Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
among
NEWPORT CORPORATION,
MAGNESIUM ACQUISITION CORP.,
and
MICRO ROBOTICS SYSTEMS, INC.
Dated as of January 22, 2002
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AGREEMENT AND PLAN OF MERGER, dated as of January 22, 2002 (this
"Agreement"), among NEWPORT CORPORATION, a Nevada corporation ("Parent"),
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MAGNESIUM ACQUISITION CORP., a Massachusetts corporation and a wholly owned
subsidiary of Parent (the "Merger Sub"), and MICRO ROBOTICS SYSTEMS, INC., a
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Massachusetts corporation (the "Company").
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W I T N E S S E T H
WHEREAS, upon the terms and subject to the conditions of this Agreement
and in accordance with the General Laws of the Commonwealth of Massachusetts
("Massachusetts Law"), Parent and the Company will enter into a business
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combination transaction pursuant to which the Merger Sub will merge with and
into the Company (the "Merger");
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WHEREAS, the Board of Directors of the Company (i) has determined that the
Merger is fair to, advisable to and in the best interests of, the Company and
its Shareholders and has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement and (ii) has recommended the
approval of this Agreement by the Shareholders of the Company; and
WHEREAS, for Federal income tax purposes, the Merger is intended to
qualify as a reorganization under the provisions of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code");
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NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms of this Agreement and subject to
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the conditions set forth in Article VII, at the Effective Time (as defined in
Section 1.02), the Merger Sub shall be merged with and into the Company. As a
result of the Merger, the separate corporate existence of the Merger Sub shall
cease and the Company shall continue as the surviving corporation of the Merger
(the "Surviving Corporation"). As set forth in Section 6.15 below, as soon as
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possible, but not later than fifteen (15) days following the Effective Time,
the Surviving Corporation, as part of a single plan to which the Merger is a
part, shall be merged with and into a newly formed and wholly-owned Delaware
subsidiary of Parent ("Newsub") in accordance with the provisions of
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Massachusetts and Delaware Law. Newsub shall ultimately be the Surviving
Corporation in the Merger.
SECTION 1.02. Effective Time; Closing. As promptly as practicable
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following the satisfaction or, if permissible, waiver of the conditions set
forth in Article VII (or such other date as may be agreed by Parent and the
Company), the parties hereto shall cause the Merger to be consummated by filing
articles of merger (the "Articles of Merger") with the Secretary of the
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Commonwealth of Massachusetts in such form as is required by, and executed in
accordance with, the relevant provisions of Massachusetts Law. The term
"Effective Time" means the date and time of the filing of the Articles of
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Merger with the Secretary of the Commonwealth of Massachusetts (or such later
time as may be agreed by Parent and the Company and specified in the Articles of
Merger). Immediately prior to the filing of the Articles of Merger, a closing
(the "Closing") will be held at the offices of Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx,
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000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000, Xxxxxxx Xxxxx, Xxxxxxxxxx, 00000 (or such
other place as the parties may agree). The date on which the Closing shall
occur is referred to herein as the "Closing Date".
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SECTION 1.03. Effect of the Merger. At the Effective Time, the effect of
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the Merger shall be as provided in the applicable provisions of Massachusetts
Law. Without limiting the generality of the foregoing, at the Effective Time,
all the property, rights, privileges, powers and franchises of each of the
Company and the Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions, disabilities and duties of each
of the Company and the Merger Sub shall become the debts, liabilities,
obligations, restrictions, disabilities and duties of the Surviving Corporation.
SECTION 1.04. Articles of Organization; By-Laws.
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(a) At the Effective Time, the articles of organization of the
Company, as in effect immediately prior to the Effective Time, shall be the
articles of organization of the Surviving Corporation until thereafter amended
as provided by Law and such articles of organization.
(b) At the Effective Time, the by-laws of the Company, as in
effect immediately prior to the Effective Time, shall be the by-laws of the
Surviving Corporation until thereafter amended as provided by Law, the articles
of organization of the Surviving Corporation and such by-laws.
(c) The purposes of the Surviving Corporation shall be as set
forth in the articles of organization of the Company, as in effect immediately
prior to the Effective Time, until thereafter amended as provided by Law and
such articles of organization.
(d) The total number of shares and the par value, if any, of each
class of stock which the Surviving Corporation is authorized to issue shall be
as set forth in the articles of organization of the Company, as in effect
immediately prior to the Effective Time, until thereafter amended as provided
by Law and such articles of organization.
SECTION 1.05. Directors and Officers. The directors of Merger Sub
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immediately prior to the Effective Time shall be the directors of the Surviving
Corporation, each to hold office in accordance with the articles of
organization and by-laws of the Surviving Corporation, and the officers of the
Merger Sub immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
SECTION 1.06. Additional Actions. If at any time after the Effective
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Time, the Surviving Corporation shall reasonably determine that any further
deeds, assignments or assurances or any other acts or things are necessary to
(a) vest, perfect, or record in the Surviving Corporation its right, title or
interest in, to or under any of the rights, properties or assets of the
Company, or (b) otherwise carry out the provisions of this Agreement, the
Company and its officers and directors shall be deemed to have granted to the
Surviving Corporation an irrevocable power of attorney to execute and deliver
all such deeds, assignments or assurances and to take all acts necessary and
proper to vest, perfect or confirm title to possession of such rights,
properties or assets in the Surviving Corporation and otherwise to carry out
the provisions of this Agreement, and the officers and directors of the
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Surviving Corporation are authorized in the name of the Company or otherwise to
take any and all such actions.
SECTION 1.07. Tax Treatment. The parties intend that the Merger,
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including the sideways merger contemplated in Section 6.15 below, be treated as
a reorganization described in Section 368(a) of the Code. The parties to this
Agreement shall not take a position on any tax returns inconsistent with such
treatment unless otherwise required by Law.
ARTICLE II
MERGER CONSIDERATION; EXCHANGE OF CERTIFICATES; ESCROW
SECTION 2.01. Merger Consideration. At the Effective Time, by virtue of
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the Merger and without any action on the part of Parent, the Merger Sub, the
Company or the holders of any of the following securities, subject to the other
provisions of this Article II:
(i) each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than any
shares of Company Common Stock with respect to which the holders
thereof have perfected appraisal rights pursuant to Section 2.02(f),
and any shares of Company Common Stock to be canceled pursuant to
Section 2.01(a)(ii)) shall be converted into and represent the right
to receive:
(A) a number of shares of Parent Common Stock
equal to the Exchange Ratio; and
(B) an amount of cash equal to $15,000,000 divided
by the Company Common Capitalization, without interest (such shares
and cash, collectively, the "Merger Consideration");
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(ii) each share of Company Common Stock owned by Parent or
any direct or indirect wholly owned subsidiary of Parent or of the Company
(including without limitation treasury shares) immediately prior to the
Effective Time shall be cancelled and extinguished without any conversion
thereof and no payment or distribution shall be made with respect thereto;
and
(iii) each share of common stock, $0.01 par value per share,
of the Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly
issued, fully paid and nonassessable share of common stock, $0.01 par
value per share, of the Surviving Corporation.
(b) If, during the period between the date hereof and the
Effective Time, any change in the capital stock of Parent shall occur by reason
of reclassification, recapitalization, stock split or combination, exchange or
readjustment of shares, or any stock dividend thereon with a record date during
such period or any similar event, the Merger Consideration shall be
appropriately adjusted.
SECTION 2.02. Exchange of Certificates.
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(a) Exchange Agent. As of the Effective Time, Parent shall
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deposit, or shall cause to be deposited, with the corporate trust department of
Xxxxx Fargo Bank NA, Minneapolis,
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Minnesota, or such other bank or trust company designated by Parent and
approved by the Company, which approval shall not be unreasonably withheld (the
"Exchange Agent"), for the benefit of the holders of shares of Company Common
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Stock, for exchange in accordance with this Article II of this Agreement
through the Exchange Agent, the respective Merger Consideration (such Merger
Consideration being hereinafter referred to as the "Exchange Fund") issuable
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pursuant to Section 2.01(a) of this Agreement in exchange for outstanding
shares of Company Common Stock.
(b) Exchange Procedures.
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(i) At or promptly after the Effective Time, Parent shall
cause the Exchange Agent to mail to each holder of record of a certificate
or certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Common Stock
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Certificates"): (A) a letter of transmittal which shall be in such form
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and have such provisions as Parent may reasonably specify; and (B)
instructions to effect the surrender of the Common Stock Certificates in
exchange for the respective Merger Consideration provided in this
Agreement.
(ii) Upon surrender of a Common Stock Certificate for
cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and with such other documents as the Exchange
Agent may reasonably require, the holder of such Common Stock Certificate
shall be entitled to receive, and Parent shall cause the Exchange Agent to
promptly deliver in exchange therefor, the applicable Merger Consideration
as provided herein, less such holder's pro rata share of the Escrow Shares
(as defined in Section 2.04). The Common Stock Certificate so surrendered
shall forthwith be cancelled.
(iii) In the event of a transfer of ownership of shares of
Company Common Stock which is not registered in the transfer records of
the Company, the appropriate Merger Consideration shall be delivered to
the transferee if the Common Stock Certificate which represented such
shares of Company Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer
and by evidence that any applicable stock transfer taxes have been paid.
(iv) Until surrendered as contemplated by this Article II,
each Common Stock Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon surrender the
applicable Merger Consideration with respect to the shares of Company
Common Stock formerly represented thereby to which such holder is entitled
pursuant to Section 2.01, without interest.
(v) For purposes of making delivery of the applicable
Merger Consideration payable under this Agreement, the Exchange Agent
shall: (A) deliver to the Escrow Agent that portion of the Merger
Consideration representing each Shareholder's respective portion of the
Escrow Shares; and (B) deliver to each Shareholder the balance of the
applicable Merger Consideration. The deliveries to the Escrow Agent
required under this Section shall satisfy all obligations to deliver such
consideration to the Shareholders under this Agreement.
(vi) In the event any Common Stock Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such Common Stock Certificate to be lost,
stolen or destroyed, Parent shall cause the Exchange
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Agent to deliver in exchange for such lost, stolen or destroyed Common
Stock Certificate the respective Merger Consideration issuable in exchange
therefor pursuant to the terms of this Agreement. Parent may, in its
discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed Common Stock Certificate to
provide to Parent an indemnity agreement against any claim that may be
made against Parent with respect to, the Common Stock Certificate, alleged
to have been lost, stolen or destroyed, in accordance with Parent or the
Exchange Agent's customary procedures.
(c) Distributions with Respect to Unexchanged Shares of Parent
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Common Stock. No dividends or other distributions declared or made after the
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Effective Time with respect to Parent Common Stock comprising part of the
Merger Consideration with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Common Stock Certificate with respect to the
shares of Parent Common Stock represented thereby, and no cash payment in lieu
of any fractional shares shall be paid to any such holder pursuant to Section
2.02(e), until the holder of such Common Stock Certificate shall surrender such
Common Stock Certificate in accordance with this Section 2.02.
(d) No Further Rights in Company Stock. All cash and shares of
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Parent Common Stock issued upon conversion of shares of Company Common Stock in
accordance with the terms hereof (including any cash paid pursuant to Section
2.02(e)) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock.
(e) No Fractional Shares. No certificates or scrip representing
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fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Common Stock Certificates, and such fractional share interests will
not entitle the owner thereof to vote or to any other rights of a stockholder
of Parent. Each holder of a fractional share interest shall be paid an amount
in cash (without interest) equal to the product obtained by multiplying (i)
such fractional share interest to which such holder (after taking into account
all fractional share interests then held by such holder) would otherwise be
entitled by (ii) the Parent Share Value.
(f) Dissenting Shares.
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(i) Notwithstanding anything in this Agreement to the
contrary, if Sections 86 through 98 of the Massachusetts Business
Corporation Law shall be applicable to the Merger, shares of Company
Common Stock that are issued and outstanding prior to the Effective Date
and which are held by Shareholders who (A) have not voted such shares in
favor of the Merger, (B) shall have delivered, prior to any vote on the
Merger, a written demand for the fair value of such shares in the manner
provided in Sections 86 through 98 of the Massachusetts Business
Corporation Law and (C) as of the Effective Time, shall not have
effectively withdrawn or lost such right to dissenters' rights
("Dissenting Shares"), shall not be converted into or represent a right to
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receive the Merger Consideration pursuant hereto, but the holders thereof
shall be entitled only to such rights as are granted by Sections 86
through 98 of the Massachusetts Business Corporation Law. Each holder of
Dissenting Shares who becomes entitled to payment for such shares pursuant
to Sections 86 through 98 of the Massachusetts Business Corporation Law
shall receive payment therefor from the Surviving Corporation in
accordance with Massachusetts Law; provided, however, that if any such
holder of Dissenting Shares shall have effectively withdrawn such holder's
demand for appraisal of such shares or lost such holder's right to
appraisal and payment of such shares under Massachusetts Law, such holder
or holders (as the case may be) shall forfeit the right
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of appraisal of such shares and each such share shall thereupon be deemed
to have been canceled, extinguished and converted, as of the Effective
Time, into and represent the right to receive the Merger Consideration.
(ii) The Company shall give Parent (A) prompt notice of any
written demand for fair value, any withdrawal of a demand for fair value
and any other instrument served pursuant to Sections 86 through 98 of the
Massachusetts Business Law received by the Company, and (B) the
opportunity to direct all negotiations and proceedings with respect to
demands for fair value under Massachusetts Law. The Company shall not,
except with the prior written consent of Parent, voluntarily make any
payment with respect to any demand for fair value or offer to settle or
settle any such demand.
(g) No Liability. Neither Parent, the Exchange Agent nor the
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Surviving Corporation shall be liable to any holder of shares of Company Common
Stock for any such shares of Company Common Stock (or dividends or
distributions with respect thereto), or cash properly and legally delivered to
a public official pursuant to any abandoned property, escheat or similar law.
(h) Withholding Rights. Parent shall be entitled to deduct and
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withhold from the consideration otherwise payable pursuant to this Agreement to
any Shareholder such amounts as Parent is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of
state, local or foreign tax Law. To the extent that amounts are properly so
withheld by Parent, such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the Shareholder in respect of which such
deduction and withholding was made by Parent.
(i) Termination of Exchange Fund. Any portion of the Exchange
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Fund which remains undistributed to the Shareholders after six (6) months after
the Effective Time shall be delivered to Parent, upon demand, and any
Shareholders who have not theretofore complied with this Article II of this
Agreement shall thereafter look only to Parent for payment of their claim for
Merger Consideration.
SECTION 2.03. Stock Transfer Books. At the Effective Time, the stock
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transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. From and after the Effective Time, the holders of
certificates representing shares of Company Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Company Common Stock, except as otherwise provided in
this Agreement or by Law.
SECTION 2.04. Escrow.
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(a) Prior to or simultaneously with the Closing, the Company and
Parent shall enter into an escrow agreement (the "Escrow Agreement") with an
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escrow agent selected by Parent and reasonably acceptable to the Company (the
"Escrow Agent") substantially in the form of Exhibit A hereto. Prior to or
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simultaneously with the Closing, each Shareholder shall execute and deliver to
Parent a Shareholder Investment Representations and Joinder Agreement under
which such Shareholder shall, among other things, agree to be bound by the
terms of the Escrow Agreement and authorize and appoint a Shareholders'
Representative to act on his, her or its behalf in connection with the Escrow
Agreement. Pursuant to the terms of the Escrow Agreement, at the Closing,
Parent will deposit in escrow with the Escrow Agent shares of Parent Common
Stock having an aggregate
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value (calculated at the Parent Share Value) equal to fifteen percent (15%) of
the Merger Consideration (the "Escrow Shares") on a pro rata basis in
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accordance with each Shareholder's percentage ownership of Company Common
Stock. The shares of Parent Common Stock deposited with the Escrow Agent
pursuant to this Section 2.04 are collectively referred to as the "Escrow
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Fund". The Escrow Fund shall be available for the purpose of securing the
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indemnification obligations of the Shareholders set forth in Article VIII as
well as for any adjustment of the Merger Consideration pursuant to Section 2.05
below, with any such claim or adjustment to be handled on a pro rata basis. In
the event any claim is made by Parent against the Escrow Fund, the Escrow
Shares shall be valued at the Parent Share Value. The Escrow Fund shall be
held by the Escrow Agent under the Escrow Agreement for a period ending on the
later of (i) twelve (12) months following the Closing Date or (ii) March 30,
2003; provided, however, that if an indemnification claim is pending on such
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date, then the portion of the Escrow Fund subject to said claim shall be held
by the Escrow Agent until final resolution of such claim.
(b) The Shareholders' Representative (as defined below) shall have a
right to receive reimbursement from the Escrow Fund for any claims or expenses
incurred by the Shareholders' Representative with respect to or on behalf of
the Shareholders in connection with his duties as the Shareholders'
Representative, provided, however, that the Shareholders' Representative's
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right to receive reimbursement from the Escrow Fund shall be subject to the
conditions and restrictions set forth in this subsection (b) of this Section
2.04. The Shareholders' Representative's right to receive reimbursement from
the Escrow Fund shall be at all times subordinate and subject to Parent's
rights with respect to the Escrow Fund as provided in this Section 2.04 and in
the Escrow Agreement. The Shareholders' Representative shall only be entitled
to receive reimbursement from that portion of the Escrow Fund that is not used
or being used to satisfy or secure any indemnification obligations of the
Shareholders set forth in Article VIII or any adjustment of the Merger
Consideration. The Shareholders' Representative shall not be entitled to
receive any reimbursement from the Escrow Fund until the later of (i) the
termination date of the Escrow Fund as defined under the Escrow Agreement and
(ii) if an indemnification claim is pending on such termination date, then, as
to that portion of the Escrow Fund subject to said claim, the date of the final
resolution of said claim.
SECTION 2.05. Merger Consideration Adjustment.
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(a) The Company has delivered to Parent (i) the audited balance
sheet of the Company as of September 30, 2001 in accordance with GAAP (the
"September 30, 2001 Balance Sheet"), and (ii) a determination of the net worth
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of the Company as of September 30, 2001 in accordance with GAAP (the "September
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30, 2001 Net Worth"), and set forth in Schedule 2.05(a).
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(b) As soon as practicable following the Closing, but no later
than forty-five (45) days thereafter, Parent and its independent public
accountants shall cause to be prepared and deliver to Xxxxxxx Xxxxxxxxxx (as
the "Shareholders' Representative") an unaudited balance sheet of the Company
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as of the Closing Date (the "Draft Closing Balance Sheet"), which shall include
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a determination of the net worth of the Company as of the Closing Date (the
"Draft Closing Net Worth"). The Draft Closing Balance Sheet and the Closing
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Balance Sheet (as defined below) shall be prepared in accordance with GAAP,
consistently applied, provided that the Transaction Expenses (defined in
Section 10.10) and any gain or loss attributable to the sale of VTI shall not
be taken into account in computing Draft Closing Net Worth or Closing Net Worth
(as defined below). The Shareholders' Representative shall have thirty (30)
days to review and approve or disapprove the Draft Closing Balance Sheet. If
the Shareholders' Representative does not notify Parent in writing
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within such period that the Shareholders dispute any matter set forth in the
Draft Closing Balance Sheet, the Draft Closing Balance Sheet shall be deemed to
have been accepted by the Shareholders' Representative and shall be binding
upon all parties to this Agreement. If any disputes arise regarding the Draft
Closing Balance Sheet, the parties shall work in good faith to resolve such
disputes, and if the parties cannot resolve such dispute within fifteen (15)
days, after delivery by the Shareholders' Representative of the objections to
the Draft Closing Balance Sheet, such questions shall be referred to a
nationally recognized "Big Five" independent accounting firm mutually
satisfactory to Parent and the Company (the "Independent Accountant"), which
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shall be directed to resolve such questions within fifteen (15) days
thereafter, and whose decision shall be final and binding on all parties. All
of the fees and expenses of the Independent Accountant retained pursuant to
this Section 2.05(b) shall be paid by Parent, if the Independent Accountant
agrees with the position asserted by the Shareholders' Representative; shall be
paid by the Shareholders, if the Independent Accountant agrees with the
position asserted by Parent; or shall be split evenly by Parent and the
Shareholders if the Independent Accountant does not agree with either Parent or
the Shareholders' Representative. To the extent fees and expenses shall be
paid by the Shareholders under this Section 2.05(b), such fees and expenses
shall be charged to the Escrow Account as provided in Section 2.04. The
"Closing Balance Sheet" shall mean the Draft Closing Balance Sheet, together
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with any revisions thereto pursuant to this Section 2.05(b), including the
determination of the Independent Accountant, and the "Closing Net Worth" shall
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mean the Draft Closing Net Worth, together with any revisions thereof pursuant
to this Section 2.05(b), including the determination of the Independent
Accountant.
(c) Following the determination of the Closing Net Worth reflected
in the Closing Balance Sheet in accordance with Section 2.05(b), the Merger
Consideration shall be adjusted as follows:
(i) In the event that the Closing Net Worth is less than
the September 30, 2001 Net Worth by an amount greater than $300,000, the
Merger Consideration shall be reduced by an amount equal to (A) the excess
of said amount over $300,000 multiplied by (B) the Shareholder Ratio (as
defined in Section 10.02(a)) (the "Reduction Amount"), and the
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Shareholders shall be obligated to refund to Parent an amount equal to the
Reduction Amount, which shall be paid to Parent through a disbursement
from the Escrow Fund of shares of Parent Stock (valued at the Parent Share
Value) in an amount equal to such Reduction Amount.
(ii) In the event that the Closing Net Worth exceeds the
September 30, 2001 Net Worth by an amount greater than $300,000, the
Merger Consideration shall be increased by an amount equal to (A) the
excess of said amount over $300,000 multiplied by (B) the Shareholder
Ratio (as defined in Section 10.02(a)) (the "Increased Amount"), and
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Parent shall issue to the Shareholders, in complete satisfaction of the
increased Merger Consideration, shares of Parent Common Stock (valued at
the Parent Share Value) equal to the Increased Amount within fifteen (15)
days of the acceptance or deemed acceptance of the Closing Balance Sheet
or final resolution of any dispute thereof as contemplated in Section
2.05(b).
(iii) Following the determination of Closing Net Worth and
any required adjustment to the Merger Consideration under this Section
2.05(c), the Shareholders shall be entitled to a disbursement from the
Escrow Fund of any remaining Escrow Shares
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representing in excess of twelve and one-half percent (12.5%) of the
Merger Consideration (valued at the Parent Share Value).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule delivered by the Company to
Parent and the Merger Sub concurrently with the execution of this Agreement
(the "Company Disclosure Schedule"), the Company hereby represents and warrants
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to Parent and Merger Sub that the statements in this Article III are true and
correct. Any matter disclosed or cross-referenced in one section of the
Company Disclosure Schedule shall be deemed disclosed for all purposes of the
Company Disclosure Schedule to the extent that this Agreement requires such
disclosure and to the extent that the relevance and significance of such
disclosure are evident from said disclosure or cross-reference. Except as
otherwise provided to the contrary, each party makes the representations and
warranties without qualification as to knowledge.
SECTION 3.01. Organization and Qualification. The Company and each of its
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subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite corporate power to carry on its business as
now conducted and as currently proposed to be conducted and to own, lease and
operate its properties, except where the failure to be so organized, existing
or in good standing or to have such power and authority have not had a Material
Adverse Effect (as defined in Section 10.02(a)). Except as set forth on
Schedule 3.01, the Company and each of its subsidiaries is qualified to do
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business as a foreign corporation and is in good standing in every jurisdiction
in which the character or location of the assets owned by it or the nature of
the business transacted by it requires such qualification where the failure to
so qualify would have a Material Adverse Effect. The Sellers have delivered to
Parent true, correct and complete copies of the Company's and each of its
subsidiaries' (a) Articles of Organization (duly certified by the Secretary of
the Commonwealth of Massachusetts), (b) By-laws (certified by the Clerk of the
Company), and (c) Minute Book (certified by the Clerk of the Company). The
Company's, and each of its subsidiaries', articles of organization and by-laws
are in full force and effect. Neither the Company nor any of its subsidiaries
is in violation of any of the provisions of their respective articles of
organization or by-laws.
SECTION 3.02. Authorized Capital Stock of the Company.
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(a) The authorized capital stock of the Company consists of Five
Million (5,000,000) shares of Common Stock, $0.01 par value. As of the date
hereof, 2,030,084 shares of Company Common Stock are issued and outstanding,
all of which are duly and validly issued and outstanding, fully paid and
nonassessable and have not been issued in violation of the preemptive rights of
any shareholder or the rights of first refusal or the rights of participation
or any similar rights of any third person, except rights, if any, that have
been waived. As of the date hereof, 831,667 shares of Company Common Stock are
held in the Company's treasury. Shares of the Company Common Stock are the
only outstanding shares of any class or series of capital stock of the Company.
All of the outstanding shares of Common Stock of the Company have been issued
in transactions which were exempt from registration under the Securities Act of
1933, as amended (the "Securities Act"), and all applicable state securities
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laws and Blue Sky Laws. The Company currently has options to purchase a total
of 1,363,200 shares of Company Common Stock outstanding. Except as set forth
in the immediately preceding sentence, neither the Company nor its
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subsidiaries have any outstanding convertible securities, subscriptions,
options, warrants, preemptive rights or other agreements or commitments
obligating it to issue shares of the Company Capital Stock or relating to the
transfer or registration of the Company Capital Stock. There are no phantom
stock rights, stock appreciation rights or other similar rights in existence to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries are bound. None of the outstanding shares of stock
of the Company are subject to any preemptive rights, rights of first refusal or
rights of participation. There are no stockholder agreements, voting trusts or
other agreements or understandings to which the Company or any of its
subsidiaries is a party or by which they are bound relating to the voting or
registration of any shares of Capital Stock of the Company or any of its
subsidiaries. There are no outstanding contractual obligations of the Company
or any of its subsidiaries to repurchase, redeem or otherwise acquire any of
their respective securities. There are no outstanding contractual obligations
of the Company or any of its subsidiaries to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) to any
other person. The Company owns free and clear all shares of the capital stock
of each of its subsidiaries.
(b) To the best of the Company's knowledge, the Shareholders are,
and at the Closing will be, the owners, beneficially and of record, of that
number of shares of the Company Common Stock set forth opposite each such
Shareholder's name on Schedule 3.02, free and clear of all liens, claims,
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encumbrances, security interests, pledges, equities, options, charges,
restrictions and defects in title of any nature whatsoever, other than
restrictions imposed by federal and applicable state securities laws which do
not constitute an impediment to the transfer described in this Agreement. To
the best of the Company's knowledge, the Shareholders have, and at the Closing
will have, full legal right, capacity and power to sell and transfer their
shares of the Company Common Stock without obtaining the consent or approval of
any other person or governmental authority other than federal and applicable
state securities law regulators. To the best of the Company's knowledge, as of
the Closing, none of the Shareholders have granted and none of the Shareholders
are a party to, and as of the Closing none of the Shareholders shall be a party
to, any agreements, commitments or understandings providing for the grant of
any options to purchase or rights to acquire any of the Company Common Stock,
obligating any of the Shareholders to sell any of the Company Common Stock, or
restricting the right of any of the Shareholders to transfer the Company Common
Stock.
SECTION 3.03. Authority Relative to This Agreement. The Company has the
------------------------------------
full legal right and capacity and all necessary power and authority to execute
and deliver this Agreement and the Escrow Agreement, and to perform its
obligations hereunder and thereunder, and to consummate the Merger. This
Agreement and the Escrow Agreement have been duly executed and delivered by the
Company with the intent to be bound thereby and to perform and comply with all
respective obligations hereunder and thereunder. This Agreement and the Escrow
Agreement constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting the rights of creditors generally
and by general equitable principles. No further action is required to be taken
by the Company or any of the Shareholders, nor is it necessary for any of such
parties to obtain any action, approval or consent by or from any
non-governmental third party to enable each of such parties to enter into or
perform their respective obligations under this Agreement or the other
documents contemplated hereby, except for the consents (if any) of third
parties to the change in control of the Company under the Contracts (defined in
Section 3.11), which shall be obtained by the Company on or before the Closing
(unless waived in writing by Parent). Such consents are set forth in Schedule
--------
3.03 hereto.
----
SECTION 3.04. No Conflict; Required Filings and Consents.
------------------------------------------
10
(a) The execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement by the Company will not, (i)
conflict with or violate the articles of organization or by-laws of the
Company, (ii) assuming that all consents, approvals, authorizations and other
actions described in Section 3.04(b) have been obtained and all filings and
obligations described in Section 3.04(b) have been made, conflict with or
violate in any respect any foreign or domestic law, statute, ordinance, rule,
regulation, writ, injunction, order, judgment or decree ("Law") applicable to
---
the Company or by which any property or asset of the Company is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on
any property or asset of the Company pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation, except for, in the case of clauses (ii) and (iii)
above, such conflicts, violations, defaults or rights as would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect or to impair materially the ability of the Company to consummate the
transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement by the Company will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any domestic or foreign governmental or regulatory authority
("Governmental Entity"), except (i) for applicable requirements, if any, of
-------------------
state securities or blue sky laws ("Blue Sky Laws") or state takeover laws,
-------------
(ii) for the filing and recordation of appropriate merger documents as required
by Massachusetts Law and (iii) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect or to prevent or delay materially the consummation of
the transactions contemplated by this Agreement.
SECTION 3.05. Licenses and Permits; Compliance. Attached hereto as
--------------------------------
Schedule 3.05 is a list and description of all licenses, franchises, permits,
-------------
easements, certificates, consents, rights and privileges, and governmental
authorizations necessary to the conduct of the business of the Company
(collectively, "Licenses and Permits"). All such items are in full force and
--------------------
effect and complete and correct copies thereof have been furnished to Parent.
The Company is in compliance in all material respects with all conditions or
requirements imposed by or in connection with such Licenses and Permits and
with respect to the operations of its business and has not received any notice,
nor does the Company have any knowledge or reason to believe, that any
governmental authority intends to cancel, terminate or modify any of such
Licenses or Permits or that valid grounds for any such cancellation,
termination or modification currently exist. Except as set forth in Schedule
--------
3.05, all Licenses and Permits are transferable, and, commencing as of the
----
Closing, the Surviving Corporation will hold the Licenses and Permits now held
by the Company for the operation of the Company's business, on substantially
the same terms and conditions as are now applicable to the Company.
SECTION 3.06. Financial Statements.
--------------------
(a) The Company has delivered to Parent, (a) the audited balance
sheets of the Company as of September 30, 1999, 2000 and 2001 (herein referred
to as the "Balance Sheets") and (b) the audited statements of income of the
--------------
Company for the fiscal years ended September 30, 1999, 2000 and 2001. Such
financial statements are complete and correct in all material respects, are in
accordance with the books of account and records of the Company, present fairly
the financial position of the Company at the dates indicated and the results of
their respective operations for the
11
periods then ended, have been prepared in accordance with generally accepted
accounting principles (or "GAAP," as defined below), consistently applied for
the interim financial statements, and reflect reasonable reserves for all
liabilities of the Company in compliance with GAAP. The books, records, and
accounts of the Company accurately and fairly reflect, in reasonable detail,
all transactions, assets, and liabilities of the Company in accordance with
normal accounting practice. There is no liability or indebtedness of the
Company for dividends or other distributions declared or accumulated but unpaid
with respect to the Shares.
The term "generally accepted accounting principles" or "GAAP" shall mean
---------------------------------------- ----
generally accepted accounting principles, as defined by the Financial Accounting
Standards Board as of the date hereof.
(b) Except as set forth in Schedule 3.06(b), neither the Company
----------------
nor any of its subsidiaries has any Liabilities that are not shown on the
September 30, 2001 Balance Sheet delivered pursuant hereto, other than
Liabilities incurred after September 30, 2001, in the Ordinary Course of
Business, which have not had and are not expected to have, individually or in
the aggregate, a Material Adverse Effect on the financial condition or results
of operations or prospects of the Company or any of its subsidiaries or their
respective businesses.
(c) The September 30, 2001 Balance Sheet reflects all indebtedness
for borrowed money owed by the Company or any of its subsidiaries or to which
any of their respective assets or properties are subject at that date. A
complete and correct copy of each note, loan, credit or other similar
instrument pursuant to which any such indebtedness for borrowed money was
incurred has been delivered to Parent.
SECTION 3.07. Absence of Certain Changes or Events. Except as set forth in
------------------------------------
Schedule 3.07 attached hereto, since September 30, 2001, neither the Company
-------------
nor any of its subsidiaries has:
(a) made any changes in its articles of organization, by-laws,
authorized capital or outstanding securities;
(b) issued, sold, delivered or agreed to issue, sell or deliver
any of its capital stock, bonds or other corporate securities, or granted or
agreed to grant any options, warrants or other rights calling for the issuance,
sale or delivery thereof;
(c) borrowed or agreed to borrow any funds or incurred, or become
subject to, any obligations or liability (absolute or contingent), except
obligations and liabilities incurred in the Ordinary Course of Business (as
defined below);
(d) paid any obligations or liability (absolute or contingent)
other than current liabilities reflected in or shown on the balance sheets and
current liabilities incurred since September 30, 2001 in the Ordinary Course of
Business;
(e) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kinds whatsoever in respect of
its capital stock, or purchased, redeemed or otherwise acquired, or agreed to
purchase, redeem or otherwise acquire, any of its outstanding capital stock;
12
(f) except in the Ordinary Course of Business, sold, transferred,
or otherwise disposed of, or agreed to sell, transfer, or otherwise dispose of,
any of its assets, properties, or rights, or cancelled or otherwise terminated,
or agreed to cancel or otherwise terminate, any debts or claims;
(g) except in the Ordinary Course of Business, entered or agreed
to enter into any agreement or arrangement granting any preferential right to
purchase any of its assets, properties, or rights, or requiring the consent of
any party to the transfer and assignment of any such assets, properties, or
rights;
(h) waived any rights of value, without consideration therefor,
which in the aggregate are material to its business;
(i) accelerated, terminated, modified in any material respect, or
canceled any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) involving more than $100,000 to
which the Company is a party or by which it is bound;
(j) made, directly or indirectly, any accrual or arrangement for
or payment of bonuses or special compensation of any kind or any severance or
termination pay to any of its present or former officers, directors, or
employees;
(k) increased or agreed to increase the rate of compensation
payable or to become payable by the Company to any of its officers, directors,
or employees or adopted any new, or made any increase in, any existing, profit
sharing, bonus, deferred compensation, savings, insurance, pension, retirement,
or other employee benefit plan, payment or arrangement made to, for, or with
any of such officers, directors, or employees;
(l) made any capital expenditures (or commitments therefor) in
excess of $100,000 individually or $250,000 in the aggregate;
(m) entered into any other transaction other than in the Ordinary
Course of Business;
(n) experienced any labor trouble or been informed of the loss or
potential loss of any management or technical personnel which has, or can be
anticipated to have, a Material Adverse Effect;
(o) been warned or cited for any material violations of the
federal Occupational Safety Health Act of 1970 or any rules or regulations
promulgated thereunder or any other act, rules or regulations of any other
governmental agency;
(p) suffered any damages, destruction or losses which in the
aggregate are material to the Company's business, or incurred or become subject
to any material claim or liability for any damages or alleged damages for any
actual or alleged negligence or other tort or breach of contract which are in
the aggregate material to the Company's business;
(q) failed to operate the business of the Company in the Ordinary
Course of Business so as to use reasonable efforts to preserve such businesses
intact, to keep available the services of the employees of the Company, and to
preserve the goodwill of the suppliers of the Company, customers and others
having business relations with the Company except where such
13
failure would not have a Material Adverse Effect on the respective businesses
or financial condition of the Company;
(r) changed the accounting methods or practices by the Company in
a manner materially affecting its assets, liabilities or business;
(s) entered into any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, or licenses) involving more
than $100,000, other than customer contracts entered into in the Ordinary
Course of Business;
(t) imposed any Lien other than Permitted Liens, (as defined in
Section 3.16), upon any of its assets, tangible or intangible;
(u) delayed or postponed the payment of accounts payable or other
liabilities outside the Ordinary Course of Business, other than accounts which
the Company is disputing in good faith;
(v) granted any license or sublicense of any rights under or with
respect to any Intellectual Property other than in the Ordinary Course of
Business;
(w) made any loan to, or entered into any other material
transaction with, any of its affiliates, directors, officers, employees, the
Shareholders or any affiliate thereof;
(x) experienced any cancellations of customer orders exceeding
$100,000 individually or $500,000 in the aggregate; or
(y) experienced any change in its condition (financial or
otherwise), assets, liabilities, working capital, reserves, earnings or
business, except for changes contemplated hereby or changes which have not,
individually or in the aggregate, been materially adverse;
As used herein, the term "Ordinary Course of Business" shall mean the
---------------------------
ordinary course of business consistent with past custom and practice
(including, without limitation, with respect to quantity and frequency).
SECTION 3.08. Litigation. Except as set forth in Schedule 3.08 hereto,
---------- -------------
there is neither (a) any action, suit, proceeding or investigation, nor (b) any
counter or cross-claim in an action brought by or on behalf of the Company or
any of its subsidiaries, whether at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind, that is pending or,
to the best knowledge of the Company, threatened, against the Company or any of
its subsidiaries, which (i) could reasonably be expected to affect adversely
the Company's or its subsidiaries' ability to perform any of their respective
obligations under this Agreement or the agreements referenced herein or
complete any of the transactions contemplated hereby or thereby, or (ii)
involves the reasonable possibility of any material judgment or liability, or
which may become a claim, against Parent, the Company, or its subsidiaries' or
their respective businesses or assets prior to or subsequent to the Closing,
which in any such case would be reasonably expected to have a Material Adverse
Effect. Except as set forth in Schedule 3.08, neither the Company nor any of
-------------
its subsidiaries are subject to any judgment, order, writ, injunction, decree
or award of any court, arbitrator or governmental department, commission,
14
board, bureau, agency or instrumentality having jurisdiction over the Company
or any of its subsidiaries, or, any of their respective assets or businesses.
SECTION 3.09. Employees.
---------
(a) Except as described in Schedule 3.09, the Company is not a
-------------
party to, nor does the Company have any obligation pursuant to any oral or
written agreement, collective bargaining or otherwise, with any party regarding
the rates of pay or working conditions of any group of its employees, nor is
the Company obligated under any agreement to recognize or bargain with any
labor organization or union on behalf of such employees, nor has the Company
experienced any strikes, grievances or other collective bargaining disputes.
No organizational effort has been or is currently being made or to the
Company's knowledge, threatened by or on behalf of any labor union with respect
to employees of the Company.
(b) Neither the Company nor any of its officers, directors, or
employees has been charged or to the Company's knowledge, threatened with the
charge of any unfair labor practice, with respect to the business of the
Company. To the Shareholders' or the Company's knowledge, no facts exist which
could reasonably be expected to give rise to such a charge.
(c) The Company is in compliance in all material respects with all
applicable federal and state laws and regulations concerning the
employer-employee relationship and with all agreements relating to the
employment of the employees, including applicable wage and hour laws, worker
compensation statutes, unemployment laws, and social security laws.
(d) Except as described in Schedule 3.09, there are no pending,
-------------
nor within the past three years have there been, nor, to the Company's
knowledge, are there threatened, claims, investigations, charges, citations,
hearings, consent decrees, or litigation concerning: wages, compensation,
bonuses, commissions, awards, or payroll deductions; equal employment or human
rights violations regarding race, color, religion, sex, national origin, age,
handicap, veteran's status, marital status, disability, or any other recognized
class, status, or attribute under any federal or state equal employment law
prohibiting discrimination; representation petitions or unfair labor practices;
grievances or arbitrations pursuant to workers' compensation; wrongful
termination, negligent hiring, invasion of privacy or defamation; or
immigration (collectively, "Labor Claims") which would have a Material Adverse
------------
Effect on the Company.
(e) The Company is not liable for any unpaid wages, bonuses, or
commissions (other than those not yet due) or any tax, penalty, assessment, or
forfeiture for failure to comply with any of the foregoing. Except as
disclosed on Schedule 3.09, the Company has not made any promises for the
-------------
payment of any bonuses, backpay or other remuneration (over and above such
person's normal compensation) to any employees, contractors, interns or other
persons for their work on behalf of such entity.
(f) Except as described on Schedule 3.09, all employees are
-------------
employees at-will and for indefinite terms and there is no outstanding
agreement or arrangement with respect to severance payments. Except as
disclosed on Schedule 3.09, and to the knowledge of the Company, no officer, or
-------------
group of employees, has any plans to terminate employment with the Company.
(g) The Company is not aware that any employee is obligated under
any contract or other agreement, or subject to any judgment, decree, or order
of any court or administrative
15
agency, that would conflict with the obligation of such employee to use best
efforts to promote the interests of the Company.
(h) To the best of the Company's knowledge, no employee has: (i)
violated or may be violating any of the terms or conditions of any employment,
non-competition, or non-disclosure agreement between such employee and any
former employee or other third party, (ii) disclosed or may be disclosing, or
utilized or may be utilizing, any material trade secret or proprietary
information or documentation of such third party, except as set forth in
Schedule 3.09, or (iii) interfered or may be interfering, in the employment
-------------
relationship between such third party and any employee or any former employee.
To the best of the Company's knowledge, no third party has requested
information from the Company which suggests that such a claim might be
contemplated.
(i) Attached hereto as Schedule 3.09 is a true and complete list
-------------
of the names of all elected or appointed officers and all elected directors of
the Company.
SECTION 3.10. Labor and Employment Agreements.
-------------------------------
(a) As used herein, the following terms shall have the meanings
specified below:
(i) "Employee Plan" shall refer to any plan, program,
-------------
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether formal or informal, funded or unfunded
and whether or not legally binding, including without limitation, each
"employee benefit plan", within the meaning of Section 3(3) of ERISA which
is or has been maintained, contributed to, or required to be contributed
to, by the Company, its subsidiaries or any affiliate for the benefit of
any "Employee" (as defined below), and pursuant to which the Company, its
subsidiaries or any affiliate has or may have any material liability
contingent or otherwise;
(ii) "Employee" shall mean any current, former, or retired
--------
employee, officer, consultant, agent or director of the Company, its
subsidiaries or any affiliate;
(iii) "Employee Agreement" shall refer to each management,
------------------
employment, severance, consulting or similar agreement or contract between
the Company, its subsidiaries or any affiliate and any Employee.
(b) Schedule 3.10 contains an accurate and complete list of each
-------------
Employee Plan and each Employee Agreement, together with a schedule of all
liabilities, whether or not accrued, under each such Employee Plan. Except as
set forth in Schedule 3.10, neither the Company nor any of its subsidiaries has
-------------
any plan or commitment, whether legally binding or not, to establish any new
Employee Plan or Employee Agreement, to modify any Employee Plan or Employee
Agreement (except to the extent required by law or to conform any such Employee
Plan or Employee Agreement to the requirements of any applicable Law, in each
case as previously disclosed to Parent in writing, or as required by this
Agreement), or to enter into any Employee Plan or Employee Agreement, nor do
they have any intention or commitment to do any of the foregoing.
(c) The Company has provided to Parent: (i) correct and complete
copies of all documents embodying each Employee Plan and each Employee
Agreement including all amendments thereto and copies of all forms of agreement
and enrollment used therewith; (ii) the
16
most recent annual actuarial or account valuations, if any, prepared for each
Employee Plan; (iii) all opinions, notifications or determination letters and
rulings from the Internal Revenue Service, the United States Department of
Labor or any other governmental authority relating to Employee Plans and copies
of all applications, audits, examinations and correspondence to or from the
Internal Revenue Service, the United States Department of Labor or any other
governmental authority with respect any Employee Plan; (iv) the three most
recent years of annual and periodic accounting of Employee Plan assets; (v) all
material agreements and contracts relating to each Employee Plan, including but
not limited to, administrative service agreements, group annuity contracts and
group insurance contracts; and (vi) all communications material to any Employee
or Employees relating to any Employee Plan and any proposed Employee Plans, in
each case, relating to any amendments, terminations, establishments, increases
or decreases in benefits, acceleration of payments or vesting schedules or
other events which would result in any material liability to the Company or any
of its subsidiaries.
(d) (i) The Company and each of its subsidiaries have performed
all material obligations required to be performed by each of them under each
Employee Plan and Employee Agreement; (ii) each Employee Plan (and each related
trust, insurance contract or fund) complies in form and in operation in all
material respects with the applicable requirements of the terms of the plan as
well as ERISA, the Code and any other applicable law; (iii) there are no
actions, suits or claims pending, or, to the knowledge of the Company,
threatened or anticipated (other than routine claims for benefits) against any
Employee Plan or against the assets of any Employee Plan or under any Employee
Agreement; (iv) the Company and its subsidiaries shall perform all material
obligations required to be performed under each Employee Plan and Employee
Agreement between the date of this Agreement and the Closing; (v) each Employee
Plan can be amended, terminated or otherwise discontinued after the Closing in
accordance with its terms, without liability to the Company and its
subsidiaries or Parent (other than claims for benefits accrued or otherwise
properly payable thereunder prior thereto, and ordinary administration expenses
typically incurred in a termination event); (vi) there are no inquires or
proceedings pending or, to the knowledge of the Company threatened by the
Internal Revenue Service, the United States Department of Labor or any other
governmental authority with respect to any Employee Plan or Employee Agreement;
(vii) neither the Company nor any of its subsidiaries is subject to any penalty
or Tax, including, but not limited to, any excise tax, with respect to any
Employee Plan or Employee Agreement; (viii) to the Company's knowledge, no
prohibited transaction within the meaning of Section 4975 of the Code or
Section 406 or 407 of the Employee Retirement Income Security Act ("ERISA"),
-----
and not otherwise exempt under Section 408 of ERISA or Section 4975 of the
Code, has occurred with respect to any Employee Plan and no fiduciary has any
liability for breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of such Employee
Plan, and no action, suit, proceeding, hearing or investigation with respect to
the administration or the investment of the assets of such Employee Plan is
pending or, to the Company's knowledge, threatened; and (ix) each Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code has either received a favorable
determination letter with respect to each such Plan from the IRS or has
remaining a period of time under applicable Treasury regulations or IRS
pronouncements in which to apply for such determination letter and make any
amendments necessary to obtain favorable determination, and, to the Company's
knowledge, nothing has occurred since the date of such letter that could
reasonably be expected to affect the qualified status of such Employee Plan.
(e) Neither the Company nor any of its subsidiaries has not now,
nor has ever, maintained, established, sponsored, participated in, or
contributed to, any pension plan which is
17
subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or
Section 412 of the Code. Neither the Company nor any of its subsidiaries
contributes to, nor has ever contributed to or has ever been required to
contribute to any multi-employer plan as defined in Section 3(37)(A) of ERISA
("Multi-employer Plan") or has any liability (including withdrawal liability)
-------------------
under any Multi-employer Plan. None of the transactions contemplated by this
Agreement will trigger any withdrawal or termination liability under any
Multi-employer Plan.
(f) Neither the Company nor any of its subsidiaries has not now,
nor has ever, maintained, established, sponsored, participated in, or
contributed to, any pension plan which is subject to Part 3 of Subtitle B of
Title I of ERISA, Title IV of ERISA or Section 412 of the Code.
(g) No Employee Plan provides, or imposes any obligations to
provide life insurance, health or other employee benefits to any Employee upon
his or her retirement or termination of employment for any reason, except as
may be required by applicable Law, and neither the Company nor any of its
subsidiaries has represented, promised or contracted (whether in oral or
written form) to any Employee (either individually or to Employees as a group)
that such Employee(s) would be provided with life insurance, health or other
employee welfare benefits upon their retirement or termination of employment,
except to the extent required by applicable Law. Except to the extent (if any)
to which provision or allowance has been made in the September 30, 2001 Balance
Sheet or is otherwise required in connection with the transactions contemplated
by this Agreement, no material liability has been incurred by the Company or
any of its subsidiaries to pay damages (or wrongful or unfair dismissal or for
failure to comply with any order for the reinstatement or re-engagement of any
employee) and no gratuitous payments have been made or promised by the Company
or any of its subsidiaries in connection with the actual or proposed
termination or suspension of employment or variation or any contract of
employment of any present or former director or employee.
(h) The execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) under any Employee Plan, Employee
Agreement, trust or loan constitute an event that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in any options, warrants, rights
or benefits or obligation to fund benefits with respect to any Employee.
(i) All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports and Summary Plan Descriptions) have been
filed or distributed appropriately with respect to such Employee Plan and the
requirements of Part 6 of Subtitle B of Title I of ERISA and Section 4980B of
the Code have been met with respect to each such Employee that is an employee
welfare benefit plan as defined in Section 3(1) of ERISA ("Welfare Plan"). No
------------
Welfare Plan is self funded.
SECTION 3.11. Material Contracts.
------------------
(a) Except only as to contracts and documents listed in Schedule
--------
3.11 hereto or any other Schedule attached to this Agreement, neither the
----
Company nor any of its subsidiaries is a party to or bound by, and none of
their respective assets and properties are subject to, any:
(i) distribution or sales representative agreements
relating to the Company's or any of is subsidiaries' products and services;
18
(ii) employment, consulting, severance or representation
contract;
(iii) contract with any labor union or association;
(iv) bonus, pension, profit sharing, retirement, stock
purchase, stock option, hospitalization, insurance or other plan or
agreement providing employee benefits;
(v) lease with respect to any property, real or personal,
whether as lessor or lessee, providing for an annual rental in excess of
$100,000;
(vi) continuing contract, or series of related contracts,
which involves payments by the Company or any of its subsidiaries of in
excess of $100,000 individually or $250,000 in the aggregate;
(vii) contract or commitment for any capital expenditures
exceeding $100,000 individually or in the aggregate;
(viii) executory contracts for the purchase or sale of goods
or services by the Company or any of its subsidiaries exceeding $100,000 in
any year;
(ix) agreement relating to indebtedness, liability for
borrowed money or the deferred purchase price of property (excluding trade
payables in the Ordinary Course of Business) or any guarantee or other
contingent liability in respect of any indebtedness or obligation of any
person (other than the endorsement of negotiable instruments for collection
in the Ordinary Course of Business);
(x) agreement that contains restrictions with respect to
payment of dividends or any other distribution in respect of the equity of
the Company or any of its subsidiaries;
(xi) letters of credit or similar arrangements issued on
behalf of the Company or any of its subsidiaries;
(xii) agreement concerning a partnership or joint venture;
(xiii) powers of attorney granted by or on behalf of the
Company or any of its subsidiaries;
(xiv) agreement, other than agreements entered into in the
Ordinary Course of Business consistent with past practice, which prohibits
the Company or any of its subsidiaries from freely engaging in business
anywhere in the world; or
(xv) agreement under which the Company or any of its
subsidiaries has advanced or loaned any material amount to any of its
directors, officers and employees outside the Ordinary Course of Business;
(xvi) all contracts, agreements or commitments with any
Governmental Entity to which the Company or any of its subsidiaries is a
party;
19
(xvii) all contracts, agreements or commitments between or
among the Company or any of its subsidiaries and any Shareholder of the
Company or any of its subsidiaries or any affiliate of such person;
(xviii) all contracts or agreements for the storage,
transportation, treatment or disposal of any Hazardous Material (as defined
in Section 3.12);
(xix) all contracts or agreements pursuant to which the
Company has agreed to indemnify a third party or hold a third party
harmless against or from any fact, occurrence or other matter; or
(xx) any contract, agreement or commitment pursuant to
which the Company or any of its subsidiaries has granted any exclusive
marketing or other rights to any third party.
(b) A complete and correct copy of each contract listed on
Schedule 3.11 hereto or on any other Schedule attached hereto (collectively,
-------------
the "Contracts") has been delivered to Parent, and each such contract is in
---------
full force and effect and none of the parties thereto are in default
thereunder.
(c) Each of such contracts, agreements, leases, licenses and
instruments so listed, or required to be so listed, in Schedule 3.11 is a valid
-------------
and binding obligation of the Company or its subsidiaries, as applicable, and,
to the Company's knowledge, the other parties thereto, enforceable in
accordance with its terms, except as may be affected by bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally and general
principles of equity relating to the availability of equitable remedies.
Except as otherwise set forth in Schedule 3.11 hereto, there have not been any
-------------
defaults by the Company or its subsidiaries, as applicable, or, to the best
knowledge of the Company, defaults or any claims of default or claims of
nonenforceability by the other party or parties which, individually or in the
aggregate, would have a Material Adverse Effect, and there are no facts or
conditions that have occurred or that are anticipated to occur which, through
the passage of time or the giving of notice, or both, would constitute a
default by the Company or its subsidiaries, as applicable, or, to the knowledge
of the Company, by the other party or parties, under any of such contracts,
agreements, leases, licenses and instruments or would cause a creation of a
lien, security interest or encumbrance upon any of the assets of the Company or
its subsidiaries, as applicable, except such as would not have a Material
Adverse Effect. To the Company's knowledge, no Contract contains any material
requirement with which there is a reasonable likelihood that the Company or its
subsidiaries, as applicable, or any other party thereto will be unable to
comply.
(d) Except as listed on Schedule 3.11, there is no Contract, the
-------------
continuation, validity, effectiveness or terms of which will be affected by the
consummation of the transactions contemplated by this Agreement, except such as
would not have a Material Adverse Effect. Except as listed on Schedule 3.11,
-------------
there exists no actual or, to the best knowledge of the Company, any threatened
termination, cancellation, or limitation of, or any amendment, modification, or
change to any Contract, which would have a Material Adverse Effect on the
Company or its subsidiaries, as applicable, including without limitation, (i)
the business relationship of the Company or its subsidiaries, as applicable,
with any customer, distributor, or related group of customers or distributors
whose purchases individually or in the aggregate are material to the operations
and financial condition of the Company or its subsidiaries, as applicable, (ii)
the requirements of any customer or related group of customers of the Company
or its subsidiaries, as applicable, whose
20
purchases individually or in the aggregate are material to the operations and
financial condition of the Company or its subsidiaries, as applicable, or (iii)
the business relationship of the Company or its subsidiaries, as applicable,
with any material supplier.
(e) There are no commitments for capital expenditures in excess of
$100,000 that have been approved or made prior to the date of this Agreement by
the Company or any of its subsidiaries and that remain outstanding as of the
date hereof. To the Company's knowledge, none of the Contracts is for materials,
supplies, equipment, or services in excess of the Company's or its subsidiaries'
normal requirements or as needed for reasonably anticipated needs of the
Company's or its subsidiaries' respective businesses.
SECTION 3.12. Environmental and Safety Matters.
--------------------------------
(a) Hazardous Material. As of the date hereof, to the knowledge
------------------
of the Company, but without investigation, no underground storage tanks are
present under any property that the Company or any of its subsidiaries has at
any time owned, operated, occupied or leased. As of the date hereof, no
material 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, petroleum products, by-products
or breakdown products, radioactive materials, asbestos-containing materials or
polychlorinated biphenyls, urea-formaldehyde and all substances, chemicals or
materials listed, defined or regulated as hazardous or toxic substances or as a
pollutant, contaminate or waste, 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 any other Environmental Laws, and the
regulations promulgated pursuant to said laws, or any byproduct thereof (any
such substance, a "Hazardous Material"), but excluding office and janitorial
------------------
supplies, are present, as a result of (a) the actions of the Company or any of
its subsidiaries or (b) to the Company's knowledge, any third party's actions
or otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water, that the Company or any of its
subsidiaries has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. At no time has the Company or
------------------------------
any of its subsidiaries 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, nor has the Company or any of
its subsidiaries disposed of, transported, sold, or manufactured any product
containing a Hazardous Material, or contracted with any person to take any such
action (collectively, "Hazardous Materials Activities") in violation of any
------------------------------
rule, regulation, treaty or statute promulgated by any Governmental Entity to
prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity, which such violation would have a Material Adverse Effect taken as a
whole.
(c) Environmental Liabilities. No action, proceeding, revocation
-------------------------
proceeding, amendment procedure, writ, injunction or claim is pending or, to
the knowledge of the Company, threatened concerning any environmental permit or
any Hazardous Materials Activity of the Company or any of its subsidiaries.
The Company is not aware of any fact or circumstance which would reasonably be
expected to involve the Company or any of its subsidiaries in any environmental
litigation or impose upon any environmental liability which would have a
Material Adverse Effect. Neither the Company nor any of its subsidiaries has
entered into or agreed to any consent decree or order or is subject to any
judgment, decree or judicial order relating to compliance
21
with Environmental Laws, Environmental Permits or the investigation, sampling,
monitoring, treatment, remediation, removal or cleanup of Hazardous Materials
and, to the knowledge of the Company, as of the date of this Agreement, no
investigation, litigation or other proceeding is pending or threatened in
writing with respect thereto.
(d) Environmental Audits and Reports. Schedule 3.12 lists all
-------------------------------- -------------
material environmental reports, investigations and audits, of which the Company
or any of its subsidiaries has possession or actual knowledge and which were
generated during the last five years, relating to premises currently or
previously owned or operated by the Company or any of its subsidiaries (whether
conducted by or on behalf of the Company or any of its subsidiaries or a third
party, and whether done at the initiative of the Company or any of its
subsidiaries or directed by a Governmental Entity or other third party).
Complete and accurate copies of such written environmental reports,
investigations and audits have been delivered by the Company to Parent.
SECTION 3.13. Intellectual Property.
---------------------
(a) Certain Definitions
"Company Intellectual Property" means (i) the Registered Intellectual
-----------------------------
Property; (ii) any and all other Intellectual Property that is owned by the
Company or its subsidiaries, including the Company Software and the
Unregistered Intellectual Property; and (iii) any and all Intellectual Property
of third parties that is exclusively licensed to the Company or its subsidiary.
"Company Software" means all computer software, including all enhancements,
----------------
versions, releases and updates of such computer software, developed by or for
the Company or any of its subsidiaries or otherwise used in the Company's
products as of the Closing, and any other computer software regardless of the
computer software's stage of development. Company Software includes all source
code, object code, firmware, development tools, documentation, files, records
and data, and all media on which any of the foregoing is recorded. For purposes
of clarification, the Company Software does not include computer software that
is licensed under the Excluded Licenses.
"Excluded Licenses" means contracts, licenses, or other agreements
-----------------
currently in effect relating to any Intellectual Property that constitutes: (i)
"shrink wrap" software; or (ii) third party software generally available to the
public for a license fee of less than $10,000.
"Intellectual Property" means any or all of the following and all rights
---------------------
in, arising out of, or associated therewith, whether registered or
unregistered, as applicable: (i) United States and foreign patents and
applications therefor and all reissues, divisions, renewals, extensions,
provisionals, continuations and continuations-in-part thereof; (ii) inventions
and discoveries (whether or not patentable and whether disclosed or
undisclosed), disclosures on inventions, trade secrets, proprietary
information, know-how, technical data and customer lists, and all documentation
relating to any of the foregoing material to the business of the Company; (iii)
copyrights, copyright registrations and applications therefor and all other
corresponding rights thereto throughout the world; (iv) industrial designs and
any registrations and applications therefor throughout the world; (v) trade
names, logos, common law trademarks and service marks, and trademark and
service xxxx registrations and applications therefor and all goodwill
associated with the foregoing throughout the world; (vi) data bases and data
collections and all rights therein throughout the world; (vii) all Web
addresses, sites and domain names; (viii) computer software; (ix) any similar
corresponding or equivalent rights to any one of the foregoing; and (x) all
documentation directly related to any of the foregoing.
22
"Registered Intellectual Property" means all of the following items of
--------------------------------
Intellectual Property owned by the Company or any of its subsidiaries:
(i) United States and foreign patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent to use applications or other registrations related to trade
identity and trademarks; (iii) registered copyrights and applications for
copyright registration; (iv) mask work registrations and applications to
register mask works; (v) all Web addresses, sites and domain names; and
(vi) any other Intellectual Property that is the subject of an application,
certificate or registration filed with, issued by, or recorded by, any state,
government, or other public legal authority.
"Unregistered Intellectual Property" means all Intellectual Property owned
----------------------------------
by the Company, other than the Registered Intellectual Property and the Company
Software, that is relevant to conducting the business as now being conducted
and as presently proposed to be conducted, including: (i) disclosures or
inventions; (ii) trade secrets, documented know-how, proprietary processes, and
other documented proprietary information relevant to conducting the business of
the Company; (iii) unregistered trademarks; and (iv) all unregistered Web
addresses, sites and domain names.
(b) Schedule 3.13(b) contains a complete list (showing in each
----------------
case the registered or other owner, registration, application or issue date and
number, if any) of all Registered Intellectual Property.
(c) The Company or any of its subsidiaries (i) owns all rights,
title, and interest in all Company Intellectual Property free and clear of any
encumbrance, including ownership of pending and accrued causes of action for
patent, trademark, or copyright infringement, misappropriation, and unfair
business practice and has the sole and exclusive right to bring actions for
infringement and misappropriation of such Company Intellectual Property, and
(ii) owns free and clear of any encumbrances or otherwise has the right to all
Intellectual Property necessary to conduct the business of the Company or any
of its subsidiaries as it is currently conducted, including its design,
development, manufacture, and sale of its products, services and the Company
Software (including those products, services and the Company Software currently
under development).
(d) Each item of Registered Intellectual Property is valid and
subsisting; all necessary registration, maintenance or annuity, and renewal
fees in connection with such item of Registered Intellectual Property have been
made; all necessary documents and certificates in connection with such
Registered Intellectual Property have been filed with the relevant patent,
copyright, trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property; and all patent, trademark, service xxxx and
copyright applications set forth on Schedule 3.13(b) have been duly filed. No
----------------
Registered Intellectual Property has been or is now involved in any
interference, reissue, reexamination, opposition or cancellation proceeding
and, to the Company's best knowledge, (A) no such action is or has been
threatened with respect to any of the Registered Intellectual Property, and
(B) to the knowledge of the Company, there is no patent or patent application
of another person potentially interfering with any Registered Intellectual
Property.
(e) Except as described in Schedule 3.13(e), all employees,
----------------
agents, consultants, contractors, or other persons who have contributed to or
participated in the creation or development of any the Company Intellectual
Property, including Company Software: (i) made such contribution pursuant to
and within the scope of employment with the Company or any of its subsidiaries
as an employee or otherwise as a party to a "work-for-hire" agreement under
which the Company or any of
23
its subsidiaries is deemed to be the owner and/or author, as applicable, of all
right, title, and interest therein; or (ii) have executed a written assignment
or other agreement to assign in favor of the Company or any of its subsidiaries
legally transferring to the Company or any of its subsidiaries all right, title
and interest in the Company or any of its subsidiaries Intellectual Property
and ownership of all pending and accrued causes of action relating thereto.
(f) Except as set forth on Schedule 3.13(f), all employees and
----------------
non-employees (including interns, trainees, independent contractors to the
Company, vendors, customers, joint-venturers, and other potential claimants)
who have had access to any Company Intellectual Property, including the Company
Software, have executed a confidentiality agreement, prior to receipt of the
Company confidential/proprietary information.
(g) Except as set forth on Schedule 3.13(g): (i) the Company
----------------
and its subsidiaries have complete and exclusive right, title and interest in
and to the Company Software; (ii) no third party has any interest in, or right
to compensation from the Company or any of its subsidiaries by reason of, the
use, exploitation, or sale of the Company Software; (iii) to the Company's
knowledge, none of the Company Software contains any source code or portions of
source code (including any "canned program" or "free-xxxx") constituting a
material portion of the Company Software created by any party other than the
authors of the Company Software on behalf of the Company, (iv) the Company
Software is not subject by agreement to any transfer, assignment, site,
equipment, or other operational limitation, and no situation, matter, or
agreement exists that would prevent the Company or any of its subsidiaries from
making any change to the Company Software or combining it with other software
in a lawful manner, subject to restrictions under applicable patent laws;
(v) the Company and its subsidiaries have maintained and protected the Company
Software with appropriate proprietary notices (including, without limitation,
the notice of copyright in accordance with the requirements of 17 U.S.C. [sec]
401), confidentiality and non-disclosure agreements and such other measures as
are reasonably necessary to protect the proprietary, trade secret or
confidential information contained therein; (vi) the Company Software is
eligible for protection and registration under applicable U.S. copyright law
and has not been forfeited to the public domain; (vii) the Company and its
subsidiaries have copies of all releases or separate versions of the Company
Software so that the same may be subject to registration in the United States
Copyright Office; (viii) to the knowledge of the Company without further
inquiry, the Company Software does not infringe any copyright or other
Intellectual Property rights of any other person; (ix) the Company Software
includes the source code, system documentation, statements of principles of
operation and schematics, as well as any pertinent commentary, explanation,
program (including compilers), workbenches, tools, and higher level (or
"proprietary") language used for the development, maintenance, implementation
and use thereof, so that a trained computer programmer could develop, maintain,
support, compile and use all releases or separate versions of the same that are
currently subject to maintenance obligations by the Company or any of its
subsidiaries; (x) there are no agreements or arrangements in effect with
respect to the marketing, distribution, licensing or promotion of the Company
Software by any other person; (xi) neither the Company nor any of its
subsidiaries has any source code for the Company Software or other the Company
Intellectual Property in escrow; and (xii) neither the Company nor any of its
subsidiaries has received notice of, and neither the Company nor any of its
subsidiaries has knowledge of, any complaint, assertion, threat, or allegation
inconsistent with the preceding statements in this paragraph.
(h) No claims of any kind have been made by the Company or any
of its subsidiaries against any third party that, and the Company has no
knowledge that, any third party
24
infringes, or has previously infringed, misappropriates, or has previously
misappropriated any Company Intellectual Property.
(i) Except as set forth in Schedule 3.13(i), no claims of any
----------------
kind have been made or asserted by any party against the Company or any of its
subsidiaries, or, to the knowledge of the Company, against or to the Company's
employees, agents or contractors, customers, vendors, suppliers, or
distributors claiming or alleging that the Company or any of its products
(including products currently under development), services, or methods of
operation infringe, have infringed, contribute to the infringement or induce
the infringement of, misappropriate the Intellectual Property of any third
party, violate the right of any person (including rights of privacy or
publicity), or constitute unfair competition, nor is the Company or any of its
subsidiaries aware of or on notice of any such infringement, misappropriation
or violation. (i) Except as set forth in Schedule 3.13(i), to the Company's
----------------
knowledge, (i) neither the Company nor any of its subsidiaries has infringed
any Intellectual Property right of any third party or breached any obligation
of confidentiality owed to a third party, and (ii) the continued operation of
the Company's business consistent with past practices will not infringe any
Intellectual Property rights of a third party.
(j) No Company Intellectual Property or product or service of
the Company or any of its subsidiaries is subject to any outstanding decree,
order, judgment, or stipulation restricting in any manner the use or licensing
thereof by the Company or any of its subsidiaries.
(k) Schedule 3.13(k) contains a list (showing in each case the
----------------
parties thereto and the material terms thereof) of all contracts, licenses,
assignments, software escrows, and other agreements to which the Company or any
of its subsidiaries is a party relating to any Intellectual Property licensed
or assigned to the Company or any of its subsidiaries (collectively the
"Company Licenses") other than Excluded Licenses. Except as set forth on
----------------
Schedule 3.13(k): (i) the Company Licenses listed on Schedule 3.13(k) are in
---------------- ----------------
full force and effect; (ii) the consummation of the transactions contemplated
by this Agreement will neither violate nor result in the breach, modification,
cancellation, termination, or suspension of the Company Licenses listed on
Schedule 3.13(k); (iii) the Company and its subsidiaries are in compliance with
----------------
and have not breached any term of, the Company Licenses listed on Schedule
--------
3.13(k); and (iv) to the Shareholders' and the Company's knowledge, all other
-------
parties to the Company Licenses listed on Schedule 3.13(k) are in compliance
----------------
with, and have not breached any term of such the Company Licenses. Except as
disclosed on Schedule 3.13(k), following the Closing, the Company will be
----------------
permitted to exercise all of its rights under the Company Licenses listed on
Schedule 3.13(k) without the payment of any additional amounts or consideration
----------------
other than ongoing fees, royalties or payments that the Company or any of its
subsidiaries would otherwise be required to pay (all of which are specified in
Schedule 3.13(k)).
----------------
(l) Except as set forth on Schedule 3.13(l) and other than
----------------
end-user licenses, neither the Company nor any of its subsidiaries has: (i)
licensed, or otherwise authorized any third party reseller, or original
equipment manufacturer (OEM) to make, have made, use or sell, copy, distribute,
modify, reverse engineer, decompile, prepare derivatives of, or disclose, any
the Company Intellectual Property including the Company Software; (ii) conveyed,
disclosed, or licensed to any third party any proprietary or trade secret
information as "trade secret" is defined in the Uniform Trade Secrets Act, under
circumstances that could reasonably be expected to cause a Material Adverse
Effect on the Company; and (iii) by any of its acts or omissions (or by acts or
omissions of its directors, officers, employees, or agents) caused any
proprietary rights in the Company
25
Intellectual Property, including the Company Software, to be diminished, or
adversely affected to any material extent.
(m) Schedule 3.13(m) lists all contracts, licenses, software
----------------
escrows, and other agreements between the Company or any of its subsidiaries
and any other person wherein or whereby the Company or any of its subsidiaries
has agreed to assume, or assumed, any obligation or duty to indemnify, hold
harmless or otherwise assume or incur any obligation or liability with respect
to the infringement by the Company or any of its subsidiaries or such other
person of the Intellectual Property rights of any other person; provided,
however, that the foregoing only applies to agreements for which the Company's
or any of its subsidiaries' obligations are continuing as of the date of this
Agreement.
(n) Except as set forth in Schedule 3.13(n), there are no
----------------
contracts, licenses, software escrows, and other agreements between the Company
or any of its subsidiaries and any other person with respect to the Company
Intellectual Property with respect to which the Company has received notice of
any dispute that could be reasonably considered to be a material dispute
regarding the scope of such agreement, or performance under such agreement
including with respect to any payments to be made or received by the Company or
any of its subsidiaries thereunder.
(o) No government funding or university or college facilities
were used in the development of any the Company Intellectual Property in a
manner that would give such government or university or college any interest in
the Company Intellectual Property.
(p) To the knowledge of the Company, (i) no product, service,
or publication of the Company or any of its subsidiaries, (ii) no material
published or distributed by the Company or any of its subsidiaries, and
(iii) no conduct or statement of the Company or any of its subsidiaries,
constitutes obscene material, a defamatory statement or material, or violates
any rights, including rights of publicity or privacy, of any person.
SECTION 3.14. Tax Matters.
-----------
(a) The Company has, or prior to the Closing will have, prepared
and timely filed all required Tax Returns (as defined below) relating to any and
all Taxes (as defined below) payable by the Company and such Tax Returns are
true and correct and have been completed in accordance with applicable law.
(b) The Company has, or prior to the Closing will have: (i) paid
all Taxes it is required to pay and will have withheld with respect to its
Employees all income taxes, social security and insurance contributions and
other Taxes required to be withheld and, if required, will have deposited same
with the appropriate governmental agency, and (ii) will have accrued on the
Balance Sheets all Taxes attributable to the Company for the periods covered by
the Balance Sheets (whether or not such unpaid Taxes are shown on a Tax Return
for such period and whether or not a Tax Return has been filed for such period)
and will not have incurred any liability for Taxes for the period prior to the
Closing other than in the Ordinary Course of Business.
(c) The Company has not been delinquent in the payment of any
Tax nor is there any Tax deficiency outstanding, assessed or proposed against
the Company nor has the Company executed any waiver of any statute of
limitations on or extending the period for the assessment or collection of any
Tax.
26
(d) No audit or other examination of any Tax Return of the
Company is presently in progress, nor has the Company been notified of any
request for such audit or other examination.
(e) The Company has no liabilities for unpaid Taxes which have
not been accrued or reserved against in accordance with GAAP on the Balance
Sheets, whether asserted or unasserted, contingent or otherwise.
(f) The Company has no knowledge of any basis for the assertion of
any claim relating or attributable to Taxes which, if adversely determined,
would result in any lien, security interest, encumbrance, pledge, equity, claim,
charge, restriction, condition or other adverse interest of any nature
whatsoever on the Company or its assets.
(g) The tax basis of the Company in its assets for purposes of
determining its future amortization, depreciation and other income tax
deductions is accurately reflected on its tax books and records.
(h) Neither the Company nor any of its subsidiaries has filed any
consent under Code [sec] 341(f) concerning collapsible corporations. Neither the
Company nor any of its subsidiaries has made any payments or provided any
benefits, is obligated to make any payments or provide any benefits, or is a
party to any agreement that under certain circumstances could obligate it to
make any payments or provide any benefits that will not be fully deductible
under Section 162(m) or 280G of the Code or similar provisions of applicable
law. The Company is not and has not been a United States real property holding
corporation within the meaning of Code [sec] 897(c)(2) during the applicable
period specified in Code [sec] 897(c)(1)(A)(ii). Neither the Company nor any of
its subsidiaries has taken any position on any Tax Return of the Company or any
of its subsidiaries that would require disclosure under Code [sec] 6662 or any
similar provision of applicable law. Neither the Company nor any of its
subsidiaries is a party to any Tax allocation or sharing agreement or similar
arrangement with any other party. Neither the Company nor any of its
subsidiaries (A) has ever been a member of an affiliated group filing a
consolidated Federal income Tax Return (other than the consolidated group of
which the Company is the common parent) or (B) has any liability for the Taxes
of any other person under Treas. Reg. [sec] 1.1502-6 (or any similar provision
of state, local, or foreign law), as a transferee or successor, by contract, or
otherwise.
(i) Except as indicated on Schedule 3.14(i), to the Company's
----------------
knowledge, neither the Company nor any of its subsidiaries maintains or ever
has maintained a permanent establishment (as defined under applicable law) in
any location outside of the United States and neither the Company nor any of
its subsidiaries has ever received notice to the contrary from any foreign
governmental authority. Neither the Company nor any of its subsidiaries owes or
has ever owed Taxes to any foreign authority outside the country in which it is
domiciled.
27
(j) No asset of the Company or of any of its subsidiaries is
subject to the alternative depreciation system under Code [sec] 168(g). No
portion of the cost of any asset of the Company or of any of its subsidiaries
has been financed directly or indirectly from the proceeds of any tax-exempt
state or local government obligation described in Code [sec] 103(a). None of the
assets of the Company or of any of its subsidiaries is property that the
Company or any of its subsidiaries is required to treat as being owned by any
other person pursuant to the safe harbor lease provisions of former Code [sec]
168(f)(8).
(k) During the past five years, neither the Company nor any of
its subsidiaries has been a party to: (i) any transaction that has been
reported as a reorganization within the meaning of Code [sec] 368, or (ii) any
transaction, either as a distributing corporation or controlled corporation,
that has been reported to qualify for tax-free treatment under Code [sec] 355.
(l) There are no outstanding rulings of, or requests for
rulings with, any Tax authority expressly addressed to the Company or any of
its subsidiaries that are, or if issued would be, binding upon the Company or
any of its subsidiaries after the Closing.
(m) Neither the Company nor any of its subsidiaries will have
any taxable income or gain as a result of prior intercompany transactions that
have been deferred and that will be taxed as a result of the changes in
ownership contemplated by this Agreement.
(n) Except as disclosed on Schedule 3.14(n), neither the
----------------
Company nor any of its subsidiaries has any excess loss account with respect to
the stock of any other corporation.
(o) Neither the Company nor any of its subsidiaries has, in a
manner that would be binding on either the Company or its subsidiaries after
the Closing, executed, become subject to, or entered into any closing agreement
pursuant to Code [sec] 7121 or any similar provision of applicable law.
(p) Except as set forth on Schedule 3.14(p), none of the
----------------
subsidiaries of the Company is an entity organized (i) in a foreign
jurisdiction or (ii) pursuant to a foreign law.
The term "Tax" or collectively "Taxes" means (i) any and all federal,
--- -----
state and local and other foreign taxes, assessments and other governmental
charges, duties, impositions and liabilities, including taxes based upon or
measured by gross receipts, license, income, profits, sales, use and occupation,
and value added, ad valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise, estimated, severance, stamp, occupation, premium,
windfall profits, environmental, withholding, social security (or similar),
disability, unemployment, and property taxes, together with all interest,
penalties and additions imposed with respect to such amounts; (ii) any liability
for the payment of any amounts of the type described in clause (i) as a result
of being a member of an affiliated, consolidated, combined or unitary group for
any period; and (iii) any liability for the payment of any amounts of the type
described in clause (i) or (ii) as a result of any obligations under any
agreements or arrangements with any other person with respect to such amounts
and including any liability for taxes of a predecessor entity.
The term "Tax Return" shall mean any return, declaration, report, claim
----------
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
28
SECTION 3.15. Vote Required. The only vote of the holders of any classes
-------------
or series of capital stock of the Company necessary to approve this Agreement,
the Merger and the other transactions contemplated by this Agreement is the
affirmative vote of the holders of at least two-thirds of the outstanding
shares of Company Common Stock in favor of the approval of this Agreement.
SECTION 3.16. Leases, Title to Properties, Etc. The Company does not
---------------------------
own any real property. Attached hereto as Schedule 3.16 is a general
-------------
description of each parcel of real property leased by the Company.
Schedule 3.16 hereto describes each lease agreement under which the Company has
-------------
any leasehold interest in any real property. The Company is in possession of
all such real properties leased by it. The Company has good and marketable
title to all properties and assets owned by it, including those reflected in
the Balance Sheets (other than properties and assets reflected in the Balance
Sheets which have since been sold or otherwise disposed of in the Ordinary
Course of Business (as defined in Section 3.07) and those described in
Schedules 3.13, 3.17 and 3.18) free and clear of all liens, mortgages, security
-------------- ---- ----
interests and encumbrances, including any conditional sale or other title
retention agreement (collectively, "Liens"), except for the following matters
-----
(the "Permitted Liens"):
---------------
(a) liens for Taxes (as defined in Section 3.14) not yet due
and payable;
(b) statutory liens in immaterial amounts which are not yet
delinquent;
(c) minor defects and irregularities in title or encumbrances
which do not impair the use thereof for the purposes for which they are held;
and
(d) as set forth in the Balance Sheets.
The leases set forth in Schedule 3.16 hereto are in full force and effect and
-------------
there is no existing default under any of such leases on the part of the lessor
or lessee thereunder. Such leases consist only of documents described in
Schedule 3.16 hereto, true, complete and correct copies of which have been
-------------
delivered by the Company to Parent. To the Company's knowledge none of the
buildings, structures or appurtenances located upon the real properties
described in Schedule 3.16 hereto or the operation and maintenance thereof as
-------------
now operated or maintained, contravenes any zoning ordinance or other
administrative regulation (whether or not permitted because of prior
nonconforming use) or violates any restrictive covenant or any provision of
law, the effect of which would materially interfere with or prevent the
continued use of such properties for the purposes for which they are now being
used or would materially adversely affect the value thereof. The real
properties currently leased by the Company (a) are in good condition, ordinary
wear and tear excepted, (b) have been properly maintained, (c) do not require
more than regularly scheduled maintenance in the ordinary course, consistent
with the Company's established maintenance policies, to keep them in good
operating condition, and (d) are adequate for the Company's business as
presently conducted.
SECTION 3.17. Fixed Assets; Inventory.
-----------------------
(a) Schedule 3.17(a) is a list as of September 30, 2001 of all
----------------
of the fixed assets used in the business of the Company (the "Fixed Assets"),
------------
other than any Fixed Asset the replacement cost of which would be less than
$5,000 and which is not of material importance to the Company's operations. The
Fixed Assets used by the Company as of the date hereof (a) are in good working
order and condition, ordinary wear and tear excepted, (b) have been properly
maintained, (c)
29
are suitable for the uses for which they are being utilized in the Company's
business, (d) do not require more than regularly scheduled maintenance in the
ordinary course, consistent with the Company's established maintenance
policies, to keep them in good operating condition, (e) comply with all
requirements under applicable laws, regulations and licenses which govern the
use and operation thereof, and (f) are all the material assets necessary for
the Company's business as presently conducted.
(b) The Inventory is in good and merchantable condition and
suitable for its intended purposes.
SECTION 3.18. Notes and Accounts Receivable. Attached hereto as
-----------------------------
Schedule 3.18 are (i) accurate lists as of January 14, 2002 of all accounts and
-------------
notes receivable of the Company, including any accounts or notes receivable not
reflected in the September 30, 2001 Balance Sheet, and (ii) agings of all such
accounts and notes receivable showing amounts due in 30-day aging categories.
All such accounts and notes receivable on such listings arose from, and all
accounts and notes receivable of the Company created between September 30, 2001
and the Closing will have arisen from, the provision of goods and services by
the Company in the Ordinary Course of Business. The Company has received no
notice or knows of no counterclaim or set-off with respect to any such accounts
or notes receivable, or any facts or circumstances that would be the basis for
any such counterclaim or set-off, which is not reflected or taken into account
in the contractual allowance or bad debt reserves set forth in the September 30,
2001 Balance Sheet. Except to the extent collected since September 30, 2001, all
notes and accounts receivable reflected on the September 30, 2001 Balance Sheet
are, and all notes and accounts receivable accruing between the September 30,
2001 and the Closing will be (i) bona fide claims against debtors for sale or
other charges, (ii) subject to no material expenses, set-offs or counterclaims,
and (iii) collected in an amount equal to the net amount thereof as set forth on
the September 30, 2001 Balance Sheet within 180 days of the date when due.
SECTION 3.19. Conflict of Interest. Except as set forth in Schedule 3.19,
-------------------- -------------
neither the Company, nor any officer, director or affiliate (as defined in
Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended)
of the Company or any member of the immediate family of any such person:
(a) has any direct or indirect interest in (A) any entity
which does business with the Company, or (B) any property, asset or right which
is used by the Company in the conduct of its business, or (C) any competitor of
the Company;
(b) has any contractual relationship with the Company; or
(c) has been involved in any transaction with the Company
during the past three (3) years.
Except for the payment of employee compensation in the Ordinary Course of
Business, the Company does not have any liability or any other obligation of
any nature whatsoever to any Shareholder of the Company or any affiliate
thereof or to any officer or director of the Company or, to the knowledge of
the Company, to any immediate relative or spouse (or immediate relative of such
spouse) of any such officer or director.
SECTION 3.20. Insurance. Schedule 3.20 contains an accurate description
--------- -------------
(including liability limits, deductibles and coverage exclusions) of all
policies of fire, general liability, property,
30
worker's compensation, errors and omissions and other forms of insurance
maintained by or on behalf of the Company in connection with the Company's
business as protection for the Company's assets and business. Except as set
forth in Schedule 3.20 hereto, all of such policies are now in full force and
-------------
effect and policies covering the same risks and in substantially the same
amounts have been in full force and effect during the past five (5) years. The
Company has not received any notice of cancellation or material amendment of
any such policies; no coverage thereunder is being disputed; and all material
claims thereunder have been filed in a timely fashion.
SECTION 3.21. Brokers. Except for Xxxxx, Xxxxxxxx & Xxxx, Inc., whose
-------
fees and expenses (collectively, the "Banking Fee") shall be paid by the
-----------
Company and handled as set forth in Section 2.01, the Company is not a party to
or in any way obligated under any contract or other agreement regarding, and
there are no outstanding claims against it for the payment of, any broker's or
finder's fee in connection with the origin, negotiation, execution, or
performance of this Agreement or the transactions contemplated hereby.
SECTION 3.22. Questionable Payments. Neither the Company nor any of its
---------------------
subsidiaries has made, and the Company has no knowledge or information that any
shareholder, officer, director, employee, agent or other representative acting
on the Company's or any of its subsidiaries' behalf has made, directly or
indirectly, any bribes, kickbacks, or political contributions with corporate
funds, payments from corporate funds not recorded on the books and records of
the Company, payments from corporate funds which were falsely recorded on the
books and records of the Company, payments from corporate funds to governmental
officials in their individual capacities or illegal payments from corporate
funds to obtain or retain business either within the United States of America
or abroad.
SECTION 3.23. Tax Treatment. Neither the Company nor any of its
-------------
affiliates has taken or agreed to take action that would prevent the Merger
from constituting a reorganization qualifying under the provisions of
Section 368(a) of the Code.
SECTION 3.24. Forecasts and Projections. All of the Company's forecasts
-------------------------
and projections made to Parent regarding the Company's business and financial
prospects and performance have been made in good faith and based on both
reasonable and practical assumptions and expectations, including, but not
limited to, those based on the Company's past performance.
SECTION 3.25. Guaranties and Suretyship. Neither the Company nor any
-------------------------
of its subsidiaries is a party to or bound by any guaranties or matters of
suretyship, or other similar instrument.
SECTION 3.26. Warranties. Except as set forth on Schedule 3.26, neither
---------- -------------
the Company nor any of its subsidiaries has given or made any express
warranties to third parties with respect to any products sold or services
performed by the Company or any of its subsidiaries, and except for the
warranties contained in certain of the contracts listed in Schedule 3.11, the
-------------
Company has no knowledge of any fact or of the occurrence of any event forming
the basis of any present or future claim against the Company or any of its
subsidiaries not covered by insurance, for liability in connection with the
sale of goods or performance of services by the Company or any of its
subsidiaries or on account of any express or implied warranty in connection
therewith.
SECTION 3.27. Intentionally Omitted.
---------------------
31
SECTION 3.28. Compliance with Laws. Since the date of incorporation,
--------------------
the Company and its subsidiaries have complied with all applicable foreign,
federal, state, municipal and other political subdivision or governmental
agency statutes, ordinances and regulations, including, without limitation,
those imposing Taxes and those relating to exports of products or technology,
in every applicable jurisdiction, in respect of the ownership of their
respective assets and properties and the conduct of their respective businesses
where the effect of failure to so comply would have a Material Adverse Effect.
Except as disclosed in Schedule 3.28 hereto, and without limiting the
-------------
generality of this Section 3.28, there are no unresolved (i) proceedings or
investigations instituted or, to the best knowledge of the Company, threatened,
by any such governmental authorities against the Company or any of its
subsidiaries or relating to the Company's or any of its subsidiaries' business,
or (ii) citations issued or, to the best knowledge of the Company, threatened
against the Company or any of its subsidiaries or the Company's or any of its
subsidiaries' business by any governmental authorities, or (iii) other notices
of deficiency or charges of violation brought or, to the best knowledge of the
Company, threatened against the Company or any of its subsidiaries or the
Company's or any of its subsidiaries' business, including under any federal or
state regulation or otherwise, which would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect, or interfere with
the maintenance, or the transfer or reissuance to Parent, of the permits,
licenses, franchises, certificates, authorizations or any right to operate held
by the Company; and, to the best knowledge of the Shareholders and the Company,
there are no facts or circumstances upon which any such proceedings,
investigations, citations, notices, disallowances or charges may be instituted,
issued or brought hereafter.
SECTION 3.29. Bank Accounts and Powers of Attorney. Attached hereto as
------------------------------------
Schedule 3.29 is a list setting forth:
-------------
(a) the name of each bank, savings and loan or other financial
institution in which the Company has any account or safe deposit box, the
account name and number of each such account or safe deposit box, and the names
of all persons authorized to draw thereon or have access thereto;
(b) the name of each person, corporation, firm, association,
or business entity or enterprise holding a general or special power of attorney
from the Company and a summary of the terms thereof; and
(c) the name and address of each person holding a credit card
for which the Company is responsible
SECTION 3.30. Business Relations. Except as disclosed on Schedule 3.30,
------------------ -------------
the Company has no knowledge that (i) any customer listed on Schedule 3.30 will
-------------
cease to do business with the Company after the consummation of the Merger
contemplated hereby on substantially the same terms and at substantially the
same levels (considered on an annualized basis) as previously conducted with
the Company; or (ii) any vendor of goods or services to the Company expects or
intends to increase the cost of goods or services provided by such vendor to
the Company; or (iii) that any customer or client of the Company has required
or intends to request any decrease in the cost of services provided by the
Company. No representation is made as to the future volume of business with any
customers or vendors or the price or terms thereof.
32
SECTION 3.31. Complete Copies of Materials. The Company has delivered to
----------------------------
Parent true and complete copies of each document (or summaries of same)
referred to in a Schedule to this Agreement.
SECTION 3.32. Full Disclosure. All of the representations and warranties
---------------
made by the Company in this Agreement, and all statements set forth in the
certificates delivered by the Company at the Closing pursuant to this
Agreement, are true, correct and complete in all material respects and do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make such representations, warranties or statements,
in light of the circumstances under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE MERGER SUB
Except as set forth in the Disclosure Schedule delivered by Parent and the
Merger Sub to the Company concurrently with the execution of this Agreement
(the "Parent Disclosure Schedule") or in the Parent SEC Reports (as defined in
--------------------------
Section 4.07), Parent and the Merger Sub, hereby represent and warrant to the
Company and the Shareholders that the statements in this Article IV are true
and correct. Any matter disclosed or cross-referenced in one section of the
Company Disclosure Schedule shall be deemed disclosed for all purposes of the
Company Disclosure Schedule to the extent that the Agreement requires such
disclosure and to the extent that the relevance and significance of such
disclosure are evident from said disclosure or cross-reference.
SECTION 4.01. Organization and Qualification. Each of Parent and each
------------------------------
subsidiary of Parent (the "Parent Subsidiaries") is a corporation duly
-------------------
incorporated, 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, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing or in good standing or to have such corporate power and authority have
not had, would not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect (as defined in Section 10.02(a)).
Each of Parent and the Parent Subsidiaries is duly qualified or licensed as a
foreign corporation 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 business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that have not had, and would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
SECTION 4.02. Certificate of Incorporation and By-Laws. Parent has
----------------------------------------
heretofore made available to the Company a complete and correct copy of the
certificate of incorporation and the by-laws of Parent and the articles of
incorporation and by-laws of the Merger Sub. Such certificate of incorporation,
articles of incorporation and by-laws are in full force and effect. Neither
Parent nor the Merger Sub is in violation of any of the provisions of their
respective organizational documents.
SECTION 4.03. Authorized Capital Stock.
------------------------
(a) The authorized capital stock of Parent consists of
(i) 200,000,000 shares of Parent Common Stock, $0.1167 par value. As of
September 30, 2001, 36,647,000 shares of Parent Common Stock were issued and
outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable and free of all preemptive rights. Except as set forth in
Schedule 4.03 of the
-------------
33
Parent Disclosure Schedule, or pursuant to the stock option and stock purchase
plans of Parent (the "Parent Stock Plans"), there are no options, warrants or
------------------
other rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of Parent or any Parent Subsidiary or
obligating Parent or any Parent Subsidiary to issue or sell any shares of
capital stock of, or other equity interests in, Parent or any Parent
Subsidiary. All shares of Parent Common Stock subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable.
(b) The authorized capital stock of the Merger Sub consists of
100 shares of common stock, $0.01 par value per share, all of which are duly
authorized, validly issued, fully paid and non-assessable and free of any
preemptive rights in respect thereof and all of which are owned by Parent.
(c) The shares of Parent Common Stock to be issued pursuant to
the Merger in accordance with Section 2.01(a) will (i) be duly authorized,
validly issued, fully paid and non-assessable and not subject to preemptive
rights created by statute, Parent's articles of incorporation or by-laws or any
agreement to which Parent is a party or is bound and (ii) when issued, be
exempt from registration under the Securities Act and exempt from registration
under applicable Blue Sky Laws.
SECTION 4.04. Authority Relative to This Agreement. Each of Parent and the
------------------------------------
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement, and the Escrow Agreement and to perform its obligations
hereunder and to consummate the Merger and the other transactions contemplated
by this Agreement. The execution and delivery of this Agreement by each of
Parent and the Merger Sub and the consummation by each of Parent and the Merger
Sub of the Merger and the other transactions contemplated by this Agreement
have been duly and validly authorized by the boards of directors of Parent and
the Merger Sub and by Parent as the sole shareholder of the Merger Sub and no
other corporate proceedings on the part of Parent or the Merger Sub are
necessary to authorize this Agreement or to consummate the Merger and the other
transactions contemplated by this Agreement (other than, with respect to the
Merger, the filing and recordation of appropriate merger documents as required
by Massachusetts Law). This Agreement has been duly and validly executed and
delivered by each of Parent and the Merger Sub and, assuming the due
authorization, execution and delivery by the other parties hereto, constitutes
a legal, valid and binding obligation of each of Parent and the Merger Sub,
enforceable against each of Parent and the Merger Sub in accordance with its
terms, subject to any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to creditors'
rights generally or to general principles of equity.
SECTION 4.05. No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement by each of
Parent and the Merger Sub do not, and the performance of this Agreement by each
of Parent and the Merger Sub will not, (i) conflict with or violate their
respective organizational documents, (ii) assuming that all consents,
approvals, authorizations and other actions described in Section 4.05(b) have
been obtained and all filings and obligations described in Section 4.05(b) have
been made, conflict with or violate in any material respect any Law applicable
to Parent or the Merger Sub or by which any material property or asset of
Parent or the Merger Sub is bound or affected, or (iii) result in any breach of
or constitute a default (or an event which with notice or lapse of time or both
would become a default)
34
under, or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on
any property or asset of Parent or the Merger Sub pursuant to, any material
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation, except for, in the case of clauses
(ii) and (iii) above, such conflicts, violations, defaults or rights as would
not reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect or to impair materially the ability of either of Parent
or the Merger Sub to consummate the transactions contemplated by this Agreement.
(b) The execution and delivery of this Agreement by each of
Parent and the Merger Sub do not, and the performance of this Agreement by each
of Parent and the Merger Sub will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity, except (i) for applicable requirements, if any, of Blue Sky Laws or
state takeover laws, (ii) for the filing and recordation of appropriate merger
documents as required by Massachusetts Law, (iii) for filings required by the
Nasdaq Stock Market, Inc. and (iv) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications
would not reasonably be expected to have, individually or in the aggregate to
have a Parent Material Adverse Effect or to prevent or delay materially the
consummation of the transactions contemplated by this Agreement.
SECTION 4.06. Permits; Compliance. Each of Parent and the Parent
-------------------
Subsidiaries are in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for Parent or any
Parent Subsidiary to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Parent Permits"), except for such
--------------
nonpossession, suspension or cancellation that has not had, or would not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect, and, as of the date of this Agreement, no suspension
or cancellation of any of the Parent Permits is pending or, to the knowledge of
Parent, threatened, except where the failure to have, or the suspension or
cancellation of, any Parent Permits has not had, or would not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect.
SECTION 4.07. SEC Filings; Financial Statements.
---------------------------------
(a) Parent has filed, and made available to the Company and
its representativ es, all forms, reports and documents required to be filed by
it with the SEC since January 1, 2001 through the date of this Agreement
(collectively, the "Parent SEC Reports"). As of the respective dates they were
------------------
filed, (i) the Parent SEC Reports were prepared, and all forms, reports and
documents filed with the SEC after the date of this Agreement and prior to the
Effective Time will be prepared, in all material respects in accordance with
the requirements of the Securities Act or the Securities "Exchange Act" of 1934,
------------
as amended (the "Exchange Act") as the case may be, and (ii) none of the Parent
------------
SEC Reports contained, nor will any forms, reports and documents filed after
the date of this Agreement and prior to the Effective Time 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 made therein, in
the light of the circumstances under which they were made, not misleading,
except to the extent superseded by a Parent SEC Report filed subsequently and
prior to the date hereof. Parent is eligible to register the resale of the
Parent Company Stock to be issued hereby by the Shareholders under a Form S-3
registration statement.
35
(b) Each of the consolidated financial statements (including,
in each case, any notes thereto) contained in the Parent SEC Reports and in any
form, report or document filed after the date of this Agreement and prior to
the Effective Time was, or will be, as the case may be, prepared in accordance
with GAAP applied on a consistent basis throughout the periods indicated
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by GAAP) and each presented or will present fairly, in
all material respects, the consolidated financial position of Parent and its
consolidated subsidiaries as at the respective dates thereof and for the
respective periods indicated therein, except as otherwise noted therein
(subject, in the case of unaudited statements, to normal year-end adjustments
that would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect).
SECTION 4.08. Operation of the Merger Sub. The Merger Sub is a wholly
---------------------------
owned subsidiary of Parent, was formed solely for the purpose of engaging in
the transactions contemplated by this Agreement, has engaged in no other
business activities and has conducted its operations only as contemplated by
this Agreement.
SECTION 4.09. Absence of Certain Changes or Events. Since September
------------------------------------
30, 2001, except as contemplated by or as disclosed in this Agreement, or as
disclosed in the Parent SEC Reports, Parent and its subsidiaries have conducted
their businesses only in the Ordinary Course of Business and, since such date,
there has not been (a) any Parent Material Adverse Effect, or (b) any material
change by Parent or any Parent Subsidiary in its accounting methods, principles
or practices, except for any such change required by reason of a concurrent
change in GAAP.
SECTION 4.10. Taxes. Parent is not aware of any agreement, plan or other
-----
circumstance that would prevent the Merger from qualifying as a tax-free
reorganization under Section 368(a) of the Code.
SECTION 4.11. Brokers. No broker, finder or investment banker is entitled
-------
to any brokerage, finder's or other fee or commission in connection with the
Merger or the other transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or the Merger Sub.
SECTION 4.12. Litigation. Except as set forth in Schedule 4.12 hereto,
---------- -------------
there is neither (a) any action, suit, proceeding or investigation, nor (b) any
counter or cross-claim in an action brought by or on behalf of Parent, whether
at law or in equity, or before or by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, or before any
arbitrator of any kind, that is pending or, to the best knowledge of Parent,
threatened, against Parent, which (i) could reasonably be expected to adversely
affect Parent's ability to perform any of its obligations under this Agreement
or the agreements referenced herein or complete any of the transactions
contemplated hereby or thereby, or (ii) involves the reasonable possibility of
any material judgment or liability, or which may become a claim, against Parent
or its business or assets prior to or subsequent to the Closing, which in any
such case would be reasonably expected to have a Parent Material Adverse
Effect. Except as set forth in Schedule 4.12, Parent is not subject to any
-------------
judgment, order, writ, injunction, decree or award of any court, arbitrator or
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over Parent or its assets or business.
36
ARTICLE V
CONDUCT OF BUSINESSES PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the Merger.
-----------------------------------------------------
Except as set forth in the Company Disclosure Schedule or as contemplated by
any other provision of this Agreement, the Company agrees that, between the
date of this Agreement and the Effective Time:
(i) the businesses of the Company shall be conducted only in,
and the Company shall not take any action except in, the Ordinary Course of
Business and in a manner consistent with past practice;
(ii) the Company shall use commercially reasonable best efforts to
preserve substantially intact its current business organization, to keep
available the services of the current officers, employees and consultants
of the Company and to preserve the current relationships of the Company
with customers, suppliers, distributors, lessors, creditors, contractors
and other persons with which the Company has business relations, with the
intention that its goodwill and ongoing businesses shall be preserved;
(iii) the Company shall maintain in good working order and
condition, ordinary wear and tear excepted, and in compliance in all
material respects with all applicable laws and regulations, all of the
Company's assets; and
(iv) the Company shall observe and perform all terms, conditions,
covenants and obligations contained in all existing agreements between the
Company and third parties the violation of which would have, individually
or in the aggregate, a Material Adverse Effect on the Company's business;
not willfully take any action which would cause a breach or violation of or
default under any material agreement, lease, contract, or other written
instrument, commitment or arrangement, or under any License or Permit,
judgment, writ or order, applicable to or affecting the Company's business
or the Company Common Stock, and promptly notify Parent in writing of the
occurrence of any such breach or default.
By way of amplification and not limitation, except as expressly provided
in this Agreement or as set forth in the Company Disclosure Schedule, the
Company shall not, between the date of this Agreement and the Effective Time,
directly or indirectly, do, or propose to do, any of the following:
(a) amend or otherwise change its articles of incorporation or
by-laws;
(b) issue, sell, pledge, dispose of, grant, encumber, transfer
or authorize the issuance, sale, pledge, disposition, grant, encumbrance or
transfer of, (i) any shares of its capital stock of any class, or any options,
warrants, convertible securities or other rights of any kind to acquire any
shares of such capital stock, or any other ownership interest (including,
without limitation, any phantom interest), of the Company, or (ii) any assets
or properties of the Company other than in the Ordinary Course of Business;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to
any of its capital stock, make any other actual, constructive or deemed
distribution in respect of its capital stock or otherwise make any payments to
stockholders in their capacity as such;
37
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any shares of its capital stock;
(e) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization or any division thereof
or, except in the Ordinary Course of Business, any material assets;
(f) incur or agree to incur any indebtedness for borrowed
money or issue or agree to issue any debt securities or assume, guarantee or
endorse, or otherwise as an accommodation become responsible for, the
obligations of any person, except for indebtedness incurred in the Ordinary
Course of Business, which in no event shall exceed $50,000 individually or
$250,000 in the aggregate;
(g) make or authorize any capital expenditures involving
payments by the Company in excess of $50,000 individually or $250,000 in the
aggregate;
(h) increase or agree to increase the compensation payable or
to become payable to its officers, directors or employees, except for increases
in accordance with past practice in salaries or wages of employees of the
Company who are not officers of the Company, or grant or agree to grant any
severance or termination pay to, or enter into any employment or severance
agreement with, any director, officer, employee or consultant of the Company
(except that the Company may continue to hire new employees and to enter into
employment agreements or arrangements with such new employees), or establish,
adopt, enter into or amend any collective bargaining, bonus, profit sharing,
savings, insurance, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the benefit of
any director, officer or employee, other than in the Ordinary Course of
Business;
(i) enter into, amend, modify or waive any material right under
any contract or agreement material to the business, results of operations or
financial condition of the Company;
(j) enter into any licensing, distribution, sponsorship,
advertising, marketing, sales, merchant program or other similar contracts,
agreements, or obligations involving payments by the Company in excess of
$50,000;
(k) take any action, other than reasonable and usual actions in
the Ordinary Course of Business and consistent with past practice, with respect
to accounting policies or procedures, except for any such action required by a
concurrent change in GAAP;
(l) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person;
(m) make any loans, advances or capital contributions to, or
investments in, any other person;
(n) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company;
38
(o) revalue in any material respect any of its assets, including
writing down the value of inventory or writing-off notes or accounts receivable,
other than in the Ordinary Course of Business;
(p) modify its standard warranty terms for its products or
amend or modify any product warranties in effect as of the date hereof in any
manner that would reasonably be expected to have a Material Adverse Effect;
(q) make any material Tax election (except as permitted by
Section 7.11) or settle or compromise any Tax liability or permit any material
insurance policy naming it as a beneficiary or loss-payable to expire or to be
canceled or terminated, unless a comparable insurance policy reasonably
acceptable to Parent is obtained and in effect;
(r) fail to file any Tax Returns when due (or, alternatively,
fail to file for available extensions) or fail to cause such Tax Returns when
filed to be complete and accurate in all respects;
(s) fail to pay any Taxes or other material debts when due;
(t) fail to maintain all insurance polices consistent with past
practices and, unless comparable insurance is substituted therefor, not take any
action to terminate or modify, nor permit the lapse or termination of, the
present insurance policies and coverages of the Company;
(u) settle or compromise any pending or threatened suit, action or
claim that (i) relates to the transactions contemplated hereby or (ii) would
involve payment by the Company of more than $50,000 individually or $250,000 in
the aggregate or that would reasonably be expected to have a Material Adverse
Effect;
(v) take any action or fail to take any action that could
reasonably be expected to (i) limit the utilization of any net operating
losses, built-in losses, tax credits or other similar items of the Company
under Section 382, 383, 384 or 1502 of the Code or the Treasury Regulations
thereunder, other than limitations arising under the Merger, (ii) cause any
transaction in which the Company was a party that was intended to be treated as
a reorganization under Section 368(a) of the Code to fail to qualify as a
reorganization under Section 368(a) of the Code, or (iii) cause or voluntarily
permit a change in any method of accounting for tax purposes during or
applicable to its current tax year which would render inaccurate, misleading or
incomplete the information concerning Taxes set forth or referred to in
Section 3.14 hereof, or that would reasonably be expected to have a Material
Adverse Effect for any period prior to the Effective Time; or
(w) take or agree in writing or otherwise to take any of the
actions described in Sections 5.01(a) through 5.01(v) or take any action that
would make any of the representations or warranties of the Company contained in
this Agreement (including the exhibits hereto) untrue or incorrect.
SECTION 5.02. Conduct of Business by Parent Pending the Merger. Parent
------------------------------------------------
agrees that, except as contemplated by this Agreement Parent shall not, between
the date of this Agreement and the Effective Time, directly or indirectly, do,
or propose to declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to
any of its capital stock.
39
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Resale Registration Statement on Form S-3.
-----------------------------------------
(a) Parent shall use commercially reasonable best efforts to
register for resale the shares of Parent Common Stock to be issued pursuant to
the Merger in accordance with Section 2.01 (the "Parent Shares") to the
-------------
Shareholders under the Securities Act. With respect to the Parent Shares to be
registered, Parent shall take the following actions:
(i) Prepare, and within sixty (60) days following the
Closing, file, and use commercially reasonable best efforts to cause to
become effective as soon as practicable with the Commission and keep
effective for a period of two (2) years, a registration statement (the
"Registration Statement"), and reasonable and necessary amendments,
----------------------
regarding such Parent Shares;
(ii) Furnish to the Shareholders such numbers of copies of
a prospectus, including a preliminary prospectus, and all amendments and
supplements thereto, in conformity with the requirements of the
Securities Act;
(iii) Register and qualify the securities covered by the
Registration Statement under such other securities or Blue Sky Laws of
the Commonwealth of Massachusetts and such other jurisdictions reasonably
deemed necessary by Shareholders, and prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements and to take such other actions as may be necessary to
maintain such registration and qualification as necessary;
(iv) Notify the Shareholders, at any time when a
prospectus relating to securities covered by the Registration Statement
is required to be delivered under the Securities Act, of the happening of
any event as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading
in light of the circumstances then existing. Parent will promptly amend
or supplement the Registration Statement to correct any such untrue
statement or omission;
(v) Notify the Shareholders of the issuance by the SEC or
any state securities regulatory authority of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for the purpose; and
(vi) Do such other actions or make available to the
Shareholders such documents as reasonably required under the Securities
Act and as reasonably requested in relation to the registration of
securities covered by the Registration Statement.
(b) Notwithstanding the foregoing, Parent shall not be obligated
to take any action pursuant to this Section 6.01 in any particular jurisdiction
in which Parent would be required to execute a general consent to service of
process in affecting such registration, qualification or
40
compliance, unless Parent is already subject to service in such jurisdiction
and except as may be required by the Securities Act;
(c) Notwithstanding Parent's obligations under this Section 6.01,
if in the good faith judgment of Parent, following consultation with legal
counsel, it would be detrimental to Parent and its stockholders for resales of
the Parent Shares to be made pursuant to the Registration Statement due to the
exercise of a material development or potential material development involving
Parent which Parent would be obligated to disclose in the Registration
Statement, but which disclosure would be premature or otherwise inadvisable at
such time or would have a material adverse effect on Parent or its
stockholders, Parent shall have the right to suspend the use of the
Registration Statement for a period of not more than sixty (60) days. If the
use of the Registration Statement is suspended by Parent, Parent shall promptly
give notice of the suspension to all Shareholders whose Parent Shares are
covered by the Registration Statement, and shall promptly notify each such
Shareholder when the use of the Registration Statement may be resumed.
(d) All expenses incurred in connection with registrations
pursuant to this Section 6.01, including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, transfer agent
fees, fees and disbursements of counsel for Parent, blue sky fees and expenses,
the expense of any special audits incident to or required by any such
registration and the reasonable fees and disbursements of one counsel for the
Shareholders (not to exceed $15,000), shall be borne by Parent. All
underwriting discounts, selling commissions and stock transfer taxes applicable
to the Parent Shares being registered by the Shareholders shall be borne by the
Shareholders. Parent's obligations pursuant to this Section 6.01 shall be
conditioned upon the execution and delivery by the Shareholders of customary
indemnification agreements, in form reasonably satisfactory to Parent and its
counsel, relating to such registration.
(e) The obligations of Parent to register the Parent Shares shall
not be transferable by the Shareholders except (i) in connection with a
transfer of the Parent Shares to a Shareholder's ancestors, decedents or spouse
(or former spouse in connection with marriage dissolution proceedings) on death
or otherwise, or to a trust from their benefit. Shareholders shall give prompt
notice of any such transfer.
SECTION 6.02. Approval of Merger by Company and Shareholders. The Company
----------------------------------------------
shall take all action necessary for the approval of the Merger and adoption of
this Agreement. By way of amplification and not limitation, the Company,
acting through its Board of Directors, shall, in accordance with all applicable
legal requirements and its articles of organization and by-laws, (i) promptly
duly call, give notice of, convene and hold a meeting of Shareholders of the
Company, (ii) unanimously recommend the approval of the Merger and adoption of
this Agreement, (iii) take all commercially reasonable action to solicit such
approval and (iv) take all other action necessary or advisable to secure the
vote or consent of Shareholders required by Massachusetts Law. Simultaneously
with the execution of this Agreement, Xxxxxxx Xxxxxxxxxx and Xxxxxxxxxx
Xxxxxxxxxx shall each enter into a voting agreement with the Parent, in the
form attached hereto as Exhibit F, pursuant to which each of them agrees to
---------
vote their respective shares in favor of the Merger.
SECTION 6.03. Access to Information; Confidentiality.
--------------------------------------
(a) From the date of this Agreement to the Effective Time, the
Company shall: (i) provide to Parent (and its officers, directors, employees,
accountants, consultants, legal counsel, agents and other representatives,
collectively, "Representatives") reasonable access at reasonable
---------------
41
times upon prior notice to the officers, employees, agents, properties, offices
and other facilities of the Company and to the books and records thereof and
(ii) furnish promptly such information concerning the business, properties,
contracts, assets, liabilities, personnel and other aspects of the Company as
Parent or its Representatives may reasonably request.
(b) Parent shall comply with, and shall cause its Representatives
to comply with, all of their respective obligations under the Confidentiality
Agreement dated April 10, 2001 (the "Confidentiality Agreement") between the
-------------------------
Company and Parent.
(c) The Company will hold, and will cause its Representatives to
hold, in confidence all documents and information furnished to it by or on
behalf of Parent in connection with the transactions contemplated by this
Agreement in accordance with the provisions of the Confidentiality Agreement as
if such provisions were applicable to the Company.
SECTION 6.04. Employee Benefits Matters.
-------------------------
(a) From and after the Effective Time, Parent shall honor, and
shall cause the Surviving Corporation to honor, in accordance with their terms,
all contracts, agreements, arrangements and commitments of the Company as in
effect immediately prior to the Effective Time, to the extent disclosed in
writing to Parent prior to the Effective Time, that are applicable to any
current or former employees or directors of the Company.
(b) Parent hereby agrees that, immediately following the Effective
Time, it shall, or shall cause the Surviving Corporation to provide employee
benefit and compensation plans, programs, contracts and arrangements for the
benefit of employees of the Company which, in the aggregate, will provide
benefits and compensation that are substantially equivalent to the benefits and
compensation provided to such employees under the employee benefit and
compensation plans, programs, contracts and arrangements of similarly situated
employees of Parent; provided, however, that changes may be made to the extent
-------- -------
necessary to comply with applicable law.
(c) To the extent that service is relevant for eligibility and
vesting (and, solely for purposes of calculating entitlement to vacation and
sick days, benefit accruals) under any retirement plan, employee benefit plan,
program or arrangement established or maintained by Parent or any of the Parent
Subsidiaries for the benefit of employees of Parent, such plan, program or
arrangement shall credit Company employees for service accrued or deemed
accrued on or prior to the Effective Time with the Company or any affiliate or
predecessor thereof. In addition, Parent shall waive limitations on benefits
relating to any pre-existing conditions to the same extent such limitations are
waived under any comparable Plan and recognize, for purposes of annual
deductible and out-of-pocket limits under its medical and dental plans,
deductible and out-of-pocket expenses paid by the Company's employees in the
calendar year in which the Effective Time occurs.
(d) The Company agrees to use its commercially reasonable best
efforts to encourage employees of the Company to continue their employment with
the Surviving Corporation.
SECTION 6.05. Further Action; Consents; Filings. Upon the terms and
---------------------------------
subject to the conditions hereof, each of the parties hereto shall use its
commercially reasonable best efforts to (i) take, or cause to be taken, all
appropriate action and do, or cause to be done, all things necessary, proper or
advisable under applicable Law or otherwise to consummate and make effective
the Merger and the other transactions contemplated by this Agreement, (ii)
obtain from Governmental
42
Entities any consents, licenses, permits, waivers, approvals, authorizations or
orders required to be obtained or made by Parent or the Company or any of their
subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the consummation of the Merger and the other transactions
contemplated by this Agreement, (iii) contest any legal proceedings relating to
the Merger, (iv) make all necessary filings, and thereafter make any other
required submissions, with respect to this Agreement, the Merger and the other
transactions contemplated by this Agreement required under applicable Law, and
(v) use commercially reasonable efforts to cause the shares of the Parent's
common stock to be issued in the Merger to be approved for listing on the
Nasdaq National Market prior to the Effective Time. The parties hereto shall
cooperate with each other in connection with the making of all such filings,
including by providing copies of all such documents to the nonfiling party and
its advisors prior to filing and, if requested, by accepting all reasonable
additions, deletions or changes suggested in connection therewith. If at any
time after the Effective Time any further action is necessary to carry out the
purposes of this Agreement, the proper officers and directors of each party
hereto shall take all such necessary action.
SECTION 6.06. Plan of Reorganization. This Agreement is intended to
----------------------
constitute a "plan of reorganization" within the meaning of Section 1.368-2(g)
of the Income Tax Regulations promulgated under the Code and Revenue Ruling
2001-46. From and after the date of this Agreement and until the Effective
Time, each party hereto, shall use its reasonable best efforts to cause the
Merger to qualify, and will not knowingly take any action, cause any action to
be taken, fail to take any action or cause any action to fail to be taken which
action or failure to act could prevent the Merger from qualifying, as a
reorganization under the provisions of Section 368(a) of the Code, other than
as contemplated by this Agreement. Following the Effective Time, neither the
Surviving Corporation, Parent nor any of their affiliates shall knowingly take
any action, cause any action to be taken, fail to take any action or cause any
action to fail to be taken, which action or failure to act could cause the
Merger to fail to qualify as a reorganization under Section 368(a) of the Code,
other than as contemplated by this Agreement.
SECTION 6.07. Public Announcements. The initial press release relating to
--------------------
this Agreement shall be a joint press release the text of which has been agreed
to by each of Parent and the Company. Prior to such initial press release,
unless otherwise required by applicable Law or the rules and regulations of the
Nasdaq National Market, neither Parent nor the Company shall issue any press
release or otherwise make any public statements (including any written
statement circulated to employees, customers or other third parties), other
than a proxy statement delivered to Shareholders in connection with the meeting
referred to in Section 6.02, with respect to this Agreement, the Merger or any
of the other transactions contemplated by this Agreement without the prior
written consent of the other party; subsequent to such initial press release,
neither Parent nor the Company shall make any such public statement without
coordination with the other party; provided, however, that if after
consultation with its counsel, Parent determines that any law, rule or
regulatory requirement (including any Nasdaq rule) requires Parent to issue,
make or otherwise disseminate a press release, disclosure or other publicity
concerning the possible transactions contemplated by this letter, Parent may
(without being deemed to be in breach of this Section 6.07) issue, make or
otherwise disseminate such press release, disclosure or other publicity.
SECTION 6.08. Assistance and Cooperation. After the Closing Date, each of
--------------------------
Parent and Company shall:
(a) assist (and cause their respective affiliates to assist) the
other party in preparing any Tax Returns or reports which such other party is
responsible for preparing and filing;
43
(b) cooperate fully in preparing for any audits of, or disputes
with taxing authorities regarding, any Tax Returns of the Company;
(c) make available to the other and to any taxing authority as
reasonably requested all information, records, and documents relating to Taxes
of the Company;
(d) provide timely notice to the other in writing of any pending
or threatened tax audits or assessments of the Company for taxable periods for
which the other may have a liability, provided that failure to comply with this
provision shall not affect the other party's rights to indemnification
hereunder; and
(e) furnish the other with copies of all correspondence received
from any taxing authority in connection with any tax audit or information
request with respect to any such taxable period.
SECTION 6.09. Notification of Certain Matters. Parent shall give prompt
-------------------------------
notice to the Company, and the Company shall give prompt notice to Parent, of
(i) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause (x) any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect or (y) any covenant or agreement contained in this Agreement not to be
complied with in any material respect and (ii) any failure to satisfy any
condition to the consummation of the Merger; provided, however, that the
-------- -------
delivery of any notice pursuant to this Section 6.09 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
SECTION 6.10. Access to Company Employees. From and after the date hereof
---------------------------
until the Effective Time, the Company will provide Parent with reasonable
access to employees of the Company during normal working hours and upon prior
written notice to provide information to such employees about Parent and their
continued employment. All communications by Parent with employees of the
Company shall be conducted in a manner that does not disrupt or interfere with
the Company's efficient and orderly operation of its business.
SECTION 6.11. Customers and Suppliers. From and after the date hereof
-----------------------
until the Effective Time, upon Parent's written request, the Company shall use
its best efforts to introduce Parent to each of its customers and suppliers and
shall promptly notify Parent in writing of any proposed or threatened
termination of the Company's business relationship with any such customer or
supplier.
SECTION 6.12. No Solicitation of Transactions. The Company shall not:
-------------------------------
(a) enter into any agreement, understanding or arrangement
relating to any Acquisition Proposal;
(b) consider, or engage in any discussions or negotiations
relating to, any Acquisition Proposal;
(c) provide any information regarding the Company or its business
or operations to any party (other than to representatives of Parent) relating
to any Acquisition Proposal;
(d) solicit or encourage, directly or indirectly, the submission
of any Acquisition Proposal;
44
(e) otherwise take any action which would prejudice the ability of
Parent to complete the transactions described in this letter; or
(f) permit any representative or affiliate of the Company or of
any Shareholder to do any of the foregoing.
The term "Acquisition Proposal," as used in this Section 6.12, refers to any
--------------------
proposal, plan, agreement, understanding or arrangement contemplating (1) any
merger, consolidation, reorganization, recapitalization or similar transaction
involving the Company or any of its affiliates, (2) any transfer or issuance of
any capital stock or other securities of the Company or any of its affiliates
other than the issuance of stock options in the Ordinary Course of Business, or
the issuance of capital stock upon the exercise of outstanding options, or
other stock transfers not resulting in a change of control of more than
twenty-five percent (25%) of the Company's common stock as of the date hereof,
or (3) any transfer of any material asset of the Company or any of its
affiliates, except as expressly permitted by this Agreement.
SECTION 6.13. Assumption of Company Options.
-----------------------------
(a) Each outstanding option to purchase shares of Company Common
Stock shall be assumed and converted into an option to purchase a number of
shares of Parent Common Stock determined by multiplying the number of shares
subject to such option immediately prior to the Closing Date by the number
obtained by dividing (i) the Total Consideration minus the Banking Fee by (ii)
the Parent Share Value and further dividing the quotient thereof by the Company
Fully-Diluted Capitalization, (such resulting number, the "Conversion Ratio").
----------------
The exercise price of such converted option shall be the exercise price of the
Company option immediately prior to the Closing Date divided by the Conversion
Ratio, and the vesting of such converted option shall be the same as it existed
immediately prior to the Closing Date. The Conversion Ratio shall be subject
to adjustment in the event of any adjustment to the Merger Consideration under
Section 2.05 or any indemnifiable loss under Section 8.02. In the event that
any such converted option is exercised prior to March 30, 2003, the holder
shall (x) execute the Shareholder Investment Representations and Joinder
Agreement and (y) place in the escrow provided for in Section 2.04 hereof a
portion of the shares issued equal to (i) fifteen percent (15%) of said shares
if such exercise occurs prior to the determination of Closing Net Worth under
Section 2.05, or (ii) twelve and one half percent (12.5%) if such exercise
occurs thereafter, and any and all such shares under clause (i) or (ii) shall
be deemed Escrow Shares.
(b) Parent shall prepare, and within sixty (60) days following the
Closing, file, and use commercially reasonable best efforts to cause to become
effective as soon as practicable with the Commission, a registration statement
on Form S-8 pursuant to the Securities Act, and reasonable and necessary
amendments, regarding the shares of Parent Common Stock issuable upon the
exercise of options assumed by Parent pursuant to subsection (a) of this
Section 6.13.
SECTION 6.14. Sale of Vascular Technology, Incorporated Shares. Prior to
------------------------------------------------
the Closing Date, the Company shall sell to Xxxxxxx Xxxxxxxxxx and/or other
members of the Srivastava family, all shares of Vascular Technology,
Incorporated ("VTI"), a wholly-owned subsidiary of the Company, for $184,000;
---
provided, however, that before making the sale the Company must provide Parent
-------- -------
all documents regarding the sale, and obtain Parent's prior approval before
closing the sale, which approval will not unreasonably be withheld or delayed.
Such sale shall include the retention
45
of all liabilities of VTI and an indemnification of the Company from and
against all liabilities of VTI or relating to its business.
SECTION 6.15. Completion of Sideways Merger. As soon as possible, but not
-----------------------------
later than fifteen (15) days following the Effective Time, the Surviving
Corporation, as part of a single plan to which the Merger is a part, shall be
merged with and into a newly formed and wholly-owned subsidiary of Parent
("Newsub") in accordance with the provisions of Massachusetts and Delaware Law.
------
Newsub shall ultimately be the surviving corporation in the Merger.
SECTION 6.16. Listing of Parent Common Stock. Parent agrees to authorize
------------------------------
for listing on the Nasdaq National Market the shares of Parent Common Stock
issuable and reserved for issuance in connection with the Merger, upon official
notice of issuance.
SECTION 6.17. Indemnification Provisions. (a) Parent and the Surviving
--------------------------
Corporation shall indemnify and hold harmless the present and former officers
and directors of the Company in respect of any acts or omissions occurring at
or prior to the Effective Time to the fullest extent permitted by Massachusetts
or other applicable Law.
(b) If Parent or the Surviving Corporation (i) merges into or
consolidates with any other person and shall not be the surviving or continuing
corporation, or (ii) transfers all or substantially all of its assets to
another person, then and in each such event, proper provision shall be made so
the successors and assigns of the Parent or the Surviving Corporation, as the
case may be, shall assume the objections set forth in this Section 6.17
(c) The rights of each person indemnified under this Section 6.17
shall be in addition to any rights such person may have under the Articles of
Organization or bylaws of the Company or other applicable Law, which rights
shall survive the Merger and are intended to benefit, and shall be enforceable
by, each such indemnified person.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Obligations of Each Party. The obligations
-------------------------------------------
of the Company, Parent and the Merger Sub to consummate the Merger are subject
to the satisfaction or waiver of the following conditions:
(a) this Agreement shall have been approved and adopted by the
requisite affirmative vote of the Shareholders of the Company in accordance
with Massachusetts Law and the Company's articles of organization; and
(b) no Governmental Entity or court of competent jurisdiction
located or having jurisdiction in the United States shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, judgment, decree,
executive order or award (an "Order") which is then in effect and has the
-----
effect of making the Merger illegal or otherwise prohibiting consummation of
the Merger;
46
SECTION 7.02. Conditions to the Obligations of Parent and the Merger Sub.
----------------------------------------------------------
The obligations of Parent and the Merger Sub to consummate the Merger are
subject to the satisfaction or waiver of the following additional conditions:
(a) each of the representations and warranties of the Company and
the Shareholders contained in this Agreement shall be true and correct as of
the Effective Time as though made on and as of the Effective Time, except that
those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date, with only such
exceptions as would not have a Material Adverse Effect, and Parent shall have
received a certificate of the Chief Executive Officer of the Company to such
effect;
(b) the Company shall have performed or complied with all
agreements and covenants required by this Agreement to be performed or complied
with by it on or prior to the Effective Time, and Parent shall have received a
certificate of the Chief Executive Officer of the Company to that effect;
(c) there shall not be pending any suit, action, investigation or
proceeding to which a Governmental Entity is a party (i) seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement or seeking to obtain from Parent or the Company
any damages that are material or (ii) seeking to prohibit or limit the
ownership or operation by Parent or the Company of any material portion of
their respective businesses or assets;
(d) each Shareholder of the Company shall have completed, executed
and delivered to Parent a Shareholder Investment Representation and Joinder
Agreement in substantially the form attached hereto as Exhibit B;
---------
(e) the Shareholders shall have approved the terms and provisions
of this Agreement and of the Merger by the requisite two-thirds vote at a duly
called and notice special meeting of the Shareholders in accordance with
applicable provisions of Massachusetts Law and the articles of organization and
by-laws of the Company;
(f) each of the individuals listed on Schedule 7.02(f) shall have
----------------
executed and delivered to Parent an Employment Agreement in substantially the
form attached hereto as Exhibit C;
---------
(g) Xxxxxxx Xxxxxxxxxx and Xxxxxxx Xxxxxxx shall have
executed and delivered to Parent employment agreements satisfactory to Parent;
(h) each of the individuals listed on Schedule 7.02(h) shall have
----------------
executed and delivered to Parent a Non-Competition Agreement, in substantially
the form attached hereto as Exhibit D;
---------
(i) Parent shall have received an opinion of Xxxxx, Xxxx &
X'Xxxxxxxx, P.C., counsel to the Company, dated as of the Closing Date,
substantially in the form and to the effect of Exhibit E hereto;
---------
(j) there shall not have been any material adverse change in the
business or prospects of the Company, and no litigation shall have been
threatened or instituted against Parent or the Company challenging the legality
of the transaction;
47
(k) Parent's consultants shall have completed an audit which
determines to Parent's satisfaction that there are no material environmental
problems with any of the facilities owned or leased by the Company;
(l) all required regulatory and contractual approvals shall have
been obtained prior to the Closing Date;
(m) the sale of VTI shall have been completed in accordance with
Section 6.14;
(n) the Consulting Agreement dated April 21, 1998 between the
Company and Xxxxxxxxxx Xxxxxxxxxx shall have been amended in a manner
satisfactory to Parent;
(o) The aggregate amount of Dissenting Shares (as defined in
Section 2.02(f) hereof) shall not exceed five percent (5%) of the total number
of shares of Company Common Stock, based on the Company Fully-Diluted
Capitalization, issued and outstanding immediately prior to the Effective Time;
and
(p) The Company's financial results for the quarter ended December
31, 2001 shall reflect net sales of not less than $3,800,000, and a net loss no
greater than $100,000.
SECTION 7.03. Conditions to the Obligations of the Company. The
--------------------------------------------
obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver (where permissible) of the following additional
conditions:
(a) each of the representations and warranties of Parent and the
Merger Sub contained in this Agreement shall be true and correct as of the
Effective Time, as though made on and as of the Effective Time, except that
those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date, with only such
exceptions as would not have a Parent Material Adverse Effect, and the Company
shall have received a certificate of a duly authorized officer of Parent to
such effect;
(b) Parent and the Merger Sub shall have performed or complied
with all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time, with only such
exceptions as would not have a Parent Material Adverse Effect, and the Company
shall have received a certificate of a duly authorized officer of Parent to
that effect; and
(c) Parent shall have publicly released its financial statements
for the fiscal year ended December 31, 2001, and such financial statements
shall reflect (i) net sales of not less than $315 million for said fiscal year,
and (ii) net income per share (exclusive of extraordinary or non-recurring
items) no less than $.70 per share for said fiscal year.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. Survival of Representations and Warranties. The
------------------------------------------
representations and warranties contained in this Agreement, the Company
Disclosure Schedules, the Parent Disclosure Schedules and the Shareholder
Investment Representations and Joinder Agreement (collectively, the
"Acquisition Documents"), shall survive the Effective Time until the later of
---------------------
(a) twelve (12) months
48
following the Effective Time, or (b) March 30, 2003; provided, however, that
-------- -------
such time limits shall not apply to any claim involving fraud or intentional
misrepresentation or ownership of Shares. If written notice of a claim has
been given prior to the expiration of the applicable representations and
warranties by a party hereto (which notice shall indicate with reasonable
specificity the amount and nature of the claim and the representation on which
it is based) to another party hereto, then the relevant representations and
warranties shall survive as to such claim until such claim has been finally
resolved.
SECTION 8.02. Indemnification by the Shareholders.
-----------------------------------
(a) After the Effective Time, Parent, the Merger Sub and their
affiliates (including, after the Effective Time, the Surviving Corporation),
officers, directors, employees, agents, successors and assigns (collectively,
the "Parent Indemnified Parties") shall be indemnified and held harmless by
--------------------------
each of the Shareholders, jointly and severally, for any and all Liabilities,
losses, damages, claims, costs and expenses, interest, awards, judgments and
penalties (including, without limitation, attorneys' and consultants' fees and
expenses) (hereinafter, a "Loss"), arising out of or resulting from:
----
(i) the breach of any representation or warranty made by
the Company or such Shareholder in the Acquisition Documents;
(ii) the breach of any covenant or agreement made by the
Company or such Shareholder in the Acquisition Documents to be performed
on or prior to the Effective Time; or
(iii) the breach of any covenant or agreement made by the
Company or such Shareholder in the Acquisition Documents to be performed
after the Effective Time.
(b) Notwithstanding anything to the contrary contained in this
Agreement, except with respect to claims based on fraud, intentional
misrepresentation or with respect to the title of the Company Common Stock:
(i) the maximum aggregate amount of indemnifiable Losses
arising out of or resulting from the causes enumerated in Section
8.02(a)(i) and (ii) which may be recovered from any Shareholder shall be
limited to the Escrow Shares and shall not exceed such Shareholder's pro
rata share of the Escrow Shares;
(ii) no indemnification payment by the Shareholders with
respect to any indemnifiable Loss otherwise payable under Section 8.02(a)
and arising out of or resulting from the causes enumerated in Section
8.02(a)(i) and (ii) shall be payable until such time as all such
indemnifiable Losses shall aggregate to more than $300,000, after which
time the Shareholders shall be liable for all indemnifiable Losses,
exceeding, in the aggregate, $300,000;
(iii) The amount of any Loss hereunder shall be reduced by
(A) any payment received by a Parent Indemnified Party or the Surviving
Corporation under any insurance policy, and (B) the amount, if any, by
which such Loss reduces the income tax liability of a Parent Indemnified
Party or the Surviving Corporation;
49
(iv) Any Loss resulting from the adjustment of the income
tax liability of the Company in any taxable year shall be reduced by the
present value (computed at the prime rate announced by Bank of America,
in effect on the date of any such Loss from the adjustment of income tax
liability was incurred) of any corresponding reduction in income tax
liability in future taxable years resulting from such adjustments to the
extent reasonably quantifiable and reasonably certain to be experienced
by Parent; and
(v) In no event shall the Shareholders be liable for
consequential damages under this Agreement.
SECTION 8.03. Indemnification by Parent.
-------------------------
(a) After the Effective Time, the Shareholders and their
respective affiliates, officers, directors, employees, agents, successors and
assigns (collectively, the "Shareholder Indemnified Parties") shall be
-------------------------------
indemnified and held harmless by Parent for any and all Losses, arising out of
or resulting from:
(i) the breach of any representation or warranty made by
Parent or the Merger Sub in the Acquisition Documents (in each case,
solely for purposes of calculating the amount of any Loss pursuant to
this Section 8.03, any and all qualifications of a representation or
warranty using the words "material," "materiality," "Parent Material
Adverse Effect," the negatives thereof, and words of similar import,
shall be excluded, as though, for such purposes, the representation or
warranty in question had been made without such qualification);
(ii) the breach of any covenant or agreement made by
Parent or the Merger Sub in the Acquisition Documents to be performed on
or prior to the Effective Time; or
(iii) the breach of any covenant or agreement made by
Parent or the Merger Sub in the Acquisition Documents to be performed
after the Effective Time.
(b) Notwithstanding anything to the contrary contained in this
Agreement, except with respect to claims based on fraud, intentional
misrepresentation or with respect to the title of the Parent Common Stock:
(i) the maximum aggregate amount of indemnifiable Losses
arising out of or resulting from the causes enumerated in Section
8.03(a)(i) and (ii) which may be recovered from Parent shall be limited
to $9,000,000; and
(ii) no indemnification payment by Parent with respect to
any indemnifiable Loss otherwise payable under Section 8.03(a) and
arising out of or resulting from the causes enumerated in Section
8.03(a)(i) and (ii) shall be payable until such time as all such
indemnifiable Losses shall aggregate to more than $300,000, after which
time Parent shall be liable for all indemnifiable Losses, exceeding, in
the aggregate, $300,000.
50
SECTION 8.04. Indemnification Procedures. (a) For purposes of this Section
--------------------------
8.04, a party against which indemnification may be sought is referred to as the
"Indemnifying Party" and the party which may be entitled to indemnification is
------------------
referred to as the "Indemnified Party". The obligations and Liabilities of
-----------------
Indemnifying Parties under this Article VIII with respect to Losses arising from
claims of any third party which are subject to the indemnification provided for
in this Article VIII ("Third Party Claims") shall be governed by and contingent
------------------
upon the following additional terms and conditions: if an Indemnified Party
shall receive notice of any Third Party Claim, the Indemnified Party shall give
the Indemnifying Parties notice of such Third Party Claim within 30 days of the
receipt by the Indemnified Party of such notice; provided, however, that the
-------- -------
failure to provide such notice shall not release an Indemnifying Party from any
of its obligations under this Article VIII except to the extent that such
Indemnifying Party is materially prejudiced by such failure. The notice of claim
shall describe in reasonable detail the facts known to the Indemnified Party
giving rise to such indemnification claim, and the amount or good faith estimate
of the amount arising therefrom.
(b) If the Indemnifying Party acknowledges in writing its obligation
to indemnify the Indemnified Party hereunder against any Losses that may result
from such Third Party Claim, then the Indemnifying Party shall be entitled to
assume and control the defense of such Third Party Claim at its expense and
through counsel of its choice, reasonably acceptable to the Indemnified Party,
if it gives notice of its intention to do so to the Indemnified Party within ten
days of the receipt of such notice from the Indemnified Party; provided,
--------
however, that if (A) the Indemnifying Party fails to diligently defend such
-------
Third Party Claim and (B) there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate in the judgment of the
Indemnified Party, in its reasonable discretion, for the same counsel to
represent both the Indemnified Party and the Indemnifying Party, then the
Indemnified Party shall be entitled to retain its own counsel, in each
jurisdiction for which counsel is required, at the expense of the Indemnifying
Party. In the event that the Indemnifying Party exercises the right to undertake
any such defense against any such Third Party Claim as provided above, the
Indemnified Party shall cooperate with the Indemnifying Party in such defense
and make available to the Indemnifying Party, at the Indemnifying Party's
expense, all witnesses, pertinent records, materials and information in the
Indemnified Party's possession or under the Indemnified Party's control relating
thereto as is reasonably required by the Indemnifying Party. Similarly, in the
event the Indemnified Party is, directly or indirectly, conducting the defense
against any such Third Party Claim, the Indemnifying Party shall cooperate with
the Indemnified Party in such defense and make available to the Indemnified
Party, at the Indemnifying Party's expense, all such witnesses, records,
materials and information in the Indemnifying Party's possession or under the
Indemnifying Party's control relating thereto as is reasonably required by the
Indemnified Party. No such Third Party Claim may be settled by any party
conducting the defense against such claim without the prior written consent of
the other party unless the other party and its affiliates are released in full
in connection with such settlement.
SECTION 8.05. Distributions from Escrow Fund. In the event that (a) the
------------------------------
Shareholders' Representative shall not have objected to the amount claimed by a
Parent Indemnified Party for indemnification with respect to any Loss in
accordance with the procedures set forth in the Escrow Agreement or (b) the
Shareholders' Representative shall have delivered notice of their disagreement
as to the amount of any indemnification requested by a Parent Indemnified Party
and either (i) the Shareholders' Representative and the Parent Indemnified Party
shall have, subsequent to the giving of such notice, mutually agreed that a
Shareholder is obligated to indemnify the Parent Indemnified Party for a
specified amount and shall have so jointly notified the Escrow Agent or (ii) a
final nonappealable judgment shall have been rendered by the court having
jurisdiction over the matters relating to such claim by the Parent Indemnified
Party for indemnification from such Shareholder
51
and the Escrow Agent shall have received, in the case of clause (i) above,
written instructions from such Shareholder and the Parent Indemnified Party or,
in the case of clause (ii) above, a copy of the final nonappealable judgment of
the court, the Escrow Agent shall deliver to the Parent Indemnified Party from
the Indemnity Escrow Fund an amount equal to the product of (x) any amount
determined to be owed to the Parent Indemnified Party under this Article VIII
and (y) the Shareholder Ratio then in effect.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01. Termination. This Agreement may be terminated and the Merger
-----------
and the other transactions contemplated by this Agreement may be abandoned at
any time prior to the Effective Time, notwithstanding any requisite approval and
adoption of this Agreement and the transactions contemplated by this Agreement,
as follows:
(a) by mutual written consent duly authorized by the Boards of
Directors of each of Parent and the Company;
(b) by either Parent or the Company if the Effective Time shall
not have occurred on or before March 31, 2002; provided, however, that the right
-------- -------
to terminate this Agreement under this Section 9.01(b) shall not be available to
any party whose willful failure to fulfill any obligation under this Agreement
has been the cause of, or resulted in, the failure of the Effective Time to
occur on or before March 31, 2002;
(c) if there shall be any Order which is final and nonappealable
preventing the consummation of the Merger;
(d) by Parent upon a breach of any material representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have become
untrue, in either case such that the conditions set forth in Section 7.02 would
not be satisfied ("Terminating Company Breach"); provided, however, that, if
-------------------------- -------- -------
such Terminating Company Breach is curable by the Company through the exercise
of its best efforts and for so long as the Company continues to exercise such
best efforts (but in any event not to exceed thirty (30) days following notice
thereof), Parent may not terminate this Agreement under this Section 9.01(d); or
(e) by the Company upon a breach of any material representation,
warranty, covenant or agreement on the part of Parent and the Merger Sub set
forth in this Agreement, or if any representation or warranty of Parent and the
Merger Sub shall have become untrue, in either case such that the conditions set
forth in Section 7.03 would not be satisfied ("Terminating Parent Breach");
-------------------------
provided, however, that, if such Terminating Parent Breach is curable by Parent
and the Merger Sub through the exercise of their respective best efforts and for
so long as Parent and the Merger Sub continue to exercise such best efforts (but
in any event not to exceed thirty (30) days following notice thereof), the
Company may not terminate this Agreement under this Section 9.01(e).
SECTION 9.02. Effect of Termination. In the event of termination of this
---------------------
Agreement pursuant to Section 9.01, this Agreement shall forthwith become void,
there shall be no liability under this Agreement on the part of Parent, the
Merger Sub or the Company or any of their
52
respective officers or directors, and all rights and obligations of each party
hereto shall cease, provided, however, that nothing herein shall relieve any
-------- -------
party from liability for fraud, intentional misrepresentation, or intentional
breach of this Agreement prior to the date of such termination.
SECTION 9.03. Amendment. This Agreement may be amended by the parties
---------
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 9.04. Waiver. At any time prior to the Effective Time, any party
------
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto,
and (c) waive compliance with any agreement or condition contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, facsimile, telegram or telex or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 10.01):
if to Parent or the Merger Sub:
Newport Corporation
0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Vice President and General Counsel
with a copy to:
Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: X. X. Xxxxxx, Esq.
53
if to the Company:
Micro Robotics Systems, Inc.
000 Xxxxxxxxx Xxxxxx, Xxxxxxxx 0
Xxxxx Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx (Xxxx) Srivastava, President and Chief
Executive Officer
with a copy to:
Xxxxx, Xxxx & X'Xxxxxxxx, P.C.
Xxx Xxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Xx., Esq.
SECTION 10.02. Certain Definitions. (a) As used in this Agreement, the
-------------------
following terms shall have the following meanings:
(i) "affiliate" of a specified person means a person who
---------
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with such specified person.
(ii) "Closing Parent Share Value" shall be the average of
--------------------------
the closing sales price per share for shares of Parent Common Stock as
reported on the Nasdaq National Market on each of the twenty (20)
consecutive trading days ending on the day immediately prior to the Closing
Date.
(iii) "Company Business" means the business of developing,
----------------
manufacturing and selling robotics and optical automation systems to the
semiconductor and optical communications industries.
(iv) "Company Capital Stock" means any of the Company's
---------------------
common stock, preferred stock, partnership interests, limited liability
company interests or other ownership interests entitling the holder thereof
to vote with respect to matters involving the Company.
(v) "Company Common Stock" means the Company's common
--------------------
stock, $0.01 par value per share.
(vi) "Company Fully-Diluted Capitalization" means the
------------------------------------
outstanding stock of the Company immediately preceding the Closing Date,
assuming the exercise or conversion of all outstanding options, warrants
and convertible securities directly or indirectly convertible into Company
Common Stock.
(vii) "control" (including the terms "controlled by" and
-------
"under common control with") means the possession, directly or indirectly
or as trustee or executor, of the power to direct or cause the direction of
the management and policies of a person, whether
54
through the ownership of voting securities, as trustee or executor, by
contract or credit arrangement or otherwise.
(viii) "Environmental Laws" means any federal, state or
------------------
local statute, law, ordinance, regulation, rule, code or order of the
United States, or any other jurisdiction and any enforceable judicial or
administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to pollution or
protection of the environment or natural resources, including, without
limitation, those relating to the use, handling, transportation, treatment,
storage, disposal, release or discharge of Hazardous Materials, as in
effect as of the date of this Agreement.
(ix) "Environmental Permits" means any permit, approval,
---------------------
identification number, license and other authorization required under any
applicable Environmental Law.
(x) "Exchange Ratio" means (1) the Total Consideration
--------------
minus the Banking Fees, multiplied by (2) a fraction, the numerator of
which is the total number of shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time (the "Company Common
--------------
Capitalization") and the denominator of which is the Company Fully-Diluted
--------------
Capitalization, minus (3) $15,000,000, with such amount divided by the
Parent Share Value and the quotient thereof further divided by the Company
Common Capitalization.
(xi) "Initial Parent Share Value" shall be the average of
--------------------------
the closing sales price per share for shares of Parent Common Stock as
reported on the Nasdaq National Market on each of the twenty-five (25)
consecutive trading days ending on the day immediately prior to date of
execution of this Agreement.
(xii) "Inventory" means all of the Company's inventories
---------
of raw materials, stores, supplies, repair parts, work in process,
semi-finished goods and finished goods used in the Company's business.
(xiii) "knowledge of the Company" or "the Company's
------------------------ -------------
knowledge" means the actual knowledge of Xxxxxxx Xxxxxxxxxx, Xxxxxxxxxx
---------
Srivastava, Xxxxxxx Xxxxxxx, Xxxxxx Xxxxxxx, Xxxxxx Xxxxxxx, Xxxx Xxxxxxx,
Sung-Pin Sung, Xxxxx Xxxxxxx, Xxxx Xxxxxx and Xxxxxx Xxxxx and such
knowledge that would be imputed to such persons upon due investigation.
(xiv) "Liabilities" means any debts, liabilities,
-----------
obligations, whether accrued or fixed, absolute or contingent, matured or
unmatured or determined or determinable.
(xv) "Material Adverse Effect" means any material adverse
-----------------------
change in or effect on the business, operations, assets, prospects or
condition, financial or otherwise, of the Company and its subsidiaries,
taken as a whole.
(xvi) "Parent Common Stock" means the common stock,
-------------------
$0.1167 par value per share, of Parent.
55
(xvii) "Parent Material Adverse Effect" means any material
------------------------------
adverse change in or effect on the business, operations, assets, prospects
or condition, financial or otherwise, of Parent.
(xviii) "Parent Share Value" shall mean (a) the Closing
------------------
Parent Share Value, if either (i) the Closing Parent Share Value is more
than $2.00 in excess of the Initial Parent Share Value, or (ii) the Closing
Parent Share Value is more than $2.00 less than the Initial Parent Share
Value; and (b) the Initial Parent Share Value in all other cases.
(xix) "person" means an individual, corporation,
------
partnership, limited partnership, syndicate, person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act),
trust, association or entity or government, political subdivision, agency
or instrumentality of a government.
(xx) "Shareholder Ratio" means, as of a given time, a
-----------------
fraction, the numerator of which is the sum of (a) the Merger Consideration
(as adjusted from time to time under Section 2.05 and 8.05 hereof) plus (b)
the product of (i) the number of shares of Parent Common Stock issued since
the Effective Time to holders of options converted under Section 6.13 (a)
upon exercise thereof, multiplied by (ii) the Parent Share Value; and the
denominator of which is the sum of the Total Consideration minus the
Banking Fees (as such sum is adjusted from time to time by the gross amount
of the Net Worth adjustment under Section 2.05 and the gross amount of any
indemnified Loss under Section 8.02.
(xxi) "Shareholders" means the record and beneficial
------------
owners of the Company Common Stock.
(xxii) "subsidiary" or "subsidiaries" of any person means
---------- ------------
any corporation, partnership, joint venture or other legal entity of which
such person (either alone or through or together with any other subsidiary)
owns, directly or indirectly, more than 50% of the stock or other equity
interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such
corporation or other legal entity.
(xxiii) "Total Consideration" shall mean (a) $65,000,000 if
-------------------
the Closing Parent Share Value is more than $2.00 in excess of the Initial
Parent Share Value, (b) $55,000,000 if the Closing Parent Share Value is
more than $2.00 less than the Initial Parent Share Value; and (c)
$60,000,000 in all other cases.
(b) The following terms shall have the meanings defined for such
terms in the Sections of this Agreement set forth below:
Term Section
---- -------
Acquisition Documents...........................................8.01
Acquisition Proposal............................................6.12
affiliate.......................................................10.02(a)
Agreement.......................................................Preamble
Articles of Merger..............................................1.02
Balance Sheets..................................................3.06(a)
56
Banking Fee.....................................................3.21
Blue Sky Laws...................................................3.04(b)
Closing Balance Sheet...........................................2.05(b)
Closing Date....................................................1.02
Closing Net Worth...............................................2.05(b)
Closing Parent Share Value......................................10.02(a)
Closing.........................................................1.02
Code............................................................Recitals
Common Stock Certificates.......................................2.02(b)
Company.........................................................Preamble
Company Business................................................10.02(a)
Company Capital Stock...........................................10.02(a)
Company Common Capitalization...................................10.02(a)
Company Common Stock............................................10.02(a)
Company Disclosure Schedule.....................................Article III
Company Fully-Diluted Capitalization............................10.02(a)
Company Intellectual Property...................................3.13(a)
Company Licenses................................................3.13(k)
Company Software................................................3.13(a)
Confidentiality Agreement.......................................6.03(b)
Contracts.......................................................3.11(b)
control.........................................................10.02(a)
Conversion Ratio................................................6.13(a)
Dissenting Shares...............................................2.02(f)
Draft Closing Balance Sheet.....................................2.05(b)
Draft Closing Net Worth.........................................2.05(b)
Effective Time..................................................1.02
Employee........................................................3.10(a)
Employee Agreement..............................................3.10(a)
Employee Plan...................................................3.10(a)
Environmental Laws..............................................10.02(a)
Environmental Permits...........................................10.02(a)
ERISA...........................................................3.10(d)
Escrow Agent....................................................2.04(a)
Escrow Agreement................................................2.04(a)
Escrow Fund.....................................................2.04(a)
Escrow Shares...................................................2.04(a)
Exchange Act....................................................4.07(a)
Exchange Agent..................................................2.02(a)
Exchange Fund...................................................2.02(a)
Exchange Ratio..................................................10.02(a)
Excluded Licenses...............................................3.13(a)
Fixed Assets....................................................3.17(a)
GAAP............................................................3.06(a)
Governmental Entity.............................................3.04(b)
Hazardous Material..............................................3.12(a)
Hazardous Materials Activities..................................3.12(b)
Increased Amount................................................2.05(c)
Indemnified Party...............................................8.04(a)
57
Indemnifying Party..............................................8.04(a)
Independent Accountant..........................................2.05(b)
Initial Parent Share Value......................................10.02(a)
Intellectual Property...........................................3.13(a)
Inventory.......................................................10.02(a)
knowledge of the Company........................................10.02(a)
Labor Claims....................................................3.09(d)
Law.............................................................3.04(a)
Liabilities.....................................................10.02(a)
Licenses and Permits............................................3.05
Liens...........................................................3.16
Loss............................................................8.02(a)
Massachusetts Law...............................................Recitals
Material Adverse Effect.........................................10.02(a)
Merger Consideration............................................2.01(a)
Merger Sub......................................................Preamble
Merger..........................................................Recitals
Multi-employer Plan.............................................3.10(e)
Newsub..........................................................6.15
Order...........................................................7.01(b)
Ordinary Course of Business.....................................3.07
Parent Common Stock.............................................10.02(a)
Parent Disclosure Schedule......................................Article IV
Parent Indemnified Parties......................................8.02(a)
Parent Material Adverse Effect..................................10.02(a)
Parent Permits..................................................4.06
Parent SEC Reports..............................................4.07(a)
Parent Share Value..............................................10.02(a)
Parent Shares...................................................6.01(a)
Parent Stock Plans..............................................4.03(a)
Parent Subsidiaries.............................................4.01
Parent..........................................................Preamble
Permitted Liens.................................................3.16
person..........................................................10.02(a)
Reduction Amount................................................2.05(c)
Registered Intellectual Property................................3.13(a)
Registration Statement..........................................6.01(a)
Representatives.................................................6.03(a)
Securities Act..................................................3.02(a)
September 30, 2001 Balance Sheet................................2.05(a)
September 30, 2001 Net Worth....................................2.05(a)
Shareholders....................................................10.02(a)
Shareholder Indemnified Parties.................................8.03(a)
Shareholder Ratio...............................................10.02(a)
Shareholders' Representative....................................2.05(b)
subsidiary or subsidiaries......................................10.02(a)
Surviving Corporation...........................................1.01
Tax or Taxes....................................................3.14
Tax Return......................................................3.14
58
Terminating Company Breach......................................9.01(d)
Terminating Parent Breach ......................................9.01(e)
Third Party Claims .............................................8.04(a)
Total Consideration ............................................10.02(a)
Transaction Expenses ...........................................10.10
Unregistered Intellectual Property..............................3.13(a)
VTI ............................................................6.14
Welfare Plan....................................................3.10(i)
SECTION 10.03. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated by this Agreement is not affected in
any manner materially 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 a mutually
acceptable manner in order that the transactions contemplated by this Agreement
be consummated as originally contemplated to the fullest extent possible.
SECTION 10.04. Assignment; Binding Effect; Benefit. Neither this Agreement
-----------------------------------
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, nothing in this Agreement
(except for the provisions of Section 6.05), expressed or implied, is intended
to confer on any person other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
SECTION 10.05. Incorporation of Exhibits. The Company Disclosure Schedule,
-------------------------
the Parent Disclosure Schedule and all Exhibits attached hereto and referred to
herein are hereby incorporated herein and made a part hereof for all purposes as
if fully set forth herein.
SECTION 10.06. Governing Law; Forum. This Agreement shall be governed by,
--------------------
and construed in accordance with, the laws of the State of California applicable
to contracts executed in and to be performed in that state and without regard to
any applicable conflicts of law. All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined in any California state
or federal court located in Orange County, California. Each of the parties in
this Agreement (a) consents to submit itself to the personal juris diction of
any California state or federal court in the event any dispute arises out of
this Agreement or any of the transactions contemplated by this Agreement, (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court and (c) agrees that it
will not bring any action in relation of this Agreement, the Merger or any of
the other transactions contemplated hereby in any court other than a California
state or federal court.
SECTION 10.07. Headings. The descriptive headings contained in this
--------
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
59
SECTION 10.08. Counterparts. This Agreement may be executed and delivered
------------
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
SECTION 10.09. Specific Performance. The transactions contemplated by this
--------------------
Agreement are unique. Accordingly, each of the parties acknowledges and agrees
that, in addition to all other remedies to which it may be entitled, each of the
parties hereto is entitled to a decree of specific performance, provided such
party is not in material default hereunder.
SECTION 10.10. Expenses. The Company shall bear the legal, accounting,
--------
investment banking and other expenses incurred on behalf of the Company and the
Shareholders in connection with this Agreement, the Merger, the Acquisition
Documents and the other transactions contemplated hereby (the "Transaction
-----------
Expenses"). Parent shall bear its own legal, accounting and other expenses in
--------
connection with this Agreement, the Merger, the Acquisition Documents and the
other transactions contemplated hereby.
SECTION 10.11. Entire Agreement. This Agreement (including the Exhibits,
----------------
the Company Disclosure Schedule and the Parent Disclosure Schedule), the Voting
Agreement and the Confidentiality Agreement constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
[signatures on next page]
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IN WITNESS WHEREOF, each of the parties hereto has executed or has caused
this Agreement to be executed by their respective officers thereunto duly
authorized as of the date first written above.
NEWPORT CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President and Chief Financial
Officer
MAGNESIUM ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President and Treasurer
MICRO ROBOTICS SYSTEMS, INC.
By: /s/ Xxxxxxx (Xxxx) Srivastava
-----------------------------------------------
Name: Xxxxxxx (Xxxx) Srivastava
Title: President, Chief Executive Officer and
Treasurer
61
Schedule 7.02(f) Individuals Who Shall Execute and Deliver Employment
Agreement
Schedule 7.02(h) Individuals Who Shall Execute and Deliver Non-Competition
Agreement
EXHIBIT A
Form of Escrow Agreement
EXHIBIT B
Form of Joinder and Investment Representation Agreement
EXHIBIT C
Form of Employment Agreement
EXHIBIT D
Form of Non-Competition Agreement
EXHIBIT E
Form of Legal Opinion
EXHIBIT F
Form of Voting Agreement
