyer attached hereto as Exhibit H.
"Common Stock" shall have the meaning given to such term in
the recitals.
"Company" shall have the meaning given to such term in the
title.
"Company Board Recommendation" shall have the meaning given to
such term in Section 5.2.
"Company Business Records" shall mean all books, records,
papers and files of any kind (including those in electronic form) of the Company
or any of the Subsidiaries which are held by or for the Company, any of the
Subsidiaries or any of their respective Representatives, including the stock
record books and the minute books of each of the Subsidiaries.
"Company Indemnification Obligations" shall have the meaning
given to such term in Section 8.3(a).
"Company Indemnified Persons" shall have the meaning given to
such term in Section 8.3(a).
"Company Stockholder Approval" shall have the meaning given to
such term in Section 6.4(a).
"Company Termination Fee" shall mean an amount equal to the
sum of (a) 1% of the Buyer Payment and (b) the Reimbursable Expenses of the
Buyer and the Buyer Subsidiary.
"Company Transaction Expenses" shall mean, to the extent that
they were not paid prior to March 1, 2006, without duplication, all fees and
expenses of counsel and advisors to and accountants for the Company and the
Subsidiaries incurred by the Company and the Subsidiaries in connection with
their negotiation, execution, delivery and performance of this
6
Agreement and the Related Agreements and the process leading up thereto,
including all fees and expenses of UBS Securities LLC, as financial advisor to
the Company, and all fees and expenses of the Person that issues the Fairness
Opinion, if it is a Person other than UBS Securities LLC, in each case, except
as otherwise provided herein.
"Confidential Memorandum" shall mean the Information
Memorandum, dated Fall 2005, with respect to the Company.
"Confidentiality Agreement" shall mean the Confidentiality
Agreement, dated as of September 28, 2005, between the Company and the Buyer.
"Consent" shall mean any approval, authorization, clearance,
exemption, waiver, permission or consent of any kind of any Person, whether
related to any Contract, Law or Order, or otherwise, other than a Permit.
"Contract" shall mean any written or oral contract, agreement,
undertaking, note, bond, mortgage, indenture, deed of trust, lease, sublease,
license, sublicense, purchase or sale order, quotation or other commitment,
obligation or instrument of any kind that is or is intended to be (or, upon
acceptance by the other intended party or parties thereto, would be) legally
binding or enforceable under applicable Law.
"Control" of a Person shall mean possession, directly or
indirectly, of the right or power to direct or cause the direction of the
management or policies of such Person, whether through ownership of voting
securities, through rights under Contracts, or otherwise.
"Copyrights" shall have the meaning given to such term in the
definition of Intellectual Property.
"Credit Facility" shall have the meaning given to such term in
Section 6.9(a).
"CRS" shall mean the business formerly conducted by the
Company and the Subsidiaries and the related assets formerly owned by, and
certain liabilities of, the Company and the Subsidiaries that were divested
pursuant to the Asset Purchase and Sale Agreement, dated as of April 11, 2005,
between the Company and Nice Systems Inc. and the related agreements listed in
item (xiv)(1) of Schedule 5.13.
"DGCL" shall mean the General Corporation Law of the State of
Delaware.
"Deferred Compensation Plan" shall have the meaning given to
such term in Section 5.18(g).
"Dissenters' Rights Period" shall have the meaning given to
such term in Section 7.1(b).
"Dissenting Shares" shall have the meaning given to such term
in Section 3.1.
"Divested Benefit Plan" shall mean any Benefit Plan (i)
previously maintained or required to be maintained by the Company or any
Subsidiary (or any former subsidiary of the
7
Company or any Subsidiary), (ii) to which the Company or any Subsidiary (or any
former subsidiary of the Company or any Subsidiary) previously made or was
required to make contributions or (iii) with respect to which the Company or any
Subsidiary previously had any Liability, in each case that was assumed by the
purchaser in the divestitures of CRS, EMS or International IVS.
"Domestic Benefit Plan" shall mean a Benefit Plan (i)
maintained or required to be maintained by the Company or any Subsidiary, (ii)
to which the Company or any Subsidiary makes or is required to make
contributions or (iii) with respect to which the Company or any Subsidiary
currently has or since the Plan Effective Date has had any Liability, in each
case other than a Foreign Benefit Plan or a Divested Benefit Plan.
"Effective Time" shall have the meaning given to such term in
Section 2.4(a).
"Employees" shall mean all employees of the Company and each
of the Subsidiaries, in each case, as of the relevant time.
"EMS" shall mean the business formerly conducted by the
Company and the Subsidiaries and the related assets formerly owned by, and
certain liabilities of, the Company and the Subsidiaries that were divested
pursuant to the Asset Purchase and Sale Agreement, dated as of December 30,
2005, by and among the Company, Bulova Technologies L.L.C., Bulova Technologies
EMS LLC, Xxxxx Venture Corporation and Xxxxxxx X. Xxxxx and the related
agreements listed in item (xiv)(2) of Schedule 5.13.
"EMS Adjacent Property" shall mean the parcels of real estate
adjacent to the property on which the EMS manufacturing facility is located,
containing approximately 18.633 acres.
"Environmental Claim" shall mean any Claim or Proceeding
arising from (a) any Environmental Law, (b) any Environmental Condition, (c) any
Hazardous Substance or any Release or Remediation thereof or (d) any pollution
of or failure to protect the indoor or outdoor environment (including failure to
protect human health and safety, other than in respect of occupational health
and safety) from Hazardous Substances Contamination.
"Environmental Condition" shall mean any condition (including
any Hazardous Substances Contamination) with respect to the indoor or outdoor
environment (including failure to protect human health and safety, other than in
respect of occupational health and safety) as a result of which any Person (a)
has incurred or could incur any Liability or Loss, (b) has or could become
subject to any Claim or Proceeding or (c) has or could become subject to any
obligation to Remediate such condition, including any condition resulting from
the business or activities of the Company or any of the Subsidiaries or the
business or activities of any other Person on any of the Real Property.
"Environmental Law" shall mean any Law or any regulatory
policy statement or similar guidance of any kind relating to pollution or
protection of the indoor or outdoor environment (including protection of human
health and safety, other than in respect of occupational health and safety), or
any Hazardous Substance or any Release or Remediation thereof, including (a) the
Comprehensive Environmental Response, Compensation and Liability
8
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of
1984, (b) the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments
of 1984, (c) the Federal Water Pollution Control Act of 1972, as amended by the
Clean Water Act of 1977, (d) the Toxic Substances Control Act of 1976, (e) the
Emergency Planning and Community Right-To-Know Act of 1986, (f) the Clean Air
Act of 1966, as amended by the Clean Air Act Amendments of 1990, (g) the
National Environmental Policy Act of 1970, (h) the Endangered Species Act of
1973, (i) the Safe Drinking Water Act of 1974 and (j) the Atomic Energy Act of
1954.
"Environmental Liabilities" shall mean all Liabilities arising
from any Environmental Claim or Environmental Condition.
"Equity Interests" of a Person shall mean capital stock,
capital stock equivalents (including stock options, restricted stock units,
stock appreciation rights and phantom stock), partnership interests, membership
interests, participations, shares and other equity interests of any class or
kind (however designated) of such Person.
"Estimates" shall have the meaning given to such term in
Section 2.6(b)(ii).
"Exchange Act" shall mean the Securities Exchange Act of 1934.
"Exchange Agency Agreement" shall mean an exchange agency
agreement among the Exchange Agent, the Company, the Buyer and the Buyer
Subsidiary in substantially the form attached hereto as Exhibit E, with such
reasonable changes as the Parties shall agree in good faith prior to the
Closing.
"Exchange Agent" shall mean Xxxxx Fargo Bank, N.A., a national
banking association, or any other bank and trust company reasonably acceptable
to the Company and the Buyer, in its capacity as exchange agent under the
Exchange Agency Agreement.
"Exchange Fund" shall have the meaning given to such term in
Section 2.5(d).
"Existing Coverage" shall have the meaning given to such term
in Section 8.3(c).
"Fairness Opinion" shall mean an opinion of an independent
investment bank of recognized national standing, selected by the Board of
Directors of the Company in its sole discretion, addressed to the Board of
Directors of the Company, as to the fairness of the consideration for the Merger
to the Company's stockholders from a financial point of view.
"February 28 Net Available Cash" shall mean the Net Available
Cash of the Company as of February 28, 2006.
"February 28 Working Capital" shall mean the Working Capital
of the Company as of February 28, 2006.
"Final Closing Adjustment" shall mean the final amount of the
Closing Adjustment (a) as set forth in the Closing Adjustment Estimate delivered
pursuant to Section 2.6(b)(ii), (b) if the Buyer shall have properly and timely
delivered an Objection Notice as
9
described in Section 2.6(d) and the Company and the Buyer shall have agreed on
revisions as described in Section 2.6(f), as set forth in the Closing Adjustment
Estimate as so revised, or (c) if the Company and the Buyer shall not have so
agreed, as set forth in the Closing Adjustment Estimate after giving effect to
the determination of the Selected Accountants pursuant to Section 2.6(f).
"Final Net Available Cash" shall mean the final amount of the
February 28 Net Available Cash (a) as set forth in the Pre-Closing Working
Capital and Net Available Cash Estimate delivered pursuant to Section 2.6(b)(i),
(b) if the Buyer shall have properly and timely delivered an Objection Notice as
described in Section 2.6(d) and the Company and the Buyer shall have agreed on
revisions as described in Section 2.6(f), as set forth in the Pre-Closing
Working Capital and Net Available Cash Estimate as so revised, or (c) if the
Company and the Buyer shall not have so agreed, as set forth in the Pre-Closing
Working Capital and Net Available Cash Estimate after giving effect to the
determination of the Selected Accountants pursuant to Section 2.6(f).
"Final Working Capital" shall mean the final amount of the
February 28 Working Capital (a) as set forth in the Pre-Closing Working Capital
and Net Available Cash Estimate delivered pursuant to Section 2.6(b)(i), (b) if
the Buyer shall have properly and timely delivered an Objection Notice as
described in Section 2.6(d) and the Company and the Buyer shall have agreed on
revisions as described in Section 2.6(f), as set forth in the Pre-Closing
Working Capital and Net Available Cash Estimate as so revised, or (c) if the
Company and the Buyer shall not have so agreed, as set forth in the Pre-Closing
Working Capital and Net Available Cash Estimate after giving effect to the
determination of the Selected Accountants pursuant to Section 2.6(f).
"Foreign Benefit Plan" shall mean any Benefit Plan (a)
maintained or required to be maintained by the Company or any Subsidiary, (b) to
which the Company or any Subsidiary makes or is required to make contributions
or (c) with respect to which the Company or any Subsidiary currently has or has
had since the Plan Effective Date any Liability, in each case, that is
maintained outside of the United States and, in each case, other than a Divested
Benefit Plan.
"GAAP" shall mean generally accepted accounting principles in
the United States as in effect on the relevant date, together with the
procedures, practices and methodologies of the Company used in connection
therewith, in each case, consistently applied. For this purpose, "as in effect
on the relevant date" when used in reference to GAAP as applied (a) to the 2005
Audited Financial Statements, shall mean as of the date and for the periods
covered by the 2005 Audited Financial Statements, (b) to the 2004 Audited
Financial Statements, shall mean as of the date and for the periods covered by
the 2004 Audited Financial Statements, (c) to the Unaudited Financial
Statements, shall mean as of the date and for the periods covered by the
Unaudited Financial Statements, (d) to the calculation of the Final Working
Capital and the Final Net Available Cash, shall mean as of December 31, 2005,
and (e) to all other references in this Agreement, shall mean as of the date or
for the period covered by the representation, warranty, covenant or information
in respect of which the term GAAP is used.
"Governmental Authority" shall mean any government (including
any U.S. Federal, foreign, state, commonwealth, provincial, cantonal, city,
municipal or county
10
government), any political subdivision, territory or possession thereof and any
governmental, administrative, ministerial, regulatory, central bank,
self-regulatory, quasi-governmental, taxing, executive or legislative
department, board, bureau, commission, body, agency, authority or
instrumentality of any thereof.
"GT" shall mean Xxxxx Xxxxxxxx LLP, the former independent
auditors of the Company.
"Group" shall have the meaning given to such term in Section
13(d) of the Exchange Act.
"Guarantee" of or by any Person, as of any date, shall mean,
without duplication, (a) any direct or indirect obligation, contingent or
otherwise, of such Person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other Person (the "primary obligor") in any
manner, including any obligation of such Person to (i) purchase or pay (or
advance funds for the purchase or payment of) such Indebtedness (whether arising
by virtue of partnership arrangements, agreements to keep well, to take-or-pay
or to stop losses, or otherwise) or to purchase or lease property, securities or
services for the purpose of assuring the payment of such Indebtedness or (ii)
maintain any working capital, equity capital or other financial condition
(including cash, working capital, net assets, operating results or liquidity) of
the primary obligor so as to enable the primary obligor to pay such Indebtedness
or (b) any Lien on any assets of such Person securing any Indebtedness of any
other Person, whether or not such Indebtedness is assumed by such Person, in the
case of each clause above as of such date; provided, however, that the term
"Guarantee" shall not include endorsements for collection or deposit, in either
case, in the ordinary course of business consistent with past practices.
"Hazardous Substance" shall mean any chemical, waste or other
substance as to which any Liability, standard of conduct or regulatory
requirement of any kind is imposed under any Law or regulatory policy statement,
directive or guidance of any kind relating to pollution or the protection of the
environment (including protection of human health and safety, other than in
respect of occupational health and safety), including any Hazardous Waste or any
flammable, corrosive, toxic, reactive, explosive or radioactive material
(including any source, byproduct or special nuclear material), radon, asbestos,
formaldehyde, urea formaldehyde, polychlorinated biphenyl, petroleum, petroleum
constituent, petroleum product, polycyclic aromatic hydrocarbons, methane or
medical waste.
"Hazardous Substances Contamination" shall mean the presence
in the indoor or outdoor environment of a Hazardous Substance in concentrations
or amounts that require Remediation under any Environmental Law.
"Hazardous Waste" shall mean any substance defined as a
"hazardous waste" pursuant to the Resource Conservation and Recovery Act or any
other similar Law.
"Health and Safety Condition" shall mean any condition with
respect to occupational health and safety as a result of which any Person (a)
has incurred or could incur any Liability or Loss, (b) has or could become
subject to any Claim or Proceeding or (c) has or could
11
become subject to any obligation to Remediate such condition, in each case,
under any Health and Safety Law.
"Health and Safety Law" shall mean any Law relating to
protection of occupational health and safety or any Remediation of any threat
thereto, including the Occupational Safety and Health Act of 1970, other than
any Environmental Law.
"HIPAA" shall mean the Health Insurance Portability and
Accountability Act of 1996.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976.
"Indebtedness" of any Person as of any date shall mean,
without duplication, (a) Indebtedness for Borrowed Money, (b) all obligations of
such Person upon which interest is customarily paid (other than trade payables
incurred in the ordinary course of business consistent with past practices), (c)
all off-balance-sheet financings of such Person, including synthetic leases and
project financings, (d) all Guarantees by such Person of any obligation of the
type described in clauses (a) through (c) above of any other Person, (e) all
capital lease obligations of such Person, (f) all interest rate protection,
foreign currency exchange or other interest or exchange rate hedging agreements
and (g) all obligations of such Person as an account party in respect of letters
of credit and bankers' acceptances, in the case of each clause above, as of such
date. The Indebtedness of any Person includes the Indebtedness of any other
Person (including any partnership in which such Person is a general partner) to
the extent that such Person is liable therefor under applicable Law as a result
of Equity Interests held by such Person in such other Person (except to the
extent that the terms of such Indebtedness provide that such Person is not
liable therefor).
"Indebtedness for Borrowed Money" of any Person as of any date
shall mean, without duplication, (a) all obligations of such Person for borrowed
money or with respect to deposits or advances of any kind (other than deposits
or advances in respect of deferred revenue), (b) all obligations of such Person
evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person for purchase money financing, including obligations
under conditional sale or other title retention agreements issued or assumed in
respect of deferred purchase price, relating to assets purchased by such Person
(other than trade payables incurred in the ordinary course of business
consistent with past practices) and (d) all Guarantees by such Person of any
obligation of the type described in clauses (a) through (c) above of any other
Person. The Indebtedness for Borrowed Money of any Person includes the
Indebtedness for Borrowed Money of any other Person (including any partnership
in which such Person is a general partner) to the extent that such Person is
liable therefor under applicable Law as a result of Equity Interests held by
such Person in such other Person (except to the extent that the terms of such
Indebtedness for Borrowed Money provide that such Person is not liable
therefor).
"Information" shall have the meaning given to such term in the
Confidentiality Agreement.
12
"Information Statement" shall have the meaning given to such
term in Section 6.4(b).
"Intellectual Property" shall mean any and all (a) designs,
styles, concepts, inventions and discoveries of any kind which are entitled to
protection under any patent, copyright, trademark, trade secret or similar Law,
(b) patents and patent applications (including reissues, reexaminations,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part), and statutory invention registrations (collectively,
"Patents"), (c) trademarks, service marks, domain names, trade dress, logos,
trade names, corporate names and other identifiers of source or goodwill of any
kind, including registrations and applications for registration thereof
(collectively, "Trademarks"), (d) domain names, websites, mask works, computer
software of any kind (including source code, object code and specifications,
designs and documentation related thereto (collectively "Software")) and
copyrights of any kind, including copyrights in computer software and published
and unpublished works, and registrations and applications for registration
thereof (collectively "Copyrights") and (e) confidential and proprietary
information, including trade secrets, know-how (including manufacturing and
engineering information), process technology, technical information, data,
customer lists, plans, strategies and methodologies, in the case of each clause
above, regardless of the form in which embodied or evidenced and including all
books, records, papers, files, databases, recordings, imprints, pictures,
drawings and blue prints associated therewith or related thereto.
"International IVS" shall mean the business outside of the
Americas formerly conducted by, and certain liabilities of, the Company and the
Subsidiaries and the related assets formerly owned by the Company and the
Subsidiaries that were divested pursuant to the Share Purchase Agreement, dated
as of September 13, 2005, between the Company and Xxxxxx Xxxxxxxxxxxx and the
related agreements listed in item (xiv)(3) of Schedule 5.13.
"IRS" shall have the meaning given to such term in Section
5.8(d).
"Judicial Authority" shall mean any court, arbitrator, special
master, receiver, tribunal or similar body of any kind.
"Knowledge" of the Company as to a fact or matter, shall mean
(a) actual knowledge of such fact or matter by a designated senior officer of
the Company and (b) knowledge that such officer would be reasonably expected to
obtain after making the same inquiry of Employees reporting directly to such
officer that a prudent businessperson would have made in the management and
conduct of her or his own business and affairs in order to gain a commercially
reasonable understanding of such fact or matter. For this purpose, the
designated senior officers of the Company shall mean Xxxxxx X. Xxxxxxxx, Xxx
Xxxxxxx, Xxxxx X. Xxxxx, Xxx Xxxxxxx, Xx Xxxxxxxx, Xxx Xxxxxxx (with respect to
Sections 5.16 and 5.17 only), Xxxxx Xxxxx (with respect to Sections 5.16 and
5.17 only), Xxxx Xxxxxxx (with respect to Sections 5.16 and 5.17 only) and Xxx
Xxxxxx (with respect to Sections 5.13 and 5.26 only). "Knowledge" of the Buyer
as to a fact or matter, and correlative phrases, shall mean (a) actual knowledge
of such fact or matter by a designated senior officer of the Buyer and (b)
knowledge that such designated senior officer would reasonably be expected to
obtain after making the same inquiry of employees reporting directly to him or
her that a prudent businessperson would have made in the
13
management and conduct of her or his own business and affairs in order to gain a
commercially reasonable understanding of such fact or matter. For this purpose,
the designated senior officers of the Buyer shall mean Xxxx Xxxxx, Xxxxx Xxxxxx,
Xxxx Xxxxxx and Xx-Xxxx Xxxxxxxx.
"Law" shall mean any treaty, code, statute, law (including
common law), rule, binding administrative policy or guidance, regulation or
ordinance of any kind of any Governmental Authority.
"Letter of Transmittal" shall have the meaning given to such
term in Section 6.5.
"Liability" shall mean any liability, duty, responsibility,
obligation, assessment, cost, expense, expenditure, charge, fee, penalty, fine,
contribution, premium or obligation of any kind, whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated
or unliquidated, xxxxxx or inchoate, direct or indirect, primary or secondary,
matured or unmatured, or due or to become due, and regardless of when sustained,
incurred or asserted or when the relevant events occurred or circumstances
existed, in each case, whether or not required under GAAP to be reflected in an
audited consolidated balance sheet of such Person.
"Lien" shall mean (a) any mortgage, indenture, deed of trust,
collateral assignment, lien, hypothecation, pledge, encumbrance, restriction,
charge or security interest of any kind, (b) the interest of a vendor or a
lessor under any conditional sales agreement, capital lease, purchase money
seller financing agreement or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing), (c) any
purchase option, call option or similar right (including, in the case of
securities, any transfer restriction thereon, any proxy, voting agreement or
similar arrangement with respect thereto, any reservation thereof for any
purpose, any pre-emptive right, right of first offer or first refusal, or
similar right with respect thereto, any option, warrant or right to purchase or
acquire such securities, or any other securities convertible into or exercisable
or exchangeable for such securities), (d) in respect of real property, any
easement, restriction, limitation, right of way, lease or license to a third
party, or similar right of any kind, other than those arising under or imposed
by applicable Law, or (e) any Contract to grant or enter into any arrangement
described in clause (a), (b), (c) or (d) above, but in the case of clauses (a),
(b), (c), (d) and (e) above, in the case of securities, excluding customary
transfer restrictions under securities Laws.
"Loss" shall mean any Liability or any shortage, damage,
diminution in value, deficiency or loss of any kind.
"Major Customer" shall have the meaning given to such term in
Section 5.26.
"Majority Stockholders" shall have the meaning given to such
term in the recitals.
"Material Adverse Effect" shall mean a material adverse effect
on the business, operations, assets, liabilities, financial condition or results
of the Company and the Subsidiaries, taken as a whole, but shall not include (a)
effects resulting from changes in general economic, regulatory, political or
industry conditions or from acts of terror or war, (b) effects resulting from
acts attributable to, omissions by or circumstances that relate to the Buyer,
the Buyer Subsidiary or any of their Affiliates, (c) effects resulting from
changes in commodity or energy prices, in
14
interest or currency exchange rates or in capital market conditions, (d) effects
resulting from circumstances that affect the industries in which the Company and
the Subsidiaries operate generally, (e) effects resulting from changes in
generally accepted accounting principles, (f) effects resulting from the
announcement or pendency of the Merger and the transactions contemplated hereby,
including any resignations by, or other losses of, Employees, or (g) effects
resulting from compliance with, or the taking of any action required by, the
terms of this Agreement (other than effects resulting from the Closing).
"Material Contracts" shall have the meaning given to such term
in Section 5.13.
"Merger" shall have the meaning given to such term in the
recitals.
"Merger Consideration" shall mean the sum of the Buyer Payment
and the Additional Closing Payment.
"Monthly Financial Statements" shall have the meaning given to
such term in Section 2.6(a).
"Multiemployer Plan" shall have the meaning given to such term
in Section 5.18(e).
"Multiple Employer Plan" shall have the meaning given to such
term in Section 5.18(e).
"Net Available Cash" shall mean the difference of (a) the cash
and cash equivalents (including cash on deposit, checks received but not yet
deposited or cleared and certificates of deposit and marketable securities,
including interest accrued but not yet credited or received thereon) of the
Company and the Subsidiaries, minus (b) the sum of (i) the Indebtedness for
Borrowed Money of the Company and the Subsidiaries and (ii) overdrafts in
deposit accounts of the Company or any of the Subsidiaries, in the case of each
clause above, without duplication and determined on a consolidated basis. Net
Available Cash may be a positive or negative number.
"Objection Notice" shall have the meaning given to such term
in Section 2.6(d).
"Open Source" shall have the meaning given to such term in
Section 5.17(i).
"Order" shall mean any judgment, writ, decree, directive,
decision, injunction, ruling, award or order (including any consent decree or
cease and desist order) of any kind of any Governmental Authority or Judicial
Authority.
"Ordinary Course" shall mean the ordinary course of business,
operations and activities conducted by the Company and the Subsidiaries, taken
as a whole and consistent with past practice.
"Organizational Documents" of a Person at any time shall mean
(a) all certificates, articles or agreements of any kind filed with any
Governmental Authority or Judicial Authority to form or organize such Person and
(b) all agreements, documents or instruments
15
creating, organizing or governing the internal affairs of such Person, including
trust agreements, bylaws, codes of regulations, memoranda of incorporation or
association, partnership agreements, limited liability company agreements,
charters and operating agreements, in each case, as in effect at such time.
"Other Scheduled Contracts" shall have the meaning given to
such term in Section 5.13(a).
"Parties" shall mean the Company, the Buyer and the Buyer
Subsidiary.
"Patents" shall have the meaning given to such term in the
definition of Intellectual Property.
"Per Share Additional Closing Payment" shall mean the
Additional Closing Payment divided by the number of shares of Common Stock
issued and outstanding immediately prior to the Effective Time (calculated in
accordance with Section 2.7(b)).
"Per Share Buyer Payment" shall mean the Buyer Payment divided
by the number of shares of Common Stock issued and outstanding immediately prior
to the Effective Time (calculated in accordance with Section 2.7(b)).
"Per Share Merger Consideration" shall have the meaning given
to such term in Section 2.5(b).
"Permits" shall mean any franchise, license, approval,
authorization, certificate of need, waiver, certification or permit of any kind
of any Governmental Authority.
"Permitted Lien" shall mean (a) Tax liens, workers or
unemployment compensation liens and mechanic's, materialman's, supplier's,
vendor's, laborer's, employee's or similar liens, in each case, arising in the
Ordinary Course and securing amounts that are not yet delinquent or are being
contested in good faith by appropriate Proceedings and for which there are
adequate reserves (determined on a basis consistent with the 2004 Audited
Financial Statements) on the books and accounts of the Company and the
Subsidiaries, (b) in the case of owned or leased real property, imperfections of
title and Liens which, individually or in the aggregate, do not materially
detract from the value or materially interfere with the current or currently
contemplated use of such property, (c) Liens disclosed in any Schedule and (d)
Liens which are released prior to or as of the Closing.
"Person" shall mean an individual, a partnership, a sole
proprietorship, a company, a firm, a corporation, a limited liability company,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, a union, a group acting in concert, a Judicial
Authority, a Governmental Authority or any other entity or association of any
kind.
"Plan Confirmation Order" shall have the meaning given to such
term in Section 5.33(b).
16
"Plan Effective Date" shall mean March 28, 2002, the effective
date of the Reorganization Plan.
"Pre-Closing Working Capital and Net Available Cash Estimate"
shall have the meaning given to such term in Section 2.6(b)(i).
"Proceedings" shall mean any action, suit, arbitration,
mediation, litigation, hearing, investigation, inquiry or other proceeding of
any kind involving any Governmental Authority, any Judicial Authority or any
other Person.
"PWC" shall mean PricewaterhouseCoopers LLC, the independent
auditors of the Company.
"Qualified Superior Contract" shall mean the then most current
version of a complete binding Contract relating to a Superior Proposal executed
on behalf of a Qualified Third Party (together with all exhibits, schedules and
other attachments thereto) that (a) shall be subject only to acceptance by the
Company by countersignature on behalf of the Company, (b) contains no conditions
(other than the condition that this Agreement be terminated and the conditions
set forth in Section 7.1 that shall not then have been satisfied or waived) and
(c) the Board of Directors of the Company in good faith shall have determined,
after consultation with its financial advisors, is more favorable to the holders
of outstanding shares of Common Stock than this Agreement.
"Qualified Third Party" shall have the meaning given to such
term in Section 6.6(b).
"Real Property" shall have the meaning given to such term in
Section 5.9(a).
"Real Property Lease" shall have the meaning given to such
term in Section 5.9(a).
"Related Agreements" shall mean the Exchange Agency Agreement,
the Stockholders Agreements and Acknowledgements and the Certificate of Merger.
"Release" shall mean any "release" or "threat of release"
within the meaning of any Environmental Law.
"Remediation" shall mean abatement, removal, remediation,
correction or other responsive action of any kind to reduce or contain any
Environmental Condition or to reduce risk from any Health and Safety Condition.
"Reorganization Plan" shall mean the Third Amended Plan of
Reorganization of Dictaphone Corporation.
"Representatives" of a Person shall mean controlling persons,
partners, directors, officers, managers, trustees, employees, agents,
representatives, consultants, affiliates, advisors, counsel or nominees of such
Person.
17
"Restrictive Covenants" shall have the meaning given to such
term in Section 10.3(a).
"Securities Act" shall mean the Securities Act of 1933.
"Selected Accountants" shall mean an independent accounting
firm of recognized national standing acceptable to the Company and the Buyer.
"Software" shall have the meaning set forth in the definition
of Intellectual Property.
"Stockholder Agreement and Acknowledgement" shall have the
meaning given to such term in the recitals.
"Subsequent Events" shall have the meaning given to such term
in Section 6.8(a).
"Subsidiary" shall have the meaning given to such term in
Section 5.6(c).
"Superior Proposal" shall mean any written Acquisition
Proposal that would result in the direct or indirect acquisition or purchase (by
means of stock or asset purchase, tender or exchange offer, merger,
consolidation, recapitalization, reorganization or otherwise) by any Third Party
of 50% or more of the consolidated assets of the Company and the Subsidiaries or
50% or more (by voting power) of the capital stock of the Company on terms that
the Board of Directors of the Company in good faith determines by a majority
vote, after (a) consulting with outside legal counsel, (b) considering the
advice of a financial advisor of nationally recognized reputation and (c) taking
into account (i) all of the terms and conditions of this Agreement and such
Acquisition Proposal, including any break-up fees, expense reimbursement
provisions and conditions to consummation, and (ii) to the extent that it may be
required in connection with the consummation of the transactions contemplated by
this Agreement and such Acquisition Proposal, the extent to which such financing
is then fully committed or is determined in good faith by the Board of Directors
of the Company to be reasonably available, are more favorable to the holders of
the outstanding shares of Common Stock than the terms provided herein.
"Surviving Corporation" shall have the meaning given to such
term in Section 2.1.
"Tail Coverage" shall have the meaning given to such term in
Section 8.3(c).
"Tax" shall mean any U.S. Federal, foreign, state,
commonwealth, provincial, cantonal, city, municipal, county or local income,
gross receipts, license, payroll, employment, excise, capital gains, lease,
service, branch, withholding, utility, production, severance, stamp, occupation,
premium, windfall profits, environmental (including tax under Code Section 59A),
capital stock, excise, conveyance, documentary, franchise, profits, social
security, unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum, import
(including custom duty), export, estimated or other tax, levy, impost, duty or
assessment of any kind, whether computed on a separate,
18
consolidated, unitary, combined or other basis, including any interest, fine or
penalty thereon or addition thereto and any liability for such amounts of a
predecessor and transferor entity.
"Tax Return" shall mean any return, declaration, report, claim
for refund, or information return or statement relating to any Tax, including
any information return or report with respect to backup withholding and other
payments to third parties.
"Termination Date" shall have the meaning given to such term
in Section 9.1(d).
"Third Party" shall mean any Person other than a Party or any
of its Affiliates.
"Title IV Plan" shall have the meaning given to such term in
Section 5.18(e).
"Trademarks" shall have the meaning given to such term in the
definition of Intellectual Property.
"Treasury Regulations" shall mean regulations issued by the
United States Department of the Treasury under the Code.
"Unaudited Financial Statements" shall mean the unaudited
consolidated financial statements of the Company as of September 30, 2005 and
for the nine-month period ended September 30, 2005.
"WARN" shall mean the Worker Adjustment and Retraining
Notification Act of 1988.
"Working Capital" shall mean (a) the sum of current assets
(excluding cash and cash equivalents) of the Company and the Subsidiaries minus
(b) the sum of the current liabilities (including long-term deferred revenues,
but excluding restructuring reserves) of the Company and the Subsidiaries, in
the case of each clause above, determined on a consolidated basis in accordance
with GAAP. An example of the calculation of Working Capital is attached hereto
as Exhibit D. For the avoidance of doubt, Working Capital shall not include any
liability included in Company Transaction Expenses.
"Working Capital Baseline" shall mean a negative $36,866,000
positively incremented by the amount of any accruals as of December 31, 2005 for
expenses of the type described in the definition of Company Transaction
Expenses.
"Working Capital Adjustment" shall mean the difference between
the Final Working Capital and the Working Capital Baseline, expressed as a
positive number.
"Written Consents" shall have the meaning given to such term
in the recitals.
SECTION 1.2. INTERPRETATION. Unless otherwise expressly stated
in this Agreement:
(a) the words "hereof", "hereby" and "hereunder," and
correlative words, refer to this Agreement as a whole and not any particular
provision;
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(b) the words "includes" and "including", and correlative
words, are deemed to be followed by the phrase "without limitation";
(c) the word "written," the phrase "in writing" and
correlative words and phrases include electronic and facsimile transmissions;
(d) the words "asset" and "property" are synonymous and
include owned, leased and licensed real, personal and intangible property of
every kind, including contractual rights, tort claims, cash, securities and
information;
(e) the masculine, feminine or neuter form of a word includes
the other forms of such word and the singular and plural forms of a word shall
have correlative meanings;
(f) words and phrases defined herein shall have the same
meanings in each Closing Document and each Related Agreement, unless expressly
stated otherwise in such Closing Document or Related Agreement;
(g) the words "will" and "shall" are synonymous;
(h) references to a Person shall include the successors and
permitted assigns thereof;
(i) references to any Consent, Contract, Law, Order, Permit or
Tax Return mean such Consent, Contract, Law, Order, Permit or Tax Return as
amended, modified or supplemented as of the relevant date and, in the case of
any Law, also means the rules and regulations thereunder as of the relevant
date, and, in the case of any Contract or Tax Return, includes any and all
exhibits, annexes, schedules and documents attached thereto or incorporated
therein or constituting a part thereof as of the relevant date;
(j) references to a "board of directors" of a Person mean the
board of directors or correlative governing body or authority of such Person and
include any committee thereof, references to an "officer" or "director" of a
Person mean an officer, director, executive, manager or trustee of such Person
or an individual performing correlative functions for such Person, the words
"stockholder" and "shareholder" are synonymous and references to the
"stockholders" or "shareholders" of a Person mean the stockholders, shareholders
or other owners of Equity Interests (including partners and members) of such
Person;
(k) references to an Article, Section, Schedule or Exhibit
mean an Article or Section of, or a Schedule (including the Ancillary Matters
Schedule and any other Schedules provided separately to the Buyer and not
attached to this Agreement) or Exhibit to, this Agreement;
(l) references to "amendments" of a Contract or other
document, and correlative terms, include amendments, modifications, supplements,
waivers, releases, discharges and other changes thereto as agreed by the parties
thereto;
(m) references to "environment" include ambient air and waters
(including subsurface waters) and the ground (including underground);
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(n) references to "ancillary matters" in relation to matters
approved by the Board of Directors of the Company and to be submitted to a vote
of the stockholders of the Company shall mean the matters identified in the
Schedule entitled "Ancillary Matters" provided separately to the Buyer prior to
or on the date hereof;
(o) capitalized terms that are correlative to terms defined in
Section 1.1 shall have correlative meanings; and
(p) references to the "restructuring relating to the
divestitures of CRS, EMS and International IVS", and correlative phrases,
include the related employee layoffs and service outsourcing, service depot
closures, information technology infrastructure reductions and leased property
downsizings and to the "divestitures of CRS, EMS and International IVS", and
correlative phrases, include actions taken or omitted, or to be taken or
omitted, pursuant to the Contracts related thereto.
SECTION 1.3. EXHIBITS. Each of the Exhibits may be changed
after the date hereof by mutual agreement of the Company and the Buyer (but, in
the case of the Exchange Agency Agreement, only with the consent of the Exchange
Agent) and references herein to such Exhibits shall mean such Exhibits as so
changed.
ARTICLE 2
THE TRANSACTION
SECTION 2.1. THE MERGER. On the terms and subject to the
conditions set forth in this Agreement and in accordance with the DGCL, at the
Effective Time, the Buyer Subsidiary shall merge with and into the Company. At
the Effective Time, the separate corporate existence of the Buyer Subsidiary
shall cease and the Company shall be the surviving corporation of the Merger (as
such, the "Surviving Corporation").
SECTION 2.2. THE CLOSING. Subject to Section 2.6(f) and
Article 7, the closing of the Merger (the "Closing") shall take place at the
offices of Xxxxxx Xxxx & Xxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx,
commencing at 9:00 a.m., local time, on March 15, 2006 (or, if such conditions
shall not have been satisfied or waived by such date, on the third Business Day
following the satisfaction or waiver of all conditions to the obligations of the
Parties set forth in Article 7 (other than conditions with respect to actions
contemplated to be taken at the Closing itself)) or at such other place or on
such other date as the Company and the Buyer may mutually agree. The date
applicable under this Section 2.2 is called the "Closing Date."
SECTION 2.3. ACTIONS AT THE CLOSING. At the Closing, (a) the
Company will deliver to the Buyer and the Buyer Subsidiary the documents
described in Sections 2.9(a) and 7.1(k), (b) the Buyer and the Buyer Subsidiary
will deliver to the Company the documents described in Sections 2.9(b) and
7.2(i), (c) the Company and the Buyer Subsidiary will file or cause to be filed
with the Secretary of State of the State of Delaware a duly executed Certificate
of Merger in the form attached hereto as Exhibit A (the "Certificate of Merger")
and (d) the Buyer will deliver or cause to be delivered to the Exchange Agent
for deposit pursuant to the
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Exchange Agency Agreement an aggregate amount equal to the sum of the Buyer
Payment and the Additional Closing Payment.
SECTION 2.4. EFFECT OF THE MERGER.
(a) The Merger shall become effective at the time at which the
Certificate of Merger is filed with the Secretary of State of the State of
Delaware or at such later time as the Company and the Buyer may mutually agree
and specify in the Certificate of Merger (the "Effective Time"). After the
Effective Time, (i) the Company, as the Surviving Corporation, shall continue to
be governed by the laws of the State of Delaware and (ii) the separate corporate
existence of the Company, as the Surviving Corporation, with all its rights,
privileges, immunities, powers and franchises, shall continue unaffected by the
Merger. In addition, the Merger shall have the effects set forth in the DGCL,
Sections 2.4(b), 2.4(c), 2.4(d) and 2.5 and Article 3. Without limiting the
generality of the foregoing, at the Effective Time, all of the properties,
rights, privileges, immunities, powers and franchises of the Company and the
Buyer Subsidiary shall vest in the Surviving Corporation and all of the debts,
liabilities, obligations and duties of the Company and the Buyer Subsidiary
shall become the debts, liabilities, obligations and duties of the Surviving
Corporation. The Surviving Corporation may, at any time after the Effective
Time, take any action (including executing, delivering, acknowledging,
publishing and filing any Contract, Consent, Tax Return, Permit or other
document) in the name and on behalf of either the Company or the Buyer
Subsidiary that is or may be necessary, appropriate or expedient in order to
carry out and effectuate the transactions contemplated by this Agreement.
(b) At the Effective Time, the restated certificate of
incorporation of the Company shall be amended in its entirety so that it reads
as set forth in Exhibit B. After the Effective Time, such restated certificate
of incorporation, as so amended, shall be the certificate of incorporation of
the Surviving Corporation until thereafter amended in accordance with the DGCL,
such restated certificate of incorporation and the bylaws of the Surviving
Corporation as then in effect.
(c) At the Effective Time, the bylaws of the Company shall be
amended in their entirety so that they read as set forth in Exhibit C. After the
Effective Time, such bylaws, as so amended, shall be the bylaws of the Surviving
Corporation until thereafter amended in accordance with the DGCL, the
certificate of incorporation of the Surviving Corporation as then in effect and
such bylaws.
(d) At the Effective Time, the officers and directors,
respectively, of the Buyer Subsidiary immediately prior to the Effective Time
shall be the officers and directors, respectively, of the Surviving Corporation
immediately after the Effective Time. Such officers shall initially hold the
same offices of the Surviving Corporation as they hold of the Buyer Subsidiary
immediately prior to the Effective Time, and such officers and directors shall
hold office in accordance with the DGCL and the certificate of incorporation and
bylaws of the Surviving Corporation as then in effect.
SECTION 2.5. PURCHASE PRICE; MERGER CONSIDERATION; CONVERSION
OF SHARES.
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(a) The purchase price for 100% of the equity of the Company
on a debt-free and cash-free basis is $357,000,000 (the "Buyer Payment").
(b) At and as of the Effective Time, by virtue of the Merger
and without any action on the part of the stockholders of the Company, each
share of Common Stock issued and outstanding immediately prior to the Effective
Time (other than a Dissenting Share) shall be converted into the right to
receive, without interest, the sum of (i) the Per Share Buyer Payment, and (ii)
the Per Share Additional Closing Payment (together with the Per Share Buyer
Payment, the "Per Share Merger Consideration"), all such shares shall be
canceled and cease to exist and each holder of a certificate representing any of
such shares shall thereafter cease to have any rights with respect to such
shares, except the right to receive the Per Share Merger Consideration for such
shares. After the Effective Time, no share of Common Stock issued and
outstanding immediately prior to the Effective Time shall be deemed to be issued
or outstanding or to have any rights other than as set forth in this Article 2
or Article 3.
(c) At and as of the Effective Time, by virtue of the Merger
and without any action on the part of the Company, all shares of Common Stock,
if any, that are owned directly or indirectly by the Company immediately prior
to the Effective Time as treasury stock shall be canceled without any
consideration therefor or conversion thereof and shall cease to exist and, after
the Effective Time, no such shares shall be deemed to be issued or outstanding.
At and as of the Effective Time, by virtue of the Merger and without any action
on the part of the stockholders of the Buyer Subsidiary, each share of capital
stock of the Buyer Subsidiary issued and outstanding immediately prior to the
Effective Time shall remain outstanding and shall thereafter represent one duly
authorized, validly issued, fully paid and nonassessable share of common stock,
par value $0.01 per share, of the Surviving Corporation.
(d) At or before the Effective Time, the Buyer will deposit or
cause to be deposited with the Exchange Agent pursuant to the Exchange Agency
Agreement, by wire transfer of immediately available funds, an aggregate amount
equal to the sum of (i) the Buyer Payment, and (ii) the Additional Closing
Payment. The aggregate amount so required to be deposited is called the
"Exchange Fund."
(e) At or before the Effective Time, to the extent that
Letters of Transmittal (and certificates representing the shares of Common Stock
covered thereby or affidavits satisfying the requirements of Section 2.5(f) as
to lost, stolen or destroyed certificates representing the shares of Common
Stock covered thereby) have previously been delivered to the Company pursuant to
Section 6.4, the Company will deliver such Letters of Transmittal (and
corresponding certificates or affidavits) to the Exchange Agent. Immediately
after the Effective Time, the Buyer and the Surviving Corporation shall cause
the Exchange Agent to mail a Letter of Transmittal to each holder of record of
shares of Common Stock issued and outstanding immediately prior to the Effective
Time who has not previously submitted a Letter of Transmittal (and corresponding
certificates or affidavits) that has been delivered to the Exchange Agent. The
Surviving Corporation shall promptly deliver to the Exchange Agent all Letters
of Transmittal (and corresponding certificates or affidavits) received by it
after the Effective Time.
(f) At and after the Effective Time, the Buyer and the
Surviving Corporation will cause the Exchange Agent, upon delivery to the
Exchange Agent of each such Letter of
23
Transmittal (and corresponding certificates or affidavits), duly executed and
completed in accordance with the instructions thereto, to pay, by check or, to
the extent permitted under the Exchange Agency Agreement, by wire transfer of
immediately available funds, in accordance with the instructions in such Letter
of Transmittal, the aggregate Per Share Merger Consideration payable in respect
of the issued and outstanding shares of Common Stock covered by such Letter of
Transmittal (after giving effect to any required withholding of Taxes) to the
Person to whom payment thereof is directed in such Letter of Transmittal;
provided, that no such payment shall be made in respect of Dissenting Shares
except as provided in Article 3. To the extent that any Taxes are so withheld,
the amounts so withheld shall be treated for all purposes under this Agreement
as having been paid to the Person to whom such amounts would otherwise have been
paid. If payment is to be made to a Person other than the registered holder
under the certificate surrendered or affidavit delivered therewith, it shall be
a condition precedent to such payment that the certificate so surrendered shall
be, or be accompanied by a stock transfer power, properly endorsed and otherwise
in proper form to effect such transfer and that the Person directing such
payment shall (i) pay any transfer or other Taxes required by reason of payment
to a Person other than the registered holder under the certificate surrendered
or affidavit delivered therewith or (ii) establish to the satisfaction of the
Surviving Corporation (which satisfaction shall not be unreasonably withheld)
that such Taxes have been paid or are not applicable. If any certificate
representing issued and outstanding shares of Common Stock shall have been lost,
stolen or destroyed, it shall be a condition precedent to such payment that the
Person claiming such certificate to be lost, stolen or destroyed shall have
delivered to the Surviving Corporation a duly executed and completed affidavit,
in such form as shall have been reasonably prescribed by the Company, as to that
fact and a bond in such sum (or an agreement or other arrangement to indemnify
the Surviving Corporation in such a manner) as it may reasonably prescribe to
protect it against any Claim that may be made against the Surviving Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
(g) The Company will cause its transfer agent to furnish
promptly to the Buyer Subsidiary a list, as of a recent date, of the record
holders of issued and outstanding shares of Common Stock and their addresses and
lists, as of a recent date, of security positions with respect to issued and
outstanding shares of Common Stock held in securities depositories. The Company
will furnish to the Buyer Subsidiary such additional information (including a
list of those stockholders who have previously submitted Letters of Transmittal
(and corresponding certificates or affidavits) to the Company pursuant to
Section 6.4), will cause its transfer agent to furnish such additional
information (including updated lists of security positions) and provide such
other assistance as the Buyer, the Buyer Subsidiary or their agents may
reasonably request in order to effectuate the transactions contemplated by this
Article 2.
(h) The Buyer (or, after the Effective Time, the Surviving
Corporation) may cause the Exchange Agent to invest the cash held in the
Exchange Fund in one or more investments selected by the Buyer (or, after the
Effective Time, the Surviving Corporation) as provided in the Exchange Agency
Agreement; provided, however, that the terms and conditions of the investments
shall be such as to permit the Exchange Agent to make prompt payment of the Per
Share Merger Consideration when due. The Buyer will replace promptly any portion
of the Exchange Fund which is lost by reason of such investments.
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(i) At any time beginning 180 days after the Effective Time,
the Buyer or the Surviving Corporation may cause the Exchange Agent to pay over
to the Surviving Corporation any portion of the Exchange Fund (including any
earnings thereon) then remaining. After such payment, holders of shares of
Common Stock issued and outstanding immediately prior to the Effective Time
shall be entitled to look to (but solely to) the Surviving Corporation (subject
to abandoned property, escheat and other similar Laws), as (but solely as)
general creditors thereof, for payment, without interest, of the Per Share
Merger Consideration in respect of their shares. No Party shall have, and the
Exchange Agent shall not have, any Liability to any Person arising out of
payment to any Governmental Authority of any amount otherwise payable hereunder
to such Person pursuant to applicable abandoned property, escheat or similar
Laws.
(j) The Buyer shall pay or cause to be paid (or, after the
Effective Time, shall cause the Surviving Corporation to pay) all fees and
expenses of the Exchange Agent. Such fees and expenses shall not be included in
the Company Transaction Expenses deducted in calculating the Closing Adjustment.
SECTION 2.6. WORKING CAPITAL; NET AVAILABLE CASH; CLOSING
ADJUSTMENT.
(a) The Company shall use commercially reasonable efforts to
prepare and deliver to the Buyer, promptly (and, to the extent reasonably
practicable, within 30 days) after the end of each calendar month prior to the
Closing, a consolidated balance sheet of the Company as of such month-end and a
consolidated statement of results of operations of the Company for the
year-to-date through such month-end (the "Monthly Financial Statements"), in
each case prepared in accordance with GAAP (except for the absence of footnotes
and normal year-end adjustments and as set forth on Schedule 2.6), accompanied
by a written statement signed by the chief financial officer of the Company
confirming that such balance sheet and statement of results of operations were
so prepared and that, to the Knowledge of the Company, the Company has performed
and complied in all material respects with the covenants and agreements set
forth in Section 6.2 to be performed and complied with by the Company prior to
the date of such delivery.
(b) In addition to the requirements set forth in paragraph (a)
above, the Company shall deliver to the Buyer:
(i) no later than March 10, 2006, a written statement
signed by the chief financial officer of the Company setting forth a statement
of (i) the February 28 Working Capital and (ii) the February 28 Net Available
Cash and confirming that, to the Knowledge of the Company, the Company has
performed and complied in all material respects with the covenants and
agreements set forth in Section 6.2 to be performed and complied with by the
Company prior to the date of such delivery, together with reasonably detailed
supporting documents, information and calculations (the "Pre-Closing Working
Capital and Net Available Cash Estimate"); and
(ii) no later than 5 Business Days prior to the
Closing Date then anticipated in good faith by the Company, a written statement
signed by the chief financial officer of the Company setting forth a statement
of the estimate of each component of the Closing Adjustment and confirming that,
to the Knowledge of the Company, the Company has
25
performed and complied in all material respects with the covenants and
agreements set forth in Section 6.2 to be performed and complied with by the
Company prior to the date of such delivery, together with reasonably detailed
supporting documents, information and calculations for each component of the
Closing Adjustment (the "Closing Adjustment Estimate" and, together with the
Pre-Closing Working Capital and Net Available Cash Estimate, the "Estimates"
and, each, an "Estimate"). In connection with preparing the Closing Adjustment
Estimate, the Company shall use commercially reasonable efforts to obtain from
counsel and advisers to and accountants for the Company and the Subsidiaries who
provide services in connection with the negotiation, execution, delivery and
performance by the Company and the Subsidiaries of this Agreement and the
Related Agreements and the process leading up thereto binding estimates of their
unbilled fees and expenses through consummation of the Closing. Such estimates,
together with the then billed and unpaid fees and expenses of such counsel,
advisers and accountants in connection with such services, shall be included in
the Company Transaction Expenses deducted in connection with calculating the
Closing Adjustment.
(c) Promptly after the Monthly Financial Statements and the
Estimates shall have been delivered to the Buyer, the Buyer shall review them.
The Buyer shall have the right to engage, at its expense, independent
accountants to assist it in connection with such review. Promptly upon
reasonable request by the Buyer or such accountants, the Company shall deliver,
or shall cause to be delivered, to the Buyer and such accountants such copies of
Company Business Records and access to Employees as reasonably necessary or
appropriate in connection with such review. Without limiting the rights or
obligations of the Parties under the preceding sentences of this Section 2.6(c)
or under Sections 2.6(d), 2.6(e) and 2.6(f), if the Buyer has any concerns
regarding the Monthly Financial Statements or the Estimates, the Buyer shall
promptly notify the Company thereof and the Company and the Buyer shall promptly
thereafter discuss such concerns.
(d) Subject to the next sentence, the Buyer may object to any
amount or calculation set forth in the Estimates by giving written notice to
that effect to the Company within the later of March 15, 2006 and 3 Business
Days after the delivery of the respective Estimate to the Buyer (an "Objection
Notice"); provided, however, that no such notice shall constitute an Objection
Notice unless it describes in reasonable detail the objection and the basis
therefor and is accompanied by reasonably detailed supporting documents,
information and calculations. The Buyer may object to any amount or calculation
set forth in the Estimates only:
(i) on the basis that the respective Estimate was not
prepared in accordance with this Agreement, that relevant assets, liabilities,
expenses or other line items were misstated, incorrectly included or incorrectly
omitted, or that a mathematical error was made;
(ii) with respect to the Pre-Closing Working Capital
and Net Available Cash Estimate only, if the aggregate amount by which the
estimate of the February 28 Net Available Cash and February 28 Working Capital
reflected on the Pre-Closing Working Capital and Net Available Cash Estimate
would change if the objections described in the Objection Notice were given
effect, would exceed $400,000; and
26
(iii) with respect to the Closing Adjustment Estimate
only, if the aggregate amount by which the estimate of the Closing Adjustment
reflected on the Closing Adjustment Estimate would change if the objections
described in the Objection Notice were given effect, would exceed $100,000.
(e) If the Buyer agrees with the amounts and calculations set
forth in the respective Estimate and gives written notice to that effect to the
Company (which the Buyer shall have the right to do at any time), or fails to
duly give an Objection Notice to the Company within the later of March 15, 2006
and 3 Business Days after delivery of the respective Estimate, the amounts and
calculations set forth in the respective Estimate shall be final and binding. If
the Buyer duly gives an Objection Notice, any amounts and calculations not
specifically objected to therein in accordance with this Section 2.6(e) shall be
final and binding.
(f) If the Buyer duly gives an Objection Notice with respect
to an Estimate, the Buyer and the Company shall promptly negotiate in good faith
to agree on revised amounts and calculations covered by such Objection Notice.
If the Buyer and the Company so agree (which they shall have the right to do at
any time), the revised amounts and calculations shall be set forth in a written
document signed by both of them, which shall be final and binding. If the Buyer
and the Company fail to so agree within 2 Business Days after receipt of such
Objection Notice (or such later date as may be mutually agreed by the Buyer and
the Company), then the Buyer and the Company shall promptly engage the Selected
Accountants to resolve such objections as promptly as possible (and, in any
event, with a view toward resolving such objections within 5 Business Days after
becoming so engaged). The fees and expenses of the Selected Accountants in
connection with such determination shall be borne by the Party whose claims
differ to a greater extent from the determination of the Selected Accountants
(and any such fees and expenses to be borne by the Company shall be included in
the Company Transaction Expenses deducted in calculating the Closing
Adjustment), and the engagement of the Selected Accountants shall be subject to
such terms and conditions as the Selected Accountants shall reasonably request.
Promptly upon reasonable request by the Selected Accountants, the Company shall
deliver, or shall cause to be delivered, to the Selected Accountants such copies
of Company Business Records and access to Employees as the Selected Accountants
may determine to be reasonably necessary or appropriate in connection with such
determination. In connection with such determination by the Selected
Accountants:
(i) each of the Buyer and the Company shall have the
right to (A) provide written documents and information to the Selected
Accountants so long as copies thereof are concurrently provided to the other of
them and (B) provide (by telephone or in person) oral information (so long as a
Representative of the Company and a Representative of the Buyer are present at
the time such information is provided) to the Selected Accountants (except that
this clause shall not restrict either of them from providing administrative,
ministerial or procedural information);
(ii) the Selected Accountants shall be bound by
amounts and calculations that shall have previously become final and binding as
described in this Section 2.6, shall act as experts (and not as arbitrators) and
shall set forth their determination in a written document (which shall include
reasonably detailed supporting analysis and shall be delivered simultaneously to
the Buyer and the Company); and
27
(iii) the determination of the Selected Accountants
shall be final and binding (absent manifest error), and such determination shall
be non-appealable and incontestable and not subject to collateral attack for any
reason.
The Buyer and the Company shall have the right at any time to agree in writing
to terminate the engagement of the Selected Accountants. If the Selected
Accountants are so engaged, the Closing Date, if necessary, shall be postponed
until the third Business Day following the later of receipt by the Company and
the Buyer of such determination by the Selected Accountants and the satisfaction
or waiver of all conditions to the obligations of the Parties set forth in
Article 7 (other than conditions with respect to actions contemplated to be
taken at the Closing itself) or such other date as the Company and the Buyer may
mutually agree.
SECTION 2.7. TREATMENT OF EQUITY INTERESTS.
(a) Without any requirement to duplicate the disclosure
required by Section 5.6(a), promptly after the date hereof and thereafter from
time to time prior to and on the Closing Date, upon reasonable written request
from the Buyer, the Company shall provide to the Buyer an updated list that
identifies each Equity Interest in the Company outstanding as of the date of
such list and anticipated to be outstanding immediately prior to the Effective
Time (including options, warrants and shares of Common Stock) and, to the extent
applicable thereto, the name of the record holder thereof, the number of shares
of Common Stock subject thereto, the plan under which such Equity Interest was
issued, the exercise price thereof, the extent to which such Equity Interest is
or as of the Effective Time will be vested, the vesting schedule therefor, the
grant date related thereto, and the expiration date related thereto.
(b) For purposes of calculating the Per Share Merger
Consideration and each of the components thereof and payments in respect
thereof, the shares of Common Stock issued and outstanding immediately prior to
the Effective Time shall include all shares of Common Stock issued or issuable
upon the exercise of options or warrants outstanding at the Effective Time. If
any certificates representing shares of Common Stock issuable in respect of
options or warrants exercised prior to the Effective Time shall not have been
issued as of the Effective Time, the Person in whose name such certificates
would have been issued shall not be required to deliver any certificates (or any
affidavit (or agreement or arrangement) described in Section 2.5(f)) in respect
of the shares so issued with his Letter of Transmittal and, in lieu thereof,
shall be required to deliver a duly executed and completed certificate, in such
form as the Company shall reasonably prescribe, confirming such exercise and the
fact that such certificates have not been received by such holder.
(c) Prior to the Effective Time, the Company shall use
commercially reasonable efforts to take or cause to be taken all such actions
necessary or appropriate in its good faith determination so that all Equity
Interests that do not, by their terms, expire on or before the Effective Time
(other than shares of Common Stock and Equity Interests which shall have then
been exercised), regardless of whether such Equity Interests are vested or would
vest prior to or on the Effective Time, are:
(i) fully vested and exercised (including exercises
contingent upon consummation of the transactions contemplated hereby (however
described) and exercise where
28
payment of the exercise price is funded by a portion of the Per Share Merger
Consideration payable in respect of the shares of Common Stock issued upon such
exercise); or
(ii) otherwise cancelled without any shares of Common
Stock being issued or outstanding or deemed to be issued or outstanding
immediately prior the Effective Time in respect thereof.
(d) For purposes of calculating the Per Share Merger
Consideration and payments in respect thereof, to the extent that payment of the
exercise price of any Equity Interest exercised prior to or as of the
consummation of the transactions contemplated hereby (that does not, by its
terms, expire prior to the Effective Time) is to be funded by a portion of the
Per Share Merger Consideration payable in respect thereof, the Closing
Adjustment shall be determined as if such exercise price had been paid prior to
the Effective Time.
(e) On the Closing Date, the Company shall provide (i) to the
Exchange Agent and the Buyer a list that identifies each Equity Interest in the
Company outstanding immediately prior to the Effective Time (including options,
warrants and shares of Common Stock) and, to the extent applicable thereto, the
name of the record holder thereof, the number of shares of Common Stock subject
thereto, the exercise price thereof, the extent to which such Equity Interest
shall have been exercised prior to or as of the Effective Time and the extent to
which the exercise price thereof shall have been paid prior to or as of the
Effective Time or is to be funded by a portion of the Per Share Merger
Consideration payable in respect thereof and (ii) pursuant to the Exchange
Agency Agreement, to the Exchange Agent written instructions directing the
Exchange Agent to withhold from the Per Share Merger Consideration payable in
respect of Equity Interests, as to which the exercise price thereof shall not
have been paid prior to or as of the Effective Time or is to be funded by a
portion of the Per Share Merger Consideration payable in respect thereof, an
amount equal to such exercise price.
(f) On the Closing Date, the Company shall provide, pursuant
to the Exchange Agency Agreement, to the Exchange Agent (i) a list that
identifies each option to purchase an Equity Interest in the Company outstanding
at any time prior to (and exercised prior to or as of) the Effective Time as to
which Taxes are required to be withheld but shall not have been withheld or
otherwise paid as of the Effective Time, the name of the record holder thereof,
the amount of Taxes required to be so withheld and the Governmental Authority or
other Person to whom such Taxes are required to be paid and (ii) written
instructions directing the Exchange Agent to withhold from the Per Share Merger
Consideration payable in respect of such options an amount equal to such Taxes
and pay over the amounts so withheld to the Governmental Authority or other
Person entitled thereto.
(g) Notwithstanding anything contained herein to the contrary,
in lieu of exercise of options or warrants to purchase shares of Common Stock,
the Letter of Transmittal may provide for the sale and delivery thereof to the
Company for the same net consideration which the holders thereof would have
received if such options or warrants had been exercised, on such terms and
conditions as the Company and the Buyer shall mutually agree and set forth
therein, so long as the effect thereof does not change the consideration payable
pursuant hereto in respect of any other share of Common Stock.
29
SECTION 2.8. CLOSING OF TRANSFER RECORDS. After the Effective
Time, no transfer of shares of Common Stock, or warrant to purchase shares of
Common Stock, issued and outstanding immediately prior to the Effective Time
shall be made on the stock or warrant transfer books of the Surviving
Corporation. Certificates representing such shares or warrants that are
presented for transfer after the Effective Time shall be held pending exercise
of rights and satisfaction of requirements applicable thereto by the holder of
record thereof under this Article 2 or Article 3.
SECTION 2.9. CLOSING DELIVERIES.
(a) Prior to or at the Closing, the Company shall deliver or
cause to be delivered to the Buyer and the Buyer Subsidiary, as their interests
may appear:
(i) one copy, certified by the Secretary of the
Company, of the resolutions of the Board of Directors of the Company evidencing
the authorizations described in Section 5.2;
(ii) one copy, certified by the Secretary of the
Company, of the Written Consents of the Majority Stockholders evidencing the
authorizations described in Section 5.2;
(iii) one certificate of the Secretary of State of
the State of Delaware, dated as of a recent date prior to the Closing Date, as
to the good standing of the Company;
(iv) five counterpart signature pages to each Related
Agreement, duly executed by the Company, to the extent that it is a party
thereto;
(v) a certification from the Company, in a form
reasonably acceptable to the Buyer, that the Company is not a "United States
real property holding corporation" within the meaning of Section 897(c)(2) of
the Code; and
(vi) such other certificates, instruments and
documents, in form and substance reasonably satisfactory to the Buyer, as the
Buyer may reasonably request.
(b) Prior to or at the Closing, the Buyer shall deliver or
cause to be delivered to the Company:
(i) one copy, certified by the Secretary of the
Buyer, of the resolutions of the Board of Directors of the Buyer evidencing the
authorizations described in Section 4.2;
(ii) one copy, certified by the Secretary of the
Buyer Subsidiary, of the resolutions of the Board of Directors of the Buyer
Subsidiary evidencing the authorizations described in Section 4.2;
(iii) one copy, certified by the Secretary of the
Buyer Subsidiary, of the resolutions of the sole stockholder of the Buyer
Subsidiary evidencing the authorizations described in Section 4.2;
30
(iv) one certificate of the Secretary of State of the
State of Delaware, dated as of a recent date prior to the Closing Date, as to
the good standing of the Buyer;
(v) one certificate of the Secretary of State of the
State of Delaware, dated as of a recent date prior to the Closing Date, as to
the good standing of the Buyer Subsidiary;
(vi) five counterpart signature pages to each Related
Agreement, duly executed by the Buyer and the Buyer Subsidiary, to the extent
that either or both of them is a party thereto;
(vii) evidence, in form reasonably satisfactory to
the Company, of delivery of the Buyer Payment and the Additional Closing Payment
to the Exchange Agent for deposit pursuant to the Exchange Agency Agreement; and
(viii) such other certificates, instruments and
documents in form and substance reasonably acceptable to the Company, as the
Company may reasonably request.
ARTICLE 3
DISSENTERS' RIGHTS
SECTION 3.1. DISSENTERS' RIGHTS. The holders of shares of
Common Stock issued and outstanding immediately prior to the Effective Time as
to which dissenters' appraisal rights shall have been duly exercised (or
attempted to be exercised) under applicable Law (the "Dissenting Shares"), if
any, shall (a) not be entitled to convert such shares into the right to receive
the Per Share Merger Consideration and (b) be entitled to receive payment by the
Surviving Corporation of the appraised value of such shares determined in
accordance with applicable Law, plus accrued interest thereon to the extent
required in accordance with applicable Law; provided, however, that, if any
holder of Dissenting Shares (i) shall, under the circumstances permitted by
applicable Law, subsequently deliver a written withdrawal of such holder's
demand for such appraisal or (ii) fails to perfect or loses such holder's
entitlement to such appraisal under applicable Law, such holder shall forfeit
such right to payment and such Dissenting Shares shall thereupon be deemed to
have been converted into the right to receive, without interest, the Per Share
Merger Consideration in respect of such Dissenting Shares as of the Effective
Time. Payments in respect of any settlement of any demands for appraisal may be
paid first from the Exchange Fund (provided, however, that the amount paid to
any such settling holder from the Exchange Fund shall not exceed the aggregate
Per Share Merger Consideration which would otherwise be payable with respect to
such settling holder pursuant to Section 2.5). The Company shall give prompt
notice to the Buyer of any written demands for such appraisal, any written
withdrawals of such demands and any other document served on the Company under
applicable Law in respect thereof. The Buyer shall have the right to participate
in all negotiations and Proceedings with respect to such demands for appraisal.
The Company shall not offer or agree to make or make any payment with respect to
any such demands for appraisal or offer to settle or settle any such demands
without the prior written consent of the Buyer (which shall not be unreasonably
withheld).
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES REGARDING THE BUYER AND THE BUYER SUBSIDIARY
The Buyer and the Buyer Subsidiary hereby jointly and severally
represent and warrant to the Company as of the date hereof as follows:
SECTION 4.1. ORGANIZATION. Each of the Buyer and the Buyer
Subsidiary is a corporation, partnership, limited liability company or other
entity that is duly organized, validly existing and in good standing under the
Laws of its jurisdiction of formation (to the extent such concept is recognized
in such jurisdiction). Each of the Buyer and the Buyer Subsidiary has the
corporate, partnership, limited liability company or other organizational power
and authority necessary to (a) execute, deliver and perform its obligations
under this Agreement and, to the extent that it is a party thereto, the Closing
Documents and the Related Agreements, (b) consummate the transactions
contemplated hereby and thereby to be consummated by it and (c) conduct its
business as currently conducted by it. Each of the Buyer and the Buyer
Subsidiary is duly qualified or licensed and in good standing as a foreign
corporation authorized to do business under the Laws of each jurisdiction in
which the ownership, leasing or use of assets by it or the conduct of business
by it requires such licensing or qualification, except where the failure to be
so licensed or qualified and in good standing would not have a Buyer Material
Adverse Effect. Neither the Buyer nor the Buyer Subsidiary is in violation of
any provision of its Organizational Documents.
SECTION 4.2. AUTHORIZATION, EXECUTION AND ENFORCEABILITY. The
execution and delivery of this Agreement and, to the extent that they are
parties thereto, the Closing Documents and the Related Agreements, by the Buyer
and the Buyer Subsidiary, the performance by the Buyer and the Buyer Subsidiary
of their obligations hereunder and thereunder and the consummation by the Buyer
and the Buyer Subsidiary of the transactions contemplated hereby and thereby to
be consummated by them have been duly authorized by all necessary corporate,
partnership, limited liability company or other organizational action on the
part of the Buyer and the Buyer Subsidiary. This Agreement constitutes and, to
the extent that they are parties thereto, as of the Closing each of the Closing
Documents and the Related Agreements will constitute, a legal, valid and binding
obligation of the Buyer and the Buyer Subsidiary, enforceable against the Buyer
and the Buyer Subsidiary in accordance with its respective terms, except insofar
as enforceability may be limited by bankruptcy, insolvency, moratorium or other
Laws which may affect creditors' rights and remedies generally and by principles
of equity (regardless of whether enforceability is considered in a Proceeding in
equity or at law). This Agreement has been, and, to the extent that they are
parties thereto, as of the Closing each Closing Document and Related Agreement
will have been, duly executed by the Buyer and the Buyer Subsidiary. The Board
of Directors of the Buyer Subsidiary (a) has determined that the Merger and the
other transactions contemplated hereby are advisable and are fair to, and in the
best interests of, the sole stockholder of the Buyer Subsidiary, (b) has
approved the Merger and the other transactions contemplated hereby and (c) has
recommended adoption of this Agreement by the sole stockholder of the Buyer
Subsidiary. The Buyer, for itself individually and in its capacity as the sole
stockholder of the Buyer Subsidiary, has approved the Merger and the other
transactions contemplated hereby and has adopted this Agreement.
32
SECTION 4.3. NO BREACH. The execution and delivery of this Agreement
and, to the extent that they are parties thereto, the Closing Documents and the
Related Agreements, by the Buyer and the Buyer Subsidiary, the performance by
the Buyer and the Buyer Subsidiary of their obligations hereunder and
thereunder, and the consummation by the Buyer and the Buyer Subsidiary of the
transactions contemplated hereby and thereby to be consummated by them do not
and will not (a) conflict with, result in any violation of or constitute a
default under the Organizational Documents of the Buyer or the Buyer Subsidiary,
(b) constitute a default under, result in a violation or breach of, result in
the cancellation or termination of, accelerate the performance required under or
result in the creation of any Lien upon any of the properties of the Buyer or
the Buyer Subsidiary pursuant to any Contract to which the Buyer or the Buyer
Subsidiary is a party or by which any of such properties is bound (with or
without the giving of notice or lapse of time, or both) or (c) result in a
violation of or conflict with any Law or any Order applicable to the Buyer, the
Buyer Subsidiary or any of such properties, in the case of clauses (b) or (c)
above, which default, breach, cancellation, termination, acceleration, creation
or violation would or would reasonably be expected to have a Buyer Material
Adverse Effect.
SECTION 4.4. CONSENTS. Except as otherwise contemplated by Section
6.3, no Consent is required to be obtained from, no notice is required to be
given to and no filing is required to be made with any Person (including any
Governmental Authority or Judicial Authority) by the Buyer or the Buyer
Subsidiary in order (a) for this Agreement and, to the extent that they are
parties thereto, each of the Closing Documents and the Related Agreements to
constitute a legal, valid and binding obligation of the Buyer and the Buyer
Subsidiary or (b) to authorize or permit the execution, delivery or performance
of this Agreement or, to the extent that they are parties thereto, any of the
Closing Documents or the Related Agreements, by the Buyer or the Buyer
Subsidiary or the consummation of the transactions contemplated hereby or
thereby to be consummated by them except where the failure to obtain any such
Consent, give such notice or make such filing would not or would not reasonably
be expected to have a Buyer Material Adverse Effect.
SECTION 4.5. FINANCING.
(a) Assuming consummation of the financings contemplated by the
Commitment Letters, the Buyer has sufficient funds available (on hand or under
outstanding committed credit facilities or the Commitment Letters) to enable (i)
it to pay the Buyer Payment and all fees and expenses related to the
transactions contemplated hereby, to the extent that this Agreement or any of
the Related Agreements requires it to pay such fees and expenses, and (ii) the
Buyer and the Buyer Subsidiary to pay and discharge all of their other
liabilities and obligations when due. The funds available as described in clause
(i) of the preceding sentence (to the extent that the amount thereof does not
exceed the Buyer Payment) are not committed or reserved for any other purpose
and are not necessary, and are not planned or expected to be used, for any
purpose described in clause (ii) of the preceding sentence.
(b) The Buyer has provided to the Company complete and correct
copies of the most recent financial statements of the Buyer as well as all of
the documents relating to the Commitment Letters and the credit facilities
relating to the funding described in Section 4.5(a). The Commitment Letter sets
forth all conditions relating to the funding to be provided thereunder, other
than conditions that are not material and are customarily set forth only in
33
definitive documents. As of the date hereof, the Buyer has no reason to believe
that the conditions set forth in the Commitment Letters cannot or will not be
satisfied by the Closing Date. Neither the availability nor the draw or use of
funds under any of such credit facilities or the Commitment Letters is subject
to:
(i) approval by the board of directors, shareholders or
commitment or investment committee, or other similar internal approval, of any
creditor, lender, investor or other Person directly or indirectly providing
funding thereunder or exercise of any comparable discretionary authority by any
such creditor, lender, investor or other Person;
(ii) completion of any due diligence or other similar
investigation;
(iii) disruption or changes in financial, banking or capital
market or similar conditions or changes in the value or market price of
securities of the Buyer or any of its Affiliates; or
(iv) adverse changes affecting the Buyer, the Buyer Subsidiary
or any of their Affiliates.
(c) To the Knowledge of the Buyer, there is no condition,
contingency or development (including (i) any development relating to the
businesses or affairs of the Buyer or any of its Affiliates, the industries in
which such businesses are conducted or legal, tax or regulatory matters relating
to such businesses or affairs or to the Buyer or any of its Affiliates and (ii)
the existence, assertion or threatened assertion of any Claim or Proceeding or
the existence or occurrence of any Liability or Loss or any contingent Liability
or Loss) that would or would reasonably be expected to have a Buyer Material
Adverse Effect.
SECTION 4.6. OWNERSHIP OF THE BUYER SUBSIDIARY; NO PRIOR ACTIVITIES.
(a) The Buyer Subsidiary is a direct, wholly-owned subsidiary of the
Buyer and was formed solely for the purpose of consummating the Merger and the
other transactions contemplated by this Agreement.
(b) Except for Liabilities incurred and activities undertaken in
connection with its organization, existence and the transactions contemplated by
this Agreement and except for this Agreement and, to the extent that it is party
thereto, the Closing Documents, the Related Agreements and any Contracts
relating to the debt or equity financing of the transactions contemplated
hereby, the Buyer Subsidiary has not, directly or indirectly, incurred any
material Liabilities, engaged in any activities of any kind or entered into any
Contract with any Person.
SECTION 4.7. BROKERS; FINDERS. Except for Evercore Partners or as
set forth in the Commitment Letter, no finder, broker or similar intermediary
acting on behalf of the Buyer or any of its Affiliates is entitled to a
commission, fee or other compensation in connection with the negotiation,
execution or delivery of this Agreement or any of the Related Agreements or the
consummation of any of the Merger and the other transactions contemplated hereby
or thereby.
SECTION 4.8. PURCHASE FOR INVESTMENT; ACCESS TO INFORMATION. The
Buyer is acquiring the Company for its own account for investment and not with a
view toward, or for
34
resale in connection with, any distribution of the securities thereof. The Buyer
has sufficient knowledge and experience in financial and business matters so as
to be capable of evaluating the merits and risks of its investment in the
Company and is capable of bearing the economic risks of such investment,
including a complete loss of its investment in the Company. The Buyer has had
access to and has been furnished with all information that it has requested in
connection with its evaluation of and its decision to acquire the Company and
has been given the opportunity to ask questions of, and receive answers from,
the Company and management of the Company regarding the Company, the
Subsidiaries and its and their business and activities.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
The Company represents and warrants to the Buyer and the Buyer
Subsidiary as of the date hereof as follows:
SECTION 5.1. ORGANIZATION. The Company and each Subsidiary is a
corporation, partnership, limited liability company or other entity that is duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of formation (to the extent such concept is recognized in such
jurisdiction). The Company and each Subsidiary has the corporate, partnership,
limited liability company or other organizational power and authority necessary
to (a) execute, deliver and perform its obligations under this Agreement and, to
the extent that it is a party thereto, the Closing Documents and the Related
Agreements, (b) consummate the transactions contemplated hereby and thereby to
be consummated by it and (c) conduct its business as currently conducted by it.
The Company and each Subsidiary is duly qualified or licensed and in good
standing as a foreign corporation authorized to do business under the Laws of
each jurisdiction in which the current ownership, leasing or use of assets by it
or the current conduct of business by it requires such licensing or
qualification, except where the failure to be so licensed or qualified and in
good standing would not have and would not reasonably be expected to have (i) a
Material Adverse Effect or (ii) a material adverse effect that has or would
reasonably be expected to prevent or materially delay the Company's or any
Subsidiary's ability to consummate the transactions contemplated by this
Agreement. Neither the Company nor any of the Subsidiaries is in violation of
any provision of its Organizational Documents. Schedule 5.1 sets forth each
jurisdiction under the Laws of which the Company and each Subsidiary is formed
and so licensed or qualified.
SECTION 5.2. AUTHORIZATION, EXECUTION AND ENFORCEABILITY. The
execution and delivery of this Agreement and, to the extent that they are
parties thereto, the Closing Documents and the Related Agreements, by the
Company and each Subsidiary, the performance by the Company and each Subsidiary
of their obligations hereunder and thereunder and the consummation by the
Company and each Subsidiary of the transactions contemplated hereby and thereby
to be consummated by them have been duly authorized by all necessary corporate,
partnership, limited liability company or other organizational action on the
part of the Company and each Subsidiary. This Agreement constitutes, and, to the
extent that they are parties thereto, each of the Closing Documents and the
Related Agreements will constitute, a legal, valid and binding obligation of the
Company and each Subsidiary, enforceable against the Company and each Subsidiary
in accordance with its respective terms, except insofar as enforceability may be
35
limited by bankruptcy, insolvency, moratorium or other Laws which may affect
creditors' rights and remedies generally and by principles of equity (regardless
of whether enforceability is considered in a Proceeding in equity or at law).
This Agreement has been, and, to the extent that they are parties thereto, as of
the Closing each Closing Document and Related Agreement will have been, duly
executed by the Company and each Subsidiary. The Board of Directors of the
Company has (a) determined that the Merger and the other transactions
contemplated hereby are advisable and are fair to, and in the best interests of,
the holders of outstanding shares of Common Stock, (b) subject to the adoption
of this Agreement by the stockholders of the Company and to the provisions of
this Agreement (including Sections 6.4 and 6.6 and Article 9), approved the
Merger, the other transactions contemplated hereby and various ancillary matters
and adopted this Agreement and (c) subject to the provisions of this Agreement
(including Sections 6.4 and 6.6 and Article 9), recommended the approval of such
ancillary matters and the Merger and adoption of this Agreement by the
stockholders of the Company (the "Company Board Recommendation"). The
affirmative vote of the holders of record of a majority of the outstanding
shares of Common Stock on the record date therefor is the only vote of holders
of any class or series of capital stock of the Company required in order for the
stockholders of the Company to adopt this Agreement.
SECTION 5.3. NO BREACH. The execution and delivery of this Agreement
and, to the extent that they are parties thereto, the Closing Documents and the
Related Agreements by the Company and each Subsidiary, the performance by the
Company and each Subsidiary of their obligations hereunder and thereunder and
the consummation by the Company and each Subsidiary of the transactions
contemplated hereby and thereby to be consummated by them do not and will not
(a) conflict with, result in any violation of or constitute a default under the
Organizational Documents of the Company or any Subsidiary, (b) constitute a
default under, result in a violation or breach of, result in the cancellation,
modification or termination of, trigger any payment or accelerate the
performance required under or result in the creation of any Lien upon any of the
properties of the Company or any Subsidiary pursuant to any Contract to which
the Company or any Subsidiary is a party or by which any of such properties is
bound (with or without the giving of notice or lapse of time, or both), (c)
result in a violation of or conflict with any Law or any Order applicable to the
Company, any Subsidiary or any of such properties or (d) result in the
revocation, cancellation, suspension or adverse modification of any Permit, in
the case of clauses (b), (c) or (d) above, which default, breach, cancellation,
termination, acceleration, creation or violation would have or would reasonably
be expected to have (i) a Material Adverse Effect or (ii) a material adverse
effect that has or would reasonably be expected to prevent or materially delay
the Company's or any Subsidiary's ability to consummate the transactions
contemplated by this Agreement.
SECTION 5.4. CONSENTS. Except as otherwise contemplated by Section
6.3 or set forth in Schedule 5.4 or any Schedule with respect to the Contracts
or Permits listed therein, no Consent is required to be obtained from, no notice
is required to be given to and no filing is required to be made with any Person
(including any Governmental Authority or Judicial Authority) by the Company or
any Subsidiary in order (a) for this Agreement and, to the extent that they are
parties thereto, each of the Closing Documents and the Related Agreements to
constitute a legal, valid and binding obligation of the Company and each
Subsidiary, (b) to authorize or permit the execution, delivery or performance of
this Agreement or, to the extent that they are parties thereto, any of the
Closing Documents or the Related Agreements by the
36
Company or any Subsidiary or the consummation of the transactions contemplated
hereby or thereby to be consummated by them or (c) to avoid a breach of or
default under, or to avoid enabling another party to exercise a right of
acceleration of performance, termination or cancellation under, any Contract or
Permit by reason of the consummation of the transactions contemplated hereby or
thereby, which breach, default, acceleration, termination or cancellation would
have or would reasonably be expected to have (i) a Material Adverse Effect or
(ii) a material adverse effect that has or would reasonably be expected to
prevent or materially delay the Company's or any Subsidiary's ability to
consummate the transactions contemplated by this Agreement.
SECTION 5.5. ORGANIZATIONAL DOCUMENTS.
(a) The Company has made or caused to be made available to the Buyer
and the Buyer Subsidiary complete and accurate copies of the Organizational
Documents of the Company and each Subsidiary. Except as set forth in Schedule
5.5, there are no Contracts which obligate or require (or, with the giving of
notice or lapse of time, or both, would obligate or require) the Company or any
Subsidiary to amend or authorize an amendment of the Organizational Documents of
the Company or any Subsidiary.
(b) The Company has made or caused to be made available to the Buyer
and the Buyer Subsidiary complete and accurate copies of the minute books and
stock books of the Company and each Subsidiary, and such minute books contain
complete and accurate copies of all records of all meetings and consents in lieu
of meetings of the Board of Directors (or any committee thereof) of the Company
and each Subsidiary and the stockholders of the Company and each Subsidiary, in
each case, except for those relating to (i) the transactions contemplated
hereby, (ii) the process leading up to such transactions or (iii) the other
events and circumstances in respect of such transactions and process.
(c) Schedule 5.5 lists all of the current directors and officers of
the Company and of each Subsidiary.
SECTION 5.6. CAPITALIZATION; SUBSIDIARIES.
(a) The authorized capital stock of the Company consists of
20,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, no
par value per share. At the date hereof, (i) 10,095,000 shares of Common Stock
are issued, (ii) 10,095,000 shares of Common Stock are outstanding, (iii) no
shares of Common Stock are owned directly or indirectly by the Company as
treasury stock, (iv) no shares of preferred stock are issued or outstanding, (v)
options to purchase an aggregate of 804,250 shares of Common Stock (720,829 of
which are vested and exercisable and 83,421 of which are unvested) are
outstanding and (vi) warrants to purchase an aggregate of 1,625,000 shares of
Common Stock (all of which are exercisable) are outstanding. All of the issued
shares of Common Stock are duly authorized, were validly issued and are fully
paid and nonassessable, and none of such shares was issued in violation of any
pre-emptive rights, rights of first offer or first refusal or similar rights or
in violation of the Securities Act or any other securities Law. There are no
declared or accrued unpaid dividends with respect to any shares of Common Stock
and no outstanding obligations of the Company or any Subsidiary to repurchase,
redeem or otherwise acquire any Equity Interest in the Company.
37
Except as set forth in the Ancillary Matters Schedule, there are no outstanding
subscriptions, options, warrants or other rights of any kind to acquire
(including securities exercisable or exchangeable for or convertible into) any
additional shares of any class of capital stock of the Company (or securities
convertible into or exchangeable or exercisable for any such additional shares),
no shares of any class of capital stock of the Company have been reserved or set
aside for any purpose, and the Company is not a party to any Contract in respect
thereof. Schedule 5.6 or the Ancillary Matters Schedule sets forth an accurate
and complete list of all holders of all such options, warrants or other rights
of any kind, specifying in each case the aggregate number of options, warrants
or other rights held by each such holder and the exercise, conversion or
exchange rates or prices in respect thereof. Except as set forth in Schedule 5.6
or the Ancillary Matters Schedule, there are no outstanding stock appreciation
rights (including those called virtual options), whether or not such stock
appreciation rights constitute or are treated as capital stock or the right to
acquire capital stock of the Company. Schedule 5.6 or the Ancillary Matters
Schedule sets forth an accurate and complete list of all holders of such stock
appreciation rights, specifying in each case the aggregate number of stock
appreciation rights held by each such holder and the base prices in respect
thereof. The Company has made or caused to be made available to the Buyer and
the Buyer Subsidiary accurate and complete copies of all written Contracts in
respect of any options, warrants, rights, securities or Contracts set forth in
Schedule 5.6 or the Ancillary Matters Schedule. Schedule 5.6 sets forth a
complete list of all holders of record of Equity Interests in the Company,
including their names and the number and type of Equity Interests in the Company
held as of a recent date set forth therein.
(b) Except as set forth on Schedule 5.6 or the Ancillary Matters
Schedule and except for confidentiality agreements corresponding, and which are
in form substantially similar, to the Confidentiality Agreement which relate to
acquisitions, divestitures and other strategic transactions (including the
process leading up to the negotiation, execution and delivery of this Agreement)
and which may contain trading restrictions, standstill provisions and similar
arrangements, the Company is not a party to, and to the Knowledge of the
Company, no other Person is a party to, any written Contract with respect to:
(i) the formation, management, disposition or liquidation of
the Company or the creation, acquisition or disposition of any Equity Interest
in the Company, including purchase agreements, contribution agreements,
shareholder agreements and standstill agreements;
(ii) voting any Equity Interests in the Company (including any
proxy or director nomination rights) other than the Stockholder Agreements and
Acknowledgements;
(iii) transfer of or transfer restrictions on any Equity
Interests in the Company (including any put, purchase or call option, any
buy-sell agreement or any agreement providing for rights of first refusal, first
offer, co-sale or similar rights);
(iv) repurchase, redemption or retirement of any Equity
Interests in the Company or dividends or other distributions in respect of any
Equity Interests in the Company; or
38
(v) registration of any Equity Interests in the Company under
the Securities Act or any other securities Law.
(c) Schedule 5.6 sets forth each Person which is controlled,
directly or indirectly, by the Company or of which the Company, directly or
indirectly, owns or holds more than 50% of the Equity Interests. Each such
Person is called a "Subsidiary." Except as set forth on Schedule 5.6, the
Company, directly or indirectly, owns and holds 100% of the outstanding shares
of each class of Equity Interest of each Subsidiary, free and clear of any and
all Liens (other than Permitted Liens). Schedule 5.6 or 5.13 sets forth each
other Person in which the Company, directly or indirectly, owns or holds any
Equity Interests (other than those classified as cash equivalents under GAAP), a
description of the nature of each such Equity Interest and a description of the
percentage of the Equity Interest in such Person so owned or held by the
Company. The Company, directly or indirectly, owns and holds the Equity
Interests of such other Persons free and clear of any and all Liens (other than
Permitted Liens). Schedule 5.6 sets forth the authorized, issued, outstanding
and treasury shares of each class of Equity Interests of each Subsidiary. All of
the issued Equity Interests of each class of Equity Interests of each Subsidiary
are duly authorized, were validly issued and are fully paid and nonassessable,
and none of such Equity Interests were issued in violation of any pre-emptive
rights, rights of first offer or first refusal or similar rights or in violation
of the Securities Act or any other securities Law. There are no outstanding
subscriptions, options, warrants or other rights of any kind to acquire
(including securities exercisable or exchangeable for or convertible into) any
additional Equity Interests of any class of Equity Interests of any Subsidiary
(or securities convertible into or exchangeable or exercisable for any such
additional Equity Interests), no Equity Interests of any class of any Subsidiary
have been reserved or set aside for any purpose, and neither the Company nor any
Subsidiary is a party to any written Contract in respect thereof. There are no
outstanding obligations of the Company or any Subsidiary to repurchase, redeem
or otherwise acquire any Equity Interest in any Subsidiary or any other Person.
(d) Except as set forth on Schedule 5.6 and except for
confidentiality agreements corresponding, and which are in a form substantially
similar, to the Confidentiality Agreement which relate to acquisitions,
divestitures and other strategic transactions (including the process leading up
to the negotiation, execution and delivery of this Agreement) and which may
contain trading restrictions, standstill provisions and similar arrangements,
neither the Company nor any Subsidiary is a party to any written Contract with
respect to:
(i) the formation, management, disposition or liquidation of
any Subsidiary or the creation, acquisition or disposition of any Equity
Interest in any Subsidiary, including purchase agreements, contribution
agreements, shareholder agreements and standstill agreements.
(ii) voting any Equity Interests of any class of Equity
Interests of any Subsidiary (including any proxy or director nomination rights);
(iii) transfer of or transfer restrictions on any such Equity
Interests (including any put, purchase or call option, any buy-sell agreement or
any agreement providing for rights of first refusal, first offer, co-sale or
similar rights);
39
(iv) repurchase, redemption or retirement of any such Equity
Interests or dividends or other distributions in respect of any such Equity
Interests;
(v) registration of any such Equity Interests under the
Securities Act or any other securities Law; or
(vi) investment in, contribution to or advances to any other
Person.
Except as set forth on Schedule 5.6, neither the Company nor any Subsidiary owns
or holds any Indebtedness of any other Person.
(e) Except as set forth on Schedule 5.6, neither the Company nor any
Subsidiary owns or holds any Indebtedness of any other Person.
(f) Except as set forth in Schedule 5.6 and for the divestitures of
CRS, EMS and International IVS and the related restructurings, neither the
Company nor any Subsidiary has, since the Plan Effective Date: (i) had any
predecessor, whether by way of succession by merger, consolidation or other
business combination with any Person, transfer of a majority of the voting
interests of such other Person, or transfer of all or substantially all of the
assets of such other Person; or (ii) has sold or otherwise disposed of any
material subsidiary, business unit, line of business, division or other portion
of a business, whether by way of disposition by merger, consolidation or other
business combination, transfer of a majority of the voting interests in such
subsidiary, business unit, line of business, division or other portion of a
business to any Person, or transfer of all or substantially all of the assets of
such subsidiary, business unit, line of business, division or other portion of a
business to any Person.
SECTION 5.7. FINANCIAL STATEMENTS.
(a) Complete and accurate copies of the 2004 Audited Financial
Statements and the Unaudited Financial Statements are set forth in Schedule 5.7.
The 2004 Audited Financial Statements (i) have been derived from the books and
records of the Company and the Subsidiaries, (ii) fairly present, in all
material respects, the consolidated financial position, results of operations
and cash flows of the Company at the dates and for the periods indicated in
accordance with GAAP, except as indicated in the footnotes thereto, and (iii)
are accompanied by unqualified reports thereon of PWC and GT as indicated
therein although such reports may include emphasis of matter paragraphs with
respect to the Company's bankruptcy in 2002 and classification of discontinued
operations. The Unaudited Financial Statements (i) have been derived from the
books and records of the Company and the Subsidiaries and (ii) fairly present,
in all material respects, the consolidated financial position, results of
operations and cash flows of the Company at the dates and for the periods
indicated in accordance with GAAP, except as indicated in the footnotes thereto
and subject to normal year end adjustments.
(b) The Monthly Financial Statements to be delivered under Section
2.6(a) will, when delivered, (i) have been derived from the books and records of
the Company and the Subsidiaries and (ii) fairly present, in all material
respects, the consolidated financial position and results of operations of the
Company at the dates and for the periods indicated in accordance with GAAP,
except for the absence of footnotes and normal year-end adjustments and as set
forth on Schedule 2.6.
40
(c) The 2005 Audited Financial Statements to be delivered under
Section 6.12, when delivered, will (i) have been derived from the books and
records of the Company and the Subsidiaries, (ii) fairly present, in all
material respects, the consolidated financial position, results of operations
and cash flows of the Company at the dates and for the periods indicated in
accordance with GAAP and Regulation S-X under the Exchange Act, except as
indicated in the footnotes thereto, and (iii) be accompanied by unqualified
reports thereon of PWC and GT as indicated therein, although such reports may
include emphasis of matter paragraphs with respect to the Company's bankruptcy
in 2002 and classification of discontinued operations.
SECTION 5.8. TAX MATTERS. Except as set forth on Schedule 5.8:
(a) All material Tax Returns required to be filed by or with respect
to the Company or any Subsidiary have been properly filed in a timely manner
(taking into account all extensions of due dates) and are correct and complete
in all material respects.
(b) The Company and each Subsidiary have timely paid in full all
Taxes shown as due on all Tax Returns filed by the Company or such Subsidiary.
Adequate reserves or accruals for Taxes of the Company and the Subsidiaries have
been recorded on their books and records in accordance with GAAP, with respect
to any period or date for which Taxes are not yet due and owing (except to the
extent any failure to establish such reserves or accruals would not reasonably
be expected to have a Material Adverse Effect).
(c) There are no material deficiencies for any Taxes by or in
respect of the Company or any Subsidiary. No audit or examination of any Tax
Return by or with respect to the Company or any Subsidiary is currently pending
or, to the Knowledge of the Company, threatened by any Governmental Authority.
Neither the Company nor any Subsidiary has received written notice that it is
subject to material Tax in any jurisdiction where it has not filed Tax Returns.
(d) Neither the Company nor any Subsidiary has waived any statute of
limitations with respect to any material Tax, agreed to any extension of time
with respect to any material Tax assessment or deficiency or executed or filed
with the United States Internal Revenue Service (the "IRS") or any other Tax
authority any agreement, waiver or other document extending the period for
assessment or collection of any material Tax. No written request for any such
waiver or extension is currently pending.
(e) The Company and each Subsidiary has complied in all material
respects with all applicable Laws relating to the withholding of employee taxes,
has in all material respects duly and timely withheld from payments to
employees, independent contractors, creditors, stockholders and others all
amounts required to be withheld by applicable Tax Laws and has duly and timely
paid over such withheld amounts to the proper Tax authorities.
(f) Neither the Company nor any Subsidiary (i) has agreed or is
required to make any adjustments pursuant to Section 481(a) of the Code or any
similar provision of state, local or foreign Law by reason of a change in
accounting method initiated by the Company or any Subsidiary, has received any
written notice that the IRS has proposed any such adjustment or any change in
accounting method, or has an application pending with any Taxing authority
41
requesting permission for any change in accounting method or (ii) has entered
into a closing agreement pursuant to Section 7121 of the Code (or any
predecessor provision thereof) or any similar provision of state, local or
foreign Law with respect to the Company or any Subsidiary. Neither the Company
nor any Subsidiary is subject to any private letter ruling of the IRS or
comparable ruling of any other Governmental Authority.
(g) No property owned by the Company or any Subsidiary (i) is
property required to be treated as being owned by another Person pursuant to
Section 168(f)(8) of the Code, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986, (ii) constitutes "tax-exempt use
property" within the meaning of Section 168(h)(1) of the Code or (iii) is
"tax-exempt bond financed property" within the meaning of Section 168(g) of the
Code.
(h) The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(l)(A)(ii) of the Code.
(i) Neither the Company nor any of the Subsidiaries is a party to
any Tax sharing, indemnification or allocation agreement, owes any amount under
any such agreement that has not been recorded on the books and records of the
Company in accordance with GAAP or has any Liability for the Taxes of any Person
under Section 1.1502-6 of the Treasury Regulations (or any similar provision of
state, local or foreign Law, including any arrangement for group or consortium
relief or similar arrangement), as a transferee or successor, by contract, or
otherwise.
(j) Neither the Company nor any of the Subsidiaries has, since the
Plan Effective Date, constituted either a "distributing corporation" or a
"controlled corporation" in a distribution of shares intended to qualify for
tax-free treatment under Section 355 of the Code.
(k) Neither the Company nor any of the Subsidiaries has, since the
Plan Effective Date, engaged in a reportable transaction under Section
1.6011-4(b) of the Treasury Regulations, including any transaction that is the
same as or substantially similar to one of the types of transactions that the
IRS has determined to be a Tax avoidance transaction and identified by notice,
regulation or other form of published guidance as a listed transaction, as set
forth in Section 1.6011-4(b)(2) of the Treasury Regulations.
(l) Each of the Company and the Subsidiaries is in material
compliance with the terms and conditions of any material Tax exemption, Tax
holiday or other Tax reduction agreement or order of a territorial or non-U.S.
government and the consummation of the transactions contemplated by this
Agreement would not reasonably be expected to have an adverse effect on the
continued validity and effectiveness of such Tax exemption, Tax holiday or other
Tax reduction agreement or order.
(m) Neither the Company nor any of the Subsidiaries is subject to
Tax in any country other than its country of incorporation or formation by
virtue of having a permanent establishment or other place of business or a
source of income in that country.
42
(n) Neither the Company nor any Subsidiary has any "excess loss
accounts" or "deferred gains" with respect to any "deferred intercompany
transactions," within the meaning of Sections 1.1502-19 and 1.1502-13,
respectively, of the Treasury Regulations.
SECTION 5.9. REAL PROPERTY.
(a) Schedule 5.9 sets forth (i) all of the real property owned,
leased or otherwise occupied by, or subject to an occupancy right of, the
Company or any Subsidiary (the "Real Property"), (ii) all of the written
Contracts, (including leases from or to third parties (each, a "Real Property
Lease") and Contracts related to easements granted by or to third parties)
pertaining to the Real Property to which the Company or any Subsidiary is a
party, (iii) to the Knowledge of the Company, all of the easements, rights of
way and other rights, interests and options (other than those set forth in such
Contracts) pertaining to the Real Property and (iv) all of the Proceedings
currently pending by or against, and all of the Orders issued to, the Company or
any Subsidiary or, to the Knowledge of the Company, against any third party
which pertain to the Real Property and which materially interfere or would
reasonably be expected to materially interfere with the ownership, leasing or
use of the Real Property as currently owned, leased or used by the Company and
the Subsidiaries. All of the buildings and structures owned or leased by the
Company or any Subsidiary and located on the Real Property are supplied with all
utilities necessary for the operation thereof as currently operated by the
Company and the Subsidiaries. Except for the divestitures of CRS, EMS and
International IVS, the sale of the EMS Adjacent Property and as set forth in
Schedule 5.9, neither the Company nor any Subsidiary has sold, transferred or
otherwise disposed of any real property owned by it since December 31, 2004 and
all of the real property owned by the Company or any Subsidiary as of December
31, 2004 is reflected in the balance sheet included among the 2004 Audited
Financial Statements.
(b) Each Real Property Lease constitutes the entire agreement in all
material respects of the parties thereto, and no material term or condition
thereof has been modified, amended or waived except as set forth in the Real
Property Leases set forth on Schedule 5.9. No material rents under any of the
Real Property Leases are past due.
(c) To the Knowledge of the Company, the landlord under each Real
Property Lease has complied in all material respects with all of the
requirements, conditions, representations, warranties and covenants of the
landlord thereunder, including the timely completion of construction of the
leased premises in accordance with the Real Property Leases. The Company has not
received a written notice of default under any Real Property Leases.
(d) Neither the Company nor any Subsidiary has received any written
notice from (i) any insurance company of any defects or inadequacies in any of
the Real Property which would reasonably be expected to materially and adversely
affect the insurability of such Real Property or (ii) any insurance company
which has issued a policy with respect to any of the Real Property or any board
of fire underwriters (or other body exercising similar functions) requesting
material repairs, alterations or other work which has not or is not reasonably
expected to be timely completed.
(e) To the Knowledge of the Company, there is no pending, threatened
or contemplated condemnation or similar Proceeding affecting any of the Real
Property.
43
(f) Except as set forth in Schedule 5.9, to the Knowledge of the
Company, (i) there are no structural, electrical, mechanical, plumbing, roof,
paving or other defects in any improvements located on any of the Real Property
owned by the Company or any Subsidiary, the cost of which to repair would
reasonably be expected to be $100,000 or greater with respect to each individual
defect and (ii) there are no obligations of the Company under any of the Real
Property Leases or with respect to the Real Property owned by the Company to
make capital expenditures in order to effect compliance with applicable Laws in
an amount of $100,000 or greater in any individual instance.
(g) Except as set forth in Schedule 5.9, the Company and each
Subsidiary has good and marketable fee title to the Real Property owned by it,
free and clear of all Liens other than Permitted Liens, and a valid leasehold
interest in the Real Property leased by it, free and clear of all Liens granted
by the Company or any Subsidiary or claimed by any Person by, through or under
the Company or any Subsidiary, other than Permitted Liens.
SECTION 5.10. PERSONAL PROPERTY.
(a) Schedule 5.10 sets forth a list of all fixed assets and other
material tangible personal property (including plants, leasehold improvements,
furnishings, furniture, office equipment, vehicles, inventories, tools,
machinery, equipment, structures and movable fixtures) owned by the Company or
any Subsidiary as of December 31, 2004.
(b) Except for the divestitures of CRS, EMS and International IVS
and the related restructurings or as set forth in Schedule 5.10, neither the
Company nor any Subsidiary has sold, transferred or otherwise disposed of any
fixed assets or other material tangible personal property owned by it since
December 31, 2004, except in the Ordinary Course.
(c) Except as set forth in Schedule 5.10, all of the fixed assets
and material tangible personal property (including plants, leasehold
improvements, furnishings, furniture, office equipment, vehicles, inventories,
tools, machinery, equipment, structures and movable fixtures) which is material
to the conduct of the Business as currently conducted by the Company and the
Subsidiaries and which was owned by the Company or any Subsidiary as of December
31, 2004 is reflected in the balance sheet included among the 2004 Audited
Financial Statements.
SECTION 5.11. TITLE TO PROPERTIES. Except as set forth in any
Schedule with respect to the properties listed therein or in Schedule 5.11, the
Company and each Subsidiary has good and marketable title to all fixed assets
and other properties (including Intellectual Property, but excluding the Real
Property) owned by it, free and clear of all Liens other than Permitted Liens.
SECTION 5.12. SUFFICIENCY AND CONDITION OF PROPERTY. All of the
buildings and structures owned by the Company or any Subsidiary and the portions
of buildings and structures leased by the Company or any Subsidiary, in each
case located on the Real Property, and all of the material tangible personal
property owned or leased by the Company or any Subsidiary are in good operating
condition (normal wear and tear excepted), are in a state of reasonable
maintenance and repair, and are suitable for the uses for which they are
currently used by the
44
Company and the Subsidiaries and, together with the rights (including rights to
Intellectual Property) granted and services provided under the Contracts to
which the Company or a Subsidiary is a Party, the rights granted under Permits
held by the Company or a Subsidiary and the intangible personal property
(including Intellectual Property) owned by the Company or a Subsidiary (and
assuming timely receipt of all Consents contemplated hereby or otherwise
necessary or appropriate in connection with the transactions contemplated
hereby), are sufficient in all material respects to enable the Company and the
Subsidiaries to continue to conduct the Business after the Closing as currently
conducted by them.
SECTION 5.13. CONTRACTS.
(a) Except for those Contracts set forth on Schedule 5.5, 5.6, 5.8,
5.9, 5.16, 5.17, 5.18, 5.22 or 5.28 or the Ancillary Matters Schedule
(collectively, the "Other Scheduled Contracts") and except for those
confidentiality agreements, corresponding, and which are in a form substantially
similar, to the Confidentiality Agreement, and those Contracts with
Representatives in each case that relate to the process leading up to the
negotiation, execution and delivery of this Agreement, Schedule 5.13 sets forth
all written Contracts to which the Company or any Subsidiary is a party and:
(i) which involve future expenditures or receipts in excess of
$500,000 with respect to the purchase, sale or lease of goods or personal or
real property;
(ii) which involve future expenditures or receipts with
respect to the purchase or sale of services (including utilities) in excess of
$500,000;
(iii) which involve payment of royalties or license fees by
the Company or any Subsidiary (that, with respect to license fees, currently are
or are reasonably expected by the Company to become material);
(iv) which contain continuing or future commitments of
suretyship, guaranty or indemnification (other than (A) customary guarantees,
warranties and indemnities in connection with the collection of checks and
similar items, (B) Contracts involving the purchase, sale or lease of materials,
supplies, utilities, goods or other personal property or the purchase or sale of
services in the Ordinary Course and (C) Contracts described in clause (xiii) of
this sentence);
(v) which involve the handling, treatment, storage,
transportation, recycling, reclamation or disposal of Hazardous Waste in the
future or since January 1, 2004;
(vi) which provide for the continuing or future grant of a
Lien (other than Permitted Liens and Liens set forth on Schedule 5.9 or Schedule
5.11) or the continuing or future incurrence or extension of Indebtedness;
(vii) which relate to the disposition or acquisition of any
business or any Equity Interest in any Person or the creation of any Person
(other than (A) Organizational Documents of the Subsidiaries and (B) Contracts
described in clause (xiv) of this sentence) in the future or since January 1,
2004;
45
(viii) which (A) relate to a continuing or future joint
venture or partnership as a separate Person (other than (A) Organizational
Documents of the Subsidiaries and (B) Contracts described in clause (xiv) of
this sentence) or (B) constitute OEM agreements;
(ix) which relate to the continuing or future appointment of a
sales or marketing agent or representative, a reseller or a distributor;
(x) which relate to the indemnification of any director,
officer or employee of the Company or any Subsidiary;
(xi) which relate to the continuing or future employment of
any employee or engagement of a consultant, including Contracts relating to
compensation or severance of any current or future employee or consultant;
(xii) which restrict the current or future conduct of business
by the Company or any Subsidiary anywhere in the world (by way of example, but
not limitation, such Contracts include non-competition agreements and exclusive
licenses to third parties but not restrictions such as those on the scope of
rights granted to the Company by a licensor);
(xiii) which involve continuing or future rights against other
Persons or obligations in favor of other Persons with respect to confidentiality
or non-use of information or non-solicitation of employees or customers that
would reasonably be expected to materially interfere with the future conduct of
the Business (other than (A) customary rights and obligations in connection with
the purchase, sale or lease of materials, supplies, utilities, goods or other
personal property or the purchase or sale of services in the Ordinary Course and
(B) Contracts described in clause (xiv) of this sentence);
(xiv) which relate to the divestiture of CRS, EMS or
International IVS or the sale of the EMS Adjacent Property;
(xv) which involve continuing or future obligations and to
which the United States or a foreign government is a party;
(xvi) which involve material continuing or future obligations
and to which a Person who, to the Knowledge of the Company, holds more than 10%
of the issued and outstanding shares of Common Stock or the Affiliates of such a
Person is a party;
(xvii) which (A) terminated (other than by non-renewal or
expiration in accordance with their terms) or were cancelled on or after January
1, 2005 or (B) are reasonably expected by the Company to terminate (other than
by non-renewal or expiration in accordance with their terms) or be cancelled
within 6 months after the date hereof, in each case where termination or
cancellation has had or would reasonably be expected to have a Material Adverse
Effect; or
(xviii) which to the Knowledge of the Company are material to
the Business.
46
The Contracts set forth in Schedule 5.13 are called the "Material Contracts". To
the extent that the amount involved in an open purchase order or other Contract
is variable or indeterminate, the determination as to whether such Contract is
required to be set forth on Schedule 5.13 shall be based on the minimum
commitment set forth therein or, if there is none or if it is materially
greater, the good faith expectations of the Company.
SECTION 5.14. PERFORMANCE OF CONTRACTS. Except as set forth herein
or in any Schedule with respect to the Contracts listed therein, (a) all of the
Other Scheduled Contracts and the Material Contracts are legal, valid and in
full force and effect in all material respects (other than those listed in
subsection (xvii)(A) of Schedule 5.13), (b) neither the Company nor any
Subsidiary is in default or breach, or has received written notice of any
default or breach or any event which, with the passage of time, the giving of
notice, or both, would constitute a default or breach by the Company or any
Subsidiary under any of the Other Scheduled Contracts or Material Contracts,
which default or breach would reasonably be expected to have a Material Adverse
Effect, (c) to the Knowledge of the Company, none of the other parties to any of
the Other Scheduled Contracts or the Material Contracts is in default or breach
thereunder, which default or breach would reasonably be expected to have a
Material Adverse Effect and (d) except for customer contracts cancelled or not
renewed in the Ordinary Course of Business, no party thereto has given written
notice that it intends or, to the Knowledge of the Company, has threatened to
terminate, cancel or fail to renew or extend an Other Scheduled Contract or a
Material Contract to which it is a party or to otherwise cease or materially
reduce its business with the Company or any Subsidiary.
SECTION 5.15. PERMITS. Schedule 5.15 sets forth all of the Permits
(including environmental, health and safety Permits) which have been issued to,
or are held or used by, the Company or any Subsidiary, or for which the Company
or any Subsidiary has applied, in each case, which are or, upon issuance, would
reasonably be expected to be material to the conduct of Business as currently
conducted by the Company and the Subsidiaries. Except as set forth in Schedule
5.15, the Company and the Subsidiaries have obtained all of the material Permits
which are necessary in order (a) to conduct the Business as currently conducted
by them or (b) to own, lease or use properties as currently owned, leased or
used by them. Except as set forth in Schedule 5.15, the Company and the
Subsidiaries are in compliance in all material respects with the Permits set
forth therein and neither the Company nor any Subsidiary has received written
notice that any Permit set forth in Schedule 5.15 has been or will or may be
revoked, cancelled, suspended or materially adversely modified and no Proceeding
is pending or, to the Knowledge of the Company, threatened against the Company
or any Subsidiary with respect to any Permit set forth in Schedule 5.15.
SECTION 5.16. PATENTS; TECHNOLOGY.
(a) Schedule 5.16 sets forth:
(i) all of the Patents owned by or exclusively licensed or
assignable to the Company or any Subsidiary, and all actions that must be taken
by the Company or any Subsidiary within 6 months after the date hereof,
including the payment of any registration, maintenance or renewal fees or the
filing of any documents, for the purpose of maintaining or renewing any of such
Patents;
47
(ii) all of the licenses and non-assertion rights granted to
or by the Company or any Subsidiary pursuant to written Contracts pertaining to
Patents, inventions, trade secrets, know-how and process technology (including
manufacturing and engineering information) or technical information which are
material to the conduct of the Business as currently conducted by the Company
and the Subsidiaries; and
(iii) all of the Proceedings (including interference,
opposition, revocation and conflict Proceedings) currently pending by or against
or, to the Knowledge of the Company, threatened against, and all of the Orders
currently in effect issued to, the Company or any Subsidiary pertaining to
Patents, inventions, trade secrets, know-how and process technology (including
manufacturing and engineering information) or technical information described in
the preceding clauses of this Section 5.16(a).
Except as set forth in Schedule 5.16, (i) the Company and each of the
Subsidiaries has taken all actions necessary to perfect its right, title and
interest in and to the Patents listed therein, (ii) to the Knowledge of the
Company, all such Patents are valid and subsisting and (iii) the Company or a
Subsidiary exclusively owns all such Patents that have been filed or registered
by the Company or such Subsidiary or are otherwise in its name in the
jurisdictions in which they are filed or registered.
(b) Except as set forth in Schedule 5.16, to the Knowledge of the
Company:
(i) all Patents listed on Schedule 5.16 have been duly issued
in the jurisdiction indicated on Schedule 5.16 and have not been cancelled,
expired abandoned or otherwise terminated;
(ii) all patent applications listed on Schedule 5.16 are
pending in the jurisdiction indicated on Schedule 5.16; and
(iii) all inventions, trade secrets, know-how or process
technology (including manufacturing and engineering information) or technical
information described in Schedule 5.16, which are material to the conduct of the
Business as currently conducted by the Company and the Subsidiaries, taken as a
whole, and which are not available in the public domain, are owned by, licensed
to or subject to non-assertion rights granted to the Company or a Subsidiary.
(c) Except as set forth in Schedule 5.16, neither the Company nor
any Subsidiary has infringed or misappropriated the rights of any third party in
respect of any Patent or trade secret in connection with the conduct of the
Business as currently conducted by the Company and the Subsidiaries.
(d) Except as set forth in Schedule 5.4 or 5.16, all Contracts
pursuant to which any third party has licensed to the Company or any
Subsidiaries any Intellectual Property material to the operation of the Business
as currently conducted, and as currently proposed to be conducted, by the
Company and the Subsidiaries, taken as a whole, shall survive the Closing and
continue in effect for the benefit of the Surviving Corporation.
SECTION 5.17. TRADEMARKS; COPYRIGHTS; OTHER INTELLECTUAL PROPERTY
MATTERS.
48
(a) Schedule 5.17 sets forth:
(i) all of the Trademarks and registered Copyrights owned by
or licensed or assignable to the Company or any Subsidiary, and all actions that
must be taken by the Company within 6 months after the date hereof, including
the payment of any registration, maintenance or renewal fees or the filing of
any documents, for the purpose of maintaining or renewing any of such Trademarks
or registered Copyrights;
(ii) all of the Contracts (other than "shrink wrap" licenses
relating to software available "off the shelf") and all of the rights under
registered user or other written Contracts granted to or by the Company or any
Subsidiary pertaining to Intellectual Property (other than Patents) which are
material to the conduct of the Business as currently conducted by the Company
and the Subsidiaries, taken as a whole; and
(iii) all of the Proceedings (including interference,
opposition and cancellation Proceedings) currently pending by or against or, to
the Knowledge of the Company, threatened against, and all of the Orders
currently in effect issued to, the Company or any Subsidiary pertaining to
Intellectual Property (other than Patents) described in the preceding clauses of
this Section 5.17(a).
Except as set forth on Schedule 5.17, (i) the Company and each of the
Subsidiaries has taken all actions necessary to protect its right, title and
interest in and to the Trademarks and registered Copyrights listed therein, (ii)
to the Knowledge of the Company, all such Trademarks and registered Copyrights
are valid and subsisting and (iii) the Company or a Subsidiary exclusively owns
all Trademarks and Copyrights that have been registered by the Company or such
Subsidiary or are otherwise in its name in the jurisdictions in which it is
registered.
(b) Except as set forth in Schedule 5.17, all of the trademarks and
service marks described in Section 5.17(a)(i) have been duly registered or are
the subject of pending registration applications in the jurisdictions indicated
in Schedule 5.17.
(c) Except as set forth in Schedule 5.17, to the Knowledge of the
Company neither the Company nor any of the Subsidiaries has infringed or
misappropriated the rights of any third party in respect of Intellectual
Property (other than Patents) in connection with the conduct of the Business as
currently conducted by the Company and the Subsidiaries.
(d) Except as set forth in Schedule 5.17, to the Knowledge of the
Company, there has been no unauthorized use, infringement or misappropriation by
any third party, including any employee or former employee, of any material
Intellectual Property (including Patents) owned by or exclusively licensed to
the Company or any Subsidiary.
(e) Except as set forth in Schedule 5.17, the Company and the
Subsidiaries have obtained written assignments from all Employees and
independent contractors who contributed or are contributing in any material
respect to the creation or development of any material Intellectual Property
(including Intellectual Property that would reasonably be expected to be
patentable) of all right, title and interest in and to such contributions.
49
(f) Except for the divestitures of CRS, EMS and International IVS
and the related restructurings or as set forth in Schedule 5.10 or 5.17, neither
the Company nor any Subsidiary has sold, transferred or otherwise disposed of
any material Intellectual Property (including Patents) owned by it since the
Plan Effective Date.
(g) Except as set forth in Schedule 5.17 or a Contract that
constitutes an Other Scheduled Contract or a Material Contract that has been set
forth on an appropriate Schedule, no Person who has licensed any material
Intellectual Property (including Patents) to the Company or any Subsidiary has
ownership rights or license rights to any improvements made by or for the
Company or any Subsidiary in such Intellectual Property.
(h) The Company and each Subsidiary has taken reasonable steps to
protect its rights in its Information (including trade secrets).
(i) Except as set forth in Schedule 5.17, no Intellectual Property
of the Company or any of the Subsidiaries, of a third party or in the public
domain, in each case, that constitutes open source, public source or freeware,
or any modification or derivative thereof, including any version of any Software
licensed pursuant to any GNU general public license or limited general public
license or other Software that is licensed pursuant to a license that purports
to require the distribution of or access to source code or purports to restrict
a Person's ability to charge for distribution of or to use Software for
commercial purposes (collectively "Open Source") was used in, incorporated into
or integrated or bundled with any Intellectual Property or products of the
Company or any of the Subsidiaries that is commercially distributed by the
Company or any of the Subsidiaries. Except as set forth in Schedule 5.17, to the
Knowledge of Company, no third party products bundled for commercial
distribution with Intellectual Property or products of the Company or any of the
Subsidiaries contain Open Source. Schedule 5.17 sets forth a list of all Open
Source that is included in, or provided or distributed with, any Intellectual
Property or products of the Company or any of the Subsidiaries and, for each use
of such Open Source, (i) a description of the functionality of such Open Source,
(ii) the applicable license and (iii) the applicable Intellectual Property or
product of the Company or any of the Subsidiaries.
(j) Except as set forth on Schedule 5.17, neither the Company nor
any Subsidiary has disclosed or agreed to disclose to any Person any source code
(including pursuant to any source code escrow agreement), except (i) for
disclosures to Employees, contractors or consultants under agreements that
prohibit use or disclosure other than in the performances of services to the
Company or any Subsidiary and (ii) as provided in the Contracts relating to the
divesture of CRS. Except as set forth in Schedule 5.17, to the Knowledge of the
Company, no source code of the Company or any Subsidiary has been released under
a source code escrow agreement and no event has occurred or is expected by the
Company to occur as a result of which source code of the Company or any
Subsidiary would be released under a source code escrow agreement.
(k) Except as set forth in Schedule 5.17, neither this Agreement nor
the consummation of the transactions contemplated by this Agreement will result
in (i) the grant (under the terms of any Contract to which the Company or a
Subsidiary is a party) by the Surviving Corporation or the Buyer to any third
party of any right to any Intellectual Property
50
owned by, or licensed to, either of them, (ii) the Surviving Corporation or the
Buyer being bound by, or subject to, any non-competition or other restriction on
the operation or scope of their respective businesses to which it is not already
subject or (iii) the Surviving Corporation or the Buyer being obligated to pay
any royalties or other amounts to third parties in excess of those payable by
the Surviving Corporation or the Buyer, respectively, prior to the Closing.
(l) Schedule 5.17 sets forth all Contracts pursuant to which any
third party has licensed Intellectual Property to the Company or any of the
Subsidiaries that would, absent a renewal, terminate or expire in accordance
with their terms within 6 months after the date hereof.
SECTION 5.18. HUMAN RESOURCES; BENEFIT PLANS.
(a) Neither the Company nor any Subsidiary is a party to any
collective bargaining agreement or any other Contract with a labor union or
association and no such agreement or Contract is being negotiated. Except as set
forth in Schedule 5.18, there are no strikes, picketing activities or material
work stoppages, labor troubles or other similar events in which any of the
Employees have participated since January 1, 2005, are participating or, to the
Knowledge of the Company, are threatening to participate.
(b) Except for the acceleration or vesting of Equity Interests in
the Company as contemplated by Section 2.7 and except as set forth in a Contract
set forth in Schedule 5.13 or the Ancillary Matters Schedule or a Benefit Plan
or Contract set forth in Schedule 5.18, neither the Company nor any Subsidiary
has made any commitment to materially increase the wages, or materially modify
the other conditions or terms of employment, of any of the Employees, except
increases or modifications with respect to the wages or conditions or terms of
employment of non-officers in the Ordinary Course.
(c) Schedule 5.18 sets forth each material Domestic Benefit Plan,
material Foreign Benefit Plan, and each material Divested Benefit Plan.
(d) To the Knowledge of the Company, neither the Company nor any
Subsidiary has any obligation to maintain or make contributions to, or has any
material Liability with respect to, any Divested Benefit Plan.
(e) No Domestic Benefit Plan is (i) a multiemployer plan within the
meaning of Section 4001(a)(3) of ERISA (a "Multiemployer Plan"), (ii) a single
employer plan subject to Title IV of ERISA (a "Title IV Plan") or (iii) an
employee benefit plan that is maintained by more than one employer within the
meaning of Section 413(c) of the Code (a "Multiple Employer Plan").
(f) Since the Plan Effective Date, neither the Company nor any
Subsidiary (i) has maintained or contributed to, withdrawn from, terminated or
had any Liability in respect of a Multiemployer Plan, a Title IV Plan or a
Multiple Employer Plan or (ii) engaged in any transaction described in Section
4069 or 4212(c) of ERISA.
(g) Schedule 5.18 and the Ancillary Matters Schedule together set
forth each Domestic Benefit Plan that is subject to Section 409A of the Code
(each, a "Deferred
51
Compensation Plan"). To the Knowledge of the Company, each Deferred Compensation
Plan complies with Section 409A of the Code.
(h) Except as set forth in Schedule 5.18:
(i) each Domestic Benefit Plan has been established and
maintained in all material respects in compliance with its terms and all
applicable Laws, including ERISA and the Code;
(ii) each Domestic Benefit Plan that is intended to be
qualified within the meaning of Section 401(a) of the Code has received a
determination letter from the IRS (or is otherwise able to rely on a prototype
plan sponsor's IRS opinion letter) evidencing such qualification and, to the
Knowledge of the Company, no facts or circumstances exist that would reasonably
be expected to adversely effect the qualified status of any such Domestic
Benefit Plan;
(iii) no Domestic Benefit Plan provides for retiree health and
life benefits other than continuation coverage required under the Consolidated
Omnibus Budget Reconciliation Act of 1985 or other similar applicable Laws;
(iv) the plan documents for any Domestic Benefit Plan, that
previously provided any level of retiree health and life benefits higher than
continuation coverage required under the Consolidated Omnibus Budget
Reconciliation Act of 1985 or other similar applicable Laws and that now
provides a lower level of retiree health and life benefits, permitted the
decrease in the level of benefits;
(v) other than routine claims for benefits under a Domestic
Benefit Plan, no material Proceedings are pending or, to the Knowledge of the
Company, threatened with respect to any Domestic Benefit Plan;
(vi) no Equity Interests in the Company or any Subsidiary are
part of the assets of any Domestic Benefit Plan;
(vii) all material contributions required to be made and
material claims required to be paid under any Domestic Benefit Plan have been
timely made or paid; and
(viii) all material reports and documents with respect to the
Domestic Benefit Plans required by ERISA or other applicable Laws to be filed
and distributed have been so filed and distributed.
(i) Neither the Company nor any Subsidiary has and, to the Knowledge
of the Company, no other party in interest has engaged in a "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
that would reasonably be expected to subject the Company, any Subsidiary, any
Domestic Benefit Plan or any fiduciary thereof to a material penalty under the
Code or ERISA.
(j) Except as disclosed in Schedule 5.18;
52
(i) each Foreign Benefit Plan has been established and
maintained in all material respects in compliance with its terms and all
applicable Laws;
(ii) each Foreign Benefit Plan that is required to be
registered as such under applicable Laws has been so registered;
(iii) no Foreign Benefit Plan provides for material retiree
health and life benefits except as required by applicable Laws;
(iv) other than routine claims for benefits under a Foreign
Benefit Plan, no material Proceedings are pending or, to the Knowledge of the
Company, threatened with respect to any Foreign Benefit Plan;
(v) no Equity Interests in the Company or any Subsidiary are
part of the assets of any Foreign Benefit Plan;
(vi) all material contributions required to be made and
material claims required to be paid under any Foreign Benefit Plan have been
timely made or paid; and
(vii) all material reports and documents with respect to the
Foreign Benefit Plans required by applicable Laws to be filed and distributed
have been so filed and distributed.
(k) Except for the acceleration or vesting of Equity Interests in
the Company as contemplated by Section 2.7, except as otherwise provided by
applicable Law with respect to the Foreign Benefit Plans and except as set forth
in a Contract set forth in subsection (x) of Schedule 5.13 or the Ancillary
Matters Schedule or a Benefit Plan or Contract set forth in Schedule 5.18,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in (i) a material payment becoming
due, or a material increase in any payment becoming due, to any employee of the
Company or any Subsidiary or any director of the Company, (ii) the acceleration
of the time of payment or vesting of material compensation or benefits under any
Domestic Benefit Plan or any Foreign Benefit Plan, (iii) the payment of any
amount by the Company or any Subsidiary that, individually or in combination
with any other payment by the Company or any Subsidiary, would reasonably be
expected to constitute an "excess parachute payment" (as defined in Section 280G
of the Code) or (iv) the imposition of a material restriction on the right of
the Company or any Subsidiary to terminate or amend a material Domestic Benefit
Plan or a material Foreign Benefit Plan.
(l) To the Knowledge of the Company, (i) all terminations of
employees by the Company or any Subsidiary since January 1, 2004 were conducted
in compliance with applicable Laws and Contracts in all material respects and
(ii) with respect to such terminations, the Company or a Subsidiary provided
each terminated employee with all wages and other consideration owed and due to
such employee, including any accrued but unused vacation and any other
consideration due to such employee under any applicable Law, Contract or
severance plan, in each case, in all material respects.
SECTION 5.19. BUSINESS OPERATIONS; CHANGES. Except for the
divestitures of CRS, EMS and International IVS, the related restructurings and
the sale of the EMS Adjacent
53
Property and except as contemplated hereby or set forth in Schedule 5.19, the
Ancillary Matters Schedule or any other Schedule with respect to the matters
covered thereby, since January 1, 2005:
(a) neither the Company nor any Subsidiary has made any material
change in practices, operations or policies with respect to (i) the method for
selling products or services, (ii) the standard terms and conditions of the sale
of products or services (including standard terms regarding prices, returns and
discounts), (iii) the method for accounting for the sale of products or
services, (iv) the compensation of employees, (v) the maintenance of inventory
levels, (vi) the conduct of accounts receivable collection and accounts payable
payment activities, (vii) the method and level of manufacturing or sourcing
products or raw materials or (viii) accounting practices or policies;
(b) the Company and the Subsidiaries have conducted the Business in
the Ordinary Course and neither the Company nor any Subsidiary has, other than
in the Ordinary Course, (i) engaged in any material transaction, (ii) entered
into any material Contract, (iii) sold, licensed or otherwise transferred any
material property, (iv) waived or released any material right or obligation or
(v) incurred any material Indebtedness;
(c) there has been no development (including the incurrence of any
material Liability or Loss) that has had, is having or would reasonably be
expected to have a Material Adverse Effect;
(d) there has been no damage to or loss of the Company's assets
which is material to the Company (regardless of whether such damage or loss is
covered by insurance); and
(e) there has not been any declaration, setting aside or payment of
any dividend or other distribution with respect to any Equity Interests in the
Company or, except as contemplated by Section 6.14, any repurchase, redemption
or other acquisition by the Company or any Subsidiary of any outstanding Equity
Interests in the Company or any Subsidiary;
SECTION 5.20. COMPLIANCE WITH LAWS. Except as set forth in any
Schedule with respect to the matters covered thereby or in Schedule 5.20,
neither the Company nor any Subsidiary is in default under or in violation of
any applicable Law (including HIPAA, any Environmental Law or any Health and
Safety Law) or any Order and, since January 1, 2005, neither the Company nor any
Subsidiary has received written notice of, or been assessed any citation, fine
or penalty for, any such violation or alleged violation, other than such
defaults and violations, if any, which have not and would not reasonably be
expected to result in a Material Adverse Effect.
SECTION 5.21. LITIGATION; PROCEEDINGS. Schedule 5.21 sets forth (i)
all Proceedings currently pending by or against or, to the Knowledge of the
Company, threatened against the Company or a Subsidiary and (ii) all Orders
currently outstanding issued in respect of the Company or a Subsidiary, in each
case, other than routine Proceedings (including product liability, product
warranty and worker's compensation Proceedings) in which the maximum amount
54
claimed or in controversy does not exceed $250,000 or in which the maximum
amount claimed or in controversy in all Proceedings involving substantially
similar issues outstanding at any time after January 1, 2005 does not exceed
$500,000. Except as set forth in Schedule 5.21, neither the Company nor any
Subsidiary has (i) received, since January 1, 2005, (A) written notice of any
unresolved claim of personal injury or death or any unresolved claim for
injunctive relief in connection with any product or service manufactured or sold
by the Company or any Subsidiary or (B) any whistle-blower complaints regarding
allegations of material wrongdoing or (ii) any unresolved internal
investigations regarding allegations of material wrongdoing.
SECTION 5.22. ENVIRONMENTAL CONDITIONS. Except as set forth in
Schedules 5.15, 5.20 or 5.22:
(a) neither the Company nor any Subsidiary has received written
notice or an Order, and no Proceedings are pending or, to the Knowledge of the
Company, threatened under any Environmental Law alleging that the Company or any
Subsidiary has or may have a Remediation obligation at any of the Real Property
or any other real property;
(b) neither the Company nor any Subsidiary has received written
notice or an Order from any Person regarding any event, condition or
circumstance which would reasonably be expected to (i) prevent compliance by the
Company or any Subsidiary, in a material respect, with any Environmental Law or
any Permit issued under any Environmental Law and held by the Company or any
Subsidiary or (ii) require the amendment, in any material respect, of any Permit
issued under any Environmental Law or materially interfere with the timely
receipt of any such amendment, in each case, except where such non-compliance,
amendment or failure to obtain such amendment would not result in a material
liability to the Company and the Subsidiaries, taken as a whole;
(c) neither the Company nor any Subsidiary has received written
notice that it is responsible for any material Environmental Liabilities arising
from (i) any past or present Environmental Condition in, on, under, above or
about any of the Real Property or any other real property, (ii) the use,
manufacture, distribution, management, handling, transport, treatment,
generation, storage, disposal or Release of Hazardous Substances by the Company
or any Subsidiary or (iii) the failure of any of the Real Property or any other
real property or equipment, buildings or structures to comply with any
Environmental Law or any Permit issued thereunder;
(d) neither the Company nor any Subsidiary is subject to any
outstanding written notice or Order from, or agreement with, any Governmental
Authority or other Person which relates to or arises out of any Environmental
Law or in respect of which it is required or would reasonably be expected to
incur any material Environmental Liabilities;
(e) the Company and the Subsidiaries have filed all notices required
to be filed by them under any Environmental Law in respect of Releases of
Hazardous Substances by the Company or any Subsidiary, except where the failure
to file would not reasonably be expected to result in material Liabilities on
the part of the Company or any Subsidiary;
(f) neither the Company nor any of the Subsidiaries has entered into
any written Contract with any Governmental Authority or other Person pursuant to
which it has
55
assumed responsibility (including responsibility under any Guarantee or
indemnification agreement) for any Remediation of any Environmental Condition;
and
(g) neither the Company nor any Subsidiary has caused, and, to the
Knowledge of the Company, neither the Real Property nor any other real property
is adversely affected by, any Release or threatened Release of any Hazardous
Substance that would reasonably be expected to result in material Liability on
the part of the Company or any of the Subsidiaries.
SECTION 5.23. HEALTH AND SAFETY MATTERS. Except as set forth on
Schedules 5.20, 5.21, 5.22 or Schedule 5.23:
(a) neither the Company nor any Subsidiary has received any written
citation, notice or Order after the Plan Effective Date alleging Liability on
its part with respect to any Health and Safety Condition which would reasonably
be expected to result in a material Liability to the Company and the
Subsidiaries taken as a whole;
(b) no Proceedings by any Governmental Authority or other Person are
pending or, to the Knowledge of the Company, threatened with respect to any
Health and Safety Condition, in each case, relating to the Real Property, or the
conduct of the Business or ownership, leasing and use of assets by the Company
or any Subsidiary, which would reasonably be expected to have a Material Adverse
Effect; and
(c) to the Knowledge of the Company, neither the Company nor any
Subsidiary is subject to any investigation by any Governmental Authority with
respect to any failure to comply with any Health and Safety Law which would
reasonably be expected to result in a material Liability to the Company and the
Subsidiaries taken as a whole.
SECTION 5.24. INVENTORY; ACCOUNTS RECEIVABLE; BACKLOG; WARRANTY
CLAIMS.
(a) All inventories of the Company and each Subsidiary are, in all
material respects, (i) merchantable in the Ordinary Course and (ii) adequate for
the present needs of the Company and the Subsidiaries. All inventories of the
Company and each Subsidiary conform with applicable specifications, have been
produced in compliance with applicable quality control procedures and have been
manufactured in accordance with applicable Laws in effect at the time of such
manufacture, other than for any such non-conformance or non-compliance, if any,
which would not reasonably be expected to have a Material Adverse Effect. The
amount and mix of items in the inventories of the Company and the Subsidiaries,
taken as a whole, is, in all material respects (excluding the impact of the
divestitures of CRS, EMS and International IVS and the related restructurings),
consistent with past practices of the Company and the Subsidiaries.
(b) All accounts receivable of the Company and the Subsidiaries, in
all material respects, have been validly created in the Ordinary Course through
the sale of goods and services to unrelated third parties, represent valid and
enforceable obligations due to the Company or a Subsidiary and, to the Knowledge
of the Company, are not subject to any set-off or counterclaim except to the
extent of any reserve for doubtful accounts or bad debts (as adjusted for the
passage of time and conduct of the Business in the Ordinary Course in accordance
with GAAP).
56
(c) Schedule 5.24 sets forth, as of December 31, 2005, (i) the
backlog of the Company and the Subsidiaries and (ii) a summary of (A) the
unfilled outstanding orders taken by the Company and the Subsidiaries and (B)
the outstanding warranty claims relating to products or services sold by the
Company or a Subsidiary, in the case of each such clause, determined in
accordance with the customary practices and policies of the Company, excluding
backlog and warranty claims of EMS and except for omissions therefrom which,
individually or in the aggregate, would not reasonably be expected to be
material to the Company and the Subsidiaries taken as a whole.
(d) Except as set forth on Schedule 5.19, 5.21 or 5.24 neither the
Company nor any Subsidiary has received since January 1, 2005 written notice
from any customer of the Business in which such customer asserts that the
Company or a Subsidiary is in breach of any warranty, the cost of which involves
in excess of $50,000 with respect to products or services sold to such customer.
SECTION 5.25. CERTAIN BUSINESS RELATIONSHIPS. Neither the Company
nor any Subsidiary (a) has been after January 1, 2005 involved in any business
arrangement or relationship (as a lessor or lessee, vendor or customer, licensor
or licensee, consultant, service provider, or otherwise) with any director or
officer of the Company (other than in his capacity as such) or any Affiliate
thereof involving in excess of $60,000 or (b) to the Knowledge of the Company,
any beneficial owner of more than 5% of the outstanding shares of Common Stock
or any Affiliate thereof involving in excess of $60,000.
SECTION 5.26. MAJOR CUSTOMERS. Schedule 5.26 sets forth the five
largest customers of the Business, based on revenue (on a consolidated basis)
for 2005 (each, a "Major Customer") and sets forth opposite the name of each
Major Customer the percentage of revenues of the Company and the Subsidiaries
(on a consolidated basis), attributable to each Major Customer. Neither the
Company nor any Subsidiary has received written notice that any Major Customer,
and, to the Knowledge of the Company, no Major Customer (a) has ceased after
December 31, 2004 or will cease to purchase the products or services of the
Company and the Subsidiaries or (b) has substantially reduced after December 31,
2004 or will substantially reduce the purchase of products or services of the
Company and the Subsidiaries, or that any Major Customer will not purchase
products or services of the Company and the Subsidiaries, after the Closing on
terms and conditions (as they may be changed in connection with negotiation of
new purchases or renewals of existing Contracts in the Ordinary Course) similar
to those used in its current purchases from the Company and the Subsidiaries.
SECTION 5.27. ABSENCE OF CERTAIN BUSINESS PRACTICES. To the
Knowledge of the Company, neither the Company nor any Subsidiary nor any
officer, director, employee or agent of the Company or any Subsidiary, or other
Person acting on its behalf, has, directly or indirectly, in connection with the
conduct of the Business by the Company or any Subsidiary, after January 1, 2005,
given or agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other Person who is or may be in a position to help or
hinder the Company or any Subsidiary in violation of any Law.
SECTION 5.28. INSURANCE. Schedule 5.28 sets forth each material
insurance policy (including a policy providing property, casualty, liability and
workers' compensation
57
coverage and bond and surety arrangements) held by the Company or any
Subsidiary, all material claims made thereunder after January 1, 2005, all
material retroactive premium adjustments and other material loss-sharing
arrangements in respect thereof currently in effect and all material
self-insurance arrangements of the Company or any Subsidiary. Such policies are
in full force and effect and are believed in good faith by the Company to be
adequate for the conduct of the Business as currently conducted by the Company
and the Subsidiaries, taken as a whole, and to conform in all material respects
with the requirements of all leases or other arrangements to which the Company
or a Subsidiary is a party requiring specified insurance coverage. To the
Knowledge of the Company, the Company is not in default with respect to any
material provision contained in any such policy. Neither the Company nor any
Subsidiary has received notice of cancellation or non-renewal of any such
policy.
SECTION 5.29. LIABILITIES.
(a) To the Knowledge of the Company, there are no retained
Liabilities relating to the divestitures of CRS, EMS and International IVS and
the EMS Adjacent Property that would have or would reasonably be expected to
have a Material Adverse Effect.
(b) Except as set forth herein or in any Schedule, to the Knowledge
of the Company, there are no other material Liabilities of the Company or any
Subsidiary; provided, however, that the Knowledge qualification shall be
disregarded for purposes of Section 7.1(g) and 9.1(f).
SECTION 5.30. DELAWARE GENERAL CORPORATION LAW; FAIRNESS OPINION.
(a) The terms, conditions, execution, delivery and performance of
this Agreement and the consummation of the Merger and the other transactions
contemplated hereby has received the prior approval of the Board of Directors of
the Company within the meaning of DGCL Section 203.
(b) The Board of Directors of the Company has received the Fairness
Opinion and the Fairness Opinion has not subsequently been withdrawn prior to
the date hereof.
SECTION 5.31. BROKERS; FINDERS. Except as set forth on Schedule 5.31
and except for the engagement of UBS Securities LLC, no finder, broker or
similar intermediary acting on behalf of the Company or any Subsidiary is
entitled to a commission, fee or other compensation in connection with the
negotiation, execution or delivery of this Agreement or any of the Related
Agreements or the consummation of any of the transactions contemplated hereby or
thereby.
SECTION 5.32. HIPAA MATTERS.
(a) To the Knowledge of the Company, neither the Company nor any
Subsidiary or any officer, key employee or agent of the Company or any
Subsidiary has been convicted of any crime or engaged in any conduct that would
reasonably be expected to result in exclusion of the Company or any Subsidiary
under 42 U.S.C. Section 1320a-7 or any similar state Law, to the extent that it
is subject thereto.
58
(b) Neither the Company nor any Subsidiary is in breach, violation
of or default under any Contract, including any business associate arrangement,
that requires compliance with HIPAA, to the extent that it is subject thereto,
except where such breach, violation or default would not reasonably be expected
to have a Material Adverse Effect. The Company and the Subsidiaries have
implemented appropriate internal policies and procedures to maintain
HIPAA-mandated levels of privacy and security of protected health information,
to the extent that it is subject thereto.
SECTION 5.33. BANKRUPTCY MATTERS.
(a) The effective date of the Reorganization Plan was March 28,
2002.
(b) Except as set forth in Schedule 5.33, the Reorganization Plan
and its plan confirmation order, entered March 13, 2002 (the "Plan Confirmation
Order"), were not amended or modified after entry of the Plan Confirmation Order
and the discharge of the Company provided in the Plan Confirmation Order and set
forth in Section 13.3 of the Reorganization Plan has not, after entry of the
Plan Confirmation Order, been limited, modified, contradicted or overruled by
any Order or Proceeding.
(c) Except as set forth in Schedule 5.33, to the Knowledge of the
Company, there are no violations of the injunctions under, or arising from entry
of, the Plan Confirmation Order.
(d) Except as set forth in Schedule 5.33, the Company has performed
all material obligations under the Reorganization Plan.
(e) Except as set forth in Schedule 5.33, to the Knowledge of the
Company, (i) no amount remains owing to or by the Company from or to the
Litigation Trust (as defined in the Reorganization Plan), (ii) no Company
Assigned Cause of Action (as defined in the Reorganization Plan) has been
abandoned back to the Company, (iii) no Cause of Action (as defined in the
Reorganization Plan) or claim of the Company against any holder of a Claim (as
defined in the Reorganization Plan), for which the statute of limitations has
not run, has been identified which has not been settled, set off, released or
resolved by final judgment.
SECTION 5.34. INFORMATION SYSTEMS. The Company believes in good
faith that the server hardware and supporting equipment (including
communications equipment, terminals and hook-ups that interface with third party
software or systems) used in the networks of the Company and each of the
Subsidiaries provide sufficient redundancy and speed to meet industry standards
relating to availability.
SECTION 5.35. COPIES OF CONTRACTS AND OTHER DOCUMENTS. The Company
has made or caused to be made available to the Buyer and the Buyer Subsidiary
accurate and complete copies of all material Contracts (excluding typical,
routine or customary quotations, purchase orders, service or maintenance
agreements or comparable documents), Benefit Plans, Permits and Orders set forth
in any Schedule.
59
ARTICLE 6
PRE-CLOSING COVENANTS
SECTION 6.1. CONDUCT BY THE BUYER.
(a) The Buyer and the Buyer Subsidiary shall, and shall cause their
Affiliates to, refrain from taking any action which would cause any
representation or warranty contained in Article 4 to be untrue or incorrect in
any material respect as of the Closing.
(b) The Buyer and the Buyer Subsidiary shall, and shall cause their
Affiliates, their current and prospective lenders and their Representatives to,
observe the limitations on access set forth in Section 6.2(c).
SECTION 6.2. CONDUCT BY THE COMPANY.
(a) Except as permitted under Sections 6.2(d), 6.2(e) and 6.2(f) the
Company shall, and shall cause the Subsidiaries to, refrain from taking any
action which would cause any representation or warranty contained in Article 5
to be untrue or incorrect in any material respect as of the Closing.
(b) The Company shall, and shall cause the Subsidiaries to, at the
cost and expense of the Buyer (except as otherwise provided in Item 16 of the
Ancillary Matters Schedule), use commercially reasonable efforts to cooperate
with the Buyer and the Buyer Subsidiary to assist them to obtain debt financing
in connection with the transactions contemplated hereby; provided, however, that
if the Company has used commercially reasonable efforts (i) neither the failure
to obtain any such financing or any delay in obtaining any such financing from
the date when such financing might otherwise reasonably be expected to be
obtained nor the fact that the amount, terms or conditions of any such financing
are less favorable than might otherwise reasonably be expected to be obtained
shall constitute a condition to consummation of the transactions contemplated
hereby or a basis for an adjustment in the terms or conditions of this Agreement
and (ii) no failure or delay by the Company or any Subsidiary in connection with
such cooperation shall constitute a breach or default under this Section 6.2(b)
or a failure to satisfy any condition set forth in Section 7.1 unless (A) prompt
written notice of such failure or delay shall have been given to the Company by
the Buyer and (B) such failure or delay is (1) material, (2) has a material
adverse effect on obtaining such financing or the amount thereof and (3) shall
not have been cured promptly (or, if the Company offers to correspondingly
extend the Closing Date and Termination Date, within 30 days) after written
notice of such failure or delay shall have been given to the Company by the
Buyer. To the extent that the Company incurs costs and expenses for which the
Buyer is liable hereunder, any such costs and expenses paid prior to March 1,
2006 shall be included in the calculation of the Closing Adjustment.
(c) Except as permitted under Sections 6.2(d), 6.2(e) and 6.2(f) and
except as otherwise permitted under this Agreement or set forth on Schedule 6.2
or as otherwise consented to by the Buyer in writing (which consent may be
transmitted by e-mail and which consent shall not be unreasonably withheld), the
Company shall, and shall cause the Subsidiaries to carry on
60
the Business in the Ordinary Course, in substantially the same manner as
heretofore conducted and in compliance in all material respects with all
applicable Laws and, without limiting the foregoing, do the following, all with
the intent of preserving unimpaired the good will and ongoing businesses of the
Company and the Subsidiaries at the Effective Time and to:
(i) use the material assets of the Company and the
Subsidiaries owned, leased or used by them (other than inventories and obsolete
assets) in (but only in) the Ordinary Course, purchase or otherwise acquire
material assets in (but only in) the Ordinary Course, sell inventories and other
assets in (but only in) the Ordinary Course and otherwise conduct the Business
in (but only in) the Ordinary Course;
(ii) maintain the material assets of the Company and the
Subsidiaries owned, leased or used by them (other than obsolete assets) in the
Ordinary Course (except for normal wear and tear) and use all commercially
reasonable efforts to maintain its and their relationships with its and their
key customers, vendors, employees, lessors and licensors (and others with whom
the Company and the Subsidiaries have key business dealings) and to otherwise
maintain the Business as currently conducted by them;
(iii) maintain the practices, operations and policies of the
Company and the Subsidiaries with respect to (A) the method for selling products
or services, (B) the standard terms and conditions of the sale of products or
services (including standard prices and standard terms regarding returns and
discounts), (C) the maintenance of inventory levels, (D) the conduct of accounts
receivable collection and accounts payable payment activities and (E) the method
and level of sourcing products, in each case except to the extent that a change
therein shall occur in the Ordinary Course or shall have become necessary, as
determined in good faith by the Company, in order to maintain the Business as
currently conducted by the Company and the Subsidiaries;
(iv) in the Ordinary Course, pay its material debts, pay or
perform its other material obligations and pay its material Taxes, in each case,
when due (except in connection with any good faith disputes with respect
thereto);
(v) use commercially reasonable efforts to preserve intact in
all material respects its present business organization and keep available the
services of its present executive officers and other key employees;
(vi) promptly notify the Buyer of any event or occurrence or
emergency not in the Ordinary Course that arises during the period from the date
of this Agreement and continuing until the earlier of the Termination Date or
the Effective Time;
(vii) provide reasonable access to the Buyer, the Buyer
Subsidiary, their current and prospective lenders, underwriters and placements
agents and the Representatives of the Buyer, the Buyer Subsidiary and such
lenders, underwriters and placements agents to the Company Business Records and
the Employees upon reasonable request, coordinated with Xxxxx X. Xxxxx, Xxx
Xxxxxxx or such other Person as either of them may designate, with due regard to
minimizing interference with the conduct of the Business; provided, however,
that no such access shall be provided (A) with respect to technical, financial
or operating Company Business
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Records (including price and cost data on any basis other than an aggregate
basis) which, in the reasonable opinion of the Company, contain information the
disclosure of which to competitors of the Business might be detrimental to the
Company and the Subsidiaries, (B) to the extent that such access would (1)
violate the terms of any Contract to which the Company or any Subsidiary is a
party, any Law or any Order or (2) result in the loss of any attorney-client or
other privilege, (C) with respect to Company Business Records covered by U.S.
export control Laws, to any Person who is not a citizen of the United States
unless such Person has obtained all licenses required under such Laws or (D)
with respect to the process relating to the marketing and sale of the Company,
including the process leading up to the negotiation, execution and delivery of
this Agreement;
(viii) provide reasonable access to the Buyer, the Buyer
Subsidiary, their current and prospective lenders, underwriters and placements
agents and the Representatives of the Buyer, the Buyer Subsidiary and such
lenders, underwriters and placements agents to the Real Property upon reasonable
request with due regard to minimizing interference with conduct of the Business
by the Company and the Subsidiaries; provided, that (x) each such Person
complies with all applicable health and safety rules, regulations, reasonable
instructions and requests of the Company or any Subsidiary and (y) no such
access shall be provided, with respect to any portion of the Real Property
covered by U.S. export control Laws, to any Person who is not a citizen of the
United States unless such Person has obtained all licenses required under such
Laws; and
(ix) to the extent that terms and conditions of any option or
warrant to purchase shares of Common Stock outstanding prior to the Effective
Time does not already so provide, cause the Board of Directors of the Company or
the Compensation Committee thereof to take such actions as may be necessary so
that, if such options or warrants are not exercised or expired prior to or as of
the Effective Time, such options or warrants shall thereafter only be
exercisable for the Per Share Merger Consideration in respect of the shares of
Common Stock covered thereby.
(d) Except as permitted under Sections 6.2(e) and 6.2(f) and except
as otherwise permitted under this Agreement or set forth on Schedule 6.2 or as
otherwise consented to by the Buyer in writing (which consent may be transmitted
by e-mail and which consent shall not be unreasonably withheld), the Company
shall not, and shall not permit the Subsidiaries to:
(i) declare, set aside or pay any dividend on, or make any
other distribution in respect of, the outstanding shares of Common Stock or the
other outstanding Equity Interests in the Company;
(ii) effect a stock split or reverse stock split affecting the
outstanding shares of the Common Stock or reclassify the outstanding shares of
Common Stock;
(iii) issue, grant, deliver or sell or authorize or propose
the issuance, grant, delivery or sale of, or purchase or propose the purchase
of, any shares of Common Stock or any other Equity Interests in the Company
except pursuant to the exercise of Equity Interests outstanding as of the date
hereof;
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(iv) exchange any securities or other property for any
outstanding shares of Common Stock or other outstanding Equity Interests in the
Company;
(v) amend its Organizational Documents;
(vi) increase the compensation (including bonuses, severance
compensation and equity compensation) or voluntarily change benefits (including
change-in control or termination benefits) of any director or executive officer
of the Company, enhance in any respect the terms thereof or, except as
contemplated by the terms of this Agreement, grant new compensation arrangements
(including bonuses, severance compensation and equity compensation) or benefits
(including change-in control or termination benefits) to any director or
executive officer of the Company;
(vii) generally increase the compensation (including bonuses,
severance compensation and equity compensation) or voluntarily change the
benefits (including change-in control or termination benefits) of employees;
(viii) increase the compensation or benefits of an individual
employee (other than any directors or executive officers) prior to (A) giving
written notice of the proposed increase to the Buyer, (B) engaging in good faith
discussions with the Buyer and (C) requesting the consent of the Buyer to such
increase (not to be unreasonably withheld or delayed after giving due
consideration to the concerns of each of the Company and the Buyer); provided,
however, that if such consent is unreasonably withheld or not timely given, the
Company may grant increases that are commercially reasonable in view of all the
circumstances;
(ix) hire any new employees (other than independent
contractors whose engagement will terminate at the Closing) prior to (A) giving
written notice of the proposed hire to the Buyer, (B) engaging in good faith
discussions with the Buyer and (C) requesting the consent of the Buyer to such
hire (not to be unreasonably withheld or delayed after giving due consideration
to the concerns of each of the Company and the Buyer); provided, however, that
if such consent is unreasonably withheld or not timely given, the Company may
effect such hire upon market terms that are commercially reasonable in view of
all the circumstances;
(x) voluntarily increase in any respect the benefits provided
under the Benefit Plans, taken as a whole, voluntarily enhance in any respect
the terms thereof or adopt new employee benefit and welfare plans;
(xi) except as contemplated hereby, take any action to
accelerate in any material respect the rights of any director of the Company or
any employee of the Company or any Subsidiary to compensation or benefits or to
fund or secure in any material respect the payment of any such compensation or
benefits;
(xii) incur, assume or Guarantee Indebtedness (including
capitalized lease obligations), issue or sell any debt securities, or Guarantee
any debt securities of any Person other than in the Ordinary Course;
63
(xiii) sell, lease, license or otherwise dispose of, or xxxxx
x Xxxx (other than a Permitted Lien) on, any of its properties or assets,
including without limitation the sale of any accounts receivable of the Company,
except in the Ordinary Course;
(xiv) make any loan or advance to any Person (other than
advances of business expenses in the Ordinary Course);
(xv) make or change any material Tax election, consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of material Taxes, file any amended Tax Return or settle
or compromise any material Tax audit, assessment, refund or Liability;
(xvi) make any change in any accounting (including Tax
accounting) principle, policy or practice (including depreciation and
amortization policies) other than as required by GAAP;
(xvii) adopt a plan or agreement of complete or partial
liquidation, dissolution or reorganization;
(xviii) settle any pending or threatened Proceeding in which
the settlement exceeds $250,000 or in which the settlement would reasonably be
expected to have an adverse effect upon the Company's ability to exercise any of
its Intellectual Property rights;
(xix) acquire, by merging or consolidating with, or purchasing
assets or equity securities of any business, division or Person or otherwise
acquire (other than in the Ordinary Course) assets which are material to the
Company and the Subsidiaries, taken as a whole;
(xx) alter adversely, any right or claim of the Company,
including rights to any payment or refund and any rights in respect of any
account receivable of the Company (other than in the Ordinary Course and except
for an extension and amendment of the $2.6 million note received in connection
with the divestiture of EMS);
(xxi) commence any lawsuit prior to (A) giving written notice
of the proposed commencement to the Buyer, (B) engaging in good faith
discussions with the Buyer and (C) requesting the consent of the Buyer to such
commencement (not to be unreasonably withheld or delayed after giving due
consideration to the concerns of each of the Company and the Buyer); provided,
however, that if such consent is unreasonably withheld or not timely given, the
Company may commence such lawsuit;
(xxii) amend or modify any of the Other Scheduled Contracts or
the Material Contracts or enter (other than in the Ordinary Course) into new
Contracts that, upon entry, would reasonably be expected to constitute Other
Scheduled Contracts or Material Contracts;
(xxiii) sell, lease, license or transfer to any Person or
entity any rights to any Intellectual Property or enter into any agreement or
modify any existing agreement with
64
respect to any Intellectual Property with any Person or entity or with respect
to any Intellectual Property of any person or entity (other than in the Ordinary
Course);
(xxiv) purchase or license any Intellectual Property or enter
into any agreement or modify any existing agreement with respect to the
Intellectual Property of any Person or entity (other than in the Ordinary
Course);
(xxv) enter into any agreement or modify any existing
agreement with respect to the development of any Intellectual Property with a
third party (other than in the Ordinary Course);
(xxvi) enter into any agreement to purchase or sell any
interest in real property, grant any security interest in any Real Property,
enter into any lease, sublease, license or other occupancy agreement with
respect to any Real Property or adversely, taken as a whole, alter, amend,
modify or terminate any of the terms of any lease agreements where the minimum
annual rental obligation under such lease, sublease, license or other occupancy
agreement exceeds $100,000;
(xxvii) enter into any strategic alliance, affiliate agreement
or joint marketing arrangement or agreements (other than in the Ordinary
Course);
(xxviii) alter, or enter into any commitment to alter, its
interest in any corporation, association, joint venture, partnership or business
entity in which the Company directly or indirectly holds any interest (other
than in the Ordinary Course);
(xxix) cancel or amend or renew (other than in the Ordinary
Course) any material insurance policy (other than as described in Section 8.3);
(xxx) enter into any Contract outside the Ordinary Course
requiring the Company or any Subsidiary to pay specified sums in excess of
$100,000 individually or $300,000 in the aggregate (in each case, except as
expressly permitted by this Section 6.2);
(xxxi) take any action or omit to take any action that causes
any material Intellectual Property to become invalidated, abandoned or dedicated
to the public domain;
(xxxii) waive or amend any provision of any Stockholder
Agreement and Acknowledgment (and use commercially reasonable efforts to enforce
the same if so requested by the Buyer); or
(xxxiii) enter into any Contract obligating the Company or any
Subsidiary to take any of the actions described in the preceding clauses of this
Section 6.2(d).
(e) Nothing contained in this Agreement shall restrict the Company
or any Subsidiary from:
(i) issuing shares of Common Stock upon the exercise of
options or warrants to purchase shares of Common Stock issued and outstanding on
the date hereof;
65
(ii) subject to Section 6.2(d)(xvi), preparing Tax Returns on
a basis consistent with past practice, filing such Tax Returns on a timely basis
and paying Taxes shown as due thereon on a timely basis;
(iii) increasing the compensation or benefits of an individual
employee provided that it has (A) given written notice of the proposed increase
to the Buyer, (B) engaged in good faith discussions with the Buyer and requested
the consent of the Buyer to such increase (not to be unreasonably withheld or
delayed after giving due consideration to the concerns of each of the Company
and the Buyer); provided, however, that if such consent is unreasonably withheld
or not timely given, the Company may grant increases that are commercially
reasonable in view of all the circumstances;
(iv) renewing special assignments of directors for
compensation consistent with past practice, determining whether and the extent
to which targets for bonuses of directors of the Company in connection with
special assignments have been reached, determining whether and the extent to
which such targets have been reached, and making payments in respect thereof;
(v) making payments to, repurchasing or redeeming shares of
Common Stock or other Equity Interests held by or entering into other customary
arrangements with any executive officer of the Company or any employee of the
Company or a Subsidiary in connection with termination of employment and
settlement or compromise of Claims in connection therewith;
(vi) making any payment or taking any action in the Ordinary
Course required under any Contract (including any employee benefit or welfare
plan) then in effect or under any applicable Law, Order or Permit;
(vii) changing any accounting principle, practice or policy,
recording any charge or taking any other action necessary or appropriate as
determined in good faith by the Company, by reason of a change in generally
accepted accounting principles in the United States;
(viii) settling Claims and Liabilities under Contracts
relating to the divestitures of CRS, EMS and International IVS that do not
increase in any material respect the amount or likelihood of actual or
contingent Liabilities of the Company or any Subsidiary thereunder; or
(ix) entering into a Contract obligating the Company or any
Subsidiary to take any of the actions described in clauses (i) through (ix) of
this Section 6.2(e).
Notwithstanding anything contained herein to the contrary, the Company and the
Subsidiaries shall have the right to make the payments and take the actions, and
the Company shall and shall cause the Subsidiaries to make the payments (net of
any required withholding or similar Taxes) and take the actions, described in
the Ancillary Matters Schedule (which payment shall be made in amounts not less
than the amounts set forth therein on the dates specified therein). After the
Closing, the Buyer shall cause the Company and the Subsidiaries to timely
perform their obligations under the immediately preceding sentence.
66
(f) Notwithstanding anything contained herein to the contrary,
except as otherwise agreed in writing by the Company and the Buyer, the only
capital expenditures which the Company and the Subsidiaries shall make or be
required to make are capital expenditures which they are obligated to make under
Contracts with Third Parties or which have become necessary, as determined in
good faith by the Company, in order to maintain the Business as currently
conducted by the Company and the Subsidiaries in the Ordinary Course (but such
necessary capital expenditures shall not exceed $2,000,000, in the aggregate).
(g) For purposes of this Section 6.2, no written consent of the
Buyer shall be effective until it is signed by the General Counsel or Senior
Vice President, Business Development.
SECTION 6.3. GOVERNMENTAL FILINGS.
(a) Each Party shall and shall cause its Affiliates, at its or their
cost and expense (subject to the last sentence of this Section 6.3(a)), promptly
to file and thereafter diligently to pursue any filing required on the part of
it or its Affiliates in connection with the transactions contemplated by this
Agreement under the HSR Act. Neither Party will make any filing under the
competition laws of any other jurisdiction unless the Parties shall otherwise
agree. The Buyer shall or shall cause the Buyer Subsidiary to pay all (and
reimburse the Company and its Affiliates for their payment of any) filing fees
in connection with any such filings which may be made.
(b) In connection with each Party's obligations under Section
6.3(a), each Party shall and shall cause its Affiliates (i) to cooperate and
collaborate with the other Parties and their respective Affiliates in preparing
and filing any submission to be made to any Governmental Authority and in
responding to any comments, requests for information or inquires therefrom, (ii)
to notify promptly the other Parties of any comments, requests or inquiries made
by a Governmental Authority, (iii) to provide copies of all written submissions
to and communications with or from any Governmental Authority to the other
Parties and (iv) to permit the other Parties and their respective
Representatives to participate in discussions, and attend meetings, with any
Governmental Authority.
(c) Each Party shall use its commercially reasonable efforts to
resolve such objections, if any, as may be asserted with respect to the
transactions contemplated by this Agreement under any applicable competition or
antitrust Law.
SECTION 6.4. WRITTEN STOCKHOLDER CONSENT; PREPARATION OF INFORMATION
STATEMENT.
(a) Immediately following the execution and delivery of this
Agreement, the Company shall use its commercially reasonable best efforts to (i)
set 12:00 a.m. (New York Time) on February 8, 2006 as the record time and date
for determining the holders of record of shares of Common Stock entitled to act
on adoption of this Agreement and (ii) cause the Majority Stockholders to
execute and deliver the Written Consents. Adoption of this Agreement by the
holders of record of the requisite number of shares of Common Stock is called
the
67
"Company Stockholder Approval". The Company shall promptly give written notice
to the Buyer of such record time and date and receipt of the Company Stockholder
Approval.
(b) Promptly following receipt of the Company Stockholder Approval,
the Company shall prepare a notice of the Company Stockholder Approval and an
information statement, to be mailed or otherwise distributed to the holders of
record of shares of Common Stock entitled to notice of the Company Stockholder
Approval, which shall describe the Merger, the other transactions contemplated
hereby and any approval by the Majority Stockholders of the ancillary matters,
this Agreement and the adoption thereof by the Board of Directors of the Company
and the Majority Stockholders and notify such holders of any dissenters'
appraisal rights to which they may be entitled under applicable Law (the
"Information Statement"). The Company shall use all commercially reasonable
efforts to cause the Information Statement to comply in all material respects
with the informational requirements of applicable Law.
(c) The Buyer and the Buyer Subsidiary will promptly provide to the
Company such information concerning themselves, their Affiliates, the
transactions contemplated hereby and related matters as the Company may
reasonably request for inclusion in the Information Statement (or any amendment
or supplement described in Section 6.4(e)) and otherwise promptly cooperate with
the Company in the preparation thereof. The Company shall provide the Buyer with
a copy of the Information Statement (or any amendment or supplement described in
Section 6.4(e)) a reasonable time prior to the first mailing or other
distribution thereof pursuant to Section 6.4(d) and shall consider in good faith
any comments that the Buyer may have thereon. The Company shall not mail or
otherwise distribute the Information Statement to such holders without the
Buyer's prior written approval (such approval not to be unreasonably withheld or
delayed).
(d) The Company shall use commercially reasonable efforts to cause
the Information Statement (or any amendment or supplement described in Section
6.4(e)) and the Letter of Transmittal to be mailed or otherwise distributed to
such holders at a time and in a manner that complies in all material respects
with the procedural requirements of applicable Law and otherwise at a time that
it in good faith believes will not unduly delay the Closing beyond the Closing
Date then anticipated in good faith by it; provided, however, that,
notwithstanding anything contained herein to the contrary, if an amendment or
supplement described in Section 6.4(e) is to be mailed or otherwise distributed,
the Company may delay the Closing to the extent that it in good faith determines
to be necessary or appropriate by reason thereof. The Company shall also
concurrently mail or otherwise distribute the Information Statement (and any
amendment or supplement described in Section 6.4(e)), and the Letter of
Transmittal to all other holders of record of Equity Interests (other than
shares of Common Stock) in the Company.
(e) If, at any time prior to the Effective Time, any Party
determines that the Information Statement contains or may contain a misstatement
of a material fact or omits or may omit 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, such Party shall
promptly so advise the other Parties. If, at any time prior to the Effective
Time, the Company determines that the Information Statement contains a
misstatement of a material fact or omits 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, the Company
68
shall prepare an amendment or supplement to the Information Statement so that,
as amended or supplemented, the Information Statement does not contain such a
misstatement or omission.
(f) The Buyer and the Buyer Subsidiary shall indemnify the Company,
its directors, its officers and any Person that controls the Company within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
for, and hold them harmless from and against, any and all Liabilities and Losses
arising out of any misstatement of a material fact in the Information Statement
or omission 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 to the extent that such misstatement or omission is
based on information which they provide for inclusion in the Information
Statement (including payment, as incurred, of legal fees and expenses in
connection with any Claim or Proceeding or any investigation by the Company in
respect thereof).
(g) The Company shall indemnify the Buyer and the Buyer Subsidiary,
their directors, their officers and any Person that controls the Buyer or the
Buyer Subsidiary within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act for, and hold them harmless from and against, any
and all Liabilities and Losses arising out of any misstatement of a material
fact in the Information Statement or omission 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 to the extent that
such misstatement or omission is based on information which was not provided by
the Buyer or the Buyer Subsidiary for inclusion in the Information Statement
(including payment, as incurred, of legal fees and expenses in connection with
any Claim or Proceeding or any investigation by the Buyer or the Buyer
Subsidiary in respect thereof).
SECTION 6.5. LETTER OF TRANSMITTAL. The Information Statement shall
be accompanied by a letter of transmittal (with instructions for its use), in a
form to be prepared by the Company and acceptable to the Buyer and the Exchange
Agent (which acceptance shall not be unreasonably withheld or delayed), for
holders of record of shares of Common Stock and other outstanding Equity
Interests in the Company to use in surrendering their shares of Common Stock,
exercising their Equity Interests (other than shares of Common Stock) or their
dissenters' appraisal rights, or selling (as contemplated by Section 2.7(g))
such Equity Interests in connection with the Merger (the "Letter of
Transmittal"). The Letter of Transmittal shall include a customary release by
each such holder of any Claims against the Parties and the Subsidiaries that
such holder has or may have in its capacity as such a holder, including Claims
with respect to the allocation of the Merger Consideration among such holders,
except for claims to receive the Per Share Merger Consideration in accordance
with the terms of this Agreement and claims in respect of duly exercised
dissenters' appraisal rights that are not subsequently withdrawn or lost.
Surrender of such shares and Equity Interests pursuant to the Letter of
Transmittal prior to the Effective Time shall be contingent upon the
consummation of the transactions set forth in the Information Statement on
substantially the same terms as set forth in the Information Statement and this
Agreement.
SECTION 6.6. NO SOLICITATION; OTHER OFFERS.
69
(a) Subject to Section 6.6(b), the Company shall not, and shall not
authorize or permit any of the Subsidiaries or any of its or their
Representatives to, directly or indirectly, (i) solicit, initiate, knowingly
facilitate or knowingly encourage the submission of an Acquisition Proposal from
a Person or Group (other than the Buyer, the Buyer Subsidiary or any of their
Affiliates), (ii) engage or participate in discussions or negotiations with,
furnish non-public information relating to the Company or any Subsidiary to, or
provide access to the non-public Company Business Records to any Person or Group
(other than the Buyer, the Buyer Subsidiary or any of their Affiliates) that has
submitted, or has informed the Company that it is seeking to submit, an
Acquisition Proposal, (iii) enter into a Contract or letter of intent (except
for a confidentiality agreement described in Section 6.6(b)) with any Person or
Group (other than the Buyer, the Buyer Subsidiary or any of their Affiliates)
that has submitted, or has informed the Company that it is seeking to submit, an
Acquisition Proposal (A) with respect to an Acquisition Proposal or (B)
requiring it to abandon, terminate or fail to consummate the Merger or any of
the other transactions contemplated hereby. The Company, the Subsidiaries and
their Representatives will immediately cease any and all activities, discussions
or negotiations with any Third Parties conducted heretofore with respect to any
Acquisition Proposal.
As promptly as practicable (but in no event more than 48 hours) after receipt of
any Acquisition Proposal or any request for nonpublic information or inquiry
which it reasonably believes would lead to an Acquisition Proposal, the Company
shall provide Buyer oral and written notice of the material terms and conditions
of such Acquisition Proposal, request or inquiry, and the identity of the Person
or Group making any such Acquisition Proposal, request or inquiry and a copy of
all written materials provided in connection with such Acquisition Proposal,
request or inquiry.
(b) Notwithstanding anything contained herein to the contrary, the
Company (through one or more of its Representatives) or the Board of Directors
of the Company may, prior to the Company Stockholder Approval, but only to the
extent that the Company has not breached its obligations under clause (i) of
Section 6.6(a), (i) engage or participate in discussions or negotiations with
any Person or Group (or with the Representatives of any Third Party) that has
submitted, or has informed the Company that it is seeking to submit, an
Acquisition Proposal that was not solicited in violation of Section 6.6(a) and
constitutes or could reasonably be expected to lead to a Superior Proposal
(which Person or Group is called a "Qualified Third Party"), (ii) furnish
non-public information relating to the Company or any Subsidiary and provide
access to the Company Business Records and the Real Property to any Qualified
Third Party or its Representatives pursuant to an executed confidentiality
agreement containing customary nondisclosure provisions, (iii) withdraw the
Company Board Recommendation or modify the Company Board Recommendation in any
manner (including a manner adverse to the Buyer and the Buyer Subsidiary), (iv)
take any action in respect of the matters described in Section 9.2 which the
Company or the Board of Directors of the Company in good faith determines is
necessary or appropriate so that the Company would have the right to terminate
this Agreement in accordance with Sections 9.1(j) and 9.2, (v) terminate this
Agreement pursuant and subject to Section 9.1(j), (vi) take any action that any
court of competent jurisdiction orders the Company, one or more of the
Representatives of the Company or the Board of Directors of the Company to take,
(vii) take any action in respect of the Information Statement, the Company
Stockholder Approval or the other matters described in this Article 6 which the
Company or the Board of Directors of the Company in good faith determines is
necessary or appropriate by reason of the occurrence of any action described in
the preceding clause (iii), (iv), (v) or (vi), or
70
(viii) engage in any combination of activities described in the preceding
clauses of this sentence; provided, however, that the Company and the Board of
Directors of the Company shall not, and shall not authorize or permit their
Representatives to, take any action described in the preceding clause (iii) or
(v) unless the Board of Directors of the Company in good faith determines by a
majority vote, after consultation with outside legal counsel, that failure to
take such action would be reasonably likely to result in a breach of its
fiduciary duties under applicable Law.
SECTION 6.7. FULFILLMENT OF CONDITIONS. Subject to Section 6.6, each
Party shall use all commercially reasonable efforts to fulfill or cause to be
fulfilled the conditions set forth in Article 7.
SECTION 6.8. NOTICE OF DEVELOPMENTS.
(a) Solely for purposes of determining whether the Buyer or the
Buyer Subsidiary is entitled to monetary contractual damages as a result of a
breach of any representation or warranty of the Company set forth in Article 5
of this Agreement, if at any time prior to the Closing the Company becomes aware
of any information resulting from or related to facts, circumstances or
developments that occur after the date hereof ("Subsequent Events"), which
should be added to, deducted from or otherwise reflected in a change to, any
disclosure previously made in this Agreement or any Schedule in order that any
such representation or warranty of the Company shall not be inaccurate or
incomplete, the Company shall have the right to give prompt written notice to
Buyer of such Subsequent Events, and may amend any Schedule to make such
addition, deletion or change, provided that such notice must specifically
reference this Section 6.8 and must clearly identify the Subsequent Event and
representation or warranty so amended. A notice given pursuant to this Section
6.8 shall be deemed to have amended the applicable representations and
warranties of the Company contained in this Agreement and the Schedules as of
the date such notice is provided to the Buyer. The failure to have reflected the
facts, circumstances or developments constituting the Subsequent Event at the
time of execution of this Agreement shall not be deemed to have constituted a
breach of any such representation or warranty when originally made and the
Company shall have no Liability to the Buyer or the Buyer Subsidiary for
monetary contractual damages with respect thereto. Notwithstanding the
foregoing, nothing in this Section 6.8 or otherwise shall permit the Company to
update any of its representations and warranties (or any related Schedule)
contained in this Agreement after the date hereof for purposes of curing any
failure of a closing condition or curing any termination right that has arisen
as a result of a breach of the Company's representations and warranties
contained in this Agreement.
(b) The Company shall give prompt written notice to the Buyer of the
occurrence of any development known to it that has had or is reasonably expected
to have a Material Adverse Effect or has caused or is reasonably expected to
cause a failure to satisfy any of the conditions set forth in Article 7.
(c) The Buyer shall give prompt written notice to the Company of the
occurrence of any development known to it or its Representatives that has had or
is reasonably expected to have a Material Adverse Effect or has caused or is
reasonably expected to cause a failure to satisfy any of the conditions set
forth in Article 7.
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SECTION 6.9. TERMINATION OF CREDIT FACILITY.
(a) The Company shall terminate the Loan and Security Agreement
dated March 28, 2002 by and among the Company, certain subsidiaries, the
financial institutions party thereto and GMAC Commercial Finance LLC, as agent
for the lenders (the "Credit Facility") prior to or as of the Closing. All
required fees or penalties in connection therewith shall be included in the
calculation of the Closing Adjustment as provided in the definition therein.
(b) The Company shall use commercially reasonable efforts to obtain
from GMAC Commercial Finance LLC full and unconditional releases of all Liens of
the lenders under the Credit Facility together with all forms and other
documents necessary to appropriately update any public record with respect to
such releases.
SECTION 6.10. FURTHER ASSURANCES. Each of the Parties shall, and
shall cause its Affiliates to, at the request of any other Party, cooperate with
such other Party by furnishing additional information, executing and delivering
additional documents and instruments and undertaking such additional actions as
may be reasonably required by such other Party or its counsel to consummate the
transactions contemplated by this Agreement, including using all commercially
reasonable efforts to obtain all Permits, Consents and Orders of Governmental
Authorities and all Consents of parties to Contracts with the Company or a
Subsidiary which may be necessary or appropriate for the consummation of the
Merger and the other transactions contemplated by this Agreement, to avoid
termination or cancellation of such Contracts, to avoid suspension or loss of
authorizations under Permits held by the Company or any Subsidiary and to
fulfill the conditions set forth in Article 7.
SECTION 6.11. TERMINATION ON CLOSING. The obligations of the Parties
under this Article 6 (other than under the last and second from the last
sentences of Section 6.2(e)) shall terminate upon consummation of the Closing.
SECTION 6.12. 2005 AUDITED FINANCIAL STATEMENTS. The Company shall
use its commercially reasonable best efforts to prepare and cause the
Accountants to audit and deliver an unqualified report on the 2005 Audited
Financial Statements as promptly as reasonably practicable. The Buyer recognizes
that the 2005 Audited Financial Statements will reflect the divestitures of CRS,
EMS and International IVS and the sale of the EMS Adjacent Property in
accordance with GAAP and agrees that differences between the 2005 Audited
Financial Statements and the financial statements set forth on Schedule 6.12 by
reason of the fact that the financial statements set forth on Schedule 6.12 may
have been adjusted to include or exclude as appropriate financial information
related to CRS, EMS, International IVS or the EMS Adjacent Property or may have
reflected anticipated costs or savings expected to result from such divestitures
or the related restructurings, shall not constitute a Material Adverse Effect.
It is agreed and understood that the adjustments expected to result from such
divestitures and restructurings and which will not be reflected in the 2005
Audited Financial Statements are (a) an approximately $7.0 million expense run
rate reduction adjustment and (b) an approximately $1.0 million of positive
EBITDA related to the divestiture of International IVS. Additionally, it is
agreed and understood that any adjustment which may result from the audit of the
Company's 2005 Financial Statements related to the portion of software
development costs that are capitalized in accordance with GAAP, will not be
considered as a material change.
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SECTION 6.13. CORPORATE HEADQUARTERS LEASE. Notwithstanding anything
to the contrary in Section 6.2, the Company shall, in cooperation with the Buyer
and at its direction, provide the termination notice permitted by the Real
Property Lease for the Company's corporate headquarters and shall use
commercially reasonable efforts to obtain a short-term extension of such Real
Property Lease and, if unsuccessful in obtaining such extension despite using
such commercially reasonable efforts, shall hold over and thereby effect a
month-to-month tenancy of the office space covered thereby. Failure to obtain
any such extension despite using commercially reasonable efforts to obtain the
same, and any summary process action commenced by the landlord as a result of
holding over, shall not constitute a failure to satisfy any condition under
Article 7. The Company and the Buyer shall discuss in good faith a reasonable
course of action (taking into account the perspectives of both the Company and
the Buyer) to ensure that the Company will have headquarters office space
meeting its needs and to avoid material disruption or Loss with respect to the
Business or the Employees in the event of an unexpected delay in the Closing
beyond April 1, 2006 or the failure of the Buyer to give timely direction. If
the Company and the Buyer cannot agree as to a course of action, the Company may
take commercially reasonable action as it may consider necessary to satisfy such
needs. Buyer agrees to reimburse the Company for all reasonable costs incurred
by the Company prior to March 1, 2006 with respect to any such actions (other
than all termination or other fees payable to the landlord under such Real
Property Lease because such termination notice is given). All amounts which the
Buyer is obligated to reimburse to the Company hereunder which have not been so
reimbursed prior to March 1, 2006 will be included in the calculation of the
Closing Adjustment as provided therein.
SECTION 6.14. SUBSIDIARY CAPITAL STOCK. The Company will use
commercially reasonable efforts so that at the Effective Time, the Company
directly or indirectly owns 100% of the issued and outstanding capital stock of
and other Equity Interests in each of the Subsidiaries, including Phoenix
International Limited and Phoenix Company Limited; provided, however, that the
failure to so own 100% of the issued and outstanding capital stock and equity
interests of the Subsidiaries shall not constitute a failure to satisfy any
condition under Article 7.
ARTICLE 7
CONDITIONS TO CLOSING
SECTION 7.1. CONDITIONS OF THE BUYER AND THE BUYER SUBSIDIARY TO
CLOSING. The obligations of the Buyer and the Buyer Subsidiary to consummate the
transactions contemplated hereby are, unless waived by the Buyer, subject to the
fulfillment, at or before the Closing, of each of the following conditions:
(a) the Company Stockholder Approval shall have been received within
10 days after the date hereof;
(b) the period during which such holders shall have the right to
exercise dissenters' appraisal rights under applicable Law (the "Dissenters'
Rights Period") shall have expired and such rights shall not have been exercised
by holders of more than 10% of the shares of Common Stock issued and outstanding
on the date hereof;
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(c) the 2005 Audited Financial Statements shall have been delivered
to the Buyer and shall comply with Section 5.7(c) in all respects;
(d) no Governmental Authority or Judicial Authority having
jurisdiction over the Company, the Buyer or the Buyer Subsidiary shall have
enacted, issued, promulgated, enforced or entered any Law or Order (whether
temporary, preliminary or permanent) which is then in effect and which has the
effect of making the Merger illegal or otherwise prohibiting consummation of the
Merger substantially on the terms contemplated by this Agreement;
(e) the applicable waiting period under the HSR Act, including all
extensions thereof, shall have expired or been terminated;
(f) the applicable waiting period under the competition law of
jurisdictions where the Parties filed notifications, if any, pursuant to Section
6.3(a) shall have expired or been terminated;
(g) except for such changes as may be required pursuant to the terms
hereof, the representations and warranties of the Company set forth in Article 5
(disregarding all qualifications and exceptions contained therein relating to
materiality or Material Adverse Effect) shall be true and correct on and as of
the Closing as though such representations and warranties were made on and as of
the Closing (except for representations and warranties that are made as of a
date specified therein, which representations and warranties shall be true and
correct as of such date), except where the failure of such representations or
warranties to be true and correct has not resulted in, and would not reasonably
be expected to result in, individually or in the aggregate with other such
failures to be true and correct, a Material Adverse Effect (it being understood
and agreed that, solely for purposes of determining whether this condition has
been satisfied with respect to the representation and warranty set forth in
Section 5.17(k) as of the Closing Date, Material Adverse Effect shall be deemed
to mean a Material Adverse Effect on the Surviving Corporation and its
Affiliates, taken as a whole, rather than the Company and the Subsidiaries,
taken as a whole);
(h) the Company shall have performed and complied in all material
respects with all covenants and agreements set forth in this Agreement required
to be performed or complied with by the Company prior to or concurrently with
the Closing;
(i) the Buyer and the Buyer Subsidiary shall have received the
Closing Documents required to be delivered to them by the Company at or before
the Closing pursuant to this Agreement duly executed by all necessary Persons
(other than the Buyer, the Buyer Subsidiary and their respective Affiliates);
(j) no development or condition affecting the Business, the Company,
the Subsidiaries or their assets or employees (excluding a development or
condition previously disclosed in this Agreement, in Schedule 7.1 or in any of
the other Schedules) that has had or is reasonably expected to have a Material
Adverse Effect shall have occurred after the date hereof and be continuing; and
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(k) the Company shall have delivered to the Buyer a certificate of a
senior executive officer of the Company to the effect that each of the
conditions specified in clauses (a), (g), (h) and (j) of this Section 7.1 has
been satisfied in all respects.
SECTION 7.2. CONDITIONS OF THE COMPANY TO CLOSING. The obligations
of the Company to consummate the transactions contemplated hereby are, unless
waived by the Board of Directors of the Company, subject to the fulfillment, at
or before the Closing, of each of the following conditions:
(a) the Company Stockholder Approval shall have been received;
(b) the Dissenters' Rights Period shall have expired;
(c) no Governmental Authority or Judicial Authority having
jurisdiction over the Company, the Buyer or the Buyer Subsidiary shall have
enacted, issued, promulgated, enforced or entered any Law or Order (whether
temporary, preliminary or permanent) which is then in effect and which has the
effect of making the Merger illegal or otherwise prohibiting consummation of the
Merger substantially on the terms contemplated by this Agreement;
(d) the applicable waiting period under the HSR Act, including all
extensions thereof, shall have expired or been terminated;
(e) the applicable waiting period under the competition law of
jurisdictions where the Parties filed notifications, if any, pursuant to Section
6.3(a) shall have expired or been terminated;
(f) except for such changes as may be required pursuant to the terms
hereof, the representations and warranties of the Buyer and the Buyer Subsidiary
set forth in Article 4 (disregarding all qualifications and exceptions contained
therein relating to materiality or Buyer Material Adverse Effect) shall be true
and correct on and as of the Closing as though such representations and
warranties were made on and as of the Closing (except for representations and
warranties that are made as of a date specified therein, which representations
and warranties shall be true and correct as of such date), except where the
failure of such representations or warranties to be true and correct has not
resulted in, and would not reasonably be expected to result in, individually or
in the aggregate with other such failures to be true and correct, a Buyer
Material Adverse Effect;
(g) the Buyer and the Buyer Subsidiary shall have performed and
complied in all material respects with all covenants and agreements set forth in
this Agreement required to be performed or complied with by the Buyer and the
Buyer Subsidiary prior to or concurrently with the Closing;
(h) the Company shall have received the Closing Documents required
to be delivered to the Company by the Buyer and the Buyer Subsidiary at or
before the Closing pursuant to this Agreement duly executed by all necessary
Persons (other than the Company and its Affiliates);
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(i) the Buyer and the Buyer Subsidiary shall have delivered to the
Company a certificate signed by a senior executive officer of each of the Buyer
and the Buyer Subsidiary to the effect that each of the conditions specified in
the clauses (g) and (h) of this Section 7.2 has been satisfied in all respects;
and
(j) the Buyer shall have delivered or caused to be delivered to the
Exchange Agent pursuant to the Exchange Agency Agreement the Buyer Payment and
the Additional Closing Payment.
ARTICLE 8
ADDITIONAL COVENANTS
SECTION 8.1. WARN.
(a) The Company shall timely provide any notice to employees of the
Company or any Subsidiary which may be required pursuant to WARN for any
"employment loss" (as defined in WARN) and any similar notice under any similar
applicable Law, in connection with the consummation of the Merger and the other
transactions contemplated hereby that occurs prior to or on the Closing. None of
the severance, termination or other costs arising by reason of the giving of
such notice shall be deducted in calculating the Closing Adjustment.
(b) The Surviving Corporation shall timely provide, and shall be
solely responsible for providing, any notice to employees of the Company or any
Subsidiary and for providing notice to any unit of government which may be
required pursuant to WARN for any "employment loss" and any similar notice under
any similar applicable Law that occurs after the Closing.
SECTION 8.2. PRESERVATION OF RECORDS.
(a) After the Closing, the Surviving Corporation shall, and shall
cause the Subsidiaries to, (a) preserve all Company Business Records which
relate to the Company, a Subsidiary or the business or affairs of the Company or
a Subsidiary as of or prior to the Closing Date for (i) a period of six years
after the Closing Date and (ii) for such longer period as may be required (A) by
any Contract, Law, Permit or Order or (B) in connection with any then pending or
threatened Claim or Proceeding.
(b) At any time and from time to time after the Closing, upon
reasonable request, the Surviving Company shall, and shall cause the
Subsidiaries to, (a) provide full access to such Company Business Records by
then current or former directors or executive officers of the Company (and
Representatives of such directors and officers) for purposes of investigation,
prosecution or defense of any Claim or Proceeding and (b) make their
Representatives available to them for such purposes, in each case at no charge
to them.
SECTION 8.3. INSURANCE AND INDEMNIFICATION.
(a) All rights to indemnification, advancement of expenses and
exculpation with respect to actions or omissions occurring prior to the
Effective Time benefiting (i) current
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or former directors or officers of the Company or individuals serving at the
request of the Company as a current or former Representative of another Person
or (ii) individuals who after the date hereof and prior to the Effective Time
become directors or officers of the Company or begin to serve at the request of
the Company as Representatives of another Person (collectively, the "Company
Indemnified Persons"), as provided by the Organizational Documents of the
Company (as in effect on the date hereof) or as provided by any Contract to
which the Company is party (as in effect on the date hereof) and which is set
forth in Schedule 5.13 or any replacement Contract that is substantially similar
thereto (collectively, the "Company Indemnification Obligations"), shall survive
the Merger and the consummation of the other transactions contemplated hereby.
(b) Without limiting the generality or the effect of Section 8.3(a),
after the Effective Time, the Surviving Corporation shall, and shall cause its
Affiliates to, advance expenses to the Company Indemnified Persons, indemnify
the Company Indemnified Persons and hold the Company Indemnified Persons
harmless to the fullest extent permitted or required by the Company
Indemnification Obligations and the DGCL.
(c) From the Effective Time until the sixth anniversary of the
Effective Time, the Surviving Corporation shall, and shall cause its Affiliates
to, maintain in full force and effect, for the benefit of the Company
Indemnified Persons, with respect to actions and omissions occurring prior to or
as of the Effective Time, one or more policies of directors' and officers'
liability insurance that provide for coverage in an amount and with a scope no
less favorable to the Company Indemnified Persons than the policies of
directors' and officers' liability insurance which are maintained by the Company
as of the date hereof and are set forth on Schedule 5.28 (the "Existing
Coverage"); provided, however, that the Buyer may fulfill its obligation under
this Section 8.3(c) by purchasing, for an aggregate price not to exceed 225% of
the premium paid by the Company for the Existing Coverage for 2005 (the "Cap
Amount"), directors' and officers' liability tail coverage in an amount and with
a scope at least equal to the Existing Coverage (the "Tail Coverage"); provided
further, however, that if the amount or scope of the Tail Coverage obtainable
for the Cap Amount is less than those of the Existing Coverage, the Buyer shall
only be obligated to purchase so much of the Tail Coverage as may be purchased
for the Cap Amount. The Company shall have the right to purchase the Tail
Coverage prior to Closing (effective as of the Closing); provided, that (i) the
Company shall have given written notice to the Buyer of its intention to do so
and (ii) the Company shall have requested the Buyer's written consent thereto
(which shall not be unreasonably withheld). If the Company purchases the Tail
Coverage prior to March 1, 2006, the Buyer will reimburse the Company for the
cost thereof to the extent such cost does not exceed the Cap Amount. All amounts
which the Buyer is obligated to reimburse to the Company pursuant to the
immediately preceding sentence which have not been so reimbursed prior to March
1, 2006 will be included in the calculation of the Closing Adjustment as
provided therein. If the Company purchases the Tail Coverage on or after March
1, 2006 any premium in excess of the Cap Amount shall constitute Company
Transaction Expenses for purposes of the calculation of the Closing Adjustment.
(d) If the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges into one or more other Persons and shall not be
the continuing or surviving corporation or other entity of such consolidation or
merger or (ii) sells or transfers a majority of its assets to one or more other
Persons (other than in the Ordinary Course), then, in
77
each such case and as a condition precedent to the consummation thereof, proper
provision shall be made so that each such successor and assign shall assume the
obligations set forth in this Section 8.3.
(e) The rights of each Company Indemnified Person under this Section
8.3 shall be in addition to any other rights that such Company Indemnified
Person may have under the Organizational Documents of the Company or any
Subsidiary, under the DGCL or any other applicable Law, under any Contract, or
otherwise.
SECTION 8.4. PAYMENT OF CREDITORS. After the Effective Time, the
Buyer shall use commercially reasonably efforts to pay or discharge debts and
obligations of the Company as of the Effective Time when due, and not to render
the Surviving Corporation insolvent or unable to pay its debts as they come due.
ARTICLE 9
TERMINATION; SURVIVAL OF AGREEMENT
SECTION 9.1. TERMINATION. Notwithstanding anything contained herein
to the contrary, this Agreement may be terminated:
(a) at any time prior to the Effective Time, by mutual written
agreement of the Company and the Buyer;
(b) by either the Company or the Buyer if a Governmental Authority
or Judicial Authority having jurisdiction over the Company, the Buyer or the
Buyer Subsidiary shall have enacted, issued, promulgated, enforced or entered
any Law or Order, which Law or Order is final and non-appealable and which had
the effect of making the Merger illegal or otherwise prohibiting consummation of
the Merger substantially on the terms contemplated by this Agreement;
(c) by the Buyer if the Company Stockholder Approval shall not have
been obtained within 10 days after the date hereof; provided, however, that the
right to terminate this Agreement under this Section 9.1(c) shall not be
available to the Buyer where the failure to obtain the Company Stockholder
Approval shall have been caused by the action or failure to act of the Buyer and
such action or failure to act constitutes a material breach by the Buyer of this
Agreement;
(d) at any time after July 31, 2006 (the "Termination Date") and
prior to the Effective Time, by the Buyer if (i) the Closing shall not have been
consummated on or before the Termination Date and (ii) the failure to consummate
the Closing on or before the Termination Date did not result from the failure by
the Buyer or the Buyer Subsidiary to perform or comply with any covenant or
agreement contained in this Agreement required to be performed or complied with
prior to the Closing by the Buyer or the Buyer Subsidiary;
(e) at any time after the Termination Date and prior to the
Effective Time, by the Company, if (i) the Closing shall not have been
consummated on or before the Termination Date and (ii) the failure to consummate
the Closing on or before the Termination Date did not
78
result from the failure by the Company to perform or comply with any covenant or
agreement contained in this Agreement required to be performed or complied with
prior to the Closing by the Company;
(f) at any time prior to the Effective Time, by the Buyer, if the
Company shall have breached in any material respect any of the representations,
warranties, covenants or agreements of the Company contained in this Agreement
or if any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Sections 7.1(g) and 7.1(h)
would not be satisfied as of the time of such breach or as of the time such
representations and warranties shall have become untrue and, in each case, if
such breach cannot be or has not been cured by the Company, in all material
respects, prior to the earlier of the date that is 30 days after written notice
thereof shall have been given to the Company or the Termination Date;
(g) at any time prior to the Effective Time, by the Company, if the
Buyer or the Buyer Subsidiary shall have breached in any material respect any of
the representations, warranties, covenants or agreements of the Buyer or the
Buyer Subsidiary contained in this Agreement or if any representation or
warranty of the Buyer or the Buyer Subsidiary shall have become untrue, in
either case such that the conditions set forth in Sections 7.2(f) and 7.2(g)
would not be satisfied as of the time of such breach or as of the time such
representations and warranties shall have become untrue and, in each case, if
such breach cannot be or has not been cured by the Buyer or the Buyer
Subsidiary, in all material respects, prior to the earlier of the date that is
30 days after written notice thereof shall have been given to the Buyer and the
Buyer Subsidiary or the Termination Date;
(h) at any time prior to the Effective Time, by the Buyer, if the
Company or any "significant subsidiary" of the Company, within the meaning of
Regulation S-X adopted under the Exchange Act, shall be or become bankrupt or
insolvent (in each case, however defined) or if the Company or any such
"significant subsidiary" commences or there is commenced against the Company or
any such "significant subsidiary" a case under the United States Bankruptcy
Code;
(i) at any time prior to the Effective Time, by the Company, if the
Buyer or the Buyer Subsidiary shall be or become bankrupt or insolvent (in each
case, however defined) or if the Buyer or the Buyer Subsidiary commences or
there is commenced against the Buyer or the Buyer Subsidiary a case under the
United States Bankruptcy Code;
(j) at any time prior to receipt of the Company Stockholder
Approval, subject to Section 9.2, by the Company, if the Board of Directors of
the Company authorizes the Company to accept or enter into a Qualified Superior
Contract; or
(k) by the Buyer or the Buyer Subsidiary, if a Material Adverse
Effect shall have occurred and be continuing since the date hereof, if such
Material Adverse Effect cannot be or has not been cured by the Company prior to
the earlier of the date that is 30 days after written notice thereof shall have
been given to the Company or the Termination Date.
SECTION 9.2. SUPERIOR PROPOSAL.
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(a) The Company shall not have the right to terminate this Agreement
pursuant to Section 9.1(j) unless (i) the Company shall have paid or provided
for payment of any amounts owed by it to the Buyer pursuant to Section 9.3(g),
(ii) the Company shall have given written notice to the Buyer, at least three
Business Days prior to such termination, of its intention to terminate this
Agreement pursuant to Section 9.1(j), accompanied by a copy of the Qualified
Superior Contract, and (iii) either (A) the Buyer shall have failed, prior to
the expiration of such three Business Days, to submit to the Board of Directors
of the Company a complete binding Contract with respect to a Buyer Acquisition
Proposal executed on behalf of the Buyer (together with all exhibits, schedules
and other attachments thereto) that (1) shall be subject only to acceptance by
the Company by countersignature on behalf of the Company and (2) contains no
conditions (other than the condition that this Agreement be terminated and the
conditions set forth in Section 7.1 that shall not then have been satisfied or
waived) or (B) the Buyer shall have submitted such a Contract within such three
Business Days, but the Board of Directors of the Company in good faith shall
have determined, after consultation with its financial advisors, that such
Contract is not at least as favorable to the holders of outstanding shares of
Common Stock as the Qualified Superior Contract.
(b) The Company shall not enter into any Qualified Superior Contract
prior to the expiration of the three Business Days set forth in Section 9.2(a).
SECTION 9.3. EFFECT OF TERMINATION.
(a) If this Agreement is terminated pursuant to Section 9.1(a), this
Agreement, except for the provisions of this Sections 9.3, 6.4(e) and Articles 1
and 10, shall become null and void and have no further force or effect and none
of the Parties nor any of their respective Affiliates or Representatives shall
have any Liability in respect of such termination.
(b) If this Agreement is terminated pursuant to Sections 9.1(b),
9.1(d), 9.1(f) or 9.1(k) this Agreement, except for the provisions of this
Section 9.3, Sections 6.4(f) and 6.4(g) and Articles 1 and 10, shall become null
and void and have no further force or effect and none of the Parties nor any of
their respective Affiliates or Representatives shall have any Liability in
respect of such termination, except that, if the Company shall have breached
this Agreement prior to such termination, the Company shall be liable, subject
to Section 9.3(g), for all damages incurred by the Buyer and the Buyer
Subsidiary by reason of such breach.
(c) If this Agreement is terminated pursuant to Sections 9.1(b),
9.1(c), 9.1(e) or 9.1(g), this Agreement, except for the provisions of this
Section 9.3, Sections 6.4(f) and 6.4(g) and Articles 1 and 10, shall become null
and void and have no further force or effect and none of the Parties nor any of
their respective Affiliates or Representatives shall have any Liability in
respect of such termination, except that, if the Buyer or the Buyer Subsidiary
shall have breached this Agreement prior to such termination, the Buyer and the
Buyer Subsidiary shall be, jointly and severally, liable, subject to Section
9.3(g), for all damages incurred by the Company and its stockholders by reason
of such breach.
(d) If this Agreement is terminated pursuant to Section 9.1(h), this
Agreement, except for the provisions of this Section 9.3 and Articles 1 and 10,
shall cease to be binding on or enforceable against the Buyer and the Buyer
Subsidiary, and the Company shall be
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liable, subject to Section 9.3(g), for all damages incurred by the Buyer or the
Buyer Subsidiary by reason of such bankruptcy or insolvency and the
non-performance or termination of this Agreement.
(e) If this Agreement is terminated pursuant to Section 9.1(i), this
Agreement, except for the provisions of this Section 9.3 and Articles 1 and 10,
shall cease to be binding on or enforceable against the Company, and the Buyer
and the Buyer Subsidiary shall be liable, jointly and severally, subject to
Section 9.3(g), for all damages incurred by the Company by reason of such
bankruptcy or insolvency and the non-performance or termination of this
Agreement.
(f) If this Agreement is terminated pursuant to Section 9.1(j), this
Agreement, except for the provisions of this Section 9.3, Sections 6.4(f) and
6.4(g) and Articles 1 and 10, shall become null and void and have no further
force or effect, and none of the Parties nor any of their respective Affiliates
or Representatives shall have any Liability in respect of such termination,
except that the Company shall pay to the Buyer the Company Termination Fee.
(g) Payment of the Company Termination Fee shall be made within 3
Business Days following the later of the date of termination of this Agreement
or the date on which the Buyer shall have given written notice to the Company of
the instructions necessary for payment. Payment shall be made by wire transfer
of immediately available funds in accordance with written instructions given by
the Buyer to the Company for that purpose. The Parties agree that the Company
Termination Fee constitutes liquidated damages and not penalties. Each Party
acknowledges that the agreements contained in this Section 9.3 are an integral
part of the transactions contemplated hereby and that, without such agreements,
they would not enter into this Agreement. If a Party fails to pay any amount due
under this Section 9.3 when due, such Party shall pay the costs and expenses
(including reasonable legal fees and expenses) incurred by the other Parties in
connection with any action taken to collect payment (including the prosecution
of any Proceeding), together with interest on the amount of any unpaid fee at
the publicly announced prime rate of Citibank, N.A. in New York City from the
date such amount was first due to the date it is paid.
(h) Except as provided in the last sentence of Section 9.3(g) and
except for fraud, in no event will the aggregate liability of the Company, on
the one hand, or the aggregate liability of the Buyer and the Buyer Subsidiary,
on the other hand, for monetary damages for breach of their respective
liabilities, duties and obligations under this Agreement exceed 20% of the Buyer
Payment.
(i) Notwithstanding anything contained herein to the contrary, the
reimbursement obligations under Sections 6.2(b), 6.3(a) and 6.13 shall survive
any termination of the Agreement and shall not be subject to Section 9.3(h).
ARTICLE 10
MISCELLANEOUS PROVISIONS
SECTION 10.1. PUBLICITY. Except to the extent necessary or
appropriate as in good faith determined by the Company to enable it to exercise
its rights and perform its obligations
81
under Sections 6.4, 6.5, 6.6 and 9.2 and subject to Section 10.3(c), each Party
agrees that it shall not and shall not permit its Affiliates or Representatives
to issue any publicity, release or announcement concerning the execution,
delivery, performance or termination of this Agreement, the provisions hereof or
the transactions contemplated hereby without the prior written consent of the
form and content of such publicity, release or announcement by the Company and
the Buyer; provided, however, that no such consent shall be required when such
publicity, release or announcement is required by any applicable Law or Order;
and, provided further, that, prior to issuing any publicity, release or
announcement without such prior written consent, the Party issuing or whose
Affiliates or Representatives is issuing such publicity, release or announcement
shall have given reasonable prior notice to the other Parties of such intended
issuance and shall have in good faith considered their comments thereon.
SECTION 10.2. [RESERVED.]
SECTION 10.3. COMPLIANCE WITH RESTRICTIVE COVENANTS.
(a) The Buyer and the Buyer Subsidiary, on the one hand, and the
Company, on the other hand, acknowledge that money damages and other damages at
law for a breach or threatened breach of Section 10.1 (collectively, the
"Restrictive Covenants") by it or any of its Affiliates or Representatives is
unlikely to be calculable, that such a breach or threatened breach is likely to
cause irreparable harm to the other of them and that remedies at law are likely
to be inadequate and insufficient to protect the other of them against any such
actual or threatened breach. Accordingly, each Party, on behalf of itself and
its Representatives, agrees to the granting of specific performance, injunctive
relief and other equitable remedies in favor of each other Party in the event of
any such breach or threatened breach, without proof of actual damages and
without the requirement to post any bond or other security. Such performance,
relief and remedies shall not be the exclusive remedy for a breach or threatened
breach of the Restrictive Covenants by a Party or its Affiliates or
Representatives, but shall be in addition to all other rights and remedies
available at law, in equity or otherwise. If a court of competent jurisdiction
determines in a final, non-appealable order that the Restrictive Covenants have
been breached by a Party or its Affiliates or Representatives, the breaching
Party will or will cause its Affiliates or Representatives to reimburse the
injured Party for all costs and expenses (including reasonable legal fees and
expenses) incurred in connection with such litigation and all other litigation
related to such breach.
(b) At the request of a Party, a senior executive officer of each
other Party shall promptly deliver written certification to such Party to the
effect that it and its Affiliates and Representatives are in compliance with the
Restrictive Covenants, or, if not in such compliance, describing the nature of
such non-compliance; provided, however, that no such certification shall be
required more often than once within any twelve month period.
(c) Sections 10.1 shall not restrict a Party from exercising rights
or enforcing obligations hereunder pursuant to appropriate Proceedings. The
obligations of the Parties under Section 10.1 shall expire upon the earlier of
the Effective Time or the date that is two years after the date of the
termination of this Agreement.
82
(d) If, for any reason (including termination of this Agreement
pursuant to Article 9), the Closing does not take place, the Buyer and the Buyer
Subsidiary will, and will cause their Affiliates, their current and prospective
lenders, underwriters and placement agents and their Representatives, at their
expense, promptly to (i) return to the Company all written Information obtained
by any of them from the Company, any Subsidiary or any of the Representatives of
the Company or any Subsidiary in connection with the investigation and
evaluation of the transactions contemplated by, and the negotiation and
preparation of, this Agreement or any of the Closing Documents or the Related
Agreements or the consummation of such transactions, (ii) destroy all copies of
all electronic Information and all Analyses and (iii) furnish to the Company a
certificate signed by an appropriate authorized officer of the Buyer to the
effect that such return and destruction have been completed.
SECTION 10.4. NON-SURVIVAL AND LIMITATIONS AS TO REPRESENTATIONS AND
WARRANTIES.
(a) None of the representations or warranties contained in Article 4
or 5 or in any Closing Document shall survive the Effective Time. This Section
10.4(a) shall not limit any covenant or agreement of any Party which by its
terms contemplates performance after the Effective Time.
(b) Except as set forth in Article 5, no representations, warranties
or guarantees have been, are being or will be made by the Company, any
Subsidiary or any of their respective Representatives as to any past, current,
projected, forecasted or future quality, condition, defect, utility, character,
size, quantity, type, revenue, expense, liability, obligation, earning,
suitability, value or financial, tax, operating or other consequences of the
acquisition, ownership, leasing, use or disposition of the Company, any
Subsidiary or any of their assets, the ability of the Buyer or the Buyer
Subsidiary to obtain financing with respect to the Merger and the transactions
contemplated under this Agreement and any Related Agreement, the ability of the
Parties to consummate Closing or the employees of the Company or any Subsidiary
or as to the Confidential Memorandum or any information contained therein. THE
BUYER AND THE BUYER SUBSIDIARY, ON BEHALF OF THEMSELVES, THEIR RESPECTIVE EQUITY
OWNERS, LENDERS AND CREDITORS AND THEIR RESPECTIVE REPRESENTATIVES, HEREBY WAIVE
AND RELEASE ANY AND ALL RIGHTS OR CLAIMS WITH RESPECT TO SUCH MATTERS, EXCEPT
FOR THOSE ARISING UNDER ARTICLE 5. ALL REPRESENTATIONS, WARRANTIES OR GUARANTEES
IMPLIED OR OTHERWISE CREATED UNDER ANY APPLICABLE LAW, INCLUDING IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, ARE EXPRESSLY
DISCLAIMED.
(c) Except for the representations and warranties expressly set
forth in Article 5, the Buyer and the Buyer Subsidiary disclaim reliance upon
(i) any representations, warranties or guarantees (whether express or implied
and whether oral or written) by the Company, any Subsidiary or any of its
Affiliates or any of its or their Representatives (including any financial
projections and any statements regarding the prospects of the Company or any
Subsidiary) or (ii) any other information with respect to the Company or any
Subsidiary provided by or on behalf of any of them (including the Confidential
Memorandum). The Buyer and the Buyer Subsidiary
83
represent and warrant that each of them has relied on its own financial
projections in connection with the transactions contemplated hereby.
(d) Each Party agrees that the other Party has the right to rely
upon the representations, warranties, covenants and agreements of such Party
contained herein and in the Related Agreements.
SECTION 10.5. NOTICE. All notices and demands required or permitted
to be given pursuant to this Agreement shall be given in writing in the English
language, shall be transmitted by personal delivery, by a nationally recognized
courier service, by registered or certified mail, return receipt requested,
postage prepaid, or by telecopier and shall be addressed as follows:
When the Buyer or the Buyer Subsidiary is the intended recipient:
Nuance Communications, Inc.
0 Xxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: General Counsel
Telecopy Number: 000-000-0000
With a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, PC
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxxxxxx X. Xxxxxx, Esq.
Telecopy Number: 000-000-0000
and to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, PC
00 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Xxxx X. Xxxxx, Esq.
Telecopy Number: 000-000-0000
When the Company is the intended recipient:
Dictaphone Corporation
0000 Xxxxxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: General Counsel
Telecopy Number: 000-000-0000
84
With a copy to:
Xxxxxx Xxxx & Xxxxxx XXX
0 Xxxxxxxx Xxxxx
000 Xxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: X. Xxxxxxx Xxxxxx
Telecopy Number: 000-000-0000
A Party may designate a new address to which notices required or permitted to be
given pursuant to this Agreement shall thereafter be transmitted by giving
written notice to that effect to the other Parties. Each notice transmitted in
the manner described in this Section 10.5 shall be deemed to have been given,
received and become effective for all purposes at the time it shall have been
(a) delivered to the addressee as indicated by the affidavit of the messenger
(if transmitted by personal delivery), the receipt of the courier service (if
transmitted by courier service), the return receipt (if transmitted by mail) or
the answer back or call back (if transmitted by telecopier) or (b) presented for
delivery to the addressee as so indicated during normal business hours, if such
delivery shall have been refused for any reason.
SECTION 10.6. CERTAIN EXPENSES; CERTAIN FINANCING.
(a) Except as otherwise expressly provided herein, each Party agrees
to pay or cause its Affiliates to pay all expenses, fees and costs (including
legal, accounting and consulting expenses and, in the case of the Buyer,
expenses, fees and costs of current or prospective lenders) incurred by it or
its Affiliates in connection with the transactions contemplated hereby. The
obligation of the Company and the Subsidiaries to pay their expenses, fees and
costs shall survive the Closing, regardless of whether they are included in the
Company Transaction Expenses deducted in connection with the calculation of the
Closing Adjustment.
(b) At all times prior to the Effective Time, the Buyer and the
Buyer Subsidiary shall indemnify the Company, the Subsidiaries and the
stockholders, directors and officers of the Company and each of the Subsidiaries
for and hold them harmless from and against any and all Liabilities to owners,
investors, lenders, creditors, underwriters and placement agents, in respect of
any equity or debt financing obtained or to be obtained by the Buyer and the
Buyer Subsidiary in respect of the transactions contemplated hereby.
SECTION 10.7. GOVERNING LAW; FORUM; JURY TRIAL. THE VALIDITY,
INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED
BY THE LAWS OF THE STATE OF DELAWARE. Each Party agrees that any Proceeding
arising out of this Agreement or the breach or threatened breach of this
Agreement shall be commenced and prosecuted in a court in the State of Delaware.
Each Party consents and submits to the non-exclusive personal jurisdiction of
any court in the State of Delaware in respect of any such Proceeding. Each Party
consents to service of process upon it with respect to any such Proceeding by
registered mail, return receipt requested, and by any other means permitted by
applicable Laws. Each Party waives any objection that it may now or hereafter
have to the laying of venue of any such Proceeding in any court in the State of
Delaware and any Claim that it may now or hereafter have that any such
Proceeding in any court
85
in the State of Delaware has been brought in an inconvenient forum. EACH PARTY
WAIVES TRIAL BY JURY IN ANY SUCH PROCEEDING.
SECTION 10.8. BINDING EFFECT; ASSIGNMENT; THIRD PARTY BENEFICIARIES.
This Agreement shall be binding upon the Parties and their respective successors
and assigns and shall inure to the benefit of the Parties and their respective
successors and permitted assigns. Subject to Section 8.3, no Party shall assign
any of its rights or delegate any of its duties under this Agreement (by
operation of Law or otherwise) without the prior written consent of the Company
(in case of the Buyer or the Buyer Subsidiary) or of the Buyer (in case of the
Company). Any assignment of rights or delegation of duties under this Agreement
by a Party without the prior written consent of the other Parties, if such
consent is required hereby, shall be void. No such assignment or delegation
shall relieve the assignor or delegator of its obligations hereunder. No Person
(other than an individual described in Section 6.4(f), 6.4(g), 8.2 or 8.3(a) or
the Ancillary Matters Schedule) shall be, or be deemed to be, a third party
beneficiary of this Agreement. An individual described in Section 6.4(f),
6.4(g), 8.2 or 8.3(a) or the Ancillary Matters Schedule is intended to benefit
from and shall have the right, individually or collectively with other such
individuals, to directly exercise rights and enforce performance of obligations
under such Section or Schedule, respectively.
SECTION 10.9. ENTIRE AGREEMENT; CONFIDENTIALITY AGREEMENT.
(a) This Agreement, together with the Schedules (including the
Ancillary Matters Schedule and any other Schedules provided separately to the
Buyer and not attached to this Agreement), the Exhibits, the Confidentiality
Agreement and the Related Agreements, constitutes the entire agreement among the
Parties with respect to the subject matter hereof and cancels and supersedes all
of the previous or contemporaneous agreements, representations, warranties and
understandings (whether oral or written) by, between or among the Parties with
respect to the subject matter hereof.
(b) Each Party agrees and acknowledges that for all purposes under
this Agreement and the Confidentiality Agreement that (i) all covenants and
agreements of the parties to the Confidentiality Agreement thereunder shall
survive the Closing and the consummation of the transactions contemplated
hereby, (ii) the rights and obligations of the Buyer Subsidiary under the
Confidentiality Agreement shall be equivalent to the rights and obligations that
the Buyer has under the Confidentiality Agreement, as if the Buyer Subsidiary
were originally party to the Confidentiality Agreement alongside the Buyer and
(iii) the rights and obligations of the Company under the Confidentiality
Agreement shall be the same as if the Company had been a party to the
Confidentiality Agreement.
SECTION 10.10. AMENDMENTS. No addition to, and no cancellation,
renewal, extension, modification or amendment of, this Agreement shall be
binding upon a Party unless such addition, cancellation, renewal, extension,
modification or amendment is set forth in a written instrument which states that
it adds to, cancels, renews, extends, modifies or amends this Agreement and
which is executed and delivered on behalf of each Party by an officer of, or
attorney-in-fact for, such Party or, in the case of the Buyer Subsidiary, the
Buyer.
86
SECTION 10.11. WAIVERS. No waiver of any provision of this Agreement
shall be binding upon a Party, unless such waiver is expressly set forth in a
written instrument which is executed and delivered on behalf of the Company by
an officer of, or attorney-in-fact for, the Company (in the case of a waiver by
the Company) or the Buyer by an officer of, or attorney-in-fact for, the Buyer
(in the case of a waiver by the Buyer or the Buyer Subsidiary). Such waiver
shall be effective only to the extent specifically set forth in such written
instrument. Neither the exercise (from time to time and at any time) by a Party
of, nor the delay or failure (at any time or for any period of time) to
exercise, any right, power or remedy shall constitute a waiver of the right to
exercise, or impair, limit or restrict the exercise of, such right, power or
remedy or any other right, power or remedy at any time and from time to time
thereafter. No waiver of any right, power or remedy of a Party shall be deemed
to be a waiver of any other right, power or remedy of such Party or shall,
except to the extent so waived, impair, limit or restrict the exercise of such
right, power or remedy.
SECTION 10.12. REMEDIES. Except as limited by Section 9.3(h), the
rights, powers and remedies of a Party hereunder shall be in addition to, and
not in lieu of any other rights, powers or remedies, including specific
performance, injunctive relief and other equitable remedies, that may be
available to such Party, at law, in equity or otherwise, for a breach of or
default under this Agreement.
SECTION 10.13. HEADINGS; COUNTERPARTS; INTERPRETATION; SCHEDULES.
(a) The headings set forth herein have been inserted for convenience
of reference only, shall not be considered a part of this Agreement and shall
not limit, modify or affect in any way the meaning or interpretation of this
Agreement.
(b) This Agreement may be signed in any number of counterparts, each
of which (when executed and delivered) shall constitute an original instrument,
but all of which together shall constitute one and the same instrument. This
Agreement shall become effective and be deemed to have been executed and
delivered by all of the Parties at such time as counterparts shall have been
executed and delivered by each of the Parties, regardless of whether each of the
Parties has executed the same counterpart. It shall not be necessary when making
proof of this Agreement to account for any counterparts other than a sufficient
number of counterparts which, when taken together, contain signatures of all of
the Parties. Delivery of a counterpart by facsimile shall be as effective as
delivery of an original.
(c) All Parties have participated substantially in the negotiation
and drafting of this Agreement and no ambiguity herein shall be construed
against the draftsman. Nothing contained in this Agreement or in any of the
Schedules shall constitute or be interpreted or construed as an admission by any
Party or any of its Affiliates of liability to third parties, whether under any
Law, Contract or Permit, or otherwise, or as an admission that any Party or any
of its Affiliates are in violation or breach of or default under, or have ever
violated, breached or defaulted under, any Law, Contract or Permit.
(d) Disclosure made in any Schedule with reasonable clarity and
particularity as to matters covered, or required or contemplated to be covered,
in any other Schedule is hereby incorporated by reference into all such other
Schedules to the extent the relevance of such
87
disclosure to another Schedule is readily and plainly apparent on its face. The
Schedules and the information and disclosures contained in such Schedules are
intended only to qualify and limit the representations and warranties of the
Company contained herein and shall not be deemed to expand in any way the scope
of any such representation or warranty. The disclosure of any matter in the
Schedules does not constitute an acknowledgment that such matter is required to
be disclosed or is material within the meaning of the representations and
warranties contained herein, or otherwise. The inclusion of any information in
the Schedules shall not be deemed to be an admission or acknowledgment that such
information is material or outside the Ordinary Course and the omission of any
information from any Schedule or any representation or warranty shall not be
deemed to be a statement or acknowledgement that such information is not
material or is within the Ordinary Course. ACCORDINGLY, INVESTORS IN AND LENDERS
AND CREDITORS TO THE BUYER, THE BUYER SUBSIDIARY OR THE COMPANY SHOULD NOT RELY
ON ANY REPRESENTATIONS, WARRANTIES OR SCHEDULES FOR ANY PURPOSE.
SECTION 10.14. SEVERABILITY. If any provision of this Agreement
shall hereafter be held to be invalid, unenforceable or illegal, in whole or in
part, in any jurisdiction under any circumstances for any reason, (a) such
provision shall be reformed to the minimum extent necessary to cause such
provision to be valid, enforceable and legal while preserving the intent of the
Parties as expressed in, and the benefits to the Parties provided by, this
Agreement or (b) if such provision cannot be so reformed, such provision shall
be severed from this Agreement and an equitable adjustment shall be made to this
Agreement (including addition of necessary further provisions to this Agreement)
so as to give effect to the intent so expressed and the benefits so provided.
Such holding shall not affect or impair the validity, enforceability or legality
of such provision in any other jurisdiction or under any other circumstances.
Neither such holding nor such reformation nor severance shall affect or impair
the legality, validity or enforceability of any other provision of this
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Parties have duly executed and delivered
this Agreement as of the date first above written.
DICTAPHONE CORPORATION
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Chief Executive Officer
NUANCE COMMUNICATIONS, INC.
By: /s/ Xxxx X. Xxxxx
--------------------------------------
Name: Xxxx X. Xxxxx
Title: Chairman and Chief Executive Officer
PHOENIX MERGER SUB, INC.
By: /s/ Xxxx X. Xxxxx
--------------------------------------
Name: Xxxx X. Xxxxx
Title: Chairman and Chief Executive Officer
89
Exhibit A
90
Exhibit B
91
Exhibit C
92
Exhibit D
93
Exhibit E
94
Exhibit F
95
Exhibit G
96
Exhibit H
97
