EXHIBIT 10.1
EXECUTION COPY
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AGREEMENT AND PLAN OF REORGANIZATION
AMONG
VIISAGE TECHNOLOGY, INC.
VIDS ACQUISITION CORP.,
AND
IDENTIX INCORPORATED
JANUARY 11, 2006
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TABLE OF CONTENTS
PAGE
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ARTICLE 1 CERTAIN DEFINITIONS.....................................................................................2
1.1 Definitions.....................................................................................2
1.2 Additional Definitions..........................................................................8
ARTICLE 2 THE MERGER.............................................................................................10
2.1 The Merger.....................................................................................10
2.2 Closing........................................................................................10
2.3 Effects of the Merger..........................................................................10
2.4 Conversion of Stock............................................................................11
2.5 Company Options, Company Warrants, Company Stock Purchase Plan.................................12
2.6 Company Restricted Shares......................................................................13
2.7 Exchange of Certificates.......................................................................13
2.8 Tax Consequences and Withholding...............................................................15
2.9 Further Assurances.............................................................................16
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................................16
3.1 Organization...................................................................................16
3.2 Capitalization of the Company..................................................................17
3.3 Authorization..................................................................................19
3.4 SEC Filings....................................................................................20
3.5 Litigation.....................................................................................22
3.6 Compliance with Laws...........................................................................22
3.7 Properties.....................................................................................23
3.8 Taxes..........................................................................................23
3.9 Intellectual Property..........................................................................24
3.10 Employment.....................................................................................26
3.11 Absence of Certain Changes.....................................................................28
3.12 Material Contracts.............................................................................28
3.13 Environmental Matters..........................................................................29
3.14 Interested Party Transactions..................................................................29
3.15 State Takeover Statutes........................................................................30
3.16 Brokers........................................................................................30
3.17 Opinion of Financial Advisor...................................................................30
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT...............................................................30
4.1 Organization...................................................................................30
4.2 Capitalization of Parent and Merger Sub........................................................31
4.3 Authorization..................................................................................33
4.4 SEC Filings....................................................................................35
4.5 Litigation.....................................................................................37
4.6 Compliance with Laws...........................................................................37
4.7 Properties.....................................................................................37
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4.8 Taxes..........................................................................................38
4.9 Intellectual Property..........................................................................39
4.10 Employment.....................................................................................40
4.11 Absence of Certain Changes.....................................................................42
4.12 Material Contracts.............................................................................42
4.13 Environmental Matters..........................................................................43
4.14 Interested Party Transactions..................................................................44
4.15 State Takeover Statutes........................................................................44
4.16 Brokers........................................................................................44
4.17 Opinion of Financial Advisor...................................................................44
ARTICLE 5 COVENANTS..............................................................................................44
5.1 Conduct of Business............................................................................44
5.2 No Solicitation................................................................................50
5.3 Preparation of SEC Documents; Stockholders' Meetings...........................................52
5.4 Accountant's Letters...........................................................................54
5.5 Access to Information; Confidentiality.........................................................55
5.6 Reasonable Best Efforts........................................................................55
5.7 Indemnification and Insurance..................................................................57
5.8 Fees and Expenses..............................................................................59
5.9 Public Announcements...........................................................................59
5.10 Listing........................................................................................60
5.11 Tax-Free Reorganization Treatment..............................................................60
5.12 Equity Awards and Employee Benefits............................................................60
5.13 Parent Corporate Governance....................................................................62
5.14 Affiliates Legends.............................................................................63
5.15 Voting Agreements..............................................................................64
5.16 Notification of Certain Matters................................................................64
5.17 Section 16 Matters.............................................................................64
5.18 State Takeover Laws............................................................................64
5.19 Reservation of Parent Common Stock.............................................................65
5.20 Parent Name Change.............................................................................65
5.21 Potential Agreement with L-1...................................................................65
5.22 Parent Headquarters............................................................................65
ARTICLE 6 CONDITIONS TO OBLIGATIONS OF THE PARTIES...............................................................65
6.1 Conditions to Each Party's Obligation to Effect the Merger.....................................65
6.2 Conditions to Obligations of the Company.......................................................66
6.3 Conditions to Obligations of Parent and Merger Sub.............................................67
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER......................................................................68
7.1 Termination....................................................................................68
7.2 Effect of Termination..........................................................................69
7.3 Payments.......................................................................................69
7.4 Amendment......................................................................................71
7.5 Extension; Waiver..............................................................................71
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ARTICLE 8 GENERAL................................................................................................71
8.1 Expiration of Representations and Warranties...................................................71
8.2 Notices........................................................................................71
8.3 Interpretation.................................................................................73
8.4 Counterparts...................................................................................73
8.5 Entire Agreement; No Third-Party Beneficiaries.................................................73
8.6 Governing Law..................................................................................73
8.7 Assignment.....................................................................................73
8.8 Consent to Jurisdiction........................................................................74
8.9 Headings.......................................................................................74
8.10 Severability...................................................................................74
8.11 Failure or Indulgence Not Waiver; Remedies Cumulative..........................................74
8.12 Waiver of Jury Trial...........................................................................74
8.13 Specific Performance...........................................................................74
8.14 No Joint Venture...............................................................................75
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AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
This AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is made
and entered into as of January 11, 2006 (the "AGREEMENT DATE") by and among
Viisage Technology, Inc., a Delaware corporation ("PARENT"), VIDS Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of Parent ("MERGER
SUB"), and Identix Incorporated, a Delaware corporation (the "COMPANY").
RECITALS
A. The parties intend that, subject to the terms and conditions
hereinafter set forth, Merger Sub shall merge with and into the Company (the
"MERGER"), with the Company to be the surviving corporation of the Merger, on
the terms and subject to the conditions of this Agreement and in accordance with
the General Corporation Law of the State of Delaware ("DELAWARE LAW").
B. The Board of Directors of the Company has approved and declared
advisable this Agreement and the Merger, has deemed it in the best interests of
its stockholders to consummate the Merger, and has determined to recommend to
its stockholders the adoption of this Agreement.
C. The Board of Directors of Parent has approved and declared
advisable this Agreement, the issuance of shares of Parent Common Stock (as
defined in Article 1) in connection with the Merger (the "PARENT STOCK
ISSUANCE") and an amendment to Parent's Certificate of Incorporation (i) to
increase the number of authorized shares of Parent Common Stock to 125,000,000,
(ii) change Parent's name to a name mutually agreed upon by Parent and the
Company prior to the Effective Time as provided in Section 5.20 hereto, and
(iii) to make any changes required to permit compliance with Section 5.13 hereto
(the "PARENT CHARTER AMENDMENT"), has deemed it in the best interests of its
stockholders that the Parent Stock Issuance and Parent Charter Amendment be
effected, and has determined to recommend to its stockholders approval of the
Parent Stock Issuance and Parent Charter Amendment. The Parent Charter Amendment
shall be effected pursuant to a Certificate of Amendment to its Certificate of
Incorporation (the "CERTIFICATE OF AMENDMENT").
D. Simultaneously with the execution and delivery of this Agreement
and as a condition and inducement to the Company's willingness to enter into
this Agreement, the Company is entering into Voting Agreements in the form of
Exhibit A attached hereto with certain stockholders of Parent in their
respective capacities as stockholders of Parent (the "PARENT VOTING
AGREEMENTS").
E. Simultaneously with the execution and delivery of this Agreement
and as a condition and inducement to Parent's willingness to enter into this
Agreement, Parent is entering into Voting Agreements in the form of Exhibit B
attached hereto with certain stockholders of the Company in their respective
capacities as stockholders of the Company (the "COMPANY VOTING AGREEMENTS").
F. For United States federal income tax purposes, the Merger is
intended to qualify as a "reorganization" pursuant to the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "CODE"), and the
parties intend, by executing this Agreement, to adopt a "plan of reorganization"
within the meaning of Treasury Regulation Sections 1.368-2(g) and 1.368-3.
G. Parent, Merger Sub and the Company desire to make certain
representations, warranties and covenants in connection with the Merger and to
prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and conditions contained herein, the
parties hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below.
"AFFILIATE" means with respect to any Person, another Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person, where
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management policies of a Person, whether through
the ownership of voting securities, by contract, as trustee or executor, or
otherwise.
"ALTERNATIVE TRANSACTION" means with respect to Parent or the
Company, any of the following transactions (other than the Merger): (A) any
acquisition or purchase from such party by any Person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of more than a 20% interest in the total outstanding voting
securities of such party or any tender offer or exchange offer that if
consummated would result in any Person or "group" (as defined under Section
13(d) of the Exchange Act and the rules and regulations thereunder) beneficially
owning securities representing 20% or more of the total outstanding voting power
of such party or any merger, consolidation, business combination, share exchange
or similar transaction involving such party pursuant to which the stockholders
of such party immediately preceding such transaction hold securities
representing less than 80% of the total outstanding voting power of the
surviving or resulting entity of such transaction (or parent entity of such
surviving or resulting entity); (B) any sale, lease, exchange, mortgage,
transfer, license or disposition of assets (including capital stock or other
ownership interests in Subsidiaries) representing 20% or more of the aggregate
fair market value of the consolidated assets of such party and its Subsidiaries
taken as a whole; or (C) any liquidation or dissolution of such party.
"ALTERNATIVE TRANSACTION PROPOSAL" means any offer, inquiry, proposal
or indication of interest (whether binding or non-binding) to Parent or the
Company, or their respective stockholders, relating to an Alternative
Transaction.
"APPLICABLE LAW" means all foreign, federal, state, local or
municipal laws, statutes, ordinances, regulations, and rules, and all orders,
writs, injunctions, awards, judgments and decrees of any Governmental Authority
applicable to Parent, the Company, their respective Subsidiaries or any of their
respective assets, properties or businesses.
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"CERTIFICATE OF MERGER" means a certificate of merger, in such
appropriate form as is determined by the parties.
"CHANGE OF RECOMMENDATION" means the withholding, withdrawal, adverse
amendment, qualification or modification of the Board of Directors'
recommendation in favor of, in the case of the Company, adoption of this
Agreement and, in the case of Parent, approval of the Parent Stock Issuance and
Parent Charter Amendment, and, in the case of a tender or exchange offer made by
a third party directly to the Company's or Parent's stockholders, as the case
may be, a recommendation that the Company's stockholders or Parent's
stockholders, as the case may be, accept the tender or exchange offer.
"CLOSING" means the closing of the transactions to consummate the
Merger.
"CLOSING DATE" means the business day after the satisfaction or
waiver of the conditions set forth in Article 6 (excluding conditions that, by
their terms, are to be satisfied on the Closing Date, but subject to the
satisfaction or waiver of such conditions), or such other date as the parties
hereto agree in writing.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"COMPANY COMMON STOCK" means the Common Stock, $0.01 par value per
share, of the Company.
"COMPANY ESPP" means the Employee Stock Purchase Plan of the Company
and the Foreign Subsidiary Employee Stock Purchase Plan.
"COMPANY FOREIGN PLAN" means each Company Benefit Arrangement that
has been established or maintained, or that is required to be maintained or
contributed to by the law or applicable custom or rule of any jurisdiction
outside of the United States.
"COMPANY OPTION PLANS" means the 1992 Employee Stock Option Plan, as
amended, the 1995 Equity Incentive Plan, as amended, the 1995 Non-Employee
Directors Stock Option Plan, as amended, the New Employee Stock Incentive Plan,
as amended, the 2002 Equity Incentive Plan, the Nonemployee Directors Stock
Award Plan, Visionics' Stock Incentive Plan, Digital Biometrics Inc.1990 Stock
Option Plan, as amended, Visionics' 1998 Stock Option Plan and IDT Holdings,
Inc. 1998 Stock Option/Stock Issuance Plan.
"COMPANY OPTIONS" means options to purchase shares of Company Common
Stock.
"COMPANY PREFERRED STOCK" means the Preferred Stock, $0.01 par value
per share, of the Company.
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"COMPANY RESTRICTED SHARES" means any shares of Company Common Stock
that are issued and outstanding that are unvested or are subject to a repurchase
option, risk of forfeiture or other condition providing that such shares may be
repurchased by or forfeited to the Company under the terms of any Contract with
the Company (including without limitation any stock option agreement, stock
option exercise agreement or restricted stock purchase agreement).
"COMPANY STOCKHOLDERS" means the holders of shares of Company Common
Stock.
"CONTRACT" means any written or oral legally binding contract,
agreement, instrument, commitment or undertaking (including leases, licenses,
mortgages, notes, guarantees, sublicenses, subcontracts and purchase orders).
"EFFECTIVE TIME" means the time of the filing of the Certificate of
Merger with the Office of the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware Law (or such later time as
may be mutually agreed in writing by the Company and Parent as the time of the
Merger and specified in the Certificate of Merger).
"ENCUMBRANCE" means, with respect to any asset, any mortgage, deed of
trust, lien, pledge, charge, security interest, title retention device,
collateral assignment, adverse claim, restriction or other encumbrance of any
kind in respect of such asset (including any restriction on the voting of any
security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset, any restriction
on the use of any asset and any restriction on the possession, exercise or
transfer of any other attribute of ownership of any asset).
"ENVIRONMENTAL LAWS" means any and all federal, state, foreign,
interstate, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decisions, injunctions, decrees, requirements of any
Governmental Authority, any and all common law requirements, rules and bases of
liability regulating, relating to, or imposing liability or standards of conduct
concerning pollution, Hazardous Materials or protection of human health, safety
or the environment, as currently in effect, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq., the
Clean Air Act, 42 U.S.C. Section 7401 et seq., the Toxic Substances Control Act,
15 U.S.C. Section 2601 et seq., the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C., Section 136 et seq., Occupational Safety and Health
Act 29 U.S.C. Section 651 et seq., the Oil Pollution Act of 1990, 33 U.S.C.
Section 2701 et seq., and the Endangered Species Act (16 U.S.C. Section 1531 et
seq.) as such laws have been amended or supplemented, and the regulations
promulgated pursuant thereto, and all analogous state or local statutes.
"ENVIRONMENTAL LIABILITIES" means with respect to Parent or the
Company, any and all Liabilities of or relating to such party or any of its
Subsidiaries (including any entity which is, in whole or in part, a predecessor
of such party or any of such Subsidiaries), which (A) arise under or relate to
matters covered by Environmental Laws and (B) relate to actions occurring or
conditions existing on or prior to the Closing Date.
4
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means with respect to Parent or the Company, any
entity which is a member of: (A) a "controlled group of corporations", as
defined in Section 414(b) of the Code; (B) a group of entities under "common
control", as defined in Section 414(c) of the Code; or (C) an "affiliated
service group", as defined in Section 414(m) of the Code, or treasury
regulations promulgated under Section 414(o) of the Code, any of which includes
such party.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"GAAP" means United States generally accepted accounting principles.
"GOVERNMENTAL AUTHORITY" means any federal, state, county, local,
municipal or foreign court or tribunal, governmental or regulatory body,
administrative agency, commission or other governmental authority.
"GOVERNMENTAL PERMIT" means with respect to Parent, the Company or
any of their respective Subsidiaries, any consent, license, permit, grant, or
other authorization of a Governmental Authority that is required for the
operation of such entity's business or the holding of any of its material assets
or properties.
"HAZARDOUS MATERIALS" means any materials or wastes, defined, listed,
classified or regulated as radioactive, hazardous, toxic or otherwise dangerous
to health or the environment in or under any Environmental Laws including
without limitation petroleum, petroleum products, friable asbestos, urea
formaldehyde, radioactive materials and polychlorinated biphenyls, but excluding
office and janitorial supplies safely stored and maintained.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"INTELLECTUAL PROPERTY" means, collectively, all worldwide industrial
and intellectual property rights, including rights in the following: patents and
patent applications, trademarks and trademark applications, trade dress rights,
trade names, Internet domain names, copyrights and copyrightable works
(including object code and source code software), mask work and applications
therefor, franchises, inventions, trade secrets, know-how, proprietary business
information, processes and formulae, databases, and proprietary technology.
"KNOWLEDGE" means with respect to any particular fact, circumstance,
event or other matter in question, with respect to the Company, that any of the
Chief Executive Officer, Chief Financial Officer, Chief Technical Officer, Chief
Operating Officer or Chief Legal Officer, and with respect to Parent, that any
of the Chief Executive Officer, Chief Financial Officer, Chief Technical
Officer, General Counsel, Senior Vice President of Customer Solutions or Senior
Vice President of ID Service, has actual knowledge of such fact, circumstance,
event or other matter.
5
"LIABILITIES" means debts, liabilities and obligations, whether
accrued or fixed, absolute or contingent, matured or unmatured, determined or
determinable, known or unknown, including those arising under any law, action or
governmental order and those arising under any Contract.
"MATERIAL ADVERSE EFFECT" means with respect to Parent or the
Company, any change, event, circumstance or effect (any such item, an "EFFECT")
that is (i) materially adverse to the business, assets (including intangible
assets), financial condition or results of operations of such party taken as a
whole with its Subsidiaries or (ii) would reasonably be expected to prevent
Parent or the Company, as applicable, from consummating the Merger or any of the
transactions contemplated by the Agreement or to perform any of its obligations
under the Agreement before the Effective Time; provided however, in no event
shall Effects resulting from any of the following be taken into account in
determining whether there has been or will be, a Material Adverse Effect on any
such party: (A) changes in general economic or political conditions or the
financing or capital markets in general or Effects affecting the industry
generally in which such party and its Subsidiaries operates (provided that such
Effects do not affect such party and its Subsidiaries as a whole in a materially
disproportionate manner as compared to other similarly situated participants in
the industry in which such party and its Subsidiaries operates); (B) changes in
Applicable Law or GAAP or official published interpretations thereof; (C) the
execution, delivery and performance of this Agreement or the pendency or
consummation of any transaction contemplated hereby or the announcement thereof;
(D) any natural disaster, sabotage, military action, acts of war or terrorism or
any escalation or worsening thereof, (E) any change in the price at which the
Parent Common Stock or the Company Common Stock is publicly traded (provided
that the underlying cause of any such change may (subject to the other
provisions of this Agreement) be taken into account in making a determination as
to whether there has been a Material Adverse Effect) or (F) any failure to meet
any internal or external financial projections, estimates or forecasts (provided
that the underlying cause of any such change may (subject to the other
provisions of this Agreement) be taken into account in making a determination as
to whether there has been a Material Adverse Effect).
"MERGER SUB COMMON STOCK" means the Common Stock, $0.01 par value per
share, of Merger Sub.
"PARENT COMMON STOCK" means the Common Stock, $0.001 par value per
share, of Parent.
"PARENT ESPP" means the 1997 Employee Stock Purchase Plan of Parent.
"PARENT OPTION PLANS" means the Second Amended and Restated 1996
Management Stock Option Plan, 1996 Director Stock Option Plan, Imaging
Automation, Inc. 1996 Stock Option Plan, Imaging Automation, Inc. 2003 Employee,
Director and Consultant Stock Plan, Parent 2005 Long Term Incentive Plan,
Viisage Technology AG Share Option Plan and 2001 Directors Stock in Lieu of Cash
Plan.
6
"PARENT OPTIONS" means options to purchase shares of Parent Common
Stock.
"PARENT PREFERRED STOCK" means the Preferred Stock, $0.001 par value
per share, of Parent.
"PARENT RESTRICTED SHARES" means any shares of Parent Common Stock
that are issued and outstanding that are unvested or are subject to a repurchase
option, risk of forfeiture or other condition providing that such shares may be
repurchased by or forfeited to Parent under the terms of any Contract with
Parent (including without limitation any stock option agreement, stock option
exercise agreement or restricted stock purchase agreement).
"PERMITTED ENCUMBRANCES" means: (A) statutory liens for Taxes or
other payments that are not yet due and payable; (B) statutory liens to secure
obligations to landlords, lessors or renters under leases or rental agreements;
(C) deposits or pledges made in connection with, or to secure payment of,
workers' compensation, unemployment insurance or similar programs mandated by
Applicable Law; (D) statutory liens in favor of carriers, warehousemen,
mechanics and materialmen, to secure claims for labor, materials or supplies and
other like liens; and (E) statutory purchase money liens.
"PERSON" means any individual, corporation, company, limited
liability company, partnership, limited liability partnership, trust, estate,
proprietorship, joint venture, association, organization, entity or Governmental
Authority.
"PROXY STATEMENT/PROSPECTUS" means the joint proxy
statement/prospectus to be filed with the SEC as part of the Registration
Statement.
"PUBLIC SOFTWARE" means any software that is or contains, in whole or
in part, any software that is licensed pursuant to an "open source" licensing
agreement or similar agreement, including without limitation software licensed
under the GNU General Public License (GPL) or the GNU Lesser/Library GPL, the
Mozilla Public License, the Netscape Public License, the Sun Community Source
License, the Sun Industry Standards License, the BSD License, and the Apache
License.
"REGISTRATION STATEMENT" means the registration statement on Form S-4
to be filed by Parent with the SEC in connection with the issuance of Parent
Common Stock pursuant to the Merger.
"SARBANES ACT" means the Xxxxxxxx-Xxxxx Act of 2002.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SUBSIDIARY" means with respect to Parent or the Company, another
Person, an amount of the voting securities, other voting ownership or voting
partnership interests of which is sufficient to elect at least a majority of its
Board of Directors or other governing body is (or, if there are no such voting
interests, more than 50% of the equity interests of which are) owned directly or
indirectly by such party.
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"SUPERIOR PROPOSAL" means with respect to Parent or the Company, an
unsolicited, bona fide written Alternative Transaction Proposal, which the Board
of Directors of such party has in good faith determined (after consultation with
its outside legal counsel and its financial advisor), taking into account all
legal, financial, regulatory, timing and other aspects of the proposal, (A) is
more favorable, from a financial point of view, to such party's stockholders (in
their capacities as stockholders) than the terms of this Agreement (after giving
effect to any adjustments to the terms of this Agreement proposed by the other
party in response to such Alternative Transaction Proposal), (B) is fully
financed or reasonably capable of being fully financed, and (C) is reasonably
likely to be consummated on the terms proposed; provided that, for purposes of
this definition of "Superior Proposal" each reference to "20%" or "80%" in the
definition of "Alternative Transaction" shall be deemed to be a reference to
"50%".
"TAX" (and, with correlative meaning, "TAXES") means (A) any net
income, alternative or add-on minimum tax, estimated, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any governmental entity responsible for the imposition of any such
tax (domestic or foreign), (B) any liability for the payment of any amounts of
the type described in clause (A) of this sentence as a result of being a member
of an affiliated, consolidated, combined, unitary or aggregate group for any
taxable period, and (C) any liability for the payment of any amounts of the type
described in clause (A) or (B) of this sentence as a result of being a
transferee of or successor to any Person or as a result of any express or
implied obligation to indemnify any other Person for any amounts of the type
described in clause (A) or (B) of this sentence.
"TERMINATION FEE" means $20,000,000 in immediately available funds.
1.2 Additional Definitions. Other capitalized terms defined elsewhere
in this Agreement and not defined in this Article 1 shall have the meanings
assigned to such terms in this Agreement in the sections set forth below.
Term Section
---- -------
Agreement Preamble
Agreement Date Preamble
Assumed Awards 5.12(b)
Bear Xxxxxxx 4.16
Certificate of Amendment Recitals
Certificates 2.7(c)
Claim 5.7(a)
Code Recitals
Company Preamble
Company 401(k) Plans 5.12(e)
Company Balance Sheet 3.4(b)
8
Term Section
---- -------
Company Benefit Arrangements 3.10(d)
Company Charter Documents 3.1(b)
Company Disclosure Letter 3
Company Financial Statements 3.4(b)
Company IP Rights 3.9(a)
Company Material Contract 3.12(a)
Company-Owned IP Rights 3.9(a)
Company SEC Documents 3.4(a)
Company Source Code 3.9(g)
Company Stockholder Approval 3.3(c)
Company Stockholders' Meeting 3.4(e)
Company Voting Agreements Recitals
Company Voting Debt 3.2(d)
Company Warrants 2.5(b)
Confidentiality Agreement 5.2(c)(1)
Continuing Employees 5.12(d)
Delaware Law Recitals
Dissenting Shares 2.9
Exchange Agent 2.7(a)
Exchange Fund 2.7(b)
Exchange Multiple 2.4(g)
Exchange Quotient 2.4(g)
Exchange Ratio 2.4(a)
Expenses 5.7(a)
Xxxxxx Xxxxxxxxxx 3.16
Indemnified Parties 5.7(a)
Initial Post-Closing Directors 5.13(a)
L-1 2.2
Merger Recitals
Merger Consideration 2.4(a)
Merger Sub Preamble
Outside Date 7.1(b)(1)
Parent Preamble
Parent Balance Sheet 4.4(b)
Parent Benefit Arrangements 4.10(d)
Parent Benefit Plans 5.12(d)
Parent Charter Amendment Recitals
Parent Charter Documents 4.1(b)
Parent Disclosure Letter 4
Parent Financial Statements 4.4(b)
Parent IP Rights 4.9(a)
Parent Material Contract 4.12(a)
Parent-Owned IP Rights 4.9(a)
Parent SEC Documents 4.4(a)
Parent Source Code 4.9(g)
9
Term Section
---- -------
Parent Stock Issuance Recitals
Parent Stockholder Approval 4.3(c)
Parent Stockholders' Meeting 3.4(e)
Parent Voting Agreements Recitals
Parent Voting Debt 4.2(d)
Parent Warrants 4.2(b)
Restraints 6.1(c)
Returns 3.8
Rule 145 Affiliates 5.14
Stock Consideration 2.4(a)
Surviving Corporation 2.1
USBX 4.16
Use 3.9(a) and 4.9(a)
ARTICLE 2
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions of this
Agreement and the applicable provisions of Delaware Law, at the Effective Time,
Merger Sub shall be merged with and into the Company and the Company shall
continue as the surviving corporation of the Merger (the "SURVIVING
CORPORATION").
2.2 Closing. Subject to termination of this Agreement as provided in
Article 7, the Closing shall take place at the offices of L-1 Investment
Partners LLC ("L-1"), 000 Xxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxx, xx the Closing
Date. The parties hereto shall cause the Merger to be consummated on the Closing
Date by filing the Certificate of Merger with the Delaware Secretary of State in
accordance with Delaware Law.
2.3 Effects of the Merger. At and upon the Effective Time:
(a) the separate existence of Merger Sub shall cease and Merger
Sub shall be merged with and into the Company, and the Company shall be the
surviving corporation of the Merger pursuant to the terms of this Agreement and
the Certificate of Merger;
(b) the Certificate of Incorporation of the Surviving
Corporation shall be amended and restated as of the Effective Time to be
identical to the Certificate of Incorporation of Merger Sub as in effect
immediately prior to the Effective Time, until thereafter amended in accordance
with Delaware Law and as provided in such Certificate of Incorporation;
provided, however, that at the Effective Time, Article 1 of the Certificate of
Incorporation of the Surviving Corporation shall be amended and restated in its
entirety to read as follows: "The name of the corporation is "Identix
Incorporated".
(c) the Bylaws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the Bylaws of the Surviving Corporation at the
Effective Time until thereafter amended in accordance with Delaware Law and as
provided in the Certificate of Incorporation of the Surviving Corporation and
such Bylaws;
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(d) the officers of the Company immediately prior to the
Effective Time shall continue as the initial officers of the Surviving
Corporation immediately after the Effective Time until their respective
successors are duly appointed;
(e) the members of the Board of Directors of Merger Sub
immediately prior to the Effective Time shall be appointed as the members of the
Board of Directors of the Surviving Corporation immediately after the Effective
Time until their respective successors are duly elected or appointed and
qualified; and
(f) the Merger shall, from and after the Effective Time, have
all of the effects provided by Delaware Law.
2.4 Conversion of Stock.
As of the Effective Time, by virtue of the Merger, and without any
action on the part of the holders of any outstanding shares of capital stock or
securities of the Company or Merger Sub:
(a) Each share of the Company Common Stock, issued and
outstanding immediately prior to the Effective Time (other than shares of
Company Common Stock to be canceled pursuant to Section 2.4(c)), shall be
automatically converted into the right to receive 0.473 (the "EXCHANGE RATIO")
of a fully paid and nonassessable share of Parent Common Stock (the "MERGER
CONSIDERATION"). All such shares of Company Common Stock, when so converted,
shall no longer be outstanding, shall automatically be canceled and shall cease
to exist, and each certificate previously representing any such shares shall
thereafter represent only the right to receive the Merger Consideration into
which such shares of Company Common Stock have been converted.
(b) Each holder of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock shall cease to have any rights with respect thereto, except
the right to receive (i) a certificate (or direct registration) representing the
number of whole shares of Parent Common Stock payable with respect to such
Company Common Stock, and (ii) cash in lieu of fractional shares of Parent
Common Stock in accordance with Section 2.4(f), without interest.
(c) Each share of Company Common Stock held of record
immediately prior to the Effective Time by the Company, Merger Sub, Parent shall
be canceled and extinguished without any consideration paid thereof.
(d) Each share of Common Stock, $0.01 per share par value, of
Merger Sub Common Stock issued and outstanding immediately prior to the
Effective Time shall be automatically converted into one validly issued, fully
paid and nonassessable share of Common Stock, $0.01 per share par value, of the
Surviving Corporation. Each certificate evidencing ownership of a number of
shares of Merger Sub Common Stock shall be deemed to evidence ownership of the
same number of shares of Common Stock, $0.01 per share par value, of the
Surviving Corporation.
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(e) Without limiting any other provision of this Agreement, the
Exchange Ratio and Exchange Quotient shall be adjusted to reflect fully the
effect of any stock split, reverse stock split, stock dividend (including any
dividend or distribution of securities convertible into Parent Common Stock or
Company Common Stock), extraordinary dividend or distribution, reorganization,
reclassification, recapitalization or other like change with respect to Parent
Common Stock or Company Common Stock occurring or having a record date or an
effective date on or after the date hereof and prior to the Effective Time.
(f) No fraction of a share of Parent Common Stock will be issued
by virtue of the Merger. Instead, each holder of shares of Company Common Stock
who would otherwise be entitled by virtue of the Merger to receive a fraction of
a share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock which otherwise would be received by such holder) shall
receive in lieu thereof from Parent an amount of cash (rounded to the nearest
whole cent, with .5 being rounded up) equal to the product of (i) such fraction,
multiplied by (ii) $8.50.
(g) For the purposes of this Agreement, the "EXCHANGE MULTIPLE"
of any quantity means the product obtained from multiplying such quantity by the
Exchange Ratio, and the "EXCHANGE QUOTIENT" of any quantity means the quotient
obtained from dividing such quantity by the Exchange Ratio.
2.5 Company Options, Company Warrants, Company Stock Purchase Plan.
(a) As of the Effective Time, Parent shall, to the full extent
permitted by Applicable Law and the terms of the Company Option Plans, assume
all of the Company Options and the Company Option Plans. Each Company Option,
whether or not exercisable at the Effective Time, shall be assumed by Parent in
such a manner that after the Effective Time it shall be exercisable upon the
same terms and conditions as under the Company Option Plan pursuant to which it
was granted and the applicable option agreement issued thereunder (after giving
effect to any acceleration of vesting resulting from the Merger on the terms
provided under the Company Option Plan pursuant to which it was granted and the
applicable option agreement issued thereunder); provided, however, that (i) each
such option thereafter shall be exercisable for a number of shares of Parent
Common Stock (rounded down to the nearest whole share) equal to the Exchange
Multiple of the number of shares of Company Common Stock subject to such option,
and (ii) the exercise price per share of Parent Common Stock thereafter shall
equal the Exchange Quotient (rounded up to the nearest whole cent) of the
exercise price per share of Company Common Stock subject to such option in
effect immediately prior to the Effective Time. Notwithstanding the foregoing,
any Company Options that vest according to their terms as of the Effective Time
shall be vested from and after the Effective Time. It is intended that Company
Options assumed by Parent shall to the extent permitted by the Code qualify
following the Effective Time as incentive stock options as defined in Section
422 of the Code to the extent Company Options qualified as incentive stock
options immediately prior to the Effective Time and the provisions of this
Section 2.5 shall be applied consistent with such intent.
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(b) As of the Effective Time, Parent shall, to the full extent
permitted by applicable law, assume all warrants of Company outstanding
immediately prior to the Effective Time (the "COMPANY WARRANTS"). Each Company
Warrant, whether or not exercisable at the Effective Time, shall be assumed by
Parent in such a manner that it shall be exercisable upon the same terms and
conditions as set forth in the applicable Company Warrant immediately prior to
the Effective Time (after giving effect to any acceleration of vesting resulting
from the Merger on the terms provided under the applicable warrant); provided
that (i) each such warrant thereafter shall be exercisable for a number of
shares of Parent Common Stock (rounded down to the nearest whole share) equal to
the Exchange Multiple of the number of shares of Company Common Stock subject to
such Company Warrant, and (ii) the strike price per share of Parent Common Stock
thereafter shall equal the Exchange Quotient (rounded up to the nearest whole
cent) of the strike price per share of Company Common Stock subject to such
Company Warrant in effect immediately prior to the Effective Time.
(c) Employees of the Company and its Subsidiaries who continue
in the employ of the Surviving Corporation or Parent or any Subsidiary of Parent
after the Effective Time shall be eligible for participation in the Parent ESPP
in accordance with the terms, provisions and policies thereof.
2.6 Company Restricted Shares.
Subject to the terms of the Company Option Plans (a correct and
complete copy of which has been disclosed and made available to Parent), the
shares of Parent Common Stock issued upon the conversion of any Company
Restricted Shares pursuant to the Merger will continue to be unvested and
subject to the same repurchase options, risks of forfeiture or other conditions
following the Effective Time, and the certificates representing such shares of
Parent Common Stock may accordingly be marked with appropriate legends noting
such repurchase options, risks of forfeiture or other conditions. The Company
shall take all actions that may be necessary to ensure that, from and after the
Effective Time, Parent is entitled to exercise any such repurchase option or
other right set forth in any Contract governing Company Restricted Shares.
2.7 Exchange of Certificates.
(a) Exchange Agent. Parent shall select an institution
reasonably acceptable to the Company to act as the exchange agent (the "EXCHANGE
AGENT") in the Merger and shall enter into an exchange agent agreement with the
Exchange Agent reasonably satisfactory to Company.
(b) Exchange Fund. Promptly after the Effective Time, Parent
shall deposit with the Exchange Agent for exchange in accordance with this
Article 2, the shares of Parent Common Stock, and cash in lieu of fractional
shares (together with any dividends or distributions with respect thereto, the
"EXCHANGE FUND") issuable pursuant to Section 2.4 in exchange for outstanding
shares of Company Common Stock.
(c) Exchange Procedures. Promptly after the Effective Time,
Parent shall instruct the Exchange Agent to mail to each holder of record of a
certificate or certificates ("CERTIFICATES") which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock whose
shares were converted into the right to receive shares of Parent Common Stock
pursuant to Section 2.4(a), cash in lieu of any fractional shares pursuant to
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Section 2.4(f) and any dividends or other distributions pursuant to Section
2.4(e), (i) a letter of transmittal in customary form (that shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the consideration provided for herein. Upon surrender of
Certificates for cancellation to the Exchange Agent together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may reasonably be required by
the Exchange Agent (including any required Form W-9 or Form W-8), the holders of
such Certificates shall be entitled to receive in exchange therefor certificates
representing the number of whole shares of Parent Common Stock (after
aggregating all Certificates surrendered by such holder) into which such holder
is entitled pursuant to Section 2.4 (which shall be in uncertificated book entry
form unless a physical certificate is requested or required by Applicable Law or
regulation), a check in the amount of U.S. dollars in lieu of fractional shares
that such holders have the right to receive pursuant to Section 2.4(f) and any
dividends or distributions payable pursuant to Section 2.4(e), and the
Certificates so surrendered shall forthwith be canceled. Until so surrendered,
outstanding Certificates will be deemed from and after the Effective Time, for
all corporate purposes, to evidence only the right to receive upon surrender
thereof the number of whole shares of Parent Common Stock to which such holder
is entitled pursuant to Section 2.4(a), an amount in cash in lieu of the
issuance of any fractional shares in accordance with Section 2.4(f) and any
dividends or distributions payable pursuant to Section 2.4(e). No interest will
be paid or accrued on any cash payable in lieu of fractional shares of Parent
Common Stock or on any unpaid dividends or distributions payable to holders of
Certificates. In the event of a transfer of ownership of shares of Company
Common Stock that is not registered in the transfer records of the Company, a
certificate representing the proper number of whole shares of Parent Common
Stock and cash payable in lieu of fractional shares may be issued to a
transferee if the Certificate representing such shares of Company Common Stock
is presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made with respect to Parent Common
Stock with a record date after the Effective Time will be paid to the holders of
any unsurrendered Certificates with respect to the shares of Parent Common Stock
issuable pursuant to the Merger until the holders of record of such Certificates
shall surrender such Certificates. Subject to Applicable Law, following
surrender of any such Certificates, the Exchange Agent shall deliver to the
record holders thereof, without interest, (i) promptly after such surrender, the
amount of any cash payable with respect to a fractional share of Parent Common
Stock to which such holder is entitled pursuant to Section 2.4(f) and the amount
of dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to the whole shares of Parent Common Stock issued
in respect thereof, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender and a payment date occurring after surrender, payable with
respect to such whole shares of Parent Common Stock.
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(e) Lost, Stolen or Destroyed Certificates. In the event that
any Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall issue and pay in exchange for such lost, stolen or destroyed Certificates,
upon the making of an affidavit of that fact by the holder thereof, certificates
representing the shares of Parent Common Stock to which the shares of Company
Common Stock represented by such Certificates were converted into the right to
receive pursuant to Section 2.4(a), cash for fractional shares, if any, as may
be required pursuant to Section 2.4(f) and any dividends or distributions
payable pursuant to Section 2.4(e); provided, however, that Parent or the
Exchange Agent may, in its discretion and as a condition precedent to the
issuance of such certificates representing shares of Parent Common Stock, cash
and other distributions, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Parent, the Surviving
Corporation or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the former holders of Company Common Stock
for one year after the Effective Time shall be delivered to Parent, upon demand,
and any such holders of Company Common Stock who have not theretofore complied
with the provisions of this Section 2.7 shall thereafter look only to Parent for
the shares of Parent Common Stock to which they are entitled pursuant to Section
2.4(a), any cash in lieu of fractional shares of Parent Common Stock to which
they are entitled pursuant to Section 2.4(f) and any dividends or other
distributions with respect to Parent Common Stock to which they are entitled
pursuant to Section 2.4(e), in each case without any interest thereon.
(g) No Further Ownership Rights in Company Common Stock. All
shares of Parent Common Stock, cash in lieu of fractional shares of Parent
Common Stock and dividends or other distributions with respect to Parent Common
Stock issued in accordance with the terms hereof shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Company
Common Stock, and there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of Company Common Stock that 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.
(h) No Liability. Notwithstanding anything to the contrary in
this Section 2.7, neither the Exchange Agent, Parent, the Company, the Surviving
Corporation nor any party hereto shall be liable to a holder of shares of
Company Common Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
2.8 Tax Consequences and Withholding.
(a) Consequences. It is intended by the parties hereto that the
Merger shall constitute a "reorganization" within the meaning of Section 368 of
the Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations.
15
(b) Withholding. Each of the Exchange Agent, Parent and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
former Company Stockholder such amounts as may be required to be deducted or
withheld therefrom under the Code or under any provision of state, local or
foreign tax law or under any other Applicable Law. To the extent such amounts
are so deducted and withheld, such amounts shall be treated for all purposes
under this Agreement as having been paid to the Person in respect of whom such
deduction and withholding was made.
2.9 Further Assurances.
If, at any time before or after the Effective Time, the Company or
Parent reasonably believes or is advised that any further instruments, deeds,
assignments or assurances are reasonably necessary or desirable to consummate
the Merger or to carry out the purposes and intent of this Agreement at or after
the Effective Time, then the Company, Parent, the Surviving Corporation and
their respective officers and directors shall execute and deliver all such
proper deeds, assignments, instruments and assurances and do all other things
reasonably necessary or desirable to consummate the Merger and to carry out the
purposes and intent of this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure letter of the Company addressed
to Parent, dated as of the Agreement Date and delivered to Parent concurrently
with the parties' execution of this Agreement (the "COMPANY DISCLOSURE LETTER")
referencing a representation or warranty herein (it being understood that the
Company Disclosure Letter shall be arranged in sections and subsections
corresponding to the sections and subsections contained in this Agreement, and
the disclosures in any section or subsection of the Company Disclosure Letter
shall qualify all of the applicable representations and warranties in the
corresponding section or subsection of this Article 3 and, in addition, in all
other sections or subsections in this Article 3 to the extent it is reasonably
apparent from the text of such disclosure that that such disclosure is
applicable to such other sections or subsections), the Company represents and
warrants to Parent as follows:
3.1 Organization.
(a) Standing and Power. Each of the Company and its Subsidiaries
(i) is a corporation or other entity duly organized, validly existing and in
good standing (with respect to jurisdictions which recognize such concept) under
the laws of the jurisdiction of its incorporation or organization, (ii) has the
requisite power and authority to own, lease and operate its properties and to
carry on its business as currently conducted, and (iii) is duly qualified or
licensed to do business, and is in good standing (with respect to jurisdictions
which recognize such concept), in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its activities makes
such qualification or licensing necessary, in each case except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
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(b) Charter Documents. The Company has made available to Parent
or filed with the SEC prior to the Agreement Date: (i) a complete and correct
copy of the Certificate of Incorporation (including any Certificates of
Designation) and Bylaws of the Company, each as amended to date, and (ii) a
complete and correct copy of the articles or certificate of incorporation and
bylaws (or like organizational documents), each as amended to date, of each of
its Subsidiaries (collectively with the documents identified in the preceding
clause (i), the "COMPANY CHARTER DOCUMENTS"), and each such instrument is in
full force and effect. Neither Company nor any of such Subsidiaries is in
violation of any of its Company Charter Documents, except in the case of such
Subsidiaries as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company.
(c) Subsidiaries. Schedule 3.1(c) of the Company Disclosure
Letter sets forth a list of each Subsidiary of the Company. All the outstanding
shares of capital stock of, or other equity or voting interests in, each
Subsidiary of the Company (i) are owned directly or indirectly by the Company,
free and clear of all Encumbrances (except for Permitted Encumbrances and
restrictions imposed by applicable securities laws), (ii) are not subject to any
preemptive right or right of first refusal created by Applicable Law, the
Company Charter Documents or any Contract to which such Subsidiary is a party or
by which it is bound, and (iii) are duly authorized, validly issued, fully paid
and nonassessable. Other than the Subsidiaries of the Company, as of the
Agreement Date, neither the Company nor any of its Subsidiaries owns any capital
stock of, or other equity or voting interests of any nature in, or any interest
convertible, exchangeable or exercisable for, capital stock of, or other equity
or voting interests of any nature in, any other Person. As of the Agreement
Date, there are no outstanding obligations of the Company or any of its
Subsidiaries under any Contract to which it is a party or by which it is
otherwise bound to make any loan to, or any equity or other investment (in the
form of a capital contribution or otherwise) in any other Person (other than the
Company or such a Subsidiary) in an amount in excess of $100,000 in respect of
any single Person.
3.2 Capitalization of the Company.
(a) Capital Stock. The authorized capital stock of the Company
consists solely of 100,000,000 shares of Company Common Stock, 2,000,000 shares
of Company Preferred Stock. As of the close of business on December 31, 2005,
(i) 89,186,700 (including 50,000 Company Restricted Shares) shares of Company
Common Stock were issued and outstanding (ii) no shares of Company Common Stock
were held in treasury by the Company and its Subsidiaries, and (iii) no shares
of Company Preferred Stock were issued or outstanding. All issued and
outstanding shares of Company Common Stock have been duly authorized and validly
issued, are fully paid and nonassessable, and are not subject to preemptive
rights created by Applicable Law, the Company Charter Documents or any Contract
to which the Company is a party or by which it is bound.
(b) Stock Options, Purchase Plans and Convertible Securities. As
of the close of business on December 31, 2005, (i) 6,960,199 shares of Company
Common Stock were subject to issuance pursuant to outstanding Company Options
under the Company Option Plans, (ii) no shares of Company Common Stock were
subject to issuance pursuant to outstanding Company Options outside the Company
Option Plans, (iii) 5,771,373 shares of Company Common Stock were reserved for
17
future grant and issuance under the Company Option Plans (excluding shares
subject to issuance pursuant to outstanding Company Options), (iv) 1,024,351
shares of Company Common Stock were subject to issuance pursuant to outstanding
Company Warrants, and (v) no shares of Company Common Stock were reserved for
future issuance under the Company ESPP. All shares of Company Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and nonassessable. There are no
outstanding or authorized stock appreciation, profit participation (other than
Company bonus plans), "phantom stock", or other similar plans or Contracts with
respect to the Company or any of its Subsidiaries. Schedule 3.2(b) of the
Company Disclosure Letter sets forth (x) the following information with respect
to each Company Option: the aggregate number of shares issuable thereunder, the
type of option, the grant date, the expiration date, the exercise price and the
vesting schedule including a description of any acceleration provisions, and (y)
the following information with respect to each Company Warrant: the aggregate
number of shares issuable thereunder, the issue date, the expiration date, the
exercise price and the vesting schedule, if any, including a description of any
acceleration provisions. Each Company Option was granted in accordance with the
terms of the Company Stock Plan applicable thereto. The terms of each of the
Company Stock Plans do not prohibit the assumption of the Company Options as
provided in Section 2.5(a). The terms of each of the Company Warrants do not
prohibit the assumption of the Company Warrants as provided in Section 2.5(b).
(c) No Other Rights. As of the close of business on January 6,
2006, except as set forth in the preceding subsection (b), there were no
options, warrants, calls, rights, commitments, conversion privileges or
preemptive or other rights or Contracts (to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound) outstanding to purchase or otherwise acquire any Company Voting Debt, any
shares of capital stock of the Company or any of its Subsidiaries or any
securities or debt exercisable for, convertible into or exchangeable for capital
stock of the Company or any of its Subsidiaries, or obligating the Company or
any of its Subsidiaries to issue, grant, extend or enter into any such option,
warrant, call, right, commitment, conversion privilege or preemptive or other
right or Contract. The Company Charter Documents do not provide, and neither the
Company nor any of its Subsidiaries is a party to or otherwise bound by any
Contract providing, for registration rights, rights of first refusal in favor of
a third party, preemptive rights, co-sale rights, antidilution rights,
redemption rights or other similar rights or other restrictions applicable to
any outstanding securities of the Company or its Subsidiaries. Neither the
Company nor any of its Subsidiaries is a party to or otherwise bound by any
Contract (including any voting agreement, voting trust or proxy, other than
proxies to be submitted in connection with the Company Stockholders' Meeting (as
defined below)) regarding the voting of any outstanding securities of the
Company or its Subsidiaries. Neither the Company nor any of its Subsidiaries is
a party to or otherwise bound by any rights agreement or "poison pill"
anti-takeover plan.
(d) Voting Debt. There are no issued or outstanding bonds,
debentures, notes or other evidences of indebtedness having the right to vote on
any matters on which stockholders of the Company may vote ("COMPANY VOTING
DEBT").
(e) Legal Compliance. All outstanding shares of Company Common
Stock, all outstanding Company Options, all outstanding Company Warrants, and
all outstanding shares of capital stock of each Subsidiary of the Company have
been issued and granted in compliance in all material respects with (i) all
applicable securities laws and other Applicable Laws and (ii) all requirements
set forth in applicable Contracts pursuant to which such securities were issued.
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(f) Ownership of Parent. Neither the Company nor any of its
Subsidiaries owns, or has in the past three years owned, any shares of capital
stock of Parent or any of its Subsidiaries.
3.3 Authorization.
(a) Power and Authority. The Company has all requisite corporate
power and authority to enter into this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby, subject in the
case of consummation of the Merger to obtaining the Company Stockholder Approval
(as defined below). The execution and delivery of this Agreement have been duly
and validly authorized by all necessary corporate action on the part of the
Company and no other corporate proceedings on the part of Company are necessary
to authorize the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby, other than the Company Stockholder
Approval.
(b) Board Approval. The Board of Directors of the Company has
(i) determined that this Agreement and the Merger are fair to and in the best
interests of the Company and its stockholders and has declared this Agreement
advisable, (ii) duly approved this Agreement, the Company Voting Agreements, the
Merger and the other transactions contemplated hereby, which approval has not
been rescinded or modified, (iii) resolved (subject to Section 5.2(d)) to
recommend this Agreement to the Company Stockholders for adoption, and (iv)
directed that this Agreement be submitted to the Company Stockholders for
consideration in accordance with this Agreement.
(c) Stockholder Approval. The affirmative vote of the holders of
a majority of the outstanding shares of Company Common Stock (the "COMPANY
STOCKHOLDER APPROVAL") is the only vote of the holders of any class or series of
capital stock of the Company necessary to adopt this Agreement and consummate
the Merger and the other transactions contemplated hereby.
(d) Enforceability. This Agreement has been duly executed and
delivered by Company and, assuming the due execution and delivery by Parent and
Merger Sub, constitutes the valid and binding obligation of Company, enforceable
against Company in accordance with its terms, subject to the effect of (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to rights of creditors generally and
(ii) rules of law and equity governing specific performance, injunctive relief
and other equitable remedies.
(e) No Consents. No consent, approval, order, authorization,
release or waiver of, or registration, declaration or filing with, any
Governmental Authority is necessary or required to be made or obtained by the
Company or any of its Subsidiaries to enable the Company to lawfully enter into,
and perform its obligations under, this Agreement or to consummate the Merger
and the other transactions contemplated hereby, except for (i) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware and
19
appropriate documents with the relevant authorities of other states in which
Company is qualified to do business, (ii) such filings and notifications as may
be required to be made by the Company in connection with the Merger under the
HSR Act and the antitrust, competition or similar laws of any foreign
jurisdiction and the expiration or early termination of applicable waiting
periods under the HSR Act and such foreign laws, (iii) the filing with the SEC
of the Proxy Statement/Prospectus and such reports and filings under the
Exchange Act and the rules and regulations thereunder as may be required in
connection with this Agreement and the transactions contemplated hereby, (iv)
such other filings and notifications as may be required to be made by the
Company under federal, state or foreign securities laws or the rules and
regulations of the Nasdaq Stock Market, (v) the Company Stockholder Approval,
and (vi) such other consents, approvals, orders, authorizations, releases,
waivers, registrations, declarations or filings that if not made or obtained
would not, individually or in the aggregate, reasonably be expected to
materially affect the ability of the Company to consummate the Merger or have a
Material Adverse Effect on the Company.
(f) No Conflict. The execution and delivery of this Agreement by
the Company do not, and the consummation by the Company of the transactions
contemplated hereby and compliance by the Company with the provisions of this
Agreement will not, conflict with, result in any violation or breach of or
default (with or without notice or lapse of time, or both) under, or require any
consent, waiver or approval under, (i) the Company Charter Documents, (ii)
subject to compliance with the requirements set forth in the preceding
subsection (e), any Applicable Law applicable to the Company, any of its
Subsidiaries or any of their respective assets or properties, or (iii) any
Contract or Governmental Permit to which the Company or any of its Subsidiaries
is a party or by which the Company or any of its Subsidiaries is bound, other
than, in the cases of clauses (ii) and (iii), any such conflicts, violations,
breaches or defaults, or failure to obtain consents, waivers or approvals,
which, individually or in the aggregate, would not reasonably be expected to
materially affect the ability of the Company to consummate the Merger or have a
Material Adverse Effect on the Company.
3.4 SEC Filings.
(a) SEC Reports. The Company has timely filed with the SEC all
registration statements, prospectuses, reports, forms, statements, schedules,
certifications and other documents (including exhibits and all other items
incorporated by reference) required to be filed by the Company since January 1,
2004 (all such required registration statements, prospectuses, reports, forms,
statements, schedules, certifications and other documents, including those that
the Company may file subsequent to the Agreement Date, are referred to herein as
the "COMPANY SEC DOCUMENTS"). As of their respective dates, the Company SEC
Documents (i) were prepared in accordance and complied in all material respects
with the requirements of the Securities Act, the Exchange Act, the Sarbanes Act
(to the extent then applicable), and the rules and regulations of the SEC
promulgated thereunder applicable to such Company SEC Documents and (ii) did not
at the time they were filed (or if amended or superseded by a filing prior to
the Agreement Date, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, except to
the extent corrected prior to the Agreement Date by a subsequently filed Company
SEC Document. None of the Company's Subsidiaries is required to file any forms,
reports or other documents with the SEC.
20
(b) Financial Statements. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Company SEC Documents (the "COMPANY FINANCIAL STATEMENTS"), including each
Company SEC Document filed after the Agreement Date until the Closing, (i)
complied, as of their respective dates of filing with the SEC, as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, (ii) was prepared in accordance with GAAP (except in the case
of unaudited interim financial statements, as may be permitted by the SEC on
Form 10-Q or Form 8-K) applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto), and (iii) fairly
presented in all material respects the consolidated financial position of
Company and its Subsidiaries as at the respective dates thereof and the
consolidated results of Company's and its Subsidiaries' operations and cash
flows for the periods indicated (except that the unaudited interim financial
statements were subject to normal and recurring year-end and quarter-end
adjustments which were not material). Except as reflected in the balance sheet
of the Company dated September 30, 2005 included in the Form 10-Q filed by the
Company with the SEC on November 7, 2005 (the "COMPANY BALANCE SHEET") (or
described in the notes thereto), neither the Company nor any of its Subsidiaries
has any Liabilities of any nature that would be required to be disclosed on a
consolidated balance sheet of the Company and its Subsidiaries prepared in
accordance with GAAP consistently applied, except (i) Liabilities incurred since
September 30, 2005 in the ordinary course of business consistent with past
practice, (ii) Liabilities under a Company Material Contract (as defined in
Section 3.12 below) set forth on Schedule 3.4(b) of the Company Disclosure
Letter or under a Contract entered into to by the Company or any of its
Subsidiaries subsequent to the Agreement Date not in violation of Section 5.2(a)
below, (iii) Liabilities reserved against in the Company Balance Sheet (but only
to the extent of such reserve), (iv) Liabilities incurred in connection with
this Agreement or the transactions contemplated hereby, and (v) Liabilities
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on the Company.
(c) Sarbanes Act. Each of the principal executive officer of the
Company and the principal financial officer of the Company (or each former
principal executive officer of the Company and each former principal financial
officer of the Company, as applicable) has made all certifications required by
Rule 13a-14 or Rule 15d-14 under the Exchange Act or Sections 302 and 906 of the
Sarbanes Act and the rules and regulations of the SEC promulgated thereunder
with respect to the Company SEC Documents. For purposes of the preceding
sentence, "principal executive officer" and "principal financial officer" shall
have the meanings given to such terms in the Sarbanes Act.
(d) Amendments. The Company has heretofore made available to
Parent a complete and correct copy of any amendments or modifications effected
prior to the Agreement Date, which have not yet been filed with the SEC but
which are required to be filed, to agreements, documents or other instruments
which previously had been filed by the Company with the SEC pursuant to the
Securities Act or the Exchange Act.
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(e) Registration Statement. The information supplied by the
Company for inclusion in the Registration Statement shall not at the time the
Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. The
information supplied by the Company for inclusion or incorporation by reference
in the Proxy Statement/Prospectus shall not, on the date the Proxy
Statement/Prospectus is mailed to Company Stockholders or Parent Stockholders,
at the time of the meeting of Company Stockholders (the "COMPANY STOCKHOLDERS'
MEETING") to consider the Company Stockholder Approval, at the time of the
meeting of Parent Stockholders (the "PARENT STOCKHOLDERS' MEETING") to consider
the Parent Stockholder Approval or as of the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not false or misleading, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Stockholders' Meeting or the Parent Stockholders' Meeting which has become false
or misleading. The proxy statement included in the Proxy Statement/Prospectus
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder. If at any time prior to
the Effective Time any event relating to the Company or any of its Affiliates,
officers or directors should be discovered by the Company which is required to
be set forth in an amendment to the Registration Statement or a supplement to
the Proxy Statement/Prospectus, the Company shall promptly inform Parent.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any statements made or incorporated by reference therein based
on information supplied by Parent or Merger Sub that is contained (including by
incorporation by reference) in any of the foregoing documents.
3.5 Litigation.
Except as and to the extent disclosed in the Company SEC Documents
filed prior to the Agreement Date (including the notes to the financial
statements included therein) or as set forth in Section 3.5 of the Company
Disclosure Letter, (a) there is no action, suit, arbitration, mediation,
proceeding, claim or investigation pending against the Company or any of its
Subsidiaries before any Governmental Authority, arbitrator or mediator, nor, to
the knowledge of the Company, has any such action, suit, arbitration, mediation,
proceeding, claim or investigation been threatened, and (b) there is no
judgment, decree, injunction, rule or order of any Governmental Authority,
arbitrator or mediator outstanding against the Company or any of its
Subsidiaries.
3.6 Compliance with Laws.
(a) Applicable Law. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company, (1) the Company and each of its Subsidiaries has complied, and is now
in compliance, with all Applicable Law, (2) neither the Company nor any of its
Subsidiaries has received any written notification from any Governmental
Authority asserting that the Company or any of its Subsidiaries has failed to
comply, or is not in compliance, with Applicable Law and to the Company's
22
knowledge, no investigation or review of the Company or any of its Subsidiaries
by any Governmental Authority is pending, and (3) to the Company's knowledge, no
such notification, investigation or review has been threatened in writing
against the Company or any of its Subsidiaries and no reasonable basis therefor
exists.
(b) Permits. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company, (1) the Company and its Subsidiaries hold all Governmental Permits and
all such Governmental Permits are valid and in full force and effect, (2)
neither the Company nor any of its Subsidiaries has received any written
notification from any Governmental Authority asserting that the Company or any
of its Subsidiaries has failed to comply with or is not in compliance with any
such Governmental Permit or regarding any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any such
Governmental Permit, and (3) to the Company's knowledge, no such notification
has been threatened in writing against the Company or any of its Subsidiaries
and no reasonable basis therefor exists.
3.7 Properties.
Except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company, the Company or one of
its Subsidiaries (a) has good and valid title to all the properties and assets
reflected in the latest audited balance sheet included in the Company SEC
Documents as being owned by the Company or one of its Subsidiaries or acquired
after the date thereof that are material to the Company's business on a
consolidated basis (except properties sold or otherwise disposed of since the
date thereof in the ordinary course of business), free and clear of all
Encumbrances, except (1) Permitted Encumbrances, (2) such imperfections or
irregularities of title, easements, covenants, rights-of-way and other
Encumbrances as do not materially impair the continued use of the properties or
assets subject thereto or affected thereby or otherwise materially impair
business operations at such properties, and (3) mortgages, deeds of trust,
security interests or other encumbrances on title related to indebtedness
reflected on the consolidated financial statements of the Company included in
the Company SEC Documents, and (b) is the lessee of all leasehold estates
reflected in the latest audited financial statements included in the Company SEC
Documents or acquired after the date thereof that are material to its business
on a consolidated basis (except for leases that have expired by their terms
since the date thereof or been assigned, terminated or otherwise disposed of in
the ordinary course of business consistent with past practice) and is in
possession of the properties purported to be leased thereunder, and each such
lease is valid without default thereunder by the lessee or, to the Company's
knowledge, the lessor.
3.8 Taxes.
(a) The Company and each of its Subsidiaries (and any
consolidated, combined, unitary or aggregate group for tax purposes of which the
Company or any such Subsidiary is or has been a member) (i) has properly
completed and timely filed all material foreign, federal, state, local and
municipal Tax and information returns (collectively, "RETURNS") required to be
filed by it and all such Returns are true, correct and complete in all material
respects, (ii) has timely paid all material Taxes required to be paid by it for
which payment was due, (iii) has established an adequate accrual or reserve in
accordance with GAAP applied on a consistent basis for the payment of all
23
material Taxes payable in respect of the periods or portions thereof prior to
and through the date of the Company Balance Sheet (which accrual or reserve as
of such date is fully reflected on the Company Balance Sheet), and (iv) has no
Liability for material Taxes in excess of the amount so paid or accruals or
reserves so established except for Taxes subsequent to the date of the Company
Balance Sheet incurred in the ordinary course of business. Neither the Company
nor any of its Subsidiaries has received any written notification from the
Internal Revenue Service or any other Taxing authority regarding any material
issues that (i) are currently pending before the Internal Revenue Service or any
other Taxing agency or authority (including any sales or use Taxing authority)
regarding the Company, or (ii) have been raised by the Internal Revenue Service
or other Taxing agency or authority and not yet finally resolved. No material
Tax liens are currently in effect against any of the assets of the Company or
any of its Subsidiaries other than liens that arise by operation of law for
taxes not yet due and payable. There is not in effect any waiver by the Company
or any of its Subsidiaries of any statute of limitations with respect to any
material Taxes. Neither the Company nor any of its Subsidiaries is a party to or
bound by any material Tax sharing, Tax indemnity, or Tax allocation agreement
nor does the Company or any of its Subsidiaries have any material liability or
material potential liability to another party under any such agreement. No claim
that has not been resolved has ever been made to the Company or any of its
Subsidiaries by an authority in a jurisdiction where the Company or its
Subsidiaries do not file Tax Returns that any one of them is or may be subject
to taxation by that jurisdiction. The Company and its 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,
shareholder or other third party.
(b) Neither the Company nor any of its Subsidiaries has ever
been a member of a consolidated, combined, unitary or aggregate group of which
the Company was not the ultimate parent corporation. Neither the Company nor any
of its Subsidiaries has constituted either a "distributing corporation" or a
"controlled corporation" in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (a) in the two years prior to the
Agreement Date or (b) in a distribution that could otherwise constitute part of
a "plan" or "series of related transactions" (within the meaning of Section
355(e) of the Code) in conjunction with the Merger. The Company is not a U.S.
real property holding corporation within the meaning of Code Section 897(c)(2).
The Company has made available to Parent or its legal or accounting
representative copies of all foreign, federal and state income, franchise, sales
and use tax Returns for the Company and each of its subsidiaries filed for all
periods including and after the period ended December 31, 2001.
(c) Neither the Company nor any of its Subsidiaries has taken
any action or knows of any fact, agreement, plan or other circumstance that
would reasonably be expected to prevent the Merger from qualifying as a
transaction described in Section 368(a) of the Code.
3.9 Intellectual Property.
(a) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company, (1) the
Company and each of its Subsidiaries owns or has the valid right or license to
use, and, to the extent that it does any of the following, to develop, make,
have made, offer for sale, sell, import, copy, modify, create derivative works
of, distribute, license to third parties and/or dispose of (for purposes of this
24
Section 3.9, "USE") all Intellectual Property as currently Used in the conduct
of the business of the Company and its Subsidiaries (such Intellectual Property
being hereinafter collectively referred to as the "COMPANY IP RIGHTS"), and (2)
all such Company IP Rights are owned or licensed by the Company free of all
material liens and Encumbrances (other than Permitted Encumbrances). As used in
this Agreement, "COMPANY-OWNED IP RIGHTS" means Company IP Rights that are or
are purportedly owned or exclusively licensed to the Company or any of its
Subsidiaries.
(b) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company, neither
the Company's entry into this Agreement nor the performance of its obligations
contemplated hereby shall, in accordance with their terms (1) cause the
forfeiture or termination of, or give rise to a right of forfeiture or
termination of, any material Contract governing any Company IP Right, (2)
materially impair the right of the Company or the Surviving Corporation or any
Subsidiary of the Company to Use any Company IP Right or portion thereof as
currently Used in the conduct of the Company's business, or (3) cause any
royalties fees or other payments to become payable by the Company or any of its
Subsidiaries to any third person as a result of the Use of any Company IP Rights
by the Company or cause any existing obligations to pay such royalties, fees or
other payments to increase (other than due to increased sales of the Company's
products or services).
(c) To the knowledge of the Company, and except as would not,
individually or in the aggregate, reasonably be excepted to have a Material
Adverse Effect on the Company, the Use of any Company IP Right as currently Used
in the conduct of its business does not infringe on or otherwise violate the
rights of any third party. There is no pending, or to the knowledge of the
Company, threatened, claim or litigation contesting the validity, ownership or
right of the Company or any of its Subsidiaries to exercise any Company IP Right
or which would reasonably be expected to result in the abandonment, cancellation
or unenforceability of such Company IP Rights, nor to the knowledge of the
Company, as of the Agreement Date, is there any legitimate basis for any such
claim. None of the Company IP Rights is subject to any proceeding or outstanding
order, contract or stipulation materially restricting the Company's use of the
Company IP Rights in the aggregate. To the knowledge of the Company, and except
as would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Company, no third party is infringing or
otherwise violating any Company IP Right (other than unlicensed end users of the
Company's commercially available software products).
(d) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company, (1) the
Company and each of its Subsidiaries has taken commercially reasonable steps to
protect, preserve and maintain the proprietary and confidential rights and trade
secrets in the Company IP Rights and (2) no current or former employee of, or
independent contractor who has worked with, the Company or any of its
Subsidiaries has any right or interest in any Company-Owned IP Rights.
(e) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Company, all
registered Company-Owned IP Rights are to the knowledge of the Company valid,
enforceable and subsisting, and the Company or a Subsidiary of the Company is
the record owner thereof.
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(f) Schedule 3.9(f) of the Company Disclosure Letter lists, as
of the Agreement Date, all Contracts pursuant to which the Company or any of its
Subsidiaries grants a third party exclusive rights under any material Company IP
Rights.
(g) To the knowledge of the Company, and except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company, no event has occurred, and no circumstance or
condition exists, that would reasonably be expected to result in the release by
the Company or any escrow agent to any third party of any Company Source Code.
"COMPANY SOURCE CODE" means, collectively, any human readable software source
code, or any material portion or aspect of the software source code which
comprise part of the Company-Owned IP Rights.
(h) To the knowledge of the Company, as of the Agreement Date,
Schedule 3.9(h) of the Company Disclosure Letter lists Contracts with government
entities, pursuant to which material computer software programs or applications
owned or co-owned by the Company or any of its Subsidiaries were developed or
co-developed and licensed and/or assigned to the Company.
(i) To the knowledge of the Company, the Company and its
Subsidiaries are in compliance with all their respective obligations pursuant to
any Public Software license agreements under which they license-in any material
Company IP Rights, except for such non-compliance that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on
the Company.
3.10 Employment.
(a) The Company, each of its Subsidiaries and each ERISA
Affiliate is in compliance with all Applicable Law and Contracts relating to
each Company Benefit Arrangement, each Company Foreign Plan, employment,
employment practices, immigration, wages, hours, and terms and conditions of
employment, including employee compensation matters, except where the failure to
so comply would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company.
(b) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company, (1) no
union organizing effort with respect to employees of the Company or any of its
Subsidiaries is underway and (2) there is no labor strike, dispute, slowdown,
stoppage or lockout actually pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries. There are no
controversies pending or, to the knowledge of the Company, threatened, between
the Company or any Subsidiary and any of their respective employees which have,
or would reasonably be expected to result in, an action, suit, proceeding,
claim, arbitration or investigation before any Governmental Authority, and which
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on the Company.
26
(c) To the knowledge of the Company, neither the Company, its
Subsidiaries, nor any ERISA Affiliate has at any time since the enactment of
ERISA, contributed to or been obligated to contribute to any "multiemployer
plan" as defined in Section 3(37) of ERISA. Neither the Company nor any
Subsidiary or current or former ERISA Affiliate currently maintains, sponsors,
participates in or contributes to, nor has it ever maintained, established,
sponsored, participated in, or contributed to, any pension plan (within the
meaning of Section 3(2) of ERISA) that is subject to Title IV of ERISA. To the
knowledge of the Company, no "accumulated funding deficiency" (as such term is
defined in Section 302 of ERISA and Section 412 of the Code) has occurred with
respect to any Company Benefit Arrangement that is not subject to Title IV of
ERISA.
(d) With respect to the Company, any of its Subsidiaries and any
ERISA Affiliate, the Company has made available to Parent (1) all employee
benefit plans within the meaning of Section 3(3) of ERISA currently contributed
to, sponsored by or maintained by the Company or any of its Subsidiaries, (2)
each outstanding loan from the Company, any of its Subsidiaries or an ERISA
Affiliate to an employee in excess of $25,000, (3) all stock option, stock
purchase, phantom stock, stock appreciation right, supplemental retirement,
severance, sabbatical, medical, dental, vision care, disability, employee
relocation, cafeteria benefit (Section 125 of the Code), dependent care (Section
129 of the Code), life insurance or accident insurance plans, programs or
arrangements (other than Company Foreign Plans) currently contributed to,
sponsored by or maintained by the Company or any of its Subsidiaries, (4) all
bonus, pension, profit sharing, savings, retirement, deferred compensation or
incentive plans, programs or arrangements (other than Company Foreign Plans)
currently contributed to, sponsored by or maintained by the Company or any of
its Subsidiaries, (5) other fringe or employee benefit plans, programs or
arrangements that apply to senior management and that do not generally apply to
all employees that are currently contributed to, sponsored by or maintained by
the Company or any of its Subsidiaries, (6) all employment or service agreements
with a current service provider (except for offer letters providing for at-will
employment which do not provide for severance, acceleration or post-termination
benefits except as required by the law or applicable custom or rule of the
relevant jurisdiction outside of the United States) where the obligations under
any such agreement are in excess of $100,000 or if any such agreement is a
"material contract" (as such term is defined in Item 601(b)(10) of Regulation
S-K promulgated by the SEC), and (7) all change of control agreements or
severance agreements, written or otherwise, for the benefit of, or relating to,
any current director or officer of the Company or any current employee or
consultant, in each case in the foregoing clauses (1)-(7) to the extent such
plans, loans, programs, arrangements, agreements or other items are material to
the business of the Company and its Subsidiaries taken as a whole (collectively,
the "COMPANY BENEFIT ARRANGEMENTS").
(e) Except as disclosed in Section 3.10(e) of the Company
Disclosure Letter, neither the Company nor any of its Subsidiaries is a party to
any Contract with any director or officer of the Company (1) the benefits of
which are contingent, or the terms of which are materially altered as a result
of the execution of this Agreement, stockholder approval of this Agreement or
the transactions contemplated by this Agreement (whether alone or in connection
with any subsequent event(s)), or (2) providing any fixed term of employment.
Except as disclosed in Section 3.10(e) of the Company Disclosure Letter, no
Company Benefit Arrangement will provide benefits that shall be increased, or
the vesting of benefits of which shall be accelerated or the value of any of the
benefits of which shall be calculated as a result of the execution of this
Agreement, stockholder approval of this Agreement, or the transactions
contemplated by this Agreement (whether alone or in connection with any
subsequent event(s)). To the knowledge of the Company, there is no agreement,
27
plan, arrangement or other Contract covering any current or former employee or
consultant of the Company or any of its Subsidiaries or ERISA Affiliate to which
the Company and/or any such Subsidiary is a party or by which the Company and/or
any such Subsidiary is bound that, considered individually or considered
collectively with any other such agreements, plans, arrangements or other
Contracts, will, or could reasonably be expected to, as a result of the
execution of this Agreement, stockholder approval of this Agreement, or the
transaction contemplated by this Agreement (or any event subsequent to and in
combination with the Merger), result in a payment that could reasonably be
expected to be characterized as a "parachute payment" within the meaning of
Section 280G of the Code.
3.11 Absence of Certain Changes. Since September 30, 2005, the
Company and each of its Subsidiaries has operated its business in all material
respects in the ordinary course consistent with its past practices, and since
such date there has not been with respect to the Company or any of its
Subsidiaries, as applicable, (a) any Effect or Effects that, individually or in
the aggregate, have had or would reasonably be expected to have a Material
Adverse Effect on the Company, (b) declaration, setting aside, making or payment
of any dividend or other distribution (whether payable in cash, stock, property
or a combination thereof) with respect to any of the capital stock of the
Company, (c) reclassification, combination, split or subdivision of any capital
stock of the Company, (d) redemption, purchase or other acquisition, directly or
indirectly, by the Company of any capital stock, other equity interests or other
securities of the Company (other than repurchases of shares in connection with
the termination of the employment relationship with any employee), or (e)
through the Agreement Date any incurrence of any indebtedness for borrowed money
in excess of $100,000 in the aggregate for the Company and its Subsidiaries or
issuance of any debt securities or assumption, guarantee or endorsement of the
obligations of any Person (other than a wholly-owned Subsidiary of the Company)
for borrowed money (except for indebtedness for borrowed money under or
guarantees with respect to indebtedness under any existing credit facility or
indebtedness of any wholly-owned Subsidiary of the Company to any other
wholly-owned Subsidiary of the Company or indebtedness of the Company to any
wholly-owned Subsidiary of the Company).
3.12 Material Contracts.
(a) Listing. Except as set forth in Section 3.12(a) of the
Company Disclosure Letter, neither the Company nor any of its Subsidiaries is a
party to or bound by any of the following as of the Agreement Date (each, a
"COMPANY MATERIAL CONTRACT"):
(1) any Contract that is a "material contract" (as such
term is defined in Item 601(b)(10) of Regulation S-K promulgated by the SEC);
(2) any Contract under which it has in excess of $100,000
of outstanding indebtedness for money borrowed as of the Agreement Date or
guaranteed indebtedness for money borrowed of any Person (other than the Company
and its Subsidiaries) in excess of $100,000 as of the Agreement Date;
(3) any Contract that (i) restricts it from participating
or competing in any line of business, market or geographic area, (ii) contains
most favored customer pricing provisions, or (iii) grants any exclusive rights,
rights of refusal, rights of first negotiation or similar rights to any Person,
in each case in a manner which is material to the business of the Company and
its Subsidiaries taken as a whole;
28
(4) any Contract that would reasonably be expected to
prevent, materially delay or materially impede the consummation of any of the
transactions contemplated by this Agreement; or
(5) any Contract the termination of which would reasonably
be expected to have a Material Adverse Effect on the Company.
A complete and correct copy of each agreement or document required by
the foregoing subsections (1)-(5) of this Section 3.12(a) to be listed on
Schedule 3.12(a) of the Company Disclosure Letter has been made available by the
Company to Parent and its counsel or filed by the Company with the SEC. All
Company Material Contracts are in written form.
(b) No Default. Neither the Company nor any of its Subsidiaries,
nor, to the Company's knowledge, any counterparty to any Company Material
Contract, has violated any provision of, or committed or failed to perform any
act which (with or without notice, lapse of time or both) would constitute a
default under, or give any counterparty the right to exercise any remedy
(including the right to a rebate, refund, credit, change in performance
schedule, cancellation, termination or modification) pursuant to, the provisions
of any Company Material Contract, except in each case for those violations and
defaults which, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on the Company.
3.13 Environmental Matters. Except as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on the
Company, (a) the operations of the Company and its Subsidiaries are, and at all
times have been, in compliance with all applicable Environmental Laws, including
possession and compliance with the terms of all Governmental Permits required by
Environmental Laws, (b) there are no pending or, to the knowledge of the
Company, threatened, suits, actions, investigations or proceedings under or
pursuant to Environmental Laws against the Company or any of its Subsidiaries or
involving any real property currently or, to the knowledge of the Company,
formerly owned, operated or leased or other sites at which Hazardous Materials
were disposed of, or allegedly disposed of, by the Company or any of its
Subsidiaries, (c) to the Company's knowledge, the Company and its Subsidiaries
have received no written allegations of any Liabilities under any Environment
Law and the Company has no knowledge or any pending or threatened such
allegations, and (d) neither the Company nor any of its Subsidiaries has
generated, transported, treated, stored, installed, disposed of or released any
Hazardous Materials in violation of, or in a manner that would reasonably be
expected to give rise to liability to the Company or its Subsidiaries under, any
Environmental Laws.
3.14 Interested Party Transactions. Since the date of filing with the
SEC of the proxy statement for the 2005 Annual Meeting of Stockholders of the
Company, no event has occurred that would be required to be reported as a
Certain Relationship or Related Transaction pursuant to Item 404 of Regulation
S-K promulgated by the SEC.
29
3.15 State Takeover Statutes. The Company has, or will have prior to
the Effective Time, taken all necessary action so that, assuming compliance by
Parent and Merger Sub with their respective obligations hereunder and the
accuracy of the representations and warranties made by Parent and Merger Sub
herein, no "business combination", "moratorium", "fair price", "control share
acquisition" or other state antitakeover statute or regulation (other than
Section 203 of Delaware Law), nor any takeover-related provision in the Company
Charter Documents, would (a) prohibit or restrict the Company's ability to
perform its obligations under this Agreement, any related agreement or the
Certificate of Merger or its ability to consummate the transactions contemplated
hereby and thereby, (b) have the effect of invalidating or voiding this
Agreement or the Certificate of Merger, or any provision hereof or thereof, or
(c) subject Parent to any impediment or condition in connection with the
exercise of any of its rights under this Agreement or the Certificate of Merger.
Assuming the accuracy of the representation and warranty set forth in Section
4.2(f), the action of the Board of Directors of the Company in approving this
Agreement, the Company Voting Agreements and the transactions provided for
herein and therein is sufficient to render inapplicable to this Agreement, the
Company Voting Agreements and the transactions provided for herein and therein
the restrictions on "business combinations" (as defined in Section 203 of
Delaware Law) as set forth in Section 203 of Delaware Law.
3.16 Brokers. Except for fees payable to Xxxxxx Xxxxxxxxxx Xxxxx, LLC
("XXXXXX XXXXXXXXXX"), no broker, investment banker, financial advisor or other
Person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
3.17 Opinion of Financial Advisor. The Company has received the
opinion of its financial advisor, Xxxxxx Xxxxxxxxxx, dated January 11, 2006, to
the effect that, as of such date and based on and subject to the matters set
forth in the opinion, the Merger Consideration is fair, from a financial point
of view, to the Company and the holders of Company Common Stock.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as set forth in the disclosure letter of Parent addressed to
the Company, dated as of the Agreement Date and delivered to Parent concurrently
with the parties' execution of this Agreement (the "PARENT DISCLOSURE LETTER")
referencing a representation or warranty herein (it being understood that Parent
Disclosure Letter shall be arranged in sections and subsections corresponding to
the sections and subsections contained in this Agreement, and the disclosures in
any section or subsection of Parent Disclosure Letter shall qualify all of the
applicable representations and warranties in the corresponding section or
subsection of this Article 4 and, in addition, in all other sections or
subsections in this Article 4 to the extent it is reasonably apparent from the
text of such disclosure that that such disclosure is applicable to such other
sections or subsections), Parent represents and warrants to the Company as
follows:
4.1 Organization.
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(a) Standing and Power. Each of Parent and its Subsidiaries (i)
is a corporation or other entity duly organized, validly existing and in good
standing (with respect to jurisdictions which recognize such concept) under the
laws of the jurisdiction of its incorporation or organization, (ii) has the
requisite power and authority to own, lease and operate its properties and to
carry on its business as currently conducted, and (iii) is duly qualified or
licensed to do business, and is in good standing (with respect to jurisdictions
which recognize such concept), in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its activities makes
such qualification or licensing necessary, in each case except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent.
(b) Charter Documents. Parent has made available to the Company
or filed with the SEC prior to the Agreement Date: (i) a complete and correct
copy of the Certificate of Incorporation (including any Certificates of
Designation) and Bylaws of Parent, each as amended to date, and (ii) a complete
and correct copy of the articles or certificate of incorporation and bylaws (or
like organizational documents), each as amended to date, of each of its
Subsidiaries (collectively with the documents identified in the preceding clause
(i), the "PARENT CHARTER DOCUMENTS"), and each such instrument is in full force
and effect. Neither Parent nor any of such Subsidiaries is in violation of any
of its Parent Charter Documents, except in the case of such Subsidiaries as
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Parent.
(c) Subsidiaries. Schedule 4.1(c) of the Parent Disclosure
Letter sets forth a list of each Subsidiary of Parent. All the outstanding
shares of capital stock of, or other equity or voting interests in, each
Subsidiary of Parent (i) are owned directly or indirectly by Parent, free and
clear of all Encumbrances (except for Permitted Encumbrances and restrictions
imposed by applicable securities laws), (ii) are not subject to any preemptive
right or right of first refusal created by Applicable Law, Parent Charter
Documents or any Contract to which such Subsidiary is a party or by which it is
bound, and (iii) are duly authorized, validly issued, fully paid and
nonassessable. Other than the Subsidiaries of Parent, as of the Agreement Date,
neither Parent nor any of its Subsidiaries owns any capital stock of, or other
equity or voting interests of any nature in, or any interest convertible,
exchangeable or exercisable for, capital stock of, or other equity or voting
interests of any nature in, any other Person. As of the Agreement Date, there
are no outstanding obligations of Parent or any of its Subsidiaries under any
Contract to which it is a party or by which it is otherwise bound to make any
loan to, or any equity or other investment (in the form of a capital
contribution or otherwise) in any other Person (other than Parent or such a
Subsidiary) in an amount in excess of $100,000 in respect of any single Person.
4.2 Capitalization of Parent and Merger Sub.
(a) Capital Stock. The authorized capital stock of Parent
consists solely of 75,000,000 shares of Parent Common Stock and 2,000,000 shares
of Parent Preferred Stock. As of the close of business on January 9, 2006, (i)
28,951,415 shares of Parent Common Stock were issued and outstanding, (ii) no
shares of Parent Common Stock were held in treasury by Parent and its
Subsidiaries, and (iii) no shares of Parent Preferred Stock were issued or
outstanding. All issued and outstanding shares of Parent Common Stock have been
duly authorized and validly issued, are fully paid and nonassessable, and are
not subject to preemptive rights created by Applicable Law, the Parent Charter
Documents or any Contract to which Parent is a party or by which it is bound.
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(b) Stock Options, Purchase Plans, Restricted Stock Units and
Convertible Securities. As of the close of business on December 31, 2005, (i)
2,552,884 shares of Parent Common Stock were subject to issuance pursuant to
outstanding Parent Options under the Parent Option Plans, (ii) no shares of
Parent Common Stock were subject to issuance pursuant to outstanding Parent
Options outside the Parent Option Plans, (iii) 2,191,210 shares of Parent Common
Stock were reserved for future issuance under the Parent Option Plans (excluding
shares subject to issuance pursuant to outstanding Parent Options), (iv) 19,584
shares of Parent Common Stock were reserved for future issuance under the Parent
ESPP, (v) 2,070,000 shares of Company Common Stock were subject to issuance
pursuant to outstanding warrants of Parent (the "PARENT WARRANTS", and (vi)
20,715 shares of Parent Common Stock were subject to issuance pursuant to
outstanding Parent Restricted Stock Units. All shares of Parent Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and nonassessable. There are no
outstanding or authorized stock appreciation, profit participation (other than
Parent bonus plans), "phantom stock", or other similar plans or Contracts with
respect to Parent or any of its Subsidiaries. Schedule 4.2(b) of Parent
Disclosure Letter sets forth (x) the following information with respect to each
Parent Option: the aggregate number of shares issuable thereunder, the type of
option, the grant date, the expiration date, the exercise price and the vesting
schedule including a description of any acceleration provisions, and (y) the
following information with respect to each Parent Warrant: the aggregate number
of shares issuable thereunder, the issue date, the expiration date, the exercise
price and the vesting schedule, if any, including a description of any
acceleration provisions. Each Parent Option was granted in accordance with the
terms of the Parent Stock Plan applicable thereto.
(c) No Other Rights. As of the close of business on January 6,
2006, except as set forth in the preceding subsection (b), there were no
options, warrants, calls, rights, commitments, conversion privileges or
preemptive or other rights or Contracts (to which Parent or any of its
Subsidiaries is a party or by which Parent or any of its Subsidiaries is bound)
outstanding to purchase or otherwise acquire any Parent Voting Debt, any shares
of capital stock of Parent or any of its Subsidiaries or any securities or debt
exercisable for, convertible into or exchangeable for capital stock of Parent or
any of its Subsidiaries, or obligating Parent or any of its Subsidiaries to
issue, grant, extend or enter into any such option, warrant, call, right,
commitment, conversion privilege or preemptive or other right or Contract. The
Parent Charter Documents do not provide, and neither Parent nor any of its
Subsidiaries is a party to or otherwise bound by any Contract providing, for
registration rights, rights of first refusal in favor of a third party,
preemptive rights, co-sale rights, antidilution rights, redemption rights or
other similar rights or other restrictions applicable to any outstanding
securities of Parent or its Subsidiaries. Neither Parent nor any of its
Subsidiaries is a party to or otherwise bound by any Contract (including any
voting agreement, voting trust or proxy, other than proxies to be submitted in
connection with the Parent Stockholders' Meeting) regarding the voting of any
outstanding securities of Parent or its Subsidiaries. Neither Parent nor any of
its Subsidiaries is a party to or otherwise bound by any rights agreement or
"poison pill" anti-takeover plan.
32
(d) Voting Debt. There are no issued or outstanding bonds,
debentures, notes or other evidences of indebtedness having the right to vote on
any matters on which stockholders of Parent may vote ("PARENT VOTING DEBT").
(e) Legal Compliance. All outstanding shares of Parent Common
Stock, all outstanding Parent Options, all outstanding Parent Warrants, and all
outstanding shares of capital stock of each Subsidiary of Parent have been
issued and granted in compliance in all material respects with (i) all
applicable securities laws and other Applicable Laws and (ii) all requirements
set forth in applicable Contracts pursuant to which such securities were issued.
(f) Ownership of the Company. Neither Parent nor any of its
Subsidiaries or Affiliates owns, nor has in the past three years owned, any
shares of capital stock of the Company or any of its Subsidiaries.
(g) Merger Sub. The authorized capital stock of Merger Sub
consists solely of 1,000 shares of Merger Sub Common Stock. As of the Agreement
Date, there are 1,000 shares of Merger Sub Common Stock issued and outstanding,
all of which are held directly by Parent. All of the outstanding shares of
Merger Sub Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable. Merger Sub does not hold, nor has it held, any
material assets or incurred any material liabilities, nor has Merger Sub carried
on any business activities other than in connection with the Merger and the
transactions contemplated by this Agreement.
4.3 Authorization.
(a) Power and Authority. Each of Parent and Merger Sub has all
requisite corporate power and authority to enter into this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby, subject in the case of consummation of the Merger to obtaining (i) the
Parent Stockholder Approval (as defined below) and (ii) the adoption of this
Agreement by Parent in its capacity as the sole stockholder of Merger Sub (which
shall be effected by Parent promptly following execution of this Agreement). The
execution and delivery of this Agreement have been duly and validly authorized
by all necessary corporate action on the part of Parent and Merger Sub and no
other corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby, other than (i) the Parent Stockholder
Approval, (ii) the adoption of this Agreement by Parent in its capacity as the
sole stockholder of Merger Sub (which shall be effected by Parent promptly
following execution of this Agreement), and (iii) the filing of the Certificate
of Amendment with the Office of the Secretary of State of the State of Delaware.
(b) Board Approval. The Board of Directors of Parent has (i)
determined that this Agreement, the Parent Voting Agreements, the Merger, the
Parent Stock Issuance and the Parent Charter Amendment are advisable and fair to
and in the best interests of Parent and its stockholders, (ii) duly approved
this Agreement, the Merger, the Parent Stock Issuance, the Parent Charter
Amendment and the other transactions contemplated hereby, which approval has not
been rescinded or modified, (iii) resolved (subject to Section 5.2(d)) to
recommend the Parent Stock Issuance and Parent Charter Amendment to the Parent
Stockholders for approval, and (iv) directed that the Parent Stock Issuance and
Parent Charter Amendment be submitted to the Parent Stockholders for
consideration in accordance with this Agreement.
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(c) Stockholder Approval. The affirmative vote of a majority of
the votes cast on the Parent Stock Issuance by the holders of Parent Common
Stock at the Parent Stockholders' Meeting (as defined below), provided that the
total vote cast on the Parent Stock Issuance represents over 50% in interest of
all securities entitled to vote thereon, is the only vote of the holders of any
class or series of capital stock of Parent necessary to approve the Parent Stock
Issuance. The affirmative vote of holders of a majority of the outstanding
shares of Parent Common Stock entitled to vote on the Parent Charter Amendment
at the Parent Stockholders' Meeting (collectively with the affirmative vote
referred to in the preceding sentence, the "PARENT STOCKHOLDER APPROVAL") is the
only vote of the holders of any class or series of capital stock of Parent
necessary to approve the Parent Charter Amendment.
(d) Enforceability. This Agreement has been duly executed and
delivered by Parent and Merger Sub and, assuming the due execution and delivery
by the Company, constitutes the valid and binding obligation of Parent and
Merger Sub, enforceable against Parent and Merger Sub in accordance with its
terms, subject to the effect of (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to rights of creditors generally and (ii) rules of law and equity
governing specific performance, injunctive relief and other equitable remedies.
(e) No Consents. No consent, approval, order, authorization,
release or waiver of, or registration, declaration or filing with, any
Governmental Authority is necessary or required to be made or obtained by Parent
or any of its Subsidiaries to enable Parent or Merger Sub to lawfully enter
into, and perform its obligations under, this Agreement or to consummate the
Merger and the other transactions contemplated hereby, except for (i) the filing
of the Certificate of Merger and the Certificate of Amendment with the Secretary
of State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which Parent is qualified to do business, (ii)
such filings and notifications as may be required to be made by Parent and
Merger Sub in connection with the Merger under the HSR Act and the antitrust,
competition or similar laws of any foreign jurisdiction and the expiration or
early termination of applicable waiting periods under the HSR Act and such
foreign laws, (iii) the filing with the SEC of the Registration Statement
(including the Proxy Statement/Prospectus) and such reports and filings under
the Exchange Act and the rules and regulations thereunder as may be required in
connection with this Agreement and the transactions contemplated hereby and the
effectiveness of the Registration Statement, (iv) such other filings and
notifications as may be required to be made by Parent and Merger Sub under
federal, state or foreign securities laws or the rules and regulations of the
Nasdaq Stock Market, (v) the Parent Stockholder Approval, and (vi) such other
consents, approvals, orders, authorizations, releases, waivers, registrations,
declarations or filings that if not made or obtained would not, individually or
in the aggregate, reasonably be expected to materially affect the ability of
Parent or Merger Sub to consummate the Merger or have a Material Adverse Effect
on Parent.
(f) No Conflict. The execution and delivery of this Agreement by
Parent and Merger Sub do not, and the consummation by Parent and Merger Sub of
the transactions contemplated hereby and compliance by Parent and Merger Sub
with the provisions of this Agreement will not, conflict with, result in any
violation or breach of or default (with or without notice or lapse of time, or
34
both) under, or require any consent, waiver or approval under, (i) the Parent
Charter Documents, (ii) subject to compliance with the requirements set forth in
the preceding subsection (e), any Applicable Law applicable to Parent, any of
its Subsidiaries or any of their respective assets or properties, or (iii) any
Contract or Governmental Permit to which Parent or any of its Subsidiaries is a
party or by which Parent or any of its Subsidiaries is bound, other than, in the
cases of clauses (ii) and (iii), any such conflicts, violations, breaches or
defaults, or failure to obtain consents, waivers or approvals, which,
individually or in the aggregate, would not reasonably be expected to materially
affect the ability of Parent or Merger Sub to consummate the Merger or have a
Material Adverse Effect on Parent.
4.4 SEC Filings.
(a) SEC Reports. Except as set forth in Section 4.4(a) of the
Parent Disclosure Letter, Parent has timely filed with the SEC all registration
statements, prospectuses, reports, forms, statements, schedules, certifications
and other documents (including exhibits and all other items incorporated by
reference) required to be filed by Parent since January 1, 2004 (all such
required registration statements, prospectuses, reports, forms, statements,
schedules, certifications and other documents, including those that Parent may
file subsequent to the Agreement Date, are referred to herein as the "PARENT SEC
DOCUMENTS"). As of their respective dates, Parent SEC Documents (i) were
prepared in accordance and complied in all material respects with the
requirements of the Securities Act, the Exchange Act, the Sarbanes Act (to the
extent then applicable), and the rules and regulations of the SEC promulgated
thereunder applicable to such Parent SEC Documents and (ii) did not at the time
they were filed (or if amended or superseded by a filing prior to the Agreement
Date, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except to the extent
corrected prior to the date hereof by a subsequently filed Parent SEC Document.
None of Parent's Subsidiaries is required to file any forms, reports or other
documents with the SEC.
(b) Financial Statements. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Parent SEC Documents (the "PARENT FINANCIAL STATEMENTS"), including each Parent
SEC Document filed after the Agreement Date until the Closing, (i) complied, as
of their respective dates of filing with the SEC, as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (ii) was prepared in accordance with GAAP (except in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q or Form 8-K) applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto), and (iii) fairly presented in
all material respects the consolidated financial position of Parent and its
Subsidiaries as at the respective dates thereof and the consolidated results of
Parent's and its Subsidiaries' operations and cash flows for the periods
indicated (except that the unaudited interim financial statements were subject
to normal and recurring year-end and quarter-end adjustments which were not
material). Except as reflected in the balance sheet of Parent dated October 2,
2005 included in the Form 10-Q filed by Parent with the SEC on November 10, 2005
(the "PARENT BALANCE SHEET") (or described in the notes thereto), neither Parent
35
nor any of its Subsidiaries has any Liabilities of any nature that would be
required to be disclosed on a consolidated balance sheet of Parent and its
Subsidiaries prepared in accordance with GAAP consistently applied, except (i)
Liabilities incurred since October 2, 2005 in the ordinary course of business
consistent with past practice, (ii) Liabilities under a Parent Material Contract
(as defined in Section 4.12 below) set forth on Schedule 4.4(b) of the Parent
Disclosure Letter or under a Contract entered into to by Parent or any of its
Subsidiaries subsequent to the Agreement Date not in violation of Section 5.2(b)
below, (iii) Liabilities reserved against in the Parent Balance Sheet (but only
to the extent of such reserve), (iv) Liabilities incurred in connection with
this Agreement or the transactions contemplated hereby, and (v) Liabilities
which, individually or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on Parent.
(c) Sarbanes Act. Each of the principal executive officer of
Parent and the principal financial officer of Parent (or each former principal
executive officer of Parent and each former principal financial officer of
Parent, as applicable) has made all certifications required by Rule 13a-14 or
Rule 15d-14 under the Exchange Act or Sections 302 and 906 of the Sarbanes Act
and the rules and regulations of the SEC promulgated thereunder with respect to
Parent SEC Documents. For purposes of the preceding sentence, "principal
executive officer" and "principal financial officer" shall have the meanings
given to such terms in the Sarbanes Act.
(d) Amendments. Parent has heretofore made available to the
Company a complete and correct copy of any amendments or modifications effected
prior to the Agreement Date, which have not yet been filed with the SEC but
which are required to be filed, to agreements, documents or other instruments
which previously had been filed by Parent with the SEC pursuant to the
Securities Act or the Exchange Act.
(e) Registration Statement. The information supplied by Parent
for inclusion in the Registration Statement shall not at the time the
Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. The
information supplied by Parent for inclusion or incorporation by reference in
the Proxy Statement/Prospectus shall not, on the date the Proxy
Statement/Prospectus is mailed to Company Stockholders or Parent Stockholders,
at the time of the Company Stockholders' Meeting, at the time of the meeting of
Parent Stockholders' Meeting to consider the Parent Stockholder Approval or as
of the Effective Time, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not false or misleading, or omit to state any material fact necessary
to correct any statement in any earlier communication with respect to the
solicitation of proxies for the Company Stockholders' Meeting or the Parent
Stockholders' Meeting which has become false or misleading. The Registration
Statement and the Proxy Statement/Prospectus will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder. If at any time prior to the Effective Time any event
relating to Parent or any of its Affiliates, officers or directors should be
discovered by Parent which is required to be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement/Prospectus, Parent
shall promptly inform the Company. Notwithstanding the foregoing, Parent makes
no representation or warranty with respect to any statements made or
incorporated by reference therein based on information supplied by the Company
that is contained (including by incorporation by reference) in any of the
foregoing documents.
36
4.5 Litigation. Except as and to the extent disclosed in the Parent
SEC Documents filed prior to the Agreement Date (including the notes to the
financial statements included therein), (a) there is no action, suit,
arbitration, mediation, proceeding, claim or investigation pending against
Parent or any of its Subsidiaries before any Governmental Authority, arbitrator
or mediator, nor, to the knowledge of the Company, has any such action, suit,
arbitration, mediation, proceeding, claim or investigation been threatened, and
(b) there is no judgment, decree, injunction, rule or order of any Governmental
Authority, arbitrator or mediator outstanding against Parent or any of its
Subsidiaries.
4.6 Compliance with Laws.
(a) Applicable Law. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Parent,
(1) Parent and each of its Subsidiaries has complied, and is now in compliance,
with all Applicable Law, (2) neither Parent nor any of its Subsidiaries has
received any written notification from any Governmental Authority asserting that
Parent or any of its Subsidiaries has failed to comply, or is not in compliance,
with Applicable Law and to Parent's knowledge, no investigation or review of
Parent or any of its Subsidiaries by any Governmental Authority is pending, and
(3) to Parent's knowledge, no such notification, investigation or review has
been threatened in writing against Parent or any of its Subsidiaries and no
reasonable basis therefor exists.
(b) Permits. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Parent,
(1) Parent and its Subsidiaries hold all Governmental Permits and all such
Governmental Permits are valid and in full force and effect, (2) neither Parent
nor any of its Subsidiaries has received any written notification from any
Governmental Authority asserting that Parent or any of its Subsidiaries has
failed to comply with or is not in compliance with any such Governmental Permit
or regarding any actual or possible revocation, withdrawal, suspension,
cancellation, termination or modification of any such Governmental Permit, and
(3) to Parent's knowledge, no such notification has been threatened in writing
against Parent or any of its Subsidiaries and no reasonable basis therefor
exists.
4.7 Properties. Except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Parent,
Parent or one of its Subsidiaries (a) has good and valid title to all the
properties and assets reflected in the latest audited balance sheet included in
the Parent SEC Documents as being owned by Parent or one of its Subsidiaries or
acquired after the date thereof that are material to Parent's business on a
consolidated basis (except properties sold or otherwise disposed of since the
date thereof in the ordinary course of business), free and clear of all
Encumbrances, except (1) Permitted Encumbrances, (2) such imperfections or
irregularities of title, easements, covenants, rights-of-way and other
Encumbrances as do not materially impair the continued use of the properties or
assets subject thereto or affected thereby or otherwise materially impair
business operations at such properties, and (3) mortgages, deeds of trust,
security interests or other encumbrances on title related to indebtedness
reflected on the consolidated financial statements of Parent included in the
Parent SEC Documents, and (b) is the lessee of all leasehold estates reflected
37
in the latest audited financial statements included in the Parent SEC Documents
or acquired after the date thereof that are material to its business on a
consolidated basis (except for leases that have expired by their terms since the
date thereof or been assigned, terminated or otherwise disposed of in the
ordinary course of business consistent with past practice) and is in possession
of the properties purported to be leased thereunder, and each such lease is
valid without default thereunder by the lessee or, to Parent's knowledge, the
lessor.
4.8 Taxes.
(a) Parent and each of its Subsidiaries (and any consolidated,
combined, unitary or aggregate group for tax purposes of which Parent or any
such Subsidiary is or has been a member) (i) has properly completed and timely
filed all material Returns required to be filed by it, and all such Returns are
true, correct and complete in all material respects, (ii) has timely paid all
material Taxes required to be paid by it for which payment was due, (iii) has
established an adequate accrual or reserve in accordance with GAAP applied on a
consistent basis for the payment of all material Taxes payable in respect of the
periods or portions thereof prior to and through the date of Parent Balance
Sheet (which accrual or reserve as of such date is fully reflected on Parent
Balance Sheet), and (iv) has no Liability for material Taxes in excess of the
amount so paid or accruals or reserves so established except for Taxes
subsequent to the date of Parent Balance Sheet incurred in the ordinary course
of business. Neither Parent nor any of its Subsidiaries has received any written
notification from the Internal Revenue Service or any other taxing authority
regarding any material issues that (i) are currently pending before the Internal
Revenue Service or any other taxing agency or authority (including any sales or
use Taxing authority) regarding Parent, or (ii) have been raised by the Internal
Revenue Service or other Taxing agency or authority and not yet finally
resolved. No material Tax liens are currently in effect against any of the
assets of Parent or any of its Subsidiaries other than liens that arise by
operation of law for Taxes not yet due and payable. There is not in effect any
waiver by Parent or any of its Subsidiaries of any statute of limitations with
respect to any material Taxes. Neither Parent nor any of its Subsidiaries is a
party to or bound by any material Tax sharing, Tax indemnity, or Tax allocation
agreement nor does Parent or any of its Subsidiaries have any material liability
or material potential liability to another party under any such agreement. No
claim that has not been resolved has ever been made to Parent or any of its
Subsidiaries by an authority in a jurisdiction where Parent or its Subsidiaries
do not file Tax Returns that any one of them is or may be subject to taxation by
that jurisdiction. Parent and its 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, shareholder or other third
party.
(b) Neither Parent nor any of its Subsidiaries has ever been a
member of a consolidated, combined, unitary or aggregate group of which Parent
was not the ultimate parent corporation. Neither Parent nor any of its
Subsidiaries has constituted either a "distributing corporation" or a
"controlled corporation" in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (a) in the two years prior to the
Agreement Date or (b) in a distribution that could otherwise constitute part of
a "plan" or "series of related transactions" (within the meaning of Section
355(e) of the Code) in conjunction with the Merger. Parent is not a U.S. real
property holding corporation within the meaning of Code Section 897(c)(2).
Parent has made available to the Company or its legal or accounting
representative copies of all foreign, federal and state income, franchise, sales
and use tax Returns for Parent and each of its subsidiaries filed for all
periods including and after the period ended December 31, 2001.
38
(c) Neither Parent nor any of its Subsidiaries has taken any
action or knows of any fact, agreement, plan or other circumstance that would
reasonably be expected to prevent the Merger from qualifying as a transaction
described in Section 368(a) of the Code.
4.9 Intellectual Property.
(a) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent, (1) Parent
and each of its Subsidiaries owns or has the valid right or license to use, and,
to the extent that it does any of the following, to develop, make, have made,
offer for sale, sell, import, copy, modify, create derivative works of,
distribute, license to third parties and/or dispose of (for purposes of this
Section 4.9, "USE") all Intellectual Property as currently Used in the conduct
of the business of Parent and its Subsidiaries (such Intellectual Property being
hereinafter collectively referred to as the "PARENT IP RIGHTS"), and (ii) all
such Parent IP Rights are owned or licensed by Parent free of all material liens
and Encumbrances (other than Permitted Encumbrances). As used in this Agreement,
"PARENT-OWNED IP RIGHTS" means Parent IP Rights that are or are purportedly
owned or exclusively licensed to Parent or any of its Subsidiaries.
(b) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent, neither
Parent's entry into this Agreement nor the performance of its obligations
contemplated hereby shall, in accordance with their terms (1) cause the
forfeiture or termination of, or give rise to a right of forfeiture or
termination of, any material Contract governing any Parent IP Right, (2)
materially impair the right of Parent or any Subsidiary of Parent to Use any
Parent IP Right or portion thereof as currently Used in the conduct of Parent's
business, or (3) cause any royalties fees or other payments to become payable by
Parent or any of its Subsidiaries to any third person as a result of the Use of
any Parent IP Rights by Parent or cause any existing obligations to pay such
royalties, fees or other payments to increase (other than due to increased sales
of Parent's products or services).
(c) To the knowledge of Parent, and except as would not,
individually or in the aggregate, reasonably be excepted to have a Material
Adverse Effect on Parent, the Use of any Parent IP Right as currently Used in
the conduct of its business does not infringe on or otherwise violate the rights
of any third party. There is no pending, or to the knowledge of Parent,
threatened, claim or litigation contesting the validity, ownership or right of
Parent or any of its Subsidiaries to exercise any Parent IP Right or which would
reasonably be expected to result in the abandonment, cancellation or
unenforceability of such Parent IP Rights, nor to the knowledge of Parent as of
the Agreement Date, is there any legitimate basis for any such claim. None of
the Parent IP Rights is subject to any proceeding or outstanding order, contract
or stipulation materially restricting Parent's use of the Parent IP Rights in
the aggregate. To the knowledge of Parent, and except as would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect on
Parent, no third party is infringing or otherwise violating any Parent IP Right
(other than unlicensed end users of Parent's commercially available software
products).
39
(d) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent, (1) the
Parent and each of its Subsidiaries has taken commercially reasonable steps to
protect, preserve and maintain the proprietary and confidential rights and trade
secrets in the Parent IP Rights and (2) no current or former employee of, or
independent contractor who has worked with, the Parent or any of its
Subsidiaries has any right or interest in any Parent-Owned IP Rights.
(e) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent, all
registered Parent-Owned IP Rights are to the knowledge of Parent valid,
enforceable and subsisting, and Parent or a Subsidiary of Parent is the record
owner thereof.
(f) Schedule 4.9(f) of the Parent Disclosure Letter lists, as of
the Agreement Date, all Contracts pursuant to which Parent or any of its
Subsidiaries grants a third party exclusive rights under any material Parent IP
Rights.
(g) To the knowledge of Parent, and except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent, no event has occurred, and no circumstance or
condition exists, that would reasonably be expected to result in the release by
Parent or any escrow agent to any third party of any Parent Source Code. "PARENT
SOURCE CODE" means, collectively, any human readable software source code, or
any material portion or aspect of the software source code which comprise part
of the Parent-Owned IP Rights.
(h) To the knowledge of Parent, as of the Agreement Date,
Schedule 4.9(h) of the Parent Disclosure Letter lists Contracts with government
entities, pursuant to which material computer software programs or applications
owned or co-owned by Parent or any of its Subsidiaries were developed or
co-developed and licensed and/or assigned to Parent.
(i) To the knowledge of Parent, Parent and its Subsidiaries are
in compliance with all their respective obligations pursuant to any Public
Software license agreements under which they license-in any material Parent IP
Rights, except for such non-compliance that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on Parent.
4.10 Employment.
(a) Parent, each of its Subsidiaries and each ERISA Affiliate is
in compliance with all Applicable Law and Contracts relating to each Parent
Benefit Arrangement, each Parent Foreign Plan, employment, employment practices,
immigration, wages, hours, and terms and conditions of employment, including
employee compensation matters, except where the failure to so comply would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Parent.
(b) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent, (1) no union
organizing effort with respect to employees of Parent or any of its Subsidiaries
is underway and (2) there is no labor strike, dispute, slowdown, stoppage or
lockout actually pending or, to the knowledge of Parent, threatened against
40
Parent or any of its Subsidiaries. There are no controversies pending or, to the
knowledge of Parent, threatened, between Parent or any Subsidiary and any of
their respective employees which have, or would reasonably be expected to result
in, an action, suit, proceeding, claim, arbitration or investigation before any
Governmental Authority, and which individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on Parent.
(c) To the knowledge of Parent, neither Parent, its
Subsidiaries, nor any ERISA Affiliate has at any time since the enactment of
ERISA, contributed to or been obligated to contribute to any "multiemployer
plan" as defined in Section 3(37) of ERISA. Neither Parent nor any Subsidiary or
current or former ERISA Affiliate currently maintains, sponsors, participates in
or contributes to, nor has it ever maintained, established, sponsored,
participated in, or contributed to, any pension plan (within the meaning of
Section 3(2) of ERISA) that is subject to Title IV of ERISA. To the knowledge of
Parent, no "accumulated funding deficiency" (as such term is defined in Section
302 of ERISA and Section 412 of the Code) has occurred with respect to any
Parent Benefit Arrangement that is not subject to Title IV of ERISA.
(d) With respect to Parent, any of its Subsidiaries and any
ERISA Affiliate, Parent has made available to the Company (1) all employee
benefit plans within the meaning of Section 3(3) of ERISA currently contributed
to, sponsored by or maintained by Parent or any of its Subsidiaries, (2) each
outstanding loan from Parent, any of its Subsidiaries or an ERISA Affiliate to
an employee in excess of $25,000, (3) all stock option, stock purchase, phantom
stock, stock appreciation right, supplemental retirement, severance, sabbatical,
medical, dental, vision care, disability, employee relocation, cafeteria benefit
(Section 125 of the Code), dependent care (Section 129 of the Code), life
insurance or accident insurance plans, programs or arrangements (other than
Parent Foreign Plans) currently contributed to, sponsored by or maintained by
Parent or any of its Subsidiaries, (4) all bonus, pension, profit sharing,
savings, retirement, deferred compensation or incentive plans, programs or
arrangements (other than Parent Foreign Plans) currently contributed to,
sponsored by or maintained by Parent or any of its Subsidiaries, (5) other
fringe or employee benefit plans, programs or arrangements that apply to senior
management and that do not generally apply to all employees that are currently
contributed to, sponsored by or maintained by Parent or any of its Subsidiaries,
(6) all employment or service agreements with a current service provider (except
for offer letters providing for at-will employment which do not provide for
severance, acceleration or post-termination benefits except as required by the
law or applicable custom or rule of the relevant jurisdiction outside of the
United States) where the obligations under any such agreement are in excess of
$100,000 or if any such agreement is a "material contract" (as such term is
defined in Item 601(b)(10) of Regulation S-K promulgated by the SEC), and (7)
all change of control agreements or severance agreements, written or otherwise,
for the benefit of, or relating to, any current director or officer of Parent or
any current employee or consultant, in each case in the foregoing clauses
(1)-(7) to the extent such plans, loans, programs, arrangements, agreements or
other items are material to the business of Parent and its Subsidiaries taken as
a whole (collectively, the "PARENT BENEFIT ARRANGEMENTS").
(e) Neither Parent nor any of its Subsidiaries is a party to any
Contract with any director or officer of Parent (1) the benefits of which are
contingent, or the terms of which are materially altered as a result of the
execution of this Agreement, stockholder approval of the transactions
contemplated by this Agreement (whether alone or in connection with any
subsequent event(s)), or (2) providing any fixed term of employment. No Parent
41
Benefit Arrangement will provide benefits that shall be increased, or the
vesting of benefits of which shall be accelerated or the value of any of the
benefits of which shall be calculated as a result of the execution of this
Agreement, stockholder approval of the transactions contemplated by this
Agreement (whether alone or in connection with any subsequent event(s)). Except
as set forth in Section 4.10(e) of the Parent Disclosure Letter, to the
knowledge of Parent, there is no agreement, plan, arrangement or other Contract
covering any current or former employee or consultant of Parent or any of its
Subsidiaries or ERISA Affiliate to which Parent and/or any such Subsidiary is a
party or by which Parent and/or any such Subsidiary is bound that, considered
individually or considered collectively with any other such agreements, plans,
arrangements or other Contracts, will, or could reasonably be expected to, as a
result of the execution of this Agreement, stockholder approval of the
transaction contemplated by this Agreement (or any event subsequent to and in
combination with the Merger), result in a payment that could reasonably be
expected to be characterized as a "parachute payment" within the meaning of
Section 280G of the Code.
4.11 Absence of Certain Changes.
Except as set forth in Section 4.11 of the Parent Disclosure Letter,
since October 2, 2005, Parent and each of its Subsidiaries has operated its
business in all material respects in the ordinary course consistent with its
past practices, and since such date there has not been with respect to Parent or
any of its Subsidiaries, as applicable, (a) any Effect or Effects that,
individually or in the aggregate, have had or would reasonably be expected to
have a Material Adverse Effect on Parent, (b) declaration, setting aside, making
or payment of any dividend or other distribution (whether payable in cash,
stock, property or a combination thereof) with respect to any of the capital
stock of Parent, (c) reclassification, combination, split or subdivision of any
capital stock of Parent, (d) redemption, purchase or other acquisition, directly
or indirectly, by Parent of any capital stock, other equity interests or other
securities of Parent (other than repurchases of shares in connection with the
termination of the employment relationship with any employee), or (e) through
the Agreement Date any incurrence of any indebtedness for borrowed money in
excess of $100,000 in the aggregate for Parent and its Subsidiaries or issuance
of any debt securities or assumption, guarantee or endorsement of the
obligations of any Person (other than a wholly-owned Subsidiary of Parent) for
borrowed money (except for indebtedness for borrowed money under or guarantees
with respect to indebtedness under any existing credit facility or indebtedness
of any wholly-owned Subsidiary of Parent to any other wholly-owned Subsidiary of
Parent or indebtedness of Parent to any wholly-owned Subsidiary of Parent).
4.12 Material Contracts.
(a) Listing. Except as set forth in Section 4.12(a) of the
Parent Disclosure Letter, neither Parent nor any of its Subsidiaries is a party
to or bound by any of the following as of the Agreement Date (each, a "PARENT
MATERIAL CONTRACT"):
(1) any Contract that is a "material contract" (as such
term is defined in Item 601(b)(10) of Regulation S-K promulgated by the SEC);
42
(2) any Contract under which it has in excess of $100,000
of outstanding indebtedness for money borrowed as of the Agreement Date or
guaranteed indebtedness for money borrowed of any Person (other than Parent and
its Subsidiaries) in excess of $100,000 as of the Agreement Date;
(3) any Contract that (i) restricts it from participating
or competing in any line of business, market or geographic area, (ii) contains
most favored customer pricing provisions, or (iii) grants any exclusive rights,
rights of refusal, rights of first negotiation or similar rights to any Person,
in each case in a manner which is material to the business of Parent and its
Subsidiaries taken as a whole;
(4) any Contract that would reasonably be expected to
prevent, materially delay or materially impede the consummation of any of the
transactions contemplated by this Agreement; or
(5) any Contract the termination of which would reasonably
be expected to have a Material Adverse Effect on Parent.
A complete and correct copy of each agreement or document required by the
foregoing subsections (1)-(5) of this Section 4.12(a) to be listed on Schedule
4.12(a) of the Parent Disclosure Letter has been made available by Parent to the
Company and its counsel or filed by Parent with the SEC. All Parent Material
Contracts are in written form.
(b) No Default. Neither Parent nor any of its Subsidiaries, nor,
to Parent's knowledge, any counterparty to any Parent Material Contract, has
violated any provision of, or committed or failed to perform any act which (with
or without notice, lapse of time or both) would constitute a default under, or
give any counterparty the right to exercise any remedy (including the right to a
rebate, refund, credit, change in performance schedule, cancellation,
termination or modification) pursuant to, the provisions of any Parent Material
Contract, except in each case for those violations and defaults which,
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Parent.
4.13 Environmental Matters. Except as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Parent, (a) the operations of Parent and its Subsidiaries are, and at all times
have been, in compliance with all applicable Environmental Laws, including
possession and compliance with the terms of all Governmental Permits required by
Environmental Laws, (b) there are no pending or, to the knowledge of Parent,
threatened, suits, actions, investigations or proceedings under or pursuant to
Environmental Laws against Parent or any of its Subsidiaries or involving any
real property currently or, to the knowledge of Parent, formerly owned, operated
or leased or other sites at which Hazardous Materials were disposed of, or
allegedly disposed of, by Parent or any of its Subsidiaries, (c) to Parent's
knowledge, Parent and its Subsidiaries have received no written allegations of
any Liabilities under any Environment Law and Parent has no knowledge or any
pending or threatened such allegations, and (d) neither Parent nor any of its
Subsidiaries has generated, transported, treated, stored, installed, disposed of
or released any Hazardous Materials in violation of, or in a manner that would
reasonably be expected to give rise to liability to Parent or its Subsidiaries
under, any Environmental Laws.
43
4.14 Interested Party Transactions. Since the date of filing with the
SEC of the proxy statement for the 2005 Annual Meeting of Stockholders of
Parent, no event has occurred that would be required to be reported as a Certain
Relationship or Related Transaction pursuant to Item 404 of Regulation S-K
promulgated by the SEC.
4.15 State Takeover Statutes. Parent has, or will have prior to the
Effective Time, taken all necessary action so that, assuming compliance by the
Company with its obligations hereunder and the accuracy of the representations
and warranties made by the Company herein, no "business combination",
"moratorium", "fair price", "control share acquisition" or other state
antitakeover statute or regulation (other than Section 203 of Delaware Law), nor
any takeover-related provision in the Parent Charter Documents, would (a)
prohibit or restrict Parent's and Merger Sub's ability to perform their
respective obligations under this Agreement, any related agreement or the
Certificate of Merger or their ability to consummate the transactions
contemplated hereby and thereby, (b) have the effect of invalidating or voiding
this Agreement or the Certificate of Merger, or any provision hereof or thereof,
or (c) subject the Company to any impediment or condition in connection with the
exercise of any of its rights under this Agreement or the Certificate of Merger.
Assuming the accuracy of the representation and warranty set forth in Section
3.2(f), the action of the Board of Directors of the Company in approving this
Agreement, the Company Voting Agreements and the transactions provided for
herein and therein is sufficient to render inapplicable to this Agreement, the
Company Voting Agreements and the transactions provided for herein and therein
the restrictions on "business combinations" (as defined in Section 203 of
Delaware Law) as set forth in Section 203 of Delaware Law.
4.16 Brokers. Except for fees payable to Bear Xxxxxxx & Co, Inc.
("BEAR XXXXXXX") and USBX Advisory Services LLC ("USBX"), no broker, investment
banker, financial advisor or other Person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent. Without limiting the foregoing, L-1 will not receive any
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent.
4.17 Opinion of Financial Advisor. Parent has received the opinion of
its financial advisor, USBX, dated January 11, 2006, to the effect that, as of
such date and based on and subject to the matters set forth in the opinion, the
Merger Consideration is fair, from a financial point of view, to Parent.
ARTICLE 5
COVENANTS
5.1 Conduct of Business.
(a) Company. The Company agrees that, between the Agreement Date
and the Effective Time, except as set forth in Section 5.1(a) of the Company
Disclosure Letter or as expressly provided by any other provision of this
Agreement, or unless Parent shall otherwise agree in advance in writing (which
agreement shall not be unreasonably withheld, delayed or conditioned), the
Company shall, and shall cause each of its Subsidiaries to, (i) subject to the
44
restrictions and exceptions set forth in this Section 5.1(a), conduct its
operations in all material respects only in the ordinary and usual course of
business consistent with past practice and (ii) use its reasonable best efforts
to keep available the services of the current officers, key employees and key
consultants of the Company and each of its Subsidiaries and to preserve the
current relationships of the Company and its Subsidiaries with their customers,
suppliers and other Persons with which the Company or any of its Subsidiaries
has significant business relations as are reasonably necessary in order to
preserve substantially intact its business organization. In addition, without
limiting the foregoing, except as set forth in Section 5.1(a) of the Company
Disclosure Letter or as expressly provided by any other provision of this
Agreement, the Company shall not and shall not permit any of its Subsidiaries,
nor any of its or its Subsidiaries' officers, directors or employees, Affiliates
or any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its respective Subsidiaries, to (unless
required by Applicable Law), between the date of this Agreement and the
Effective Time, directly or indirectly, do, or agree to do, any of the following
without the prior written consent of Parent (which consent shall not be
unreasonably withheld, delayed or conditioned):
(1) amend or otherwise change its articles or certificate
of incorporation or bylaws or equivalent organizational documents;
(2) (i) issue, sell, grant, transfer or authorize the
issuance, sale, grant or transfer of any shares of capital stock of, or other
equity interests in, the Company or any of its Subsidiaries, or securities
convertible or exchangeable or exercisable for any shares of such capital stock
or other equity interests, or any options, warrants or other rights of any kind
to acquire any shares of such capital stock or other equity interests or such
convertible or exchangeable securities, or any other ownership interest, of the
Company or any of its Subsidiaries, except for (A) the issuance of securities
issuable upon the exercise of options or other rights outstanding as of the
Agreement Date, and (B) grants of stock options and restricted stock in the
ordinary course of business consistent with past practice or (ii) accelerate the
vesting of any options, warrants or other rights of any kind to acquire any
shares of capital stock to the extent that such acceleration of vesting does not
occur automatically under the terms of any such interests or plans governing
such interests;
(3) sell, pledge, dispose of, transfer, lease, license, or
encumber, or authorize the sale, pledge, disposition, transfer, lease, license,
or encumbrance of, any material property or assets of the Company or any of its
Subsidiaries, including without limitation, intellectual property, except in the
ordinary course of business consistent with past practice;
(4) declare, set aside, make or pay any dividend or other
distribution (whether payable in cash, stock, property or a combination thereof)
with respect to any of the capital stock of the Company or enter into any
agreement with respect to the voting of the capital stock of the Company;
45
(5) (A) reclassify, combine, split or subdivide any capital
stock of the Company or issue or authorize the issuance of any other securities
in respect of, in lieu of, or in substitution for, shares of its capital stock,
or (B) redeem, purchase or otherwise acquire, directly or indirectly, any
capital stock, other equity interests or other securities of the Company (other
than repurchases of shares in connection with the termination of the employment
relationship with any employee pursuant to agreements in effect on the Agreement
Date or entered into in the ordinary course of business consistent with past
practice after the Agreement Date);
(6) (A) incur any indebtedness for borrowed money or issue
any debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any Person (other than
a wholly-owned Subsidiary of the Company) for borrowed money, except for (i)
indebtedness for borrowed money under or guarantees with respect to indebtedness
under any existing credit facility, (ii) indebtedness of any wholly-owned
Subsidiary of the Company to any other wholly-owned Subsidiary of the Company or
indebtedness of the Company to any wholly-owned Subsidiary of the Company, or
(iii) letters of credit entered into in the ordinary course of business
consistent with past practice, (B) terminate, cancel, or agree to any material
and adverse change in, any Company Material Contract other than in the ordinary
course of business consistent with past practice, (C) make or authorize any
material loan to any Person (other than a Subsidiary of the Company) outside the
ordinary course of business, or (D) enter into any new contract that would
result in a significant negative gross margin for the Company;
(7) (A) increase the base salary, incentive compensation
(whether in Company Common Stock or cash), severance benefits or perquisites
payable or to become payable to directors or officers of the Company (other than
increases pursuant to the terms of a Contract in effect on the Agreement Date
and increases granted pursuant to performance reviews held in the ordinary
course of business consistent with past practice and methodology), (B) increase
the compensation or benefits payable or to become payable to its other employees
(other than increases pursuant to the terms of a Contract in effect on the
Agreement Date and increases granted pursuant to performance reviews held in the
ordinary course of business consistent with past practice and methodology), (C)
grant any rights to severance or termination pay to, or enter into any
employment or severance agreement with, any director, officer or other employee
of the Company or any of its Subsidiaries (other than with respect to newly
hired employees in accordance with past practices of the Company or any of its
Subsidiaries, provided that any such agreements shall not provide for the
payment of any severance or termination pay as a result of the execution of this
Agreement or the consummation of the transactions contemplated hereby), (D)
establish, adopt, enter into or amend any collective bargaining agreement or
Company Benefit Arrangement for the benefit of any director, officer, consultant
or employee, except to the extent required by Applicable Law, or (E) take any
affirmative action to amend or waive any performance or vesting criteria or
accelerate vesting, exercisability or funding under any Company Benefit
Arrangement or Company Option;
(8) make any material change in accounting policies or
procedures, other than in the ordinary course of business consistent with past
practice or except as required by GAAP or by a Governmental Authority;
46
(9) except in the ordinary course of business consistent
with past practice, make any material Tax election or settle or compromise any
material liability for Taxes (except to the extent that any such election,
settlement or compromise does not result in or create an obligation to pay Taxes
in excess of amounts reserved therefor in the Company Balance Sheet), or change
any annual Tax accounting period or method of Tax accounting;
(10) modify, amend or terminate, or waive, release or
assign any material rights or claims with respect to any confidentiality or
standstill agreement to which the Company is a party and which relates to a
business combination involving the Company;
(11) write up, write down or write off the book value of
any assets, individually or in the aggregate, for the Company and its
Subsidiaries, taken as a whole, other than (A) in the ordinary course of
business, (B) as may be required by GAAP, or (C) otherwise not in excess of
$100,000 in the aggregate;
(12) except as permitted by Section 5.18, take any action
to render inapplicable, or to exempt any third Person (other than Parent or
Merger Sub) from, (A) the provisions of Delaware Law or (B) any other state
takeover law or state law that purports to limit or restrict business
combinations or the ability to acquire or vote shares of capital stock;
(13) acquire, or agree to acquire, from any Person any
operation, division or business, or engage in, or agree to engage in, any
merger, consolidation or other business combination with any Person;
(14) take any action that is intended to result in any of
the conditions to the Merger set forth in Article 6 not being satisfied;
(15) take any action that is reasonably likely to cause a
delay in the filing or effectiveness of the Registration Statement or the
convening of either the Company Stockholder Meeting or the Parent Stockholder
Meeting; or
(16) authorize or enter into any agreement or otherwise
make any commitment to do any of the foregoing.
(b) Parent. Parent agrees that, between the Agreement Date and
the Effective Time, except as set forth in Section 5.1(b) of Parent Disclosure
Letter or as expressly provided by any other provision of this Agreement, or
unless Parent shall otherwise agree in advance in writing (which agreement shall
not be unreasonably withheld, delayed or conditioned), Parent shall, and shall
cause each of its Subsidiaries to, (i) subject to the restrictions and
exceptions set forth in this Section 5.1(b), conduct its operations in all
material respects only in the ordinary and usual course of business consistent
with past practice and (ii) use its reasonable best efforts to keep available
the services of the current officers, key employees and key consultants of
Parent and each of its Subsidiaries and to preserve the current relationships of
Parent and its Subsidiaries with their customers, suppliers and other Persons
with which Parent or any of its Subsidiaries has significant business relations
as are reasonably necessary in order to preserve substantially intact its
business organization. In addition, without limiting the foregoing, except as
set forth in Section 5.1(b) of Parent Disclosure Letter or as expressly provided
47
by any other provision of this Agreement, Parent shall not and shall not permit
any of its Subsidiaries, nor any of its or its Subsidiaries' officers, directors
or employees, Affiliates or any investment banker, financial advisor, attorney,
accountant or other representative retained by it or any of its respective
Subsidiaries, to (unless required by Applicable Law), between the date of this
Agreement and the Effective Time, directly or indirectly, do, or agree to do,
any of the following without the prior written consent of the Company (which
consent shall not be unreasonably withheld, delayed or conditioned):
(1) amend or otherwise change its articles or certificate
of incorporation or bylaws or equivalent organizational documents;
(2) (i) issue, sell, grant, transfer or authorize the
issuance, sale, grant or transfer of any shares of capital stock of, or other
equity interests in, Parent or any of its Subsidiaries, or securities
convertible or exchangeable or exercisable for any shares of such capital stock
or other equity interests, or any options, warrants or other rights of any kind
to acquire any shares of such capital stock or other equity interests or such
convertible or exchangeable securities, or any other ownership interest, of
Parent or any of its Subsidiaries, except for (A) the issuance of securities
issuable upon the exercise of options or other rights outstanding as of the
Agreement Date, and (B) grants of stock options and restricted stock in the
ordinary course of business consistent with past practice or (ii) accelerate the
vesting of any options, warrants or other rights of any kind to acquire any
shares of capital stock to the extent that such acceleration of vesting does not
occur automatically under the terms of any such interests or plans governing
such interests;
(3) sell, pledge, dispose of, transfer, lease, license, or
encumber, or authorize the sale, pledge, disposition, transfer, lease, license,
or encumbrance of, any material property or assets of Parent or any of its
Subsidiaries, including without limitation, intellectual property, except in the
ordinary course of business consistent with past practice;
(4) declare, set aside, make or pay any dividend or other
distribution (whether payable in cash, stock, property or a combination thereof)
with respect to any of the capital stock of Parent or enter into any agreement
with respect to the voting of the capital stock of Parent;
(5) (A) reclassify, combine, split or subdivide any capital
stock of Parent or issue or authorize the issuance of any other securities in
respect of, in lieu of, or in substitution for, shares of its capital stock, or
(B) redeem, purchase or otherwise acquire, directly or indirectly, any capital
stock, other equity interests or other securities of Parent (other than
repurchases of shares in connection with the termination of the employment
relationship with any employee pursuant to agreements in effect on the Agreement
Date or entered into in the ordinary course of business consistent with past
practice after the Agreement Date);
(6) (A) incur any indebtedness for borrowed money or issue
any debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any Person (other than
a wholly-owned Subsidiary of Parent) for borrowed money, except for (i)
indebtedness for borrowed money under or guarantees with respect to indebtedness
under any existing credit facility, (ii) indebtedness of any wholly-owned
Subsidiary of Parent to any other wholly-owned Subsidiary of Parent or
indebtedness of Parent to any wholly-owned Subsidiary of Parent, or (iii)
48
letters of credit entered into in the ordinary course of business consistent
with past practice, (B) terminate, cancel, or agree to any material and adverse
change in, any Parent Material Contract other than in the ordinary course of
business consistent with past practice, (C) make or authorize any material loan
to any Person (other than a Subsidiary of Parent) outside the ordinary course of
business, or (D) enter into any new contract that would result in a significant
negative gross margin for Parent;
(7) (A) increase the base salary, incentive compensation
(whether in Parent Common Stock or cash), severance benefits or perquisites
payable or to become payable to directors or officers of Parent (other than
increases pursuant to the terms of a Contract in effect on the Agreement Date
and increases granted pursuant to performance reviews held in the ordinary
course of business consistent with past practice and methodology), (B) increase
the compensation or benefits payable or to become payable to its other employees
(other than increases pursuant to the terms of a Contract in effect on the
Agreement Date and increases granted pursuant to performance reviews held in the
ordinary course of business consistent with past practice and methodology), (C)
grant any rights to severance or termination pay to, or enter into any
employment or severance agreement with, any director, officer or other employee
of Parent or any of its Subsidiaries (other than with respect to newly hired
employees in accordance with past practices of Parent or any of its
Subsidiaries, provided that any such agreements shall not provide for the
payment of any severance or termination pay as a result of the execution of this
Agreement or the consummation of the transactions contemplated hereby), (D)
establish, adopt, enter into or amend any collective bargaining agreement or
Parent Benefit Arrangement for the benefit of any director, officer, consultant
or employee, except to the extent required by Applicable Law, or (E) take any
affirmative action to amend or waive any performance or vesting criteria or
accelerate vesting, exercisability or funding under any Parent Benefit
Arrangement or Parent Option;
(8) make any material change in accounting policies or
procedures, other than in the ordinary course of business consistent with past
practice or except as required by GAAP or by a Governmental Authority;
(9) except in the ordinary course of business consistent
with past practice, make any material tax election or settle or compromise any
material liability for taxes (except to the extent that any such election,
settlement or compromise does not result in or create an obligation to pay taxes
in excess of amounts reserved therefor in the Parent Balance Sheet), or change
any annual tax accounting period or method of tax accounting;
(10) modify, amend or terminate, or waive, release or
assign any material rights or claims with respect to any confidentiality or
standstill agreement to which Parent is a party and which relates to a business
combination involving Parent;
(11) write up, write down or write off the book value of
any assets, individually or in the aggregate, for Parent and its Subsidiaries,
taken as a whole, other than (A) in the ordinary course of business, (B) as may
be required by GAAP, or (C) otherwise not in excess of $100,000;
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(12) except as permitted by Section 5.18, take any action
to render inapplicable, or to exempt any third Person (other than the Company)
from, (A) the provisions of the Delaware Law or (B) any other state takeover law
or state law that purports to limit or restrict business combinations or the
ability to acquire or vote shares of capital stock;
(13) acquire, or agree to acquire, from any Person any
operation, division or business, or engage in, or agree to engage in, any
merger, consolidation or other business combination with any Person;
(14) take any action that is intended to result in any of
the conditions to the Merger set forth in Article 6 not being satisfied;
(15) take any action that is reasonably likely to cause a
delay in the filing or effectiveness of the Registration Statement or the
convening of either the Company Stockholder Meeting or the Parent Stockholder
Meeting; or
(16) authorize or enter into any agreement or otherwise
make any commitment to do any of the foregoing.
5.2 No Solicitation.
(a) Alternative Transaction. Neither the Company nor Parent
shall, nor shall the Company or Parent permit any of its Subsidiaries to, nor
authorize or permit any of its or its Subsidiaries' officers, directors or
employees or any investment banker, financial advisor, attorney, accountant or
other representative retained by it or any of its respective Subsidiaries to,
directly, or indirectly, (i) solicit, initiate or encourage, or take any other
action to knowingly facilitate, induce or encourage any inquiries with respect
to, or the making, submission or announcement of, any Alternative Transaction
Proposal, (ii) participate in any discussions or negotiations regarding, furnish
to any Person any information with respect to, or otherwise cooperate in any way
with or knowingly facilitate any effort or attempt to make or implement any
Alternative Transaction Proposal (except to disclose the existence of this
Agreement and the terms hereof or as specifically permitted by Section 5.2(c)),
(iii) approve, endorse or recommend any Alternative Transaction (except to the
extent specifically permitted by Section 5.2(d)), or (iv) enter into any letter
of intent or similar document or any contract, agreement or commitment (whether
binding or not) contemplating or otherwise relating to any Alternative
Transaction Proposal (except any confidentiality agreement contemplated by
Section 5.2(c)(1)). Each of the Company and Parent and each of their respective
Subsidiaries will immediately cease, and will cause its officers, directors and
employees and instruct any investment banker, financial adviser, attorney,
accountant or other representative retained by it to cease, any and all existing
activities, discussions or negotiations with any third parties conducted
heretofore with respect to any Alternative Transaction Proposal, and will use
its reasonable best efforts to enforce, and will not waive any provisions of,
any confidentiality or standstill agreement (or any similar agreement) to which
such party of any of its Subsidiaries is a party relating to any such
Alternative Transaction Proposal.
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(b) Notification. As promptly as practicable (and in any event
within 24 hours) after receipt of any Alternative Transaction Proposal or any
request for nonpublic information or any inquiry relating in any way to any
Alternative Transaction Proposal, the Company or Parent, as the case may be,
shall provide the other party with oral and written notice of the material terms
and conditions of such Alternative Transaction Proposal, request or inquiry, and
the identity of the Person or group making any such Alternative Transaction
Proposal, request or inquiry and a copy of all written materials provided to it
in connection with such Alternative Transaction Proposal, request or inquiry. In
addition, the Company or Parent, as the case may be, shall provide the other
party as promptly as possible with all information as is reasonably necessary to
keep the other party informed in all material respects of all oral or written
communications regarding, and the status and material terms of, any such
Alternative Transaction Proposal, request or inquiry, and, without limitation of
the other provisions of this Section 5.2, shall promptly provide to the other
party a copy of all written materials (including written materials provided by
email or otherwise in electronic format) subsequently provided by or to it in
connection with such Alternative Transaction Proposal, request or inquiry. The
Company or Parent, as the case may be, shall provide the other party with 48
hours prior notice (or such lesser prior notice as is provided to the members of
its Board of Directors) of any meeting of its Board of Directors at which its
Board of Directors is reasonably expected to consider any Alternative
Transaction Proposal or Alternative Transaction.
(c) Superior Proposal. Notwithstanding anything to the contrary
contained in Section 5.2(a), in the event that the Company or Parent, as the
case may be, receives an unsolicited, bona fide written Alternative Transaction
Proposal which is determined to be, or to be reasonably likely to result in, a
Superior Proposal, such party or its Board of Directors may then take the
following actions (but only (i) if and to the extent that (x) its Board of
Directors concludes in good faith, after consultation with its outside legal
counsel, that the failure to do so would be inconsistent with its fiduciary
duties under Applicable Law, and (y) the Company or Parent, as the case may be,
has given the other party at least two business days prior written notice of its
intention to take any of the following actions and of the identity of the Person
or group making such Alternative Transaction Proposal and the material terms and
conditions of such Alternative Transaction Proposal and (ii) if it shall not
have breached in any material respect any of the provisions of this Section
5.2):
(1) Furnish nonpublic information to the Person or group
making such Alternative Transaction Proposal, provided that (A) prior to
furnishing any such nonpublic information, it receives from such Person or group
an executed confidentiality agreement containing confidentiality terms at least
as restrictive as the terms contained in the Confidentiality Agreement, dated as
of December 28, 2005, between the Company and Parent (the "CONFIDENTIALITY
AGREEMENT") and (B) contemporaneously with furnishing any such nonpublic
information to such Person or group, it furnishes such nonpublic information to
the other party hereto (to the extent such nonpublic information has not been
previously so furnished to such party); and
(2) Engage in discussions or negotiations with such Person
or group with respect to such Alternative Transaction Proposal.
(d) Changes of Recommendation. Solely in response to the receipt
of an unsolicited, bona fide written Alternative Transaction Proposal which is
determined to be a Superior Proposal, the Board of Directors of the Company or
Parent, as the case may be, may make a Change of Recommendation, if all of the
following conditions in clauses (1) through (5) are met:
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(1) the Superior Proposal has been made and has not been
withdrawn and continues to be a Superior Proposal;
(2) the stockholder vote at the Company Stockholders'
Meeting or Parent Stockholders' Meeting, as the case may be, has not occurred;
(3) the Company or Parent, as the case may be, has (A)
provided to the other party hereto three business days' prior written notice
which shall state expressly (i) that it has received a Superior Proposal, (ii)
the material terms and conditions of the Superior Proposal and the identity of
the Person or group of Persons making the Superior Proposal, and (iii) that it
intends to effect a Change of Recommendation and the manner in which it intends
to do so, and (B) during the aforementioned period, if requested by the other
party hereto, engaged in good faith negotiations to amend this Agreement in such
a manner that the Alternative Transaction Proposal which was determined to be a
Superior Proposal no longer is a Superior Proposal;
(4) the Board of Directors of the Company or Parent, as the
case may be, has determined in good faith, after consultation with its outside
legal counsel, that, in light of such Superior Proposal, the failure of the
Board of Directors to effect a Change of Recommendation would be inconsistent
with its fiduciary duties under Applicable Law; and
(5) the Company or Parent, as the case may be, shall have
complied in all material respects with Section 5.2(c) and shall not have
breached in any material respect any of the other provisions set forth in this
Section 5.2.
(e) Tender Offer Rules. Nothing contained in this Agreement
shall prohibit the Company or Parent or their respective Boards of Directors
from taking and disclosing to their stockholders a position contemplated by
Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act; provided that
neither party shall effect, or disclose pursuant to such rules or otherwise a
position which constitutes, a Change of Recommendation unless specifically
permitted pursuant to the terms of Section 5.2(d).
5.3 Preparation of SEC Documents; Stockholders' Meetings.
(a) Registration Statement and Prospectus. As soon as reasonably
practicable following the Agreement Date, Parent and the Company shall prepare
and file with the SEC the Proxy Statement/Prospectus, and Parent shall prepare
and file with the SEC the Registration Statement, in which the Proxy
Statement/Prospectus will be included. Each of Parent and the Company shall use
reasonable best efforts to have the Registration Statement declared effective
under the Securities Act as promptly as practicable after such filing and to
keep the Registration Statement effective as long as is necessary to consummate
the Merger and the other transactions contemplated hereby. Parent will use
reasonable best efforts to cause the Proxy Statement/Prospectus to be mailed to
Parent Stockholders, and the Company will use reasonable best efforts to cause
the Proxy Statement/Prospectus to be mailed to Company Stockholders, in each
case as promptly as practicable after the Registration Statement is declared
52
effective under the Securities Act. Parent shall also take any action (other
than qualifying to do business in any jurisdiction in which it is not now so
qualified or filing a general consent to service of process) required to be
taken under any applicable state securities laws in connection with the issuance
and reservation of shares of Parent Common Stock pursuant to the Merger and the
conversion of Company Options into Parent Options, and the Company shall furnish
all information concerning the Company and the holders of Company Common Stock
as may be reasonably requested in connection with any such action. No filing of,
or amendment or supplement to, the Registration Statement or the Proxy
Statement/Prospectus will be made by Parent without the Company's prior consent
(which shall not be unreasonably withheld, delayed or conditioned) and without
providing the Company the reasonable opportunity to review and comment thereon.
Parent will advise the Company, promptly after it receives oral or written
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, the issuance of any stop order,
the suspension of the qualification of the Parent Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or any oral
or written request by the SEC for amendment of the Proxy Statement/Prospectus or
the Registration Statement or comments thereon and responses thereto or requests
by the SEC for additional information and will promptly provide the Company with
copies of any written communication from the SEC or any state securities
commission. If at any time prior to the Effective Time any information
(including any Change of Recommendation) relating to Parent or the Company, or
any of their respective Affiliates, officers or directors, should be discovered
by Parent or the Company which should be set forth in an amendment or supplement
to any of the Registration Statement or the Proxy Statement/Prospectus, so that
any of such documents would not include any misstatement of a material fact or
omit to state any material fact necessary to make the statements therein not
misleading, the party which discovers such information shall promptly notify the
other parties hereto and an appropriate amendment or supplement describing such
information shall be promptly filed with the SEC and, to the extent required by
law, disseminated to the stockholders of Parent and the Company.
(b) Stockholders' Meetings. Each of the Company and Parent
shall, as promptly as practicable after the Registration Statement is declared
effective under the Securities Act, take all action necessary in accordance with
Applicable Law and the Company Charter Documents, in the case of the Company,
and the Parent Charter Documents, in the case of Parent, to duly give notice of,
convene and hold the Company Stockholders' Meeting, in the case of the Company,
and the Parent Stockholders' Meeting, in the case of Parent. Subject to Section
5.2(d), each of the Company and Parent will use reasonable best efforts to
solicit from its stockholders proxies in favor of, in the case of the Company,
the adoption of this Agreement, and in the case of Parent, the approval of the
Parent Stock Issuance and Parent Charter Amendment, and will take all other
action necessary or advisable to secure the vote or consent of its stockholders
required by the rules of the Nasdaq Stock Market or Applicable Law to obtain
such approvals. Notwithstanding anything to the contrary contained in this
Agreement, the Company or Parent may adjourn or postpone the Company
Stockholders' Meeting or Parent Stockholders' Meeting, as the case may be, to
the extent necessary to ensure that any necessary supplement or amendment to the
Proxy Statement/Prospectus is provided to its stockholders in advance of a vote
on, in the case of the Company, the adoption of this Agreement, and in the case
53
of Parent, the approval of the Parent Stock Issuance and Parent Charter
Amendment, or, if, as of the time for which the Company Stockholders' Meeting or
Parent Stockholders' Meeting, as the case may be, is originally scheduled, there
are insufficient shares of Company Common Stock or Parent Common Stock, as the
case may be, represented (either in person or by proxy) to constitute a quorum
necessary to conduct the business of such meeting. Each of the Company and
Parent shall ensure that the Company Stockholders' Meeting and the Parent
Stockholders' Meeting, respectively, is called, noticed, convened, held and
conducted, and that all proxies solicited in connection with the Company
Stockholders' Meeting or Parent Stockholders' Meeting, as the case may be, are
solicited in compliance with Applicable Law, the rules of the Nasdaq Stock
Market and, in the case of the Company, the Company Charter Documents, and, in
the case of Parent, the Parent Charter Documents. Without the prior written
consent of Parent, adoption of this Agreement is the only matter (other than
procedural matters) which the Company shall propose to be acted on by the
Company Stockholders at the Company Stockholders' Meeting. Without the prior
written consent of the Company, approval of the Parent Stock Issuance, the
Parent Charter Amendment and any proposals set forth in Schedule 5.3(b) of the
Parent Disclosure Letter are the only matters (other than procedural matters)
which Parent shall propose to be acted on by Parent Stockholders at the Parent
Stockholders' Meeting. Notwithstanding any Change of Recommendation by the Board
of Directors of the Company or Parent, (i) adoption of this Agreement shall be
submitted to the Company Stockholders at the Company Stockholders' Meeting and
(ii) approval of the Parent Stock Issuance and Parent Charter Amendment shall be
submitted to the Parent Stockholders at the Parent Stockholders' Meeting, and
nothing contained herein shall be deemed to relieve the Company or Parent of
such obligations.
(c) Time of Meetings. Each of the Company and Parent will use
reasonable best efforts to hold the Company Stockholders' Meeting and Parent
Stockholders' Meeting, respectively, on the same date as the other party and as
soon as reasonably practicable after the date of this Agreement.
(d) Board Recommendations. Except to the extent expressly
permitted by Section 5.2(d): (i) the Board of Directors of each of the Company
and Parent shall recommend that its stockholders vote in favor of, in the case
of the Company, the adoption of this Agreement at the Company Stockholders'
Meeting, and, in the case of Parent, the approval of the Parent Stock Issuance
and Parent Charter Amendment at the Parent Stockholders' Meeting, (ii) the Proxy
Statement/Prospectus shall include a statement to the effect that the Board of
Directors of (A) the Company has recommended that the Company Stockholders vote
in favor of adoption of this Agreement at the Company Stockholders' Meeting and
(B) Parent has recommended that Parent Stockholders vote in favor of approval of
the Parent Stock Issuance and Parent Charter Amendment at the Parent
Stockholders' Meeting and (iii) neither the Board of Directors of the Company or
Parent nor any committee thereof shall withdraw, amend or modify, or propose or
resolve to withdraw, amend or modify in a manner adverse to the other party, the
recommendation of its respective Board of Directors that the respective
stockholders of the Company or Parent vote in favor of, in the case of the
Company, the adoption of this Agreement, and, in the case of Parent, the
approval of the Parent Stock Issuance and Parent Charter Amendment.
5.4 Accountant's Letters. Each of the Company and Parent shall use
reasonable best efforts to cause to be delivered to the other party two letters
from their respective independent accountants, one dated approximately as of the
date the Registration Statement is declared effective and one dated
approximately as of the Closing Date, each addressed to the other party, in form
and substance reasonably satisfactory to the other party and customary in scope
and substance for comfort letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement.
54
5.5 Access to Information; Confidentiality.
(a) Access to Information. Subject to the Confidentiality
Agreement and Applicable Law, each of the Company and Parent shall, and shall
cause each of its respective Subsidiaries to, afford to the other party and to
the officers, employees, accountants, counsel, financial advisors and other
representatives of such other party, reasonable access at all reasonable times
on reasonable notice during the period prior to the Effective Time to all their
respective properties, books, contracts, commitments, personnel and records
(provided, that such access shall not unreasonably interfere with the business
or operations of such party) and, during such period and subject to the
Confidentiality Agreement and Applicable Law, each of the Company and Parent
shall, and shall cause each of its respective Subsidiaries to, furnish promptly
to the other party (a) a copy of each report, schedule, registration statement
and other document filed by it during such period pursuant to the requirements
of federal or state securities laws and (b) all other information concerning its
business, properties and personnel as such other party may reasonably request.
No review pursuant to this Section 5.5 shall affect or be deemed to modify any
representation or warranty contained herein, the covenants or agreements of the
parties hereto or the conditions to the obligations of the parties hereto under
this Agreement.
(b) Confidentiality. Each of the Company and Parent will hold
and keep confidential, and will cause its respective officers and employees and
will direct its accountants, counsel, financial advisors and other
representatives and Affiliates to hold and keep confidential, any nonpublic
information in accordance with the terms of the Confidentiality Agreement, which
Confidentiality Agreement will remain in full force and effect.
5.6 Reasonable Best Efforts.
(a) Governmental and Third Party Approvals. Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use their reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable under
Applicable Law to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including (1) the obtaining of all necessary actions or non-actions,
waivers, consents and approvals from Governmental Authorities and the making of
all necessary registrations and filings and the taking of all steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Authority, including all filings required under
the HSR Act, with the Federal Trade Commission or the United States Department
of Justice and any necessary antitrust, competition or similar laws of any
foreign jurisdiction, (2) the obtaining of all necessary consents, approvals or
waivers from third parties, (3) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated by this Agreement, including
promptly seeking to have any stay or temporary restraining order entered by any
court or other Governmental Authority vacated or reversed, and (4) the execution
55
and delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement. Subject to Applicable Law relating to the exchange of information,
the Company and Parent shall have the right to review in advance, and to the
extent reasonably practicable each will consult the other on, all the
information relating to the Company and its Subsidiaries or Parent and its
Subsidiaries, as the case may be, that appears in any filing made with, or
written materials submitted to, any Governmental Authority or third party in
connection with the Merger and the other transactions contemplated by this
Agreement.
(b) Notification. Each of the Company and Parent shall keep the
other reasonably apprised of the status of matters relating to the completion of
the transactions contemplated hereby and work cooperatively in connection with
obtaining all required approvals or consents of any Governmental Authority
(whether domestic, foreign or supranational). In that regard, each party shall
without limitation use its reasonable best efforts to: (1) promptly notify the
other of, and if in writing, furnish the other with copies of (or, in the case
of material oral communications, advise the other orally of) any communications
from or with any Governmental Authority (whether domestic, foreign or
supranational) with respect to the Merger or any of the other transactions
contemplated by this Agreement, (2) permit the other to review and discuss in
advance, and consider in good faith the views of the other in connection with,
any proposed written (or any material proposed oral) communication with any such
Governmental Authority with respect to the Merger or any of the other
transactions contemplated by this Agreement, (3) to the extent practical, not
participate in any meeting with any such Governmental Authority with respect to
the Merger or any of the other transactions contemplated by this Agreement
unless it consults with the other in advance and to the extent permitted by such
Governmental Authority gives the other the opportunity to attend and participate
thereat, and (4) furnish the other with such necessary information and
reasonable assistance as the Company or Parent, as applicable, may reasonably
request in connection with its preparation of necessary filings or submissions
of information to any such Governmental Authority. Each of the Company and
Parent may, as each deems advisable and necessary, reasonably designate any
competitively sensitive material provided to the other under this Section 5.6 as
"outside counsel only". Such material and the information contained therein
shall be given only to the outside legal counsel of the recipient and will not
be disclosed by such outside counsel to employees, officers, or directors of the
recipient unless express permission is obtained in advance from the source of
the materials (the Company or Parent, as the case may be) or its legal counsel.
(c) State Takeover Statutes. In connection with and without
limiting the foregoing, the Company and Parent shall (i) take all action
reasonably necessary to ensure that no state takeover statute or similar statute
or regulation is or becomes applicable to this Agreement or any of the
transactions contemplated hereby and (ii) if any state takeover statute or
similar statute or regulation becomes applicable to this Agreement or any of the
transactions contemplated hereby, take all action reasonably necessary to ensure
that such transactions may be consummated as promptly as practicable on the
terms required by, or provided for, in this Agreement and otherwise to minimize
the effect of such statute or regulation on the Merger and the other
transactions contemplated by this Agreement.
(d) Divestitures. Notwithstanding anything to the contrary in
this Agreement, neither Parent nor the Company shall be required to hold
separate (including by trust or otherwise) or divest, or take any other action
with respect to, any of its assets or businesses or enter into any consent
decree or other agreement that (1) would reasonably be expected to result in a
Material Adverse Effect on Parent or the Company after the Effective Time or (2)
is not conditional on consummation of the Merger.
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5.7 Indemnification and Insurance.
(a) Indemnification and Advancement. From and after the
Effective Time, each of Parent and the Surviving Corporation shall, and Parent
shall cause the Surviving Corporation to: (1) indemnify and hold harmless each
person who served as a director or officer of Parent, the Company or their
respective Subsidiaries prior to the Effective Time (collectively, the
"INDEMNIFIED PARTIES") to the fullest extent authorized or permitted by
Applicable Law, as now or hereafter in effect, in connection with any Claim (as
defined below) and any judgments, fines, penalties and amounts paid in
settlement (including all interest, assessments and other charges paid or
payable in connection with or in respect of such judgments, fines, penalties or
amounts paid in settlement) resulting therefrom; and (2) promptly pay on behalf
of or, within 30 days after any request for advancement, advance to each of the
Indemnified Parties, to the fullest extent authorized or permitted by Applicable
Law, as now or hereafter in effect, and if required by Delaware Law subject to
the receipt of an unsecured undertaking to repay such amounts if it is
ultimately determined that the Indemnified Party is not entitled to
indemnification, any Expenses (as defined below) incurred in defending, serving
as a witness with respect to or otherwise participating in any Claim in advance
of the final disposition of such Claim, including payment on behalf of or
advancement to the Indemnified Party of any Expenses incurred by such
Indemnified Party in connection with enforcing any rights with respect to such
indemnification and/or advancement. The indemnification and advancement
obligations of Parent and the Surviving Corporation pursuant to this Section 5.7
shall extend to acts or omissions occurring at or before the Effective Time and
any Claim relating thereto (including with respect to any acts or omissions
occurring in connection with the approval of this Agreement and the consummation
of the transactions contemplated hereby and any Claim relating thereto) and all
rights to indemnification and advancement conferred hereunder shall continue as
to a person who has ceased to be a director or officer of Parent, the Company or
their respective Subsidiaries prior to the Effective Time and shall inure to the
benefit of such person's heirs, executors and personal and legal
representatives. As used in this Section 5.7, (1) the term "CLAIM" means any
threatened, asserted, pending or completed action, suit or proceeding, or any
inquiry or investigation that any Indemnified Party in good faith believes might
lead to the institution of any such action, suit or proceeding, whether civil,
criminal, administrative, investigative or other, including any arbitration or
other alternative dispute resolution mechanism, as a result of or in connection
with such Indemnified Party's service as a director, officer, trustee, employee,
agent, or fiduciary of Parent, the Company or any of, their Subsidiaries, as the
case may be, or any employee benefit plan maintained by any of the foregoing at
or prior to the Effective Time; and (2) the term "EXPENSES" means documented and
reasonable attorneys' fees and all other documented and reasonable costs,
expenses and obligations (including, without limitation, experts' fees, travel
expenses, court costs, retainers, transcript fees, duplicating, printing and
binding costs, as well as telecommunications, postage and courier charges) paid
or incurred in connection with investigating, defending, being a witness in or
participating in (including on appeal), or preparing to investigate, defend, be
a witness in or participate in, any Claim for which indemnification is
authorized pursuant to this Section 5.7, including any action relating to a
claim for indemnification or advancement brought by a Company Indemnified Party.
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(b) Certificate of Incorporation, Bylaws and Indemnification
Agreements. In furtherance and not in limitation of Section 5.7(a) hereof, from
and after the Effective Time, each of Parent and the Surviving Corporation
shall, and Parent shall cause the Surviving Corporation to: (1) include and
cause to be maintained in the Surviving Corporation's (or any successor's)
Certificate of Incorporation and Bylaws for a period of at least six years from
and after the Effective Time, provisions regarding elimination of liability of
directors, indemnification of directors, officers and employees and advancement
of expenses which are no less advantageous to the intended beneficiaries than
the corresponding provisions contained in the Company's Certificate of
Incorporation and Bylaws, in each case as in effect on the Agreement Date; and
(2) otherwise keep in full force and effect, and, subject to Applicable Laws,
comply with the terms and conditions of, any agreement in effect as of the
Agreement Date between or among the Company or any of its Subsidiaries and any
Indemnified Party providing for the indemnification of or the advancement of
expenses to such Indemnified Party.
(c) Insurance. For a period of six years after the Effective
Time, each of Parent and the Surviving Corporation shall cause to be maintained
in effect the current policies (whether through purchase of a "tail end" policy
or otherwise) of directors' and officers' and fiduciary liability insurance
maintained by the Company, including with respect to Claims arising from facts
or events which occurred on or before the Effective Time (including those
related to this Agreement and the transactions contemplated hereby); provided,
that Parent or the Surviving Corporation may substitute therefor policies of at
least the same coverage and amounts containing terms and conditions which are no
less advantageous to former officers and directors of the Company; and provided,
further, that if the aggregate annual premiums for such policies at any time
during such period will exceed 300% of the per annum premium rate paid by the
Company and its Subsidiaries as of the Agreement Date for such policies, then
Parent and the Surviving Corporation shall only be required to provide such
coverage as will then be available at an annual premium equal to 300% of such
rate. The provisions of the immediately preceding sentence shall be deemed to
have been satisfied if prepaid policies have been obtained prior to the
Effective Time for purposes of this Section 5.7(c), which policies provide such
directors and officers with coverage for an aggregate period of six years after
the Effective Time, including with respect to acts or omissions occurring at or
prior to the Effective Time (including with respect to acts or omissions
occurring in connection with approval of this Agreement and consummation of the
transactions contemplated hereby), and nothing in Section 5.1(c) shall prohibit
the Company from obtaining such prepaid policies prior to the Effective Time,
provided that the annual cost thereof shall not exceed 300% of the per annum
premium rate paid by the Company and its Subsidiaries as of the Agreement Date
for such policies. If such prepaid policies have been obtained prior to the
Effective Time, each of Parent and the Surviving Corporation shall, and Parent
shall cause the Surviving Corporation to, maintain such policies in full force
and effect for their duration.
(d) Survival of Claims. Notwithstanding anything herein to the
contrary and to the maximum extent permitted by Applicable Law, if any Claim is
made or brought against any Indemnified Party on or prior to the sixth
anniversary of the Effective Time, the provisions of this Section 5.7 shall
continue in effect until the final disposition of such Claim.
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(e) Successors. If Parent, the Surviving Corporation or any of
their respective successors or assigns (1) shall consolidate with or merge with
or into any other Person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (2) shall transfer all
or substantially all of its properties or assets to any Person, then, in each
case, Parent shall take such action as may be necessary so that such Person
shall assume all of the applicable obligations set forth in this Section 5.7.
(f) Enforceability. The provisions of this Section 5.7 are (1)
intended to be for the benefit of, and shall be enforceable by, each Indemnified
Party (it being expressly agreed that the Indemnified Parties to whom this
Section 5.7 applies shall be third party beneficiaries of this Section 5.7) and
(2) in addition to, and not in substitution for, any other rights to
indemnification or contribution that any such Person may have by contract or
otherwise. The obligations of Parent under this Section 5.7 shall not be
terminated or modified in such a manner as to adversely affect the rights of any
Indemnified Party under this Section 5.7 without the consent of such affected
Indemnified Party.
(g) Expenses. Parent shall pay (as incurred) all Expenses that a
Company Indemnified Party may incur in enforcing the indemnity, advancement and
other obligations set forth in this Section 5.7.
(h) Burden of Proof. In connection with any determination as to
whether the Company Indemnified Parties are entitled to the benefits of this
Section 5.7, the burden of proof shall be on the Parent and the Surviving
Corporation to establish that a Company Indemnified Person is not so entitled.
5.8 Fees and Expenses. Except as set forth in this Section 5.8, all
fees and expenses incurred in connection with the Merger, this Agreement and the
transactions contemplated by this Agreement shall be paid by the party incurring
such fees or expenses, whether or not the Merger is consummated, except that
each of the Company and Parent shall bear and pay one-half of the costs and
expenses incurred by Parent, Merger Sub or the Company (other than attorneys'
fees, accountants' fees and related expenses) in connection with the filing,
printing and mailing of the Registration Statement (including financial
statements and exhibits) and the Proxy Statement/Prospectus (including SEC
filing fees) and any preliminary materials related thereto.
5.9 Public Announcements. The Company and Parent will use reasonable
best efforts to consult with each other before issuing, and will provide each
other the opportunity to review, comment upon and concur with, and use
reasonable best efforts to agree on, any press release or other public
statements with respect to the transactions contemplated by this Agreement,
including the Merger, and shall not issue any such press release or make any
such public statement prior to such consultation, except as either party may
determine is required by Applicable Law, court process or by obligations
pursuant to any listing agreement with any national securities exchange or stock
market. In addition, except to the extent disclosed in or consistent with the
Proxy Statement/Prospectus in accordance with the provisions of Section 5.3 or
prior communications consented to in accordance with this Section 5.9, neither
party shall issue any press release or otherwise make any public statement or
disclosure concerning the other party or the other party's business, financial
condition or results of operations without the consent of such other party,
which consent shall not be unreasonably withheld, delayed or conditioned. The
parties agree that the initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be in the form agreed to by
the parties.
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5.10 Listing. Parent shall use reasonable best efforts to cause the
Parent Common Stock issuable under Article 2 (including those shares of Parent
Common Stock required to be reserved for issuance in connection with the Merger
or upon exercise of Company Options or Company Warrants from time to time) to be
authorized for listing on the Nasdaq Stock Market, subject to official notice of
issuance, prior to the Closing Date.
5.11 Tax-Free Reorganization Treatment. Parent and the Company hereby
adopt this Agreement as a plan of reorganization within the meaning of Treasury
Regulations Sections 1.368-2(g) and 1.368-3(a). Parent and the Company intend
that the Merger will qualify as a reorganization within the meaning of Section
368(a) of the Code, and each shall, and shall cause its respective Subsidiaries
to, use its reasonable best efforts to cause the Merger to so qualify and shall
file all Returns consistent with, and take no position inconsistent with, such
treatment. Neither Parent, Merger Sub nor the Company shall take any action,
cause or permit any action to be taken, or fail to take any action, that would
reasonably be expected to cause the Merger to fail to qualify as a
reorganization within the meaning of Section 368(a) of the Code.
5.12 Equity Awards and Employee Benefits.
(a) Notices. As soon as reasonably practicable, but in no event
later than 20 business days following the Effective Time, Parent will issue to
each holder of an Assumed Company Option a document evidencing the assumption of
such Company Option by Parent. The parties shall use their reasonable best
efforts to ensure that the conversion of any Company Options which are intended
to be "incentive stock options" (as defined in Section 422 of the Code) shall be
effected in a manner consistent with Section 424(a) of the Code.
(b) Form S-8. Parent shall file a registration statement on Form
S-8 for the shares of Parent Common Stock issuable with respect to the Company
Options, the Company Restricted Shares and other assumed equity compensation
awards (collectively, the "ASSUMED AWARDS") no later than one business day after
the Effective Time and shall exercise reasonable best efforts to maintain the
effectiveness of such registration statement for so long as any of such Assumed
Awards remains outstanding.
(c) Company ESPP. To the extent the Company ESPP has not expired
on its terms, the Company shall terminate the Company ESPP immediately prior to
the Effective Time. To the extent any offering period under the Company ESPP is
in progress prior to such termination, the Company shall ensure that such
offering period ends immediately prior to such termination, and that each
participant's accumulated contributions for such offering period are applied
towards the purchase of Company Common Stock immediately prior to such
termination unless the participant has previously withdrawn from such offering
period in accordance with the terms of such plan. With respect to matters
described in this Section 5.12(c), the Company will communicate with Parent
prior to sending any material notices or other communication materials to its
employees.
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(d) Benefit Plans. For a period of not less than one year after
the Effective Time, Parent shall provide, or cause to be provided, to those
persons who were employees of the Company or its Subsidiaries immediately prior
to the Effective Time and who remain employees of the Surviving Corporation or
its Subsidiaries or become employees of Parent following the Effective Time
("CONTINUING EMPLOYEES") employee benefits (other than Parent Option Plans and
the Parent ESPP) no less favorable in the aggregate than those currently
provided to employees of the Company. Continuing Employees will be eligible to
participate in Parent Option Plans and the Parent ESPP in accordance with the
terms and conditions of such plans. As promptly as reasonably practicable after
the Effective Time, Continuing Employees shall be eligible to participate in (1)
Parent's employee benefit plans, programs, policies and arrangements, including
any severance plan, medical plan, dental plan, life insurance plan, vacation
program and disability plan, to the extent permitted by the terms of the
applicable plans, programs, policies and arrangements or (2) such Company
Benefit Arrangements, including, but not limited to, any agreements, programs,
policies or other programs sponsored by or maintained by the Company or any of
its Subsidiaries, that are continued by the Surviving Corporation or any of its
Subsidiaries following the Closing Date, or which are assumed by Parent (for the
purposes of this Section 5.12(d) only, clauses (1) and (2) taken together, the
"PARENT BENEFIT PLANS"). Continuing Employees shall, to the extent permitted by
Applicable Law receive full credit for purposes of eligibility, vesting, level
of benefits (but not benefit accrual) under the Parent Benefit Plans in which
such Continuing Employees participate for such Continuing Employees' service
with the Company, any of its Subsidiaries, and either of their predecessors.
With respect to any welfare benefit plans maintained by Parent for the benefit
of Continuing Employees on and after the Effective Time, Parent shall (1) cause
there to be waived, as required by Applicable Law, any eligibility requirements
or pre-existing condition limitations and (2) give effect, in determining any
deductible or maximum out-of-pocket limitations, amounts paid by such Continuing
Employees with respect to similar plans maintained by the Company and its
Subsidiaries, subject to the terms and conditions of the applicable welfare
benefit plans maintained by Parent. Depending upon the date of the Effective
Time relative to the completion of the then-next ending offer period under the
Parent ESPP, and upon the relative benefits and costs, Parent will determine in
good faith whether to establish a special offering period for Continuing
Employees under the Parent ESPP commencing as soon as administratively
practicable following the Effective Time and ending immediately prior to the
commencement of the next regularly scheduled offering period under the Parent
ESPP.
(e) Termination of Benefit Plans. To the extent requested in
writing by Parent no later than ten business days prior to the Closing Date,
Company shall take (or cause to be taken) all actions necessary or appropriate
to terminate, effective no later than the date immediately preceding the Closing
Date, any Company Benefit Arrangement that contains a cash or deferred
arrangement intended to qualify under Section 401(k) of the Code (the "COMPANY
401(K) PLANS") in accordance with the provisions of the Company 401(k) Plans and
Applicable Law. If Parent requests that the Company 401(k) Plans be terminated,
the Company's Board of Directors shall adopt resolutions authorizing the
termination of the Company 401(k) Plans effective no later than the day
immediately preceding the Closing Date.
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(f) Disclaimer. Notwithstanding anything in this Agreement to
the contrary, no provision of this Agreement shall be deemed to (i) guarantee
employment for any period of time for, or preclude the ability of either party
to terminate any continuing employee at will at any time, with or without cause,
for any reason or no reason, (ii) duplicate any benefit provided to any
Continuing Employee or to fund any such benefit not previously funded, or (iii)
subject to the limitations and requirements specifically set forth in this
Section 5.12, require either party to continue any Parent Benefit Arrangement or
Company Benefit Arrangement, or prevent the amendment, modification or
termination thereof, after the Effective Time.
5.13 Parent Corporate Governance.
(a) On or prior to the Effective Time, the Board of Directors of
Parent shall cause the number of directors that will comprise the full Board of
Directors of Parent immediately following the Effective Time to be 12. The
members of such Board of Directors immediately following the Effective Time
shall consist of seven persons designated prior to the Effective Time by Parent
(which shall include Xxxxxx XxXxxxx as a Chairman) and five persons designated
prior to the Effective Time by the Company (which shall consist of Xxxxxx Xxxxx
as a Vice Chairman, Xxxxxx Xxxxxx, Xxxxxxx Xxxxx, Xxxx Xxxxxx, and one
individual identified by the Company prior to the Effective Time) (such members,
the "INITIAL POST-CLOSING DIRECTORS"). From and after the Effective Time,
subject to regulatory requirements, at least one director designated by the
Company shall be appointed to serve on each and every committee of the Board of
Directors of Parent until at least the expiration of the term of the Class III
directors. In connection with joining the Board of Directors of Parent,
directors designated by the Company shall receive such compensation for their
services as members of the Board of Directors of Parent, as set forth in Section
5.13 (a) of the Company Disclosure Letter.
(b) On or prior to the Effective Time, pursuant to Section 141
of Delaware Law, the Parent Charter Amendment shall provide that (1) any change
in the size of the Board of Directors of Parent shall require the prior approval
of at least two-thirds of the entire Board of Directors of Parent and at least
two-thirds of the independent Board members of Parent, (2) the full and
exclusive power and authority otherwise conferred upon the Board of Directors to
evaluate candidates and nominate persons to stand for election to the Board of
Directors or to fill vacancies on the Board of Directors or newly created
directorships shall be exercised and performed by the nominating and governance
committee of the Board of Directors of Parent and (3) any amendment to the
provisions required by the immediately foregoing clauses (1) and (2) by the
Board of Directors of Parent shall require the prior approval of at least
two-thirds of the entire Board of Directors of Parent and at least two-thirds of
the independent Board members of Parent.
(c) On or prior to the Effective Time, the Board of Directors of
Parent shall take all actions necessary to appoint (i) four Initial Post-Closing
Directors designated by the Company pursuant to Section 5.13(a) to be appointed
to the Board of Directors as a Class III director whose term of office shall
expire in 2008, unless in each case such nominee shall have resigned, retired or
otherwise become unable to serve prior to the Effective Time, (ii) four Initial
Post-Closing Directors designated by Parent pursuant to Section 5.13(a) to be
appointed to the Board of Directors as a Class II director whose term of office
shall expire in 2007, unless in each case such nominee shall have resigned,
retired or otherwise become unable to serve prior to the Effective Time and
(iii) three Initial Post-Closing Directors designated by the Parent and one
Initial Post-Closing Directors designated by the Company pursuant to Section
5.13(a) to be appointed to the Board of Directors as a Class I director whose
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term of office shall expire in 2006, unless in each case such nominee shall have
resigned, retired or otherwise become unable to serve prior to the Effective
Time. Each of Parent and the Company agrees to cause each member of its Board of
Directors that is not an Initial Post-Closing Director to resign effective
immediately prior to the Effective Time and Parent agrees to cause each member
of its Board of Directors that is a Class III director to resign affective
immediately prior to the Effective Time; provided that any such Class III
director that is also an Initial Post-Closing Director Directors shall be
reappointed to the Board of Directors of Parent as a Class I or Class II
director. The Class I director chosen by the Company shall be renominated to the
Board of Directors in 2006 by the governance and nominating committee of the
Board of Directors of Parent.
(d) At the Effective Time, Xxxxxx XxXxxxx will be the Chairman
of the Board and Chief Executive Officer of Parent. The following individuals
will report directly to Xx. XxXxxxx with their respective identified titles at
the Parent corporate level: (1) Xxxxxx Xxxxx, Vice Chairman of the Board and
Corporate Chief Strategic Officer; (2) Xxxxx XxXxxxx, Executive Vice President
and Chief Financial Officer of Parent; (3) Xxxx Xxxxxx, Executive Vice
President, Chief Legal Officer and Corporate Secretary of Parent; (4) Xxxxxx
Xxxxxx, Executive Vice President and Chief Marketing and Sales Officer of
Parent. The following individuals will also report directly to Xx. XxXxxxx with
their respective identified titles: Xxxxxxx Xxxxxx, President of the Secure
Documents Division and Xxx Xxxx, President of the Biometrics Division. Xxxxxxx
Xxxxxxxx will be Chief Technology Officer of Parent reporting to Xx. Xxxxx. The
product and technology strategy and development functions and responsibilities
wherever located throughout Parent, Company and current and future Affiliate
operations (including Minnesota, New Jersey, Massachusetts and Germany) will
also report to Xx. Xxxxx. Xxxxxx Xxxxxxx will be the Chief Financial Officer of
the Biometrics Division and Xxxxxxx X. Xxxxxx will be the Chief Financial
Officer of the Secure Documents Division, each reporting to Xx. XxXxxxx. Xxxxxx
Xxxx will be the General Counsel and Senior Vice President of the Secure
Documents Division reporting to Xx. Xxxxxx. The legal and contracts functions of
all current and future Affiliates and Divisions will also report to Xx. Xxxxxx.
Divisional sales and marketing will be the oversight of Xx. Xxxxxx with direct
reporting lines to the Divisional Presidents. After the Agreement Date and prior
to the Effective Time, Parent shall offer compensation arrangements to Messrs.
LaPenta, DePalma, Paresi, Bailey, Xxxxxx and Xxxx commensurate with their
respective positions as described above and as mutually agreed by the Company
and Parent prior to Closing. If such compensation arrangements are not mutually
agreed to prior to Closing such arrangements shall be as approved after Closing
by recommendation of the Compensation Committee and approval by the Board of
Parent. After the Agreement Date and prior to the Effective Time, Parent shall
offer compensation arrangements, to be effective as of the Effective Time, with
Messrs. Atick, Moar and Xxxxxx and Xx. Xxxxxxx on the terms provided in Section
5.13(d) of the Company Disclosure Letter. After the Agreement Date and prior to
the Effective Time, Parent shall enter into indemnification agreements with
current Company directors and officers who are continuing as directors and
officers of Parent on terms no less favorable than the Company's current form of
indemnification agreement for directors and officers.
5.14 Affiliates Legends.
The Company shall notify Parent in writing of the identity of those
Persons who are, in the Company's reasonable judgment, "affiliates" of the
Company within the meaning of Rule 145 promulgated under the Securities Act
("RULE 145 AFFILIATES") prior to the Closing Date. Parent shall be entitled to
place appropriate legends on the certificates evidencing any shares of Company
Common Stock to be received by Rule 145 Affiliates in the Merger reflecting the
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restrictions set forth in Rule 145 promulgated under the Securities Act and to
issue appropriate stop transfer instructions to the transfer agent for Parent
Common Stock (provided, that such legends or stop transfer instructions shall be
removed, one year after the Effective Time, upon the request of any holder of
shares of Parent Common Stock issued in the Merger if such holder is not then a
Rule 145 Affiliate or an Affiliate of Parent).
5.15 Voting Agreements.
(a) Concurrently with the execution hereof, the Company shall
deliver to Parent the Company Voting Agreements executed by certain stockholders
of the Company identified on Schedule 5.15(a) of the Company Disclosure Letter.
If any Company Voting Agreements is not executed and delivered by a stockholder
identified on Schedule 5.15(a) of the Company Disclosure Letter on the date
hereof, the Company shall use best reasonable efforts to obtain such Company
Voting Agreements within five business days hereof.
(b) Concurrently with the execution hereof, Parent shall deliver
to the Company the Parent Voting Agreements executed by certain stockholders of
Parent (including L-1) identified on Schedule 5.15(b) of the Parent Disclosure
Letter. If any Parent Voting Agreements is not executed and delivered by a
stockholder identified on Schedule 5.15(b) of the Parent Disclosure Letter on
the date hereof, Parent shall use best reasonable efforts to obtain such Parent
Voting Agreements within five business days hereof.
5.16 Notification of Certain Matters. The Company shall give prompt
notice to Parent and Parent shall give prompt notice to the Company, as the case
may be, if it determines that any Effect has had a Material Adverse Effect on
such party or would result in the failure of any of the conditions set forth in
Article 6 to be satisfied. Notwithstanding the above, the delivery of any notice
pursuant to this Section 5.16 will not limit or otherwise affect the remedies
available hereunder to the party receiving such notice or the conditions to such
party's obligation to consummate the Merger.
5.17 Section 16 Matters. Prior to the Effective Time, each of the
Company and Parent shall take all such steps as may be required (to the extent
permitted under Applicable Law) to cause any dispositions of Company Common
Stock (including derivative securities with respect to Company Common Stock) or
acquisitions of Parent Common Stock (including derivative securities with
respect to Parent Common Stock) resulting from the transactions contemplated by
this Agreement by each individual who is subject to the reporting requirements
of Section 16(a) of the Exchange Act with respect to the Company to be exempt
under Rule 16b-3 promulgated under the Exchange Act, such steps to be taken in
accordance with the No-Action Letter, dated January 12, 1999, issued by the SEC
to Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP. The parties acknowledge that all
such above referenced dispositions and acquisitions are compensatory in nature.
5.18 State Takeover Laws.
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Prior to the Effective Time, neither the Company nor Parent shall
take any action to render inapplicable or to exempt any third Person from, any
state takeover law or state law that purports to limit or restrict business
combinations or the ability to acquire or vote shares of capital stock unless
(i) required to do so by order of a court of competent jurisdiction or (ii) the
Company's or Parent's Board of Directors, as the case may be, has concluded in
good faith, after consultation with its outside legal counsel, that, in light of
a Superior Proposal with respect to the Company or Parent, as applicable, the
failure to take such action would be inconsistent with the Board of Directors'
fiduciary duties under Applicable Law.
5.19 Reservation of Parent Common Stock. Effective at or prior to the
Effective Time, Parent shall reserve (free from preemptive rights) out of its
reserved but unissued shares of Parent Common Stock, for the purposes of
effecting the conversion of the issued and outstanding shares of Company Common
Stock and assumption of Company Options and Company Warrants pursuant to this
Agreement, sufficient shares of Parent Common Stock to provide for such
conversion and assumption.
5.20 Parent Name Change. Parent and Company shall mutually agree on
the name of Parent to be included in the Parent Charter Amendment.
5.21 Potential Agreement with L-1. Prior to the date the Proxy
Statement/Prospectus will be mailed to the Parent Stockholders and Company
Stockholders, Company and Parent shall cooperate in good faith to reach an
agreement between Parent and L-1. Such agreement, if agreed to by Company and
Parent, would provide that Parent shall not compensate Messrs. XxXxxxx, XxXxxxx
and Xxxxxx for their services to the Parent (as officers, directors, employees
or otherwise) and instead Parent shall compensate L-1 for such services. If
Company and Parent do not mutually agree on the form and substance of such
agreement, Parent shall instead compensate the foregoing individuals directly
for their services, and no such agreement shall be entered into between Parent
and L-1.
5.22 Parent Headquarters. Prior to the Effective Time, Parent and
Company shall cooperate in good faith to mutually agree upon reasonable
arm-length terms and conditions, including the terms and conditions of any
lease, under which Parent shall move its corporate headquarters to 000 Xxxxx
Xxxxxx, Xxxxxxxx, Xxxxxxxxxxx.
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF THE PARTIES
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
obligation of each party to effect the Merger is subject to the satisfaction or
waiver in writing at or prior to the Closing of the following conditions:
(a) Stockholder Approvals. Each of the Company Stockholder
Approval and the Parent Stockholder Approval shall have been obtained.
(b) Antitrust Waiting Periods. The waiting periods (and any
extensions thereof) applicable to the Merger under the HSR Act shall have been
terminated or shall have expired.
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(c) No Injunctions or Restraints. No judgment, order, decree,
statute, law, ordinance, rule or regulation, or other legal restraint or
prohibition, entered, enacted, promulgated, enforced or issued by any court or
other Governmental Authority of competent jurisdiction (collectively,
"RESTRAINTS"), shall be in effect or be pending which prohibits, makes illegal
or enjoins, or threatens to prohibit, make illegal or enjoin, the consummation
of the transactions contemplated by this Agreement.
(d) Registration Statement. The Registration Statement shall
have become effective under the Securities Act prior to the mailing of the Proxy
Statement/Prospectus by each of the Company and Parent to their stockholders,
and no stop order or proceedings seeking a stop order shall have been initiated
or, to the knowledge of the Company or Parent, threatened by the SEC.
(e) Listing. The shares of Parent Common Stock issuable to the
Company Stockholders pursuant to the Merger and to be reserved for issuance upon
exercise of Company Options or Company Warrants from time to time as provided
for in Article 2 shall have been authorized for listing on the Nasdaq Stock
Market, upon official notice of issuance.
(f) Certificate of Amendment. The Certificate of Amendment shall
have become effective under Delaware Law.
6.2 Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger is further subject to satisfaction or waiver in
writing at or prior to the Closing of the following conditions:
(a) Representations and Warranties. (i) The representations and
warranties of Parent (except for the representations and warranties set forth in
Section 4.2) set forth herein (A) that are qualified as to Material Adverse
Effect shall be true and correct and (B) that are not so qualified as to
Material Adverse Effect shall be true and correct, in each case both when made
and at and as of the Closing Date, as if made at and as of such time (except to
the extent expressly made as of an earlier date, in which case as of such date),
except to the extent where the failure of any such representations and
warranties referred to in clause (B) to be so true and correct does not have,
and would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Parent, and (ii) the representations and warranties
of Parent set forth in Section 4.2 shall be true and correct in all material
respects, in each case both when made and at and as of the Closing Date, as if
made at and as of such time (except to the extent expressly made as of an
earlier date, in which case as of such date).
(b) Performance of Obligations of Parent and Merger Sub. Each of
Parent and Merger Sub shall have performed, or complied with, in all material
respects all obligations required to be performed or complied with by it under
this Agreement at or prior to the Closing Date.
(c) Officer's Certificate. The Company shall have received an
officer's certificate duly executed by each of the Chief Executive Officer and
Chief Financial Officer of Parent to the effect that each of the conditions set
forth in Section 6.2(a) and Section 6.2(b) have been satisfied.
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(d) Tax Opinion. The Company shall have received the opinion of
Xxxxxx Xxxxxx LLP, dated as of the Effective Time, to the effect that the Merger
will qualify as a reorganization within the meaning of Section 368(a) of the
Code. The issuance of such opinion shall be conditioned upon receipt by such
counsel of customary representation letters from each of Parent, Merger Sub and
the Company, in each case, in form and substance reasonably satisfactory to such
counsel, which representation letters shall not have been withdrawn or modified.
(e) L-1 Investment Partners LLC . Parent and L-1 shall have
entered into the Termination and Non-Compete Agreement in form and substance
satisfactory to the Company and Parent, which shall, among other things, (1)
terminate all arrangements (other than those specifically identified in such
agreement) whereby L-1 and its Affiliates provide financial, advisory,
administrative or other services to Parent or its Affiliates, and (2) prohibit
L-1 and its Affiliates from directly advising, performing services for,
investing in or enter into any other agreement with any Person that competes
directly or indirectly with Parent or the Company, which includes without
limitation, in the word-wide biometric, credentialing and ID management
businesses (other than with respect to investments of L-1 and its Affiliates as
specifically identified in such agreement).
6.3 Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are further subject to
satisfaction or waiver in writing at or prior to the Closing of the following
conditions:
(a) Representations and Warranties. (i) The representations and
warranties of the Company (except for the representations and warranties set
forth in Section 3.2) set forth herein (A) that are qualified as to Material
Adverse Effect shall be true and correct and (B) that are not so qualified as to
Material Adverse Effect shall be true and correct, in each case both when made
and at and as of the Closing Date, as if made at and as of such time (except to
the extent expressly made as of an earlier date, in which case as of such date),
except to the extent where the failure of any such representations and
warranties referred to in clause (B) to be so true and correct does not have,
and would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on the Company, and (ii) the representations and
warranties of the Company set forth in Section 3.2 shall be true and correct in
all material respects, in each case both when made and at and as of the Closing
Date, as if made at and as of such time (except to the extent expressly made as
of an earlier date, in which case as of such date).
(b) Performance of Obligations of the Company. The Company shall
have performed, or complied with, in all material respects all obligations
required to be performed or complied with by it under this Agreement at or prior
to the Closing Date.
(c) Officer's Certificate. Parent shall have received an
officer's certificate duly executed by each of the Chief Executive Officer and
Chief Financial Officer of the Company to the effect that each of the conditions
set forth in Section 6.3(a) and Section 6.3(b) have been satisfied.
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(d) Tax Opinion. Parent shall have received the opinion of
Xxxxxx, Hall & Xxxxxxx LLP, dated as of the Effective Time, to the effect that
the Merger will qualify as a reorganization within the meaning of Section 368(a)
of the Code. The issuance of such opinion shall be conditioned upon receipt by
such counsel of customary representation letters from each of Parent, Merger Sub
and the Company, in each case, in form and substance reasonably satisfactory to
such counsel, which representation letters shall not have been withdrawn or
modified.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time by action taken or authorized by the Board of Directors of
the terminating party or parties, which action (A) in the case of Section
7.1(a), Section 7.1(b)(1), Section 7.1 (b)(2), Section 7.1(c) and Section
7.1(d), may be taken or authorized before or after the Parent Stockholder
Approval or the Company Stockholder Approval, as the case may be, (B) in the
case of Section 7.1(e) and Section 7.1(f), may be taken or authorized only
before the Parent Stockholder Approval or Company Stockholder Approval, as the
case may be, and (C) in the case of Section 7.1(b)(3) and Section 7.1(b)(4), may
be taken or authorized only after the Parent Stockholders' Meeting where a vote
was taken or the Company Stockholders' Meeting where a vote was taken, as the
case may be:
(a) by mutual written consent of the Company and Parent, if the
Board of Directors of each so determines;
(b) by written notice of either the Company or Parent (as
authorized by the Board of Directors of the Company or Parent, as applicable):
(1) if the Merger shall not have been consummated by
September 1, 2006 (the "OUTSIDE DATE"), provided, however, that the right to
terminate this Agreement under this Section 7.1(b)(1) shall not be available to
any party whose failure to comply with any provision of this Agreement has been
the cause of, or resulted in, the failure of the Merger to be consummated by
such date;
(2) if a Governmental Authority that is of competent
jurisdiction shall have issued an order, decree or ruling or taken any other
action (including the failure to have taken an action), in any case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, which order, decree, ruling or other action is final and nonappealable,
provided, however, that the right to terminate this Agreement under this Section
7.1(b)(2) shall not be available to any party whose failure to comply with any
provision of this Agreement has been the cause of, or resulted in, such action;
(3) if the Parent Stockholder Approval shall not have been
obtained at the Parent Stockholders' Meeting, or at any adjournment or
postponement thereof, at which the vote thereon was taken;
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(4) if the Company Stockholder Approval shall not have been
obtained at the Company Stockholders' Meeting, or at any adjournment or
postponement thereof, at which the vote thereon was taken;
(c) by the Company (as authorized by its Board of Directors)
upon a breach of any representation, warranty, covenant or agreement of Parent
set forth in this Agreement, if (1) as a result of such breach the conditions
set forth in Section 6.2(a) or Section 6.2(b) would not be satisfied as of the
time of such breach and (2) such breach shall be incapable of being cured or
shall not have been cured in all material respects within 20 business days after
written notice thereof shall have been received by Parent;
(d) by Parent (as authorized by its Board of Directors) upon a
breach of any representation, warranty, covenant or agreement of the Company set
forth in this Agreement, if (1) as a result of such breach the conditions set
forth in Section 6.3(a) or Section 6.3(b) would not be satisfied as of the time
of such breach and (2) such breach shall be incapable of being cured or shall
not have been cured in all material respects within 20 business days after
written notice thereof shall have been received by the Company;
(e) by the Company (as authorized by its Board of Directors), at
any time prior to Parent Stockholder Approval, if Parent, the Parent Board of
Directors or any committee thereof, for any reason, shall have (1) failed to
include in the Proxy Statement/Prospectus distributed to the Parent Stockholders
its recommendation in favor of the Parent Stock Issuance and Parent Charter
Amendment, (2) effected a Change of Recommendation, or (3) approved or
recommended any Alternative Transaction; or
(f) by Parent (as authorized by its Board of Directors), at any
time prior to Company Stockholder Approval, if the Company, the Company Board of
Directors or any committee thereof, for any reason, shall have (1) failed to
include in the Proxy Statement/Prospectus distributed to the Company
Stockholders its recommendation that such stockholders adopt and approve this
Agreement and approve the Merger, (2) effected a Change of Recommendation, or
(3) approved or recommended any Alternative Transaction.
7.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1 hereof, this Agreement shall forthwith
become void and there shall be no liability on the part of any of the parties,
except (i) as set forth in Section 5.5(b), Section 5.8, this Section 7.2 and
Section 7.3, as well as Article 8 (other than Section 8.1) to the extent
applicable to such surviving sections, each of which shall survive termination
of this Agreement, and (ii) that nothing herein shall relieve any party from any
further liability for any willful breach of this Agreement. No termination of
this Agreement shall affect the obligations of the parties contained in the
Confidentiality Agreement, all of which obligations shall survive termination of
this Agreement in accordance with their terms.
7.3 Payments.
(a) Payment by the Company. In the event that this Agreement is
terminated by the Company pursuant to Section 7.1(b)(1), Section 7.1(b)(4) or by
Parent pursuant to any of Section 7.1(b)(4), Section 7.1(d) (but, in the case of
Section 7.1(d), only if such termination is due to an intentional breach of any
representation, warranty or covenant by the Company) or Section 7.1(f), the
Company shall promptly, but in no event later than ten business days after the
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date of such termination (subject to the further provisions of this Section
7.3(a)), pay Parent the Termination Fee; provided, that in the case of a
termination pursuant to Section 7.1(b)(1), Section 7.1(b)(4) or Section 7.1(d)
(but, in the case of Section 7.1(d), only if such termination is due to an
intentional breach of any representation, warranty or covenant by the Company),
the Termination Fee shall be payable only if following the Agreement Date and
prior to such termination, any Person shall have made to the Company or its
stockholders, or publicly announced, any Alternative Transaction Proposal with
respect to the Company and within 12 months following termination of this
Agreement, any Alternative Transaction with respect to the Company is
consummated or the Company enters into an agreement providing for an Alternative
Transaction, such fee payment to be made concurrently with the consummation of
such Alternative Transaction.
(b) Payment by Parent. In the event that this Agreement is
terminated by Parent pursuant to Section 7.1(b)(1), Section 7.1(b)(3) or by the
Company pursuant to any of Section 7.1(b)(3), Section 7.1(c) (but, in the case
of Section 7.1(c), only if such termination is due to an intentional breach of
any representation, warranty or covenant by Parent) or Section 7.1(e), Parent
shall promptly, but in no event later than ten business days after the date of
such termination (subject to the further provisions of this Section 7.3(b)), pay
the Company the Termination Fee; provided, that in the case of a termination
pursuant to Section 7.1(b)(1), Section 7.1(b)(3) or Section 7.1(c) (but, in the
case of Section 7.1(c), only if such termination is due to an intentional breach
of any representation, warranty or covenant by Parent), the Termination Fee
shall be payable only if following the Agreement Date and prior to such
termination, any Person shall have made to Parent or its stockholders, or
publicly announced, an Alternative Transaction Proposal with respect to Parent
and within 12 months following termination of this Agreement, any Alternative
Transaction with respect to Parent is consummated or Parent enters into an
agreement providing for any Alternative Transaction, such fee payment to be made
concurrently with the consummation of such Alternative Transaction.
(c) Interest and Costs; Other Remedies. All payments under this
Section 7.3 shall be made by wire transfer of immediately available funds to an
account designated by the party to receive payment. Each of the Company and
Parent acknowledges that the agreements contained in this Section 7.3 are an
integral part of the transactions contemplated by this Agreement and that,
without these agreements, the other party hereto would not enter into this
Agreement. Accordingly, if the Company or Parent, as the case may be, fails to
pay in a timely manner the amounts due pursuant to this Section 7.3 and, in
order to obtain such payment, the other party hereto makes a claim that results
in a judgment against the party failing to pay for the amounts set forth in this
Section 7.3, the party so failing to pay shall pay to the other party its
reasonable costs and expenses (including reasonable attorneys' fees and
expenses) in connection with such suit, together with interest on the amounts
set forth in this Section 7.3 at the rate of interest per annum publicly
announced by Bank of America as its prime rate, as in effect on the date such
payment was required to be made. Payment of the fees described in this Section
7.3 shall not be in lieu of damages incurred in the event of breach of this
Agreement, to the extent permitted by Section 7.2.
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7.4 Amendment. This Agreement may be amended by the parties at any
time before or after the Company Stockholder Approval or the Parent Stockholder
Approval; provided, however, that after the occurrence of either the Company
Stockholder Approval or the Parent Stockholder Approval there may not be,
without further approval of the stockholders of the Company and Parent, as the
case may be, any amendment of this Agreement which by Applicable Law expressly
requires the further approval of such stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto and duly approved by the parties' respective Boards of Directors
or a duly designated committee thereof.
7.5 Extension; Waiver. At any time prior to the Effective Time, a
party may, subject to Applicable Law, (a) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties of the other parties
contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) waive compliance by the other party hereto with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a party to any such extension or waiver shall be valid only if set forth in
an instrument in writing signed on behalf of such party. Any extension or waiver
given in compliance with this Section 7.5 or failure to insist on strict
compliance with an obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE 8
GENERAL
8.1 Expiration of Representations and Warranties. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement, including any rights
arising out of any breach of such representations, warranties, covenants and
agreements, shall survive the Effective Time, provided that this Section 8.1
shall not limit the survival of any covenant or agreement of the parties in the
Agreement which by its terms contemplates performance after the Effective Time.
8.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given (a) on the date of delivery if delivered personally or sent via facsimile
(receipt confirmed) or (b) on the first business day following the date of
dispatch if sent by a nationally recognized overnight courier (providing proof
of delivery), in each case to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to the Company:
Identix Incorporated
0000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxx, Esq.
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with a copy to:
Xxxxxx Xxxxxx LLP
000 Xxxxxxxxxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Peers, Esq.
Xxxx Xxxx, Esq.
(b) if to Parent or Merger Sub:
Viisage Technology, Inc.
000 Xxxxxxx Xxxx, Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxx, Esq.
with a copy to:
Xxxxxx, Xxxx & Xxxxxxx LLP
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
and to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
72
8.3 Interpretation.
When a reference is made in this Agreement to an Article, Section or
Exhibit, such reference shall be to an Article or Section of, or an Exhibit to,
this Agreement unless otherwise indicated. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. Any
agreement, instrument or statute defined or referred to herein or in any
agreement or instrument that is referred to herein means such agreement,
instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver or consent and
(in the case of statutes) by succession of comparable successor statutes and
references to all attachments thereto and instruments incorporated therein.
References to a Person are also to its permitted successors and assigns.
8.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties. The exchange of copies of this
Agreement and of signature pages by facsimile, or electronic transmission shall
constitute effective execution and delivery of this Agreement as to the parties
and may be used in lieu of the original Agreement for all purposes. Signatures
of the parties transmitted by facsimile or electronic transmission shall be
deemed to be their original signatures for all purposes.
8.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the Confidentiality Agreement and the documents and instruments
referred to herein) (a) constitutes the entire agreement, and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter of this Agreement and neither party is
relying on any other oral or written representation, agreement or understanding
and (b) except for the provisions of Section 5.7 (which upon the Effective Time
are intended to benefit the Indemnified Parties), and Section 2.4 (which upon
the Effective Time are intended to benefit the Company Stockholders) is not
intended to confer upon any Person other than the parties any rights or
remedies.
8.6 Governing Law. This Agreement and any disputes arising out of or
related to this Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware.
8.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by either of the parties hereto without
the prior written consent of the other party. Any assignment in violation of the
preceding sentence shall be void. Subject to the preceding two sentences, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
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8.8 Consent to Jurisdiction. Each of the parties hereto (a) consents
to submit itself to the personal jurisdiction of the Court of Chancery of the
State of Delaware in the event any dispute arises out of this Agreement or any
of the transactions contemplated by this Agreement, (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other request
for leave from such court, and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other such court.
8.9 Headings. The headings and table of contents contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
8.10 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect, insofar as the foregoing can be accomplished
without materially affecting the economic benefits anticipated by the parties to
this Agreement. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
Applicable Law in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the greatest extent possible.
8.11 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
8.12 Waiver of Jury Trial. EACH OF THE COMPANY, PARENT AND MERGER SUB
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HERBY OR THE ACTIONS
OF THE COMPANY, PARENT OR MERGER SUB IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT.
8.13 Specific Performance. The parties agree that irreparable damage
would occur and that the parties would not have any adequate remedy at law in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in the Court of Chancery of the State
of Delaware, this being in addition to any other remedy to which they are
entitled at law or in equity.
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8.14 No Joint Venture. Nothing contained in this Agreement shall be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party shall have
the power to control the activities and operations of any other and their status
is, and at all times shall continue to be, that of independent contractors with
respect to each other. No party shall have any power or authority to bind or
commit any other party. No party shall hold itself out as having any authority
or relationship in contravention of this Section 8.14.
[SIGNATURE PAGE NEXT]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
VIISAGE TECHNOLOGY, INC. IDENTIX INCORPORATED
By: /s/ Xxxxxx X. XxXxxxx By: /s/ Xxxxxx X. Xxxxxx
----------------------------- ------------------------------
Name: Xxxxxx X. XxXxxxx Name: Xxxxxx X. Xxxxxx
Title: Chairman of the Board Title: Chairman of the Board
VIDS ACQUISITION CORP.
By: /s/ Xxxxxx X. XxXxxxx
------------------------------
Name: Xxxxxx X. XxXxxxx
Title: Chairman, President & CEO
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
