EXHIBIT 99.(d)(1)
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AGREEMENT AND PLAN OF MERGER
By and Among
INFRASTRUX GROUP, INC.
INFRASTRUX ACQUISITION, INC.
and
UTILX CORPORATION
Dated as of June 28, 2000
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CONTENTS
ARTICLE I THE TENDER OFFER.............................................1
1.1 The Offer....................................................1
1.2 Company Action...............................................3
1.3 Directors....................................................4
ARTICLE II THE MERGER..................................................5
2.1 The Merger...................................................5
2.2 Effective Time...............................................5
2.3 Effects of the Merger........................................5
2.4 Restated Certificate of Incorporation........................5
2.5 Bylaws.......................................................5
2.6 Directors....................................................6
2.7 Officers.....................................................6
2.8 Conversion of Shares.........................................6
2.9 Payment for Shares...........................................7
2.10 No Further Rights or Transfers...............................8
2.11 Supplementary Action.........................................8
2.12 Closing......................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY..............9
3.1 Organization of the Company..................................9
3.2 Company Capital Structure...................................10
3.3 Obligations With Respect to Capital Stock...................11
3.4 Authority...................................................11
3.5 SEC Filings; the Company Financial Statements...............12
3.6 Absence of Certain Changes or Events........................13
3.7 Taxes.......................................................13
3.8 Title to Properties; Absence of Liens and Encumbrances......16
3.9 Intellectual Property.......................................16
3.9.1 General.............................................16
3.9.2 Company Technology..................................16
3.9.3 Third Party Technology..............................17
3.9.4 Trademarks..........................................17
3.9.5 Intellectual Property Rights........................18
3.9.6 Maintenance of Rights...............................18
3.9.7 Third Party Claims..................................18
3.9.8 Infringement by the Company.........................19
3.9.9 Restrictions on Intellectual Property...............19
3.10 Compliance; Permits; Restrictions...........................19
3.11 Litigation..................................................20
3.12 Brokers' and Finders' Fees..................................20
3.13 Employee Benefit Plans......................................20
3.13.1 Employee Benefit Plan Listing.......................20
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3.13.2 Documents Provided..................................21
3.13.3 Compliance..........................................21
3.13.4 Qualification.......................................22
3.13.5 Contributions and Premium Payments..................22
3.13.6 Multiemployer, Defined Benefit and Money
Purchase Pension Plans and Multiple Employer
Welfare Arrangements................................22
3.13.7 Post-Termination Benefits...........................23
3.13.8 Suits, Claims and Investigations....................23
3.13.9 Payments Resulting From Transactions................23
3.13.10 Insured Benefits....................................23
3.13.11 Definitions.........................................24
3.14 Employees; Labor Matters....................................24
3.15 Environmental Matters.......................................25
3.16 Agreements, Contracts and Commitments.......................26
3.17 Change of Control Payments..................................27
3.18 Board Approval..............................................27
3.19 Fairness Opinion............................................27
3.20 State Anti-Takeover Statutes Not Applicable;
Company Rights Plan.........................................27
3.21 Offer Documents; Proxy Statement............................28
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER....28
4.1 Organization and Qualification..............................29
4.2 Corporate Power, Authorization and Enforceability...........29
4.3 No Conflict; Required Filings and Consents..................29
4.4 Schedule TO.................................................30
4.5 Available Funds.............................................30
ARTICLE V COVENANTS...................................................30
5.1 Conduct of Business by the Company..........................30
5.2 Access to Information; Confidentiality......................33
5.3 Proxy Material; Stockholders' Meeting.......................33
5.4 No Solicitation; Break-up Fee...............................34
5.5 Public Announcements........................................36
5.6 Notification of Certain Matters.............................36
5.7 Actions by Company..........................................37
5.8 Officers' and Directors' Indemnification....................37
5.9 Employment Agreements.......................................37
5.10 Additional Agreements.......................................38
5.11 Other Actions by the Company................................38
5.12 Company Options.............................................38
5.13 Stock Option Plans..........................................39
5.14 Employee Benefit Plans......................................39
5.15 Stockholder Litigation......................................39
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ARTICLE VI CONDITIONS OF MERGER.......................................39
6.1 Conditions to the Obligations of Each Party
to Effect the Merger........................................39
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.........................40
7.1 Termination.................................................40
7.2 Procedure and Effect of Termination.........................42
7.3 Fees and Expenses...........................................42
7.4 Amendment...................................................43
7.5 Waiver......................................................43
ARTICLE VIII MISCELLANEOUS............................................43
8.1 Severability................................................43
8.2 Notices.....................................................44
8.3 Entire Agreement; No Third Party Beneficiaries;
No Assignment...............................................45
8.4 Interpretation; Knowledge...................................45
8.5 Counterparts................................................46
8.6 Other Remedies; Specific Performance........................46
8.7 Governing Law...............................................46
8.8 Rules of Construction.......................................47
8.9 WAIVER OF JURY TRIAL........................................47
EXHIBIT A Employment Agreements
EXHIBIT B Required Third Party Consents
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of June 28, 2000, by and among InfrastruX Group, Inc., a Washington
corporation ("Parent"), InfrastruX Acquisition, Inc., a Delaware corporation and
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a wholly owned subsidiary of Parent ("Purchaser"), and UTILX Corporation, a
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Delaware corporation (the "Company").
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RECITALS
A. The Boards of Directors of Parent and Purchaser and the Board of
Directors of the Company, through its special committee of disinterested
directors (referred to herein as the "Board of Directors of the Company") have
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each unanimously approved the terms and conditions of a merger of Purchaser with
and into the Company (the "Merger") upon the terms and subject to conditions set
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forth herein, the Board of Directors of the Company having determined that the
Merger represents the best available transaction for the Company.
B. Pursuant to the Merger, Purchaser will acquire each issued and
outstanding share of Common Stock of the Company at a price of $6.125 net per
Share to the seller in cash and without interest thereon (the "Offer Price").
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In order to accomplish the Merger, Purchaser shall first commence a tender offer
(the "Offer") by Purchaser under Section 14(d)(1) of the Securities and Exchange
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Act of 1934, as amended (the "Exchange Act"), to purchase all outstanding shares
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of the Common Stock, no par value, of the Company (shares of the Common Stock of
the Company are referred to herein as the "Shares").
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C. The Board of Directors of the Company has unanimously resolved to
recommend, subject to applicable law and the provisions of this Agreement, the
acceptance of the Offer and approval of the Merger to the holders of Shares and
determined that the consideration to be paid for each Share in the Offer and the
Merger is fair to the holders of such Shares and that the Offer and the Merger
are in the best interests of the holders of such Shares.
NOW, THEREFORE, intending to be legally bound hereby, the parties agree as
follows:
ARTICLE I
THE TENDER OFFER
1.1 The Offer
(a) Provided that this Agreement shall not have been terminated pursuant
to Section 7.1 and none of the events set forth in clause (iii) of Annex I shall
have occurred or be existing, Purchaser shall, and Parent shall cause Purchaser
to, promptly (but no later than
five (5) business days) following the public announcement of the execution of
this Agreement commence (within the meaning of Rule 14d-2 under the Exchange
Act) the Offer at the Offer Price.
(b) The obligations of Purchaser to consummate the Offer and to accept for
payment and pay for any of the Shares tendered shall be subject to the
conditions set forth on Annex I, including that a minimum of sixty-seven percent
(67%) of the Shares outstanding on a fully diluted basis (including for purposes
of such calculation all Shares issuable upon the cash exercise of all vested and
unvested stock options, warrants and conversion of convertible securities or
other rights to purchase or acquire Shares) being validly tendered and not
withdrawn prior to the expiration of the Offer (the "Minimum Condition"). The
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per Share amount shall be net to the seller in cash, upon the terms and subject
to the conditions of the Offer and subject to reduction for any applicable
federal back-up or other applicable withholding or stock transfer taxes. The
Offer shall remain open until 12:00 Midnight, New York City time, on the date
that is twenty (20) business days following the commencement of the Offer; which
shall be the "Expiration Date," unless Purchaser extends the Offer as permitted
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by this Agreement, in which case the "Expiration Date" means the latest time and
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date to which the Offer is extended.
(c) Purchaser expressly reserves the right in its sole discretion to waive
any conditions to the Offer (other than the condition set forth in clause (i)
unless agreed to by the Company or (iii)(E) of Annex I), to increase the price
per Share payable in the Offer, to extend the duration of the Offer, or to make
any other changes in the terms and conditions of the Offer, provided, however,
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that no such change may be made which decreases the price per Share payable in
the Offer, reduces the maximum number of Shares to be purchased in the Offer,
imposes conditions to the Offer in addition to those set forth in Annex I or
amends any other material terms of the Offer in a manner materially adverse to
the Company's shareholders, and provided, further, that the Offer may not,
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without the Company's prior written consent, be extended beyond the Expiration
Date. Notwithstanding the foregoing, Purchaser may, without the consent of the
Company but upon notification of the Company, (i) extend the offer for any
period required by any rule, regulation, interpretation or position of the
Securities and Exchange Commission (the "SEC") or the staff thereof applicable
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to the Offer and (ii) make available a subsequent offering period (within the
meaning of Rule 14d-11 under the Exchange Act) which shall not exceed ten (10)
business days.
(d) The Offer shall be made by means of an offer to purchase (the "Offer
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to Purchase") containing the terms set forth in this Agreement and the
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conditions set forth in Annex I. Concurrently with the commencement of the
Offer, Parent and Purchaser shall file with the SEC a tender offer statement on
Schedule TO reflecting the Offer (together with all exhibits, amendments and
supplements thereto, the "Schedule TO"). Upon the terms and subject to the
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conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), Purchaser will
purchase by accepting for payment and will pay for Shares validly tendered and
not properly withdrawn, as promptly as practicable after the Expiration Date.
The Schedule TO will contain or will incorporate by reference the Offer to
Purchase (or portions thereof) and forms of the related
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letter of transmittal and summary advertisements (which Schedule TO, Offer to
Purchase and other documents, together with any supplements or amendments
thereto, are referred to herein collectively as the "Offer Documents"). Parent,
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Purchaser and the Company agree promptly to correct any information provided by
any of them for use in the Offer Documents that shall have become false or
misleading, and Parent and Purchaser further agree to take all steps necessary
to cause the Schedule TO as so corrected to be filed with the SEC and the other
Offer Documents as so corrected to be disseminated to the holders of Shares, in
each case as and to the extent required by applicable federal securities laws.
The Offer Documents will, on the date filed, comply in all material respects
with all provisions of applicable federal securities laws.
1.2 Company Action
(a) The Company hereby approves of and consents to the Offer and
represents and warrants that (i) its Board of Directors has unanimously (A)
determined that this Agreement and the transactions contemplated hereby,
including each of the Offer and the Merger, are fair to and in the best
interests of the holders of the Shares, (B) approved and adopted this Agreement
and the transactions contemplated hereby and (C) resolved to recommend, subject
to applicable law and the provisions of this Agreement, that the shareholders of
the Company accept the Offer and approve and adopt this Agreement and the
transactions contemplated hereby and thereby (provided, however, that subject to
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the provisions of Section 5.4 such recommendation may be withdrawn, modified or
amended in connection with a Superior Proposal (as defined in Section 5.4)) and
(ii) Banc of America Securities LLC ("Banker") has rendered to the Board of
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Directors of the Company its written opinion (which opinion is permitted to be
included in writing in the Schedule 14D-9 (as defined in Section 1.2(b)), to the
effect that the consideration to be received by the holders of Shares pursuant
to each of the Offer and the Merger is fair to the holders of Shares from a
financial point of view. The Company hereby consents to the inclusion in the
Offer Documents of the recommendation of the Company's Board of Directors
described in the first sentence of this Section 1.2(a), and has obtained the
consent of Banker to the inclusion in the Schedule 14D-9 of a copy of the
written opinion referred to in clause (ii) above.
(b) The Company shall file with the SEC, concurrently with the filing by
Parent and Purchaser of the Schedule TO, a Solicitation/Recommendation Statement
on Schedule 14D-9 under the Exchange Act relating to the Offer (together with
all exhibits, amendments and supplements thereto as well as the Information
Statement required pursuant to Section 14(f) under the Exchange Act,
collectively the "Schedule 14D-9"), which shall contain the recommendation of
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the Company's Board of Directors described in Section 1.2(a), and shall
disseminate the Schedule 14D-9 as required by Rule 14D-9 promulgated under the
Exchange Act. The Schedule 14D-9, and each amendment thereto, will, on the date
filed, comply in all material respects with the provisions of applicable federal
securities laws. The Company, Parent and Purchaser agree promptly to correct
any information provided by any of them for use in the Schedule 14D-9 that shall
have become false or misleading, and the Company further agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the
SEC and the Schedule 14D-9 as so
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corrected to be disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws. Parent and its counsel
shall be given the opportunity to review and shall be reasonably satisfied with
the Schedule 14D-9 in the form in which such document is originally filed with
the SEC, and all amendments and supplements thereto, prior to the time at which
such documents and all documents related thereto are filed with the SEC. The
Company shall provide Purchaser and its counsel with any comments the Company or
its counsel may receive from the SEC with respect to the Schedule 14D-9 promptly
after receipt of such comments.
(c) The Company has been advised by each of the members of the Special
Committee and by its Chief Executive Officer and Chief Financial Officer, as of
the date of this Agreement, that such person intends to tender all outstanding
Shares beneficially owned and not disclaimed by such person to Purchaser
pursuant to the Offer unless to do so would subject such person to liability
under Section 16(b) of the Exchange Act.
(d) The Company shall promptly furnish Purchaser with mailing labels
containing the names and addresses of all record holders of Shares and security
position listings of Shares held in stock depositories, each of a recent date,
and shall promptly furnish Purchaser with such additional information, including
updated lists of shareholders, mailing labels and security position listings,
and such other assistance as Parent, Purchaser or their agents may reasonably
request in connection with communicating the Offer and any amendments or
supplements thereto to the Company's shareholders. Subject to the requirements
of applicable laws and except for such steps as are necessary to disseminate the
Offer Documents and any other documents necessary to consummate the Merger,
Parent and Purchaser shall hold in confidence the information contained in any
of such labels and lists.
1.3 Directors
Promptly upon the acquisition by Purchaser pursuant to the Offer of such
number of Shares which satisfies the Minimum Condition and from time to time
thereafter, Parent shall be entitled to designate a majority of the members of
the Company's Board of Directors, subject to compliance with Section 14(f) of
the Exchange Act. The Company shall, upon request by Parent, promptly increase
the size of the Board of Directors to the extent permitted by its Restated
Certificate of Incorporation and/or secure the resignations of such number of
directors as is necessary to enable Parent's designees to be elected to the
Board of Directors and shall cause Parent's designees to be so elected. The
Company shall take, at its expense, all action necessary to effect any such
election, including mailing to its shareholders the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in form
and substance reasonably satisfactory to Parent and its counsel. Following the
election or appointment of Parent's designees pursuant to this Section 1.3 and
prior to the Effective Time (as defined in Section 2.2), any amendment or
termination of this Agreement, extension for the performance or waiver of the
obligations or other acts of Parent or Purchaser or waiver of the Company's
rights hereunder, shall require the concurrence of a majority of the Company's
directors (or the concurrence of the director, if there is only one remaining)
then in office who are directors on the date hereof, or are directors (other
than
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directors designated by Parent in accordance with this Section 1.3)
designated by such persons to fill any vacancy (the "Continuing Directors").
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ARTICLE II
THE MERGER
2.1 The Merger
Upon the terms and subject to the conditions hereof and in accordance with
the Delaware General Corporation Law (the "DGCL"), Purchaser shall be merged
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with and into the Company as soon as practicable following the satisfaction or
waiver, if permissible, of the conditions set forth in Article VI of this
Agreement. Following the Merger, the Company shall continue as the surviving
corporation (the "Surviving Corporation") and the separate corporate existence
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of Purchaser shall cease. At the election of Parent or Purchaser, any direct or
indirect wholly owned subsidiary of Parent incorporated under the laws of
Delaware may be substituted for Purchaser as a constituent corporation in the
Merger. As used herein, the term "Purchaser" shall, upon such substitution
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refer to any such substituted corporation.
2.2 Effective Time
The Merger shall be consummated by and shall be effective at the time there
has been filed as provided by Section 2.12 with the Secretary of State of the
State of Delaware the articles of merger in such form as is required by, and
executed in accordance with, the relevant provisions of the DGCL, and such other
documents as may be required by the provisions of the DGCL. The time of such
filing is referred to as the "Effective Time."
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2.3 Effects of the Merger
The Merger shall have the effects set forth in applicable sections of the
DGCL. As of the Effective Time, the Company shall be a wholly owned subsidiary
of Parent.
2.4 Restated Certificate of Incorporation
The Restated Certificate of Incorporation of the Surviving Corporation
shall be amended to contain the substantive provisions of the Certificate of
Incorporation of the Purchaser as in effect at the Effective Time, except that
Article I thereof shall read as follows: "The name of this corporation is UTILX
Corporation."
2.5 Bylaws
The Bylaws of Purchaser, as in effect immediately prior to the Effective
Time, shall be the Bylaws of the Surviving Corporation, until thereafter duly
amended in accordance with applicable law.
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2.6 Directors
The directors of Purchaser immediately prior to the Effective Time shall be
the initial directors of the Surviving Corporation and will hold office from the
Effective Time until their respective successors are duly elected or appointed
and qualified in the manner provided in the Certificate of Incorporation and
Bylaws of the Surviving Corporation, as such instruments may be amended from
time to time, or as otherwise provided by law.
2.7 Officers
The officers of the Purchaser immediately prior to the Effective Time shall
be the initial officers of the Surviving Corporation. Such officers of the
Surviving Corporation will hold office from the Effective Time until their
respective successors are duly elected or appointed and qualified in the manner
provided in the Certificate of Incorporation and Bylaws of the Surviving
Corporation, as such instruments may be amended from time to time, or as
otherwise provided by law.
2.8 Conversion of Shares
(a) At the Effective Time, by virtue of the Merger and without any action
on the part of Parent, Purchaser, the Company or the holders of the Shares:
(i) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares held, directly or indirectly, by Parent,
Purchaser, the Company or any of their majority-owned subsidiaries and any
Dissenting Shares (as defined below)) shall automatically be canceled and
extinguished and be converted into the right to receive $6.125, or such higher
amount per Share as is paid pursuant to the Offer (the "Merger Consideration"),
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in cash, without interest thereon.
(ii) Each Share issued and outstanding immediately prior to the
Effective Time which is owned or held, directly or indirectly, by Parent,
Purchaser, the Company or any of their majority-owned subsidiaries shall be
canceled and extinguished and cease to exist, without any conversion thereof,
and no payment shall be made with respect thereto.
(iii) Each holder (other than holders referred to in Section
2.8(a)(ii)) of a certificate representing any Shares shall after the Effective
Time cease to have any rights with respect to such Shares, except either to
receive the Merger Consideration upon surrender of such certificate, or to
exercise such holder's appraisal rights as provided in Section 2.9 and the DGCL.
(iv) Each share of Common Stock of Purchaser issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
thereafter represent one validly issued, fully paid and nonassessable share of
Common Stock of the Surviving Corporation.
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(v) Each Company Option (as defined in Section 3.2) shall be treated
in accordance with Section 5.12.
(b) Notwithstanding anything in this Agreement to the contrary, Shares
which are outstanding immediately prior to the Effective Time and which are held
by a holder who dissents from the Merger in the manner provided under the DGCL
and becomes entitled to obtain payment for the fair value of such Shares
pursuant to the applicable provisions of the DGCL ("Dissenting Shares") shall
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not be converted into a right to receive the Merger Consideration pursuant to
this Section 2.8, but the holders of Dissenting Shares shall instead be entitled
to receive such consideration as shall be determined pursuant to the DGCL;
provided, however, that this Section 2.8 shall apply to Shares held by a
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dissenting shareholder who subsequently withdraws his or her demand for payment
in the manner provided under the DGCL, fails to comply fully with the
requirements of applicable provisions of the DGCL, or otherwise fails to
establish the fair value of such holder's Shares under the DGCL, in which event
such Shares shall be deemed to be converted into the right to receive the Merger
Consideration pursuant to Section 2.8. The Company shall give Parent and
Purchaser prompt notice of any written objection to the Merger and demand for
payment of the fair value of Shares. Prior to the Effective Time, the Company
shall not, except with the prior written consent of Purchaser, make any payment
with respect to, or settle or offer to settle, any such demand for payment of
the fair value of Shares. Each holder of Dissenting Shares shall have only such
rights and remedies as are granted to such holder under the DGCL.
2.9 Payment for Shares
(a) Prior to the Effective Time, Purchaser shall select and appoint a bank
to act as agent for the holders of Shares (the "Paying Agent") to receive and
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disburse the Merger Consideration to which holders of Shares shall become
entitled pursuant to Section 2.8. At the Effective Time, Purchaser or Parent
shall provide the Paying Agent with sufficient cash to allow the Merger
Consideration to be paid by the Paying Agent for each Share then entitled to
receive the Merger Consideration.
(b) As soon as practicable after the Effective Time, Purchaser or Parent
shall cause the Paying Agent to mail to each record holder a certificate or
certificates representing Shares which as of the Effective Time represents the
right to receive the Merger Consideration (the "Certificates"), a form of letter
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of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent) and instructions for use in effecting the
surrender of the Certificates for payment therefor. Upon surrender to the
Paying Agent of a Certificate, together with such letter of transmittal duly
executed and completed in accordance with the instructions thereto, and such
other documents as may be requested, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration and such
Certificate shall forthwith be canceled. No interest shall be paid or accrued
on the Merger Consideration upon the surrender of the Certificates. Until
surrendered in accordance with the provisions of this Section, each Certificate
shall be
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deemed for all purposes to evidence only the right to receive the
Merger Consideration (without interest thereon), and shall have no other right.
(c) If the Merger Consideration (or any portion thereof) is to be
delivered to a person other than the person in whose name the Certificates
surrendered in exchange thereof are registered, it shall be a condition to the
payment that the Certificates so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the person requesting such
payment or delivery shall pay any transfer or other taxes payable by reason of
the foregoing or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Notwithstanding the foregoing,
neither the Paying Agent nor any party hereto shall be liable to a holder of
Shares for any Merger Consideration delivered to a public official pursuant to
applicable abandoned property, escheat and similar laws.
(d) Promptly following the date that is six months after the Effective
Date, the Paying Agent shall return to the Surviving Corporation all Merger
Consideration and other cash, property and instruments in its possession
relating to the transactions described in this Agreement, and the Paying Agent's
duties shall terminate. Thereafter, each holder of a Certificate formerly
representing a Share may surrender such Certificate to the Surviving Corporation
and (subject to applicable abandoned property, escheat and similar laws) receive
in exchange therefor the Merger Consideration (without interest thereon).
Notwithstanding the foregoing, the Surviving Corporation shall be entitled to
receive from time to time all interest or other amounts earned with respect to
any cash deposited with the Paying Agent as such amounts accrue or become
available.
2.10 No Further Rights or Transfers
At and after the Effective Time the holders of Certificates to be exchanged
for the Merger Consideration pursuant to this Agreement shall cease to have any
rights as to shareholders of the Company except for the right to surrender such
holder's Certificates in exchange for payment of the Merger Consideration, and
after the Effective Time there shall be no transfers on the stock transfer books
of the Surviving Corporation of the Shares which were outstanding immediately
prior to the Effective Time. Any Certificates formerly representing Shares
presented to the Surviving Corporation or Paying Agent shall be canceled and
exchanged for the Merger Consideration, as provided in this Article II, subject
to applicable law in the case of Dissenting Shares.
2.11 Supplementary Action
If at any time after the Effective Time, any further assignments or
assurances in law or any other things are necessary or desirable to vest or to
perfect or confirm of record in the Surviving Corporation the title to any
property or rights of either the Company or Purchaser, or otherwise to carry out
the provisions of this Agreement, the officers and directors of the Surviving
Corporation are hereby authorized and empowered, in the name of and on behalf of
the Company and Purchaser, to execute and deliver any and all things necessary
or proper to
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vest or to perfect or confirm title to such property or rights in
the Surviving Corporation, and otherwise to carry out the purposes and
provisions of this Agreement.
2.12 Closing
Upon the terms and subject to the conditions of this Agreement, as soon as
practicable after all the conditions to the obligations of the parties hereto to
effect the Merger under Article VI of this Agreement shall have been satisfied
or waived, the Company and Purchaser shall (i) file with the Delaware Secretary
of State a certificate or agreement of merger or a certificate of ownership and
merger in such form as may be required by, and executed in accordance with, the
relevant provisions of the DGCL and (ii) take all such other and further actions
as may be required by law to make the Merger effective. Contemporaneous with
the filing referred to in this Section, a closing (the "Closing") will be held
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at the offices of Xxxxxxx Coie LLP, 0000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxxxx or at such other location as the parties may establish for the
purpose of confirming all the foregoing. The date and the time of such Closing
are referred to as the "Closing Date."
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company (which for purposes of this Article III shall include the
Company and each of its subsidiaries unless the context otherwise requires)
represents and warrants to Parent and Purchaser, subject to the exceptions
specifically disclosed in writing in the disclosure letter supplied by the
Company to Parent and Purchaser dated as of the date hereof and certified by a
duly authorized officer of the Company (the "Company Schedules"), as follows:
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3.1 Organization of the Company
(a) The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; has the corporate power and authority to own,
lease and operate its assets and property and to carry on its business as now
being conducted and as proposed to be conducted; and is duly qualified or
licensed to do business and is in good standing 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, except where the
failure to be so qualified would not have a Material Adverse Effect (as defined
below).
(b) The Company has delivered to Parent a true and complete list of all of
the Company's subsidiaries, indicating the jurisdiction of incorporation or
formation of each subsidiary, the jurisdictions in which such subsidiary is
qualified or licensed to do business, and the Company's and any other person's
equity interest therein. Except for qualifying directors' shares, no person
other than the Company owns any equity interest in any such subsidiary.
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(c) The Company has delivered or made available to Parent a true and
correct copy of the Restated Certificate of Incorporation and Bylaws of the
Company and similar governing instruments of each of its subsidiaries, each as
amended to date, and each such instrument is in full force and effect. Neither
the Company nor, to the knowledge of the Company, any of its subsidiaries is in
violation of any of the provisions of its Restated Certificate of Incorporation
or Bylaws or equivalent governing instruments.
(d) When used in connection with the Company, the term "Material Adverse
----------------
Effect" means, for purposes of this Agreement, any change, event or effect that
------
is materially adverse to the business, assets (including intangible assets),
financial condition or results of operations of Company and its subsidiaries
taken as a whole.
3.2 Company Capital Structure
The authorized capital stock of the Company consists of 25,000,000 shares
of Common Stock, no par value, of which 7,475,944 shares were issued and
outstanding as of June 2, 2000, and 2,000,000 shares of Preferred Stock, no par
value, of which no shares are issued or outstanding. No shares of capital stock
have been issued since June 2, 2000 except pursuant to option exercises. All
outstanding shares of the Company Common Stock are duly authorized, validly
issued, fully paid and nonassessable and are not subject to preemptive rights
created by statute, the Restated Certificate of Incorporation or Bylaws of the
Company or any agreement or document to which the Company is a party or by which
it is bound. As of the date of this Agreement, the Company had reserved an
aggregate of 1,600,000 shares of the Company Common Stock, net of exercises, for
issuance to employees, consultants and non-employee directors pursuant to the
1984 Restated Nonqualified Stock Option Plan, 1984 Restated Stock Option Plan,
1987 Restated Stock Option Plan for Non-Employee Directors and the 1994 Option
and Restricted Stock Plan for Employees (the "Option Plans"). (Stock options
------------
granted by the Company pursuant to the Option Plans or otherwise are referred to
in this Agreement as "Company Options.") As of June 2, 2000, there were Company
---------------
Options outstanding to purchase an aggregate of 1,572,416 shares of Common
Stock, issued to employees, consultants and non-employee directors pursuant to
the Option Plans. Except for 10,000 shares subject to options granted to Xxx
Xxxxxx upon his election as a new director on June 9, 2000, no Company Options
have been granted since June 2, 2000 and, except pursuant to the exercise of
Company Options, no shares of capital stock of the Company have been issued by
the Company since June 2, 2000. All shares of the 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, would be duly authorized,
validly issued, fully paid and nonassessable. The Company has provided the
Purchaser a complete and accurate list as of June 26, 2000 of each person who
held restricted stock or options, the name of the holder of such shares or
option, the exercise price of such option, and the term of such shares or
option.
-10-
3.3 Obligations With Respect to Capital Stock
Except as set forth in Section 3.2, there are no equity securities,
partnership interests or similar ownership interests of any class of the
Company, or any securities exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding. Except for securities the Company
owns, directly or indirectly through one or more subsidiaries, there are no
equity securities, partnership interests or similar ownership interests of any
class of any subsidiary of the Company, or any security exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except as set forth in Section 3.2, there are no options,
warrants, equity securities, partnership interests or similar ownership
interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which the Company or any of its subsidiaries is a
party or by which it is bound obligating the Company or any of its subsidiaries
to issue, deliver or sell, or cause to be issued, delivered or sold, or
repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or
acquisition, of any shares of capital stock, partnership interests or similar
ownership interests of the Company or any of its subsidiaries or obligating the
Company or any of its subsidiaries to grant, extend, accelerate the vesting of
or enter into any such option, warrant, equity security, call, right, commitment
or agreement. There are no registration rights and, to the knowledge of the
Company, as of the date of this Agreement, there are no voting trusts, proxies
or other agreements or understandings with respect to any equity security of any
class of the Company or with respect to any equity security, partnership
interest or similar ownership interest of any class of any of its subsidiaries.
3.4 Authority
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval and
adoption of this Agreement and the approval of the Merger by the Company's
shareholders and the filing and recordation of the Restated Articles of Merger
pursuant to the DGCL. A vote of the holders of two-thirds of the outstanding
Shares is required for the Company's shareholders to approve and adopt this
Agreement and approve the Merger. This Agreement has been duly executed and
delivered by the Company and constitutes valid and binding obligations of the
Company, enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy and other similar laws and general principles of
equity. The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement by the Company will not, (i) conflict with or
violate the Restated Certificate of Incorporation or Bylaws of the Company or
the equivalent organizational documents of any of its subsidiaries, (ii) subject
to obtaining the approval and adoption of this Agreement and the approval of the
Merger by the Company's shareholders, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the Company or any of its
subsidiaries or by which its or any of their respective properties is
-11-
bound or affected and which will have a Material Adverse Effect, or (iii) result
in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or impair the Company's rights or
alter the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the properties or assets of the
Company or any of its subsidiaries pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or any of
their respective properties are bound or affected. The Company Schedules list
all consents, waivers and approvals under any of the Company's or any of its
subsidiaries' material agreements, contracts, licenses or leases required to be
obtained in connection with the consummation of the transactions contemplated
hereby.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality, foreign or domestic
("Governmental Entity"), is required by or with respect to the Company in
-------------------
connection with the execution and delivery of this Agreement or the consummation
of the Merger, except for (i) the filing of the Certificate of Merger with the
Delaware Secretary of State, (ii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws and the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the securities or
-------
antitrust laws of any foreign country, and (iii) such other consents,
authorizations, filings, approvals and registrations which if not obtained or
made would not have a Material Adverse Effect or have a material adverse effect
on the ability of the parties to consummate the Offer or the Merger.
3.5 SEC Filings; the Company Financial Statements
(a) The Company has filed in a timely manner all forms, reports and
documents required to be filed with the SEC since it became subject to the
reporting requirements of the Exchange Act, and has made available to Parent all
such forms, reports and documents. All such required forms, reports and
documents (including those that the Company may file subsequent to the date
hereof) are referred to herein as the "Company SEC Reports." As of their
-------------------
respective dates, the Company SEC Reports and all currently effective
registration statements of the Company filed with the SEC (i) were prepared in
accordance with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, as the case may be, and the rules and
--------------
regulations of the SEC thereunder applicable to such the Company SEC Reports,
and (ii) did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, 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. None of the Company's subsidiaries is required to file any forms,
reports or other documents with the SEC.
-12-
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports (the
"Company Financials") including any of the Company SEC Reports filed after the
------------------
date hereof until the Closing, (x) complied as to form in all material respects
with the published rules and regulations of the SEC with respect thereto, (y)
was prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved (except
----
as may be indicated in the notes thereto or, in the case of unaudited interim
financial statements, as may be permitted by the SEC on Form 10-Q, 8-K or any
successor form under the Exchange Act) and (z) fairly presented the consolidated
financial position of the Company and its subsidiaries as at the respective
dates thereof and the consolidated results of the Company's operations and cash
flows for the periods indicated. The balance sheet of the Company contained in
the Company SEC Reports as of March 31, 2000 is hereinafter referred to as the
"Company Balance Sheet." Except as disclosed in the Company Financials or the
---------------------
Company Schedules, since the date of the Company Balance Sheet neither the
Company nor any of its subsidiaries has any liabilities (absolute, accrued,
contingent or otherwise) of a nature required to be disclosed on a balance sheet
or in the related notes to the consolidated financial statements prepared in
accordance with GAAP which are, individually or in the aggregate, material to
the business, results of operations or financial condition of the Company and
its subsidiaries taken as a whole, except liabilities (i) provided for in the
Company Balance Sheet, or (ii) incurred since the date of the Company Balance
Sheet in the ordinary course of business consistent with past practices and
immaterial in the aggregate and liabilities incurred in connection with this
Agreement.
(c) The Company has heretofore furnished to Parent a complete and correct
copy of any amendments or modifications, 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.
3.6 Absence of Certain Changes or Events
Since the date of the Company Balance Sheet there has not been: (i) any
Material Adverse Effect, (ii) any material change by the Company in its
accounting methods, principles or practices, except as required by concurrent
changes in GAAP, or (iii) any material revaluation by the Company of any of its
assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable other than in the ordinary
course of business.
3.7 Taxes
(a) To the Company's knowledge, (i) All Tax Returns (as defined below)
required to be filed by or on behalf of the Company and each of its subsidiaries
have been filed on a timely basis with the appropriate governmental authority in
all jurisdictions in which such Tax Returns are required to be filed, and all
such Tax Returns are true, correct and complete in all material respects; (ii)
all Taxes (as defined below) of the Company and each of its subsidiaries
(whether or not reflected on any Tax Return) have been fully and timely paid,
-13-
withheld and remitted to the applicable Taxing authority; (iii) no waivers of
statutes of limitation have been given or requested with respect to the Company
or any of its subsidiaries in connection with any Tax Returns covering the
Company or any of its subsidiaries with respect to any Taxes payable thereby;
(iv) no taxing authority in a jurisdiction where none of the Company or any of
its subsidiaries files Tax Returns has made a claim, assertion or threat to the
Company or any of its subsidiaries that the Company or any of its subsidiaries
is or may be subject to taxation by such jurisdiction; (v) there are no liens
with respect to Taxes on any of the Company's or any of its subsidiaries'
property or assets other than liens for current Taxes not yet payable; (vii)
there are no audits or other administrative proceedings presently in progress,
pending or threatened with respect to Taxes or any Tax Return of the Company or
any of its subsidiaries; and (viii) no Tax deficiencies or assessments have been
proposed, asserted or threatened against the Company or any of its subsidiaries.
(b) Neither the Company nor, to the Company's knowledge, any of its
subsidiaries nor any other Person on behalf thereof (i) has executed or entered
into a closing agreement pursuant to Section 7121 of the Internal Revenue Code
of 1986, as amended (the "Code") or any predecessor provision thereof or any
----
similar provision of state, local or foreign law; or (ii) has agreed to or is
required to make any adjustments pursuant to Section 481(a) of the Code or any
similar provision of state, local or foreign law by reason of a change in
accounting method initiated by the Company or has notice that a governmental
authority has proposed any such adjustment or change in accounting method.
(c) To the knowledge of the Company, there is no dispute or claim
concerning any Tax liability of the Company or any of its subsidiaries either
(i) claimed or raised by any authority in writing or (ii) as to which any of the
directors and officers (and employees responsible for Tax matters) of the
Company or its subsidiaries have knowledge based on contact or correspondence
with any agent of such authority. Schedule 3.7 (c) to the Company Schedules
lists all U.S. federal Tax Returns filed with respect to the Company and its
subsidiaries for taxable periods ended on or after March 31, 1995 that have been
audited. The Company has made available to Parent through the Company's
accountants correct and complete copies of all income, excise and franchise Tax
Returns, examination reports and statements of deficiencies assessed against or
agreed to by the Company related thereto for all taxable periods ended on or
after March 31, 1995.
(d) Neither the Company, nor any of its subsidiaries, nor any ERISA
Affiliate (as defined in Section 3.13.11) has made any payments, is obligated to
make any payments or is a party to (or a participating employer in) any
agreement or Employee Benefit Plan (as defined in Section 3.13.11) that could
obligate it to make any payments that would constitute "excess parachute
payments" within the meaning of Section 280G of the Code (or any similar
provision of state, local or foreign law) or that would otherwise not be
deductible under Section 162(a)(1), 162(m) or 404 of the Code.
(e) The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
-14-
(f) Neither the Company nor any of its subsidiaries is a party to any Tax
allocation, sharing, indemnity or similar agreement. Neither the Company nor
any of its subsidiaries (i) has been a member of a Tax Group (as defined below)
filing a consolidated income Tax Return under Section 1501 of the Code (or any
similar provision of state, local or foreign law) (other than the Tax Group, the
common parent of which is the Company) and (ii) does not have any liability for
Taxes of any Person (other than the Company and any of its subsidiaries) under
Treasury Regulations Section 1.1502-6 (or any similar provision of state, local
or foreign law) as a transferee or successor by contract or otherwise.
(g) The unpaid Taxes of the Company and its subsidiaries (i) did not, as
of March 31, 2000, exceed the reserve for Tax liability set forth on the face
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) of the Company Balance Sheet and (ii)
do not exceed that reserve as adjusted for the passage of time and operations in
the ordinary course of business through the Closing Date.
As used in this Agreement, the following terms shall have the following
meanings:
"Taxes" means (A) all foreign, federal, state, county or local taxes,
-----
charges, fees, levies, imposts, duties and other assessments, including, but not
limited to, any income, alternative minimum or add-on, estimated, gross income,
gross receipts, sales, use, transfer, transactions, intangibles, ad valorem,
value-added, franchise, registration, title, license, capital, paid-up capital,
profits, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, real property, recording, personal property, federal highway use,
commercial rent, environmental (including, but not limited to, taxes under
Section 59A of the Code) 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, penalties or additions to tax, (B) any liability for
payment of amounts described in clause (A) whether as a result of transferee
liability, or being a member of a Tax Group for any period, or otherwise through
operation of law, and (C) any liability for the payment of amounts described in
clauses (A) or (B) as a result of any tax sharing, tax indemnity or tax
allocation agreement or any other express or implied agreement to indemnify any
other person; and "Tax" means any of the foregoing Taxes.
---
"Tax Group" means any federal, state, local or foreign consolidated,
---------
affiliated, combined, unitary or other similar group of which the Company is now
or was formerly a member.
"Tax Returns" means any return, declaration, report, claim or refund,
-----------
information return, statement or other similar document, including any schedule
or attachment thereto, and including any amendment thereof required to be filed
with respect to Taxes.
3.8 Title to Properties; Absence of Liens and Encumbrances
(a) The Company Schedules list all jurisdictions in which real property is
owned or leased by the Company. The Company Schedules list all real property
leases to which the
-15-
Company is a party and each amendment thereto with lease payments of more than
an aggregate of $100,000 per year. All such current leases are in full force and
effect, are valid and effective in accordance with the respective terms, and
there is not, under any of such leases, any existing default or event of default
(or event which with notice or lapse of time, or both, would constitute a
default) that would give rise to a claim in an amount greater than $100,000.
(b) The Company has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("Liens"), except as reflected in
-----
the Company Financials or in the Company Schedules and except for liens for
taxes not yet due and payable and such imperfections of title and encumbrances,
if any, which are not material in character, amount or extent, and which do not
materially detract from the value, or materially interfere with the present use,
of the property subject thereto or affected thereby.
3.9 Intellectual Property
3.9.1 General
The Company owns, co-owns or is licensed and has all rights in and to all
intellectual property and other proprietary rights required to conduct its
business as now conducted and as proposed to be conducted, including, without
limitation, all trade names, trademarks, service marks, logos, brand names and
other identifiers, trade secrets, maskworks, copyrights and domestic and foreign
letters patent, and the registrations, applications, renewals, extensions,
reissues, reexaminations, divisionals and continuations (in whole or in part)
thereof, all goodwill associated therewith and all rights and causes of action
for infringement, misappropriation, misuse, dilution or unfair trade practices
associated therewith.
3.9.2 Company Technology
(a) Schedule 3.9.2 to the Company Schedules sets forth a list of all
products and tools developed, produced, used, marketed or sold by the Company
during the two years prior to the date of this Agreement and that are essential,
proprietary, and required to conduct its business as now conducted and as
proposed to be conducted , together with all prior versions, predecessors or
precursors to such products or tools (collectively, the "Products"). Except for
--------
the Third Party Technologies (as defined in Section 3.9.3), the Company owns all
right, title and interest in and to the following (collectively, the
"Technology"), free and clear of all Liens: all inventions, discoveries,
----------
processes, designs, works of authorship, data compilations (whether in
electronic form or not) trade secrets, know-how and other confidential or
proprietary information related to the Products. The Technology, excluding the
Third Party Technologies (as defined below), is sometimes referred to herein as
the "Company Technology."
------------------
-16-
(b) The Company owns certain proprietary Company Technology relating
to the CableCure treatment process and injection technology, separate and apart
from its rights under the CableCure license agreement with Dow Corning
Corporation, which would provide the Company with a significant competitive
advantage, both in terms of cost and product/service effectiveness, relative to
any other third parties in the event that the exclusivity provisions of the
CableCure license agreement with Dow Corning Corporation were terminated in
connection with the Dow Corning Corporation bankruptcy proceedings.
3.9.3 Third Party Technology
Schedule 3.9.3 to the Company Schedules sets forth a list of all Technology
used in the Company's business for which the Company does not own all right,
title and interest (collectively, the "Third Party Technologies"), and all
------------------------
material license agreements or other contracts pursuant to which the Company has
the right to use (in the manner used by the Company, or intended or necessary
for use with the Company Technology) the Third Party Technologies (the "Third
-----
Party Licenses"), indicating, with respect to each of the Third Party
--------------
Technologies listed therein, the owner thereof and the Third Party License
applicable thereto. The Company has the lawful right to use (free of any
material restriction not expressly set forth in the Third Party Licenses) (a)
all Third Party Technology that is incorporated in or used in the development or
production of the Company Technology and (b) all other Third Party Technology
material to and necessary for the conduct of the Company's business as now
conducted and as proposed to be conducted. All Third Party Licenses are valid,
binding and in full force and effect, the Company and, to the Company's
knowledge, each other party thereto have performed in all material respects
their obligations thereunder, and neither the Company nor, to the Company's
knowledge, any other party thereto is in default thereunder, nor to the
Company's knowledge has there occurred any event or circumstance that with
notice or lapse of time or both would constitute a default or event of default
on the part of the Company or, to the Company's knowledge, any other party
thereto or give to any other party thereto the right to terminate or modify any
Third Party License. The Company has not received notice that any party to any
Third Party License intends to cancel, terminate or refuse to renew (if
renewable) such Third Party License or to exercise or decline to exercise any
option or right thereunder. To the knowledge of the Company, no action has been
taken to reject the CableCure License in connection with the Dow Corning
bankruptcy proceedings.
3.9.4 Trademarks
Schedule 3.9.4 to the Company Schedules sets forth a list of all
trademarks, trade names, brand names, service marks, logos or other identifiers
for the Products or otherwise used by the Company in its business (the "Marks").
-----
The Company has full legal and beneficial ownership, free and clear of any
Liens, of all rights conferred by use of the Marks in connection with the
Products or otherwise in the Company's business and, as to those Marks that have
been registered in the United States Patent and Trademark Office, by federal
registration of the Marks.
-17-
3.9.5 Intellectual Property Rights
Schedules 3.9.4 and 3.9.5 to the Company Schedules sets forth all patents,
patent applications, copyright registrations (and applications therefor),
maskwork registrations (and applications therefor) and trademark registrations
(and applications therefor) (collectively, the "IP Registrations") associated
with the Company Technology and the Marks. Except as set forth in Schedule
3.9.3 and 3.9.5 to the Company Schedules, the Company owns all right, title and
interest, free and clear of any Liens, in and to the IP Registrations, together
with any other rights in or to any copyrights (registered or unregistered),
rights in the Marks (registered or unregistered), trade secret rights and other
intellectual property rights (including, without limitation, rights of
enforcement) contained or embodied in the Company Technology and the Marks
(collectively, the "IP Rights").
3.9.6 Maintenance of Rights
The Company has not conducted its business, and has not used or enforced
(or, to its knowledge, failed to use or enforce) the IP Rights, in a manner that
would result in the abandonment, cancellation, lapse or unenforceability of any
item of the IP Rights or the IP Registrations or any inventions, and the Company
has not taken (or, to its knowledge, failed to take) any action that would
result in the forfeiture or relinquishment of any IP Rights, IP Registrations or
inventions, in each case where such abandonment, cancellation, unenforceability,
forfeiture or relinquishment would have a Material Adverse Effect. Except as
set forth in Schedules 3.9.6 to the Company Schedules, the Company has not
granted to any third party any rights or permissions to use any of the
Technology or the IP Rights, except for any such grant that would not be
reasonably expected (as far as can be foreseen at the time) to have a Material
Adverse Effect. To the best of the Company's knowledge, except pursuant to
reasonably prudent safeguards, (a) no third party has received any confidential
information relating to the Technology or the IP Rights and the Company has at
all times maintained and diligently enforced commercially reasonable procedures
to protect all confidential information relating to the Technology, and (b) the
Company is not under any contractual or other obligation to disclose to any
third party any Company Technology.
3.9.7 Third Party Claims
Except as disclosed in Schedules 3.9.7(a), (b) and (c) to the Company
Schedules, (a) the Company has not received any notice or claim (whether
written, oral or otherwise) challenging the Company's ownership of or rights in
the Company Technology or the IP Rights or claiming that any other person or
entity has any legal or beneficial ownership with respect thereto; (b) all the
IP Rights are legally valid and enforceable without any material qualification,
limitation or restriction on their use, and the Company has not received any
notice or claim (whether written, oral or otherwise) challenging the validity or
enforceability of any of the IP Rights; and (c) to the Company's knowledge, no
other person or entity is infringing or misappropriating any part of the IP
Rights or otherwise making any unauthorized use of the Company Technology.
-18-
3.9.8 Infringement by the Company
Except as disclosed in Schedule 3.9.8 to the Company Schedules, (a) the
manufacture, use, sale, disclosure, execution, reproduction, modification,
adaptation, distribution, performance or display of any of the Technology or any
modifications or enhancements thereof, in the Company's business does not and
will not infringe, violate or interfere with or constitute an appropriation of
any right, title or interest (including, without limitation, any patent,
maskwork, copyright or trade secret right) held by any other person or entity,
and there have been no claims made with respect thereto; (b) the use of any of
the Marks and other IP Rights in the Company's business will not infringe,
violate or interfere with or constitute an appropriation of any right, title or
interest (including, without limitation, any patent, copyright, trademark or
trade secret right) held by any other person or entity, and there have been no
claims made with respect thereto; and (c) the Company has not received any
notice or claim (whether written, oral or otherwise) regarding any infringement,
misappropriation, misuse, abuse or other interference with any third party
intellectual property or proprietary rights (including, without limitation,
infringement of any patent, copyright, trademark or trade secret right of any
third party) by the Company, the Technology or the Marks or other IP Rights, or
claiming that any other entity has any claim of infringement with respect
thereto.
3.9.9 Restrictions on Intellectual Property
To the knowledge of the Company, none of the Company's officers, employees,
consultants, distributors, agents, representatives or advisors has entered into
any agreement relating to the Company's business regarding know-how, trade
secrets, assignment of rights in inventions, or prohibition or restriction of
competition or solicitation of customers, or any other similar restrictive
agreement or covenant, whether written or oral, with any Person other than the
Company.
3.10 Compliance; Permits; Restrictions
(a) Neither the Company nor any of its subsidiaries is, in conflict with,
or in default or violation of (i) any law, rule, regulation, order, judgment or
decree applicable to the Company or any of its subsidiaries or by which the
Company or any of its subsidiaries or any of their respective properties is
bound or affected, or (ii) any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other material
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective properties is bound or affected and, in either case, which default or
violation would have a Material Adverse Effect. To the knowledge of the
Company, no investigation or review by any Governmental Entity is pending or
threatened against the Company or any of its subsidiaries, nor has any
Governmental Entity indicated an intention to conduct the same. There is no
agreement, judgment, injunction, order or decree binding upon the Company or any
of its subsidiaries which has or could reasonably be expected to have the effect
of prohibiting or materially impairing any business practice of the Company or
any of its subsidiaries, any
-19-
acquisition of material property by the Company or any of its subsidiaries or
the conduct of business by the Company as currently conducted.
(b) The Company and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities that are material
to the operation of the business of the Company (collectively, the "Company
-------
Permits"). The Company and its subsidiaries are in compliance in with the terms
-------
of the Company Permits, except where the failure to do so would not have a
Material Adverse Effect.
3.11 Litigation
There is no action, suit, proceeding, claim, arbitration or investigation
pending, or as to which the Company or any of its subsidiaries has received any
notice of assertion nor, to the knowledge of the Company, is there a threatened
action, suit, proceeding, claim, arbitration or investigation against the
Company or any of its subsidiaries which would be required to be disclosed
pursuant to Item 103 of Regulation S-K under the Exchange Act which has not been
disclosed in the Company's Exchange Act filings. To the knowledge of the
Company, no Governmental Entity has at any time challenged or questioned in
writing the legal right of the Company to manufacture, offer or sell any of its
products in the present manner or style thereof.
3.12 Brokers' and Finders' Fees
Except for fees payable to Banker pursuant to an engagement letter dated
June 14, 2000, as amended, a copy of which has been provided to Parent, the
Company has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
3.13 Employee Benefit Plans
3.13.1 Employee Benefit Plan Listing
Schedule 3.13.1 to the Company Schedules contains a complete and accurate
list of all material Employee Benefit Plans other than the Option Plans.
Neither the Company nor any ERISA Affiliate has any agreement, arrangement,
commitment or obligation, whether formal or informal, whether written or
unwritten and whether legally binding or not, to create, enter into or
contribute to any additional material Employee Benefit Plan, or to modify or
amend any existing material Employee Benefit Plan. There has been no amendment,
interpretation or other announcement (written or oral) by the Company, any ERISA
Affiliate or any other person relating to any material Employee Benefit Plan
that, either alone or together with other such items or events, could materially
increase the expense of maintaining the Employee Benefit Plans above the level
of expense incurred with respect thereto for the most recent fiscal year
included in the Financial Statements. Except as disclosed in the Company
Schedules, the terms of each material Employee Benefit Plan permit the Company
or its ERISA Affiliates to amend or terminate such Employee Benefit
-20-
Plan at any time and for any reason without material penalty or material
liability. Except as disclosed in the Company Schedules, none of the rights of
the Company or any ERISA Affiliate under any material Employee Benefit Plan will
be impaired in any way by this Agreement or the consummation of the transactions
contemplated in (or by) this Agreement.
3.13.2 Documents Provided
The Company has delivered or will deliver to Parent within ten (10)
business days after the execution of this Agreement true, correct and complete
copies (or, in the case of unwritten Employee Benefit Plans, descriptions) of
all Employee Benefit Plans (and all amendments thereto), along with, to the
extent applicable to the particular Employee Benefit Plan, copies of the
following: (a) the last three annual reports (Form 5500 series) filed with
respect to such Employee Benefit Plan; (b) all summary plan descriptions,
summaries of material modifications and all employee manuals or communications
filed or distributed with respect to such Employee Benefit Plan during the last
three years; (c) all contracts and agreements (and any amendments thereto)
relating to such Employee Benefit Plan, including, without limitation, trust
agreements, investment management agreements, annuity contracts, insurance
contracts, bonds, indemnification agreements and service provider agreements;
(d) the most recent determination letter issued by the IRS with respect to such
Employee Benefit Plan; (e) all written communications relating to the amendment,
creation or termination of such Employee Benefit Plan, or an increase or
decrease in benefits, acceleration of payments or vesting or other events that
could result in liability to the Company since the date of the most recently
completed and filed annual report; (f) all correspondence to or from any
Governmental Entity relating to such Employee Benefit Plan; (g) samples of all
administrative forms currently in use, including, without limitation, all COBRA
and HIPAA forms and notices; (h) all coverage, nondiscrimination, top heavy and
Code Section 415 tests performed with respect to such Employee Benefit Plan for
the last three years; and (i) the most recent registration statement, annual
report (Form 11-K) and prospectus prepared in connection with such Employee
Benefit Plan.
3.13.3 Compliance
With respect to each material Employee Benefit Plan: (a) such Employee
Benefit Plan is, and at all times since inception has been, maintained,
administered, operated and funded in all respects in accordance with its terms
and in material compliance with all applicable requirements of all applicable
laws, statutes, orders, rules and regulations, including, without limitation,
ERISA, COBRA, HIPAA and the Code; (b) the Company, each ERISA Affiliate, each
fiduciary of such Employee Benefit Plan and all other persons have, at all
times, properly performed all material obligations, whether arising by operation
of law or by contract, required to be performed by any of them in connection
with such Employee Benefit Plan; (c) none of the Company, any ERISA Affiliate or
any other fiduciary of such Employee Benefit Plan has engaged in any transaction
or acted or failed to act in a manner that violates the fiduciary requirements
of ERISA or any other applicable law in any material respect; (d) no transaction
or event has occurred or is threatened or about to occur (including any of the
transactions contemplated in or by this Agreement) that constitutes or could
constitute a
-21-
prohibited transaction under Section 406 or 407 of ERISA or under Section 4975
of the Code for which an exemption is not available; and (e) neither the Company
nor any ERISA Affiliate has incurred, and there exists no condition or set of
circumstances in connection with which the Company, any ERISA Affiliate, Parent,
Purchaser or the Surviving Corporation could incur, directly or indirectly, any
material liability or expense (except for routine contributions and benefit
payments) under ERISA, the Code or any other applicable law, statute, order,
rule or regulation or pursuant to any indemnification or similar agreement with
respect to such Employee Benefit Plan.
3.13.4 Qualification
Each Employee Benefit Plan that is intended to be qualified under Section
401(a) of the Code is, and at all times since inception has been, so qualified
and its related trust is, and at all times since inception has been, exempt from
taxation under Section 501(a) of the Code. Each such Employee Benefit Plan
either is the subject of an unrevoked favorable determination, opinion,
notification or advisory letter from the IRS with respect to such Employee
Benefit Plan's qualified status under the Code, as amended by the Tax Reform Act
of 1986 and all subsequent legislation, or has remaining a period of time under
the Code or applicable Treasury regulations or IRS pronouncements in which to
apply to the IRS for such a letter and to make any amendments necessary to
obtain such a letter from the IRS. No fact exists or is reasonably expected by
the Company or any ERISA Affiliate to arise, that could adversely affect the
qualification or exemption of any such Employee Benefit Plan or its related
trust. No such Employee Benefit Plan is a "top-heavy plan," as defined in
Section 416 of the Code.
3.13.5 Contributions and Premium Payments
All contributions, premiums and other payments (including, without
limitation, administrative costs, such as trustee and service provider fees) due
or required to be paid to (or with respect to) each material Employee Benefit
Plan have been timely paid, or, if not yet due, have been accrued as a liability
on the Company Balance Sheet.
3.13.6 Multiemployer, Defined Benefit and Money Purchase Pension Plans and
Multiple Employer Welfare Arrangements.
Neither the Company nor any ERISA Affiliate maintains or contributes to, or
has ever maintained or contributed to (or been obligated to contribute to), any
multiemployer plan as defined in Section 3(37) or Section 4001(a)(3) of ERISA or
414(f) of the Code, any multiple employer plan within the meaning of Section
4063 or 4064 of ERISA or Section 413(c) of the Code, any employee benefit plan,
fund, program, contract or arrangement that is subject to Section 412 of the
Code, Section 302 of ERISA or Title IV of ERISA or any multiple employer welfare
arrangement as defined in Section 3(40) of ERISA.
-22-
3.13.7 Post-Termination Benefits
Except as disclosed in the Company Schedules, none of the Company, any
ERISA Affiliate or any material Employee Benefit Plan provides or has any
obligation to provide (or contribute toward the cost of) post-employment or
post-termination benefits of any kind, including, without limitation, death and
medical benefits, with respect to any current or former officer, employee,
agent, director or independent contractor of the Company or any ERISA Affiliate,
other than (a) continuation coverage mandated by Sections 601 through 608 of
ERISA and Section 4980B(f) of the Code, (b) retirement benefits under any
Employee Benefit Plan that is qualified under Section 401(a) of the Code, and
(c) deferred compensation that is accrued as a current liability on the Company
Balance Sheet.
3.13.8 Suits, Claims and Investigations
Except as disclosed in the Company Schedules, there are no actions, suits
or claims (other than routine claims for benefits) pending or, to the knowledge
of the Company and each ERISA Affiliate, threatened with respect to (or against
the assets of) any Employee Benefit Plan, nor, to the knowledge of the Company
and each ERISA Affiliate, is there a basis for any such action, suit or claim.
No Employee Benefit Plan is currently under investigation, audit or review,
directly or indirectly, by the IRS, the DOL or any other Governmental Entity,
and, to the knowledge of the Company or any ERISA Affiliate, no such action is
contemplated or under consideration by the IRS, the DOL or any other
Governmental Entity.
3.13.9 Payments Resulting From Transactions
Except as disclosed in the Company Schedules, neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
in (or by) this Agreement, will (a) entitle any individual to severance pay,
unemployment compensation or any other payment from the Company, any ERISA
Affiliate, Parent, Purchaser, the Surviving Corporation or any Employee Benefit
Plan, (b) otherwise increase the amount of compensation due to any individual,
(c) result in any benefit or right becoming established or increased, or
accelerate the time of payment or vesting of any benefit, under any Employee
Benefit Plan, or (d) require the Company, any ERISA Affiliate, Parent, Purchaser
or the Surviving Corporation to transfer or set aside any assets to fund or
otherwise provide for any benefits for any individual.
3.13.10 Insured Benefits
With respect to any Employee Benefit Plan that is funded wholly or
partially through a third party insurance policy, there will be no liability, as
of the Effective Time, under any insurance policy or ancillary agreement with
respect to such insurance policy in the nature of a retroactive rate adjustment,
loss sharing arrangement or other actual or contingent liability arising wholly
or partially out of events occurring prior to the Effective Time.
-23-
3.13.11 Definitions
As used in this Agreement, the following terms shall have the following
meanings:
(a) "COBRA" means the Consolidated Omnibus Budget Reconciliation Act
-----
of 1985, as amended (as set forth in Part 6 of Subtitle B of Title I of ERISA
and Section 4980B of the Code).
(b) "DOL" means the United States Department of Labor.
---
(c) "Employee Benefit Plan" means any retirement, pension, profit
---------------------
sharing, deferred compensation, stock bonus, savings, bonus, incentive,
cafeteria, medical, dental, vision, hospitalization, life insurance, accidental
death and dismemberment, medical expense reimbursement, dependent care
assistance, tuition reimbursement, disability, sick pay, holiday, vacation,
severance, change of control, stock purchase, stock option, restricted stock,
phantom stock, stock appreciation rights, fringe benefit (within the meaning of
Section 132 of the Code) or other employee benefit plan, fund, policy, program,
contract, arrangement or payroll practice (including any "employee benefit
plan," as defined in Section 3(3) of ERISA) or any employment, consulting or
personal services contract, whether written or oral, qualified or nonqualified,
funded or unfunded, or domestic or foreign, (i) sponsored, maintained or
contributed to by the Company or any ERISA Affiliate or to which the Company or
any ERISA Affiliate is a party, (ii) covering or benefiting any current or
former officer, employee, agent, director or independent contractor of the
Company or any ERISA Affiliate (or any dependent or beneficiary of any such
individual), or (iii) with respect to which the Company or any ERISA Affiliate
has (or could have) any obligation or liability.
(d) "ERISA" means the Employee Retirement Income Security Act of 1974,
-----
as amended.
(e) "ERISA Affiliate" means any corporation, partnership, limited
---------------
liability company, sole proprietorship, trade, business or other organization,
entity or person that, together with the Company, is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code.
(f) "HIPAA" means the Health Insurance Portability and Accountability
-----
Act of 1997, as amended.
(g) "IRS" means the United States Internal Revenue Service.
---
3.14 Employees; Labor Matters
To the Company's knowledge, no employee of the Company (a) is in violation
of any term of any employment contract, patent disclosure agreement, non-
competition agreement, or any restrictive covenant to a former employer relating
to the right of any such employee to be employed by the Company because of the
nature of the business conducted or presently proposed to be conducted by the
Company or to the use of trade secrets or proprietary
-24-
information of others and (b) has given notice to the Company, nor is the
Company otherwise aware, that any employee intends to terminate his or her
employment with the Company except for terminations of a nature and number that
are consistent with the Company's prior experience. Company Schedule 3.14 lists
all collective bargaining agreements that are binding on the Company. To the
Company's knowledge, there are no activities or proceedings of any labor union
to organize any employees of the Company or any of its subsidiaries and there
are no strikes, or material slowdowns, work stoppages or lockouts, or threats
thereof by or with respect to any employees of the Company or any of its
subsidiaries. To the Company's knowledge, the Company and its subsidiaries are
and have been in compliance in all material respects with all applicable laws
regarding employment practices, terms and conditions of employment, and wages
and hours (including, without limitation, OSHA, ERISA, WARN or any similar state
or local law).
3.15 Environmental Matters
(a) Hazardous Material. To the Company's knowledge, no underground storage
------------------
tanks and no amount of any substance that has been designated by any
Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum, urea-
formaldehyde and all substances listed as hazardous substances pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws (a "Hazardous Material"), but excluding office
------------------
and janitorial supplies, are present in, on or under any property, including the
land and the improvements, ground water and surface water thereof, that the
Company or any of its subsidiaries has at any time owned, operated, occupied or
leased.
(b) Hazardous Materials Activities. Neither the Company nor any of its
------------------------------
subsidiaries has transported, stored, used, manufactured, disposed of, released
or exposed its employees or others to Hazardous Materials in violation of any
law in effect on or before the Closing Date, nor has the Company or any of its
subsidiaries disposed of, transported, sold, used, released, exposed its
employees or others to or manufactured any product containing a Hazardous
Material (collectively "Hazardous Materials Activities") in violation of any
------------------------------
rule, regulation, treaty or statute promulgated by any Governmental Entity in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity, except where such
violation would not have a Material Adverse Effect.
(c) Permits. The Company and its subsidiaries currently hold all
-------
environmental approvals, permits, licenses, clearances and consents (the
"Company Environmental Permits") material and necessary for the conduct of the
------------------------------
Company's and its subsidiaries' Hazardous Material Activities and other
businesses of the Company and its subsidiaries as such activities and businesses
are currently being conducted.
-25-
(d) Environmental Liabilities. No material action, proceeding, revocation
-------------------------
proceeding, amendment procedure, writ, injunction or claim is pending, or the
Company's knowledge, threatened concerning any Company Environmental Permit,
Hazardous Material or any Hazardous Materials Activity of the Company or any of
its subsidiaries. The Company is not aware of any fact or circumstance which
could involve the Company or any of its subsidiaries in any material
environmental litigation or impose upon the Company any material environmental
liability.
The Cablecure/R/ and CableBlock/R/ services provided to customers have
been conducted in compliance with all applicable environmental and safety laws,
and have not resulted in any soil contamination or given rise to any claims of
which the Company has notice, nor to the Company's knowledge, is there any basis
for any such claims.
3.16 Agreements, Contracts and Commitments
Except as set forth in the Company Schedules, neither the Company nor any
of its subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement, contract or commitment with
any officer or director level employee or member of the Company's Board of
Directors, other than those that are terminable by the Company or any of its
subsidiaries o n no more than thirty days notice without liability or financial
obligation, except to the extent general principles of wrongful termination law
may limit the Company's or any of its subsidiaries' ability to terminate
employees at will;
(b) any agreement or plan, including, without limitation, any stock option
plan, stock appreciation right plan, stock purchase plan or restricted stock
purchase agreement, any of the benefits of which will be increased, or the
vesting of benefits of which will be accelerated, by the occurrence of any of
the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement;
(c) any agreement of indemnification or guaranty not entered into in the
ordinary course of business other than indemnification agreements between the
Company or any of its subsidiaries and any of its officers or directors;
(d) any agreement, contract or commitment currently in force containing any
covenant limiting the freedom of the Company or any of its subsidiaries to
engage in any line of business or compete with any person or granting any
exclusive distribution rights;
(e) any agreement, contract or commitment currently in force relating to
the disposition or acquisition of assets not in the ordinary course of business
or any ownership interest in any corporation, partnership, joint venture or
other business enterprise; or
(f) any material joint marketing or development agreement.
-26-
Neither the Company nor any of its subsidiaries, nor to the Company's
knowledge any other party to a Company Contract (as defined below), has
breached, violated or defaulted under, or received notice that it has breached
violated or defaulted under, any of the material terms or conditions of any
agreement, contract or commitment to which the Company or any of its
subsidiaries is a party of the type described above or any other material
agreement, contract or commitment (any such agreement, contract or commitment,
as well as any agreement, contract or commitment that is an exhibit to any
Company SEC Report, a "Company Contract") in such a manner as would permit any
----------------
other party to cancel or terminate any such Company Contract, or would permit
any other party to seek damages, which would be reasonably likely to be material
to the Company.
3.17 Change of Control Payments
The Company Schedules set forth each plan or agreement pursuant to which
any amounts may become payable (whether currently or in the future) to current
or former officers and directors of the Company as a result of or in connection
with the Offer and/or the Merger.
3.18 Board Approval
The Board of Directors of the Company has, as of the date of this
Agreement (a) determined that this Agreement and the transactions contemplated
hereby, including each of the Offe r and the Merger, are fair to and in the best
interests of the holders of the Shares, (b) approved and adopted this Agreement
and the transactions contemplated hereby and (c) resolved to recommend that the
shareholders of the Company accept the Offer and approve and adopt this
Agreement and the transactions contemplated hereby and thereby.
3.19 Fairness Opinion
The Company's Board of Directors has received a written opinion from
Banker to the effect tha t the consideration to be received by the holders of
Shares pursuant to each of the Offer and the Merger is fair to the holders of
Shares from a financial point of view, and the Company has delivered to Parent a
copy of such opinion.
3.20 State Anti-Takeover Statutes Not Applicable; Company Rights Plan
The Board of Directors of the Company has taken all actions so that (a)
the restrictions contained in Chapter 23B.19 of the Washington Business
Corporation Act and Section 203 of the DGCL will not apply to the execution,
delivery or performance of this Agreement or to the consummation of the Merger
or the other transactions contemplated by this Agreement, (b) approval of
shareholders holding sixty-se ven percent (67%) of the outstanding shares will
be sufficient under the DGCL to approve the Merger, and (c) the execution,
delivery and performance of this Agreement and the consummation of the Merger
will not cause any change, effect or result under the Rights Agreement, dated as
of November 6, 1998, between the Company and American Stock Transfer and Trust
Company (the "Company Rights Plan") which is adverse to the interests of
--------------------
Purchaser or Parent.
-27-
Without limiting the generality of the foregoing, if necessary to accomplish the
foregoing, the Company Rights Plan has been (or will be within five business
days of the date hereof) amended to (i) render the Company Rights Plan
inapplicable to the Merger and the other transactions contemplated by this
Agreement, (ii) ensure that (x) neither Parent nor Purchaser is an Acquiring
Person (as defined in the Company Rights Plan) pursuant to the Company Rights
Plan by virtue of the Offer or the Consummation of the Merger or the other
transactions contemplated hereby and thereby and (y) a Distribution Date or
Shares Acquisition Date (as such terms are defined in the Company Rights Plan)
does not occur by reasons of the execution of this Agreement, the consummation
of the Merger, or the consummation of the transactions contemplated hereby or
thereby, and such amendment may not be further amended by Company without the
prior consent of Parent in its sole discretion.
3.21 Offer Documents; Proxy Statement
Neither the Schedule 14D-9, nor any of the information supplied by the
Company for inclusion in the Offer Documents, shall, at the respective times
that the Schedule 14D-9, the Offer Documents or any amendments or supplements
thereto are filed with the SEC or are first published, sent or given to
shareholders, as the case may be, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Neither the proxy
statement to be sent to the shareholders of the Company in connection with the
meeting of the Company's stockholders to consider the Merger (the "Company
-------
Stockholders' Meeting") or the information statement to be sent to such
---------------------
shareholders, as appropriate (such proxy statement or information statement, as
amended or supplemented, is referred to as the "Proxy Statement"), shall, at the
---------------
date the Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to shareholders, at the time of the Company Stockholders' Meeting
and at 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 made therein, in the light of the circumstances
under which they are made, not misleading or necessary to correct any statement
in any earlier communication with respect to the solicitation of proxies for the
Company Stockholders' Meeting which has become false or misleading. The
Schedule 14D-9 and the Proxy Statement will comply in all material respects as
to form and substance with the requirements of the Exchange Act and the rules
and regulations thereunder. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information supplied to the
Company by Parent or Purchaser which is contained in the foregoing document.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser, jointly and severally, represent and warrant to the
Company that:
-28-
4.1 Organization and Qualification
Each of Parent and Purchaser is a corporation duly organized validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all requisite corporate power and authority to own,
operate and lease its properties and to carry on its business as it is now being
conducted.
4.2 Corporate Power, Authorization and Enforceability
Each of Parent and Purchaser has full corporate power and authority to
enter into this Agreement and to perform its obligations hereunder and to
consummate all the transactions contemplated hereby. The execution and delivery
of this Agreement by Parent and Purchaser, the performances by each of Parent
and Purchaser of their respective obligations hereunder and the consummation by
Parent and Purchaser of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of each Parent and Purchaser and no
other corporate action on the part of Parent or Purchaser are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
(other than the filing and recordation of appropriate merger documents as
required by the DGCL). This Agreement has been duly executed and delivered by
each of Parent and Purchaser and is a legal, valid and binding obligation of
each of Parent and Purchaser, enforceable against Parent and Purchaser in
accordance with its terms.
4.3 No Conflict; Required Filings and Consents
(a) Assuming satisfaction of all applicable requirements referred to in
Section 4.3(b) below, the execution and delivery of this Agreement by Parent and
Purchaser, the compliance by Parent and Purchaser with the provisions hereof and
the consummation by Parent and Purchaser of the transactions contemplated hereby
will not conflict with or violate (i) any statute, law, ordinance, rule,
regulation, order, writ, judgment, award, injunction, decree or ruling
applicable to Parent and Purchaser or any of their properties, other than such
conflicts or violations which individually or in the aggregate do not and will
not have a material adverse effect on the business, properties, assets, results
of operations or financial condition of Parent and Purchaser, taken as a whole,
or (ii) conflict with or violate the Articles of Incorporation or Bylaws of
Parent and the Certificate of Incorporation or Bylaws of Purchaser.
(b) Other than in connection with or in compliance with the provisions of
the DGCL, the Exchange Act, the "takeover" or "blue sky" laws of various states
and the HSR Act, (i) neither Parent nor Purchaser is required to submit any
notice, report, registration, declaration or other filing with any Governmental
Entity in connection, with the execution or delivery of this Agreement by Parent
and Purchaser or the performance by Parent and Purchaser of their obligations
hereunder or the consummation by Parent and Purchaser of the transactions
contemplated by this Agreement and (ii) no waiver, consent, approval, order or
authorization of any Governmental Entity is required to be obtained by Parent
and Purchaser in connection with the execution or delivery of this Agreement by
Parent and Purchaser or
-29-
the performance by Parent and Purchaser of their obligations hereunder or the
consummation by Parent and Purchaser of the transactions contemplated by this
Agreement. None of the information supplied by Parent and Purchaser for
inclusion in the Proxy Statement shall, at the date the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to stockholders or at
the time of the Company Stockholders' Meeting, contain any untrue statement of a
material fact required to be stated therein or necessary in order to make the
statements made therein in light of the circumstances under which they were
made, not misleading.
4.4 Schedule TO
Neither the Schedule TO nor the Offer Documents, nor any of the information
supplied by Parent and Purchaser for inclusion in the Schedule 14D-9, shall at
the respective times the Schedule TO or the Offer Documents or any amendments or
supplements thereto are filed with the SEC or are first published, sent or given
to shareholders or upon the expiration of the Offer, as the case may be, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein in the light of the circumstances under which they were made not
misleading (except for information supplied by the Company for inclusion in the
Schedule TO and the Offer Documents, as to which Parent and Purchaser make no
representation).
4.5 Available Funds
Parent has or has available to it, and will make available to Purchaser,
all funds necessary to satisfy all of Parent's and Purchaser's obligations under
this Agreement and in connection with the transaction contemplated hereby,
including, without limitation, the obligation to purchase all outstanding Shares
pursuant to the Offer and the Merger and to pay all related fees and expenses in
connection with the Offer and the Merger.
ARTICLE V
COVENANTS
5.1 Conduct of Business by the Company
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement pursuant to its terms and the
Effective Time, the Company (which for the purposes of this Article V shall
include the Company and each of its subsidiaries) agrees, except to the extent
that Parent shall otherwise consent in writing, to carry on its business
diligently and in accordance with good commercial practice and to carry on its
business in the usual, regular and ordinary course, in substantially the same
manner as heretofore conducted and in compliance with all applicable laws and
regulations, to pay its debts and taxes when due subject to good faith disputes
over such debts or taxes, to pay or perform other material obligations when due,
and use its commercially reasonable efforts
-30-
consistent with past practices and policies to preserve intact its present
business organization, keep available the services of its present officers and
employees and preserve its relationship with customers, suppliers, distributors,
licensors, licensees, and others with which it has business dealings. In
addition, the Company will promptly notify Parent of any material event
involving its business or operations.
In addition, except as permitted by the terms of this Agreement, without
the prior written consent of Parent, the Company shall not do any of the
following, and shall not permit any of its subsidiaries to do any of the
following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant or director stock plans or authorize cash
payments in exchange for any options granted under any of such plans;
(b) Grant any severance or termination pay to any officer or employee
except payments in amounts consistent with policies and past practices or
pursuant to written agreements outstanding, or policies existing, on the date
hereof and as previously disclosed in writing to the other, or adopt any new
severance plan;
(c) Other than with respect to the proposed licensing and joint venture
arrangement with Xx. X. Xxxx and affiliates (the "Chen Transaction"), transfer
----------------
or license to any person or entity or otherwise extend, amend or modify in any
material respect any rights to the Company's intellectual property or other
proprietary rights, or enter into grants to future patent rights, other than in
the ordinary course of business, consistent with past practice;
(d) Buy any intellectual property of a third party or enter into any
license agreement with respect to the intellectual property of any third party
for an acquisition or license, the price for which exceeds $50,000 individually
(or in the aggregate for a single third party), other than "shrink wrap," "click
wrap," and similar widely available commercial end-user licenses;
(e) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any capital stock of the
Company or split, combine or reclassify 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 any capital stock of the Company;
(f) Repurchase or otherwise acquire, directly or indirectly, any shares of
capital stock of the Company except pursuant to rights of repurchase of any such
shares under any employee, consultant or director stock plan existing on the
date hereof (which repurchase rights the Company shall be obligated to exercise
if the repurchase price is less than the Merger Consideration);
(g) Issue, deliver, sell, authorize or propose the issuance, delivery or
sale of, any shares of capital stock of the Company or any securities
convertible into shares of capital stock of the Company, or subscriptions,
rights, warrants or options to acquire any shares of
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capital stock of the Company or any securities convertible into shares of
capital stock of the Company, or enter into other agreements or commitments of
any character obligating it to issue any such shares or convertible securities,
other than the issuance of Shares pursuant to the exercise of stock options
therefor outstanding as of the date of this Agreement;
(h) Cause, permit or propose any amendments to any charter document or
Bylaw (or similar governing instruments of any subsidiaries);
(i) Other than with respect to the Chen Transaction, acquire or agree to
acquire by merging or consolidating with, or by purchasing any equity interest
in or a material portion of the assets of, or by any other manner, any business
or any corporation, partnership interest, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to the business of
the Company, or enter into any joint ventures, strategic partnerships or
alliances;
(j) Other than with respect to the Chen Transaction, sell, lease, license,
encumber or otherwise dispose of any properties or assets which are material,
individually or in the aggregate, to the business of the Company, except in the
ordinary course of business consistent with past practice;
(k) Incur any indebtedness for borrowed money (other than ordinary course
trade payables or pursuant to existing credit facilities in the ordinary course
of business) or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire debt securities, or guarantee any
debt securities of others;
(l) Adopt or amend any employee benefit or employee stock purchase or
employee option plan (other than is necessary to comply with law), or enter into
any employment contract, pay any special bonus or special remuneration to any
director or employee, or increase the salaries or wage rates of its officers or
employees other than in the ordinary course of business, consistent with past
practice, or change in any material respect any management policies or
procedures;
(m) Pay, discharge or satisfy any claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business;
(n) Other than with respect to the Chen Transaction, make any grant of
exclusive rights to any third party;
(o) Except in the ordinary course of business, modify, amend or terminate
any material contract or agreement involving payments of $50,000 or more to
which the Company or any subsidiary thereof is a party or waive, release or
assign any material rights or claims thereunder;
(p) Materially revalue any of its assets or, except as required by GAAP,
make any change in accounting methods, principles or practices;
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(q) Make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes in an amount in excess of $50,000 in the
aggregate;
(r) Commence any litigation or settle any litigation for an amount in
excess of the greater of $100,000 in the aggregate or the amount reserved in
respect thereof in the Company Balance Sheet, as set forth in Section 5.1 of the
Company Schedules; or
(s) Agree in writing or otherwise to take any of the actions described in
(a) through (r) above.
With respect to the actions described in (a), (b) and (l) above, the
Company further represents and warrants that it has not taken any such actions
since March 31, 2000, other than the authorization of the annual bonuses in
April 2000 and their payment in May 2000.
5.2 Access to Information; Confidentiality
(a) Subject to and in accordance with the terms and conditions of that
certain letter dated May 24, 2000 between Parent and the Company (the
"Confidentiality Agreement"), from the date of this Agreement to the Effective
--------------------------
Time, the Company shall, and shall cause its subsidiaries, officers, directors,
employees and agents to, afford the officers, employees and agents of Parent,
Purchaser and their affiliates and the attorneys, accountants, banks, other
financial institutions and investment banks working with Parent or Purchaser,
and their respective officers, employees and agents, reasonable access at all
reasonable times to its officers, employees, agents, properties, books, records
and contracts, and shall furnish Parent, Purchaser and their affiliates and the
attorneys, banks, other financial institutions and investment banks working with
Parent or Purchaser, all financial, operating and other data and information as
they reasonably request.
(b) Subject to the requirements of law, Parent and Purchaser shall, and
shall use their reasonable efforts to cause their officers, employees and
agents, and the attorneys, banks, other financial institutions and investment
banks who obtain such information to, hold all information obtained pursuant to
this Agreement or the Confidentiality Agreement in accordance with the terms and
conditions of the Confidentiality Agreement.
(c) No investigation pursuant to this Section 5.2 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
5.3 Proxy Material; Stockholders' Meeting
(a) The Company and each of Parent and Purchaser shall prepare and file,
or shall cause to be prepared and filed, with the SEC those documents, schedules
and amendments and supplements thereto required to be filed with respect to the
transactions contemplated by this Agreement. The Company, acting through its
Board of Directors, shall, if necessary,
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cause the Company Stockholders' Meeting to be duly called (including
establishing the record date, if requested, to be a date immediately after the
date the Purchaser first purchases any Shares pursuant to the Offer) and shall
give notice of, convene and hold the Company Stockholders' Meeting as soon as
practicable, and at such time and place designated by Parent or Purchaser, for
the purpose of approving the Merger, this Agreement and any other actions
contemplated hereby which require the approval of the Company's stockholders.
The Company shall recommend to its stockholders approval of the Merger and take
all reasonable actions necessary to solicit such approval. The Company shall use
its best efforts to obtain and furnish the information required to be included
by it in the Proxy Statement and, after consultation with Parent and Purchaser,
shall respond promptly to any comments of the SEC relating to any preliminary
proxy statement regarding the Merger and the other transactions contemplated by
this Agreement and to cause the Proxy Statement to be mailed to its
stockholders, all at the earliest practicable time. Whenever any event occurs
which should be set forth in an amendment or supplement to the Proxy Statement
or any other filing required to be made with the SEC with respect to the Proxy
Statement or the Company Stockholders' Meeting, each party shall promptly inform
the other of such occurrence and cooperate in filing with the SEC and/or mailing
to the Company's stockholders such amendment or supplement. The Proxy Statement
and all amendments and supplements thereto shall comply with applicable law and
be in form and substance satisfactory to each of Parent and Purchaser and the
Company. The Company, acting through its Board of Directors, shall include in
the Proxy Statement the recommendation of its Board of Directors that
stockholders of the Company vote, to the extent possible, for the approval and
adoption of this Agreement and the Merger and shall disclose, to the extent
possible, that each of the Company's directors and executive officers intend to
tender all outstanding shares beneficially owned by such persons to Purchaser
pursuant to the Offer unless to do so would subject such person to liability
under Section 16(b) of the Exchange Act. The Company shall solicit from
stockholders of the Company proxies in respect of such approval and adoption and
shall, subject to applicable law, take all other actions necessary or, in the
reasonable judgment of Parent and Purchaser, advisable to secure the vote or
consent of the Company's stockholders required by the DGCL to effect the Merger.
(b) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least ninety percent (90%) of the outstanding Shares, the parties
hereto agree, at the request of Purchaser, subject to Article VI, to take all
necessary and appropriate action to cause the Merger to become effective as soon
as reasonably practicable after such acquisition, without a meeting and without
a vote of the Company's stockholders, in accordance with the DGCL.
5.4 No Solicitation; Break-up Fee
(a) From and after the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement pursuant to its terms, the
Company and its subsidiaries shall not, and will instruct their respective
directors, officers, employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, (i) solicit or encourage submission
of, any proposals or offers by any person, entity or group (other than Parent
and its affiliates, agents and representatives), or (ii) participate in any
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discussions or negotiations with, or disclose any non-public information
concerning the Company or any of its subsidiaries to, or afford any access to
the properties, books or records of the Company or any of its subsidiaries to,
or otherwise assist or facilitate, or enter into any agreement or understanding
with, any person, entity or group (other than Parent and its affiliates, agents
and representatives), in connection with any Acquisition Proposal with respect
to the Company. For the purposes of this Agreement, an "Acquisition Proposal"
--------------------
with respect to an entity means any proposal or offer relating to (i) any
merger, consolidation, sale of substantial assets or similar transactions
involving the entity or any subsidiaries of the entity (other than sales of
assets or inventory in the ordinary course of business or as permitted under the
terms of this Agreement), (ii) sale of outstanding shares of capital stock of
the entity (including without limitation by way of a tender offer or an exchange
offer), (iii) the acquisition by any person of beneficial ownership or a right
to acquire beneficial ownership of, 10% or more of the then outstanding shares
of capital stock of the entity (except for acquisitions for passive investment
purposes only in circumstances where the person or group qualifies for and files
a Schedule 13G with respect thereto); or (iv) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing. The Company will immediately cease any and all
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. The Company will (i) notify
Parent as promptly as practicable if any inquiry or proposal is made or any
information or access is requested in connection with an Acquisition Proposal or
potential Acquisition Proposal and (ii) as promptly as practicable notify Parent
of the terms and conditions of any such Acquisition Proposal. In addition,
subject to the other provisions of this Section 5.4, from and after the date of
this Agreement until the earlier of the Effective Time and termination of this
Agreement pursuant to its terms, the Company and its subsidiaries will not, and
will instruct their respective directors, officers, employees, representatives,
investment bankers, agents and affiliates not to, directly or indirectly, make
or authorize any public statement, recommendation or solicitation in support of
any Acquisition Proposal made by any person, entity or group (other than
Parent).
(b) Notwithstanding the provisions of paragraph (a) above, prior to
consummation of the Offer, the Company may participate in discussions or
negotiations with, and, subject to the requirements of paragraph (c), below,
furnish information to any person, entity or group after such person, entity or
group has delivered to the Company in writing, an unsolicited bona fide
Acquisition Proposal which the Board of Directors of the Company in its good
faith reasonable judgment determines, upon advice of its independent financial
advisors, would result in a transaction more favorable than the Offer and the
Merger to the shareholders of the Company from a financial point of view and for
which there would not be a financing condition or contingency, (a "Superior
--------
Proposal"). In the event the Company receives a Superior Proposal, nothing
--------
contained in this Agreement (but subject to the terms hereof) will prevent the
Board of Directors of the Company from recommending such Superior Proposal to
the Company's stockholders, provided that (i) the Board determines in good faith
that such action is required by its fiduciary duties under applicable law; (ii)
the Company shall not recommend to its stockholders a Superior Proposal until at
least two (2) business days after Parent's receipt of a copy of such Superior
Proposal (or a description of its terms and
-35-
conditions, if not in writing); and (iii) the Company shall not recommend to its
stockholders a Superior Proposal unless the Company shall have terminated this
Agreement and paid the Break-up Fee pursuant to Section 7.3(c).
(c) Notwithstanding anything to the contrary herein, the Company will not
provide any non-public information to a third party unless: (x) the Company
provides such non-public information pursuant to a nondisclosure agreement with
terms regarding the protection of confidential information at least as
restrictive as such terms in the Confidentiality Agreement; and (y) such non-
public information has been previously delivered to Parent.
(d) Nothing contained in this Section 5.4 shall prohibit the Company from
at any time taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) or (b) promulgated under the Exchange Act or from making any
disclosure to the Company's stockholders if, in the good faith judgment of the
Company Board, upon the advice of outside counsel, failure so to disclose would
constitute a breach of its fiduciary duties to the Company's shareholders under
applicable law; provided, however, that neither the Company nor its Board of
Directors nor any committee thereof shall, except as permitted by Section
5.4(b), withdraw or modify, or propose to withdraw or modify, its position with
respect to the Merger or this Agreement or approve or recommend, or propose to
approve or recommend, an Acquisition Proposal. The taking of a position by the
Company pursuant to Rule 14e-2(a)(2) or (3) of the Exchange Act in respect of an
Acquisition Proposal shall not be deemed a withdrawal, a modification or a
proposal to withdraw or modify its position with respect to the Acquisition for
purposes hereof.
5.5 Public Announcements
Parent and Purchaser on the one hand and the Company on the other hand will
consult with each other before issuing any press release or otherwise making any
public statements with respect to this Agreement or the Merger or the other
transactions contemplated hereby, and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by law. This Section 5.5 shall supersede any conflicting provisions in
the Confidentiality Agreement.
5.6 Notification of Certain Matters
(a) The Company shall give prompt notice (which notice shall state that it
is delivered pursuant to Section 5.6(a) of this Agreement) in writing to Parent,
and Parent and Purchaser shall give prompt notice in writing to the Company, of
(i) the occurrence, or failure to occur, of any event which occurrence or
failure would be likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at any time
from the date of this Agreement through the Effective Time and (ii) any failure
of the Company, Parent or Purchaser, as the case may be, or of any officer,
director, employee or agent thereof, to comply with or satisfy in all material
respects any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement; provided, however, no
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such notification shall affect the representations or warranties of the parties
or the conditions to the obligations of the parties hereunder.
(b) The Company shall give prompt notice in writing (which notice shall
state that it is delivered pursuant to Section 5.6(b) of this Agreement) to
Parent of (i) any act, omission to act, event or occurrence which, with the
passage of time or otherwise, would likely have a Material Adverse Effect on the
Company and (ii) any material contingent liability of the Company or any of its
subsidiaries for which such party reasonably believes it will, with the passage
of time or otherwise, become liable; provided, however, that no such
notification shall affect the representations or warranties of the parties or
the conditions to the obligations of the parties hereunder.
5.7 Actions by Company
Subject to the terms and conditions hereof, the Company shall, and shall
cause its subsidiaries to, cooperate with Parent and Purchaser and take all such
actions as may be reasonably requested by Parent and Purchaser to accomplish the
Merger.
5.8 Officers' and Directors' Indemnification
(a) From and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of the Company
pursuant to any indemnification agreements between the Company and its directors
and officers as of the Effective Time (the "Indemnified Parties"). The Restated
-------------------
Certificate of Incorporation and Bylaws of the Surviving Corporation will
contain provisions with respect to exculpation and indemnification that are at
least as favorable to the Indemnified Parties as those contained in the Restated
Certificate of Incorporation and Bylaws of the Company as in effect on the date
hereof, which provisions will not be amended, repealed or otherwise modified for
a period of six years from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who, immediately prior to the
Effective Time, were directors, officers, employees or agents of the Company,
unless such modification is required by law.
(b) For a period of six years after the Effective Time, Parent will cause
the Surviving Corporation to use its commercially reasonable efforts to maintain
in effect, if available, directors' and officers' liability insurance covering
those persons who are currently covered by the Company's directors' and
officers' liability insurance policy on terms comparable to those applicable to
the current directors and officers of the Company; provided, however, that in no
event will Parent or the Surviving Corporation be required to expend in excess
of 150% of the annual premium currently paid by the Company for such coverage
(or such coverage as is available for such 150% of such annual premium).
5.9 Employment Agreements
Prior to commencement of the Offer, the Company shall offer to enter into
employment agreement (the "Employment Agreement") with Xxxxxxx Xxxxxxxxx, which
--------------------
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Employment Agreement shall be substantially in the form of Exhibit A hereto or
such other terms as may be accepted in writing by Parent.
5.10 Additional Agreements
(a) Subject to the terms and conditions hereof, each of the parties to
this Agreement agrees to use all reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement (including consummation of the Offer
and the Merger) and to cooperate with each other in connection with the
foregoing.
(b) Subject to the terms and conditions hereof, each of the parties to
this Agreement agrees to use (i) all reasonable efforts to obtain all necessary
waivers, consents and approvals from other parties to loan agreements, leases,
licenses and other contracts, and (ii) all reasonable efforts to obtain all
necessary consents, approvals and authorizations as required to be obtained
under any federal, state or foreign law or regulations, including, but not
limited to, those required under the HSR Act, to defend all lawsuits or other
legal proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby, to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the parties
to consummate the transactions contemplated hereby, to effect all necessary
registrations and filings, including, but not limited to, filings under the HSR
Act and submissions of information requested by Governmental Entities, and to
fulfill all conditions to this Agreement.
5.11 Other Actions by the Company
If any "fair price," "moratorium," "control share acquisition,"
"shareholder protection" or other form of anti-takeover statute, regulation or
charter provision or contract is or shall become applicable to the Offer or the
Merger or the transactions contemplated hereby, the Company and the Board of
Directors of the Company shall grant such approvals and take such actions as are
necessary under such laws and provisions so that the transactions contemplated
hereby may be consummated as promptly as practicable on the terms contemplated
hereby and otherwise act to eliminate or minimize the effects of such statute,
regulation, provision or contract on the transactions contemplated hereby.
5.12 Company Options
As soon as reasonably practicable following the date of this Agreement, the
board of directors of the Company (or, if appropriate, any committee
administering the Option Plans) shall adopt resolutions or take such other
actions as may be reasonably requested by Purchaser (which resolutions or other
actions may be contingent on the Purchaser acquiring pursuant to the Offer such
number of Shares which satisfies the Minimum Condition) as may be required to
effect the following: (i) adjust the terms of all outstanding Company Options,
whether vested or unvested, as necessary to provide that each Company Option
outstanding,
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including all vested and unvested Company Stock Options, shall be canceled
effective immediately prior to the Effective Time, with the holder thereof
becoming entitled to receive an amount in cash equal to (A) the excess, if any,
of (1) $6.125 over (2) the exercise price per share of the Common Stock subject
to such Company Option, multiplied by (B) the number of shares of the Common
Stock for which such Company Option shall not theretofore have been exercised;
provided, however, that all amounts payable pursuant to this Section 5.12 shall
be subject to any required withholding of Taxes or proof of eligibility of
exemption therefrom and to receipt of the written consent of the holder thereof
and shall be paid at or as soon as practicable following the Effective Time,
without interest; and (ii) make such other changes to the Company Plans as the
Company and Parent may agree are appropriate to give effect to the Merger.
5.13 Stock Option Plans
The Company agrees to take all necessary actions to ensure that all
offering periods outstanding under the Company's Stock Option Plans terminate
immediately prior to the Effective Time, and to ensure that the Stock Option
Plans terminate immediately prior to the Effective Time.
5.14 Employee Benefit Plans
The Company and its ERISA Affiliates each agree to adopt resolutions that
terminate or amend their respective 401(k) plans or other Employee Benefit Plans
in accordance with any directions given by Parent prior to the Effective Time
(the form and substance of which resolutions shall be subject to review and
approval by Parent), such terminations or amendments to be effective prior to
the Effective Time (but which may be contingent on the Purchaser acquiring
pursuant to the Offer such number of Shares which satisfies the Minimum
Condition).
5.15 Stockholder Litigation
The Company shall give Parent the opportunity to participate in the defense
or settlement of any stockholder litigation against the Company and its
directors relating to any of the transactions contemplated by this Agreement
until the purchase of Company Common Stock pursuant to the Offer, and
thereafter, shall give Parent the opportunity to direct the defense of such
litigation and, if Parent so chooses to direct such litigation, Parent shall
give the Company and its directors an opportunity to participate in such
litigation; provided, however, that no settlement of such litigation shall be
agreed to without Parent's consent; and provided further that no settlement
requiring a payment by a director shall be agreed to without such director's
consent.
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ARTICLE VI
CONDITIONS OF MERGER
6.1 Conditions to the Obligations of Each Party to Effect the Merger
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of each of the
following conditions:
(a) If required by the DGCL, this Agreement and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of the Company.
(b) Any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(c) Shares shall have been purchased pursuant to the Offer.
(d) No temporary restraining order, preliminary or permanent injunction,
judgment or other order, decree or ruling nor any statute, rule, regulation or
order shall be in effect which would (i) make the acquisition or holding by
Parent or its affiliates of Shares or shares of Common Stock of the Surviving
Corporation illegal or otherwise prevent the consummation of the Merger, (ii)
prohibit Parent's or Purchaser's ownership or operation of, or compel Parent or
Purchaser to dispose of or hold separate, all or a material portion of the
business or assets of Purchaser, the Company or any Significant Subsidiary
thereof, (iii) compel Parent, Purchaser or the Company to dispose of or hold
separate all or a material portion of the business or assets of Parent or any of
its Subsidiaries or the Company or any of its Significant Subsidiaries, (iv)
impose material limitations on the ability of Parent or Purchaser or their
affiliates effectively to exercise full ownership and financial benefits of the
Surviving Corporation, or (v) impose any material condition to the Offer, this
Agreement or the Merger.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination
This Agreement may be terminated, at any time prior to the Effective Time,
whether before or after approval by the shareholders of the Company:
(a) by mutual written agreement of the Boards of Directors of Parent and
the Company;
(b) by either Parent or the Company;
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(i) if the Offer shall be terminated or expire without any Shares
having been purchased pursuant to the Offer; provided, however, that a party
shall not be entitled to terminate this Agreement pursuant to this Section
7.1(b)(i) if it is in material breach of its representations and warranties,
covenants or other obligations under this Agreement; or
(ii) if any court of competent jurisdiction in the United States or
other United States governmental body shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or otherwise prohibiting
the Offer or the Merger and such order, decree, ruling or other action shall
have become final and nonappealable;
(c) by Parent or Purchaser:
(i) if the Board of Directors of the Company or any committee
thereof shall have approved, or recommended that shareholders of the Company
accept or approve, an Acquisition Proposal by a third party, or shall have
resolved to do any of the foregoing;
(ii) if the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified its approval of, or recommendation that
the shareholders of the Company accept or approve (as the case may be), the
Offer, this Agreement and the Merger, or shall have resolved to do any of the
foregoing;
(iii) if the Company shall have failed to include in the Schedule
14D-9 the recommendation of the Board of Directors of the Company that the
shareholders of the Company accept the Offer;
(iv) prior to the purchase of Shares pursuant to the Offer, in the
event that the conditions to the Offer set forth in clause (i) or (ii) of Annex
I shall not be satisfied or if any of the events set forth in clause (iii)
thereof shall have occurred; or
(v) if the Company is in material breach of any of its covenants or
obligations under this Agreement, or if there shall have been or be any material
inaccuracy in the representations and warranties of the Company contained in
this Agreement, either as of the date of this Agreement or subsequently;
(d) by the Company:
(i) if the Offer shall not have been commenced in accordance with
Section 1.1, or Parent or Purchaser shall have failed to purchase validly
tendered Shares in violation of the terms of the Offer within ten business days
after the expiration of the Offer; provided, however, that the Company shall not
be entitled to terminate this Agreement pursuant to this Section 7.1(d)(i) if it
is in material breach of its representations and warranties, covenants or other
obligations under this Agreement;
(ii) if the Board of Directors of the Company has resolved to, and in
fact does, recommend to the Company's Shareholders that they accept a Superior
Proposal, provided that all the provisions of Section 5.4 have been fully
complied with, and provided
-41-
further that the Company shall have paid to Parent the entire Break-up Fee as
provided in Section 7.3(b);
(iii) prior to the purchase of Shares pursuant to the Offer, if
Parent or Purchaser is in material breach of any of its covenants or obligations
under this Agreement, or any representation or warranty of Parent or Purchaser
contained in this Agreement shall have been incorrect, in any material respect,
when made or shall have since ceased to be true and correct in any material
respect; or
(iv) prior to the purchase of Shares pursuant to the Offer, in the
event that the conditions to the Offer set forth in clause (i) of Annex I shall
not be satisfied or if any of the events set forth in clause (iii)(A)(1) thereof
shall have occurred.
7.2 Procedure and Effect of Termination
In the event of the termination of this Agreement by the Company or Parent
or both of them pursuant to Section 7.1, the terminating party shall provide
written notice of such termination to the other party and this Agreement shall
forthwith become void and there shall be no liability on the part of Parent,
Purchaser or the Company, except as set forth in Sections 5.4(b) and 7.3.
Sections 5.4(b), 7.2, 7.3 and Article VIII shall survive the termination of this
Agreement.
7.3 Fees and Expenses
(a) Except as otherwise provided in this Agreement and whether or not the
transactions contemplated by the Offer and this Agreement are consummated, all
costs and expenses incurred in connection with the transactions contemplated by
the Offer and this Agreement shall be paid by the party incurring such expenses.
(b) Parent has advanced the Company $50,000 pursuant to a Non-Solicitation
and Expense Reimbursement Agreement dated June 14, 2000 between Parent and
Company (the "Non-Solicitation and Expense Reimbursement Agreement" and shall,
----------------------------------------------------
upon signing of this Agreement, advance to the Company $225,000 to fund
additional expenses to be incurred by the Company in connection with the
transactions contemplated by this Agreement. The Company shall repay to Parent
these advances in the event Parent or the Purchaser terminates this Agreement
pursuant to Section 7.1(c)(v). The parties acknowledge that the Non-
Solicitation and Expense Reimbursement Agreement is terminated as of the date
hereof.
(c) The Company shall pay to Parent, in same day funds, upon demand, (i) a
fee of U.S. $2 million (the "Break-up Fee"), if any of the following shall
------------
occur:
(i) if the Board of Directors of the Company or any committee
thereof shall have approved, or recommended that shareholders of the Company
accept or approve, an Acquisition Proposal by a third party, or shall have
resolved to do any of the foregoing;
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(ii) if the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified its approval of, or recommendation that
the stockholders of the Company accept or approve (as the case may be), the
Offer, this Agreement and the Merger, or shall have resolved to do any of the
foregoing; or
(iii) if the Company shall have failed to include in the Schedule
14D-9 the recommendation of the Board of Directors of the Company that the
stockholders of the Company accept the Offer.
(d) Parent, Purchaser and the Company agree that the agreement contained
in paragraph (c) above is an integral part of the transactions contemplated by
this Agreement, and that without such agreement, Parent and Purchaser would not
have entered into this Agreement. The parties acknowledge that the damages to
Parent and Purchaser in the event this Agreement is breached by the Company
would be extremely costly and impractical to calculated and that such amount
constitutes reasonable liquidated damages and reasonable compensation to Parent
and Purchaser for the loss likely to be sustained thereby and is not a penalty.
(e) Parent shall pay for filing fees related to compliance with requirements of
the HSR Act.
7.4 Amendment
This Agreement may be amended by each of the parties by action taken by or
on behalf of their respective Boards of Directors at any time prior to the
Effective Time; provided, however, that (i) such amendment shall be in writing
-------- -------
signed by all of the parties, (ii) any such waiver, amendment or supplement by
the Company shall be effective as against the Company only if approved by a
majority of the Continuing Directors and (iii) after adoption of this Agreement
and the Merger by the shareholders of the Company, no amendment may be made
without the further approval of the shareholders of the Company which reduces
the Merger Consideration or changes the form thereof or changes any other terms
and conditions of this Agreement if the changes, alone or in the aggregate,
would materially adversely affect the shareholders of the Company.
7.5 Waiver
At any time prior to the Effective Time, whether before or after the
Company's Shareholders Meeting, any party hereto, by action taken by its Board
of Directors, may (i) extend the time for the performance of any of the
obligations or other acts of any other party hereto or (ii) subject to the
provisions of Section 7.4, waive compliance with any of the agreements of any
other party or with any conditions to its own obligations. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party by a duly
authorized officer of such party. Notwithstanding the above, any waiver given
shall not apply to any subsequent failure of compliance with agreements of the
other party or conditions to its own obligations.
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ARTICLE VIII
MISCELLANEOUS
8.1 Severability
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party. 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 in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible.
8.2 Notices
All notices and other communications given or made pursuant hereto shall be
in writing and shall be deemed to have been duly given, or made as of the date
delivered if sent via telecopier or delivered personally (including, without
limitation, delivery by commercial carrier next-day delivery) to the parties at
the following addresses (or at such other address for a party as shall be
specified by similar notice, except that notices of changes of address shall be
effective upon receipt):
(a) If to Parent or Purchaser:
InfrastruX Group, Inc.
000-000xx Xxxxxx XX
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxx
Telecopier No. (000) 000-0000
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With copies to:
Xxxxxxx Coie LLP
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxxx Xxx
Telecopier No.: (000) 000-0000
(b) If to the Company:
UTILX Corporation
00000 Xxxxxxx Xxxx
X.X. Xxx 00000
Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxxxxxx
Telecopier No.: (000) 000-0000
With copies to:
Xxxxxx & Xxxx PC
0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
Telecopier No.(000) 000-0000
8.3 Entire Agreement; No Third Party Beneficiaries; No Assignment
This Agreement, Annex I, the documents delivered pursuant hereto or in
connection herewith, and the Confidentiality Agreement (i) constitute the entire
agreement and supersede all other prior agreements and undertakings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof (including the Non-Solicitation and Expense Reimbursement
Agreement), (ii) are not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder, and (iii) may not be assigned,
except that Parent or Purchaser may assign their rights hereunder in whole or in
part to one or more direct or indirect subsidiaries or affiliates of Parent
which, in written instruments reasonably satisfactory to the Company, shall
agree to make all representations and warranties of Purchaser set forth herein
and shall agree to assume all of such party's obligations hereunder and be bound
by all of the terms and conditions of this Agreement; provided, however, that no
-------- -------
such assignment shall relieve the assignor of its obligations hereunder.
8.4 Interpretation; Knowledge
(i) When a reference is made in this Agreement to Exhibits, such reference
shall be to an Exhibit to this Agreement unless otherwise indicated. The words
"include," "includes" and "including" when used herein shall be deemed in each
case to be followed by
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the words "without limitation." The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. When reference is made herein
to "the business of" an entity, such reference shall be deemed to include the
business of all direct and indirect subsidiaries of such entity. Reference to
the subsidiaries of an entity shall be deemed to include all direct and indirect
subsidiaries of such entity.
(ii) For purposes of this Agreement, the term "knowledge" means, with
---------
respect to any matter in question, that any of the directors, Chief Executive
Officer or Chief Financial Officer) of the parties, as the case may be, have
knowledge of such matter and knowledge that could have been obtained by such
persons with respect to those matters that would cause a reasonable person, in a
similar position, to investigate the matter further and that could have been
obtained from such investigation without undue effort.
8.5 Counterparts
This Agreement may be executed in one 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 party, it being understood that all parties need not sign the same
counterpart.
8.6 Other Remedies; Specific Performance
Except as otherwise provided herein, any and all remedies herein expressly
conferred upon a party will be deemed cumulative with and not exclusive of any
other remedy conferred hereby, or by law or equity upon such party, and the
exercise by a party of any one remedy will not preclude the exercise of any
other remedy. The parties hereto agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
8.7 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Washington, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law thereof; provided that
issues involving the corporate governance of any of the parties hereto shall be
governed by their respective jurisdictions of incorporation. Each of the
parties hereto irrevocably consents to the exclusive jurisdiction of any state
or federal court within King County, Washington, in connection with any matter
based upon or arising out of this Agreement or the matters contemplated herein,
other than issues involving the corporate governance of any of the parties
hereto, agrees that process may be served upon them in any manner authorized by
the laws of the State of Washington
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for such persons and waives and covenants not to assert or plead any objection
which they might otherwise have to such jurisdiction and such process.
8.8 Rules of Construction
The parties hereto agree that they have been represented by counsel during
the negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
8.9 WAIVER OF JURY TRIAL
EACH OF THE PARTIES HERETO 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 ACTIONS OF THE
PARTIES IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
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IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
INFRASTRUX GROUP, INC.
By: /s/ Xxxx Xxxxxx
-----------------------------------------
Name: Xxxx Xxxxxx
---------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
INFRASTRUX ACQUISITION, INC.
By: /s/ Xxxx Xxxxxx
-----------------------------------------
Name: Xxxx Xxxxxx
---------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
UTILX CORPORATION
By: /s/ Xxxxxxx Xxxxxxxxx
-----------------------------------------
Name: Xxxxxxx Xxxxxxxxx
---------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
ANNEX I
CONDITIONS OF THE OFFER
The term "Agreement" as used in this Annex I shall mean the Agreement and
---------
Plan of Merger to which this Annex I is attached, and all capitalized terms used
in this Annex I and not defined in this Annex I shall have the respective
meanings set forth in the Agreement.
Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) Purchaser's rights to extend and amend the Offer at any
time, Purchaser shall not be required to accept for payment, purchase or pay
for, or may terminate or amend the Offer and may postpone the acceptance of, and
payment for, subject to Rule 14e-1(c) under the Exchange Act (whether or not any
Shares have theretofore been accepted for payment or paid for pursuant to the
Offer), any Shares tendered pursuant to the Offer if:
(i) any waiting period (and any extension thereof) under the HSR Act
applicable to the purchase of Shares pursuant to the Offer shall not have
expired or been terminated prior to the Expiration Date;
(ii) the Minimum Condition is not satisfied;
(iii) at any time on or after the date of the Agreement, any of the
following events shall be determined by Parent or Purchaser to have occurred:
(A) there shall have been any action taken or threatened, or any
statute, rule, regulation, judgment, temporary restraining order, preliminary or
permanent injunction or other order, decree or ruling proposed, sought,
promulgated, enacted, entered, enforced or deemed applicable to the Offer or the
Merger by any Governmental Entity or arbitration panel that could reasonably be
expected to, directly or indirectly, (1) make the acceptance for payment or the
payment for, or the purchase of some or all of the Shares pursuant to the Offer
illegal or otherwise delay, restrict or prohibit consummation of the Offer or
the Merger or the consummation of any transaction contemplated by the Merger
Agreement, (2) result in a delay in or restrict the ability of Purchaser, or
render Purchaser unable, to accept for payment, pay for or purchase some or all
of the Shares, (3) require the divestiture by Parent, Purchaser, the Company or
any of their respective Subsidiaries or affiliates of all or any portion of the
business, assets or property of any of them or any Shares or impose any material
limitation on the ability of any of them to conduct their business and own such
assets, property or Shares, (4) impose any material limitation on the ability of
Parent, Purchaser or their affiliates to acquire or hold or to exercise
effectively all rights of ownership of the Shares, including the right to vote
any Shares purchased by any of them on all matters properly presented to the
shareholders of the Company, including, without limitation, the adoption and
approval of the Agreement and the Merger, (5) result in a material diminution in
the benefits expected to be derived by Parent or Purchaser as a result of the
transactions contemplated by the Offer or the Agreement (other than legislation
or rule-making affecting the industry as a whole), or
(6) impose any material condition to the Offer, the Agreement or the Merger
unacceptable to Parent or Purchaser; or
(B) the Company shall have failed to obtain all of the consents of
third parties set forth in Exhibit B by the Expiration Date; or
---------
(C) the Company shall have breached, or failed to comply with, in any
material respect, any of its covenants or obligations under the Agreement or
there shall have been or be any material inaccuracy in the representations and
warranties of the Company contained in the Agreement, either as of the date of
this Agreement or subsequently; or
(D) the Board of Directors of the Company or any committee thereof
shall have (1) withdrawn or modified (including without limitation, by amendment
of the Company's Schedule 14D-9) in a manner adverse to Parent or Purchaser its
approval or recommendation of the Offer, the Merger or the Agreement, (2)
approved or recommended any Acquisition Proposal by a third party other than the
Offer and the Merger, (3) publicly resolved to do any of the foregoing, or (4)
upon a request to reaffirm the Company's approval or recommendation of the
Offer, the Agreement or the Merger, the Board of Directors of the Company shall
fail to do so within two business days after such request is made; or
(E) the Agreement shall have been terminated in accordance with its
terms; or
(F) there shall have occurred any Material Adverse Effect on the
Company, or any event, fact or change which could reasonably be expected to
result in a Material Adverse Effect on the Company.
The foregoing conditions are for the sole benefit of Parent, Purchaser and
their affiliates and may be asserted by Parent or Purchaser regardless of the
circumstances giving rise to such condition. All the foregoing conditions may
be waived by Parent or Purchaser in whole or in part at any time and from time
to time in the sole discretion of Parent or Purchaser. The failure by Parent or
Purchaser at any time to exercise its rights with respect to the foregoing
conditions shall not be deemed a waiver of any such condition, and each
condition shall be deemed an ongoing condition with respect to which Parent or
Purchaser may assert its rights at any time and from time to time.
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