EXHIBIT 2.1
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
AMONG
ADVANCED TECHNOLOGY INDUSTRIES, INC.,
LTDN ACQUISITION CORP.,
AND
LTDNETWORK, INC.
Dated as of June 18, 2003
================================================================================
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER..........................................................1
1.1 The Merger............................................................1
1.2 Closing...............................................................1
1.3 Effective Time of the Merger..........................................2
1.4 Subsequent Actions....................................................2
1.5 Effects of the Merger.................................................2
1.6 Tax Consequences......................................................2
ARTICLE II EFFECT OF THE MERGER ON THE OUTSTANDING SECURITIES OF THE COMPANY
AND ACQUISITION; EXCHANGE PROCEDURES................................3
2.1 Effect on Capital Stock...............................................3
2.2 Exchange of Certificates..............................................6
2.3 Effect of the Merger on Company Stock Options.........................8
2.4 Purchase Price Adjustment.............................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES....................................12
3.1 Representations and Warranties of the Company........................12
3.2 Representations and Warranties of Parent and Acquisition.............25
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS..........................37
4.1 Affirmative Covenants................................................37
4.2 Negative Covenants...................................................37
ARTICLE V ADDITIONAL AGREEMENTS...............................................41
5.1 Access to Information; Confidentiality...............................41
5.2 Fees and Expenses....................................................41
5.3 No Solicitation or Other Negotiations................................42
5.4 Brokers or Finders...................................................42
5.5 Reasonable Best Efforts..............................................43
5.6 Publicity............................................................43
5.7 Notification of Certain Matters......................................44
5.8 Preparation of the Proxy Statement and Registration Statement;
Parent Special Meeting...............................................44
5.9 Company Financial Statements.........................................45
i
5.10 Appointment of Directors............................................45
5.11 Compliance with the Securities Act..................................46
5.12 LTDN Interim Notes..................................................46
5.13 Non-Disclosure and Invention Assignment Agreements..................46
5.14 Vote................................................................46
ARTICLE VI CONDITIONS PRECEDENT...............................................46
6.1 Conditions to Each Party's Obligation to Effect the Merger...........46
6.2 Conditions to the Obligation of Parent and Acquisition to Effect
the Merger...........................................................47
6.3 Conditions to Obligation of the Company to Effect the Merger.........48
ARTICLE VII TERMINATION AND ABANDONMENT.......................................49
7.1 Termination and Abandonment..........................................49
7.2 Effect of Termination................................................50
ARTICLE VIII MISCELLANEOUS....................................................51
8.1 Survival of Representations, Warranties, Covenants and Agreements....51
8.2 Specific Performance.................................................51
8.3 Notices..............................................................51
8.4 Interpretation.......................................................52
8.5 Counterparts.........................................................52
8.6 Entire Agreement; No Third Party Beneficiaries.......................52
8.7 Amendment............................................................53
8.8 Waiver...............................................................53
8.9 Governing Law........................................................53
8.10 Submission to Jurisdiction..........................................53
8.11 Assignment..........................................................53
8.12 Severability........................................................54
ii
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 18, 2003 (this
"AGREEMENT"), is made and entered into by and among ADVANCED TECHNOLOGY
INDUSTRIES, INC., a Delaware corporation ("PARENT"), LTDN ACQUISITION CORP., a
Delaware corporation ("ACQUISITION"), and LTDNETWORK, INC., a Delaware
corporation (the "COMPANY").
RECITALS
WHEREAS, the Board of Directors of each of Parent, Acquisition and the
Company has unanimously deemed it advisable and in the best interests of their
respective stockholders for Acquisition to merge with and into the Company (the
"MERGER") pursuant to Section 251 of the Delaware General Corporation Law (the
"DGCL") upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of Parent has unanimously deemed it
advisable and in the best interests of the stockholders of Parent to adopt an
amendment to Parent's Certificate of Incorporation (the "CERTIFICATE OF
INCORPORATION AMENDMENT") to increase the authorized shares of Parent Common
Stock (as hereinafter defined) to 500,000,000 shares of Parent Common Stock; and
WHEREAS, Parent, Acquisition and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the DGCL, Acquisition shall be merged
with and into the Company at the Effective Time (as hereinafter defined). At the
Effective Time, the separate corporate existence of Acquisition shall cease and
the Company shall continue as the surviving corporation under the name
"LTDnetwork, Inc." and shall succeed to and assume all of the rights and
obligations of Acquisition in accordance with the DGCL. As the context requires,
the Company is sometimes hereinafter referred to as the "SURVIVING CORPORATION."
1.2 CLOSING. Unless this Agreement shall have been terminated and the
Merger shall have been abandoned pursuant to Section 7.1, the consummation of
the Merger (the "CLOSING") shall take place as promptly as practical following
the satisfaction or waiver (subject to applicable Law (as hereinafter defined))
of all of the conditions (other than those conditions which by their nature are
to be satisfied at Closing, but subject to the fulfillment or waiver of those
conditions) set forth in Article VI (the "CLOSING DATE"), at the offices of
Ropes & Xxxx LLP, 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, XX, unless another date, time
or place is agreed to in writing by the parties hereto.
1.3 EFFECTIVE TIME OF THE MERGER. At Closing, the parties hereto shall
cause the Merger to be consummated by filing a certificate of merger (the
"CERTIFICATE OF MERGER") with the Secretary of State of the State of Delaware as
provided in the DGCL. The Merger shall become effective upon such filing or at
such time thereafter as Parent, Acquisition and the Company shall agree and
specify in the Certificate of Merger (the "EFFECTIVE TIME").
1.4 SUBSEQUENT ACTIONS. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of the Company acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or otherwise to
carry out this Agreement, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of either the Company or the Parent, all such deeds, bills of sale,
instruments of conveyance, assignments and assurances and to take and do, in the
name and on behalf of each of such corporations or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry out this Agreement.
1.5 EFFECTS OF THE MERGER.
(a) The Merger shall have the effects set forth in this
Agreement, the Certificate of Merger and the applicable provisions of the DGCL.
(b) The directors and the officers of the Company immediately
prior to the Effective Time shall, from and after the Effective Time, be the
initial directors and officers of the Surviving Corporation until their
successors have been duly elected or appointed and qualified, or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws.
(c) The Certificate of Incorporation of the Company as in
effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation following the Merger until thereafter
amended in accordance with its terms and the DGCL.
(d) The Bylaws of the Company as in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation following
the Merger until thereafter amended in accordance with the DGCL, the Certificate
of Incorporation of the Surviving Corporation and the Bylaws of the Surviving
Corporation.
1.6 TAX CONSEQUENCES. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368(a) of
the Code and this Agreement is intended to constitute a plan of reorganization
for purposes of Section 368 of the Code and related Treasury Regulations.
2
ARTICLE II
EFFECT OF THE MERGER ON THE OUTSTANDING SECURITIES
OF THE COMPANY AND ACQUISITION; EXCHANGE PROCEDURES
2.1 EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of common
stock, par value $0.001 per share, of the Company (the "COMPANY COMMON STOCK")
or the holder of any shares of common stock, par value $0.0001 per share, of
Parent (the "PARENT COMMON Stock"):
(a) COMMON STOCK OF ACQUISITION. Each share of common stock,
par value $0.001 per share, of Acquisition issued and outstanding immediately
prior to the Effective Time shall be converted into and become one fully paid
and nonassessable share of common stock, par value $0.001 per share, of the
Surviving Corporation. Each stock certificate of Acquisition evidencing
ownership of any shares shall continue to evidence ownership of such shares of
common stock of the Surviving Corporation.
(b) CONVERSION OF COMPANY COMMON STOCK. (i) Each share of
Company Common Stock issued and outstanding immediately prior to the Effective
Time other than Dissenting Shares (as hereinafter defined) and Excluded Shares
(as hereinafter defined) shall be converted into the right to receive that
number of shares of Parent Common Stock equal to the Exchange Ratio (the "MERGER
CONSIDERATION").
(ii) All shares of Company Common Stock that are held
in the treasury of the Company and shares of Company Common
Stock owned by Parent or Acquisition (collectively, the
"EXCLUDED SHARES") shall be cancelled and retired and shall
cease to exist, and no consideration shall be delivered or
deliverable in exchange therefor.
(iii) Definitions.
(A) "ADDITIONAL AMOUNT" means the number of
shares of Parent Common Stock determined by
calculating the Additional Amount per the following
formula once the Additional Percentage is determined:
N = (O+B+N)X
Where:
N = Additional Amount
O = Aggregate Parent Number
B = Base Amount
X = Additional Percentage
3
(B) "ADDITIONAL PERCENTAGE" means the
product obtained by multiplying (1) the difference
between (x) the Threshold Amount and (y) $5,000,000,
by (2) the quotient obtained by dividing (x) 0.05 by
(y) $750,000.
X = (T - 5,000,000) x (0.05 / 750,000)
Where:
X = Additional Percentage
T = Threshold Amount
(C) "AGGREGATE COMMON NUMBER" means the sum
of (1) the number of shares of Company Common Stock
issued and outstanding immediately prior to the
Effective Time and (2) the number of shares of
Company Common Stock issuable upon exercise,
conversion or exchange of any security of the Company
issued and outstanding as of the Effective Time that
is exercisable, convertible or exchangeable into
Company Common Stock (including Company Stock Options
(as hereinafter defined)).
(D) "AGGREGATE PARENT NUMBER" means the sum
of (1) the number of shares of Parent Common Stock
issued and outstanding immediately prior to the
Effective Time and (2) the number of shares of Parent
Common Stock issuable upon exercise, conversion or
exchange of any security (including, any Parent
Indebtedness (as hereinafter defined)) of Parent
(other than the LTDN Interim Notes) issued and
outstanding as of the Effective Time that is
exercisable, convertible or exchangeable into Parent
Common Stock (including Parent Stock Options (as
hereinafter defined)) whether by the terms of such
security or pursuant to an agreement with the holder
thereof to convert or exchange such security;
provided that shares of Parent Common Stock issued to
the Company or any of its Subsidiaries (as
hereinafter defined) prior to, on or after the date
of this Agreement shall not be included in the
calculation of the Aggregate Parent Number. Without
limiting the foregoing, the Aggregate Parent Number
shall include all shares of Parent Common Stock,
Parent Stock Options and Parent Convertible
Securities issued or issuable to (i) Xxxxxx Xxxxxx &
Co. in connection with the transactions contemplated
by this Agreement and (2) Alfa-Pro Products GmbH
pursuant to the Alfa-Pro Agreement (as hereinafter
defined).
(E) "AGGREGATE SHARE NUMBER" means the
number of shares of Parent Common Stock equal to the
sum of (1) the Base Amount and (2) the Additional
Amount.
(F) "BANK ACCOUNT AMOUNT" means the amount
of immediately available funds held in a bank account
of the Company (the "CASH BANK ACCOUNT") at the
Effective Time at a bank designated by the Company
(and reasonably acceptable to Parent) at least ten
days prior to the Closing Date with an office located
in New York City, New York (the "COMPANY'S BANK").
4
(G) "BASE AMOUNT" means the number of shares
of Parent Common Stock equal to the quotient obtained
by dividing (1) the product obtained by multiplying
(x) 0.58 by (y) the Aggregate Parent Number by (2)
0.42.
(H) "CERTIFIED EXCESS PARENT LIABILITIES"
means the amount of Excess Parent Liabilities, as set
forth in a certificate (the "EXCESS PARENT
LIABILITIES CERTIFICATE") signed on behalf of Parent
by the chief executive officer and chief financial
officer of Parent.
(I) "CERTIFIED TOTAL AMOUNT" means an amount
equal to the sum of (i) the Net Cash Amount and (ii)
the LTDN Interim Note Amount, as set forth in a
certificate (the "TOTAL AMOUNT CERTIFICATE") signed
on behalf of the Company by the chief executive
officer and chief financial officer of the Company.
(J) "EXCESS PARENT LIABILITIES" means the
difference, if any, between (1) all obligations and
liabilities of Parent and its Subsidiaries
outstanding on December 31, 2002 (and which are still
outstanding on the Closing Date) of a nature required
by United States generally accepted accounting
principles ("GAAP") to be reflected in a consolidated
balance sheet (or reflected in the notes thereto),
other than any such obligations or liabilities that
are (x) reflected in the Form 10-KSB of Parent for
the fiscal year ended December 31, 2002 (the "PARENT
FORM 10-KSB") or (y) converted into Parent Common
Stock on the Closing Date, and (2) $520,000,
expressed as a positive number.
(K) "EXCHANGE RATIO" means the quotient
obtained by dividing (1) the Aggregate Share Number
by (2) the Aggregate Common Number.
(L) "LTDN INTERIM NOTE AMOUNT" means the
aggregate principal and interest outstanding at the
Effective Time under the LTDN Interim Notes.
(M) "LTDN INTERIM NOTES" means the
Promissory Notes issued prior to the Closing Date by
Parent and payable to the Company.
(N) "NET CASH AMOUNT" means an amount equal
to the difference between (1) the Bank Account Amount
and (2) all obligations and liabilities of the
Company and its Subsidiaries outstanding on the
Closing Date of a nature required by GAAP to be
reflected in a consolidated balance sheet (or
reflected in the notes thereto), other than any such
obligations or liabilities that are converted into
Company Common Stock on the Closing Date.
(O) "THRESHOLD AMOUNT" means the sum of (1)
the lesser of (I) $10,000,000 and (II) the Certified
Total Amount and (2) the Certified Excess Parent
Liabilities.
5
(c) ESCROW SHARES. Parent shall withhold from the shares of
Parent Common Stock to be issued at the Effective Time to the holders of Company
Common Stock five percent (5%) of the Aggregate Share Number (the "ESCROW
SHARES"). The portion of the Escrow Shares contributed on behalf of each holder
of Company Common Stock shall be in proportion to the ratio of the aggregate
Merger Consideration which such holder would otherwise be entitled to receive
but for the withholding of the Escrow Shares to the aggregate Merger
Consideration that would otherwise be received by all such holders but for the
withholding of the Escrow Shares.
(d) DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock that are issued and
outstanding immediately prior to the Effective Time and that are held by a
holder who has validly demanded appraisal rights in accordance with Section 262
of the DGCL ("DISSENTING SHARES") shall not be converted into or be exchangeable
for the right to receive the Merger Consideration unless and until such holder
shall have failed to perfect or shall have effectively withdrawn or lost such
holder's appraisal right under the DGCL (but instead shall be converted into the
right to receive payment from the Surviving Corporation with respect to such
Dissenting Shares in accordance with the DGCL). If any such holder shall have
failed to perfect or shall have effectively withdrawn or lost such right, each
share of such holder shall be treated as a share of Company Common Stock that
had been converted as of the Effective Time into the right to receive the Merger
Consideration in accordance with Section 2.1(b). The Company shall give prompt
notice to Parent of any demands, attempted withdrawals of such demands and any
other instruments served pursuant to the DGCL received by the Company for
appraisal of shares of Company Common Stock.
(e) CANCELLATION AND RETIREMENT OF COMPANY COMMON STOCK. As of
the Effective Time, all shares of Company Common Stock (other than Dissenting
Shares and Excluded Shares), that are issued and outstanding immediately prior
to the Effective Time shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a certificate
representing any shares of Company Common Stock being converted into the right
to receive the Merger Consideration pursuant to Section 2.1(b) (the
"CERTIFICATES") shall cease to have any rights with respect to such shares of
Company Common Stock, except the right to receive the Merger Consideration to be
issued in consideration therefor upon surrender of such Certificate in
accordance with Section 2.2(b).
2.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Effective Time, Parent shall
appoint a bank or trust company, or other party acceptable to the Company, to
act as exchange agent (the "EXCHANGE AGENT") for the payment of the Merger
Consideration upon surrender of the Certificates. At the Effective Time, subject
to Section 2.1(c), the Surviving Corporation shall deposit (or cause to be
deposited) with the Exchange Agent, for the benefit of the holders of such
Certificates, for exchange in accordance with this Article II, certificates
representing shares of Parent Common Stock issuable pursuant to Section 2.1(b)
(the "EXCHANGE FUND").
(b) EXCHANGE PROCEDURES. Promptly after the Effective Time,
Parent shall cause the Exchange Agent to mail or deliver to each Person (as
hereinafter defined) who was, at the Effective Time, a holder of record of
Company Common Stock and whose shares are being converted into the Merger
Consideration pursuant to Section 2.1(b) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
6
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall otherwise be in a form and have such other provisions as Parent
may reasonably specify) containing instructions for use by holders of Company
Common Stock to effect the exchange of their shares of Company Common Stock for
the Merger Consideration as provided herein. As soon as practicable after the
Effective Time, each holder of an outstanding Certificate or Certificates shall,
upon surrender to the Exchange Agent of such Certificate or Certificates and
such letter of transmittal duly executed and completed in accordance with the
instructions thereto (together with such other documents as the Exchange Agent
may reasonably request) and acceptance thereof by the Exchange Agent, be
entitled to receive, subject to Section 2.1(c), in exchange therefore a
certificate representing that number of whole shares of Parent Common Stock
which such holder has the right to receive pursuant to this Article II. The
Exchange Agent shall accept such Certificates upon compliance with such
reasonable terms and conditions as the Exchange Agent may impose to effect an
orderly exchange thereof in accordance with normal exchange practices. If Parent
Common Stock is to be remitted to a Person other than the Person in whose name
the Certificate surrendered for exchange is registered, it shall be a condition
of such exchange that the Certificate so surrendered shall be properly endorsed,
with signature guaranteed, or otherwise in proper form for transfer and that the
Person requesting such exchange shall pay to the Exchange Agent any transfer or
other taxes required by reason of the receipt of the Merger Consideration by a
Person other than the registered holder of the Certificate so surrendered, or
shall establish to the satisfaction of the Exchange Agent that such tax either
has been paid or is not applicable. Until surrendered as contemplated by this
Section 2.2(b), at any time after the Effective Time, each Certificate shall be
deemed to represent only the right to receive the Merger Consideration upon such
surrender as contemplated by Section 2.1.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All
shares of Parent Common Stock issued upon the surrender for exchange of
Certificates representing shares of Company Common Stock in accordance with the
terms of this Article II shall be deemed to have been issued in full
satisfaction of all rights pertaining to the shares of Company Common Stock
theretofore represented by such Certificates, and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were issued and
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for transfer, they
shall be cancelled and exchanged as provided in this Article II.
(d) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund which remains undistributed to the holders of Certificates for 180 days
after the Effective Time shall be delivered to Parent, and any holders of
Certificates who have not theretofore complied with this Article II shall
thereafter look only to the Surviving Corporation for payment of the Merger
Consideration, subject to escheat and abandoned property and similar Laws.
(e) NO LIABILITY. None of Parent, the Surviving Corporation or
the Exchange Agent shall be liable to any Person in respect of any shares of
Parent Common Stock from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar Law. If any
Certificate shall not have been surrendered prior to two years after the
Effective Time (or immediately prior to such earlier date on which any Merger
Consideration and dividends in respect of such Certificate would otherwise
7
escheat to or become the property of any Governmental Entity (as hereinafter
defined)), any such Merger Consideration and dividends in respect of such
Certificate shall, to the extent permitted by applicable Law, become the
property of Parent, free and clear of all claims or interest of any Person
previously entitled thereto.
(f) NO FRACTIONAL SHARES. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates, no dividend or distribution of Parent
shall relate to such fractional share interests and such fractional share
interests will not entitle the owner thereof to the right to vote or to any
other rights of a stockholder of Parent. Any fractional share interests shall be
rounded down to the nearest whole share of Parent Common Stock.
(g) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions with respect to shares of Parent Common Stock
with a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock
represented thereby and all such dividends and other distributions shall be paid
by Parent to the Exchange Agent and shall be included in the Exchange Fund, in
each case until the surrender of such Certificate in accordance with this
Article II. Subject to the effect of applicable escheat or similar Laws,
following surrender of any such Certificate there shall be paid to the holder of
the certificate representing whole shares of Parent Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
such surrender and with a payment date subsequent to such surrender payable with
respect to such whole shares of Parent Common Stock.
(h) WITHHOLDING RIGHTS. Parent or the Exchange Agent shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company Common Stock such
amounts as Parent or the Exchange Agent is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder (the "Code"),
or any provision of state, local or foreign tax Law. To the extent that amounts
are so deducted and withheld by Parent or the Exchange Agent, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the shares of Company Common Stock in respect of which such
deduction and withholding was made by Parent or the Exchange Agent.
(i) LOST CERTIFICATES. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond or
guarantee in such reasonable amount as the Surviving Corporation may require as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the Merger Consideration payable pursuant to this
Agreement.
2.3 EFFECT OF THE MERGER ON COMPANY STOCK OPTIONS.
8
(a) As soon as practicable following the date of this
Agreement, the Board of Directors of the Company (or, if appropriate, any
committee administering the stock option plan of the Company (the "COMPANY STOCK
OPTION PLAN")) shall adopt such resolutions or take such other actions (if any)
as may be required to effect the following:
(i) adjust the terms of all options to purchase
shares of Company Common Stock ("COMPANY STOCK OPTIONS")
granted under the Company Stock Option Plan, whether vested or
unvested, as necessary to provide that, at the Effective Time,
each such Company Stock Option outstanding immediately prior
to the Effective Time shall be assumed by Parent and become an
option to acquire, on the same terms and conditions as were
applicable under such Company Stock Option, the number of
shares of Parent Common Stock (rounded down to the nearest
whole share), determined by multiplying the number of shares
of Company Common Stock subject to such Company Stock Option
by the Exchange Ratio, at an exercise price per share of
Parent Common Stock equal to (1) the per share exercise price
for the shares of Company Common Stock otherwise subject to
such Company Stock Option divided by (2) the Exchange Ratio,
provided that such exercise price shall be rounded up to the
nearest whole cent; and
(ii) make such other changes to the Company Stock
Option Plan as Parent and the Company may agree are
appropriate to give effect to the Merger.
(b) The adjustments provided herein with respect to any
Company Stock Options that are "incentive stock options" as defined in Section
422 of the Code shall be and are intended to be effected in a manner which is
consistent with Section 424(a) of the Code. It is the intention of the parties
that the Company Stock Options assumed by Parent shall qualify following the
Effective Time as incentive stock options as defined in Section 422 of the Code
to the same extent the Company Stock Options qualified as incentive stock
options immediately prior to the Effective Time and the provisions of this
Section 2.3 shall be applied consistent with this intent.
(c) At the Effective Time, by virtue of the Merger and without
the need of any further corporate action, Parent shall assume the Company Stock
Option Plan, with the result that all obligations of the Company under the
Company Stock Option Plan, including with respect to Company Stock Options
outstanding at the Effective Time, shall be obligations of Parent following the
Effective Time.
(d) Except as otherwise contemplated by this Section 2.3 and
except to the extent required under the respective terms of the Company Stock
Options or the Company Stock Option Plan, all restrictions or limitations on
transfer with respect to Company Stock Options awarded under the Company Stock
Option Plan or any other plan, program or arrangement of the Company, to the
extent that such restrictions or limitations shall not have already lapsed,
shall remain in full force and effect with respect to such Company Stock Options
after giving effect to the Merger and the assumption of the Company Stock
Options by Parent as set forth above.
2.4 PURCHASE PRICE ADJUSTMENT.
9
(a) Within 60 days after the Closing Date, Parent shall
prepare and deliver to Xxxx Xxxxxxx (the "Representative") a statement (the
"STATEMENT"), certified by the independent auditor of the Company, setting forth
the Net Cash Amount as of the close of business on the Closing Date ("CLOSING
NET CASH AMOUNT").
(b) (i) During the 60-day period following the
Representative's receipt of the Statement, the Representative and its
independent auditors shall be permitted to review the working papers relating to
the Statement and any other books and records of the Company reasonably
requested by the Representative. The Statement shall become final and binding
upon the parties on the 60th day following delivery thereof, unless the
Representative gives written notice of his disagreement with the Statement (a
"NOTICE OF DISAGREEMENT") to Parent prior to such date. Any Notice of
Disagreement shall specify in reasonable detail the nature of any disagreement
so asserted. If a Notice of Disagreement is received by Parent in a timely
manner, then the Statement (as revised in accordance with this sentence) shall
become final and binding upon Parent and the Company on the earlier of (A) the
date Parent and the Representative resolve in writing any differences they have
with respect to the matters specified in the Notice of Disagreement or (B) the
date any disputed matters are finally resolved in writing by the Accounting Firm
(as defined below). During the 30-day period following the delivery of a Notice
of Disagreement, Parent and the Representative shall seek in good faith to
resolve in writing any differences that they may have with respect to the
matters specified in the Notice of Disagreement. At the end of such 30-day
period, Parent and the Representative shall submit to an independent accounting
firm (the "ACCOUNTING FIRM") for arbitration any and all matters that remain in
dispute and were properly included in the Notice of Disagreement. The Accounting
Firm shall be a firm agreed upon by the Representative, the Company and Parent
in writing. Judgment may be entered upon the determination of the Accounting
Firm in any court having jurisdiction over the party against which such
determination is to be enforced.
(ii) During the 60-day period following the Company's receipt
of the Excess Parent Liabilities Certificate, Xxxxx Xxxxxxxx (the "COMPANY
REPRESENTATIVE") and its independent auditors shall be permitted to review the
working papers relating to the Excess Parent Liabilities Certificate and any
other books and records of Parent reasonably requested by the Company
Representative. The Excess Parent Liabilities Certificate shall become final and
binding upon the parties on the 60th day following the Closing Date, unless the
Company Representative gives written notice of his disagreement with the Excess
Parent Liabilities Certificate (a "COMPANY NOTICE OF DISAGREEMENT") to the
Representative prior to such date. Any Company Notice of Disagreement shall
specify in reasonable detail the nature of any disagreement so asserted. If a
Company Notice of Disagreement is received by the Representative in a timely
manner, then the Excess Parent Liabilities Certificate (as revised in accordance
with this sentence) shall become final and binding upon Parent and the Company
on the earlier of (A) the date the Company Representative and the Representative
resolve in writing any differences they have with respect to the matters
specified in the Company Notice of Disagreement or (B) the date any disputed
matters are finally resolved in writing by the Accounting Firm. During the
30-day period following the delivery of a Company Notice of Disagreement, the
Company Representative and the Representative shall seek in good faith to
resolve in writing any differences that they may have with respect to the
matters specified in the Company Notice of Disagreement. At the end of such
10
30-day period, the Company Representative and the Representative shall submit to
the Accounting Firm for arbitration any and all matters that remain in dispute
and were properly included in the Company Notice of Disagreement. Judgment may
be entered upon the determination of the Accounting Firm in any court having
jurisdiction over the party against which such determination is to be enforced.
The amount of Excess Parent Liabilities that becomes final and binding pursuant
to this Section 2.4(b)(ii) shall be referred to herein as the "CLOSING EXCESS
PARENT LIABILITIES."
(iii) The cost of any arbitration (including the fees and
expenses of the Accounting Firm and reasonable attorney fees and expenses of the
parties) pursuant to this Section 2.4 shall be borne by Parent.
(c) If the sum (the "ACTUAL THRESHOLD AMOUNT") of (i) the
lesser of (1) $10,000,000 and (2) the sum of (x) the Closing Net Cash Amount and
(y) the LTDN Interim Note Amount and (ii) the Closing Excess Parent Liabilities
is less than the sum of (A) the Certified Total Amount and (B) the Certified
Excess Parent Liabilities, then (x) if the Threshold Amount is greater than
$5,000,000, the Additional Percentage and the Additional Amount shall be
calculated by substituting the Actual Threshold Amount for the Threshold Amount
and the difference in the number of shares of Parent Common Stock between (I)
the Additional Amount calculated using the Threshold Amount and (II) the
Additional Amount calculated using the Actual Threshold Amount, shall be
subtracted from the Escrow Shares and returned to the treasury of Parent and (y)
if the Actual Threshold Amount is less than $5,000,000, then in addition to any
reduction in Escrow Shares pursuant to clause (x) above, the difference in the
number of shares of Parent Common Stock between (I) the Base Amount as
calculated on the Closing Date and (II) the New Base Amount (as defined below),
shall be subtracted from the Escrow Shares and returned to the treasury of
Parent. If there are Escrow Shares remaining after any reduction in the Escrow
Shares is made in accordance with the immediately preceding sentence, then such
remaining Escrow Shares shall be issued to the Persons who were holders of
Company Common Stock immediately prior to the Effective Time on a pro rata basis
in proportion to the Merger Consideration received by such holders.
(d) If the Actual Threshold Amount is greater than the
Threshold Amount, then the Additional Percentage and the Additional Amount shall
be calculated by substituting the Actual Threshold Amount for the Threshold
Amount and the difference in the number of shares of Parent Common Stock between
(i) the Additional Amount calculated using the Actual Threshold Amount and (ii)
the Additional Amount calculated using the Threshold Amount shall be issued to
Persons who were holders of Company Common Stock immediately prior to the
Effective Time on a pro rata basis in proportion to the Merger Consideration
received by such holders. Any additional shares of Parent Common Stock issued
pursuant to this Section 2.4(d) shall be deemed part of the Merger
Consideration.
(e) Definitions:
(i) "NEW BASE AMOUNT" means the number of shares of
Parent Common Stock determined by calculating the New Base
Amount per the following formula once the New Base Percentage
is determined:
B = (O+B)Y
Where:
11
B = New Base Amount
O = Aggregate Parent Number
Y = New Base Percentage
(ii) "NEW BASE PERCENTAGE" means the difference
between (A) 0.58 and (B) the product obtained by multiplying
(1) the difference between (x) $5,000,000 and (y) the Actual
Threshold Amount by (0) 0.000000000.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth
in the disclosure schedule, dated the date hereof, delivered by the Company to
Parent at or prior to delivery of this Agreement, the Company represents and
warrants to Parent and Acquisition as follows:
(a) ORGANIZATION, STANDING AND POWER. The Company is a
corporation duly organized and validly existing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. On
the Closing Date, the Company will be in good standing under the laws of the
State of Delaware. Each Subsidiary (as defined below) of the Company is a
corporation, partnership or a limited liability company duly organized, validly
existing and, as of the Closing Date will be, in good standing under the Laws of
its respective jurisdiction of organization and has all requisite corporate,
partnership or limited liability company power and authority to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing or in good standing or to
have such power or authority has not had and would not reasonably be expected to
have, individually or in the aggregate, a Company Material Effect (as defined
below). Each of the Company and its Subsidiaries is duly qualified or licensed
to do business as a foreign corporation, partnership or limited liability
company and in good standing to conduct business in each jurisdiction in which
the business it is conducting, or the operation, ownership or leasing of its
properties, makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to so qualify or be licensed to do business as a
foreign corporation, partnership or limited liability company or to be in good
standing has not had and would not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect. As used in this
Agreement, (i) "COMPANY MATERIAL ADVERSE EFFECT" shall mean a material adverse
effect on the business, operations, assets, liabilities, financial condition or
results of operations of the Company and its Subsidiaries, taken as a whole,
other than any such material adverse effect (A) arising as a result of changes
in (x) the general economic conditions in any of the countries in which the
Company and its Subsidiaries operates or (y) the industries in which the Company
and its Subsidiaries operates or (B) resulting from the announcement of this
Agreement; (ii) "SUBSIDIARY" shall mean, with respect to any party, any Person
(as hereinafter defined) (A) of which such party or any other Subsidiary of such
party is a general partner, (B) of which voting power to elect a majority of the
board of directors or others performing similar functions with respect to such
Person is held by such party or by one or more of its Subsidiaries or (C) of
12
which at least 50% of the equity interests (or economic equivalent) of such
Person are, directly or indirectly, owned or controlled by such party or by one
or more of its Subsidiaries, and (iii) "PERSON" shall mean any natural person,
firm, partnership, limited liability company, joint venture, business trust,
trust, association, corporation, company, unincorporated entity or other entity.
(b) CAPITAL STRUCTURE.
(i) THE COMPANY. The authorized capital stock of the
Company consists of 180,000,000 shares of Company Common
Stock. As of May 10, 2003 (the "CAPITALIZATION DATE"),
171,209,000 shares of Company Common Stock were issued and
outstanding; no shares of Company Common Stock were held in
the Company's treasury; 12,340,000 shares of Company Common
Stock were reserved for issuance pursuant to the outstanding
Company Stock Options and 733,333 shares of Company Common
Stock were reserved for issuance pursuant to the securities of
the Company convertible into, or exchangeable or exercisable
for, Company Common Stock (other than Company Stock Options)
(the "COMPANY CONVERTIBLE SECURITIES"). No bonds, debentures
or notes of the Company or any Subsidiary thereof or other
Company Indebtedness (as hereinafter defined) having any right
to vote with the stockholders (or other equityholders) of the
Company or such Subsidiary on matters submitted to the
stockholders (or other equityholders) of the Company or such
Subsidiary (or any securities that are convertible into or
exercisable or exchangeable for securities having such voting
rights) are issued or outstanding. Since the Capitalization
Date, no shares of capital stock of the Company and no other
securities directly or indirectly convertible into, or
exchangeable or exercisable for, capital stock of the Company
have been issued, other than shares of Company Common Stock
and Company Convertible Securities. Except as set forth above
or on SCHEDULE 3.1(b)(i), as of the Capitalization Date, there
were no outstanding shares of capital stock of the Company or
securities, directly or indirectly, convertible into, or
exchangeable or exercisable for, shares of capital stock of
the Company or any outstanding "phantom" stock, "phantom"
stock rights, stock appreciation rights, restricted stock
awards, dividend equivalent awards, or other stock-based
awards or rights pursuant to which any Person is or may be
entitled to receive any payment or other value based upon,
relating to or valued by reference to the capital stock of the
Company or the dividends paid on the capital stock of the
Company or the revenues, earnings or financial performance,
stock performance or any other attribute of the Company.
Except as set forth above or on SCHEDULE 3.1(b)(i), there are
no puts, calls, rights (including preemptive rights),
commitments or agreements (including employment, termination
and similar agreements) to which the Company or any of its
Subsidiaries is a party or by which it is bound, in any case
obligating the Company or any of its Subsidiaries to issue,
deliver, sell, purchase, redeem or acquire, any debt or equity
securities of the Company, or obligating the Company or any of
its Subsidiaries to grant, extend or enter into any such
option, put, warrant, call, right, commitment or agreement.
All outstanding shares of capital stock of the Company are
validly issued, fully paid and nonassessable and are not
subject to, and have not been issued in violation of,
preemptive or other similar rights. SCHEDULE 3.1(b)(i) sets
forth, as of the Capitalization Date, a true and complete list
of (A) the name and the last known address of each holder of
shares of Company Common Stock, Company Convertible Securities
and Company Stock Options, (B) the number of shares of Company
13
Common Stock, Company Convertible Securities and Company Stock
Options owned of record by such holder, (C) the exercise or
conversion price of the Company Convertible Securities and
Company Stock Options and (D) the number of shares of Company
Common Stock issuable with respect to each of the Company
Convertible Securities and Company Stock Options. As a result
of the Merger, the Company Convertible Securities shall become
convertible into the right to receive the consideration into
which the underlying Company Common Stock would have been
converted in the Merger had such conversion of Company
Convertible Securities occurred immediately prior to the
Effective Time.
(ii) AGREEMENTS RELATING TO CAPITAL STOCK. Except as
set forth in this Agreement or on SCHEDULE 3.1(B)(II), there
are not as of the date hereof any stockholder agreements,
voting trusts or other agreements or understandings to which
the Company or any of its Subsidiaries is a party or by which
it is bound relating to the voting of any shares of the
capital stock of the Company or any of its Subsidiaries. All
registration rights agreements, stockholders' agreements and
voting agreements to which the Company or any of its
Subsidiaries is a party are identified on SCHEDULE 3.1(B)(II).
(iii) SUBSIDIARIES. All operating Subsidiaries of the
Company, their respective jurisdictions of organization, their
respective forms of organization and holders of their
respective outstanding capital stock or other equity
interests, are identified on SCHEDULE 3.L(b)(iii). Except as
described on SCHEDULE 3.1(b)(iii), all outstanding shares of
capital stock of, or other ownership interests in, such
operating Subsidiaries are owned by the Company or a direct or
indirect wholly-owned Subsidiary of the Company, free and
clear of all pledges, liens, hypothecations, claims, charges,
security interests or other encumbrances of any kind (other
than licenses to Intellectual Property (as hereinafter
defined)) (collectively, "LIENS"). All such issued and
outstanding shares of capital stock or other ownership
interests are validly issued, fully paid and nonassessable and
no such shares or other ownership interests have been issued
in violation of any preemptive or similar rights. No shares of
capital stock of, or other ownership interests in, any
Subsidiary of the Company are reserved for issuance. Except as
set forth on SCHEDULE 3.1(b)(iii), there are no outstanding
shares of capital stock of any Subsidiary of the Company or
securities directly or indirectly convertible into, or
exchangeable or exercisable for, shares of capital stock of
any Subsidiary of the Company or any outstanding awards or
rights pursuant to which any Person is or may be entitled to
receive any payment or other value based upon, relating to or
valued by reference to the value, revenues, earnings or
financial performance or any other attribute of any Subsidiary
of the Company. Except as set forth on SCHEDULE 3.1(B)(III),
there are no calls, rights (including preemptive rights),
commitments or agreements (including employment, termination
and similar agreements) to which the Company or any of its
Subsidiaries is a party or by which it is bound, in any case
obligating the Company or any of its Subsidiaries to issue,
deliver, sell, purchase, redeem or acquire, any debt or equity
securities of any Subsidiary of the Company.
(c) AUTHORITY; NO VIOLATIONS; CONSENTS AND APPROVALS.
14
(i) The Company has all requisite corporate power and
authority to enter into this Agreement and, subject to the
adoption of this Agreement by the holders of a majority of the
outstanding shares of Company Common Stock (the "COMPANY
STOCKHOLDER APPROVAL"), to consummate the transactions
contemplated by this Agreement. The Company's execution and
delivery of this Agreement and, subject to the Company
Stockholder Approval, the consummation of the transactions
contemplated hereby by the Company have been duly authorized
by all necessary corporate action on the part of the Company.
This Agreement has been duly executed and delivered by the
Company and, assuming the due execution and delivery of this
Agreement by Parent and Acquisition, constitutes the valid and
binding obligation of the Company enforceable against the
Company in accordance with its terms except as the enforcement
hereof may be limited by (A) applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance
or other similar Laws now or hereafter in effect relating to
creditors' rights generally and (B) general principles of
equity (regardless of whether enforceability is considered in
a proceeding at law or in equity).
(ii) Except as set forth on SCHEDULE 3.1(C)(II), the
execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby by the Company will
not conflict with, or result in any breach or violation of, or
default (with or without notice or the lapse of time, or both)
under, or give rise to a right of termination, cancellation,
modification or acceleration of any material obligation under,
or the loss of any material assets (including any material
intellectual property assets) or the creation of any Lien
under (any of the foregoing, a "VIOLATION"), (A) any provision
of the certificate or articles of incorporation or bylaws (or
other organizational documents) of the Company or any of its
Subsidiaries, (B) any loan or credit agreement, note, bond,
mortgage, deed of trust, indenture, lease, Company Permit (as
hereinafter defined), or other agreement, obligation,
instrument, concession, franchise or license to which the
Company or any Subsidiary of the Company is a party or by
which any of their respective properties or assets are bound,
(C) assuming that all consents, approvals, authorizations and
other actions described in Section 3.1(c)(iii) have been
obtained and all filings and other obligations described in
Section 3.1(c)(iii) have been made or fulfilled, any statute,
law, ordinance, rule, regulation or listing requirement,
permit or authorization (collectively, "LAWS") applicable to
the Company or any of its Subsidiaries or their respective
properties or assets, or (D) any writ, judgment, decree,
award, consent decree, waiver, stipulation, consent,
settlement agreement, subpoena, complaint, citation, notice,
summons, temporary restraining order, temporary or permanent
injunction, stay, ruling or order of any Governmental Entity
(collectively, "ORDERS") applicable to the Company or any of
its Subsidiaries or their respective properties or assets
except, in the case of clauses (B), (C) and (D) for any
Violations that, individually or in the aggregate, have not
had and would not reasonably be expected to have a Company
Material Adverse Effect.
(iii) No consent, approval, franchise, license, order
or authorization of, or registration, declaration or filing
with, notice, application or certification to, or permit,
waiver or exemption from any court, tribunal, judicial body,
arbitrator, stock exchange, administrative or regulatory
agency, self-regulatory organization, body or commission or
15
other governmental or quasi-governmental authority or
instrumentality, whether local, state or federal, domestic or
foreign (each a "GOVERNMENTAL ENTITY"), is required by or with
respect to the Company or any of its Subsidiaries in
connection with the execution and delivery of this Agreement
by the Company or the consummation by the Company of the
transactions contemplated hereby, except for (A) the filing of
a certificate of merger and any related documents with the
Secretary of State of the State of Delaware and appropriate
documents, if any, with the relevant authorities of other
states in which the Company does business and (B) such other
consents, approvals, franchises, licenses, orders,
authorizations, registrations, declarations, filings, notices,
applications, certifications, permits, waivers and exemptions
the failure of which to be obtained or made has not and would
not reasonably be expected to have a Company Material Adverse
Effect.
(d) FINANCIAL STATEMENTS. Set forth on Schedule 3.1(d) is the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
June 30, 2002, and the related unaudited consolidated income statement,
statement of changes in shareholders equity and cash-flow statement of the
Company and its Subsidiaries for the fiscal year ended on such date
(collectively, the "COMPANY FINANCIAL STATEMENTS"). The Company Financial
Statements were derived from and are in accordance with the books and records of
the Company and its consolidated Subsidiaries and fairly present the
consolidated financial condition of the Company and such Subsidiaries as of the
date thereof and the consolidated results of operations and cash flows of the
Company and such Subsidiaries for the period then ended, subject to adjustments
with respect to the audit of the Company Financial Statements in accordance with
Section 5.9, which adjustments will not be, individually or in the aggregate,
material in amount or significance.
(e) INFORMATION SUPPLIED. None of the information to be
supplied by the Company specifically for inclusion or incorporation by reference
in the Proxy Statement (as hereinafter defined) or the Registration Statement
(as hereinafter defined) will (i) in the case of the Registration Statement, on
the date that it is filed with the SEC, at any time it is amended or
supplemented, at the time it becomes effective under the Securities Act of 1933
(as amended, the "SECURITIES ACT") and at the Effective Time and (ii) in the
case of the Proxy Statement, on the date it is filed with the SEC, at any time
it is amended or supplemented, at the time of mailing of the Proxy Statement and
on the date (the "MEETING DATE") of the Parent Special Meeting (as hereinafter
defined), in each case, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to the information supplied or to be
supplied by Parent or Acquisition for inclusion or incorporation by reference in
the Proxy Statement and the Registration Statement.
(f) COMPLIANCE WITH LAWS. The conduct by the Company and its
Subsidiaries of their respective businesses has been and is in compliance with
all applicable Laws, except where the failure to be in compliance has not and
would not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
(g) COMPANY PERMITS. The Company and its Subsidiaries hold all
of the permits, licenses, variances, exemptions, orders, franchises,
authorizations, rights, registrations, certifications, accreditations and
16
approvals of Governmental Entities that are necessary for the lawful conduct of
the businesses of the Company and its Subsidiaries (each a "COMPANY PERMIT"),
and are in compliance with the terms thereof, except where the failure to hold
such Company Permit or to be in compliance with the terms thereof has not and
would not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect. None of the Company and any of its Subsidiaries
has received any notice of any action pending or threatened by any Governmental
Entities to revoke, withdraw or suspend any Company Permit and no event has
occurred which, with or without the giving of notice, the passage of time, or
both, has resulted in or would reasonably be expected to result in a revocation,
withdrawal or suspension of any Company Permit, except for any such events that
have not and would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
(h) LITIGATION; INSPECTIONS AND INVESTIGATIONS, ETC. Except as
set forth and described on SCHEDULE 3.1(H), there is no claim, suit, action,
survey, review, audit, investigation, inquiry or other proceeding pending or, to
the knowledge of the Company, threatened against or affecting the Company or any
of its Subsidiaries ("COMPANY LITIGATION") the resolution of which has had or
would reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect, nor is there any Order outstanding against the
Company or any of its Subsidiaries or affecting any of their respective
properties or assets or business operations the operation or effect of which has
had or would reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
(i) TAXES. Each of the Company, its Subsidiaries and any
affiliated, combined or unitary group of which any such corporation is or was a
member (A) has duly filed with the appropriate taxing authority all material tax
returns, reports, declarations, estimates, information returns and statements,
including any related schedules, attachments or other supporting information and
including any amendment thereto ("TAX RETURNS") required to be filed by it, or
requests for extensions to file such Tax Returns have been timely filed and
granted and have not expired, and such Tax Returns are true, correct and
complete in all material respects; (B) has duly paid in full (or the Company has
paid on its behalf) or made adequate provision in the Company's accounting
records for all taxes for all past and current periods for which the Company or
any of its Subsidiaries is liable; and (C) has complied in all material respects
with all applicable Laws relating to the payment and withholding of taxes and
has in all material respects timely withheld from employee wages and paid over
to the proper Governmental Entities all amounts required to be so withheld and
paid over. All material deficiencies asserted as a result of such examinations
and any examination by any applicable state, local or foreign taxing authority
which have not been or will not be appealed or contested in a timely manner have
been paid, fully settled or adequately provided for in the Company Financial
Statements. Except as set forth on SCHEDULE 3.1(i), no federal, state, local or
foreign tax audits or other administrative proceedings or court proceedings are
currently pending with regard to any federal, state, local or foreign taxes for
which the Company or any of its Subsidiaries could reasonably be expected to be
liable, and no deficiencies for any such taxes have been proposed, asserted or
assessed, or to the best knowledge of the Company, threatened against the
Company or any of its Subsidiaries pursuant to any such examination of the
Company or any of its Subsidiaries by any such federal, state, local or foreign
17
taxing authority with respect to any period. Neither the Company nor any of its
Subsidiaries is a party to any agreement providing for the allocation or sharing
of liability for any taxes. Except as set forth on SCHEDULE 3.1(i), none of the
Company or any of its Subsidiaries (i) has been a member of any "affiliated
group" (within the meaning of Section 1504 of the Code) filing a consolidated
federal income tax return (other than a group the common parent of which was the
Company) or (ii) has any liability for the taxes of any Person (other than the
Company and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state or local law), as a transferee or successor, by
contract or otherwise. Section 162(m) of the Code has not and will not apply to
disallow or otherwise limit the deductibility of any compensation realized by
any employee of the Company or any of its Subsidiaries, whether such
compensation results from the payment of salary and bonus, the exercise of
employee stock options or otherwise. Neither the Company nor any of its
Subsidiaries has made any payments subject to Section 280G of the Code, or is
obligated to make any such payments that will not be deductible under Section
280G of the Code, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Section 280G of the Code. The Company has not constituted either a
"distributing corporation" or a "controlled corporation" in a distribution of
stock intended to qualify for tax-free treatment under Section 355 of the Code.
The Company has not engaged in a transaction that is the same or substantially
similar to one of the types of transactions that the Internal Revenue Service
has determined to be a tax avoidance transaction and identified by notice,
regulation, or other form of published guidance as a listed transaction, as set
forth in Treas. Reg. ss. 1.6011-4(b)(2). As used in this Agreement the term
"taxes" includes all domestic or foreign, federal, state or local income,
franchise, property, sales, use, ad valorem, payroll, social security,
unemployment, assets, value added, withholding, excise, severance, transfer,
employment, alternative or add-on minimum and other taxes or governmental
charges, fees, levies, imposts, duties or other like assessments including
obligations for withholding taxes from payments due or made to any other person,
together with any interest, penalties, fines or additional amounts imposed by
any taxing authority or additions to tax.
(j) PENSION AND BENEFIT PLANS; ERISA; EMPLOYMENT MATTERS.
(i) For purposes of this Agreement, the "Plan" of a
Person shall refer to any of the following maintained by such
Person, any of its Subsidiaries or any of their respective
ERISA Affiliates (as defined below), or with respect to which
such Person, any of its Subsidiaries or any of their
respective ERISA Affiliates contributes or has any obligation
to contribute or has any liability (including a liability
arising out of an indemnification, guarantee, hold harmless or
similar agreement): any plan, program, arrangement, agreement
or commitment, whether written or oral, which is an
employment, consulting, deferred compensation or
change-in-control agreement, or an executive compensation,
incentive bonus or other bonus, employee pension, profit
sharing, savings, retirement, stock option, stock purchase,
severance pay, life, health, disability or accident insurance
plan, or other employee benefit plan or program, whether
written or oral, including any "employee benefit plan" as
defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
(ii) SCHEDULE 3.1(j)(ii) identifies each Plan of the
Company. Except as set forth on SCHEDULE 3.1(j)(ii), none of
the Company, its Subsidiaries or any of their respective ERISA
Affiliates has maintained or contributed to any of the
following:
18
(A) a defined benefit plan subject to Title
IV of ERISA;
(B) a "Multiemployer Plan" as defined in
Section 4001 of ERISA; or
(C) a "Multiple Employer Plan" as that term
is defined in Section 413(a) of the Code.
(iii) No event has occurred and no condition or
circumstance currently exists, in connection with which the
Company, any of its Subsidiaries, their respective ERISA
Affiliates or any Plan of the Company, directly or indirectly,
could be subject to any liability under ERISA, the Code or any
other Law applicable to any Plan of the Company which has had
or would reasonably be expected to have a Company Material
Adverse Effect.
(iv) With respect to each Plan of the Company, (A)
all material payments due from the Company or any of its
Subsidiaries to date have been made and all material amounts
that should be accrued as liabilities of the Company or any of
its Subsidiaries which have not been paid have been properly
recorded on the books of the Company, (B) each such Plan which
is an "employee pension benefit plan" (as defined in Section
3(2) of ERISA) and intended to qualify under Section 401 of
the Code has either received a favorable determination letter
from the Internal Revenue Service with respect to such
qualifications as of the date specified in SCHEDULE 3.1(J)(IV)
or has filed or has time remaining to file for such a
determination letter with the Internal Revenue Service within
the time permitted under applicable Treasury Regulations or
Internal Revenue Service Pronouncements, and (C) there are no
material actions, suits or claims pending (other than routine
claims for benefits) or, to the Company's knowledge,
threatened with respect to such Plan or against the assets of
such Plan, (D) no "prohibited transaction," within the meaning
of Section 4975 of the Code or Sections 406 and 407 of ERISA,
and not otherwise exempt under Section 4975 of the Code or
Section 408 of ERISA (or any administrative class exemption
issued thereunder), has occurred with respect to any Plan of
the Company, (E) there are no audits, inquiries or proceedings
pending or, to the knowledge of the Company, its Subsidiaries
or any of their respective ERISA Affiliates, threatened by the
Internal Revenue Service or the Department of Labor with
respect to any Plan of the Company; and (F) none of the
Company, its Subsidiaries or any of their respective ERISA
Affiliates is subject to any penalty or tax with respect to
any Plan of the Company under Section 502(i) of ERISA or
Sections 4975 through 4980 of the Code
(v) Except as set forth on SCHEDULE 3.1(j)(v), the
consummation of the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any
additional or subsequent events) (A) entitle any current or
former employee, officer, consultant or director of the
Company or any Subsidiary to any payment (whether severance
pay or otherwise), unemployment compensation, forgiveness of
indebtedness, distribution, increase in benefits, obligation
to fund benefits or any other payment by the Company, except
as may be required by applicable Law, or (B) accelerate the
time of payment or vesting, or increase the amount of
compensation due any such employee or officer.
19
(vi) No Plan of the Company provides, or reflects or
represents any liability to provide retiree health to any
person for any reason, except as may be required by COBRA or
other applicable Law, and the Company has never represented,
promised or contracted (whether in oral or written form) to
any current or former or retired employee, consultant or
director of the Company or any of its ERISA Affiliates (either
individually or as a group) or any other person that such
individuals or other person would be provided with retiree
health, except to the extent required by Law.
(vii) The Company is not liable in any material
respect for any payment to any trust or other fund governed by
or maintained by or on behalf of any Governmental Entity, with
respect to unemployment compensation benefits, social security
or other benefits or obligations for any current or former
employee, consultant or director of the Company or any of its
ERISA Affiliates (other than routine payments to be made in
the normal course of business and consistent with past
practice). There are no pending, or to the knowledge of the
Company, threatened claims or actions against the Company, its
Subsidiaries or any of their respective ERISA Affiliates under
any worker's compensation policy or long-term disability
policy.
(viii) No work stoppage or labor strike against the
Company is pending, or to the knowledge of the Company,
threatened or reasonably anticipated. The Company does not
know of any activities or proceedings of any labor union to
organize any current or former employees of the Company or any
of its ERISA Affiliates. There are no actions, suits, claims,
labor disputes or grievances pending, or, to the knowledge of
the Company, threatened or reasonably anticipated relating to
any labor, safety or discrimination matters involving any
current or former employee, consultant or director of the
Company or any of its ERISA Affiliates, including, without
limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined,
would, individually or in the aggregate, result in a Material
Adverse Effect on the Company. Neither the Company nor any of
its Subsidiaries has engaged in any unfair labor practices
within the meaning of the National Labor Relations Act. The
Company is not presently, nor has it been in the past, a party
to, or bound by, any collective bargaining agreement or union
contract with respect to any current or former employees of
the Company or any of its ERISA Affiliates and no collective
bargaining agreement is being negotiated by the Company.
(ix) For purposes of this Agreement, "ERISA
Affiliates" of a Person means each corporation that is a
member of the same controlled group as such Person or any of
its Subsidiaries within the meaning of Section 414(b) of the
Code, any trade or business, whether or not incorporated,
under common control with such Person or any of its
Subsidiaries within the meaning of Section 414(c) of the Code
and any member of an affiliated service group that includes
such Person, any of its Subsidiaries and any of the
corporations, trades or business described above, within the
meaning of Section 414(m) and 414(o) of the Code.
(k) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31, 2003
and except as disclosed in SCHEDULE 3.1(k), (i) each of the Company and its
20
Subsidiaries has conducted its business, in all material respects, in the
ordinary course and in a manner consistent with past practice (except in
connection with the negotiation and execution and delivery of this Agreement or
any of the transactions contemplated by this Agreement), (ii) no event has
occurred and no action has been taken that would have been prohibited by the
terms of Section 4.2(b) if such Section had been in effect as of and at all
times since March 31, 2003 and (iii) there has not been any change, event,
condition, circumstance or state of facts, individually or in the aggregate,
that has had or that would reasonably be expected to have, a Company Material
Adverse Effect.
(l) NO UNDISCLOSED MATERIAL LIABILITIES. Except as set forth
on SCHEDULE 3.1(l), there are no liabilities of the Company or any of its
Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, that have had or would reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect, other than (i) liabilities reflected in the Company Financial Statements
(together with the related notes thereto) and (ii) liabilities incurred in
connection with the transactions contemplated by this Agreement.
(m) INTELLECTUAL PROPERTY.
(i) DEFINITIONS: As used in this Agreement, the
following terms shall have the following meanings:
(A) "INTELLECTUAL PROPERTY" means all of the
following: (i) U.S. and foreign trademarks, service
marks, trade dress, logos, trade names, brand names,
corporate names, assumed names, business names and
general intangibles of like nature, together with all
goodwill, registrations and applications related to
the foregoing (collectively, the "TRADEMARKS"), (ii)
Internet domain names ("DOMAIN NAMES"), (iii) U.S.
and foreign patents, industrial designs, invention
disclosures, and any and all divisions,
continuations, continuations-in-part, reissues,
continuing patent applications, reexaminations, and
extensions thereof, any counterparts claiming
priority there from, utility models, patents of
importation/confirmation, certificates of invention,
certificates of registration and like statutory
rights related to the foregoing (collectively, the
"PATENTS"), (iv) U.S. and foreign copyrights, and all
registrations and applications to register the
foregoing (collectively, the "COPYRIGHTS"), (v) all
categories of trade secrets as defined in the Uniform
Trade Secrets Act and under corresponding foreign
statutory and common law, including, but not limited
to, business, technical and know-how information
(collectively, the "TRADE SECRETS").
(B) "REGISTERED INTELLECTUAL PROPERTY" means
Patents, Trademark registrations and applications,
Domain Names, Copyright registrations and
applications, and any other Intellectual Property
that is the subject of an application, certificate,
filing or registration (or other document issued by,
filed with or recorded by any Governmental Entity).
(C) "COMPANY OWNED IP" means any
Intellectual Property that is owned by the Company or
its Subsidiaries.
21
(D) "COMPANY LICENSED IP" means any
Intellectual Property that is licensed (or other
similar agreement) to the Company or its
Subsidiaries.
(E) "COMPANY INTELLECTUAL PROPERTY" means
the Company Owned IP and Company Licensed IP.
(ii) Except as set forth on SCHEDULE 3.1(M)(II), the
Company or a Subsidiary thereof is the owner of the entire
right, title and interest in and to the Company Owned IP, free
and clear of all Liens, and is entitled to use such Company
Owned IP in the continued operation of its respective
business;
(iii) The Company or one of its Subsidiaries is
listed in the records of the appropriate United States, state
or foreign registry as the sole current owner of record for
all material Company Owned IP that constitutes Registered
Intellectual Property and all such Registered Intellectual
Property, is in full force and effect, and has not been
cancelled and is not subject to any outstanding court order,
judgment or decree restricting the use thereof by the Company
or its Subsidiaries;
(iv) With respect to each item of Company Licensed
IP, the Company or a Subsidiary of the Company has the right
to use material Company Licensed IP in the continued operation
of its respective business in accordance with the terms of the
license or other similar agreement governing such Company
Licensed IP, all of which licenses or other agreements are
valid and enforceable, binding on all parties thereto and in
full force and effect, and no Person has advised the Company
or any Subsidiary of the Company of any claimed violation of
the terms of any such licenses or agreements;
(v) Except as has not and would not reasonably be
expected to have a Company Material Adverse Effect, the
conduct of the business of the Company and its Subsidiaries as
currently conducted and the use of the Company Intellectual
Property by the Company and its Subsidiaries does not conflict
with, infringe upon, violate or interfere with or constitute
an appropriation of any right, title, interest or goodwill,
including any Intellectual Property of any other Person and no
claim has been asserted against the Company or any of its
Subsidiaries, and the Company has no knowledge of any basis
for such claim, that the conduct of such business or such use
of the Company Intellectual Property constitutes such a
conflict, infringement, violation, interference or
appropriation;
(vi) Except as would not individually or in the
aggregate have a Company Material Adverse Effect, no current
or former director, officer, or employee of Company or any of
its Subsidiaries (or any of their respective predecessors in
interest) will, after giving effect to the transactions
contemplated herein, own or retain any rights to use any of
the Company Intellectual Property, except as provided by
applicable Law;
(vii) The Company and its Subsidiaries have taken
reasonable measures to protect, preserve and maintain the
confidentiality and secrecy of Company Intellectual Property
that is a Trade Secret, except as would not individually or in
the aggregate have a Company Material Adverse Effect;
22
(viii) Except as would not individually or in the
aggregate have a Company Material Adverse Effect, to the
knowledge of Company, no Person is infringing or
misappropriating any Company Owned IP; and
(ix) SCHEDULE 3.1(m)(ix) contains a complete and
accurate listing of all Company Intellectual Property (other
than Domain Names) that is material to the assets, properties,
business, operations or condition (financial or other) of the
Company and its Subsidiaries, taken as a whole and, with
respect to such material Company Owned IP that constitutes
Registered Intellectual Property, the date of application and
the date of issuance, if any.
(n) REAL PROPERTY. Neither the Company nor any of its
Subsidiaries owns any real property.
(o) CONTRACTS. (A) Subsections (i) through (vi) of PART A OF
SCHEDULE 3.1(O) each contain a complete and accurate listing of the following
contracts, agreements, commitments, leases, licenses, arrangements, instruments
and obligations, whether written or oral (and, if oral, a complete and accurate
summary thereof), to which the Company or any Subsidiary of the Company is a
party:
(i) each contract, agreement, commitment, lease,
license, arrangement, instrument and/or obligation which is
reasonably likely to involve aggregate annual payments by or
to the Company or any Subsidiary of the Company of more than
$50,000;
(ii) all collective bargaining agreements and Plans
of the Company maintained for or providing benefits to
employees of, or independent contractors or other agents for,
the Company or any Subsidiary of the Company;
(iii) all contracts and agreements relating to (A)
any indebtedness, notes payable (including notes payable in
connection with acquisitions), accrued interest payable or
other obligations for borrowed money, whether current,
short-term, or long-term, secured or unsecured, of the Company
or any of its Subsidiaries, (B) any purchase money
indebtedness or earn-out or similar obligation in respect of
purchases of property or assets by the Company or any of its
Subsidiaries, (C) any lease obligations of the Company or any
of its Subsidiaries under leases which are capital leases in
accordance with GAAP, (D) any financing of the Company or any
of its Subsidiaries effected through "special purpose
entities" or synthetic leases or project financing, (E) any
obligations of the Company or any of its Subsidiaries in
respect of banker's acceptances or letters of credit (other
than stand-by letters of credit in support of ordinary course
trade payables), (F) any obligation or liability of the
Company or any of its Subsidiaries with respect to interest
rate swaps, collars, caps, currency derivatives and similar
hedging obligations or (G) any guaranty of any of the
foregoing (the liabilities and obligations referred to in (A)
through (G) above, "COMPANY INDEBTEDNESS") or any Liens upon
any properties or assets of the Company or any Subsidiary of
the Company as security for Company Indebtedness;
23
(iv) all leases or subleases relating to real
property;
(v) all contracts and agreements that restrict the
ability of the Company and/or any Subsidiary or affiliate of,
or successor to, the Company, or, to the knowledge of the
Company, any executive officer of the Company or any
Subsidiary thereof, to compete in any line of business or with
any Person or in any geographic area or during any period of
time, or grant any exclusive license to Company Owned IP; and
(vi) all other contracts, agreements, commitments,
leases, licenses, arrangements, instruments and/or
obligations, whether or not made in the ordinary course of
business, which are material to the Company or any Subsidiary
of the Company in the conduct of their respective businesses,
or the termination or cancellation of which would have or
would reasonably be expected to have a Company Material
Adverse Effect.
(B) The Company has made available to Parent and Acquisition
true, complete and correct copies of all written contracts and agreements
required to be listed on PART A OF SCHEDULE 3.1(o), together with all
amendments, waivers or other changes thereto, and has been given a written
summary of all oral contracts required to be listed on PART A OF SCHEDULE
3.1(o). Except as set forth on PART B OF SCHEDULE 3.1(o), and except for matters
that have not had and would not reasonably be expected to have, individually or
in the aggregate, a Company Material Adverse Effect, (i) none of the Company or
any of its Subsidiaries is (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect under any
contract, lease, license or other agreement or instrument, (ii) to the knowledge
of the Company, none of the other parties to any such contract, lease, license
or other agreement or instrument is (with or without the lapse of time or the
giving of notice, or both) in breach or default in any material respect
thereunder and (iii) neither the Company nor any of its Subsidiaries has
received any written notice of the intention of any party to terminate or cancel
any such contract, lease, license or other agreement or instrument whether as a
termination or cancellation for convenience or for default of the Company or any
of its Subsidiaries thereunder.
(p) AFFILIATE CONTRACTS AND AFFILIATED TRANSACTIONS. Except as
set forth on SCHEDULE 3.1(p), no officer or director or other affiliate of the
Company or of any Subsidiary of the Company (or, to the Company's knowledge, any
family member of any such Person who is an individual or any entity in which any
such Person or any such family member owns a material beneficial interest) is a
party to any material contract, agreement, commitment, lease, license,
arrangement, instrument, obligation, transaction or understanding with or
binding upon the Company or any of its Subsidiaries or any of their respective
properties or assets or has any material interest in any material property owned
by the Company or any of its Subsidiaries or has engaged in any material
transaction with any of the foregoing within the last thirty-six months.
(q) STATE TAKEOVER STATUTES. No "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or regulation
enacted under any Law (with the exception of Section 203 of the DGCL) applicable
to the Company is applicable to the Merger or the other transactions
contemplated hereby. The Board of Directors of the Company has taken all action
necessary such that the restrictions on business combinations contained in
Section 203 of the DGCL will not apply to the Merger and the other transactions
contemplated by this Agreement.
24
(r) VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock is the only vote of
the holders of any class or series of the Company's capital stock or other
securities necessary (under applicable Law or otherwise) to adopt this Agreement
and to consummate the Merger and the other transactions contemplated hereby.
(s) BOARD RECOMMENDATION. The Board of Directors of the
Company, at a meeting duly called and held on June 14, 2003, has by the
unanimous vote of those directors present (i) determined that this Agreement and
the transactions contemplated hereby, including the Merger, are advisable and
fair to and in the best interests of the Company and the stockholders of the
Company and has approved the same and (ii) resolved to recommend that the
holders of the shares of Company Common Stock approve and adopt this Agreement.
3.2 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION. Except as
set forth in the disclosure schedule, dated the date hereof, delivered by Parent
and Acquisition to the Company at or prior to delivery of this Agreement, Parent
and Acquisition jointly and severally represent and warrant to the Company as
follows:
(a) ORGANIZATION, STANDING AND POWER. Parent is a corporation
duly organized and validly existing under the laws of the State of Delaware and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. On the Closing
Date, Parent will be in good standing under the laws of the State of Delaware.
Each Subsidiary of Parent is a corporation, partnership or a limited liability
company duly organized, validly existing and in good standing under the Laws of
its respective jurisdiction of organization and has all requisite corporate,
partnership or limited liability company power and authority to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing or in good standing or to
have such power or authority has not had and would not reasonably be expected to
have, individually or in the aggregate, a Parent Material Adverse Effect (as
defined below). Each of Parent and its Subsidiaries is duly qualified or
licensed to do business as a foreign corporation, partnership or limited
liability company and in good standing to conduct business in each jurisdiction
in which the business it is conducting, or the operation, ownership or leasing
of its properties, makes such qualification or licensing necessary, other than
in such jurisdictions where the failure to so qualify or be licensed to do
business as a foreign corporation, partnership or limited liability company or
to be in good standing has not had and would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect. As used in
this Agreement, "PARENT MATERIAL ADVERSE EFFECT" shall mean a material adverse
effect on the business, operations, assets, liabilities, financial condition or
results of operations of Parent and its Subsidiaries, taken as a whole, other
than any such material adverse effect (A) arising as a result of changes in (x)
the general economic conditions in any of the countries in which Parent and its
Subsidiaries operates or (y) the industries in which Parent and its Subsidiaries
operates or (B) resulting from the announcement of this Agreement.
(b) Capital Structure.
(i) PARENT. As of the date of this Agreement the
authorized capital stock of Parent consists of 100,000,000
shares of Parent Common Stock and 1,000,000 shares of
25
preferred stock, par value $0.001, of Parent ("PARENT
PREFERRED STOCK"). Following the filing of the Certificate of
Incorporation Amendment with the Secretary of State of the
State of Delaware, the authorized capital stock of Parent will
consist of 500,000,000 shares of Parent Common Stock and
1,000,000 shares of Parent Preferred Stock. As of the date of
this Agreement (the "PARENT CAPITALIZATION DATE"), 51,827,270
shares of Parent Common Stock were issued and outstanding; no
shares of Parent Common Stock were held in Parent's treasury;
and 1,256,000 shares of Parent Common Stock were reserved for
issuance pursuant to the outstanding options to purchase
shares of Parent Common Stock ("PARENT STOCK OPTIONS") and
2,100,000 shares of Company Common Stock were reserved for
issuance pursuant to the securities of the Company convertible
into, or exchangeable or exercisable for, Company Common Stock
(other than Parent Stock Options) (the "PARENT CONVERTIBLE
SECURITIES"). No bonds, debentures or notes of the Parent or
any Subsidiary thereof or other Parent Indebtedness having any
right to vote with the stockholders (or other equityholders)
of Parent or such Subsidiary on matters submitted to the
stockholders (or other equityholders) of Parent or such
Subsidiary (or any securities that are convertible into or
exercisable or exchangeable for securities having such voting
rights) are issued or outstanding. Except as set forth on
SCHEDULE 3.2(b)(i), since the Parent Capitalization Date, no
shares of capital stock of Parent and no other securities
directly or indirectly convertible into, or exchangeable or
exercisable for, capital stock of Parent have been issued,
other than shares of Parent Common Stock issued upon the
exercise of Parent Stock Options outstanding on the Parent
Capitalization Date or upon the conversion or exchange of
outstanding Parent Indebtedness or Parent Convertible
Securities. Except as set forth above or on SCHEDULE
3.2(b)(i), as of the Parent Capitalization Date, there were no
outstanding shares of capital stock of Parent or securities,
directly or indirectly, convertible into, or exchangeable or
exercisable for, shares of capital stock of Parent or any
outstanding "phantom" stock, "phantom" stock rights, stock
appreciation rights, restricted stock awards, dividend
equivalent awards, or other stock-based awards or rights
pursuant to which any Person is or may be entitled to receive
any payment or other value based upon, relating to or valued
by reference to the capital stock of Parent or the dividends
paid on the capital stock of the Company or the revenues,
earnings or financial performance, stock performance or any
other attribute of Parent. Except as set forth above or on
SCHEDULE 3.2(b)(i), there are no puts, calls, rights
(including preemptive rights), commitments or agreements
(including employment, termination and similar agreements) to
which Parent or any of its Subsidiaries is a party or by which
it is bound, in any case obligating Parent or any of its
Subsidiaries to issue, deliver, sell, purchase, redeem or
acquire, any debt or equity securities of Parent, or
obligating Parent or any of its Subsidiaries to grant, extend
or enter into any such option, put, warrant, call, right,
commitment or agreement. All outstanding shares of capital
stock of Parent are validly issued, fully paid and
nonassessable and are not subject to, and have not been issued
in violation of, preemptive or other similar rights. SCHEDULE
3.2(b)(i) sets forth, as of the Parent Capitalization Date, a
true and complete list of (A) the name of each holder of
Parent Convertible Securities and Parent Stock Options, (B)
the number of Parent Convertible Securities and Parent Stock
Options owned of record by such holder, (C) the exercise or
conversion price of the Parent Convertible Securities and
Parent Stock Options and (D) the number of shares of Parent
Common Stock issuable with respect to each of the Parent
Convertible Securities and Parent Stock Options.
26
(ii) AGREEMENTS RELATING TO CAPITAL STOCK. Except as
set forth in this Agreement or on SCHEDULE 3.2(b)(ii), there
are not as of the date hereof any stockholder agreements,
voting trusts or other agreements or understandings to which
Parent or any of its Subsidiaries is a party or by which it is
bound relating to the voting of any shares of the capital
stock of Parent or any of its Subsidiaries. All registration
rights agreements, stockholders' agreements and voting
agreements to which Parent or any of its Subsidiaries is a
party are identified on SCHEDULE 3.2(B)(II).
(iii) SUBSIDIARIES. All Subsidiaries of Parent, their
respective jurisdictions of organization, their respective
forms of organization, holders of their respective outstanding
capital stock or other equity interests are identified on
SCHEDULE 3.2(b)(iii). Except as described on SCHEDULE
3.2(b)(iii), all outstanding shares of capital stock of, or
other ownership interests in, the Subsidiaries of Parent are
owned by Parent or a direct or indirect wholly-owned
Subsidiary of Parent, free and clear of all Liens. As set
forth on SCHEDULE 3.2(b)(iii), Parent holds 96% of the
outstanding capital stock and voting power of RESEAL, Ltd., a
subsidiary of Parent, and 100% of the outstanding capital
stock and voting power of Cetoni
Umwelttechnologie-Entwicklungs GmbH, a wholly-owned subsidiary
of Parent. All such issued and outstanding shares of capital
stock or other ownership interests are validly issued, fully
paid and nonassessable and no such shares or other ownership
interests have been issued in violation of any preemptive or
similar rights. No shares of capital stock of, or other
ownership interests in, any Subsidiary of Parent are reserved
for issuance. Except as set forth on SCHEDULE 3.2(b)(iii),
there are no outstanding shares of capital stock of any
Subsidiary of Parent or securities directly or indirectly
convertible into, or exchangeable or exercisable for, shares
of capital stock of any Subsidiary of Parent or any
outstanding awards or rights pursuant to which any Person is
or may be entitled to receive any payment or other value based
upon, relating to or valued by reference to the value,
revenues, earnings or financial performance or any other
attribute of any Subsidiary of Parent. Except as set forth on
SCHEDULE 3.2(b)(iii), there are no calls, rights (including
preemptive rights), commitments or agreements (including
employment, termination and similar agreements) to which
Parent or any of its Subsidiaries is a party or by which it is
bound, in any case obligating Parent or any of its
Subsidiaries to issue, deliver, sell, purchase, redeem or
acquire, any debt or equity securities of any Subsidiary of
Parent.
(c) AUTHORITY; NO VIOLATIONS; CONSENTS AND APPROVALS.
(i) Each of Parent and Acquisition has all requisite
corporate power and authority to enter into this Agreement
and, subject to the adoption of the Certificate of
Incorporation Amendment by the holders of a majority of the
outstanding shares of Parent Common Stock (the "PARENT
STOCKHOLDER APPROVAL"), to consummate the transactions
contemplated by this Agreement. Parent's and Acquisition's
execution and delivery of this Agreement and, subject to the
Parent Stockholder Approval, the consummation of the
transactions contemplated hereby by each of Parent and
Acquisition have been duly authorized by all necessary
corporate action on the part of each of Parent and
27
Acquisition. This Agreement has been duly executed and
delivered by each of Parent and Acquisition and, assuming the
due execution and delivery of this Agreement by the Company,
constitutes the valid and binding obligation of each of Parent
and Acquisition enforceable against each of Parent and
Acquisition in accordance with its terms except as the
enforcement hereof may be limited by (A) applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar Laws now or hereafter in effect
relating to creditors' rights generally and (B) general
principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
(ii) Except as set forth on SCHEDULE 3.2(c)(ii), the
execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby by each of Parent and
Acquisition will not result in any Violation of (A) any
provision of the certificate or articles of incorporation or
bylaws (or other organizational documents) of Parent or any of
its Subsidiaries, (B) any loan or credit agreement, note,
bond, mortgage, deed of trust, indenture, lease, Parent Permit
(as hereinafter defined), or other agreement, obligation,
instrument, concession, franchise or license to which Parent,
or any Subsidiary of Parent is a party or by which any of
their respective properties or assets are bound, (C) assuming
that all consents, approvals, authorizations and other actions
described in Section 3.2(c)(iii) have been obtained and all
filings and other obligations described in Section 3.2(c)(iii)
have been made or fulfilled, any Law applicable to Parent or
any of its Subsidiaries or their respective properties or
assets, or (D) any Orders applicable to Parent or any of its
Subsidiaries or their respective properties or assets except,
in the case of clauses (B), (C) and (D) for any Violations
that, individually or in the aggregate, have not had and would
not reasonably be expected to have a Parent Material Adverse
Effect.
(iii) No consent, approval, franchise, license, order
or authorization of, or registration, declaration or filing
with, notice, application or certification to, or permit,
waiver or exemption from any Governmental Entity, is required
by or with respect to Parent or any of its Subsidiaries in
connection with the execution and delivery of this Agreement
by Parent or Acquisition or the consummation by Parent or
Acquisition of the transactions contemplated hereby, except
for (A) the filing with the Securities and Exchange Commission
(the "SEC") of (1) a proxy statement in connection with the
approval by the stockholders of Parent of the Certificate of
Incorporation Amendment (such proxy statement as amended or
supplemented from time to time being hereinafter referred to
as the "PROXY STATEMENT"), (2) a registration statement on
Form S-4 for the purpose of registering the shares of Parent
Common Stock to be issued in connection with the Merger (such
registration statement as amended or supplemented from time to
time being hereinafter referred to as the "REGISTRATION
STATEMENT") and (3) such reports under and such other
compliance with the Securities Exchange Act of 1934 (as
amended, the "EXCHANGE ACT") as may be required in connection
with this Agreement and the transactions contemplated hereby,
(B) the filing of a certificate of merger and any related
documents with the Secretary of State of the State of Delaware
and appropriate documents, if any, with the relevant
authorities of other states in which Parent does business and
(C) such other consents, approvals, franchises, licenses,
28
orders, authorizations, registrations, declarations, filings,
notices, applications, certifications, permits, waivers and
exemptions the failure of which to be obtained or made has not
and could not reasonably be expected to have a Company
Material Adverse Effect.
(d) PARENT SEC DOCUMENTS. Except for the Form 10-QSB of Parent
for the period ended March 31, 2003, Parent has filed all required documents
with the SEC pursuant to Section 13(a) of the Exchange Act since December 31,
2001 (the "PARENT SEC DOCUMENTS"). The Form 10-KSB complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the SEC promulgated thereunder, and on the date the Parent Form 10-KSB was
filed, the Parent Form 10-KSB did not contain any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of Parent
included in the Parent Form 10-KSB complied as to form in all material respects
with the published rules and regulations of the SEC with respect thereto, were
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and present
fairly in all material respects the consolidated financial position of Parent
and its consolidated Subsidiaries as of December 31, 2002 and the consolidated
results of operations and the consolidated cash flows of Parent and its
consolidated Subsidiaries for the period presented therein.
(e) INFORMATION SUPPLIED. None of the information to be
supplied by Parent and Acquisition specifically for inclusion or incorporation
by reference in the Proxy Statement or the Registration Statement will (i) in
the case of the Registration Statement, on the date that it is filed with the
SEC, at any time it is amended or supplemented, at the time it becomes effective
under the Securities Act and at the Effective Time and (ii) in the case of the
Proxy Statement, on the date it is filed with the SEC, at any time it is amended
or supplemented, at the time of mailing of the Proxy Statement and on the
Meeting Date, in each case, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. Notwithstanding the foregoing, Parent makes no
representation or warranty with respect to the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the Proxy
Statement and the Registration Statement.
(f) COMPLIANCE WITH LAWS. The conduct by Parent and its
Subsidiaries of their respective businesses has been and is in compliance with
all applicable Laws, except where the failure to be in compliance has not and
would not reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect.
(g) PARENT PERMITS. Parent and its Subsidiaries hold all of
the permits, licenses, variances, exemptions, orders, franchises,
authorizations, rights, registrations, certifications, accreditations and
approvals of Governmental Entities that are necessary for the lawful conduct of
the businesses of Parent and its Subsidiaries (each a "PARENT PERMIT"), and are
in compliance with the terms thereof, except where the failure to hold such
Parent Permit or to be in compliance with the terms thereof has not and would
not reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. None of Parent and any of its Subsidiaries has received
any notice of any action pending or threatened by any Governmental Entities to
29
revoke, withdraw or suspend any Parent Permit and no event has occurred which,
with or without the giving of notice, the passage of time, or both, has resulted
in or could reasonably be expected to result in a revocation, withdrawal or
suspension of any Parent Permit, except for any such events that have not and
would not reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect.
(h) LITIGATION; INSPECTIONS AND INVESTIGATIONS, ETC. Except as
set forth and described on SCHEDULE 3.2(H), there is no claim, suit, action,
survey, review, audit, investigation, inquiry or other proceeding pending or, to
the knowledge of Parent or Acquisition, threatened against or affecting Parent
or any of its Subsidiaries ("PARENT LITIGATION") the resolution of which has had
or would reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect, nor is there any Order outstanding against
Parent or any of its Subsidiaries or affecting any of their respective
properties or assets or business operations the operation or effect of which has
had or would reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect.
(i) TAXES. Except as set forth on SCHEDULE 3.2(i), each of
Parent, its Subsidiaries and any affiliated, combined or unitary group of which
any such corporation is or was a member (A) has duly filed with the appropriate
taxing authority all material Tax Returns required to be filed by it, or
requests for extensions to file such Tax Returns have been timely filed and
granted and have not expired, and such Tax Returns are true, correct and
complete in all material respects; (B) has duly paid in full (or Parent has paid
on its behalf) or made adequate provision in Parent's accounting records for all
taxes for all past and current periods for which Parent or any of its
Subsidiaries is liable; and (C) has complied in all material respects with all
applicable Laws relating to the payment and withholding of taxes and has in all
material respects timely withheld from employee wages and paid over to the
proper Governmental Entities all amounts required to be so withheld and paid
over. All material deficiencies asserted as a result of such examinations and
any examination by any applicable state, local or foreign taxing authority which
have not been or will not be appealed or contested in a timely manner have been
paid, fully settled or adequately provided for in the financial statements of
Parent contained in the Parent SEC Documents. Except as set forth on SCHEDULE
3.2(i), no federal, state, local or foreign tax audits or other administrative
proceedings or court proceedings are currently pending with regard to any
federal, state, local or foreign taxes for which Parent or any of its
Subsidiaries could reasonably be expected to be liable, and no deficiencies for
any such taxes have been proposed, asserted or assessed, or to the best
knowledge of Parent, threatened against Parent or any of its Subsidiaries
pursuant to any such examination of Parent or any of its Subsidiaries by any
such federal, state, local or foreign taxing authority with respect to any
period. Neither Parent nor any of its Subsidiaries is a party to any agreement
providing for the allocation or sharing of liability for any taxes. Except as
set forth on SCHEDULE 3.2(i), none of Parent or any of its Subsidiaries (i) has
been a member of any "affiliated group" (within the meaning of Section 1504 of
the Code) filing a consolidated federal income tax return (other than a group
the common parent of which was Parent) or (ii) has any liability for the taxes
of any Person (other than Parent and its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state or local law), as a
transferee or successor, by contract or otherwise. Section 162(m) of the Code
has not and will not apply to disallow or otherwise limit the deductibility of
any compensation realized by any employee of Parent or any of its Subsidiaries,
whether such compensation results from the payment of salary and bonus, the
exercise of employee stock options or otherwise. Neither Parent nor any of its
Subsidiaries has made any payments subject to Section 280G of the Code, or is
30
obligated to make any such payments that will not be deductible under Section
280G of the Code, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Section 280G of the Code. Parent has not constituted either a
"distributing corporation" or a "controlled corporation" in a distribution of
stock intended to qualify for tax-free treatment under Section 355 of the Code.
Parent has not engaged in a transaction that is the same or substantially
similar to one of the types of transactions that the Internal Revenue Service
has determined to be a tax avoidance transaction and identified by notice,
regulation, or other form of published guidance as a listed transaction, as set
forth in Treas. Reg. ss. 1.6011-4(b)(2).
(j) PENSION AND BENEFIT PLANS; ERISA; EMPLOYMENT MATTERS.
(i) SCHEDULE 3.2(j)(i) identifies each Plan of
Parent. Except as set forth on SCHEDULE 3.2(j)(i), none of
Parent, its Subsidiaries or any of their respective ERISA
Affiliates has maintained or contributed to any of the
following:
(A) a defined benefit plan subject to Title
IV of ERISA;
(B) a "Multiemployer Plan" as defined in
Section 4001 of ERISA; or
(C) a "Multiple Employer Plan" as that term
is defined in Section 413(a) of the Code.
(ii) No event has occurred and no condition or
circumstance currently exists, in connection with which
Parent, any of its Subsidiaries, their respective ERISA
Affiliates or any Plan of Parent, directly or indirectly,
could be subject to any liability under ERISA, the Code or any
other Law applicable to any Plan of Parent which has had or
would reasonably be expected to have a Parent Material Adverse
Effect.
(iii) Except as set forth on SCHEDULE 3.2(j)(iii),
with respect to each Plan of Parent, (A) all material payments
due from Parent or any of its Subsidiaries to date have been
made and all material amounts that should be accrued (in
accordance with GAAP) as liabilities of Parent or any of its
Subsidiaries which have not been paid have been properly
recorded on the books of Parent, (B) each such Plan of Parent
which is an "employee pension benefit plan" (as defined in
Section 3(2) of ERISA) and intended to qualify under Section
401 of the Code has either received a favorable determination
letter from the Internal Revenue Service with respect to such
qualifications as of the date specified in SCHEDULE
3.2(j)(iii) or has filed or has time remaining to file for
such a determination letter with the Internal Revenue Service
within the time permitted under applicable Treasury
Regulations or Internal Revenue Pronouncements, (C) there are
no material actions, suits or claims pending (other than
routine claims for benefits) or, to Parent's knowledge,
threatened with respect to such Plan or against the assets of
such Plan, (D) no "prohibited transaction," within the meaning
of Section 4975 of the Code or Sections 406 and 407 of ERISA,
and not otherwise exempt under Section 4975 of the Code or
Section 408 of ERISA (or any administrative class exemption
issued thereunder), has occurred with respect to any Plan of
Parent, (E) there are no audits, inquiries or proceedings
31
pending or, to the knowledge of the Parent, its Subsidiaries
or any of their respective ERISA Affiliates, threatened by the
Internal Revenue Service or the Department of Labor with
respect to any Plan of Parent; and (F) none of Parent, its
Subsidiaries or any of their respective ERISA Affiliates is
subject to any penalty or tax with respect to any Plan of
Parent under Section 502(i) of ERISA or Sections 4975 through
4980 of the Code.
(iv) Except as set forth on SCHEDULE 3.2(j)(iv), the
consummation of the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any
additional or subsequent events) (A) entitle any current or
former employee, officer, consultant or director of Parent or
any Subsidiary to any payment (whether severance pay or
otherwise), unemployment compensation, forgiveness of
indebtedness, distribution, increase in benefits, obligation
to fund benefits or any other payment, except as may be
required by applicable Law, or (B) accelerate the time of
payment or vesting, or increase the amount of compensation due
any such employee or officer.
(v) No Plan of Parent provides, or reflects or
represents any liability to provide retiree health to any
person for any reason, except as may be required by COBRA or
other applicable Law, and Parent has never represented,
promised or contracted (whether in oral or written form) to
any current or former or retired employee, consultant or
director of Parent or any of its ERISA Affiliates (either
individually or as a group) or any other person that such
individuals or other person would be provided with retiree
health, except to the extent required by Law.
(vi) Except as set forth on SCHEDULE 3.2(j)(vi),
Parent is not liable in any material respect for any payment
to any trust or other fund governed by or maintained by or on
behalf of any Governmental Entity, with respect to
unemployment compensation benefits, social security or other
benefits or obligations for any current or former employee,
consultant or director of Parent or any of its ERISA
Affiliates (other than routine payments to be made in the
normal course of business and consistent with past practice).
There are no pending, or to the knowledge of Parent,
threatened claims or actions against Parent, its Subsidiaries
or any of their respective ERISA Affiliates under any worker's
compensation policy or long-term disability policy.
(vii) No work stoppage or labor strike against Parent
is pending, or to the knowledge of Parent, threatened or
reasonably anticipated. Parent does not know of any activities
or proceedings of any labor union to organize any current or
former employees of Parent or any of its ERISA Affiliates.
There are no actions, suits, claims, labor disputes or
grievances pending, or, to the knowledge of Parent, threatened
or reasonably anticipated relating to any labor, safety or
discrimination matters involving any current or former
employee, consultant or director of Parent or any of its ERISA
Affiliates, including, without limitation, charges of unfair
labor practices or discrimination complaints, which, if
adversely determined, would, individually or in the aggregate,
result in a Parent Material Adverse Effect. Neither Parent nor
any of its Subsidiaries has engaged in any unfair labor
practices within the meaning of the National Labor Relations
Act. Parent is not presently, nor has it been in the past, a
32
party to, or bound by, any collective bargaining agreement or
union contract with respect to any current or former employees
of Parent or any of its ERISA Affiliates and no collective
bargaining agreement is being negotiated by Parent.
(k) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31, 2003
and except as disclosed in SCHEDULE 3.2(k), (i) each of Parent and its
Subsidiaries has conducted its business, in all material respects, only in the
ordinary course and in a manner consistent with past practice (except in
connection with the negotiation and execution and delivery of this Agreement or
any of the transactions contemplated by this Agreement), (ii) no event has
occurred and no action has been taken that would have been prohibited by the
terms of Section 4.2(a) if such Section had been in effect as of and at all
times since March 31, 2003 and (iii) there has not been any change, event,
condition, circumstance or state of facts, individually or in the aggregate,
that has had or that would reasonably be expected to have, a Parent Material
Adverse Effect.
(l) NO UNDISCLOSED MATERIAL LIABILITIES. Except as set forth
on SCHEDULE 3.2(L), there are no liabilities of Parent or any of its
Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, that have had or would reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect, other than (i) liabilities reflected in the financial statements of
Parent contained in the Parent SEC Documents (together with the related notes
thereto) and (ii) liabilities incurred in connection with the transactions
contemplated by this Agreement.
(m) INTELLECTUAL PROPERTY.
(i) DEFINITIONS: As used in this Agreement, the
following terms shall have the following meanings:
(A) "PARENT OWNED IP" means any Intellectual
Property that is owned by Parent or its Subsidiaries.
(B) "PARENT LICENSED IP" means any
Intellectual Property that is licensed (or other
similar agreement) to Parent or its Subsidiaries.
(C) "PARENT INTELLECTUAL PROPERTY" means the
Parent Owned IP and Parent Licensed IP.
(ii) Except as set forth on SCHEDULE 3.2(m)(ii),
Parent or a Subsidiary thereof is the owner of the entire
right, title and interest in and to the Parent Owned IP, free
and clear of all Liens, and is entitled to use such Parent
Owned IP in the continued operation of its respective
business;
(iii) Except as set forth in SCHEDULE 3.2(m)(iii),
Parent or one of its Subsidiaries is listed in the records of
the appropriate United States, state or foreign registry as
the sole current owner of record for all material Parent Owned
IP that constitutes Registered Intellectual Property and all
such Registered Intellectual Property, is in full force and
effect, and has not been cancelled and is not subject to any
outstanding court order, judgment or decree restricting the
use thereof by Parent or its Subsidiaries;
33
(iv) With respect to each item of Parent Licensed IP,
Parent or a Subsidiary of Parent has the right to use material
Parent Licensed IP in the continued operation of its
respective business in accordance with the terms of the
license or other similar agreement governing such Parent
Licensed IP, all of which licenses or other agreements are
valid and enforceable, binding on all parties thereto and in
full force and effect, and no Person has advised Parent or any
Subsidiary of Parent of any claimed violation of the terms of
any such licenses or agreements;
(v) Except as has not and would not reasonably be
expected to have a Parent Material Adverse Effect, the conduct
of the business of Parent and its Subsidiaries as currently
conducted and the use of Parent Intellectual Property by
Parent and its Subsidiaries does not conflict with, infringe
upon, violate or interfere with or constitute an appropriation
of any right, title, interest or goodwill, including any
Intellectual Property of any other Person and no claim has
been asserted against Parent or any of its Subsidiaries, and
Parent has no knowledge of any basis for such claim, that the
conduct of such business or such use of the Parent
Intellectual Property constitutes such a conflict,
infringement, violation, interference or appropriation;
(vi) Except as would not individually or in the
aggregate have a Parent Material Adverse Effect, no current or
former director, officer, or employee of Parent or any of its
Subsidiaries (or any of their respective predecessors in
interest) will, after giving effect to the transactions
contemplated herein, own or retain any rights to use any of
the Parent Intellectual Property, except as provided by
applicable Law;
(vii) Parent and its Subsidiaries have taken
reasonable measures to protect, preserve and maintain the
confidentiality and secrecy of Parent Intellectual Property
that is a Trade Secret, except as would not individually or in
the aggregate have a Parent Material Adverse Effect;
(viii) Except as would not individually or in the
aggregate have a Parent Material Adverse Effect, to the
knowledge of Parent, no Person is infringing or
misappropriating any Parent Owned IP;
(ix) SCHEDULE 3.2(m)(ix) contains a complete and
accurate listing of all Parent Intellectual Property that is
material to the assets, properties, business, operations or
condition (financial or other) of Parent and its Subsidiaries,
taken as a whole, and with respect to Parent Owned IP that
constitutes Registered Intellectual Property, the date of
application and the date of issuance, if any.
(n) REAL PROPERTY. Neither Parent nor any of its Subsidiaries
owns any real property.
(o) CONTRACTS. (A) Subsections (i) through (vi) of PART A OF
SCHEDULE 3.2(o) each contain a complete and accurate listing of the following
contracts, agreements, commitments, leases, licenses, arrangements, instruments
and obligations, whether written or oral (and, if oral, a complete and accurate
summary thereof), to which Parent or any Subsidiary of Parent is a party:
34
(i) each contract, agreement, commitment, lease,
license, arrangement, instrument and/or obligation which is
reasonably likely to involve aggregate annual payments by or
to Parent or any Subsidiary of Parent of more than $50,000;
(ii) all collective bargaining agreements and Plans
of Parent maintained for or providing benefits to employees
of, or independent contractors or other agents for, Parent or
any Subsidiary of Parent;
(iii) all contracts and agreements relating to (and a
description of the outstanding principal amount, the interest
owing thereon and other payment and principal terms) (A) any
indebtedness, notes payable (including notes payable in
connection with acquisitions), accrued interest payable or
other obligations for borrowed money, whether current,
short-term, or long-term, secured or unsecured, of Parent or
any of its Subsidiaries, (B) any purchase money indebtedness
or earn-out or similar obligation in respect of purchases of
property or assets by Parent or any of its Subsidiaries, (C)
any lease obligations of Parent or any of its Subsidiaries
under leases which are capital leases in accordance with GAAP,
(D) any financing of Parent or any of its Subsidiaries
effected through "special purpose entities" or synthetic
leases or project financing, (E) any obligations of Parent or
any of its Subsidiaries in respect of banker's acceptances or
letters of credit (other than stand-by letters of credit in
support of ordinary course trade payables), (F) any obligation
or liability of Parent or any of its Subsidiaries with respect
to interest rate swaps, collars, caps, currency derivatives
and similar hedging obligations or (G) any guaranty of any of
the foregoing (the liabilities and obligations referred to in
(A) through (G) above, "PARENT INDEBTEDNESS") or any Liens
upon any properties or assets of Parent or any Subsidiary of
Parent as security for Parent Indebtedness;
(iv) all leases or subleases relating to real
property;
(v) all contracts and agreements that restrict the
ability of Parent and/or any Subsidiary or affiliate of, or
successor to, Parent, or, to the knowledge of Parent, any
executive officer of Parent or any Subsidiary thereof, to
compete in any line of business or with any Person or in any
geographic area or during any period of time, grant an
exclusive license to Parent Owned IP or following Closing
would result in the licensing of Company Owned IP; and
(vi) all other contracts, agreements, commitments,
leases, licenses, arrangements, instruments and/or
obligations, whether or not made in the ordinary course of
business, which are material to Parent or any Subsidiary of
Parent in the conduct of their respective businesses, or the
termination or cancellation of which would have or would
reasonably be expected to have a Parent Material Adverse
Effect.
(B) Parent and Acquisition have made available to the Company
true, complete and correct copies of all written contracts and agreements
required to be listed on PART A OF SCHEDULE 3.2(o), together with all
amendments, waivers or other changes thereto (each provided in English unless
otherwise indicated on Schedule 3.2(o)), and has been given a written summary of
all oral contracts required to be listed on PART A OF SCHEDULE 3.2(o). Except as
35
set forth on PART B OF SCHEDULE 3.2(o), and except for matters that have not had
and would not reasonably be expected to have, individually or in the aggregate,
a Parent Material Adverse Effect, (i) none of Parent or any of its Subsidiaries
is (with or without the lapse of time or the giving of notice, or both) in
breach or default in any material respect under any contract, lease, license or
other agreement or instrument, (ii) to the knowledge of Parent and Acquisition,
none of the other parties to any such contract, lease, license or other
agreement or instrument is (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect thereunder and
(iii) neither Parent nor any of its Subsidiaries has received any written notice
of the intention of any party to terminate or cancel any such contract, lease,
license or other agreement or instrument whether as a termination or
cancellation for convenience or for default of Parent or any of its Subsidiaries
thereunder.
(p) AFFILIATE CONTRACTS AND AFFILIATED TRANSACTIONS. Except as
set forth on SCHEDULE 3.2(p) or disclosed in the Parent SEC Documents, no
officer or director or other affiliate of Parent or of any Subsidiary of Parent
(or, to the knowledge of Parent or Acquisition, any family member of any such
Person who is an individual or any entity in which any such Person or any such
family member owns a material beneficial interest) is a party to any material
contract, agreement, commitment, lease, license, arrangement, instrument,
obligation, transaction or understanding with or binding upon Parent or any of
its Subsidiaries or any of their respective properties or assets or has any
material interest in any material property owned by Parent or any of its
Subsidiaries or has engaged in any material transaction with any of the
foregoing within the last thirty-six months.
(q) STATE TAKEOVER STATUTES. No "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or regulation
enacted under any Law (with the exception of Section 203 of the DGCL) applicable
to the Parent or Acquisition is applicable to the Merger or the other
transactions contemplated hereby. The Boards of Directors of Parent and
Acquisition have taken all action necessary such that the restrictions on
business combinations contained in Section 203 of the DGCL will not apply to the
Merger and the other transactions contemplated by this Agreement.
(r) VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding shares of Parent Common Stock is the only vote of
the holders of any class or series of Parent's capital stock or other securities
necessary (under applicable Law or otherwise) to adopt the Certificate of
Incorporation Amendment, this Agreement and to consummate the Merger and the
other transactions contemplated hereby.
(s) BOARD RECOMMENDATION. The Board of Directors of Parent, at
a meeting duly called and held on June 14, 2003, has by the unanimous vote of
those directors present (i) determined that this Agreement and the transactions
contemplated hereby, including the Merger, are advisable and fair to and in the
best interests of the Company and the stockholders of the Company and has
approved the same and (ii) resolved to recommend that the holders of the shares
of Parent Common Stock approve and adopt the Certificate of Incorporation
Amendment and adopt this Agreement.
36
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Affirmative Covenants.
(a) During the period from the date of this Agreement to the
Effective Time, except (i) as set forth on SCHEDULE 4.1(a) or (ii) to the extent
that the Company shall otherwise consent in writing (such consent not to be
unreasonably withheld), Parent shall, and shall cause each of its Subsidiaries
to carry on their respective businesses in the usual, regular and ordinary
course in substantially the same manner as heretofore conducted.
(b) During the period from the date of this Agreement to the
Effective Time, except (i) as set forth on SCHEDULE 4.1(b) or (ii) to the extent
that Parent shall otherwise consent in writing (such consent not to be
unreasonably withheld), the Company shall, and shall cause each of its
Subsidiaries to carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted.
4.2 NEGATIVE COVENANTS.
(a) During the period from the date of this Agreement to the
Effective Time, except (x) as set forth on SCHEDULE 4.2(a) or (y) to the extent
that the Company shall otherwise consent in writing, Parent shall not, and shall
not permit any of its Subsidiaries to:
(i) (A) declare, set aside or pay dividends on, or
make other distributions (whether in cash, stock or property)
in respect of, any capital stock (other than cash dividends
and distributions by wholly-owned Subsidiaries of Parent to
Parent or another wholly-owned Subsidiary of Parent), or set
aside funds therefor, (B) adjust, split, combine or reclassify
any capital stock or (C) purchase, redeem or otherwise acquire
any capital stock or securities directly or indirectly
convertible into, or exercisable or exchangeable for, capital
stock, or set aside funds therefore (except upon the exercise
of Parent Stock Options outstanding on the date of this
Agreement to the extent cashless exercises are provided for in
the stock plan governing such Parent Stock Option);
(ii) (A) except for shares of Parent Common Stock
issuable pursuant to Parent Stock Options outstanding on the
date of this Agreement in accordance with the current terms
thereof or for the issuance of Parent Common Stock upon the
conversion (upon terms reasonably satisfactory to the Company)
of any Parent Indebtedness, issue, deliver, hypothecate,
pledge, sell or otherwise encumber any shares of capital
stock, any other voting securities or any securities directly
or indirectly convertible into, or exercisable or exchangeable
for, capital stock or other voting securities, or any
"phantom" stock, "phantom" stock rights, stock appreciation
rights or stock based performance units or (B) amend the terms
of any equity security (including any Parent Stock Options or
Parent Convertible Securities);
37
(iii) except for the Certificate of Incorporation
Amendment, amend or propose to amend its certificate or
articles of incorporation or bylaws (or other organizational
documents);
(iv) except for the Merger, (A) merge or consolidate
with, or acquire any interest in, any Person or division or
unit thereof, (B) acquire or agree to acquire any assets,
except for acquisitions of office supplies in the ordinary
course of business and consistent with past practice or (C)
make any loan, advance or capital contribution to, or
otherwise make any investment in, any Person;
(v) sell, lease, license, encumber or otherwise
dispose of, or subject to any Lien, any of its assets, or
revalue any of its assets, including writing down the value of
inventory or writing off notes or accounts receivable;
(vi) authorize, recommend, propose or announce an
intention to adopt a plan of complete or partial liquidation
or dissolution;
(vii) (A) assume, incur or guarantee any Parent
Indebtedness, (B) issue or sell any debt securities or
warrants or rights to acquire any debt securities, (C)
guarantee any other obligations of any other Person or (D)
enter into any "keep well" or other agreement to maintain the
financial condition of any other Person or any other agreement
having the same economic effect, in each case, other than in
the ordinary course of business consistent with past practice;
(viii) enter into any license with respect to Parent
Intellectual Property, or otherwise dispose of or transfer any
Parent Intellectual Property;
(ix) enter into any new line of business;
(x) make any capital expenditures;
(xi) enter into any contract, agreement or
arrangement to the extent consummation of the transactions
contemplated by this Agreement or compliance by Parent with
the provisions of this Agreement could reasonably be expected
to result in a Violation of such contract, agreement or
arrangement;
(xii) hire, employ, appoint, engage, retain, fire or
terminate any Person, or grant any severance or termination
pay (cash, equity or otherwise) to any officer or employee
except pursuant to written agreements outstanding, or policies
existing, on the date hereof and as previously disclosed in
writing or made available to the Company, or adopt any new
severance plan, or amend or modify or alter in any respect any
severance plan, agreement or arrangement existing on the date
hereof, or grant any equity-based compensation;
(xiii) adopt or amend any employee benefit plan,
policy or arrangement, or employee stock purchase or stock
option plan, or enter into any employment contract or
collective bargaining agreement, pay any special bonus or
special remuneration (cash, equity or otherwise) to any
director or employee, or increase the salaries or wage rates
or fringe benefits (cash, equity or otherwise) (including
rights to severance or indemnification) of its directors,
officers, employees or consultants;
38
(xiv) enter into, modify, amend, cancel, renew or
terminate any contract, agreement or arrangement which if so
entered into, modified, amended, cancelled, renewed or
terminated could reasonably be expected to (A) have a Parent
Material Adverse Effect, (B) impair in any material respect
the ability of Parent to perform its obligations under this
Agreement, (C) prevent or materially delay the consummation of
the transactions contemplated by this Agreement or (D)
terminate or waive any right of substantial value;
(xv) alter (through merger, liquidation,
reorganization, restructuring or any other fashion) the
corporate structure or ownership of Parent or any of its
Subsidiaries;
(xvi) knowingly or intentionally take any action that
results or is reasonably likely to result in any of the
representations or warranties of Parent hereunder being untrue
in any material respect;
(xvii) commence any lawsuit other than (A) for the
routine collection of bills, or (B) in such cases where it in
good faith determines that failure to commence suit would
result in the material impairment of a valuable aspect of its
business, provided that Parent shall consult with the Company
prior to the filing of such a suit; or
(xviii) agree to or make any commitment, whether
orally or in writing, to take any actions prohibited by this
Agreement.
(b) During the period from the date of this Agreement to the
Effective Time, except (x) as set forth on SCHEDULE 4.2(b) or (y) to the extent
that Parent shall otherwise consent in writing (such consent not to be
unreasonably withheld), the Company shall not, and shall not permit any of its
Subsidiaries to:
(i) (A) declare, set aside or pay dividends on, or
make other distributions (whether in cash, stock or property)
in respect of, any capital stock (other than cash dividends
and distributions by wholly-owned Subsidiaries of the Company
to the Company or another wholly-owned Subsidiary of the
Company), or set aside funds therefor, (B) adjust, split,
combine or reclassify any capital stock, or issue, authorize
or propose the issuance of any other securities in respect of,
in lieu of or in substitution for, any capital stock or (C)
purchase, redeem or otherwise acquire any capital stock or
securities directly or indirectly convertible into, or
exercisable or exchangeable for, capital stock, or set aside
funds therefore (except upon the exercise of Company Stock
Options outstanding on the date of this Agreement as set forth
on Schedule 3.1(b) to the extent cashless exercises are
provided for in the stock plan governing such Company Stock
Option or the repurchase of Company Common Stock pursuant to
repurchase rights of the Company arising upon an employee's
termination of employment); PROVIDED that with respect to
clauses (A) and (B) of this paragraph, the Company may sell
and issue Company Common Stock, Company Stock Options and
Company Convertible Securities to investors and other parties
prior to the Effective Time;
39
(ii) amend or propose to amend its certificate or
articles of incorporation or bylaws (or other organizational
documents), except for the Company's proposed amendment to its
Certificate of Incorporation to increase the number of its
authorized shares of Company Common Stock to an aggregate of
300,000,000 shares for sale and issuance to investors prior to
the Effective Time;
(iii) sell, lease, license, encumber or otherwise
dispose of, or subject to any Lien, any of its assets, other
than sales, leases, licenses or other dispositions in the
ordinary course of business consistent with past practice;
PROVIDED that the Company may sell and issue Company Common
Stock, Company Stock Options and Company Convertible
Securities to investors and other parties prior to the
Effective Time;
(iv) authorize, recommend, propose or announce an
intention to adopt a plan of complete or partial liquidation
or dissolution;
(v) enter into any contract, agreement or arrangement
to the extent consummation of the transactions contemplated by
this Agreement or compliance by the Company with the
provisions of this Agreement could reasonably be expected to
result in a Violation of such contract, agreement or
arrangement;
(vi) enter into, modify, amend, cancel, renew or
terminate any contract, agreement or arrangement which if so
entered into, modified, amended, cancelled, renewed or
terminated could reasonably be expected to (A) have a Company
Material Adverse Effect, (B) impair in any material respect
the ability of the Company to perform its obligations under
this Agreement, (C) prevent or materially delay the
consummation of the transactions contemplated by this
Agreement or (D) terminate or waive any right of substantial
value;
(vii) alter (through merger, liquidation,
reorganization, restructuring or any other fashion) the
corporate structure or ownership of the Company or any of its
Subsidiaries; PROVIDED that the Company may sell and issue
Company Common Stock, Company Stock Options and Company
Convertible Securities to investors and other parties prior to
the Effective Time;
(viii) knowingly or intentionally take any action
that results or is reasonably likely to result in any of the
representations or warranties of the Company hereunder being
untrue in any material respect; or
(ix) agree to or make any commitment, whether orally
or in writing, to take any actions prohibited by this
Agreement.
40
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) During the period from the date of this Agreement to the
Effective Time, the Company and Parent shall, and shall cause each of their
respective Subsidiaries to, afford to the officers, employees, accountants,
counsel and other representatives of the other, during normal business hours,
access to all of such parties properties, books, records, leases, contracts,
commitments, customers, officers, employees, accountants, counsel and other
representatives, subject to the confidentiality provisions set forth in Section
5.1(b).
(b) Each party hereto shall cause, and shall cause its
representatives not to disclose or use any confidential information concerning
the other party and its Subsidiaries furnished by the other party to such party
in connection with the transactions contemplated by this Agreement without the
prior written consent of the other party, except to the extent that such
information (i) at the time of its disclosure to the receiving party by or on
behalf of the disclosing party is already known or available to the receiving
party or its Subsidiaries, (ii) is or becomes known or available to the public
other than as a result of an unauthorized disclosure by the receiving party or
its representatives or (iii) is required to be disclosed by the receiving party
or its Subsidiaries by Law or other legal process. In the event that any party
or any of its representatives is requested or required to disclose any of the
confidential information referred to above, such party will provide the other
party with prompt notice of any such request or requirement so that the other
party may seek a protective order or waive such party's compliance with this
Section 5.1(b). If, failing the entry of a protective order or the receipt of a
waiver hereunder, such party is compelled to disclose such confidential
information, such party may, subject to prior notification thereof, disclose
that portion of such confidential information that such party is compelled to
disclose. In any event, any party hereto will not oppose action by, and such
party will cooperate with, the other party to obtain an appropriate protective
order or other reliable assurance that confidential treatment will be accorded
such confidential information.
(c) The Company acknowledges that Parent Common Stock is
publicly traded and that any information obtained during the course of its due
diligence could be considered to be material non-public information within the
meaning of federal and state securities Laws. The Company agrees not to, and
shall use its reasonable efforts to cause its representatives not to, engage in
any transactions in Parent Common Stock in violation of applicable xxxxxxx
xxxxxxx Laws.
5.2 FEES AND EXPENSES.
(a) Except as otherwise provided in this Section 5.2 and
except with respect to claims for damages incurred as a result of a material and
willful breach of this Agreement, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such costs and expenses.
41
(b) In the event of any termination of this Agreement by
Parent or the Company under Section 7.1(g) (the "SPECIFIED TERMINATION EVENT")
then the Secured Promissory Note (the "SECURED PROMISSORY NOTE") in the
principal amount of $1,250,000 in the form attached hereto as Exhibit C (which
is accompanied by the Security Agreement (the "SECURITY AGREEMENT") attached
hereto as Exhibit D) shall become due and payable in accordance with the terms
thereof (the "TERMINATION FEE"); PROVIDED that the Termination Fee shall not be
payable if at the time of such termination pursuant to Section 7.1(g) (A) Parent
could otherwise terminate this Agreement pursuant to Section 7.1(d) or (B)
Parent or the Company could otherwise terminate this Agreement pursuant to
Section 7.1(f). Signature pages for the Secured Promissory Note and the Security
Agreement shall be sent to, and held in escrow by, counsel to the Company to be
(i) released to the Company upon the Specified Termination Event or (ii)
returned to Parent upon termination of this Agreement for any reason other than
the Specified Termination Event, in accordance with the Escrow Agreement
attached hereto as Exhibit E entered into among the parties thereto..
5.3 NO SOLICITATION OR OTHER NEGOTIATIONS.(a) (a) From and after the
date of this Agreement until the earlier of the Effective Time or the
termination of this Agreement pursuant to SECTION 7.1 hereof (the "EXPIRATION
DATE"), neither Parent nor any of its directors, officers, employees,
affiliates, investment bankers, attorneys, accountants, advisors, agents or
other representatives (collectively, "AGENTS") will, directly or indirectly: (i)
take any action to or otherwise solicit, initiate, seek, encourage, support or
take any other action to facilitate any inquiries or the making of any
Acquisition Proposal (as defined in clause (c) below), (ii) engage in any
discussions or negotiations regarding any Acquisition Proposal, or (iii) furnish
to any Person any information (except in the ordinary course of business) to
assist such Person with respect to any Acquisition Proposal. Parent agrees that
any such negotiations in progress as of the date hereof will be terminated or
suspended during such period.
(b) Parent will promptly, and in any event within 24 hours,
notify the Company of any contact of it or its Agents by any third party
regarding any Acquisition Proposal, including in any such notice the identity of
the Person making, and the terms of, such Acquisition Proposal. In no event will
Parent accept or enter into an agreement concerning any Acquisition Proposal
prior to the Expiration Date.
(c) For purposes of this SECTION 5.3, "ACQUISITION PROPOSAL"
shall mean any inquiry, proposal or offer for a merger, consolidation,
dissolution, sale of a material portion of the stock or assets of Parent, tender
offer, recapitalization, share exchange or other business combination involving
Parent other than the Merger contemplated by this Agreement. Each of Parent and
the Company acknowledge that this SECTION 5.3 was a significant inducement for
the Company to enter into this Agreement and the absence of such provision would
have resulted in either (i) a material reduction in the consideration with
respect to the Merger or (ii) a failure to induce the Company to enter into this
Agreement.
5.4 BROKERS OR FINDERS.
(a) The Company represents, as to itself, its Subsidiaries and
its affiliates, that no agent, broker, investment banker, financial advisor or
other firm or Person engaged by the Company or a Subsidiary is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of the Company, except for Xxxxxx Xxxxxx
& Co.
42
(b) Each of Parent and Acquisition represents, as to itself,
its Subsidiaries and its affiliates, that no agent, broker, investment banker,
financial advisor or other firm or Person engaged by Parent or Acquisition is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee in connection with any of the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent or Acquisition
except for Xxxxxx Xxxxxx & Co.
5.5 REASONABLE BEST EFFORTS.
(a) Subject to the terms and conditions of this Agreement,
each of the parties hereto agrees to use its reasonable best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable, under applicable Laws or otherwise, to
consummate and make effective the transactions contemplated by this Agreement.
(b) Each party hereto shall cooperate and use its reasonable
best efforts to promptly prepare and file all necessary documentation to effect
all necessary applications, notices, petitions, filings and other documents, and
use its reasonable efforts to obtain (and will cooperate with each other in
obtaining) any consent, acquiescence, authorization, order or approval of, or
any exemption or nonopposition by, any Governmental Entity required to be
obtained or made by Parent, Acquisition or the Company or any of their
respective affiliates in connection with the Merger, the Certificate of
Incorporation Amendment or the taking of any other action contemplated by this
Agreement.
(c) Each party hereto shall cooperate and use its reasonable
best efforts to negotiate with the creditors of Parent and its Subsidiaries
mutually agreed upon between Parent and the Company to cause such creditors to
either (i) convert the Parent Indebtedness held by such creditor to Parent
Common Stock prior to Closing or (ii) cancel or permanently reduce such Parent
Indebtedness prior to Closing; PROVIDED that any such conversion, cancellation
or reduction is on terms reasonably acceptable to the Company.
(d) The Company shall use its reasonable best efforts to sell
such number of shares of Company Common Stock or Company Convertible Securities
that is necessary to obtain aggregate net cash proceeds (the "FINANCING
PROCEEDS") at least equal to an amount so that the Certified Total Amount as of
the Closing Date will be at least equal to $5,000,000.
5.6 PUBLICITY. The parties will consult with each other and will
mutually agree upon any press release or other public announcement pertaining to
the Merger or this Agreement and shall not issue any such press release or make
any such public announcement prior to such consultation and agreement, except as
may be required by applicable Law, in which case the party proposing to issue
such press release or make such public announcement shall use its reasonable
best efforts to consult in good faith with the other party before issuing any
such press release or making any such public announcement.
43
5.7 NOTIFICATION OF CERTAIN MATTERS. Each party shall give prompt
written notice to each other party of (a) any notice or other communication from
any Person alleging that the consent of such Person is or may be required in
connection with the transactions contemplated hereby, (b) notice or
communication from any Governmental Entity in connection with the transactions
contemplated hereby, (c) the occurrence, or failure to occur, of any event of
which it becomes aware that has caused or could reasonably be expected to cause
any representation or warranty of such party contained in this Agreement that is
qualified as to materiality being or becoming as of any time between the date of
this Agreement and the Effective Time untrue or inaccurate at such time in any
respect or any such representation or warranty that is not so qualified being or
becoming as of any time between the date of this Agreement and the Effective
Date untrue or inaccurate in any material respect, (d) the failure of it to
comply with or satisfy in any material respect any obligation to be complied
with or satisfied by it under this Agreement or (e) the commencement or threat
of any Company Litigation or Parent Litigation, as the case may be, or any other
action, suit, investigation, inquiry or proceeding which relates to the
consummation of the transactions contemplated hereby.
5.8 PREPARATION OF THE PROXY STATEMENT AND REGISTRATION STATEMENT;
PARENT SPECIAL MEETING.
(a) As soon as practicable following the date of this
Agreement, Parent and the Company shall prepare and Parent shall file with the
SEC the Registration Statement in which the Proxy Statement will be included as
a prospectus. The parties will cooperate with each other in connection with the
preparation of the Registration Statement. Each party agrees to correct any
information provided by it for use in the Registration Statement and the Proxy
Statement which shall have become false or misleading. If at any time prior to
the Effective Time, in the case of the Registration Statement, and at any time
prior to the Meeting Date, in the case of the Proxy Statement, any information
should be discovered by any party hereto which should be set forth in an
amendment or supplement to the Registration Statement or Proxy Statement, as the
case may be, so that the Registration Statement or Proxy Statement, as the case
may be, would not include any misstatement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, the party which discovers such information shall promptly
notify the other parties hereto and, to the extent required by applicable Law,
an appropriate amendment or supplement describing such information shall be
promptly filed by Parent with the SEC.
(b) Parent shall, acting through its Board of Directors and in
accordance with applicable Law and the Certificate of Incorporation and the
Bylaws of Parent, duly call, give notice of, convene and hold a special meeting
of its stockholders (the "PARENT SPECIAL MEETING") as promptly as practicable
after the date hereof for the purpose of adopting the Certificate of
Incorporation Amendment and shall solicit proxies in favor of approval of the
Certificate of Incorporation Amendment. The Board of Directors of Parent has
unanimously recommended to its stockholders approval of the Certificate of
Incorporation Amendment and shall include such recommendation in the Proxy
Statement and shall not withdraw or modify such recommendation.
(c) Commencing on the first business day following the date on
which the Registration Statement is declared effective by the SEC, the Company
shall solicit a written consent of stockholders in lieu of meeting, in the form
attached hereto as EXHIBIT A (the "STOCKHOLDERS' CONSENT"), from each holder of
shares of Company Common Stock pursuant to Section 228(e) of the DGCL and the
Bylaws of the Company with a view to obtaining the Company Stockholders Approval
as promptly as practicable. Promptly following the date on which the Company
Stockholders Approval is obtained, the Company shall prepare and mail to all its
stockholders the notice of action authorized by the Stockholders' Consent. The
Board of Directors of the Company has unanimously recommended to its
stockholders approval of the matters set forth in the Stockholders' Consent and
shall not withdraw or modify such recommendation.
44
5.9 COMPANY FINANCIAL STATEMENTS. The Company shall use its reasonable
best efforts to provide Parent, within 60 days following the date of this
Agreement, (a) the audited consolidated balance sheets of the Company and its
Subsidiaries as of June 30, 2002 and June 30, 2001, and the related audited
consolidated income statements, statements of changes in shareholders equity and
cash-flow statements of the Company and its Subsidiaries for the fiscal years
ended on such dates, in each case together with the report thereon of Xxxxxxx
Xxxxxxxx & Co. the independent certified public accountants of the Company, (b)
the unaudited consolidated balance sheet of the Company and its Subsidiaries as
of March 31, 2003 and the related unaudited consolidated income statements,
statements of changes in shareholders equity and cash-flow statements of the
Company and its Subsidiaries for the nine-month period then ended and (c) any
other financial statements of the Company and its consolidated Subsidiaries
required to be included in the Registration Statement and the Proxy Statement
pursuant to the Securities Act and the Exchange Act (the financial statements
described in clause (a), (b) and (c) are collectively referred to as the
"ADDITIONAL COMPANY FINANCIAL STATEMENTS"). The Additional Company Financial
Statements will be derived from and will be in accordance with the books and
records of the Company and its consolidated Subsidiaries and will fairly present
the consolidated financial condition of the Company and such Subsidiaries as of
the dates thereof and the consolidated results of operations and cash flows of
the Company and such Subsidiaries for the periods then ended and will be
prepared in conformity with GAAP consistently applied, subject in the case of
the interim financial statements to the absence of certain footnote disclosures
and normal year-end adjustments.
5.10 APPOINTMENT OF DIRECTORS. Parent shall use its best efforts to
cause such number of vacancies agreed to by the Company and Parent to be created
on its Board of Directors (by increasing the number of directors constituting
the Board of Directors of Parent or otherwise) and to cause Xxxxx Xxxxxxxx, Xxxx
Xxx and such other designees requested by the Company within 30 days of the date
of this Agreement to be appointed or elected to fill such vacancies at the
Effective Time. Parent also shall use its best efforts to cause Xxxxx Xxxxxxxx,
Xxxx Xxx and such other designees to be nominated for election at the Parent
Special Meeting and shall recommend the election of such individuals to its
shareholders. Notwithstanding the foregoing, Parent shall not be required to
appoint or elect to, or, if appointed or elected, shall be entitled to remove
from, the Board of Directors of Parent any person who has been convicted of any
crime (other than a traffic violation) or who, in the reasonable judgment of the
Board, is legally ineligible to serve on the Board.
45
5.11 COMPLIANCE WITH THE SECURITIES ACT. Within 30 days following the
date of this Agreement, the Company shall cause to be prepared and delivered to
Parent a list identifying all Persons who in the Company's reasonable judgment
may be deemed to be "affiliates" of the Company as that term is used in
paragraphs (c) and (d) of rule 145 under the Securities Act (the "RULE 145
AFFILIATES"). The Company shall use its reasonable best efforts to cause each
Person who is identified as a Rule 145 Affiliate in such list to deliver to
Parent on or prior to the Effective Time a written agreement in substantially
the form attached hereto as EXHIBIT B (the "AFFILIATE'S AGREEMENT"), executed by
such Person.
5.12 LTDN INTERIM NOTES. At the Effective time, each LTDN Interim Note
shall be cancelled and all obligations thereunder shall be extinguished. In
addition, promptly following the Effective Time, all security interests under
the Pledge and Security Agreement shall be released and the Pledge and Security
Agreement shall be terminated.
5.13 NON-DISCLOSURE AND INVENTION ASSIGNMENT AGREEMENTS. Parent shall
use its reasonable efforts to cause to be executed and delivered to Parent a
non-disclosure agreement and invention assignment agreement in a form delivered
by Parent and reasonably acceptable to the Company, to be executed by each of
the employees and consultants of Parent and its Subsidiaries.
5.14 VOTE. The Company shall, and shall cause its Subsidiaries, to vote
all shares of Parent Common Stock held by the Company and its Subsidiaries in
favor of the Merger Agreement, the Merger and the Certificate of Incorporation
Amendment.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction or waiver, where permitted by applicable Law, by each party
hereto prior to the Effective Time of the following conditions:
(a) The Company Stockholder Approval shall have been obtained.
(b) The Parent Stockholder Approval shall have been obtained.
(c) All consents, approvals and actions of, filings with, and
notices to, all Governmental Entities required of Parent, Acquisition or the
Company or any of their respective Subsidiaries or other affiliates in
connection with the transactions contemplated hereby shall have been made,
obtained or effected, as the case may be, except for those, the failure of which
to be made, obtained or effected has not had and would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect or a Parent Material Adverse Effect, as the case may be.
46
(d) No Order or Law shall be in effect that prevents or
restricts the consummation of the Merger or the Certificate of Incorporation
Amendment or the other transactions contemplated hereby; provided, that prior to
invoking this condition, each party shall use its reasonable best efforts to
have any such legal prohibition or restraint removed.
(e) There shall not be pending or threatened any suit, action,
investigation, inquiry or proceeding by any Governmental Entity challenging the
acquisition by Parent or Acquisition of any shares of Company Common Stock or
seeking to restrain or prohibit the consummation of the Merger.
(f) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act. No stop order suspending
the effectiveness of the Registration Statement shall have been issued by the
SEC and no proceedings for that purpose shall have been initiated or, to the
knowledge of Parent or the Company, threatened by the SEC.
6.2 CONDITIONS TO THE OBLIGATION OF PARENT AND ACQUISITION TO EFFECT
THE MERGER. The obligation of Parent and Acquisition to effect the Merger is
further subject to the following conditions, any or all of which may be waived,
in whole or in part by Parent and Acquisition, on or prior to the Effective
Time, to the extent permitted by applicable Law:
(a) Each of the representations and warranties of the Company
(i) set forth in Section 3.1(b), 3.1(c)(i), 3.1(q), 3.1(r) and 3.1(s) (the
"COMPANY SPECIFIED SECTIONS") shall be true and correct in all material respects
as of the Closing Date as though made on and as of the Closing Date (provided
that, to the extent any such representation or warranty speaks as of a specified
date, it need only be true and correct as of such specified date) and (ii) set
forth in this Agreement (other than the Company Specified Sections) shall be
true and correct as of the Closing Date as though made on and as of the Closing
Date (provided that, to the extent any such representation or warranty speaks as
of a specified date, it need only be true and correct as of such specified
date), except (A) in the case of this clause (ii), where the failure of such
representations and warranties to be so true and correct does not have,
individually or in the aggregate, a Company Material Adverse Effect and (B) in
the case of clauses (i) and (ii), for any inaccuracy that results from or
relates to the taking of any action, or failure to act, as required by this
Agreement or at the direction of or after the consent of Parent, and Parent and
Acquisition shall have received a certificate signed on behalf of the Company by
the chief executive officer and the chief financial officer of the Company to
the effect set forth in this paragraph.
(b) The Company shall have performed in all material respects
the obligations required to be performed by it under this Agreement on or prior
to the Closing Date and Parent and Acquisition shall have received a certificate
signed on behalf of the Company by the chief executive officer and the chief
financial officer of the Company to the effect set forth in this paragraph.
(c) Parent shall have received the Total Amount Certificate,
which must certify that the Certified Total Amount is equal to, or greater than,
at least $5,000,000.
(d) Parent shall have received a Bank Account Verification
Letter dated the Closing Date from the Company's Bank setting forth the amount
of immediately available funds in the Cash Bank Account, which amount must be
equal to, or greater than, the difference between $5,000,000 and the LTDN
Interim Note Amount.
47
(e) Parent shall have received a certificate signed on behalf
of the Company by the chief executive officer and chief financial officer of the
Company setting forth the information contained in Section 3.1(b)(i) as if the
Capitalization Date was the Closing Date.
6.3 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER. The
obligation of the Company to effect the Merger is further subject to the
following conditions, any or all of which may be waived, in whole or in part by
the Company, on or prior to the Effective Time, to the extent permitted by
applicable Law:
(a) The representations and warranties of Parent and
Acquisition (i) set forth in Sections 3.2(b), 3.2(c)(i), 3.2(q), 3.2(r) and
3.2(s) (the "PARENT SPECIFIED SECTIONS") shall be true and correct in all
material respects as of the Closing Date as though made on and as of the Closing
Date (provided that, to the extent any such representation or warranty speaks as
of a specified date, it need only be true and correct as of such specified date)
and (ii) set forth in this Agreement (other than the Parent Specified Sections)
shall be true and correct as of the Closing Date as though made on and as of the
Closing Date (provided that, to the extent any such representation or warranty
speaks as of a specified date, it need only be true and correct as of such
specified date), except (A) in the case of this clause (ii), where the failure
of such representations and warranties to be so true and correct does not have,
individually or in the aggregate, a Parent Material Adverse Effect and (B) in
the case of clauses (i) and (ii), for any inaccuracy that results from or
relates to the taking of any action, or failure to act, as required by this
Agreement or at the direction of or after the consent of the Company, and the
Company shall have received a certificate signed on behalf of Parent and
Acquisition by their respective chief executive officers and chief financial
officers to the effect set forth in this paragraph.
(b) Parent and Acquisition shall have performed in all
material respects the obligations required to be performed by them under this
Agreement on or prior to the Closing Date and the Company shall have received a
certificate signed on behalf of Parent and Acquisition by their respective chief
executive officers and chief financial officers to the effect set forth in this
paragraph.
(c) At least the greater of (i) 71.5% of the Parent
Indebtedness outstanding as of March 31, 2003 (excluding any indebtedness
outstanding under any LTDN Interim Notes) or (ii) $5,000,000 of such Parent
Indebtedness, (A) has been converted, or is subject to an agreement in writing
to be converted on the Closing Date, to shares of Parent Common Stock or (B) has
been cancelled or permanently reduced, or is subject to an agreement in writing
to be cancelled or permanently reduced on the Closing Date, in connection with a
settlement with such creditor (but only to the extent such Parent Indebtedness
is forgiven and is not required by such creditor to be repaid), in a manner
reasonably satisfactory to the Company.
(d) The Company shall have received the Excess Parent
Liabilities Certificate.
(e) Parent shall have entered into an agreement with Alfa-Pro
Products GmbH ("THE ALFA-PRO AGREEMENT") in form and substance reasonably
acceptable to the Company providing for the assignment of all patents and
related Intellectual Property owned by Alfa-Pro Products GmbH to Parent in
exchange for Parent Common Stock in an amount to be determined, which patents
and related Intellectual Property shall be free and clear of all Liens at the
time of such transfer and at the Effective Time, except for any Liens in favor
of the Company, Parent or any of their respective Subsidiaries.
48
(f) The Company shall have received a certificate signed on
behalf of Parent by the chief executive officer and chief financial officer of
Parent setting forth the information contained in Section 3.2(b)(i) as if the
Parent Capitalization Date was the Closing Date.
(g) Parent shall not have any outstanding shares of Parent
Preferred Stock.
(h) Parent shall exclusively own immediately prior to the
Closing all right, title and interest to and in the patents and related Parent
Intellectual Property set forth on SCHEDULE 6.3(H) free and clear of any Liens,
except for any Liens in favor of the Company.
(i) The Company shall have obtained the Financing Proceeds.
(j) The consummation of the Merger shall entitle the holders
of Company Common Stock, Company Convertible Securities and Company Stock
Options to acquire such number of shares of Parent Common Stock such that after
such issuance such holders own at least 58% of the outstanding shares of Parent
Common Stock (excluding shares of Parent Common Stock issued to the Company or
any of its Subsidiaries).
ARTICLE VII
TERMINATION AND ABANDONMENT
7.1 TERMINATION AND ABANDONMENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after Company Stockholder Approval and Parent Stockholder Approval:
(a) by mutual written consent of the Company, Parent and
Acquisition;
(b) by Parent or the Company, if any court of competent
jurisdiction or other Governmental Entity shall have issued an Order or taken
any other action permanently restraining, enjoining or otherwise prohibiting the
Merger or the Certificate of Incorporation Amendment, and such Order or other
action shall have become final and non-appealable;
(c) by Parent or the Company, if the Effective Time shall not
have occurred on or before 5:00 p.m., Eastern Standard Time, on October 31, 2003
(the "TERMINATION DATE"); provided, that the right to terminate this Agreement
under this Section 7.1(c) shall not be available to any party whose failure to
fulfill or breach of any obligation under this Agreement has been the cause of,
or resulted in, the failure of the Effective Time to occur on or before such
date;
(d) by Parent, if (i) any of the representations and
warranties of the Company contained in this Agreement shall fail to be true and
correct such that the condition set forth in Section 6.2(a) would not be
satisfied, or (ii) the Company shall have breached or failed to comply with any
49
of its obligations under this Agreement such that the condition set forth in
Section 6.2(b) would not be satisfied (in either case, other than as a result of
a material breach by Parent or Acquisition of any of their respective
obligations under this Agreement) and such failure or breach with respect to any
such representation, warranty or obligation cannot be cured or, if curable,
shall continue unremedied for a period of thirty days after the Company has
received written notice from Parent of the occurrence of such failure or breach
(provided that in no event shall such thirty day period extend beyond the second
day preceding the Termination Date);
(e) by the Company, if (i) any of the representations and
warranties of Parent and Acquisition contained in this Agreement shall fail to
be true and correct such that the condition set forth in Section 6.3(a) would
not be satisfied, or (ii) Parent or Acquisition shall have breached or failed to
comply with any of their respective obligations under this Agreement such that
the condition set forth in Section 6.3(b) would not be satisfied (in either
case, other than as a result of a material breach by the Company of any of its
obligations under this Agreement) and such failure or breach with respect to any
such representation, warranty or obligation cannot be cured or, if curable,
shall continue unremedied for a period of thirty days after Parent has received
written notice from the Company of the occurrence of such failure or breach
(provided that in no event shall such thirty day period extend beyond the second
day preceding the Termination Date);
(f) by Parent or the Company, if the Company fails to obtain
Company Stockholder Approval within 20 days following the date on which the
Company mails the Stockholder's Consent to its stockholders (which mailing shall
occur within five business days following the date on which the Registration
Statement is declared effective by the SEC); or
(g) by Parent or the Company, if Parent fails to obtain Parent
Stockholder Approval at the Parent Special Meeting (or any adjournment thereof).
Any party desiring to terminate this Agreement shall give written notice of such
termination to the other parties.
7.2 EFFECT OF TERMINATION. In the event of any termination of this
Agreement by any party hereto as provided in Section 7.1, this Agreement shall
forthwith become void and there shall be no further liability or obligation
hereunder on the part of any party hereto or their respective affiliates,
officers, directors or stockholders, except that (a) Section 5.1(b), Section
5.2, this Section 7.2 and Article VIII shall survive such termination and (b) no
such termination shall relieve any party from liability for a material and
willful breach of any term or provision hereof.
50
ARTICLE VIII
MISCELLANEOUS
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
None of the representations, warranties, covenants and agreements contained in
this Agreement or in any certificate or other instrument delivered pursuant to
this Agreement shall survive the Effective Time except for covenants and
agreements that contemplate performance after the Effective Time (which
covenants and agreements shall survive in accordance with their terms).
8.2 SPECIFIC PERFORMANCE. The parties hereto acknowledge and agree that
any breach or threatened breach of the terms of this Agreement would give rise
to irreparable harm for which money damages would not be an adequate remedy and
accordingly the parties agree that, in addition to any other remedies, each
party shall be entitled to enforce the terms of this Agreement by a decree of
specific performance without the necessity of proving the inadequacy of money
damages as a remedy.
8.3 NOTICES. Any notice or communication required or permitted
hereunder shall be in writing and shall be delivered personally, delivered by
internationally recognized courier service, sent by certified or registered
mail, postage prepaid, or sent by facsimile (subject to electronic confirmation
of such facsimile transmission and the sending (on the date of such facsimile
transmission) of a confirmation copy of such facsimile by internationally
recognized courier service or by certified or registered mail, postage prepaid).
Any such notice or communication shall be deemed to have been given (i) when
delivered, if personally delivered, (ii) three business days after it is
deposited with an internationally recognized courier service, if sent by
internationally recognized courier service, (iii) the day of sending, if sent by
facsimile prior to 5:00 p.m. (EST) on any business day or the next succeeding
business day if sent by facsimile after 5:00 p.m. (EST) on any business day or
on any day other than a business day or (iv) five business days after the date
of mailing, if mailed by certified or registered mail, postage prepaid, in each
case, to the following address or facsimile number, or to such other address or
addresses or facsimile number or numbers as such party may subsequently
designate to the other parties by notice given hereunder:
(a) if to Parent or Acquisition, to it:
Xxxxxxxxxxxxx 00, X-00000
Xxxxxx, Xxxxxxx
Attn: Xxxx Xxxxxxxxx
Facsimile: 49 30 201 77899
(b) if to the Company, to:
Xxxxx 00, Xxxxxx Xxxxx
000 Xxxxxxx Xxxxxx
Xxxxxxxxx Xxx 0000
Xxxxxxxxx
Attn: Mr. Xxxxx Xxxxxxx
Facsimile: x00 0 0000 0000
51
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxx X. Xxxxxxxx
Facsimile: x0 (000) 000-0000
8.4 INTERPRETATION. As used herein, the words "hereof", "herein",
"herewith" and words of similar import shall, unless otherwise stated, be
construed to refer to this Agreement as a whole and not to any particular
provision of this Agreement, and the words "Article", "Schedule" and "Section"
are references to the articles, schedules and sections of this Agreement unless
otherwise specified. Whenever the words "include", "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation". Unless otherwise provided herein, each accounting term used in this
Agreement has the meaning given to it in accordance with GAAP. As used in this
Agreement, the term "affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under the Exchange Act. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such terms. Any
agreement or statute referred to herein means such agreement or statute as from
time to time amended, qualified or supplemented, including, in the case of
statutes, by succession of comparable successor statutes. References to the
Securities Act and to the Exchange Act are also references to the rules and
regulations of the SEC promulgated thereunder. References to a Person are also
to its successors and permitted assigns. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. The parties hereto
have participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.
8.5 COUNTERPARTS. This Agreement may be executed in two or more
counterparts (and may be delivered by facsimile or similar reproduction), each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
8.6 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement,
including the schedules hereto, together with the LTDN Interim Notes, the
Secured Promissory Note, the Security Agreement and the Escrow Agreement,
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
both written and oral, between the parties hereto with respect to the subject
matter hereof. This Agreement shall be binding upon and inure to the benefit of
each party hereto and to their respective successors and permitted assigns, and
nothing in this Agreement express or implied, is intended to or shall confer
upon any other Person any other right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
52
8.7 AMENDMENT. This Agreement may be amended, modified or supplemented,
only by written agreement of Parent, Acquisition and the Company at any time
prior to the Effective Time with respect to any of the terms contained herein;
PROVIDED, that, after (a) Company Stockholder Approval is obtained, no term or
condition contained in this Agreement shall be amended or modified in any manner
that by Law requires further approval by the stockholders of the Company without
so obtaining such further stockholder approval and (b) Parent Stockholder
Approval is obtained, no term or condition contained in this Agreement shall be
amended or modified in any manner that by Law requires further approval by the
stockholders of Parent without so obtaining such further stockholder approval.
8.8 WAIVER. At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective Boards of Directors,
may, to the extent legally allowed (a) extend the time for the performance of
any of the obligations or other acts required hereby, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed by such party. No failure or delay by any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by Law.
8.9 GOVERNING LAW. This Agreement, and all claims arising hereunder or
relating hereto, shall be governed and construed and enforced in accordance with
the Laws of the State of Delaware, without giving effect to the principles of
conflicts of Law thereof.
8.10 SUBMISSION TO JURISDICTION. Each of the parties hereto irrevocably
and unconditionally submits, for itself and its property, to the exclusive
jurisdiction of the Delaware Court of Chancery or, in the event (but only in the
event) such court does not have subject matter jurisdiction, any other court of
the State of Delaware or the United States District Court for the District of
Delaware, in any action or proceeding arising out of or relating to this
Agreement. Each of the parties hereto agrees that, subject to rights with
respect to post-trial motions and rights of appeal or other avenues of review, a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by Law. Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in the
Delaware Court of Chancery or any other state court of the State of Delaware or
the United States District Court for the District of Delaware. Each of the
parties hereto irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
8.11 ASSIGNMENT. No party hereto shall assign this Agreement or any of
its rights, interests or obligations hereunder (whether by operation of Law or
otherwise) without the prior written consent of the other parties hereto. Any
assignment in violation of the foregoing shall be null and void.
53
8.12 SEVERABILITY. If any term or other provision of this Agreement is
determined by a court of competent jurisdiction, by final judgment no longer
subject to review, to be invalid, illegal or incapable of being enforced, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as neither the economic nor legal substance of the
transactions contemplated herein is affected in any manner materially adverse to
any party hereto. 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.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
54
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and
Plan of Merger to be executed and delivered by their respective officers
thereunto duly authorized as of the date first above written.
THE COMPANY:
LTDNETWORK, INC.
By: _______________________________
Name:
Title:
PARENT:
ADVANCED TECHNOLOGY INDUSTRIES, INC.
By: _______________________________
Name:
Title:
ACQUISITION:
LTDN ACQUISITION CORP.
By: _______________________________
Name:
Title:
