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AGREEMENT AND PLAN OF MERGER
by and among
SYMANTEC CORPORATION,
NEBRASKA ACQUISITION SUB, INC.,
and
NEXLAND, INC.
Dated as of May 13, 2003
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TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS........................................................1
1.1 Defined Terms.....................................................1
1.2 Interpretation Provisions........................................12
ARTICLE 2. THE MERGER........................................................12
2.1 The Merger.......................................................12
2.2 Effective Time...................................................12
2.3 Effect of the Merger.............................................13
2.4 Certificate of Incorporation; Bylaws.............................13
2.5 Directors and Officers...........................................13
2.6 The Merger Consideration; Effect on Outstanding
Securities of the Company........................................13
2.7 Dissenting Shares................................................14
2.8 Exchange Procedures..............................................15
2.9 No Further Ownership Rights in Company Securities................15
2.10 Lost, Stolen or Destroyed Certificates...........................16
2.11 Taking of Necessary Action; Further Action.......................16
2.12 Tax Treatment....................................................16
2.13 Withholding......................................................16
2.14 Cancellation, Termination or Exercise of In-the-Money
Company Options..................................................16
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
MAJOR STOCKHOLDERS...........................................................17
3.1 Organization of the Company......................................17
3.2 Capitalization of the Company....................................17
3.3 Stockholders' Agreements, etc....................................18
3.4 Authorization....................................................18
3.5 Officers and Directors...........................................19
3.6 Bank Accounts....................................................19
3.7 Subsidiaries.....................................................19
3.8 Real Property....................................................19
3.9 Personal Property................................................20
3.10 Environmental Matters............................................21
3.11 Contracts........................................................22
3.12 No Conflict or Violation; Consents...............................24
3.13 Permits..........................................................24
3.14 SEC Reports; Financial Statements; Books and Records.............25
3.15 Absence of Certain Changes or Events.............................26
3.16 Liabilities......................................................28
3.17 Litigation.......................................................28
3.18 Labor Matters....................................................29
3.19 Employee Benefit Plans...........................................30
3.20 Transactions with Related Parties................................32
3.21 Compliance with Law..............................................32
3.22 Intellectual Property............................................32
3.23 Tax Matters......................................................36
3.24 Insurance........................................................38
3.25 Brokers; Transaction Costs.......................................39
3.26 No Other Agreements to Sell the Company or the Assets............39
3.27 Accounts Receivable..............................................39
3.28 Inventory........................................................40
3.29 Product Warranty.................................................40
3.30 Board Recommendation.............................................40
3.31 Fairness Opinion.................................................40
3.32 Material Misstatements or Omissions..............................40
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ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB............41
4.1 Organization.....................................................41
4.2 Authorization....................................................41
4.3 No Conflicts.....................................................41
4.4 Approvals........................................................41
4.5 Merger Consideration.............................................42
4.6 Brokers' and Finders' Fees.......................................42
4.7 Board Approval; No Stockholder Approval Required.................42
4.8 Material Misstatements or Omissions..............................42
ARTICLE 5. CONDUCT PRIOR TO THE EFFECTIVE TIME...............................42
5.1 Conduct of Business of the Company...............................42
5.2 No Solicitation..................................................44
ARTICLE 6. ADDITIONAL COVENANTS..............................................46
6.1 Special Meeting; Board Recommendation............................46
6.2 Voting Agreements................................................47
6.3 Access to Information............................................47
6.4 Confidentiality..................................................47
6.5 Expenses.........................................................48
6.6 Public Disclosure................................................48
6.7 Commercially Reasonable Efforts..................................48
6.8 Notification of Certain Matters..................................48
6.9 Company Repurchases..............................................49
6.10 Proprietary Rights...............................................49
6.11 Tax Matters......................................................49
6.12 SEC Filings......................................................50
6.13 Stockholder Litigation...........................................50
6.14 Indemnification..................................................51
ARTICLE 7. CONDITIONS TO THE MERGER..........................................51
7.1 Conditions to Obligations of Each Party to
Effect the Merger................................................51
7.2 Additional Conditions to Obligations of the Company..............51
7.3 Additional Conditions to the Obligations of Buyer................52
ARTICLE 8. TERMINATION.......................................................54
8.1 Termination......................................................54
8.2 Termination by Buyer.............................................55
8.3 Termination by the Company.......................................56
8.4 Procedure for Termination........................................56
8.5 Effect of Termination............................................56
8.6 Extension; Waiver................................................57
ARTICLE 9. MISCELLANEOUS PROVISIONS..........................................57
9.1 Notices..........................................................57
9.2 Entire Agreement.................................................58
9.3 Further Assurances; Post-Closing Cooperation.....................58
9.4 Amendment; Waiver................................................58
9.5 Third Party Beneficiaries........................................59
9.6 No Assignment; Binding Effect....................................59
9.7 Headings.........................................................59
9.8 Invalid Provisions...............................................59
9.9 Governing Law....................................................59
9.10 Arbitration......................................................59
9.11 Remedies Cumulative..............................................59
9.12 Construction.....................................................60
9.13 Counterparts.....................................................60
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EXHIBITS TO THE AGREEMENT AND PLAN OF MERGER
Exhibit A Form of Voting Agreement
Exhibit B Form of Certificate of Merger
Exhibit C Form of Buyer Compliance Certificate
Exhibit D Form of Employment Agreement
Exhibit E Form of Company Compliance Certificate
Exhibit F Form of Noncompetition Agreement with Key Employees
Exhibit G Form of Noncompetition Agreement with Nexland, S.A.
Exhibit H Form of Indemnification Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of May 13, 2003 (the
"AGREEMENT"), is by and among Symantec Corporation, a Delaware corporation
("BUYER"), Nebraska Acquisition Sub, Inc., a Delaware corporation and
wholly-owned subsidiary of Buyer ("MERGER SUB"), and Nexland, Inc., a Delaware
corporation (the "COMPANY").
RECITALS:
A. The respective Boards of Directors of Buyer, Merger Sub and the Company
have determined that it is advisable and in the best interests of their
respective stockholders to effect the acquisition of the Company pursuant to the
terms and subject to the conditions set forth herein.
B. In furtherance of such acquisition, the Boards of Directors of Buyer,
Merger Sub and the Company have each approved the merger of Merger Sub with and
into the Company (the "MERGER"), upon the terms and subject to the conditions
set forth herein, in accordance with the applicable provisions of the Delaware
General Corporation Law (the "DGCL" or "DELAWARE LAW").
C. In connection with the execution of this Agreement and as an inducement
to Buyer to enter into this Agreement, Xxxxxxx X. Xxxxxx, Xxxxxx X. Dell'Oca, I.
Xxxxxx Xxxxxx, Xxxxx Xxxxxxxxx, Xxxxxxx Xxxxxxx and Yves Many (collectively, the
"MAJOR STOCKHOLDERS") shall have executed and delivered to Buyer, concurrently
with the execution and delivery of this Agreement by the parties hereto, a
Voting Agreement in the form attached hereto as EXHIBIT A.
E. Pursuant to the Merger, each outstanding share of Company Common Stock
will be converted solely into the right to receive cash payment, as provided in
Section 2.6 herein, upon the terms and subject to the conditions set forth
herein.
AGREEMENT:
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NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Buyer, Merger Sub and the Company hereby agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the terms below shall have
the following meanings:
"ACQUISITION AGREEMENT" has the meaning set forth in Section
5.2(f).
"ACQUISITION PROPOSAL" has the meaning set forth in Section
5.2(c).
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"ACTIONS" means, collectively, any action, order writ,
injunction, judgment or decree outstanding or claim, suit, litigation,
proceeding, investigation or dispute.
"AFFILIATE" of a Person means any other Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"AGREEMENT" has the meaning set forth in the preamble.
"AGGREGATE COMPANY OPTION CONSIDERATION" means $1,777,376.45,
subject to adjustment as set forth in Section 2.14(c).
"APPROVAL" means any approval, authorization, consent, permit,
qualification or registration, or any waiver of any of the foregoing,
required to be obtained from or made with, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental or
Regulatory Authority or any other Person.
"ASSETS" means the right, title and interest of any Person in its
properties, assets and rights of any kind, whether tangible or intangible,
real or personal, including without limitation the right, title and interest
in the following: all Contracts and Contract Rights; all machinery,
equipment and computer hardware; all inventory; all Books and Records; all
Proprietary Rights; all Permits; all return and other rights under or
pursuant to all warranties, representations and guarantees made by suppliers
and other third parties in connection with the Assets or services furnished
to such Person; all cash, accounts receivable, deposits and prepaid expenses;
and all goodwill.
"BALANCE SHEET DATE" means December 31, 2002.
"BENEFIT ARRANGEMENT" means any employment, consulting, severance
or other similar contract, arrangement or policy (written or oral) and each
plan, arrangement, program, agreement or commitment (written or oral)
providing for insurance coverage (including, without limitation, any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
life, health or accident benefits (including, without limitation, any
"voluntary employees' beneficiary association" as defined in
Section 501(c)(9) of the Code providing for the same or other benefits) or
for deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation rights, stock purchases or other forms of incentive compensation
or post-retirement insurance, compensation or benefits which (a) is not a
Welfare Plan, Pension Plan or Multiemployer Plan, (b) is entered into,
maintained, contributed to or required to be contributed to, as the case may
be, by the Company or any Subsidiary or under which the Company or any
Subsidiary may incur any liability, and (c) covers any Employee or former
Employee.
"BOOKS AND RECORDS" means (a) all product, business and marketing
plans, sales and promotional literature and artwork relating to the Assets of
the Company or any Company Subsidiary or the Business, (b) all books,
records, lists, ledgers, financial data, files, reports, Tax Returns and
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related work papers and letters from accountants, budgets, pricing
guidelines, journals, deeds, title policies, minute books, stock certificates
and books, stock transfer ledgers, Contracts, product and design manuals,
plans, drawings, technical manuals and operating records of every kind
relating to the Assets of the Company or the Company Subsidiaries or the
Business (including records and lists of customers, distributors, suppliers
and personnel), computer files and programs (including data processing files
and records), retrieval programs, operating data and plans and environmental
studies and plans, and (c) all telephone and fax numbers used in the
Business, and in each case whether maintained as hard copy or stored in
computer memory and whether owned by the Company or its Affiliates.
"BUSINESS" means the business and operations of the Company.
"BUSINESS COMBINATION" means, with respect to any Person, (i) any
merger, consolidation or other business combination to which such Person is a
party, (ii) any sale, dividend, split or other disposition of any capital
stock or other equity interests of such Person (except for issuances of
common stock upon conversion of preferred stock outstanding on the date
hereof or the exercise of options or warrants outstanding on the date hereof
or issued in accordance with the covenants of this Agreement), (iii) any
tender offer (including a self tender), exchange offer, recapitalization,
restructuring, liquidation, dissolution or similar or extraordinary
transaction, (iv) any sale, dividend or other disposition of all or a
material portion of the Assets of such Person (including by way of exclusive
license or joint venture formation) or (v) the entering into of any agreement
or understanding, the granting of any rights or options, or the acquiescence
of such Person, with respect to any of the foregoing.
"BUSINESS DAY" means a day other than Saturday, Sunday or any day
on which banks located in the State of California are authorized or obligated
to close.
"BUYER" has the meaning set forth in the preamble.
"BUYER EXPENSE NOTICE" has the meaning set forth in Section
8.5(b).
"BUYER TRANSACTION EXPENSES" has the meaning set forth in
Section 8.5(b).
"CERTIFICATE OF MERGER" has the meaning set forth in Section 2.2.
"CERTIFICATES" has the meaning set forth in Section 2.8(b).
"CLOSING" has the meaning set forth in Section 2.1(b).
"CLOSING DATE" means the date of the Closing.
"COBRA" has the meaning set forth in Section 3.19(f).
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON MERGER CONSIDERATION" means the dollar amount equal to
the fraction, the numerator of which is the Merger Consideration minus the
Aggregate Company Option Consideration and the denominator of which is the
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aggregate number of shares of Company Common Stock outstanding immediately
prior to the Effective Time.
"COMPANY" has the meaning set forth in the preamble.
"COMPANY BALANCE SHEET" has the meaning set forth in Section
3.14(b).
"COMPANY COMMON STOCK" means the Common Stock, par value $0.0001 per
share, of the Company.
"COMPANY FINANCIAL STATEMENTS" has the meaning set forth in Section
3.14(b).
"COMPANY MATERIAL ADVERSE EFFECT" or "COMPANY MATERIAL ADVERSE
CHANGE" or a similar phrase means (a) any change, circumstance or effect that
individually or in the aggregate with all other changes, circumstances and
effects, is or would be reasonably likely to be materially adverse to (i) the
business, operations, assets, properties (whether tangible or intangible),
liabilities (taken as a whole), condition (financial or otherwise), results of
operations or prospects, of the Company and the Company Subsidiaries, taken as a
whole, or (ii) the right or ability of the Company to consummate any of the
transactions contemplated hereby or (b) any event or condition which, with the
passage of time, the giving or receipt of notice, would reasonably be expected
to constitute a "Material Adverse Effect" on or "Material Adverse Change" with
respect to the Company and the Company Subsidiaries, taken as a whole.
"COMPANY NEGATIVE VOTE" has the meaning set forth in Section 8.1(d).
"COMPANY OPTION PAYMENT SCHEDULE" means SCHEDULE 2.4(C) to the
Disclosure Schedules, which sets forth, each as of the date hereof, the name of
each holder of In-the-Money Company Options, as well as the number of
In-the-Money Company Options held by each such holder, the number of shares of
Company Common Stock for which such In-the-Money Company Options are
exercisable, the price per share of Company Common Stock for which such
In-the-Money Company Options are exercisable and the amount payable to the
holder of such In-the-Money Company Options pursuant to this Agreement.
"COMPANY OPTIONS" means options to purchase shares of Company Common
Stock issued by the Company (including, but not limited to, options issued to
Employees).
"COMPANY PROPRIETARY RIGHT" shall mean any Proprietary Right that is
(i) owned by, (ii) licensed to, or (iii) was developed or created by or for the
Company or the Company Subsidiaries.
"COMPANY REGISTERED PROPRIETARY RIGHTS" means all Registered
Proprietary Rights owned by, filed in the name of, assigned to or applied by or
for, the Company or the Company Subsidiaries.
"COMPANY RESTRICTED STOCK" means shares of Company Common Stock
which are subject to a repurchase option by the Company.
"COMPANY SEC REPORTS" has the meaning set forth in Section 3.14(a).
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"COMPANY SHARES" means (i) all shares of Company Common Stock issued
and outstanding immediately prior to the Effective Time, (ii) all vested and
unvested Company Options issued and outstanding immediately prior to the
Effective Time, and (iii) any other securities convertible into or otherwise
exercisable or exchangeable for Company Common Stock issued and outstanding
immediately prior to the Effective Time.
"COMPANY SPECIAL MEETING" has the meaning set forth in Section
6.1(a).
"COMPANY STOCKHOLDER" means each holder of Company Common Stock
immediately prior to the Effective Time.
"COMPANY STOCK PLANS" means the Company's 1999 Nonqualifying Stock
Option Plan and the Company's 2000 Stock Option Plan.
"COMPANY SUBSIDIARY" means any corporation or other organization,
whether incorporated or unincorporated, of which (A) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by the Company (through ownership of securities,
by contract or otherwise) or (B) the Company or any subsidiary of the Company is
a general partner of any general partnership or a manager of any limited
liability company.
"COMPANY THIRD PARTY EXPENSES" has the meaning set forth in Section
6.5.
"COMPANY WARRANTS" has the meaning set forth in Section 3.2(b).
"CONFIDENTIALITY AGREEMENT" means that certain Mutual Non-Disclosure
Agreement, dated as of January 20, 2003, between Buyer and the Company.
"CONSENTS" means any and all Permits and any and all consents,
approvals or waivers from third parties that are required for the consummation
of the transactions contemplated by this Agreement.
"CONTRACT RIGHTS" means all rights and obligations under the
Contracts.
"CONTRACTS" means all agreements, contracts, leases (whether for
real or personal property), purchase orders, undertakings, covenants not to
compete, employment agreements, confidentiality agreements, licenses,
instruments, obligations and commitments to which a Person is a party or by
which a Person or any of its Assets are bound or affected, whether written or
oral.
"DEFAULT" means (a) a breach of or default under any Contract, (b)
the occurrence of an event that with the passage of time or the giving of notice
or both would constitute a breach of or default under any Contract or (c) the
occurrence of an event that with or without the passage of time or the giving of
notice or both would give rise to a right of termination, renegotiation or
acceleration under any Contract.
"DGCL" or "DELAWARE LAW" has the meaning set forth in the recitals.
5
"DISCLOSURE SCHEDULES" has the meaning set forth in Article 3.
"DISSENTING SHARES" has the meaning set forth in Section 2.7(a).
"EFFECTIVE TIME" has the meaning set forth in Section 2.2.
"EMPLOYEE PLANS" means all Benefit Arrangements, Multiemployer
Plans, Pension Plans and Welfare Plans.
"EMPLOYEES" means all officers and directors of the Company or the
Company Subsidiaries and all other Persons employed by the Company on a full or
part-time basis, together with all Persons retained as "independent contractors"
as of the relevant date.
"EMPLOYMENT AGREEMENTS" has the meaning set forth in Section 7.3(d).
"ENCUMBRANCE" means any claim, lien, pledge, option, charge,
easement, tax assessment, security interest, deed of trust, mortgage,
right-of-way, encroachment, building or use restriction, conditional sales
agreement, encumbrance or other right of third parties, whether voluntarily
incurred or arising by operation of law, and includes any agreement to give any
of the foregoing in the future, and any contingent sale or other title retention
agreement or lease in the nature thereof.
"ENVIRONMENTAL CLAIMS" means all notices of violation, liens,
claims, demands and Action or Proceedings arising directly or indirectly out of
Environmental Conditions or Environmental Laws.
"ENVIRONMENTAL CONDITIONS" means the state of the environment,
including natural resources (e.g., flora and fauna), soil, surface water, ground
water, any present or potential drinking water supply, subsurface strata or
ambient air, relating to or arising out of the use, handling, storage,
treatment, recycling, generation, transportation, release, spilling, leaking,
pumping, pouring, emptying, discharging, injecting, escaping, leaching,
disposal, dumping or threatened release of Hazardous Substances by the Company
or any of its predecessors or successors in interest, or by its respective
agents, representatives, Employees or independent contractors when acting in
such capacity on behalf of the Company. With respect to Environmental Claims by
third parties, Environmental Conditions also include the exposure of persons to
Hazardous Substances at the work place or the exposure of persons or property to
Hazardous Substances migrating from or otherwise emanating from or located on
property owned or occupied by the Company.
"ENVIRONMENTAL LAWS" means all applicable U.S. federal, state,
district and local laws, all rules or regulations promulgated thereunder, and
all orders, consent orders, judgments, notices, permits or demand letters
issued, promulgated or entered pursuant thereto, relating to pollution or
protection of the environment (including, without limitation, ambient air,
surface water, ground water, land surface, or subsurface strata), including,
without limitation, (a) laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, industrial
materials, wastes or other substances into the environment and (b) laws relating
to the identification, generation, manufacture, processing, distribution, use,
treatment, storage, disposal, recovery, transport or other handling of
pollutants, contaminants, chemicals, industrial materials, wastes or other
6
substances. Environmental Laws shall include, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), the Toxic Substances Control Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Resource Conservation and Recovery
Act, as amended ("RCRA"), the Clean Water Act, as amended, the Safe Drinking
Water Act, as amended, the Clean Air Act, as amended, and all analogous laws
promulgated or issued by any state or other Governmental or Regulatory
Authority.
"ENVIRONMENTAL REPORTS" means any and all written analyses,
summaries or explanations, in the possession or control of the Company or the
Company Subsidiaries, prepared for the purpose of analyzing or assessing (a) any
Environmental Conditions in, on or about the properties of the Company or the
Company Subsidiaries or (b) the Company's or the Company Subsidiaries'
compliance with Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" means any entity which is (or at any relevant time
was) a member of a "controlled group of corporations" with, under "common
control" with, or a member of an "affiliated service group" with, or otherwise
required to be aggregated with, the Company as set forth in Section 414(b), (c),
(m) or (o) of the Code.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FACILITIES" means all plants, offices, manufacturing facilities,
stores, warehouses, administration buildings and all real property and related
facilities leased by the Company or the Company Subsidiaries, all as identified
or listed on DISCLOSURE SCHEDULE 3.8(B).
"GAAP" means generally accepted accounting principles as applied in
the United States.
"GOVERNMENTAL OR REGULATORY AUTHORITY" means any court, tribunal,
arbitrator, authority, agency, bureau, board, commission, department, ministry
or a branch thereof, official or other instrumentality of the United States, any
foreign country or any domestic or foreign state, province, county, city or
other political subdivision.
"HAZARDOUS SUBSTANCES" means all pollutants, contaminants,
chemicals, wastes, and any other carcinogenic, ignitable, corrosive, reactive,
toxic or otherwise hazardous substances or materials (whether solids, liquids or
gases) subject to regulation, control or remediation under Environmental Laws.
"INDEMNIFICATION AGREEMENT" has the meaning set forth in Section
7.3(v).
"IRREVOCABLE OPTION AGREEMENT" has the meaning set forth in Section
7.3(m).
"IN-THE-MONEY COMPANY OPTIONS" means all Company Options identified
on the Company Option Payment Schedule.
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"KEY EMPLOYEES" means each of Xxxxxxx X. Xxxxxx, I. Xxxxxx Xxxxxx
and Xxxxx Xxxxxxx.
"LAW" or "LAWS" means any law, statute, order, decree, consent
decree, judgment, rule, regulation, ordinance or other pronouncement having the
effect of law whether in the United States, any foreign country, or any domestic
or foreign state, county, city or other political subdivision or of any
Governmental or Regulatory Authority.
"LEASE" means a real property lease or a personal property lease, as
applicable.
"LEASED PROPERTY" has the meaning set forth in Section 3.8(b).
"LETTER OF INTENT" means that certain non-binding Letter of Intent
between Buyer and the Company dated as of February 13, 2003.
"LIABILITY" means any direct or indirect liability, indebtedness,
obligation, commitment, expense, claim, deficiency, guaranty or endorsement of
or by any Person of any type, whether accrued, absolute, contingent, matured,
unmatured, liquidated, unliquidated, known or unknown.
"LICENSE" means any Contract that grants a Person the right to use
or otherwise enjoy the benefits of any Proprietary Right (including without
limitation any covenants not to xxx with respect to any Proprietary Right).
"MAJOR STOCKHOLDERS" has the meaning set forth in the preamble.
"MERGER" has the meaning set forth in the preamble.
"MERGER CONSIDERATION" means a cash amount equal to $19,600,000.00.
"MERGER SUB" has the meaning set forth in the preamble.
"MULTIEMPLOYER PLAN" means any "multiemployer plan," as defined in
Section 4001(a)(3) or 3(37) of ERISA, which (a) the Company or any ERISA
Affiliate contributes to or is required to contribute to, or, after September
25, 1980, contributed to or was required to contribute to, or under which the
Company or any ERISA Affiliate may incur any liability and (b) covers any
Employee or former Employee or any ERISA Affiliate.
"NEXLAND CANADA" means Nexland Canada Distributors Inc., a
corporation organized under the laws of British Columbia.
"NEXLAND, S.A." means Nexland, S.A., a corporation organized under
the laws of France.
"NEXLAND, S.A. INVENTORY" has the meaning set forth in Section
7.3(t).
"OFFICER'S CERTIFICATE" has the meaning set forth in Section 6.5.
8
"OPTION" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract (other
than such Person's preferred stock) that gives the right to (a) purchase or
otherwise receive or be issued any shares of capital stock or other equity
interests of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock or other equity
interests of such Person or (b) receive any benefits or rights similar to any
rights enjoyed by or accruing to the holder of shares of capital stock or other
equity interests of such Person.
"ORDER" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"OUTSIDE DATE" has the meaning set forth in Section 9.1(b).
"PAYING AGENT" means American Stock Transfer and Trust Company.
"PENSION PLAN" means any "employee pension benefit plan" as defined
in Section 3(2) of ERISA (other than a Multiemployer Plan) which (a) the Company
or any ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or, within the five (5) years prior to the Closing Date,
maintained, administered, contributed to or was required to contribute to, or
under which the Company or any ERISA Affiliate may incur any liability
(including, without limitation, any contingent liability) and (b) covers any
Employee or former Employee or any ERISA Affiliate.
"PERMITS" means all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, national, state or local, necessary for the
past, present or anticipated conduct or operation of the Business or ownership
of the Assets of any Person.
"PERMITTED ENCUMBRANCES" means (a) statutory liens of landlords,
liens of carriers, warehousepersons, mechanics and material persons, and
purchase money liens incurred in the ordinary course of business for sums (i)
not yet due and payable, or (ii) being contested in good faith, if, in either
such case, an adequate reserve shall have been made therefor in such Person's
financial statements, (b) liens incurred or deposits made in connection with
workers' compensation, unemployment insurance and other similar types of social
security programs or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return of money bonds and similar obligations, in each case in
the ordinary course of business, consistent with past practice, (c) easements,
rights-of-way, restrictions and other similar charges or encumbrances, in each
case, which do not interfere with the ordinary conduct of business of the
Company and the Company Subsidiaries and do not materially detract from the
value of the property upon which such encumbrance exists, and (d) liens securing
taxes, assessments and governmental charges not yet due and payable.
"PERSON" means any person or entity, whether an individual, trustee,
corporation, limited liability company, general partnership, limited
partnership, trust, unincorporated organization, business association, firm,
joint venture, governmental agency or authority or any similar entity.
"POTENTIAL ACQUIROR" has the meaning set forth in Section 5.2(a).
9
"PROPRIETARY RIGHTS" means all (a) U.S. and foreign patents, patent
applications, patent disclosures and improvements thereto, including xxxxx
patents and utility models and applications therefor, (b) U.S. and foreign
trademarks, service marks, trade dress, logos, trade names and corporate names
and the goodwill associated therewith and registrations and applications for
registration thereof, (c) U.S. and foreign copyrights and registrations and
applications for registration thereof, (d) U.S. and foreign mask work rights and
registrations and applications for registration thereof, (e) rights in Trade
Secrets, (f) domain name registrations, (g) other proprietary rights, and (h)
licenses granting any rights with respect to any of the foregoing.
"PROXY STATEMENT" has the meaning set forth in Section 6.1(b).
"PTO" shall mean the United States Patent and Trademark Office.
"REGISTERED PROPRIETARY RIGHTS" shall mean all United States,
international and foreign: (a) issued patents and patent applications (including
provisional applications), (b) registered trademarks and servicemarks,
applications to register trademarks and servicemarks, intent-to-use
applications, other registrations or applications to trademarks or servicemarks,
(c) registered copyrights and applications for copyright registration, (d) any
mask work registrations and applications to register mask works, and (e) any
other Proprietary Right that is the subject of an application, certificate,
filing, registration or other document issued by, filed with, or recorded by,
any state, government or other public legal authority.
"RELATED PARTY" means (a) any of the Company's officers, directors,
stockholders and any officers, directors, partners, associates or relatives of
such officers, directors and stockholders, (b) any Person in which the Company
or any stockholder or any Affiliate, associate or relative of any such Person
has any direct or indirect interest, including without limitation Nexland, S.A.,
Nexland Asia Limited, Smerwick Ltd. and Longfield Ltd. and (c) any direct or
indirect trustee or beneficiary of any stockholder.
"REPRESENTATIVE" of any Person means any officer, director,
Employee, stockholder, attorney, principal, investment advisors, accountant,
agent, Affiliate, or other representative of such Person.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"SUBSIDIARY" means any Person in which the Company or Buyer, as the
context requires, directly or indirectly through Subsidiaries or otherwise,
beneficially owns at least 50% of either the equity interest in, or the voting
control of, such Person, whether or not existing on the date hereof.
"SUPERIOR PROPOSAL" has the meaning set forth in Section 5.2(d).
"SUPERIOR TRANSACTION" has the meaning set forth in Section 5.2(f).
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"SURVIVING CORPORATION" has the meaning set forth in Section 2.1(a).
"TAX" or "TAXES" means any (i) federal, state, local or foreign net
income, gross income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental, customs
duties, capital stock, franchise, profits, withholding, social security,
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not, and (ii) any liability of the Company
or the Company Subsidiaries imposed by law for the payment of amounts described
in clause (i) on another Person, including as a result of being a transferee,
successor or a member of an affiliated, consolidated, combined or unitary group.
"TAX LIABILITY" means a Liability for any Tax.
"TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof, and
including any elections, rulings and requests for rulings and other
correspondence to or from any Governmental Authority dealing with Taxes.
"THIRD PARTY EXPENSES" has the meaning set forth in Section 6.5.
"TO THE KNOWLEDGE" or "KNOWLEDGE" of a party (or similar phrases)
means to the extent of matters which are actually known by such party and when
used in respect of the Company or the Company Subsidiaries, the term "to the
knowledge" or "knowledge" shall mean the matters which are known or reasonably
should be known by Xxxxxxx X. Xxxxxx, Xxxxxx X. Dell'Oca, I. Xxxxxx Xxxxxx or
Xxxxx Xxxxxxx after due inquiry.
"TRADE SECRETS" means all trade secrets and confidential business
information (including ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
research and development information, software, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial,
marketing and business data, pricing and cost information, business and
marketing plans, mailing and e-mail lists, and customer and supplier mailing and
e-mail lists and information), in each case which are not generally known to the
public.
"VOTING AGREEMENT" means a Voting Agreement in the form attached
hereto as EXHIBIT A, dated the date hereof, executed and delivered to Buyer by
each Major Stockholder.
"WELFARE PLAN" means any "employee welfare benefit plan" as defined
in Section 3(1) of ERISA, which (a) the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or under
which the Company or any ERISA Affiliate may incur any liability and (b) covers
any Employee or former Employee or any ERISA Affiliate.
"WSRI" has the meaning set forth in Section 3.10(f).
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1.2 Interpretation Provisions.
-------------------------
(a) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement, and article, section,
schedule and exhibit references are to this Agreement unless otherwise
specified. The meaning of defined terms shall be equally applicable to the
singular and plural forms of the defined terms. The terms "include" and
"including" are not limiting and mean "including without limitation."
(b) References to agreements and other documents are also to all
subsequent amendments and other modifications thereto.
(c) References to statutes shall include all regulations promulgated
thereunder and references to statutes or regulations shall be construed as
including all statutory and regulatory provisions consolidating, amending or
replacing the statute or regulation.
(d) The schedules and exhibits to this Agreement are a material part
hereof and shall be treated as part of this Agreement.
ARTICLE 2.
THE MERGER
2.1 The Merger.
----------
(a) THE MERGER. At the Effective Time, and on the terms and subject
to the conditions of this Agreement and the DGCL, Merger Sub shall be merged
with and into the Company, the separate corporate existence of Merger Sub shall
cease, and the Company shall continue as the surviving corporation. The Company,
as the surviving corporation after the Merger, is hereinafter sometimes referred
to as the "SURVIVING CORPORATION."
(b) CLOSING. Unless this Agreement shall have been terminated
pursuant to Section 8.1, and subject to the satisfaction (or to the extent
permitted, the waiver) of the conditions set forth in Articles 6 and 7, the
closing of the transactions contemplated by this Agreement (the "CLOSING") will
take place (i) at the offices of Xxxxxx Xxxxxx White & XxXxxxxxx LLP, 000
Xxxxxxxxxxx Xxxx, Xxxxx Xxxx, Xxxxxxxxxx, as promptly as practicable (and in any
event within three (3) Business Days) after satisfaction (or to the extent
permitted, the waiver) of the conditions set forth in Articles 6 and 7 or (ii)
at such other time, date or place as Buyer and the Company may mutually agree.
2.2 EFFECTIVE TIME. As promptly as practicable after the satisfaction
(or to the extent permitted, the waiver) of the conditions set forth in Articles
6 and 7, and provided that this Agreement has not been terminated pursuant to
Section 9.1, the parties hereto shall cause the Merger to be consummated by
executing and filing a certificate of merger, in substantially the form attached
hereto as EXHIBIT B, with the Secretary of State of the State of Delaware as
required by, and executed in accordance with the relevant provisions of, the
DGCL (the "CERTIFICATE OF MERGER"), the time of acceptance by the Secretary of
State of Delaware of such filing or such later time as may be agreed to by the
parties and set forth in the Certificate of Merger being referred to herein as
the "EFFECTIVE TIME".
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2.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights
privileges, powers, franchises of the Company and the Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and the Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
2.4 CERTIFICATE OF INCORPORATION; BYLAWS.
------------------------------------
(a) At the Effective Time, the Certificate of Incorporation of the
Company in effect immediately prior to the Effective Time shall be amended in
its entirety as set forth in Exhibit A to the Certificate of Merger, and as so
amended shall be the Certificate of Incorporation of the Surviving Corporation,
until duly amended in accordance with applicable law.
(b) At the Effective Time, the Bylaws of the Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter duly amended in accordance with
applicable law, the Certificate of Incorporation of the Surviving Corporation
and such Bylaws.
2.5 DIRECTORS AND OFFICERS. The directors of Merger Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, and the officers of the
Merger Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified in the manner provided in the
Certificate of Incorporation and Bylaws of the Surviving Corporation and in
accordance with applicable law. The Company shall cause each or any director and
officer of the Company to tender his or her resignation prior to the Effective
Time, with each such resignation to be effective as of the Effective Time.
2.6 THE MERGER CONSIDERATION; EFFECT ON OUTSTANDING SECURITIES OF THE
COMPANY. On the terms and subject to the conditions of this Agreement, at the
Effective Time, by virtue of the Merger and without any action on the part of
Buyer, the Company or the holder of any Company Shares, the following shall
occur:
(a) CONVERSION OF COMPANY COMMON STOCK. Each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time will be
canceled and extinguished, and each share of Company Common Stock which is
issued and outstanding immediately prior to the Effective Time (other than any
shares of Company Common Stock to be canceled pursuant to Section 2.6(b), and
any Dissenting Shares (as provided in Section 2.7)) shall be automatically
converted into solely the right to receive in cash, without interest, the Common
Merger Consideration.
(b) CANCELLATION OF COMPANY-OWNED STOCK. Each share of Company
Common Stock owned by the Company or the Company Subsidiaries immediately prior
to the Effective Time shall be automatically canceled and extinguished without
any exchange thereof and without any further action on the part of Buyer, Merger
Sub or the Company.
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(c) COMPANY OPTIONS.
(i) Each In-the-Money Company Option outstanding immediately
prior to the Effective Time shall be cancelled and extinguished and shall be
automatically exchanged for the right to receive a cash payment in the amount
set forth on the Company Option Payment Schedule.
(ii) All other Company Options shall be cancelled and
extinguished as of the Effective Time without consideration.
(iii) The Company shall take all action necessary to cause the
Company Options to be treated as contemplated by this Section 2.6(c).
(d) COMPANY WARRANTS. The Company shall take all action necessary to
cause the Company Warrants to be exercised prior to the Effective Time and to
cause the Company Warrants to be automatically terminated if not exercised prior
to the Effective Time.
(e) COMMON STOCK OF MERGER SUB. Each share of common stock of the
Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation. Each stock
certificate of Merger Sub evidencing ownership of any shares shall continue to
evidence ownership of such shares of capital stock of the Surviving Corporation.
2.7 DISSENTING SHARES.
-----------------
(a) Notwithstanding anything in this Agreement to the contrary,
shares of Company Common Stock outstanding immediately prior to the Effective
Time and held by a holder who has not voted in favor of the Merger and who has
demanded appraisal for such shares in accordance with Delaware Law ("DISSENTING
SHARES") shall not be converted into a right to receive the Common Merger
Consideration unless and until such holder fails to perfect or withdraws or
otherwise loses such holder's right to appraisal. A holder of Dissenting Shares
shall be entitled to receive payment of the appraisal value of such shares of
Company Common Stock held by such holder in accordance with the provisions of
Section 262 of the DGCL unless, after the Effective Time, such holder fails to
perfect or withdraws or loses such holder's right to appraisal, in which case
such shares shall be treated as if they had been converted as of the Effective
Time into the right to receive the Common Merger Consideration, without interest
thereon.
(b) The Company shall give Buyer (i) prompt notice of its receipt of
any written demands for appraisal of any shares of Company Common Stock,
withdrawals of such demands, and any other instruments relating to the Merger
served pursuant to Delaware Law and received by the Company and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
demands for appraisal under Delaware Law. The Company shall not, except with the
prior written consent of Buyer or as may be required under applicable law,
voluntarily make any payment with respect to any demands for appraisal of
Company Common Stock or offer to settle or settle any such demands.
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2.8 EXCHANGE PROCEDURES.
(a) MERGER CONSIDERATION. On the Closing Date, Buyer shall deposit
with the Paying Agent, for exchange in accordance with this Article 2, the
Merger Consideration payable in exchange for the Company Common Stock and the
In-the-Money Company Options.
(b) EXCHANGE PROCEDURES. As soon as practicable after the Effective
Time, Buyer shall cause to be mailed to each holder of record of a certificate
or certificates which immediately prior to the Effective Time represented
Company Common Stock or an option agreement representing In-the-Money Company
Options (the "CERTIFICATES") and which shares of Company Common Stock or
In-the-Money Company Options are exchanged for and represent the right to
receive a portion of the Merger Consideration pursuant to Section 2.6, (i) a
letter of transmittal in customary form (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Paying Agent and shall be in such form
and have such other provisions as Buyer may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the appropriate portion of the Merger Consideration pursuant to Section 2.6.
Upon surrender of a Certificate for cancellation to Paying Agent or to such
other agent or agents as may be appointed by Buyer, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor an amount to which such holder is entitled pursuant
to Section 2.6, and the Certificate so surrendered shall be canceled. Until
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented Company Shares or In-the-Money Company Options will be deemed from
and after the Effective Time to evidence the ownership of the portion of the
Merger Consideration as provided in Section 2.6 without any interest thereon.
(c) REMAINING FUNDS. At any time following six (6) months after the
Effective Time, the Surviving Corporation shall be entitled to require the
Paying Agent to deliver to it any funds (including any interest received with
respect thereto) which had been made available to the Paying Agent and which
have not been disbursed to holders of Certificates. Thereafter such holders
shall be entitled to look to the Surviving Corporation (subject to abandoned
property, escheat or other similar laws) only as a general creditor thereof with
respect to the Common Merger Consideration payable upon surrender of their
Certificates, without any interest thereon. Neither the Surviving Corporation
nor the Paying Agent shall be liable to any holder of a Certificate for Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
2.9 NO FURTHER OWNERSHIP RIGHTS IN COMPANY SECURITIES. The portion of
the Merger Consideration paid upon the surrender for exchange of shares of
Company Common Stock or In-the-Money Company Options in accordance with the
terms hereof shall be deemed to have been paid in full satisfaction of all
rights pertaining to such shares of Company Common Stock or In-the-Money Company
Options, and there shall be no further registration of transfers on the records
of the Company of shares of Company Common Stock or Company Options which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article 2.
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2.10 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates evidencing shares of Company Common Stock or In-the-Money Company
Options shall have been lost, stolen or destroyed, Buyer shall cause the Paying
Agent to pay the portion of the Merger Consideration applicable to such shares
or options in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof; PROVIDED, HOWEVER,
that Buyer or Paying Agent may, in their discretion and as a condition precedent
to the payment thereof, require the owner of such lost, stolen or destroyed
Certificates to provide an indemnity with respect to the Certificates alleged to
have been lost, stolen or destroyed.
2.11 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and or to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company, the officers and directors of the
Surviving Corporation and the Buyer are fully authorized to take, and will
use their reasonable efforts to take, all lawful and reasonable action.
2.12 TAX TREATMENT. The Merger shall constitute a taxable transaction
under the Code.
2.13 WITHHOLDING. Buyer shall be entitled to deduct and withhold, from
the Merger Consideration otherwise payable to the Company Stockholders or
holders of In-the-Money Company Options, such amounts as may be required to be
deducted and withheld under the Code and any other applicable Tax laws. If any
withholding obligation may be avoided by any Company Stockholder or holder of
In-the-Money Company Options providing information or documentation to Buyer,
Buyer shall request that information before withholding. To the extent amounts
are so withheld and paid to any appropriate taxing authority, Buyer shall be
treated as though it had paid, from the Merger Consideration from which
withholding was required, an appropriate amount otherwise payable directly to
such Company Stockholders or holders of In-the-Money Company Options.
2.14 CANCELLATION, TERMINATION OR EXERCISE OF IN-THE-MONEY COMPANY
OPTIONS.
(a) If at any time after the date of this Agreement but immediately
prior to the Effective Time any In-the-Money Company Options are cancelled or
terminated without consideration in connection with the termination of
employment of the holder thereof or for any other reason other than the exercise
of such In-the-Money Company Options for cash, the amount of Aggregate Company
Option Consideration shall be reduced by an amount equal to the amount payable
in respect of each such In-the-Money Company Option, as such amount is reflected
on the Company Option Payment Schedule.
(b) If at any time after the date of this Agreement but immediately
prior to the Effective Time any In-the-Money Company Options are exercised for
cash, the Merger Consideration shall be increased by an amount equal to the
exercise price for each such In-the-Money Company Option.
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ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND MAJOR STOCKHOLDERS
As an inducement of Buyer to enter into this Agreement, the Company hereby
makes the following representations and warranties to Buyer which
representations and warranties are, as of the date hereof, and will be, as of
the Closing Date, true and correct, except as otherwise set forth in written
disclosure schedules of the Company (the "DISCLOSURE SCHEDULES") delivered to
Buyer prior to the date hereof, a copy of which is attached hereto. The
Disclosure Schedules are numbered to correspond to the various sections of this
Article 3 setting forth certain exceptions to the representations and warranties
contained in this Article 3 and certain other information called for by this
Agreement.
3.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with all requisite corporate power and authority to conduct the
Business as it is presently being conducted and to own or lease, as applicable,
the Assets owned or leased by it. Each of the Company Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. The Company and each of the Company
Subsidiaries is duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction the failure to be so qualified would
constitute a Company Material Adverse Effect. Each jurisdiction in which the
Company and the Company Subsidiaries are qualified to do business as a foreign
corporation is set forth in DISCLOSURE SCHEDULE 3.1.
3.2 CAPITALIZATION OF THE COMPANY.
(a) AUTHORIZED CAPITALIZATION. As of the date of this Agreement, the
authorized capitalization of the Company consists of (i) 50,000,000 shares of
common stock, par value $0.0001 per share, of which 34,824,172 shares are issued
and outstanding and (ii) 10,000,000 shares of undesignated preferred stock, par
value $0.0001 per share, none of which are issued and outstanding. The Company
has no other capital stock authorized, issued or outstanding. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company. With respect to
any Company Common Stock that has been issued subject to a right of repurchase
on the part of the Company, DISCLOSURE SCHEDULE 3.2(A) sets forth the holder
thereof, the number and type of securities covered thereby, and the vesting
schedule thereof (including a description of the circumstances under which such
vesting schedule can or will be accelerated).
(b) COMPANY OPTIONS AND COMPANY WARRANTS. As of the date of this
Agreement, 6,592,346 shares of Company Common Stock are reserved for issuance
upon the exercise of outstanding Company Options and 100,000 shares of Company
Common Stock reserved for issuance upon exercise of warrants to purchase Company
Common Stock (the "COMPANY WARRANTS"). Except as set forth on Schedule 3.2(b),
all of the Company Options have been validly granted under the Company Common
Stock Plan. DISCLOSURE SCHEDULE 3.2(B) sets forth the name of each holder of
Company Options and Company Warrants, as well as the number of Company Options
or Company Warrants held by each such holder, the number of shares of Company
Common Stock for which each such Company Option or Company Warrant is
17
exercisable (both vested and unvested in the case of Company Options), and the
price per share of Company Common Stock for which each such Company Option or
Company Warrant is exercisable (without taking into account whether or not such
Company Option or Company Warrant is in fact exercisable on the date hereof).
The Company has previously provided to Buyer true and correct copies of all
option agreements governing Company Options and all Company Warrants.
(c) NO OTHER CAPITAL STOCK, OPTIONS, WARRANTS. Except for the
Company Options referred to above and the Company Warrants, there are no
outstanding Options, warrants, convertible securities or rights of any kind to
purchase or otherwise acquire any shares of capital stock or other securities of
the Company or any Company Subsidiary. No debt securities of the Company or any
Company Subsidiary are issued and outstanding.
(d) The Company is directly or indirectly the record and beneficial
owner of all of the outstanding shares of capital stock or other equity
interests of each Company Subsidiary. All of such shares have been duly
authorized and are validly issued, fully paid, nonassessable and free of
preemptive rights with respect thereto and are owned by the Company free and
clear of any claim, lien or encumbrance of any kind with respect thereto. There
are no proxies or voting agreements with respect to such shares, and there are
not any existing options, warrants, calls, subscriptions, or other rights or
other agreements or commitments obligating the Company or any Company Subsidiary
to issue, transfer or sell any shares of capital stock or any other securities
convertible into, exercisable for, or evidencing the right to subscribe for any
shares of any Company Subsidiary. The Company does not directly or indirectly
own any interest in any Person except the Company Subsidiaries.
(e) VALID ISSUANCES. All outstanding shares of Company Common Stock
are, and any shares of Company Common Stock issued upon exercise of any Company
Option or Company Warrant will be, validly issued, fully paid and non-assessable
and not subject to any preemptive or similar rights created by statute, the
Company's Certificate of Incorporation or Bylaws, or any Contract. The Company
Options have been, and the shares of Company Common Stock have been or will be,
issued in compliance with all federal, state and foreign corporate and
securities laws.
3.3 STOCKHOLDERS' AGREEMENTS, ETC. Neither the Company nor any Company
Subsidiary is a party or subject to any agreement or understanding, and, to the
Company's knowledge, there is no Contract, arrangement or understanding between
or among any Persons, which affects, restricts or relates to voting, giving of
written consents, dividend rights or transferability of shares with respect to
the Company Common Stock, including without limitation any voting trust
agreement or proxy.
3.4 AUTHORIZATION. The Company has all necessary corporate power and
authority to enter into this Agreement and to perform its obligations hereunder
and, assuming the approval of the adoption of the Merger by a majority of the
outstanding shares of Company Common Stock at the Company Special Meeting or any
adjournment or postponement thereof, has taken all corporate action necessary to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Company, and this Agreement is a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except that enforceability may be limited by (a) bankruptcy,
18
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors or (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at law or in
equity).
3.5 OFFICERS AND DIRECTORS. DISCLOSURE SCHEDULE 3.5 contains a true,
correct and complete list of all the officers and directors of the Company and
each Company Subsidiary.
3.6 BANK ACCOUNTS. DISCLOSURE SCHEDULE 3.6 contains a list of all of the
Company's and the Company Subsidiaries' bank accounts, safe deposit boxes and
persons authorized to draw thereon or have access thereto.
3.7 SUBSIDIARIES. The Company has no Subsidiaries, other than Nexland
Canada, and Nexland, Inc., a Florida corporation. Neither the Company nor any
Company Subsidiary owns any or has any obligations, whether conditional or
otherwise, to purchase any equity interests in any other entity.
3.8 REAL PROPERTY.
(a) COMPANY-OWNED REAL PROPERTY. Neither the Company nor any Company
Subsidiary owns any real property.
(b) LEASED REAL PROPERTY. DISCLOSURE SCHEDULE 3.8(B) sets forth and
describes briefly all Leases pursuant to which Facilities are leased, occupied
or used by the Company or any Company Subsidiary (as lessee), true and correct
copies of which have been delivered to Buyer. The Company or a Company
Subsidiary has good and valid leasehold title to, and enjoys peaceful and
undisturbed possession of, all leased property described in such Leases (the
"LEASED PROPERTY"), free and clear of any and all Encumbrances other than any
Permitted Encumbrances which would not permit the termination of the Lease
therefor by the lessor. With respect to each Leased Property (i) there are no
pending or, to the knowledge of the Company, threatened condemnation or
administrative proceedings relating to, or any pending or threatened Actions
relating to, the Company's or the Company Subsidiaries' leasehold interests in
such Leased Property or any portion thereof, (ii) to the knowledge of the
Company, no third party has entered into any sublease, license, option, right,
concession or other agreement or arrangement, written or oral, granting to any
person the right to use or occupy such Leased Property or any portion thereof or
interest therein, except in connection with a Permitted Encumbrance, and (iii)
neither the Company nor any Company Subsidiary has received notice of any
pending or threatened special assessment relating to such Leased Property or
otherwise has any knowledge of any pending or threatened special assessment
relating thereto.
With respect to each Lease listed on DISCLOSURE SCHEDULE 3.8(B), (i) there
has been no breach or default under any such Lease by the Company, any Company
Subsidiary or, to the knowledge of the Company, by any other party, (ii) the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not cause a material default under any
such Lease, (iii) such Lease is a valid and binding obligation of the lessor, is
in full force and effect with respect to and is enforceable against the lessor
in accordance with its terms, and will continue to be legal, binding,
enforceable, valid, and in full force and effect on identical terms following
19
the consummation of the transactions contemplated hereby, (iv) no party is in
breach or default and no action has been taken by the Company or any Company
Subsidiary, and no event has occurred which, with notice or lapse of time or
both, would permit termination, modification or acceleration by a party thereto
other than the Company or a Company Subsidiary without the consent of the
Company or a Company Subsidiary, as the case may be, under any such Lease that
is material to the Company or any Company Subsidiary, (v) no party has
repudiated any term thereof or threatened to terminate, cancel or not renew any
such Lease, (vi) neither the Company nor any Company Subsidiary has assigned,
transferred, conveyed, mortgaged or encumbered any interest therein or in any
leased property subject thereto (or any portion thereof), (vii) there are no
disputes, oral agreements, or forbearance programs in effect as to the lease or
sublease, (viii) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (vii) above are true and correct
with respect to the underlying Lease, (ix) neither the Company nor any Company
Subsidiary has assigned, transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or subleasehold, and (x) all Facilities
leased or subleased thereunder have received all approvals of governmental
authorities (including licenses and permits) required in connection with the
operation thereof and have been operated and maintained in accordance with
applicable laws, rules, and regulations.
3.9 PERSONAL PROPERTY.
(a) GENERAL. The Company or a Company Subsidiary owns or leases all
personal property Assets necessary for the conduct of the Business as presently
conducted, and such personal property Assets (taken as a whole) (i) are free
from material defects (patent and latent), (ii) have been maintained in
accordance with normal industry practice, and (iii) are in such operating
condition and repair as is appropriate for the conduct of the Business as
presently conducted.
(b) OWNED PERSONAL PROPERTY. The Company or a Company Subsidiary has
good and marketable title to all such personal property used by it, free and
clear of any and all Encumbrances other than Permitted Encumbrances. With
respect to each such item of personal property (i) there are no Leases,
subleases, licenses, options, rights, concessions or other agreements, written
or oral, granting to any party or parties the right of use of any portion of
such item of personal property, (ii) there are no outstanding options or rights
of first refusal in favor of any other party to purchase any such item of
personal property or any portion thereof or interest therein and (iii) there are
no parties (other than the Company or the Company Subsidiaries) who are in
possession of or who are using any such item of personal property.
(c) LEASED PERSONAL PROPERTY. Other than Personal Property owned by
the Company or the Company Subsidiaries, the Company or a Company Subsidiary has
good and valid leasehold title to all of the tangible personal property Assets
used by the Company or any Company Subsidiary, free and clear of any and all
Encumbrances other than Permitted Encumbrances which would not permit the
termination of the lease therefor by the lessor. DISCLOSURE SCHEDULE 3.9(C) sets
forth all Leases for personal property.
With respect to each Lease listed on DISCLOSURE SCHEDULE 3.9(C), (i) there
has been no breach or default under such Lease by the Company, any Company
Subsidiary or by any other party, (ii) the execution, delivery and performance
20
of this Agreement and the consummation of the transactions contemplated hereby
will not cause (with or without notice and with or without the passage of time)
a default under any such Lease, (iii) such Lease is a valid and binding
obligation of the applicable lessor, is in full force and effect and is
enforceable by the Company or a Company Subsidiary in accordance with its terms,
(iv) no action has been taken by the Company or any Company Subsidiary and no
event has occurred which, with notice or lapse of time or both, would permit
termination, modification or acceleration by a party thereto other than by the
Company or a Company Subsidiary without the consent of the Company or a Company
Subsidiary, (v) no party has repudiated any term thereof or threatened to
terminate, cancel or not renew any such Lease, and (vi) neither the Company nor
any Company Subsidiary has assigned, transferred, conveyed, mortgaged or
encumbered any interest therein or in any leased property subject thereto (or
any portion thereof).
3.10 ENVIRONMENTAL MATTERS.
(a) COMPLIANCE. The Company and the Company Subsidiaries are in
compliance with all Environmental Laws, including, without limitation, all
Permits required thereunder to conduct the Business as currently being conducted
or proposed to be conducted. All such Permits are listed on DISCLOSURE SCHEDULE
3.10(A). Neither the Company nor any Company Subsidiary has received any notice
to the effect that (i) it is not in compliance with, or is in violation of, any
such Environmental Laws or Permits required thereunder or (ii) any circumstances
are reasonably likely to result in a failure of the Company to comply with, or a
violation by the Company or any Company Subsidiary of, any such Environmental
Laws or Permits required thereunder.
(b) ENVIRONMENTAL CLAIMS. There are no existing or, to the knowledge
of the Company, threatened Environmental Claims against the Company or any
Company Subsidiary. Neither the Company nor any Company Subsidiary has received
any notification of any allegation of any actual, or potential responsibility
for, or any inquiry or investigation regarding, any disposal, release or
threatened release at any location of any Hazardous Substance which could result
in liability to the Company or any Company Subsidiary under Environmental Laws.
(c) HAZARDOUS SUBSTANCES. To the knowledge of the Company, (i) no
underground tank or other underground storage receptacle for Hazardous
Substances is currently located on the Facilities, and (ii) there have been no
releases of any Hazardous Substances from any such underground tank or related
piping. There have been no releases (i.e., any past or present releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing, or dumping) of Hazardous Substances in quantities
that could result in liability to the Company or any Company Subsidiary under
Environmental Laws, other than those authorized by Environmental Laws including,
without limitation, the Permits required thereunder. In addition, to the
knowledge of the Company, (i) there have been no such releases by predecessors
of the Company or any Company Subsidiary and (ii) no releases in quantities
exceeding the reportable quantities as defined under federal or state law on,
upon, or into any real property in the immediate vicinity of any of the real
properties of the Company or any Company Subsidiary other than those authorized
by Environmental Laws which, through soil or ground water contamination, may
have come to be located on the properties of the Company.
21
(d) ENVIRONMENTAL INDEMNITIES. Neither the Company nor any Company
Subsidiary is a party, whether as a direct signatory or as successor, assign or
third-party beneficiary, or otherwise bound, to any Lease or other Contract
(excluding insurance policies disclosed on the Disclosure Schedules) under which
the Company or any Company Subsidiary is obligated by or entitled to the
benefits of, directly or indirectly, any representation, warranty,
indemnification, covenant, restriction or other undertaking concerning
Environmental Conditions. Neither the Company nor any Company Subsidiary has
released any other person from any claim under any Environmental Law or waived
any rights concerning any Environmental Condition.
(e) ENVIRONMENTAL REPORTS. Complete and accurate copies of the
Environmental Reports, as well as all other written environmental reports,
audits or assessments which have been conducted, either by the Company, any
Company Subsidiary or any person engaged by the Company or any Company
Subsidiary for such purpose, at any facility owned or formerly owned by the
Company or any Company Subsidiary have been made available to Buyer.
(f) ENVIRONMENTAL MATTERS. The precious metal mining claims
("properties") formerly held by Windstar Resources, Inc. ("WSRI") were
properties owned by the Department of Interior (federal land) and staked
(boundaries established) by WSRI, which granted WSRI the right to mine for
minerals contained therein only if a mining permit was issued by the Department
of Interior. There were no mining nor exploration permits ever issued, therefore
no mining took place on the properties. Since the annual minimum payment payable
to the Department of Interior was not made by WSRI on August 31, 1999, the right
to hold the claims was lost and the properties reverted by to the Department of
Interior.
3.11 CONTRACTS.
(a) DISCLOSURE. DISCLOSURE SCHEDULE 3.11(A) sets forth a complete
and accurate list of all of the Contracts to which the Company or any Company
Subsidiary is a party of the following categories:
(i) Contracts not made in the ordinary course of business;
(ii) License agreements or royalty agreements, whether the
Company or any Company Subsidiary is the licensor or licensee thereunder
(excluding licenses that are commonly available on standard commercial terms,
such as software "shrink-wrap" licenses);
(iii) Non-disclosure agreements (whether the Company or any
Company Subsidiary is the beneficiary or the obligated party thereunder);
(iv) Contracts or commitments (including groups of related
Contracts or commitments) involving future expenditures or Liabilities, actual
or potential, in excess of $50,000.00 after the date hereof or otherwise
material to the Business or the Assets of the Company or any Company Subsidiary;
(v) Contracts or commitments relating to commission arrangements
with others that are material to the Business;
22
(vi) Employment contracts, consulting contracts, severance
agreements, "stay-bonus" agreements and similar arrangements, including
Contracts (A) to employ or terminate executive officers or other personnel and
other contracts with present or former officers or directors of the Company or
any Company Subsidiary or (B) that will result in the payment by, or the
creation of any Liability of the Company, any Company Subsidiary or Buyer to pay
any severance, termination, "golden parachute," or other similar payments to any
present or former personnel following termination of employment or otherwise as
a result of the consummation of the transactions contemplated by this Agreement;
(vii) Indemnification agreements;
(viii) Promissory notes, loans, agreements, indentures,
evidences of indebtedness, letters of credit, guarantees, or other instruments
relating to an obligation to pay money, whether the Company or any Company
Subsidiary shall be the borrower, lender or guarantor thereunder (excluding
credit provided by the Company or any Company Subsidiary in the ordinary course
of business to purchasers of its products and obligations to pay vendors in the
ordinary course of business and consistent with past practice);
(ix) Contracts containing covenants limiting the freedom of the
Company, any Company Subsidiary, or any officer, director, Employee or Affiliate
of the Company or any Company Subsidiary to engage in any line of business or
compete with any Person that relates directly or indirectly to the Business;
(x) Any Contract with the federal, state or local government or
any agency or department thereof;
(xi) Any Contract or other arrangement with a Related Party;
(xii) Leases of real or personal property (including groups of
related Leases) involving annual payments of more than $50,000.00;
(xiii) Contracts or commitments (including groups of related
Contracts or commitments) for the purchase or sale of raw materials,
commodities, supplies, products, or other personal property, or for the
furnishing or receipt of services, the performance of which will extend over a
period of more than six (6) months, result in a loss to the Company or any
Company Subsidiary, or involve consideration in excess of $50,000.00;
(xiv) Contracts or commitments concerning a partnership or joint
venture; and
(xv) Any other Contract under which the consequences of a
default by any party or termination would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
Complete and accurate copies of all of the Contracts listed on DISCLOSURE
SCHEDULE 3.11, including all amendments and supplements thereto, have been
provided to Buyer. There are no oral Contracts.
23
(b) TERMINATION OF EMPLOYMENT CONTRACTS. That certain Executive
Compensation Agreement dated November 17, 1999 between the Company and Xxxxxxx
X. Xxxxxx and that certain Executive Employment Agreement dated January 1, 2003
between the Company and I. Xxxxxx Xxxxxx each has been irrevocably terminated,
effective as of immediately prior to the Effective Time and pursuant to a
Termination Agreement in the form attached as DISCLOSURE SCHEDULE 3.11(B), such
that the Company shall have no liability thereunder following the termination
thereof.
(c) ABSENCE OF DEFAULTS. All of the Contracts are valid, binding and
enforceable in accordance with their terms, with no material existing (or
threatened in writing) Default or dispute. The Company or a Company Subsidiary
has fulfilled, or is in a position to take all action necessary to enable it to
fulfill when due, all of its material obligations under each of such Contracts.
All parties to such Contracts have complied in all material respects with the
provisions thereof, no party is in Default thereunder and no notice of any claim
of Default has been given to the Company or any Company Subsidiary.
3.12 NO CONFLICT OR VIOLATION; CONSENTS. None of the execution, delivery
or performance of this Agreement, the consummation of the transactions
contemplated hereby, nor compliance by the Company with any of the provisions
hereof, will (a) violate or conflict with any provision of the governing
documents of the Company or any Company Subsidiary, (b) violate, conflict with,
or result in a breach of or constitute a default (with or without notice or the
passage of time) under, or result in the termination of, or accelerate the
performance required by, or result in a right to terminate, accelerate, modify
or cancel under, or require a notice or consent under, or result in the creation
of any Encumbrance upon any of its respective Assets under, any Contract, Lease,
License, franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, security interest or other arrangement to which the
Company or any Company Subsidiary is a party or by which the Company or any
Company Subsidiary is bound or to which any of its respective Assets are
subject, (c) violate any applicable Regulation or Order or (d) impose any
Encumbrance on any of the Assets of the Company or any Company Subsidiary or the
Business.
(b) No notices to, declaration, filing or registration with,
approvals or Consents of, or assignments by, any Persons (including any federal,
national, state or local governmental or administrative authorities) are
necessary to be made or obtained by the Company in connection with the
execution, delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby.
3.13 PERMITS. DISCLOSURE SCHEDULE 3.13 sets forth a complete list of all
material Permits held by the Company and the Company Subsidiaries, all of
which are as of the date hereof in full force and effect. The Company and
the Company Subsidiaries have, and at all times have had, all material
Permits required under any applicable Regulation in the operation of the
Business or in the ownership of the Assets of the Company or any Company
Subsidiary, and own or possess such Permits free and clear of all
Encumbrances. Neither the Company nor any Company Subsidiary is in default,
and neither the Company nor any Company Subsidiary has received any notice of
any claim of default with respect to any such Permit. Except as otherwise
governed by law, all such Permits are renewable by their terms or in the
ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees
24
and will not be adversely affected by the completion of the transactions
contemplated by this Agreement.
3.14 SEC REPORTS; FINANCIAL STATEMENTS; BOOKS AND RECORDS.
----------------------------------------------------
(a) SEC REPORTS. The Company has filed with the SEC all required
forms, reports, registration statements and documents required to be filed by it
with the SEC (collectively, all such forms, reports, registration statements and
documents filed since January 1, 1998 are referred to herein as the "COMPANY SEC
REPORTS"). All of the Company SEC Reports complied as to form, when filed, in
all material respects with the applicable provisions of the Securities Act and
the Exchange Act. Accurate and complete copies of the Company SEC Reports have
been made available to Buyer. As of their respective dates or, in the case of
registration statements, their effective dates (or, if amended or superseded by
a filing prior to the date of this Agreement, then on the date of such filing),
the Company SEC Reports (including all exhibits and schedules thereto and
documents incorporated by reference therein) did not contain any untrue
statement of a material fact or 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. The Company has been
advised by each of its current officers and directors that each such person and
such persons' Affiliates have complied with all filing requirements under
Section 13 and Section 16(a) of the Exchange Act. Each certification included in
the Company SEC Reports pursuant to Section 302 or Section 906 of the
Xxxxxxxx-Xxxxx Act of 2002 was accurate when made.
(b) FINANCIAL STATEMENTS. Each of the financial statements
(including, in each case, any related notes thereto) contained in the Company
SEC Reports (the "COMPANY FINANCIAL STATEMENTS"), (x) was prepared in accordance
with GAAP and (y) fairly presented the financial position of Company as at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated, consistent with the books and records of the
Company, except that the unaudited interim financial statements were or are
subject to normal year-end adjustments. The balance sheet of the Company
contained in the Company's Form 10-K for the year ended December 31, 2002 is
hereinafter referred to as the "COMPANY BALANCE SHEET."
(c) INTERNAL CONTROLS; DISCLOSURE CONTROLS. The Company maintains a
system of internal accounting controls and disclosure controls and procedures
sufficient to provide reasonable assurance that (i) transactions are executed
with management's authorization, (ii) transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP and to
maintain accountability for assets, (iii) access to assets is permitted only in
accordance with management's authorization, (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences and (v) material information
concerning the Company is publicly disseminated in a timely manner.
(d) BOOKS AND RECORDS. The Books and Records, in reasonable detail,
accurately and fairly reflect in all material respects the activities of the
Company, the Company Subsidiaries and the Business and have been provided to
Buyer or made available for its inspection.
25
(e) ALL ACCOUNTS RECORDED. Neither the Company nor any Company
Subsidiary has engaged in any transaction, maintained any bank account or used
any corporate funds except for transactions, bank accounts or funds which have
been and are reflected in the Books and Records.
(f) CORPORATE RECORDS. The stock records and minute books of the
Company and the Company Subsidiaries that have been made available to Buyer
fully reflect all minutes of meetings, resolutions and other material actions
and proceedings of the stockholders and board of directors and all committees
thereof, all issuances, transfers and redemptions of capital stock of the
Company and the Company Subsidiaries and contain true, correct and complete
copies of their respective Certificate of Incorporation and Bylaws and all
amendments thereto through the date hereof.
3.15 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance Sheet Date,
the Company and the Company Subsidiaries have conducted the Business only in
the ordinary course consistent with past practice and there has not been any:
(a) Company Material Adverse Change;
(b) failure to operate the Business in the ordinary course so as to
use all commercially reasonable efforts to preserve the Business intact and to
preserve the continued services of the Employees and the goodwill of suppliers,
customers and others having business relations with the Company or any Company
Subsidiary;
(c) resignation or termination of any officer, director or manager,
or any increase in the rate of compensation payable or to become payable by the
Company or any Company Subsidiary to any officer, director or Representative of
the Company or any Company Subsidiary (other than standard increases in
connection with general, regularly-scheduled reviews consistent with past
practice), including the making of any loan to, or the payment, grant or accrual
of any bonus, incentive compensation, service award or other similar benefit to,
any such Person;
(d) any payment, loan or advance of any amount to or in respect of,
or the sale, transfer or lease of any properties or the Assets to, or entering
into of any Contract with, any Related Party except regular compensation to
Employees;
(e) sale, assignment, license, transfer or Encumbrance of any of the
Assets of the Company or any Company Subsidiary, tangible or intangible, singly
or in the aggregate, other than sales of products and services involving less
than $50,000.00 in the ordinary course of business and consistent with past
practice;
(f) new Contracts (or series of related new Contracts), or
extensions, modifications, terminations, accelerations or renewals thereof,
except for Contracts involving less than $50,000.00 entered into, modified or
terminated in the ordinary course of business and consistent with past practice;
(g) actual or threatened (i) termination of any material customer
account or group of accounts or actual or (ii) material reduction in purchases
or royalties payable by any such customer or occurrence of any event that is
likely to result in any such termination or reduction;
26
(h) disposition or lapsing of any Proprietary Rights of the Company
or any Company Subsidiary, in whole or in part, or any disclosure of any trade
secret, process or know-how to any Person not an Employee;
(i) change in accounting methods or practices by the Company or any
Company Subsidiary;
(j) revaluation by the Company or any Company Subsidiary of any of
their respective Assets, including writing off or establishing reserves with
respect to inventory, notes or accounts receivable (other than for which
adequate reserves have been previously established);
(k) damage, destruction or loss (whether or not covered by
insurance) adversely affecting the Assets, the Business or the prospects of the
Company or any Company Subsidiary;
(l) declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of the Company or any Company
Subsidiary or any redemption, purchase or other acquisition of any equity
securities of the Company or any Company Subsidiary;
(m) issuance or reservation for issuance by the Company or any
Company Subsidiary of, or commitment of it to issue or reserve for issuance, any
shares of capital stock or other equity securities or obligations or securities
convertible into or exchangeable for shares of capital stock or other equity
securities;
(n) increase, decrease or reclassification of the capital stock of
the Company or any Company Subsidiary;
(o) amendment of the Certificate of Incorporation, Bylaws or charter
documents of the Company or any Company Subsidiary;
(p) capital expenditure or execution of any lease or any incurring
of liability therefor by the Company in one or more related transactions,
involving payments or obligations in excess of $50,000.00 in the aggregate;
(q) failure to pay any obligation of the Company or any Company
Subsidiary when due;
(r) cancellation of any indebtedness or waiver of any rights of
substantial value to the Company or any Company Subsidiary, except in the
ordinary course of business and consistent with past practice;
(s) indebtedness incurred or guaranteed by the Company or any
Company Subsidiary for borrowed money or any commitment to borrow money entered
into by the Company or any Company Subsidiary, or any loans made or agreed to be
made by the Company or any Company Subsidiary;
27
(t) liability incurred by the Company or any Company Subsidiary
except in the ordinary course of business and consistent with past practice, or
any increase or change in any assumptions underlying or methods of calculating
any bad debt, contingency or other reserves;
(u) payment, discharge or satisfaction of any Liabilities of the
Company or any Company Subsidiary other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of Liabilities as reflected or reserved against in the Financial
Statements or incurred in the ordinary course of business and consistent with
past practice since the Balance Sheet Date;
(v) acquisition of any equity interest in any other Person by the
Company or any Company Subsidiary; or
(w) agreement by the Company or any Company Subsidiary directly or
indirectly to do any of the foregoing.
3.16 LIABILITIES. Neither the Company nor any Company Subsidiary has any
Liabilities (absolute, accrued, contingent or otherwise) except (i) Liabilities
which are reflected and properly reserved against in the Financial Statements,
(ii) Liabilities incurred after the Balance Sheet Date in the ordinary course of
business and consistent with past practice (iii) Liabilities arising under the
Contracts (other than obligations which are required to be reflected on a
balance sheet prepared in accordance with GAAP) set forth on DISCLOSURE SCHEDULE
3.11 and (iv) Liabilities set forth on DISCLOSURE SCHEDULE 3.16. None of the
Liabilities described in this Section 3.16 relates to any breach of Contract,
breach of warranty, tort, infringement or violation of law or arose out of any
Action.
3.17 LITIGATION. There is no Action pending or threatened or, to the
knowledge of the Company, anticipated (i) against, relating to or affecting the
Company or any Company Subsidiary, or any of the Assets of the Company or any
Company Subsidiary or any of the officers and directors of the Company or any
Company Subsidiary, (ii) which seeks to enjoin or obtain damages in respect of
the transactions contemplated hereby or (iii) which seeks to prevent the Company
from consummating the transactions contemplated hereby. None of such Actions, if
adversely determined against the Company, any Company Subsidiary, their
respective directors or officers, or any other Person could reasonably be
expected to result in a loss to the Company and any Company Subsidiary,
individually or in the aggregate, in excess of $25,000.00. There is no basis for
any Action, which if adversely determined against the Company, any Company
Subsidiary, their respective directors or officers, or any other Person could
reasonably be expected to result in a loss to the Company, individually or in
the aggregate, in excess of $25,000.00. There are presently no outstanding
judgments, decrees or orders of any court or any governmental or administrative
agency against or affecting the Company, any Company Subsidiary, the Business or
any of the Assets of the Company or any Company Subsidiary. DISCLOSURE SCHEDULE
3.17 contains a complete and accurate description of all Actions to which the
Company or any Company Subsidiary has been a party since January 1, 1998 or
28
which relate to any of the Assets of the Company or any Company Subsidiary or
the Company's or any Company Subsidiary's officers or directors as such, or any
such Actions which were settled prior to the institution of formal proceedings,
other than Actions brought by the Company or any Company Subsidiary for
collection of monies owed in the ordinary course of business.
3.18 LABOR MATTERS.
(a) GENERAL. Neither the Company nor any Company Subsidiary is a
party to any labor agreement with respect to its Employees with any labor
organization, group or association. No petition for certification as the
exclusive bargaining representative for any of the Employees is pending before
the National Labor Relations Board. To the Company's knowledge, no union
organizing activity has occurred with respect to the Employees in the past two
(2) years. There is no unfair labor practice charge or complaint against the
Company pending before the National Labor Relations Board or any other domestic
or foreign governmental agency arising out of the Company's or any Company
Subsidiary's activities, and the Company has no knowledge of any facts or
information which would give rise thereto; there is no labor strike or labor
disturbance pending or threatened against the Company or any Company Subsidiary,
nor is any grievance currently being asserted against it; and neither the
Company nor any Company Subsidiary has experienced a work stoppage or other
labor difficulty. There are no material controversies pending or to the
knowledge of the Company, threatened between the Company or any Company
Subsidiary and the Employees, and the Company has no knowledge of any facts
which could reasonably result in any such controversy. To the knowledge of the
Company, no executive, Key Employee, or group of Employees has any plans to
terminate employment with the Company or any Company Subsidiary.
(b) COMPLIANCE. The Company and each Company Subsidiary is in
material compliance with all applicable Laws respecting employment practices,
terms and conditions of employment, wages and hours, equal employment
opportunity, and the payment of social security and similar taxes and is not
engaged in any unfair labor practice. The Company has no knowledge of any claims
for past due wages or any penalties for failure to comply with any of the
foregoing.
(c) SEVERANCE OBLIGATIONS. Except as set forth on Schedule 3.18(c),
neither the Company nor any Company Subsidiary has entered into any severance,
"stay-bonus" or similar arrangement in respect of any present or former Employee
that will result in any obligation (absolute or contingent) of Buyer or the
Company or any Company Subsidiary to make any payment to any present or former
Employee following termination of employment or upon consummation of the
transactions contemplated by this Agreement (whether or not employment is
continued for any specified period after the Effective Time). Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in the acceleration or vesting of
any other rights of any Person to benefits under any Employee Plans.
(d) HIGHLY COMPENSATED EMPLOYEES. Attached hereto as DISCLOSURE
SCHEDULE 3.18(D) is a list of the names of all present Employees with total
compensation exceeding $100,000.00 in 2002 and their current compensation
payable by the Company or any Company Subsidiary. Notwithstanding any provision
29
of this Agreement or any Disclosure Schedule to the contrary, the Company
represents that from and after the Effective Time no benefit or other
compensation is payable to any Person identified on DISCLOSURE SCHEDULE 3.18(D)
upon the voluntary resignation of such Person from employment with Buyer or the
Company or any Company Subsidiary as a result of the Merger.
3.19 EMPLOYEE BENEFIT PLANS.
(a) There are no, and since the formation of the Company and each
Company Subsidiary, there have been no, Employee Plans which cover or have
covered Employees or under which the Company has contributed or has any
obligation to contribute or with respect to which the Company may have any
liability. With respect to each Employee Plan, the Company has delivered or made
available to Buyer a true, complete and correct copy of (i) such Employee Plan
(or, if not written, a written summary of its material terms) and the most
recent summary plan description, if any, related to such Employee Plan, (ii)
each trust agreement or other funding arrangement relating to such Employee
Plan, (iii) the two (2) most recent annual reports (Form 5500) filed with the
IRS with respect to such Employee Plan, (iv) the most recent actuarial report or
financial statement relating to such Employee Plan and (v) the most recent
determination letter, if any, issued by the IRS with respect to such Employee
Plan and any pending request for such a determination letter. The Company and
the Company Subsidiaries have no, and to the knowledge of Company, no other
person or entity has, any express or implied obligation, whether legally
enforceable or not, to modify, change or terminate any Employee Plan, other than
with respect to a modification, change or termination required by ERISA or the
Code.
(b) COMPLIANCE. Each Employee Plan has been administered in all
material respects in accordance with its terms and all applicable laws,
including ERISA and the Code, and contributions required to be made under the
terms of any of such Employee Plans as of the date of this Agreement have been
timely made or, if not yet due, have been properly reflected on the most recent
consolidated balance sheet filed or incorporated by reference in the Company
Financial Statements prior to the date of this Agreement. With respect to such
Employee Plans, no event has occurred and there exists no condition or set of
circumstances in connection with which Company or any Company Subsidiary could
be subject to any material liability (other than for routine benefit
liabilities) under the terms of, or with respect to, such Employee Plans, ERISA,
the Code or any other applicable Law.
(c) QUALIFICATION. The Company on behalf of itself and each ERISA
Affiliate hereby represents that: (i) each Employee Plan which is intended to
qualify under Section 401(a), Section 401(k), Section 401(m) or Section
4975(e)(7) of the Code has received a favorable determination letter from the
IRS as to its qualified status, and each trust established in connection with
any such Employee Plan which is intended to be exempt from federal income
taxation under Section 501(a) of the Code is so exempt, and no fact or event has
occurred that could adversely affect the qualified status of any such Employee
Plan or the exempt status of any such trust and (ii) each Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability (other than (A) liability for
ordinary administrative expenses typically incurred in a termination event or
(B) if the Employee Plan is a Pension Plan subject to Part 2 of Title I of
ERISA, liability for the accrued benefits of the Pension Plan as of the date of
such termination to the extent that either there are sufficient assets set aside
30
in the Pension Plan's trust or insurance contract to satisfy such liability or
such liability is reflected on the most recent balance sheet included in the
Company Financial Statements prior to the date of this Agreement). No suit,
administrative proceeding, action or other litigation has been brought, or is
threatened, against or with respect to any such Employee Plan, including any
audit or inquiry by the IRS or United States Department of Labor (other than
routine benefits claims by Employee Plan participants or beneficiaries).
(d) TITLE IV PENSION PLANS. No Employee Plan is a Multiemployer Plan
or other Pension Plan subject to Title IV of ERISA, and neither the Company nor
any ERISA Affiliate has sponsored or contributed to or been required to
contribute to a Multiemployer Plan or other Pension Plan subject to Title IV of
ERISA. No material liability under Title IV of ERISA has been incurred by
Company or any ERISA Affiliate that has not been satisfied in full, and no
condition exists that presents a material risk to Company or any ERISA Affiliate
of incurring or being subject (whether primarily, jointly or secondarily) to a
material liability thereunder. None of the assets of Company or any ERISA
Affiliate is, or may reasonably be expected to become, the subject of any lien
arising under ERISA or Section 412(n) of the Code. Neither the Company nor any
ERISA Affiliate has any liability for unpaid contributions to a Multiemployer
Plan under Section 515 of ERISA.
(e) FUNDING DEFICIENCY. With respect to each Pension Plan set forth
on DISCLOSURE SCHEDULE 3.19 that is subject to Title IV or Part 3 of Title I of
ERISA or Section 412 of the Code, (i) no reportable event (within the meaning of
Section 4043 of ERISA, other than an event that is not required to be reported
before or within 30 days of such event) has occurred or is expected to occur,
(ii) there was not an accumulated funding deficiency (within the meaning of
Section 302 of ERISA or Section 412 of the Code), whether or not waived, as of
the most recently ended plan year of such Pension Plan; and (iii) there is no
"unfunded benefit liability" (within the meaning of Section 4001(a)(18) of
ERISA).
(f) RETIREE WELFARE BENEFITS; COBRA AND HIPAA. Except as required by
Law, no Employee Plan provides any of the following retiree or post-employment
benefits to any person: medical, disability or life insurance benefits. The
Company is in compliance with (i) the requirements of the applicable health care
continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA") and the regulations (including
proposed regulations, if any) thereunder and (ii) the applicable requirements of
the Health Insurance Portability and Accountability Act of 1996, as amended, and
the regulations (including proposed regulations) thereunder.
(g) DEDUCTIBILITY OF PAYMENTS. There is no contract, agreement, plan
or arrangement covering any Employee or former Employee that, individually or
collectively, requires the payment by the Company or any Company Subsidiary of
any amount (i) that is not deductible under Section 162(a)(1), 162(m) or 404 of
the Code or (ii) that is an "excess parachute payment" pursuant to Section 280G
of the Code.
(h) FIDUCIARY DUTIES AND PROHIBITED TRANSACTIONS. No prohibited
transaction (as defined in Section 4975 of the Code or Section 406 of ERISA) has
occurred that involves the assets of any Employee Plan for which no exemption
exists under Section 408 of ERISA and Section 4975(c)(2) or (d) of the Code and
is reasonably likely to subject the Company, any Company Subsidiary or any of
31
their employees, directors or officers to the tax or penalty on prohibited
transactions imposed by Section 4975 of the Code or the sanctions imposed on
prohibited transactions under Title I of ERISA. Neither the Company nor any
Company Subsidiary has violated or has participated with a fiduciary (as defined
in Section 3(21) of ERISA) of a Welfare Plan or Pension Plan in a violation of
Part 4 of Title I, Subtitle B of ERISA with respect to any such plan, and the
Company has not been assessed any civil penalty under Section 502(l) of ERISA.
(i) NO ADOPTION. Neither the Company nor any ERISA Affiliate has
announced to their employees, former employees, consultants or directors an
intention to create, or otherwise created, a legally binding commitment to
adopt, change or terminate any Employee Plan which is intended to cover
Employees or former Employees.
3.20 TRANSACTIONS WITH RELATED PARTIES. No Related Party has (a)
borrowed from or loaned to the Company money or other property which has not
been repaid or returned, (b) any contractual relationship or other claims,
express, or implied, of any kind whatsoever against the Company or any
Company Subsidiary or (c) any interest in any property used by the Company or
any Company Subsidiary.
3.21 COMPLIANCE WITH LAW. The Company and the Company Subsidiaries have
conducted the Business in compliance with all applicable Laws and Orders.
Neither the Company nor any Company Subsidiary has received any notice to the
effect that, or has otherwise been advised that, the Company or any Company
Subsidiary is not in compliance with any such Laws or Orders, and the Company
has no reason to anticipate that any existing circumstances are likely to
result in any material violation of any of the foregoing.
3.22 INTELLECTUAL PROPERTY.
(a) DISCLOSURE SCHEDULE 3.22(A) lists all Company Registered
Proprietary Rights (including all Company Registered Proprietary Rights and all
trademarks and service marks that the Company or any Company Subsidiary has used
with the intent of creating or benefiting from any common law rights relating to
such marks) and lists any proceedings or actions pending as of the date hereof
before any court or tribunal (including the PTO or equivalent authority anywhere
in the world) related to any of the Company Registered Proprietary Rights.
(b) The Company or a Company Subsidiary has all requisite right,
title and interest in or valid and enforceable rights under Contracts or
Licenses to use all Company Proprietary Rights used by the Company or any
Company Subsidiary or necessary to the conduct of the Business as presently
conducted. Each item of Company Proprietary Rights, including all Company
Registered Proprietary Rights listed on DISCLOSURE SCHEDULE 3.22(B), is owned
exclusively by the Company (excluding Proprietary Rights licensed to the Company
under any License) and is free and clear of any Encumbrances). The Company (i)
owns exclusively all trademarks, service marks and trade names used by the
Company or any Company Subsidiary in connection with the operation or conduct of
the Business, including the sale of any products or technology or the provision
of any services by the Company or any Company Subsidiary, PROVIDED, HOWEVER,
that the Company or a Company Subsidiary may use trademarks, service marks and
32
trade names of third parties which are licensed to the Company or any Company
Subsidiary, and (ii) owns exclusively, and have good title to, all copyrighted
works that are the Company's products or other works of authorship that the
Company otherwise purports to own; PROVIDED, HOWEVER, that such works may
incorporate copyrighted works or works of authorship, trademarks or trade names
of third parties which are licensed to the Company or are in the public domain.
(c) To the extent that any Company Proprietary Rights have been
developed or created by any Person other than the Company, the Company has a
written agreement with such Person with respect thereto and the Company has
either (i) obtained ownership of, and is the exclusive owner of, all such
Proprietary Rights by operation of law or by valid assignment of any such rights
or (ii) has obtained a License under or to such Proprietary Rights.
(d) Neither the Company nor any Company Subsidiary has transferred
ownership of or granted any License of or other right to use or authorized the
retention of any rights to use, any Proprietary Rights that are or were Company
Proprietary Rights, to any other Person.
(e) The Company Proprietary Rights constitute all the Proprietary
Rights necessary or desirable to the conduct of the Business as it currently is
conducted or as reasonably contemplated to be conducted, including, without
limitation, the design, development, distribution, marketing, manufacture, use,
import, license, and sale of the products, technology and services of the
Company (including products, technology, or services currently under
development). Each of the Company Proprietary Rights owned or used by the
Company or any Company Subsidiary immediately prior to the Closing will be owned
or available for use by the Company or a Company Subsidiary on identical terms
and conditions immediately subsequent to the Closing. The Company has taken all
necessary and desirable action to maintain and protect each item of the Company
Proprietary Rights that it or any Company Subsidiary owns or uses.
(f) DISCLOSURE SCHEDULE 3.22(F) lists all Contracts and Licenses
(including all inbound Licenses) to which the Company or any Company Subsidiary
is a party with respect to any Proprietary Rights. No Person other than the
Company or a Company Subsidiary has ownership rights to improvements made by the
Company or any Company Subsidiary in Proprietary Rights which has been licensed
to the Company or any Company Subsidiary.
(g) DISCLOSURE SCHEDULE 3.22(G) lists all Contracts, Licenses and
agreements between the Company or any Company Subsidiary and any other Person
wherein or whereby the Company or any Company Subsidiary has agreed to, or
assumed, any obligation or duty to warrant, indemnify, reimburse, hold harmless,
guaranty or otherwise assume or incur any obligation or Liability or provide a
right of rescission with respect to the infringement or misappropriation by the
Company, any Company Subsidiary or such other Person of the Proprietary Rights
of any Person other than the Company or the Company Subsidiaries.
(h) To the knowledge of the Company, the operation of the Business
as currently conducted or as presently proposed to be conducted, including the
Company's design, development, use, import, manufacture and sale of the
products, technology or services (including products, technology or services
currently under development) of the Company or any Company Subsidiary does not
33
infringe or misappropriate the Proprietary Rights of any Person, violate the
rights of any Person (including rights to privacy or publicity), or constitute
unfair competition or an unfair trade practice under any applicable Law, and
neither the Company nor any Company Subsidiary has received notice from any
Person claiming that such operation or any act, product, technology or service
(including products, technology or services currently under development) of the
Company infringes or misappropriates the Proprietary Rights of any Person or
constitutes unfair competition or trade practices under any applicable Law. To
the extent that the Company has received any notice related to the above or is
aware of any pending, anticipated, or threatened Action against the Company or
any Company Subsidiary relating to infringement or misappropriation of the
Proprietary Rights of any Person, the Company has conducted, prior to the
Closing Date, a complete and accurate investigation of any alleged infringement
or misappropriation. Based on the complete and accurate investigation, there is
no basis for any Action against the Company or any Company Subsidiary and any
judgment, order, or determination from such Action will have no material impact
on the operation of the Business as currently conducted or as presently proposed
to be conducted, including the Company's design, development, use, import,
manufacture and sale of the products, technology or services (including
products, technology or services currently under development) of the Company.
These representations are in addition to those of Section 3.17 of this Agreement
or any other provision hereof.
(i) Each item of Company Registered Proprietary Rights is valid and
subsisting, and all necessary registration, maintenance, renewal fees, annuity
fees and taxes due through the date of this Agreement in connection with such
Registered Proprietary Rights have been paid and all necessary documents and
certificates in connection with such Company Registered Proprietary Rights have
been filed with the relevant patent, copyright, trademark or other authorities
in the United States or foreign jurisdictions, as the case may be, for the
purposes of maintaining such Registered Proprietary Rights. DISCLOSURE SCHEDULE
3.22(I) lists all actions that must be taken by the Company or any Company
Subsidiary within 180 days from the date hereof, including the payment of any
registration, maintenance, renewal fees, annuity fees and taxes or the filing of
any documents, applications or certificates for the purposes of maintaining,
perfecting or preserving or renewing any Company Registered Proprietary Rights.
The Company has not registered the copyright with the U.S. Copyright Office for
the latest version of each product or technology of the Company or any Company
Subsidiary that constitutes or includes a copyrightable work. In each case in
which the Company or any Company Subsidiary has acquired ownership of any
Proprietary Rights from any Person, the Company or a Company Subsidiary has
obtained a valid and enforceable assignment sufficient to irrevocably transfer
all rights in such Proprietary Rights (including the right to seek damages with
respect to such Proprietary Rights) to the Company or a Company Subsidiary, to
the maximum extent required to protect the Company's or the Company
Subsidiaries' ownership interests in and to such Proprietary Rights in
accordance with applicable Laws, the Company has recorded each such assignment
of Registered Proprietary Rights with the relevant Governmental or Regulatory
Authority, including the PTO, the U.S. Copyright Office, or their respective
equivalents in any relevant foreign jurisdiction, as the case may be.
(j) There are no Contracts or Licenses between the Company or any
Company Subsidiary and any other Person with respect to Company Proprietary
Rights under which there is any claim (or facts that may reasonably lead to a
claim) known to the Company regarding the scope of such Contract or License, or
34
performance under such Contract or License, including with respect to any
payments to be made or received by the Company thereunder.
(k) To the knowledge of the Company, no Person is infringing or
misappropriating any Company Proprietary Rights.
(l) The Company has taken all commercially reasonable steps to
protect its rights in confidential information and trade secrets of the Company
and the Company Subsidiaries or provided by any other Person to the Company or
any Company Subsidiary subject to a duty of confidentiality. Without limiting
the generality of the foregoing, the Company has, and enforces, a policy
requiring each Employee, consultant and independent contractor to execute
proprietary information, confidentiality and invention and copyright assignment
agreements, and all current and former Employees, consultants and independent
contractors of the Company and any Company Subsidiary have executed such
agreements, as applicable. Forms of all such agreements have been provided to
Buyer or made available to Buyer for review.
(m) No Company Proprietary Rights or product, technology or service
of the Company is subject to any Order or Action or Proceeding that restricts,
or that is reasonably expected to restrict in any manner, the use, transfer or
licensing of any Company Proprietary Rights by the Company or that may affect
the validity, use or enforceability of such Company Proprietary Rights.
(n) Neither this Agreement nor any transactions contemplated by this
Agreement will result in Buyer granting any rights or licenses with respect to
the Proprietary Rights of Buyer to any Person pursuant to any Contract to which
the Company or any Company Subsidiary is a party or by which any of their
respective Assets are bound.
(o) DISCLOSURE SCHEDULE 3.22(O) sets forth a list of (x) all
software which is material to the Business and which the Company or any Company
Subsidiary has licensed from any third party which is used by the Company or any
Company Subsidiary in the Company products or otherwise in their businesses and
(y) a list of all "freeware" and "shareware" incorporated into any product now
shipped by the Company or any Company Subsidiary. The Company and the Company
Subsidiaries have all rights necessary to the use of such software, "freeware"
and "shareware."
(p) The Company has taken all necessary and appropriate steps to
protect and preserve ownership of Company Proprietary Rights. The Company has
secured valid written assignments from all consultants and Employees who
contributed to the creation or development of the Company Proprietary Rights. In
the event that the consultant is concurrently employed by the Company or any
Company Subsidiary and a third party, the Company has taken additional steps to
ensure that any Company Proprietary Rights developed by such a consultant does
not belong to the third party or conflict with the third party's employment
agreement such steps include, but are not limited to, ensuring that all research
and development work performed by such a consultant are performed only on the
Company's or the Company Subsidiaries' facilities and only using the Company's
or the Company Subsidiaries' resources.
35
3.23 TAX MATTERS.
(a) FILING OF TAX RETURNS. The Company and each Company Subsidiary
has timely filed with the appropriate taxing authorities and in the proper form
all Tax Returns required to be filed. The Tax Returns filed are complete and
accurate. All Taxes due and payable by the Company or any Company Subsidiary
(whether or not shown on any Tax Return) have been paid. Neither the Company nor
any Company Subsidiary has applied for or received any extension of time within
which to file any Tax Return, other than for Tax Returns that have already been
filed. No claim has ever been made by an authority in a jurisdiction where the
Company or any Company Subsidiary does not file Tax Returns that the Company or
any Company Subsidiary is or may be subject to taxation by that jurisdiction.
(b) PAYMENT OF TAXES. The unpaid Taxes of the Company and the
Company Subsidiaries (i) did not, as of the Balance Sheet Date, exceed the
reserve for Tax Liability (excluding any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) set forth on the face
of the balance sheets contained in the Financial Statements (rather than in any
notes thereto), and (ii) will not exceed that reserve as adjusted for operations
and transactions through the Closing Date in accordance with the past custom and
practice of the Company and the Company Subsidiaries in filing their respective
Tax Returns.
(c) AUDITS, INVESTIGATIONS OR CLAIMS. To the knowledge of the
Company, no deficiencies for Taxes of the Company or any Company Subsidiary have
been claimed, proposed or assessed by any taxing or other governmental
authority. There are no pending or, to the knowledge of the Company, threatened
audits, assessments or other Actions for or relating to any Liability in respect
of Taxes of the Company or any Company Subsidiary, and there are no matters
under discussion with any governmental authorities, or known to the Company,
with respect to Taxes that are likely to result in an additional Liability for
Taxes with respect to the Company or any Company Subsidiary. Audits of federal,
state, local and foreign Tax Returns by the relevant taxing authorities have
been completed for the periods set forth on DISCLOSURE SCHEDULE 3.23(C) and,
except as set forth in such Disclosure Schedule, none of the Company, any
Company Subsidiary and their predecessors have been notified that any taxing
authority intends to audit a Tax Return for any other period.
(d) COPIES OF TAX RETURNS, WAIVERS AND EXTENSIONS. The Company has
delivered to Buyer complete and accurate copies of federal, state, local and
foreign Tax Returns of the Company, the Company Subsidiaries and their
predecessors for the years ended December 31, 1998, 1999, 2000 and 2001, and
complete and accurate copies of all examination reports and statements of
deficiencies assessed against or agreed to by the Company or any predecessor
since December 31, 1996. None of the Company, any Company Subsidiary or any
predecessor has waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or deficiency.
(e) LIENS. There are no Encumbrances for Taxes other than Permitted
Encumbrances on any of the Assets of the Company or any Company Subsidiary.
(f) TAX ELECTIONS. All elections with respect to Taxes affecting the
Company, the Company Subsidiaries or their Assets, as of the date hereof are set
forth on DISCLOSURE SCHEDULE 3.23(F). Neither the Company nor any Company
36
Subsidiary has (i) consented at any time under Section 341(f)(1) of the Code to
have the provisions of Section 341(f)(2) of the Code apply to any disposition of
any Assets; (ii) agreed, or is required, to make any adjustment under Section
481(a) of the Code by reason of a change in accounting method or otherwise;
(iii) made an election, or is required, to treat any Asset as owned by another
Person pursuant to the provisions of Section 168(f) of the Code or as tax-exempt
bond financed property or tax-exempt use property within the meaning of Section
168 of the Code; (iv) acquired and does not own any assets that directly or
indirectly secure any debt the interest on which is tax exempt under Section
103(a) of the Code; (v) made and will not make a consent dividend election under
Section 565 of the Code; (vi) elected at any time to be treated as an S
corporation within the meaning of Sections 1361 or 1362 of the Code; or (vii)
made any of the foregoing elections or is required to apply any of the foregoing
rules under any comparable state or local Tax provision.
(g) PRIOR AFFILIATED GROUPS. Neither the Company nor any Company
Subsidiary is or has ever been a member of an affiliated group of corporations
within the meaning of Section 1504 of the Code or of any group that has filed a
combined consolidated or unitary state or local return, except for the group of
which the Company is the parent and Company Subsidiaries are members.
(h) TAX SHARING AGREEMENTS. None of the Company, any Company
Subsidiary, their respective Assets or the Business are, or will be after the
Effective Time, bound by any Tax-sharing agreement (including indemnity
arrangements) or similar arrangements. Neither the Company nor any Company
Subsidiary has assumed the liability of any other Person for Taxes by contract
or course of dealing.
(i) PARTNERSHIPS, SINGLE MEMBER LLCS, CFCS AND PHCS. Neither the
Company nor any Company Subsidiary (i) is a partner for Tax purposes with
respect to any joint venture, partnership, or other arrangement or contract
which is treated as a partnership for Tax purposes, (ii) owns a single member
limited liability company which is treated as a disregarded entity, (iii) is a
stockholder of a "controlled foreign corporation" as defined in Section 957 of
the Code (or any similar provision of state, local or foreign law) and (iv) is a
"personal holding company" as defined in Section 542 of the Code (or any similar
provision of state, local or foreign law).
(j) NO WITHHOLDING. The Company and the Company Subsidiaries have
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any Employee, independent contractor,
creditor, stockholder or other third party.
(k) FIRPTA. Neither the Company nor any Company Subsidiary is or has
ever 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)(1)(A)(ii) of the Code.
(l) INTERNATIONAL BOYCOTT. Neither the Company nor any Company
Subsidiary has ever participated in or is participating in an international
boycott within the meaning of Section 999 of the Code.
37
(m) PERMANENT ESTABLISHMENT. Neither the Company nor any Company
Subsidiary has or has had a permanent establishment in any foreign country, as
defined in any applicable Tax treaty or convention between the United States of
America and such foreign country.
(n) OTHER AGREEMENTS. Except as set forth on DISCLOSURE SCHEDULE
3.23(N), (i) there are no Tax rulings, requests for rulings, or "closing
agreements" (as described in Section 7121 of the Code or any corresponding
provision of state, local or foreign Tax law) relating to the Company or any
Company Subsidiary which could affect the Company's or the Company Subsidiaries'
liability for Tax for any period after the Closing Date, (ii) as a result of any
closing agreement, neither the Company nor any Company Subsidiary will be
required to include any item of income in, or exclude any item of deduction
from, any taxable period ending after the Closing Date, and (iii) as a result of
a change in accounting method for a Tax period beginning on or before the
Closing Date, neither the Company nor any Company Subsidiary will be required to
include any adjustment under Section 481(c) of the Code (or any corresponding
provision of state, local or foreign Tax law) in taxable income for any Tax
period ending after the Closing Date.
(o) OTHER TAXES. No transaction contemplated by this Agreement will
be subject to any stock transfer Tax, sales Tax, use Tax, real estate transfer
or gains Tax, or other similar Tax.
(p) SECTIONS 280G AND 162(M). No payment or other benefit, and no
acceleration of the vesting of any options, payments or other benefits, will be,
as a direct or indirect result of the transactions contemplated by this
Agreement, an "excess parachute payment" to a "disqualified individual" as those
terms are defined in Section 280G of the Code and the regulations thereunder.
All compensation payable to any Employee is deductible under Section 162(m) of
the Code.
3.24 INSURANCE. DISCLOSURE SCHEDULE 3.24 sets forth the following
information with respect to each insurance policy or binders of insurance
(including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which the Company or
any Company Subsidiary has been a party, a named insured, or otherwise the
beneficiary of coverage at any time within the past two (2) years:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage was
on a claims made, occurrence or other basis) and amount (including a description
of how deductibles and ceilings are calculated and operate) of coverage; and
(e) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
38
With respect to each such insurance policy or binder: (i) the policy
is legal, valid, binding, enforceable, and in full force and effect; (ii) the
policy will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; (iii) none of the Company, any Company
Subsidiary or any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination, modification, or
acceleration, under the policy, and (iv) no party to the policy has
repudiated any provision thereof. Since November 17, 1999, the Company and
each Company Subsidiary has been covered by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged during
the aforementioned period. DISCLOSURE SCHEDULE 3.24 describes any
self-insurance arrangements affecting the Company or any Company Subsidiary.
There are no facts known to the Company upon which an insurer might
reasonably be justified in reducing or denying coverage or increasing
premiums on existing policies or binders. There are no outstanding unpaid
claims under any such policies or binders. Such policies and binders are in
full force and effect on the date hereof and shall be kept in full force and
effect by the Company through the Closing Date.
3.25 BROKERS; TRANSACTION COSTS. Neither the Company nor any Company
Subsidiary has entered into and will not enter into any contract, agreement,
arrangement or understanding with any Person which will result in the
obligation of Buyer, the Company or any Company Subsidiary to pay any
finder's fee, brokerage commission, legal, accounting, or similar payment in
connection with the transactions contemplated hereby.
3.26 NO OTHER AGREEMENTS TO SELL THE COMPANY OR THE ASSETS. Neither the
Company nor any Company Subsidiary has any legal obligation, absolute or
contingent, to any other Person to sell the Assets of the Company or any
Company Subsidiary (other than inventory in the ordinary course of business)
or to sell any capital stock of the Company or any Company Subsidiary or to
effect any merger, consolidation or other reorganization of the Company or
any Company Subsidiary or to enter into any agreement with respect thereto,
except pursuant to the Company Options and this Agreement.
3.27 ACCOUNTS RECEIVABLE. All Accounts Receivable of the Company and the
Company Subsidiaries that are reflected on the Company Balance Sheet or on the
accounting records of the Company or any Company Subsidiary as of the Closing
Date represent or will represent valid obligations arising from sales actually
made or services actually performed in the ordinary course of business of the
Company. Unless paid prior to the Closing Date, such Accounts Receivable are or
will be as of the Closing Date collectible net of an appropriate reserve shown
on the Company Balance Sheet or on the accounting records of the Company as of
the Closing Date (which reserves are adequate and calculated consistent with
past practice). Each of such Accounts Receivable either has been or will be
collected in full, without any set-off, within one hundred twenty (120) days
after the day on which it first becomes due and payable. There is no contest,
claim, or right of set-off under any Contract with any obligor of any Accounts
Receivable relating to the amount or validity of such Accounts Receivable.
DISCLOSURE SCHEDULE 3.27 contains a complete and accurate list of all Accounts
Receivable as of the date of the hereof, which list sets forth the aging of such
Accounts Receivable.
39
3.28 INVENTORY. All inventory of the Company and the Company
Subsidiaries, whether or not reflected in the Company Balance Sheet or on the
accounting records of the Company or any Company Subsidiary as of the Closing
Date (accounted for consistent with past practice), consists of a quality and
quantity usable and salable in the ordinary course of business of the Company,
except for obsolete items and items of below-standard quality, all of which have
been written off or written down to net realizable value in the Company Balance
Sheet or on the accounting records of the Company as of the Closing Date, as the
case may be. The quantities of each item of inventory are not excessive, but are
reasonable in the present circumstances of the Company. The Company has good and
marketable title to the inventories free and clear of all Encumbrances. The
inventories do not include any material amount of inventory that is slow-moving,
obsolete, excess, damaged or otherwise not merchantable or returnable by vendors
for full credit.
3.29 PRODUCT WARRANTY. Each product manufactured, sold, leased, or
delivered by the Company or any Company Subsidiary has been in conformity with
all applicable contractual commitments and all express and implied warranties,
and neither the Company nor any Company Subsidiary has any Liability (and there
is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) for replacement or repair thereof or other damage in
connection therewith, subject only to the reserve for product warranty claims
set forth on the face of the Company Balance Sheet (rather than in any notes
thereto) as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company. No product
manufactured, sold, leased, or delivered by the Company or any Company
Subsidiary is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale or lease. The Company has
previously provided to Buyer complete and accurate copies of the standard terms
and conditions of sale or lease for the Company and any Company Subsidiary
(containing applicable guaranty, warranty, and indemnity provisions).
3.30 BOARD RECOMMENDATION. The board of directors of the Company has, at
a meeting of such board duly held on May 13, 2003, unanimously (i) approved,
adopted and declared advisable this Agreement, the Voting Agreements and the
transactions contemplated hereby and thereby, (ii) determined that this
Agreement is fair to and in the best interests of the stockholders of the
Company and (iii) resolved to recommend approval of the adoption of this
Agreement to the stockholders of the Company. The Company has taken any and
all action necessary to exempt the execution, delivery and performance of
this Agreement, the Voting Agreements and the transactions contemplated
hereby and thereby from the restrictions on "business combinations" set forth
in Section 203 of the Delaware Law.
3.31 FAIRNESS OPINION. The Company has received the opinion of Xxxxxxxx,
Xxxxxx & Company, Inc. dated the date of the approval of this Agreement by the
board of directors of the Company to the effect that the aggregate consideration
in the Merger is fair, from a financial point of view, to the stockholders of
the Company.
3.32 MATERIAL MISSTATEMENTS OR OMISSIONS. No representations or
warranties by the Company in this Agreement (including all schedules,
certificates and exhibits hereto) contains or will contain at the Effective Time
any untrue statement of a material fact, or omits or will omit to state any
material fact necessary to make the statements or facts contained therein not
40
misleading. In addition, the other document, written information, statement,
certificate or schedule heretofore or hereinafter furnished by the Company or
any of its Representatives to Buyer or Merger Sub in connection with the
transactions contemplated by this Agreement, or mailed or delivered to
stockholders of the Company in connection with soliciting the approval of the
adoption of this Agreement by the stockholders of the Company, taken as a whole
do not contain or will not contain any untrue statement of a material fact, or
do not omit or will not at the Effective Time omit to state any material fact
necessary to make the statements or facts contained therein not misleading.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
As an inducement of the Company to enter into this Agreement, Buyer and
the Merger Sub represent and warrant to the Company as follows, which
representations and warranties are, as of the date hereof, and will be, as of
the Closing Date, true and correct:
4.1 ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the state of Delaware. Merger Sub has not engaged in any business
(other than in connection with this Agreement and the transactions contemplated
hereby) since the date of its incorporation. Merger sub is a wholly-owned
subsidiary of Buyer.
4.2 AUTHORIZATION. Each of Buyer and Merger Sub has all necessary
corporate power and authority to enter into this Agreement and, assuming the
approval of the adoption of this Agreement by the sole stockholder of Merger
Sub, has taken all action necessary to consummate the transactions contemplated
hereby and to perform its respective obligations hereunder. This Agreement has
been duly executed and delivered by each of Buyer and Merger Sub, and this
Agreement is a valid and binding obligation of each of Buyer and Merger Sub
enforceable against each of Buyer and Merger Sub in accordance with its terms,
except that enforceability may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors or (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
4.3 NO CONFLICTS. The execution and delivery by each of Buyer and Merger
Sub of this Agreement does not, and the performance by each Buyer and Merger Sub
of its obligations under this Agreement and the consummation of the transactions
contemplated hereby do not and will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the Certificate of Incorporation or Bylaws of
Buyer or Merger Sub; or
(b) conflict with or result in a violation or breach of any Law or
Order applicable to Buyer or Merger Sub.
4.4 APPROVALS. Other than the filing of the Certificate of Merger,
together with the required officers' certificates, and such consents,
approvals, orders, authorizations, registrations, declarations and filings as
41
may be required under state or federal securities laws, if any, there are no
material Approvals of Governmental or Regulatory Authorities relating to the
business conducted by Buyer or Merger Sub required to be given to or obtained
by Buyer from any Governmental or Regulatory Authorities in connection with
the consummation of the transactions contemplated by this Agreement.
4.5 MERGER CONSIDERATION. Buyer currently has available, and at the
Effective Time of the Merger will continue to have available, sufficient cash
and cash equivalents to enable it to perform its obligations under this
Agreement.
4.6 BROKERS' AND FINDERS' FEES. Neither Buyer nor Merger Sub has
incurred, nor will they incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transactions contemplated hereby.
4.7 BOARD APPROVAL; NO STOCKHOLDER APPROVAL REQUIRED. The boards of
directors of Buyer and Merger Sub have approved this Agreement and the
Merger. The stockholders of Buyer are not required to adopt this Agreement.
Buyer, as the sole stockholder of Merger Sub, shall adopt this Agreement
immediately after the execution and delivery of this Agreement by the parties
hereto.
4.8 MATERIAL MISSTATEMENTS OR OMISSIONS. No representation or warranties
by Buyer and/or Merger Sub in this Agreement (including all schedules,
certificates and exhibits hereto) contains or will contain at the Effective
Time any untrue statement of a material fact, or omits or will omit to state
any material fact necessary to make the statements or facts contained therein
not misleading. In addition, the other document, written information,
statement, certificate or schedule heretofore or hereinafter furnished by
Buyer and/or Merger Sub or any their respective Representatives to the
Company in connection with the transactions contemplated by this Agreement,
or provided to the Company by Buyer and/or Merger Sub or any of their
Representatives in connection with soliciting the approval of the adoption of
this Agreement by the stockholders of the Company, taken as a whole do not
contain or will not contain any untrue statement of a material fact, or do
not omit or will not at the Effective Time omit to state any material fact
necessary to make the statements or facts contained therein not misleading.
ARTICLE 5.
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as otherwise expressly
contemplated by this Agreement or as consented to by Buyer in writing, from
the date hereof through the Closing, the Company shall, and shall cause each
Company Subsidiary to, (a) operate the Business solely in the ordinary course
of business and in accordance with past practice and (b) not take any action
inconsistent with this Agreement or the consummation of the Merger. Without
limiting the generality of the foregoing, except as specifically contemplated
by this Agreement or as consented to by Buyer in writing, the Company shall
not, and shall cause each Company Subsidiary not to:
42
(a) incur any indebtedness for borrowed money, or assume, guarantee,
endorse, or otherwise become responsible for obligations of any other Person;
(b) issue (except pursuant to the exercise of the Company Options or
Company Warrants outstanding on the date of this Agreement) or commit to issue
any shares of its capital stock or any other securities or any securities
convertible into shares of its capital stock or any other securities, including,
without limitation, any options to acquire capital stock, accelerate the vesting
of any Company Options, or reserve for issuance additional shares under the
Company Stock Plans;
(c) declare, pay or incur any obligation to pay any dividend or
distribution on its capital stock or declare, make or incur any obligation to
make any distribution or redemption with respect to capital stock;
(d) make any change to the Company's Certificate of Incorporation or
Bylaws or the charter documents of any Company Subsidiary;
(e) mortgage, pledge or otherwise encumber any Assets or sell,
transfer, license or otherwise dispose of any Assets except for the sale or
disposition of inventory to customers in the ordinary course of business and
consistent with past practice;
(f) cancel, release or assign any indebtedness owed to it or any
claims or rights held by it;
(g) make any investment or commitment of a capital nature either by
purchase of stock or securities, contributions to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other Person;
(h) terminate any Contract listed on DISCLOSURE SCHEDULE 3.11 or
make any change in any such Contract;
(i) without the written consent of Buyer, which consent shall not be
unreasonably withheld, (i) enter into or modify any employment Contract, (ii)
pay any compensation to or for any Employee, officer or director other than in
the ordinary course of business and pursuant to employment arrangements existing
as of the date of this Agreement, (iii) pay or agree to pay any bonus, incentive
compensation, service award, severance, "stay bonus" or other like benefit or
(iv) enter into or modify any other material Employee Plan;
(j) enter into or modify any Contract or other arrangement with a
Related Party;
(k) make any change in any method of accounting or accounting
practice;
(l) fail to comply with all material Laws applicable to the Assets
of the Company or any Company Subsidiary and the Business consistent with past
practices;
(m) fail to use its commercially reasonable efforts to (i) maintain
the Business, (ii) maintain existing relationships with material suppliers and
customers of the Company and others having business dealings with the Company,
43
and (iii) otherwise preserve the goodwill of the Business so that such
relationships and goodwill will be preserved on and after the Closing Date;
(n) make or change any election in respect of Taxes, adopt or change
any material accounting method in respect of Taxes, enter into any Tax
allocation agreement, Tax sharing agreement, Tax indemnity agreement or closing
agreement, settle or compromise any claim, notice, audit report or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(o) commence any Action or Proceeding;
(p) take any action that would cause any representation or warranty
of the Company in this Agreement to be or become untrue in any material respect;
(q) knowingly take any other actions that would prevent the Company
from performing or cause the Company not to perform its agreements and covenants
hereunder; or
(r) directly or indirectly take, agree to take or otherwise permit
to occur any of the actions described in Sections 5.1(a) through 5.1(q).
5.2 NO SOLICITATION.
(a) The Company shall not, and shall cause each Company Subsidiary
and its Representatives not to: (i) initiate, solicit or encourage, directly or
indirectly, any inquiries or the making of any proposal that constitutes or is
reasonably likely to lead to any Acquisition Proposal (as defined in Section
5.2(c) hereof), (ii) engage in negotiations or discussions (other than to advise
as to the existence of the restrictions set forth in this Section 5.2) with, or
furnish any information or data to, any third party relating to an Acquisition
Proposal, or (iii) enter into any agreement with respect to any Acquisition
Proposal or approve any Acquisition Proposal. Notwithstanding anything to the
contrary contained in this Section 5.2 or in any other provision of this
Agreement, the Company and its Representatives (i) may participate in
discussions or negotiations with or furnish information to any third party
making an unsolicited Acquisition Proposal (a "POTENTIAL ACQUIROR") or approve
an unsolicited Acquisition Proposal if (A) neither the Company nor any of its
Representatives has violated the provisions of this Section 5.2 and (B) the
board determines in good faith after receiving advice from its financial advisor
that such Acquisition Proposal is reasonably likely to lead to a Superior
Proposal (as defined in Section 5.2(d) hereof). Prior to furnishing any
non-public information to a Potential Acquiror, the Company shall enter into an
agreement with such Potential Acquiror containing confidentiality, standstill
and nonsolicitation provisions at least as favorable to the Company as the
confidentiality, standstill and nonsolicitation provisions of the
Confidentiality Agreement and the Letter of Intent. In the event that the
Company shall determine to provide any information as described above, or shall
receive any Acquisition Proposal (or any material amendment to an Acquisition
Proposal previously received), it shall promptly, and in any event within 24
hours, inform Buyer in writing as to that fact and shall furnish to Buyer the
identity of the recipient of such information to be provided and/or the
Potential Acquiror and the terms of such Acquisition Proposal (or material
amendment).
44
(b) Except as provided in this Section 5.2(b), the board of
directors of the Company shall recommend to the stockholders of the Company the
adoption of this Agreement. The board of directors of the Company shall not (i)
withdraw or modify or propose to withdraw or modify, in any manner adverse to
Buyer, its approval and recommendation of the adoption of this Agreement or (ii)
approve or recommend, or propose to approve or recommend, any Acquisition
Proposal unless, in each case, the board has (x) determined in good faith that
the failure to take such action would be inconsistent with the board's fiduciary
duties under applicable law and (y) gives at least five (5) Business Days' prior
written notice to Buyer of its determination under clause (x) of this Section
5.2(b).
(c) For purposes of this Agreement, "ACQUISITION PROPOSAL" shall
mean any bona fide proposal, whether in writing or otherwise, made by a third
party to:
(i) acquire beneficial ownership (as defined under Rule 13d-3 of
the Exchange Act) of all or a material portion of the business of, or any
material equity interest in, the Company or any Company Subsidiary pursuant to a
merger, consolidation or other business combination, sale of shares of capital
stock, sale of assets, tender offer or exchange offer or similar transaction
involving the Company or any Company Subsidiary; or
(ii) acquire, lease, exchange, transfer, license or dispose of
(other than in the ordinary course of business), a material portion of the
Company's Proprietary Rights.
Each of (i) or (ii) above shall include any single or multi-step transaction
or series of related transactions which is structured to permit any
transaction described therein.
(d) The term "SUPERIOR PROPOSAL" means a bona fide Acquisition
Proposal for all of the Company Common Stock (or all or substantially all of the
assets of the Company), made in writing and not initiated, solicited or
encouraged in violation of Section 5.2(a) of this Agreement, on terms which the
board of directors of the Company (A) determines in its good faith judgment, if
accepted, is reasonably likely to be consummated on a timely basis, taking into
account all legal, financial and regulatory aspects of such Acquisition Proposal
and (B) determines in its good faith judgment to be more favorable to Company
and the stockholders of the Company than the Merger (based on the advice of the
Company's financial advisor that the value of the consideration provided for in
such proposal is superior to the value of the consideration provided for in the
Merger).
(e) The Company shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement relating to an
Acquisition Proposal to which it or any Company Subsidiary is a party.
(f) If prior to the Effective Time the board of directors of the
Company determines in good faith, after consultation with its financial and
legal advisors, that any Acquisition Proposal constitutes a Superior Proposal
and the board of directors of the Company believes in its good faith judgment,
after receiving advice of its outside legal counsel that failing to terminate
this Agreement and enter into a transaction (the "SUPERIOR TRANSACTION") with
respect to the Superior Proposal would constitute a breach of its fiduciary
duties under applicable law, the Company may terminate this Agreement and enter
into a binding acquisition agreement (an "ACQUISITION AGREEMENT") with respect
45
to such Superior Transaction, provided, that, prior to any such termination, (i)
the Company has provided Buyer written notice that it intends to terminate this
Agreement pursuant to this Section 5.2(f), identifying the Superior Transaction
then determined to be more favorable and the parties thereto and delivering to
Buyer a copy of the Acquisition Agreement for such Superior Transaction in the
form to be entered into, (ii) the Company causes its legal counsel and its
financial advisor to afford Buyer the opportunity to match the terms of the
Superior Transaction and to negotiate with Buyer to make other adjustments in
the terms and conditions of this Agreement that would permit the Company's board
of directors to recommend this Agreement as revised, (iii) the Company has not
received from Buyer, within three (3) Business Days of Buyer's receipt of the
notice referred to in clause (i), an offer that the Company's board of directors
determines in good faith, after consultation with and taking into account the
advice of its outside legal counsel and its outside financial advisors of
nationally recognized reputation, matches or exceeds such Superior Transaction
or is otherwise sufficient to permit the Company's board of directors to
continue to recommend this Agreement, as amended by such offer from Buyer, and
the Merger, rather than the Superior Transaction (for purposes of such
determination, if the consideration offered in a Superior Transaction is other
than cash, Buyer shall be deemed to have "matched" such Superior Transaction if
the aggregate consideration offered by Buyer has a value that is not less than
the value of the consideration offered in the Superior Transaction, as
determined in good faith by Company's board of directors, after consultation
with and taking into account the advice of its outside legal and outside
financial advisor of nationally recognized reputation); (iv) Buyer's right to
match any Superior Transaction shall apply equally with respect to any
subsequent increase or other revision of the terms of any Superior Transaction,
and (v) within three (3) full Business Days after the Company has provided the
notice referred to in clause (i) above (provided that the Company board of
directors' determinations and beliefs shall continue in effect without material
revision or modification), the Company delivers (or causes the other party to
the Superior Transaction to deliver) to Buyer the termination fee provided for
in Section 8.5.
ARTICLE 6.
ADDITIONAL COVENANTS
6.1 SPECIAL MEETING; BOARD RECOMMENDATION.
(a) In order to obtain stockholder approval of this Agreement, the
Company, acting through its board of directors, shall duly call, give notice of,
convene and hold a special meeting of the stockholders of the Company for the
purpose of considering and voting on the adoption of this Agreement (the
"COMPANY SPECIAL MEETING"). The Company Special Meeting shall be held as soon as
practicable after the execution of this Agreement.
(b) As promptly as practicable, but in no event later than 15
Business Days after the execution of this Agreement, the Company shall prepare
and file with the SEC a preliminary form of the proxy statement for the Company
Special Meeting (the "PROXY STATEMENT"). As promptly as practicable following
receipt of SEC comments on such preliminary Proxy Statement, the Company shall
prepare a response to such comments. The Company shall provide drafts of the
Proxy Statement and any response letter to Buyer, and Buyer shall be entitled to
review and comment on all such drafts. Neither the Proxy Statement nor any such
response letter shall be filed with the SEC without the consent of Buyer, which
46
consent shall not be unreasonably withheld. Upon resolution of all comments or
expiration of any waiting period, the Company shall, as promptly as practicable
following such resolution, mail the definitive Proxy Statement to the
stockholders of the Company as of the record date for the Company Special
Meeting. The Company shall use all commercially reasonable efforts to have the
preliminary Proxy Statement cleared by the SEC as promptly as practicable. Buyer
and the Company shall promptly furnish to each other all information, and take
such other actions (including, without limitation, using all commercially
reasonable efforts to provide any required consents of their respective
independent auditors), as may reasonably be requested in connection with any
action by any of them in connection with the preceding sentences of this Section
6.1(b).
(c) Subject to Section 5.2(b), the Proxy Statement shall contain the
recommendation of the board of directors of the Company in favor of the adoption
of this Agreement.
6.2 VOTING AGREEMENTS. Contemporaneously with the execution of this
Agreement, each of the Major Stockholders have entered into Voting Agreements
with Buyer (in the form of EXHIBIT A attached hereto) with respect to the
voting of their Company Common Stock and which Voting Agreements prohibit the
Major Stockholders from selling or transferring their Company Common Stock
prior to the Effective Time.
6.3 ACCESS TO INFORMATION. Between the date of this Agreement and the
earlier of the Effective Time or the termination of this Agreement, upon
reasonable notice the Company shall (i) give Buyer and its officers,
employees, accountants, counsel, financing sources and other agents and
representatives reasonable access to all buildings, offices, and other
facilities and to all Books and Records of the Company and the Company
Subsidiaries, whether located on the premises of the Company or at another
location; (ii) permit Buyer to make such inspections as it may reasonably
require; (iii) cause its officers to furnish Buyer such financial, operating,
technical and product data and other information with respect to the Business
and Assets of the Company or any Company Subsidiary as Buyer from time to
time may request, including without limitation, financial statements and
schedules; (iv) allow Buyer the opportunity to interview such Employees and
other personnel and Affiliates of the Company and the Company Subsidiaries as
Buyer may reasonably request; and (v) assist and cooperate with Buyer in the
development of integration plans for implementation by Buyer and the
Surviving Corporation following the Effective Time; PROVIDED, HOWEVER, that
no investigation pursuant to this Section 6.3 shall affect or be deemed to
modify any representation or warranty made by the Company herein.
6.4 CONFIDENTIALITY. Each of the parties hereto hereby agrees to keep
the information or knowledge obtained in any investigation pursuant to
Section 6.3, or pursuant to the negotiation and execution of this Agreement
or the effectuation of the transactions contemplated hereby, confidential;
PROVIDED, HOWEVER, that the foregoing shall not apply to information or
knowledge which (a) a party can demonstrate was already lawfully in its
possession prior to the disclosure thereof by the other party, (b) is
generally known to the public and did not become so known through any
violation of Law, or a confidentiality agreement or other contractual, legal
or fiduciary obligation of confidentiality of the disclosing party or any
other party with respect to such information, (c) became known to the public
through no fault of such party, (d) is later lawfully acquired by such party
without confidentiality restrictions from other sources not bound by
47
applicable confidentiality restrictions, (e) is required to be disclosed by
order of court or Governmental or Regulatory Authority with subpoena powers
(provided that such party shall have provided the other party with prior
notice of such order and an opportunity to object or seek a protective order
and take any other available action) or (f) which is disclosed without
obligation of confidentiality in the course of any Action or Proceeding
between any of the parties hereto.
6.5 EXPENSES(a) All fees and expenses incurred in connection with the
proposed Merger, including all legal, accounting, financial advisory,
consulting and all other fees and expenses of third parties ("THIRD PARTY
EXPENSES") incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the
transactions contemplated hereby, shall be the obligation of the respective
party incurring such fees and expenses. The Company shall deliver to Buyer
itemized invoices for all Third Party Expenses of the Company ("COMPANY THIRD
PARTY EXPENSES") to be incurred by the Company prior to or after the
Effective Time and an officer's certificate (the "OFFICER'S CERTIFICATE")
setting forth the aggregate amount of all such Company Third Party Expenses,
each to be delivered to Buyer at least five (5) Business Days before the
Closing Date.
6.6 PUBLIC DISCLOSURE. Except as required by law (including federal and
state securities laws), or as may be reasonably necessary to complete the
Merger, no party hereto shall disclose the existence of, or any subject
matter of, or the terms and conditions of, this Agreement to any third party
(other than a party's financial and legal advisors) without the prior written
consent of the other (which shall not be unreasonably withheld or delayed),
and each party is responsible for preventing disclosure by such party's
financial and legal advisors. The parties will mutually reasonably agree to
the timing and content of any announcements, press releases or public
statements concerning the proposed Merger.
6.7 COMMERCIALLY REASONABLE EFFORTS. The Company and Buyer shall use
commercially reasonable efforts to take, or cause to be taken, all actions
and do, or cause to be done, all things necessary, proper and appropriate
under this Agreement, applicable laws, and applicable regulations to complete
the transactions contemplated by this Agreement, including without
limitation, (a) obtain all Approvals and Consents under any of the Contracts
and under other agreements as may be required in connection with the Merger
(including those set forth in DISCLOSURE SCHEDULE 3.12), (b) to obtain all
Approvals from Governmental or Regulatory Authorities including, without
limitation, using commercially reasonable efforts to obtain all necessary
governmental and private party consents, approvals or waivers, PROVIDED,
HOWEVER, that no party shall be obligated to make a material payment of money
as a condition to obtaining any such Approval or Consent other than filing
fees and other reasonably anticipated costs and expenses. Buyer and the
Company shall provide each other with such assistance and information as is
reasonably required to obtain such Approvals as set forth in DISCLOSURE
SCHEDULE 3.12.
6.8 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Buyer, and Buyer shall give prompt notice to the Company, of (a) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence
of which is likely to cause any representation or warranty of the Company or
Buyer, respectively, contained in this Agreement to be untrue or inaccurate
at or prior to the Closing Date and (b) any failure of the Company or Buyer,
as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; PROVIDED,
48
however, that the delivery of any notice pursuant to this Section 6.8 shall
not limit or otherwise affect any remedies available to the party receiving
such notice.
6.9 COMPANY REPURCHASES. The Company will exercise any rights that
mature between the date hereof and the Effective Time to repurchase any
outstanding shares of Company Common Stock at the price at which such shares
were issued.
6.10 PROPRIETARY RIGHTS. The Company shall give Buyer prompt notice of
that any Person shall have (i) commenced, or shall have notified the Company or
any Company Subsidiary that it intends to commence, an Action or Proceeding
or (ii) provided the Company or any Company Subsidiary with notice, in either
case which allege(s) that any of the Proprietary Rights, including the
Company Proprietary Rights, presently embodied, or proposed to be embodied,
in the Company's or the Company Subsidiaries' products or utilized in
Company-designed or modified development tools (including standard cells) or
design environments infringes or otherwise violates the intellectual property
rights of such Person, is available for licensing from a potential licensor
providing the notice or otherwise alleges that the Company or any Company
Subsidiary does not otherwise own or have the right to exploit such
Proprietary Rights, including the Company Proprietary Rights. The Company
shall take commercially reasonable actions to maintain, perfect, preserve or
renew the Company Registered Proprietary Rights, including, without
limitation, the payment of any registration, maintenance, renewal fees,
annuity fees and taxes or the filing of any documents, applications or
certificates related thereto, and to promptly respond and prepare to respond
to all requests, related to the Company Registered Proprietary Rights,
received from Governmental or Regulatory Authorities. At the Closing, the
Company will notify Buyer of all material actions which must be taken within
the 180 days following the Closing and which are necessary to maintain,
perfect, preserve or renew the Company Registered Proprietary Rights,
including the payment of any registration, maintenance, renewal fees, annuity
fees and taxes or the filing of any documents, applications or certificates
related thereto.
6.11 TAX MATTERS
(a) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. Buyer shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company and the Company Subsidiaries for all periods ending on or prior
to the Closing Date which are required to be filed (taking into account all
extensions properly obtained) after the Closing Date.
(b) TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE CLOSING DATE.
Buyer shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns of the Company for Tax periods which begin before the Closing Date
and end after the Closing Date.
(c) REFUNDS. Any Tax refunds of the Company or any Company
Subsidiary that are received by Buyer, the Company or any Company Subsidiaries
and any amounts credited against Tax of the Company or any Company Subsidiary to
which Buyer, the Company or any Company Subsidiary become entitled, that relate
to Tax periods or portions thereof ending on, before or after the Closing Date
shall be for the account of the Buyer.
49
(d) TAX ELECTIONS. Neither the Company nor any Company Subsidiary
shall make or change any election or method of accounting with respect to Taxes
or settle or compromise any material Tax Liability or refund after the date
hereof without Buyer's prior written consent (which consent shall not be
unreasonably withheld).
(e) FIRPTA CERTIFICATE. The Company shall have delivered to Buyer,
not more than 20 days before the Closing Date, a statement in accordance with
Treasury Regulations Section 1.1445-2(c)(3) and 1.897-2(h) certifying that the
Company is not, and has not been, a "United States real property holding
corporation" for purposes of Sections 897 and 1445 of the Code. In addition, the
Company shall have delivered to Buyer on the Closing Date a copy of the
notification to the IRS, prepared in accordance with Treasury Regulations
Section 1.897-2(h)(2), of delivery of the statement referred to in the preceding
sentence, signed by a responsible corporate officer of the Company. The Company
acknowledges that Buyer may cause the Company to file such notification with the
IRS on or after the Closing Date.
(f) CARRYBACKS. Any net operating losses or similar Tax attribute of
the Company or any Company Subsidiary is an asset of the Company that (subject
to any applicable limitations imposed by law) is being acquired by Buyer
pursuant to the Merger, and neither the Company nor any Company Subsidiary shall
elect to carry back any such Tax attributes to prior years of the Company or any
Company Subsidiary or otherwise act so as to limit the ability of Buyer to use
such attributes subsequent to the Merger.
6.12 SEC FILINGS. The Company will deliver promptly to Buyer true and
complete copies of each report, registration statement or statement mailed by
it to its stockholder generally or filed by it with the SEC, in each case
subsequent to the date hereof and prior to the Effective Time. As of their
respective dates, such reports, including the consolidated financial
statements included therein, and statements (excluding any information
therein provided by Buyer or the Merger Sub, as to which the Company makes no
representation) will not contain any untrue statement of a material fact or
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
are made, not misleading and will comply in all material respects with all
applicable requirements of law. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in
such reports, (a) shall comply as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, (b) shall be prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on
Form 10-Q under the Exchange Act) and (c) shall fairly present the
consolidated financial position of the Company and the Company Subsidiaries
as at the respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal year-end
adjustments.
6.13 STOCKHOLDER LITIGATION. The Company and Buyer agree that in
connection with any third party or derivative litigation which may be brought
against the Company, any Company Subsidiary or their respective directors
relating to the transactions contemplated hereby, the Company will keep Buyer,
and any counsel which Buyer may retain, informed of the course of such
litigation, to the extent Buyer is not otherwise a party thereto, and the
Company agrees that it will consult with Buyer prior to entering into settlement
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or compromise of any such stockholder litigation; PROVIDED that no such
settlement or compromise will be entered into without Buyer's prior written
consent (which consent or denial of consent shall not be unreasonably withheld
or delayed).
6.14 INDEMNIFICATION. The certificate of incorporation and bylaws of the
Surviving Corporation shall contain the provisions with respect to
indemnification set forth in the certificate of incorporation and bylaws of
the Company as of the date hereof, which provisions shall not be amended,
repealed or otherwise modified for a period of six (6) years from the
Effective Time in any manner that would adversely affect the rights
thereunder of individuals who, immediately prior to the Effective Time, were
directors and officers of the Company, unless such modification is required
by law. The Surviving Corporation will honor and fulfill the obligations of
the Company pursuant to indemnification agreements with the Company's
officers and directors existing as of the date hereof.
ARTICLE 7.
CONDITIONS TO THE MERGER
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction or mutual waiver at or prior to the
Closing of the following conditions:
(a) GOVERNMENTAL AND REGULATORY APPROVALS. Approvals from any
Governmental or Regulatory Authority (if any) necessary for consummation of the
transactions contemplated hereby shall have been timely obtained.
(b) NO INJUNCTIONS OR REGULATORY RESTRAINTS; ILLEGALITY. No
temporary restraining order, preliminary or permanent injunction or other Order
issued by any court of competent jurisdiction or Governmental or Regulatory
Authority or other legal or regulatory restraint or prohibition preventing the
consummation of the Merger shall be in effect; nor shall there be any action
taken, or any Law or Order enacted, entered, enforced or deemed applicable to
the Merger or the other transactions contemplated by the terms of this Agreement
that would prohibit the consummation of the Merger or which would permit
consummation of the Merger only if certain divestitures were made or if Buyer
were to agree to limitations on its business activities or operations.
(c) LEGAL PROCEEDINGS. No Governmental or Regulatory Authority shall
have notified either party to this Agreement that such Governmental or
Regulatory Authority intends to commence proceedings to restrain or prohibit the
transactions contemplated hereby or force rescission, unless such Governmental
or Regulatory Authority shall have withdrawn such notice and abandoned any such
proceedings prior to the time which otherwise would have been the Closing.
7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation
of the Company to consummate the Merger and the other transactions contemplated
by this Agreement shall be subject to the satisfaction at or prior to the
Closing of each of the following conditions, any of which may be waived, in
writing, exclusively by the Company:
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(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer contained in this Agreement shall have been accurate in all
respects as of the date of this Agreement and shall be accurate in all respects
as of the Closing Date as if made on and as of the Closing Date.
(b) PERFORMANCE. Buyer shall have performed and complied with in all
material respects each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by the Buyer at or before the
Closing Date.
(c) BUYER CERTIFICATE. Buyer shall have delivered to the Company a
certificate, dated the Closing Date and executed by an authorized officer of the
Buyer, substantially in the form set forth in EXHIBIT C hereto.
7.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF BUYER. The obligation
of Buyer to consummate the Merger and the other transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the
Closing of each of the following conditions, any of which may be waived, in
writing, exclusively by Buyer:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement shall have been accurate
in all respects as of the date of this Agreement and shall be accurate in all
respects as of the Closing Date as if made on and as of the Closing Date.
(b) PERFORMANCE. The Company shall have performed and complied with
in all material respects each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by the Company on or before
the Closing Date.
(c) COMPANY CERTIFICATE. The Company shall have delivered to Buyer a
certificate, dated the Closing Date and executed by the President and Chief
Executive Officer of the Company, substantially in the form set forth in EXHIBIT
D.
(d) STOCKHOLDER APPROVAL. The adoption of this Agreement by a
majority of the outstanding shares of Company Common Stock shall have been
obtained at the Company Special Meeting or any adjournment or postponement
thereof.
(e) CONSENTS AND APPROVALS. All consents, approvals, notifications,
disclosures, filings and registrations listed or required to be listed in
DISCLOSURE SCHEDULE 3.12 of the Disclosure Schedule shall have been obtained or
made.
(f) ACTIONS. No Action shall be pending or threatened relating in
any way to this Agreement or the transactions contemplated herein.
(g) DISSENTING SHARES. Not more than 5% of the issued and
outstanding shares of Company Common Stock shall be Dissenting Shares.
(h) KEY EMPLOYEES. Each of the Key Employees shall remain
continuously employed by the Company on substantially the same terms and with
52
substantially the same responsibilities as on the date hereof and the Company
shall have no knowledge that any of the Key Employees has any intention to
terminate their employment with the Surviving Corporation.
(i) EMPLOYMENT AGREEMENTS. Each Key Employee shall have executed and
delivered to Buyer an Employment Agreement in substantially the form attached
hereto as EXHIBIT E.
(j) COMPANY OPTIONS. All agreements evidencing Company Options shall
have been amended, in a manner reasonably satisfactory to Buyer, to the extent
necessary to provide for the treatment of such Company Options in the Merger as
contemplated by this Agreement.
(k) SECTION 280G. The Company and any person who is a "disqualified
individual" (as defined in Section 280G(c) of the Code and the proposed Treasury
Regulations promulgated thereunder) with respect to the Company shall have taken
any and all actions necessary such that no payment or acceleration of any right
to benefits or payment pursuant to this Agreement, any Employee Plan, Contract
or any other plan or arrangement shall constitute an "excess parachute payment"
within the meaning of Section 280G(b)(1) of the Code.
(l) FIRPTA CERTIFICATE. Buyer shall have no actual knowledge and
shall not have received a notice pursuant to Treasury Regulations Section
1.445-4 that the statement delivered by the Company pursuant to Section 6.11(e)
is false.
(m) PURCHASE OF ASSETS OF NEXLAND, S.A. The Company shall not have
exercised, in any manner, its option to acquire the assets of Nexland, S.A.
pursuant to the Irrevocable Option Agreement, dated as of November 6, 2002,
between the Company, Nexland, S.A. and the stockholders of Nexland, S.A. (the
"IRREVOCABLE OPTION AGREEMENT").
(n) COMPANY WARRANTS. All Company Warrants shall have been exercised
or amended in a manner reasonably satisfactory to Buyer to provide for their
termination at the Effective Time.
(o) TERMINATION OF E.S. BANKEST, LLC AGREEMENT. That certain
Factoring Agreement, dated as of January 31, 2001, between the Company and
Bankest LLC shall have been terminated, the Company shall have no liability
thereunder and any UCC-1 financing statement related thereto shall have been
terminated.
(p) TERMINATION OF EXPOCREDIT CORPORATION AGREEMENT. That certain
Assignment of Receivables Agreement, dated as of April 2, 2003, between the
Company and ExpoCredit Corporation shall have been terminated, the Company shall
have no liability thereunder and any UCC-1 financing statement related thereto
shall have been terminated.
(q) NONCOMPETITION AGREEMENTS. Each of I. Xxxxxx Xxxxxx, Xxxxxxx X
Xxxxxx and Xxxxx Xxxxxxx shall have executed a Noncompetition Agreement in the
form attached hereto as EXHIBIT F.
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(r) NONCOMPETITION AGREEMENT WITH NEXLAND, S.A. The Company,
Nexland, S.A., Yves Many, Xxxxx Xxxxxxxxx and I. Xxxxxx Xxxxxx shall have
executed a Noncompetition Agreement in the form attached hereto as EXHIBIT G.
(s) ASSIGNMENT OF TRADEMARKS BY I. XXXXXX XXXXXX AND NEXLAND, S.A.
The trademark "Nexland" owned by I. Xxxxxx Xxxxxx shall have been assigned to
the Company and the trademarks "Internet Sharing Box", "Etherland" and "Plug N'
Net" owned by Nexland, S.A. shall have been assigned to the Company, pursuant to
a trademark assignment agreement reasonably satisfactory to Buyer.
(t) AMENDMENT OF IRREVOCABLE OPTION AGREEMENT. The Company shall
have caused the Irrevocable Option Agreement to be amended, in a manner
satisfactory to Buyer, so as to (i) terminate the limited licensed granted to
Nexland, S.A. by the Company under Section 2.6 of the Irrevocable Option
Agreement, (ii) grant Nexland, S.A. a limited license to sell the Company's
products which Nexland, S.A. holds in its inventory as of the date hereof (the
"NEXLAND, S.A. INVENTORY") in Europe and Africa for a period of 180 days from
the Closing Date and (iii) grant Nexland, S.A. the limited right to use the
trademarks assigned by I. Xxxxxx Xxxxxx and Nexland, S.A. to Buyer under Section
7.3(s) of this Agreement in Europe and Africa for a period of 180 days from the
Closing Date and to the extent necessary to facilitate the disposition of the
Nexland, S.A. Inventory in accordance with the terms of the amendment to the
Irrevocable Option Agreement.
(u) TERMINATION OF AGREEMENTS WITH ADP TOTALSOURCE SERVICES, INC.
All agreements between the Company and ADP TotalSource Services, Inc. including
that certain Client Services Agreement dated as of December 4, 2002, shall have
been terminated, effective as of the Closing Date.
(v) INDEMNIFICATION AGREEMENT. I. Xxxxxx Xxxxxx, Xxxxxxx X. Xxxxxx
and Xxxxxx X. Dell'Oca shall have executed and delivered to Buyer an
Indemnification Agreement, dated as of the Closing Date, in the form attached
hereto as EXHIBIT H (the "INDEMNIFICATION AGREEMENT").
ARTICLE 8.
TERMINATION
8.1 TERMINATION. This Agreement may be terminated and the Merger may be
abandoned any time prior to the Effective Time, whether before or after the
adoption of this Agreement by the stockholders of the Company:
(a) by mutual written consent of the parties duly authorized by the
boards of directors of the Company and Merger Sub;
(b) by either Buyer or the Company if the Merger shall not have been
consummated on or before August 31, 2003 (the "OUTSIDE DATE"), which date may be
extended by mutual consent of the parties hereto; PROVIDED, HOWEVER, that the
party seeking to terminate this Agreement pursuant to this clause 8.1(b) shall
not have breached in any material respect its obligations under this Agreement
in any manner that shall have proximately contributed to the failure to
consummate the Merger on or before such date;
54
(c) by either Buyer or the Company if (i) any law shall have been
enacted, entered or promulgated prohibiting the consummation of the Merger
substantially on the terms contemplated hereby or (ii) a court of competent
jurisdiction or other Government Entity shall have issued an order, decree,
ruling or injunction, or taken any other action, having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger
substantially on the terms contemplated hereby, and such order, decree, ruling,
injunction or other action shall have become final; PROVIDED, that the party
seeking to terminate this Agreement pursuant to this Section 8.1(c) shall have
used its reasonable commercial efforts to remove such order, decree, ruling or
injunction; or
(d) by either Buyer or the Company if the adoption of this Agreement
by a majority of the outstanding shares of Company Common Stock is not obtained
at the Company Special Meeting or any adjournment or postponement thereof (a
"COMPANY NEGATIVE VOTE").
8.2 TERMINATION BY BUYER. This Agreement may be terminated and the
Merger may be abandoned any time prior to the Effective Time, whether before or
after adoption of this Agreement by the stockholders of the Company, by
Buyer, if:
(a) The Company shall have failed to comply in any material respect
with any of the covenants or agreements contained in any Section of this
Agreement to be complied with or performed by the Company at or prior to such
date of termination; PROVIDED, HOWEVER, that if such failure or failures are
capable of being cured prior to the Effective Time, such failure or failures
shall not have been cured within thirty (30) days of delivery to the Company of
written notice of such failure or failures;
(b) there exists a breach or breaches of any representation or
warranty of the Company contained in this Agreement such that the closing
condition set forth in Section 7.3(a) would not be satisfied; PROVIDED, HOWEVER,
that if such breach or breaches are capable of being cured prior to the
Effective Time, such breach or breaches shall not have been cured within thirty
(30) days of delivery to the Company of written notice of such breach or
breaches; or
(c) (i) the board of directors of the Company fails to recommend the
adoption of this Agreement to the stockholders of the Company, or withdraws,
amends or modifies in a manner adverse to Buyer its recommendation to the
stockholders of the Company for adoption of this Agreement, (ii) a tender offer
(to which Rule 14e-2(a) applies) for any of the outstanding shares of capital
stock of the Company is commenced prior to the Company Special Meeting, and
within the time required by Rule 14e-2(a) under the Exchange Act the board of
directors of the Company fails to recommend against acceptance of such tender
offer, or takes no position with respect to such tender offer, or states its
inability to take a position with respect to such tender offer, (iii) the
Company or its board of directors takes any position (including making no
recommendation or stating an inability to make a recommendation) with respect to
any Acquisition Proposal other than a recommendation to reject such Acquisition
Proposal, (iv) the board of directors of the Company resolves (which resolution
shall not modify, limit or impair the Company's obligations under this
Agreement) to accept, accepts or recommends to the stockholders of the Company a
Superior Proposal, or (v) the board of directors of the Company resolves to take
any of the foregoing actions.
55
8.3 TERMINATION BY THE COMPANY. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after adoption of this Agreement by the stockholders of the Company, by
action of the board of directors of the Company:
(a) if Buyer or Merger Sub shall have failed to comply in any
material respect with any of the covenants or agreements contained in any
Section of this Agreement to be complied with or performed by Buyer or Merger
Sub at or prior to such date of termination; PROVIDED, HOWEVER, that if such
failure or failures are capable of being cured prior to the Effective Time, such
failure or failures shall not have been cured within thirty (30) days of
delivery to Buyer of written notice of such failure or failures; or
(b) if there exists a breach or breaches of any representation or
warranty of Buyer or Merger Sub contained in this Agreement such that the
Closing condition set forth in Section 7.2(a) would not be satisfied; PROVIDED,
HOWEVER, that if such breach or breaches are capable of being cured prior to the
Effective Time, such breach or breaches shall not be cured within thirty (30)
days of delivery to Buyer of written notice of such breach or breaches.
(c) pursuant to and in compliance with Section 5.2(f).
8.4 PROCEDURE FOR TERMINATION. In order to terminate this Agreement
pursuant to this Article VIII, a Party shall provide written notice thereof
to the other Parties.
8.5 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement pursuant to this
Article VIII, no Party (or any of its directors or officers) shall have any
liability or further obligation under this Agreement to any other Party, except
as provided in this Section 8.5 and except that nothing herein shall relieve any
Party from liability for breach of this Agreement.
(b) If this Agreement is terminated by Buyer (i) pursuant to Section
8.2(c), or (ii) pursuant to Section 8.2(a) as a result of a breach by the
Company of a covenant contained in Section 5.2 or by the Company pursuant to
Section 8.3(c), then within two (2) Business Days of delivery by Buyer of the
Buyer Expense Notice (as defined below) the Company shall pay Buyer a
termination fee equal to $800,000.00 PLUS all of the expenses incurred by Buyer
in connection with this Agreement and the transactions contemplated hereby
(collectively, the "BUYER TRANSACTION EXPENSES") as set forth in a written
notice to the Company (the "BUYER EXPENSE NOTICE"). If this Agreement is
terminated by Buyer or the Company pursuant to Section 8.1(d) as a result of a
Company Negative Vote, then within two (2) Business Days of delivery by Buyer of
the Buyer Expense Notice the Company shall pay Buyer its Buyer Transaction
Expenses as set forth in a Buyer Expense Notice which shall not exceed
$300,000.00; provided that if, within twelve months of the date of termination
of this Agreement pursuant to Section 8.1(d) as a result of a Company Negative
Vote, any Person acquires a majority of the voting stock of the Company or all
or substantially all of the assets of the Company, then the Company shall pay to
Buyer a termination fee equal to $800,000.00 less any termination fee previously
paid upon closing of such transaction.
56
(c) Any fee payable under this Section 8.5 will be payable by wire
transfer of immediately available funds to an account specified by the receiving
party.
8.6 EXTENSION; WAIVER. At any time prior to the Effective Time, Buyer
or the Company may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations of the other party hereto, (b) waive
any inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto, and (c) waive
compliance with any of the agreements, covenants or conditions for the
benefit of such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE 9.
MISCELLANEOUS PROVISIONS
9.1 NOTICES. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission against
facsimile confirmation or mailed by internationally recognized overnight
courier prepaid, to the parties at the following addresses or facsimile
numbers:
If prior to the Closing, to the Company:
Nexland, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxx Xxxxx - 0xx Xxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, President & Chief Executive Officer
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
With a copy to:
Xxxxxxxxxxx & Xxxxxxxx LLP
Miami Center
20th Floor
000 Xxxxx Xxxxxxxx Xxxxxxxxx
Xxxxx, Xxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
If to Buyer or Merger Sub or, if after the Closing, to the Surviving
Corporation:
Symantec Corporation
00000 Xxxxxxx Xxxxx Xxxx.
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
57
With a copy to:
Xxxxxx Xxxxxx White & XxXxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
All such notices, requests and other communications will (a) if
delivered personally to the address as provided in this Section 9.1, be
deemed given upon delivery, (b) if delivered by facsimile transmission to the
facsimile number as provided for in this Section 9.1, be deemed given upon
receipt of facsimile confirmation, (c) if delivered by mail in the manner
described above to the address as provided for in this Section 9.1, be deemed
given on the earlier of the third Business Day following mailing or upon
receipt and (d) if delivered by overnight courier to the address as provided
in this Section 9.1, be deemed given on the earlier of the first Business Day
following the date sent by such overnight courier or upon receipt (in each
case regardless of whether such notice, request or other communication is
received by any other Person to whom a copy of such notice is to be delivered
pursuant to this Section 9.1). Any party from time to time may change its
address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other party hereto.
9.2 ENTIRE AGREEMENT. This Agreement and the Exhibits and Schedules
hereto, including the Company Disclosure Schedule, constitute the entire
Agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, except for the
Confidentiality Agreement, which shall continue in full force and effect and
shall survive any termination of this Agreement or the Closing in accordance
with its terms.
9.3 FURTHER ASSURANCES; POST-CLOSING COOPERATION. At any time or from
time to time after the Closing, the parties shall execute and deliver to the
other party such other documents and instruments, provide such materials and
information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and
otherwise to cause the other party to fulfill its obligations under this
Agreement and the transactions contemplated hereby. Each party agrees to use
commercially reasonable efforts to cause the conditions to its obligations to
consummate the Merger to be satisfied.
9.4 AMENDMENT; WAIVER. Subject to applicable law, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of Buyer, Merger Sub and the Company. Any
term or condition of this Agreement may be waived at any time by the party
that is entitled to the benefit thereof, but no such waiver shall be
effective unless set forth in a written instrument duly executed by or on
behalf of the party waiving such term or condition. No waiver by any party
of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term
or condition of this Agreement on any future occasion.
58
9.5 THIRD PARTY BENEFICIARIES. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person, other than any Person entitled to
indemnity under Section 6.14, and each such person shall be a third-party
beneficiary of the provisions set forth in Section 6.14.
9.6 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any party without the prior written consent of the other party and
any attempt to do so will be void. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
9.7 HEADINGS. The headings and table of contents used in this Agreement
have been inserted for convenience of reference only and do not define or
limit the provisions hereof.
9.8 INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
9.9 GOVERNING LAW. This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the laws of the State of
Delaware.
9.10 ARBITRATION. Any and all disputes or controversies arising out of
this Agreement shall be finally settled by arbitration conducted in California
in accordance with the then existing rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof; provided, that nothing in
this Section 9.10 shall prevent a party from applying to a court of competent
jurisdiction to obtain temporary relief pending resolution of the dispute
through arbitration. The parties hereby agree that service of any notices in
the course of such arbitration at their respective addresses as provided for
in Section 9.10 shall be valid and sufficient.
9.11 REMEDIES CUMULATIVE. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or
equity upon such party, and the exercise by a party of any one remedy will
not preclude the exercise of any other remedy.
59
9.12 CONSTRUCTION. The parties hereto agree that this Agreement is the
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision
hereof. Accordingly, ambiguities in this Agreement, if any, shall not be
construed strictly or in favor of or against any party hereto but rather
shall be given a fair and reasonable construction without regard to the rule
of contra preferentum.
9.13 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
* * * * * *
60
IN WITNESS WHEREOF, Buyer, Merger Sub and the Company have caused
this Agreement to be signed by their duly authorized representatives, all as
of the date first written above.
SYMANTEC CORPORATION
By:
--------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chairman and Chief Executive Officer
NEBRASKA ACQUISITION SUB, INC.
By: ______________________________________
Name: ___________________________________
Title: __________________________________
NEXLAND, INC.
By: ______________________________________
Name: ___________________________________
Title: __________________________________
[SIGNATURE PAGE TO MERGER AGREEMENT]
