AGREEMENT AND PLAN OF MERGER
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the “Agreement”), dated September 9, 2008, among Flow
International Corporation, a Washington corporation (“Parent”), Orange Acquisition Corporation, a
Washington corporation and a wholly-owned subsidiary of Parent (“Sub”), OMAX Corporation, a
Washington corporation (“Company”), Xxxx X. Xxxxxx, Xxxx X. Xxxxx, Xxxxx X. X’Xxxxxx and Puget
Partners, L.P., the holders of forty-five percent (45%) of the issued and outstanding ownership
interests (other than holders of Company Options) in the Company (collectively referred to as the
“Major Shareholders”), and Xxxx X. Xxxxxx, Inc., a personal holding corporation owned by Xxxx X.
Xxxxxx (the “Shareholders’ Representative”) as agent and attorney-in-fact for the holders of
Company Shares (as defined in Section 2.1).
INTENDING TO BE LEGALLY BOUND, and in consideration of the premises and the mutual
representations, warranties, covenants, and agreements in this Agreement, the parties hereby agree
as follows:
ARTICLE I
THE MERGER
THE MERGER
1.1 Effective Time of the Merger. Subject to the provisions of this Agreement, Sub will be
merged with and into Company (the “Merger”). Articles of Merger (“Articles of Merger”) will be
duly prepared by the parties, executed by Surviving Corporation (as defined below) and thereafter
delivered to the Secretary of State of Washington for filing, as provided in the Washington
Business Corporation Act (the “WBCA”) as soon as practicable on or after the Closing Date (as
defined in Section 1.2). The Merger will become effective upon the later of the acceptance for
filing of the Articles of Merger by the Secretary of State of Washington or at such later time as
is provided in the Articles of Merger (the “Effective Time”). Solely for purposes of
clarification, Company and the Shareholders’ Representative acknowledge and agree that Parent will
have no obligation to make any payment in accordance with this Agreement until the Effective Time.
1.2 Closing. The closing of the Merger (“Closing”) will take place as soon as practicable
after satisfaction or waiver of the last to be fulfilled of the conditions set forth in Article VII
(the “Closing Date”), at the offices of K&L Gates LLP at 000 Xxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxxxx 00000, unless another date or place is agreed to in writing by Parent and Company.
1.3 Effects of the Merger. At the Effective Time: (i) the separate existence of Sub will
cease and Sub will be merged with and into Company and Company will continue as the surviving
corporation and as a wholly owned subsidiary of Parent (after the Merger, Company is sometimes
referred to in this Agreement as the “Surviving Corporation”); (ii) the certificate of
incorporation of Company will be amended in its entirety to be the same as the certificate of
incorporation of Sub, as in effect immediately before the Effective Time, until later amended in
accordance with the WBCA; (iii) the bylaws of Surviving Corporation will be amended and restated in
their entirety to be the same as the bylaws of Sub, as in effect immediately before the Effective
Time, until later amended in accordance with the provisions thereof, the certificate of
incorporation and the WBCA; (iv) the directors and officers of Sub immediately before the
Effective Time will be the directors and officers of the Surviving Corporation in each case until
their respective successors have been duly elected, designated, or qualified or until their earlier
death, resignation, or removal in accordance with the Surviving Corporation’s certificate of
incorporation and bylaws; and (v) the Merger will, from and after the Effective Time, have all the
effects provided by Chapter 23B.11 RCW of the WBCA and other applicable law.
ARTICLE II
EFFECT OF THE MERGER; DELIVERY OF CONSIDERATION
EFFECT OF THE MERGER; DELIVERY OF CONSIDERATION
2.1 Effect on Capital Stock. As of the Effective Time, by virtue of the Merger and without
any action (except as provided in Section 4.5 and in this Section 2.1) on the part of Sub, Parent,
Company, or the holder of any shares of Company capital stock (“Company Shares”):
2.1.1 Capital Stock of Sub. Each share of Sub common stock, no par value per share, issued
and outstanding immediately before the Effective Time, will be converted into one validly issued,
fully paid, and nonassessable share of Surviving Corporation common stock (“Surviving Corporation
Common Stock”), with the stock certificate of Sub evidencing ownership of such share of Surviving
Corporation Common Stock.
2.1.2 Cancellation of Company Shares. Each Company Share owned directly or indirectly by
Company or by any subsidiary (as defined in Section 10.2) of Company will automatically be
cancelled and retired and will cease to exist and no consideration will be delivered or deliverable
in exchange for such Company Shares. Company will obtain a written consent to such cancellation
from any subsidiary, whether or not wholly owned, that owns Company Shares.
2.1.3 Conversion of Company Securities. Subject to the limitations on payments and the
timing of payments as set forth in Section 2.2, Section 2.3 and Article VIII, each Company Share
and Company Option (as defined below) validly issued and outstanding immediately before the
Effective Time (other than Appraisal Shares, as defined in Section 2.1.6, and those Company Shares
referred to in Section 2.1.2), will, without any action on the part of the holder thereof (except
as set forth in this Section 2.1.3) be converted into, or with respect to Company Options,
cancelled in exchange for, their respective conversion payment (“Conversion Payment”), which will
be calculated as follows:
(a) Each share of Company common stock, no par value (the “Company Common Shares”), issued and
outstanding immediately before the Effective Time will convert into the right to receive (i) an
amount in cash equal to the Per Share Cash Consideration (as defined below), (ii) the Per Share
Stock Consideration (as defined below), and (iii) the Per Share Contingent Consideration (as
defined below).
(b) Each Company Option (as defined below) that is validly issued and unexpired, unexercised,
and outstanding immediately before the Closing will be exercised immediately
before Closing, with the consent of the holder thereof, (such person, the “Option Holder”),
for Company Shares; provided that the right of the Option Holder to receive the Per Share Cash
Consideration (as defined below) shall be subject first to deduction for (i) the respective
aggregate exercise price of the Company Option(s) being exercised, (ii) any previous loans or
advances to such Option Holder related to the previous acquisition of Company Shares by the
exercise of options which occurred in April 2008, and (iii) the amount of any applicable payroll,
income tax or other withholding taxes being paid on behalf of the Option Holder arising from the
exercise of a Company Option (collectively, the “Option Advances”), which shall be treated as a
partial payment of the Per Share Cash Consideration due the former Option Holder.
At the Effective Time, all Company Shares will be cancelled and will cease to exist and each
certificate (a “Certificate”) previously representing any Company Shares will represent only the
right to receive the applicable Conversion Payment as provided by this Section 2.1.3. The amount
that the holders of Company Shares are entitled to receive at Closing under this Section 2.1.3 will
be reduced by their pro rata share of (i) the Escrow Amount (as defined in Section 2.2.1), (ii) the
Employee Retention
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Pool Amount (as defined in Section 2.2.2), and (iii) in the case of the Option
Holders, the amount of Option Advances.
The numbers used below and in the pro forma calculations in the attached Schedule 2.1, each
rounded to the nearest dollar are for purposes of illustration of the Per Share Cash Consideration
only and will be adjusted and set forth in the final Schedule 2.1, which will be determined in
accordance with the following procedures, adjustments, and definitions and when approved in writing
by Parent and Company before Closing will be the final and determinative interpretation of the
following, each term used as defined below:
| (i) | Base Cash Amount |
$ | [•] | |||||
| (ii) | Plus: Option Consideration |
$ | [•] | |||||
| (iii) | Less: Working Capital Deficit, or plus Working Capital Credit (defined in Section 2.3(a)) |
$ | [•] | |||||
| (iv) | Less: Expenses |
$ | [•] | |||||
| (v) | Subtotal: Gross Distributable Cash Amount (defined below) |
$ | [•] | |||||
| (vi) | Divided by: Participating Common Share Equivalents
(PCSEs) |
|||||||
| (vii) | Per Share Cash Consideration |
$ | [•] | |||||
The following definitions will be used in making the above calculation and for purposes of this
Article II:
“Base Cash Amount” means $75,000,000, less the Employee Retention Pool Amount and less the
amounts provided for in Section 6.9.
“Company Options” means each unexpired, unexercised vested (following vesting immediately
prior to Closing in accordance with Section 3.1.23) Company Option that is
outstanding immediately before the Closing (but before the exercise of Company Options to
occur pursuant to this Section) with an exercise price less than the Per Share Amount as finally
determined.
“Expenses” means the fees (including financial advisory and professional fees), costs,
expenses, bonuses, and charges incurred by Company in connection with the Transactions, including
fees for services provided by the parties as listed on Schedule 2.1.3, which schedule shall be
provided by Company to Parent prior to Closing, and fees to be paid by Parent pursuant to Section
6.9, except to the extent such fees, costs, expenses, bonuses and charges were paid or accrued
prior to the computation of Net Working Capital or are included in the computation of Net Working
Capital.
“Gross Distributable Cash Amount” means the Base Cash Amount, plus the Option Consideration
and the Working Capital Credit, and less (a) the Working Capital Deficit, and (b) Expenses.
“Gross Distributable Contingent Consideration” means the contingent consideration payable
pursuant to Section 2.1.5 below.
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“Gross Distributable Stock Consideration” means the consideration payable pursuant to Section
2.1.4 below.
“Option Consideration” means the aggregate exercise price of all Company Options outstanding
immediately before Closing (and before the exercise of such Company Options pursuant to this
Section), and including the aggregate of any previous loans or advances to Option Holders related
to the previous acquisition of Company Shares by the exercise of options which occurred in April
2008.
“PCSEs” or “Participating Common Stock Equivalents” means all of the Company Common Shares
including Company Common Shares issued upon exercise of Company Options outstanding immediately
before Closing.
“Per Share Cash Consideration” means the Gross Distributable Cash Amount divided by the PCSEs.
“Per Share Contingent Consideration” means the Gross Distributable Contingent Consideration
divided by the PCSEs.
“Per Share Stock Consideration” means the Gross Distributable Stock Consideration divided by
the PCSEs.
2.1.4 Stock Consideration.
Subject to the terms and conditions of Section 2.1.3 above, the Conversion Payment shall include
the right to receive 3,750,000 shares of Parent Common Stock, $.01 par value (“Parent Common
Stock”) to be issued pro rata to the PCSEs; provided that the number of shares of Parent Common
Stock shall be increased to a number reflecting a value of $30,000,000, based upon the average
daily closing price per share of Parent Common Stock during the ten trading day period prior to
Closing (“Closing Share Price”), if such Closing Share Price is less than $8.00. Parent shall, in
its sole discretion, have the option to pay cash for any additional shares otherwise payable
pursuant this clause, to be calculated on the basis of the number of additional shares (in excess
of 3,750,000) which would otherwise be payable times the Closing Share Price. Notwithstanding any
other
provision of this Agreement, neither certificates nor scrip for fractional shares of Parent Common
Stock shall be issued in the Merger. Each holder of Company Common Shares who otherwise would have
been entitled to a fraction of a share of Parent Common Stock (after taking into account all PCSEs
delivered by such holder) shall receive in lieu thereof cash (without interest) in an amount
determined by multiplying the fractional share interest to which such holder would otherwise be
entitled by the Closing Share Price, rounded to the nearest whole cent.
2.1.5 Contingent Consideration. Subject to the terms of Section 2.1.3 above, the
Conversion Payment shall include the right to receive up to 1,733,334 shares of Parent Common
Stock, which shall be paid pro rata to the PCSEs on the second anniversary of Closing based on the
average daily closing share price for Parent Common Stock for the six (6) months ending twenty four
(24) months after Closing (“Average Share Price”). If the Average Share Price is:
a. less than or equal to $12.00, no payment or distribution shall be made under this Section
2.1.5;
b. equal to or greater than $14.00, an additional 1,733,334 shares of Parent Common Stock
shall be distributed to the PCSEs; or
c. between $12.01 and $13.99, additional shares of Parent Common Stock shall be derived on a
straight line interpolation basis and distributed to the PCSEs accordingly.
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Provided, however, that if the Closing Share Price is less than $8.00 a share, each of the
dollar amounts referenced in subparagraphs a., b., and c. immediately above shall be reduced by the
difference between $8.00 and the Closing Share Price; provided further, that if the Closing Share
Price is greater than $8.00 a share, each of the dollar amounts referenced in subparagraphs a., b.,
and c. immediately above shall be increased by the difference between the Closing Share Price and
$8.00, up to a maximum increase of $1.00. In the event any shares of Parent Common Stock become
payable pursuant to this Section 2.1.5, Parent shall have the option of paying cash to the PCSEs in
lieu of such Parent Common Stock, which cash payment shall be based on the Average Share Price.
Such cash payment, if so elected by Parent, shall not exceed the sum of $26,000,000 and shall be in
full satisfaction of the right to receive Parent Common Stock under this Section 2.1.5. The
calculation of Closing Share Price and the number of shares of Parent Common Stock to be paid
pursuant to this Section shall be adjusted as appropriate in the event of any stock split or stock
dividend by Parent.
2.1.6 Appraisal Rights. Company Shares validly issued and outstanding immediately before
the Effective Time and held by a holder who has not consented to the Merger in writing and who is
entitled to demand and properly demands appraisal rights for such Company Shares in accordance with
the WBCA (the “Appraisal Shares”) will not be converted into a right to receive the Conversion
Payment unless such holder fails to perfect or withdraws or otherwise loses such holder’s appraisal
rights. If, after the Effective Time, such holder fails to perfect or withdraws or otherwise loses
such holder’s appraisal rights, such Company Shares will be treated as if they had been converted
as of the Effective Time in accordance with Section 2.1.3, without any interest. Company will give
Parent prompt notice of any demands received by Company for appraisal rights, and Parent will have
the right to participate in all negotiations and proceedings with respect to such demands. Company
will not, except with the prior written consent of Parent, make any payment with respect to, or
settle or offer to settle, any such demands. Any amounts paid to a holder by Company in accordance
with appraisal rights in excess of the Per Share Amount such holder
would have otherwise received will be deducted from the Escrow Amount (as defined in Section 2.2
below) and will not be reimbursed by Parent or any affiliate of Parent.
2.2 Escrow.
2.2.1 Escrow Amount. At Closing, an amount equal to $9,450,000, composed of cash (subject
to the qualifications below) and Parent Common Stock in the same proportions as the composition of
the Consideration in Sections 2.1.3 and 2.1.4 (pro rata based upon the total consideration to be
received by such holder at Closing, the “Escrow Amount”) will not be distributed to or made
available for holders of Company Shares in accordance with Section 2.1.3 but rather will be
deposited by Parent with, and held by BNY Mellon Shareowner Services or other bank or trust company
as Parent may choose in its discretion, as escrow agent, in an escrow fund in accordance with the
Escrow Agreement substantially in the form attached hereto as Exhibit 2.2.1(a) (the “Escrow
Agreement”) to fund payments related to Net Working Capital to the extent required by Section 2.3
and to be the sole and exclusive remedy to secure claims by Parent or Surviving Corporation for
indemnification, in accordance with and subject to the terms of Article VIII; provided, however,
that one half of the cash component of the Escrow Amount described above shall consist of an
unsecured promissory note in the form attached hereto as Exhibit 2.2.1(b) (the “Escrow Note”). The
release of the Escrow Amount will occur promptly following eighteen (18) months from the Closing,
and shall be subject to the terms hereof and of the Escrow Agreement; provided, however, that in
the event of any conflict between this Agreement and the Escrow Agreement, the terms of the Escrow
Agreement will control. The Escrow Agreement shall provide that interest accruing to the Escrow
Amount shall become part of the escrowed funds and that for purposes of distribution, such interest
shall follow the principal amount.
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2.2.2 Employee Retention Pool. At Closing, cash in the aggregate amount as provided on
Schedule 2.2.2, which schedule shall be provided by Company to Parent at least five business days
prior to Closing(the “Employee Retention Pool Amount”, and together with the Escrow Amount, the
“Escrow Amounts”) that would otherwise be received by holders of Company Shares in accordance with
Section 2.1.3 (pro rata based upon the total consideration to be received by such holder at
Closing) will not be distributed to or made available for holders of Company Shares in accordance
with Section 2.1.3 but rather will be deposited by Parent with, and held by Xxxxxx Pepper PLLC or
such bank or trust company as Parent may choose in its discretion, as escrow agent, in an escrow
fund (the “Employee Retention Escrow”) in accordance with the Employee Retention Escrow Agreement
substantially in the form attached hereto as Exhibit 2.2.2 (the “Employee Retention Escrow
Agreement”, and together with the Escrow Agreement, the “Escrow Agreements”) to fund payments
related to the employee retention pool to be created in accordance with Section 6.8(d). The
release to Parent or Company of the portion of the Employee Retention Pool Amount earned by
eligible employees, as listed on Schedule 2.2.2, who are employed with Parent or Company on the six
month anniversary of the Closing and have satisfied any other conditions necessary to earn their
respective retention bonuses, as specified on Schedule 2.2.2, plus the employer’s share of FICA
(OASDI and Medicare) taxes on such portion will occur shortly after the six month anniversary of
Closing, with the remaining portion (if any) of the Employee Retention Pool Amount to be used to
pay fees and expenses of the Employee Retention Escrow or retained under the Employee Retention
Escrow Agreement until immediately prior to the distribution of the Escrow Amount. As soon as
practicable after the six month anniversary of the Closing and Company’s or Parent’s receipt of the
applicable funds from the Employee Retention Escrow, Company or Parent shall pay retention bonuses
(less applicable tax withholdings and any other required withholdings or deductions) to the
eligible employees who earned the right to receive such bonuses and remit the employees’ withheld
taxes plus the employer’s share of FICA taxes to the applicable taxing authority. Immediately
prior to the distribution of the Escrow Amount, the remaining Employee Retention Escrow Amount
(including any interest accruing thereto but less any fees and expenses of the Employee Retention
Escrow) will be thereupon deposited with the Escrow Agent under the Escrow Agreement for
distribution according to its terms, which terms shall specify that such remaining Employee
Retention Escrow Amount shall not be available for the securing of indemnification claims, the
reimbursement of fees and expenses, or the funding of payments relating to Net Working Capital.
All releases of the Employee Retention Pool Amount will be subject to the terms hereof and of the
Employee Retention Escrow Agreement; provided further, that in the event of any conflict between
this Agreement and the Employee Retention Escrow Agreement, the terms of the Employee Retention
Escrow Agreement will control.
2.3 Net Working Capital.
(a) On the Closing Date, Company will have Net Working Capital that is not less than
$7,000,000 (“Minimum Working Capital”), nor more than $9,000,000 (“Maximum Working Capital”). To
the extent that Company has Net Working Capital on the Closing Date that is less than the Minimum
Working Capital, such deficiency will be deducted from the Base Amount in accordance with Section
2.1.3 as the “Working Capital Deficit.” To the extent that Company has Net Working Capital on the
Closing Date that is greater than the Maximum Working Capital, such excess will be added to the
Base Amount in accordance with Section 2.1.3 as the “Working Capital Credit.”
(b) For purposes of this Agreement, the term “Net Working Capital” means: (i) Total Current
Assets (as defined below) less (ii) all accrued Total Current Liabilities (as defined below).
“Fixed assets, net,” “intangible assets,” deferred tax assets and deferred tax liabilities will be
excluded from the determination of Net Working Capital. For avoidance of doubt, “Total Current
Assets” as reflected on the Closing Balance Sheet will include: (i) cash and cash equivalents;
(ii) short-
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term investments; (iii) accounts receivable outstanding not more than 60 days from their
due date and other receivables net of doubtful accounts; (iv) inventories (net of allowance for
obsolete inventory) and (v) prepaid expenses and other current assets. “Total Current Liabilities”
as reflected on the Closing Balance Sheet will include: (w) accounts payable; (x) accrued taxes,
payroll and benefits; (y) other “Current Liabilities”; and (z) the current portion (due within
twelve months) of any Debt. Each of the foregoing terms will be determined in accordance with
GAAP, as consistently applied, to the extent described above except as otherwise provided in this
Section 2.3(b). “Debt” means all funded indebtedness, determined without duplication, and includes
notes; capitalized leases; bank term and revolving credit loans; obligations related to drawn
letters of credit; bonds evidencing funded indebtedness; debentures; borrowings from lending
institutions other than banks; subordinated loans and subordinated debt securities with or without
stated maturity; bank bills; bank overdrafts; obligations with respect to the factoring or
discounting of accounts receivable and other instruments; any dividends payable to the holders of
Company Shares; and accrued interest and expense and penalties on any of the foregoing (including
prepayment penalties). For the avoidance of doubt, a sample calculation of Net Working Capital is
attached hereto as Schedule 2.3(c).
(c) At least three business days before the anticipated Closing Date, Company will prepare,
subject to the reasonable approval of Parent, an unaudited estimated balance sheet
of Company as of the anticipated Closing Date as mutually expected by the parties (the
“Preliminary Closing Balance Sheet”) and a computation of the Net Working Capital as of the
expected Closing Date based upon the financial information reflected in the Preliminary Closing
Balance Sheet (the “Preliminary Closing Date NWC”). The Preliminary Closing Balance Sheet and the
Preliminary Closing Date NWC calculation will be provided as Schedule 2.3(c) and become a part of
this Agreement. The Preliminary Closing Balance Sheet will be prepared in accordance with GAAP,
except as otherwise provided in Section 2.3(b) above, and will fairly and accurately present the
financial position of Company as of the anticipated Closing Date. The parties will use the
Preliminary Closing Balance Sheet and Preliminary Closing Date NWC to calculate the Per Share
Amount for purposes of payment at the Closing in accordance with Section 2.1.3.
(d) Within 30 days after the Closing Date, Parent will prepare and deliver to the
Shareholders’ Representative an unaudited balance sheet of Company as of the Closing Date,
determined in accordance with GAAP, except as otherwise provided in Section 2.3(b) above, and
which, to the knowledge of Parent, fairly and accurately presents the financial position of Company
as of the date of such balance sheet (the “Proposed Closing Balance Sheet”), along with its
calculation of Net Working Capital as of the Closing Date (“Closing Date NWC”). The Shareholders’
Representative will be provided access to the books and records of the Company as may be reasonably
necessary for the execution of its duties hereunder.
(e) Within 10 days after the delivery by Parent of the Proposed Closing Balance Sheet and
calculation of its Proposed Closing Date NWC under Section 2.3(d), the Shareholders’ Representative
will deliver to Parent a written notice either approving or objecting to the Proposed Closing
Balance Sheet and the accompanying Closing Date NWC calculation (the “Review Notice”). The Review
Notice will reasonably state a description of the Shareholders’ Representative’s differences, if
any, with Parent’s determination of the Proposed Closing Balance Sheet and the Closing Date NWC
calculations, together with proposed revisions (such revised Proposed Closing Balance Sheet being
referred to as the “Counter Proposed Closing Balance Sheet”), along with revisions to the Closing
Date NWC calculations. A failure by the Shareholders’ Representative to so deliver the Review
Notice to Parent within such period will be deemed an approval of and agreement with the Proposed
Closing Balance Sheet and the Closing Date NWC calculations of Parent, and such Proposed Closing
Balance Sheet and the accompanying Closing Date NWC calculations of Parent will be deemed the
Closing
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Balance Sheet and the final and conclusive calculation of the Closing Date NWC (the “Final
Closing Date NWC”).
(f) If the Proposed Closing Balance Sheet and the accompanying Closing Date NWC calculation of
Parent are disputed by the Shareholders’ Representative in accordance with this Section 2.3, the
Shareholders’ Representative and Parent will negotiate in good faith in an effort to resolve any
differences regarding such determination. If Parent and the Shareholders’ Representative agree on
the Proposed Closing Balance Sheet and Closing Date NWC, the amount they agree upon will be final,
conclusive and binding as the Final Closing Date NWC, but if the objection cannot be resolved by
such negotiation within 30 days after Parent’s receipt of the Review Notice (the “Reconciliation
Deadline”), the Proposed Closing Balance Sheet, the Counter Proposed Closing Balance Sheet, the
Review Notice, and all work papers related thereto (collectively, the “Determination Materials”),
will be submitted to the Seattle, Washington offices of KPMG LLP or of a nationally recognized
accounting firm as Parent and the Shareholders’ Representative may mutually agree to (which
agreement will not be unreasonably withheld or delayed) (the “Accounting Arbitrator”), which will
review the Determination Materials and will
determine the Final Closing Date NWC. The Accounting Arbitrator will not undertake any review
of any matters not specifically identified by the Shareholders’ Representative as being in dispute
in the Review Notice and may not assign a value to any item greater than the greatest value for
such items claimed by either party or less than the smallest value for such items claimed by either
party, and its determination may not be outside the range comprised of Parent’s calculation of
Closing Date NWC and Shareholders’ Representative’s calculation of Closing Date NWC. The
Accounting Arbitrator will make its determination in accordance with GAAP and in accordance with
the provisions herein defining Net Working Capital to the extent they are inconsistent with GAAP.
The Accounting Arbitrator’s decision as to Closing Date NWC as of the Closing Date will be final,
conclusive, and binding as the Final Closing Date NWC. The parties will cause the Accounting
Arbitrator to notify the parties in writing of its determination within 30 days following the
receipt of the Determination Materials. The fees and expenses of the Accounting Arbitrator will be
borne equally by Parent and the Shareholders’ Representative (who shall in turn have recourse to
the Escrow Amount for reimbursement of such expenses pursuant to Section 10.13(c) below). All
determinations in accordance with this Section 2.3(f) will be in writing and will be delivered to
the parties hereto.
(g) If the Final Closing Date NWC (as determined in accordance with Sections 2.3(e) or 2.3(f)
above) is less than the Preliminary Closing Date NWC, then an amount equal to the difference
between (y) the Preliminary Closing Date NWC, and (z) the Final Closing Date NWC will be paid to
Parent out of the Escrow Amount to the extent the Final Closing Date NWC is less than the Minimum
Working Capital, in accordance with the terms of the Escrow Agreement. Such adjustment will not be
subject to the Threshold Amount (as defined in Section 8.6). If the Final Closing Date NWC is
greater than the Preliminary Closing Date NWC, then Parent will cause the amount equal to the
difference between (y) the Final Closing Date NWC, and (z) the Preliminary Closing Date NWC, to be
delivered, within 10 days after such final determination, to the Disbursement Agent for
disbursement as provided in Section 2.4 below to the extent the Final Closing Date NWC is greater
than the Maximum Working Capital. In addition, if the Preliminary Closing Date NWC is (i) more
than the Maximum Working Capital and the Final Closing Date NWC is less than the Maximum Working
Capital, the amount equal to the difference between the Preliminary Closing Date NWC and the
Maximum Working Capital will be paid to Parent out of the Escrow Amount, or (ii) less than the
Minimum Working Capital and the Final Closing Date NWC is more than the Minimum Working Capital
then Parent will cause the amount equal to the difference between the Preliminary Closing Date NWC
and the Minimum Working Capital to be delivered, within 10 days after such final determination, to
the Disbursement Agent for disbursement as provided in Section 2.4 below.
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(h) Nothing in this Section 2.3 will be deemed to limit the indemnification rights of the
Indemnified Parties in accordance with Article VIII hereof with respect to any breach of any
representation and warranty of this Agreement, including without limitation, a breach of any of the
representations contained in Section 3.1.5.
(i) For purposes of this Agreement, “Closing Balance Sheet” means the balance sheet of
Company as of the Closing Date determined in accordance with this Section 2.3.
2.4 Delivery of Consideration.
2.4.1 Disbursing Agent. Promptly after the Effective Time, Parent will (i) make available
to BNY Mellon Shareowner Services or other bank or trust company as Parent may choose in its
discretion (the “Disbursing Agent”), the shares of Parent Common Stock issuable pursuant to Section
2.1.4, if any, in exchange for shares of Company Common Stock outstanding immediately prior to the
Effective Time and (ii) deposit with the Disbursing Agent an amount of cash sufficient to pay the
aggregate Gross Distributable Cash Amount and any cash amounts payable under Section 2.1.4, less
the Escrow Amounts to be contributed therefrom pro rata in cash and shares of Parent Common Stock.
The Disbursing Agent will invest the deposited cash sums in its discretion (provided that Parent
will be responsible for replacing any losses of principal to such resulting from such investments),
and all interest thereon will be paid to Parent for its sole benefit.
2.4.2 Exchange Procedures. Promptly after the Effective Time, Parent will instruct the
Disbursing Agent to pay by check or wire transfer of same day funds the cash portion of any
applicable Conversion Payments, under Section 2.1 and subject to Section 2.2 hereof, and to send a
certificate or certificates (or book entry) representing the stock portion of any applicable
Conversion Payments under Section 2.1.3 and subject to Section 2.2 hereof to each record holder of
Company Shares as of the Effective Time, other than to those holders of Appraisal Shares not
entitled to payment, as promptly as practicable following (i) the submission of a Certificate to
the Disbursing Agent and a duly executed letter of transmittal (the “Letter of Transmittal”) by
such holder of record, which will specify that risk of loss and title to the Certificates will
pass, only upon proper delivery of such documents to the Disbursing Agent, and which will be in the
form and have such provisions as Parent and Company may reasonably specify, and (ii) the surrender
of the Certificates in exchange for the applicable Conversion Payment by such holder of record
(which Certificates will then be canceled). If any Certificate has been lost, stolen, or
destroyed, upon the making of an affidavit of that fact by the Person claiming such document to be
lost, stolen, or destroyed and, if required by the Surviving Corporation, the payment of any
reasonable fees, and the posting by such Person of a bond, in such reasonable amount as Parent may
direct as indemnity against any claim that may be made against it with respect to such document,
the Disbursing Agent will issue in exchange for such lost, stolen, or destroyed document, the
applicable Conversion Payments to which the holder is entitled under this Article II.
2.4.3 No Further Ownership Rights in Company Shares. The applicable Conversion Payment
delivered upon surrender in exchange for Company Shares in accordance with the terms hereof will be
deemed to have been delivered in full satisfaction of all rights pertaining to such Company Shares.
After the Effective Time, no further transfers will be made on the stock transfer books of Company
of Company Shares issued before the Effective Time. When the Merger becomes effective, all Company
Shares issued before then (other than Appraisal Shares) will cease to exist, and each Certificate
previously representing any such shares will represent only the right to receive the applicable
Conversion Payment as described in Section 2.1.3 subject to the terms of this Agreement. If, after
the Effective Time, Certificates are presented to Surviving Corporation or the Disbursing Agent for
transfer, they will be cancelled and exchanged as provided in this Article II, except as otherwise
provided by law.
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2.4.4 Return to Parent. The Disbursing Agent will redeliver or repay to Parent any cash
made available to the Disbursing Agent and not exchanged for Certificates within 12 months after
the Effective Time. After such time any holder of Certificates who has not yet delivered or
surrendered such Certificates to the Disbursing Agent, subject to applicable law, will look as a
general creditor only to Parent for payment of the applicable Conversion Payment. Despite any
provision of this Agreement, to the fullest extent permitted by applicable law,
neither Parent, the Disbursing Agent, Surviving Corporation, the Shareholders’ Representative, nor
any other party will be liable to any holder of Company Shares for any cash delivered to a public
official according to applicable abandoned property, escheat, or similar law.
2.4.5 Withholding Rights. Parent or the Disbursing Agent will be entitled to deduct and
withhold from the applicable Conversion Payment otherwise payable under this Agreement to any
Person (as defined in Section 10.2) who was a holder of Company Shares immediately before the
Effective Time, such amounts as Parent or the Disbursing Agent is required to deduct and withhold
with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the
“Code”), or any provision of state, local, or foreign tax law. Any such withheld amounts will be
timely paid over to the appropriate Governmental Entity (as defined in Section 3.1.4). To the
extent that amounts are so withheld by Parent or the Disbursing Agent, such withheld amounts will
be treated for all purposes of this Agreement as having been paid to the holder of the Certificates
in respect of which such deduction and withholding was made by Parent or the Disbursing Agent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of Company. Except as set forth in a correspondingly
numbered disclosure schedule delivered by Company to Parent dated as of the date hereof (the
“Company Disclosure Schedule”), Company represents to Parent and Sub as follows (all references in
the subsections of this Section 3.1 to “Company” will include Company’s subsidiaries except to the
extent specifically excluded or except as otherwise clearly required by the context):
3.1.1 Organization, Standing, and Power.
(a) Each of Company and its subsidiaries is an entity duly organized and validly existing
under the laws of its jurisdiction of incorporation or organization. Company has all requisite
corporate power and authority to own, lease, and operate its properties and to carry on its
businesses as now being conducted. Company is duly qualified and in good standing to do business
in each jurisdiction in which the character of the property owned, leased, or operated by it or the
nature of its activities makes such qualification necessary (all such jurisdictions are listed in
Section 3.1.1(a) of the Company Disclosure Schedule), except in such jurisdictions in which a
failure to be so organized, existing, or in good standing or to have such corporate power and
authority would not materially impair the ability of Company to consummate the Transactions or
would not result, or reasonably be expected to result, individually or in the aggregate, in a
material adverse effect on the financial condition, business, assets or results of operations of
Company and its subsidiaries, taken as a whole, other than any effect resulting from (1) the
announcement of the Transactions or the proposal thereof or this Agreement and the transactions
contemplated hereby, (2) changes after the date hereof in general economic conditions or the
industry in which the Company operates, provided that the impact of such fact, circumstance, event,
change, effect or occurrence is not disproportionately adverse to the Company, or (3) actions taken
by
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Company after the date hereof at, and in accordance with the written direction or request of Parent (“Company
Material Adverse Effect”).
(b) Company has delivered or made available to Parent or its counsel complete and correct
copies of Company’s articles of incorporation, bylaws, stock records and minute books and the
comparable governing instruments and minutes of each of its subsidiaries, in each case, as amended
to the date hereof. The minute books of Company contain correct and complete records of all
material proceedings and actions taken at all meetings of, or effected by written consent of, the
shareholders of Company and its board of directors (and each committee thereof), and the stock
records of Company contain correct and complete records of all original issuances and subsequent
transfers, repurchases, and cancellations of Company’s capital stock. Company is the owner,
directly or indirectly, of all outstanding shares of capital stock of each of its subsidiaries
(other than directors’ qualifying and similar shares, the ownership of which is identified in
Section 3.1.1(b) of the Company Disclosure Schedule) free and clear of all liens, pledges, security
interests, claims, or other encumbrances and all such shares are duly authorized, validly issued,
fully paid, and nonassessable. Section 3.1.1(b) of the Company Disclosure Schedule lists all
subsidiaries of Company, together with each subsidiary’s jurisdiction of incorporation or
formation, the jurisdictions in which it is qualified to conduct business, and its authorized
capitalization. Other than the subsidiaries so listed, Company does not own or control, directly
or indirectly, shares of capital stock of any other corporation, or any interest in any
partnership, joint venture, or other non-corporate business entity or enterprise.
3.1.2 Capital Structure.
(a) The authorized capital stock of Company consists of (i) 10,750,000 shares of stock
consisting of 10,000,000 Company Common Shares, no par value, of which, as of the date hereof,
4,741,128 shares are issued and outstanding, and (ii) 750,000 shares of Preferred Stock, no par
value (“Company Preferred Shares”), 333,334 of which have been designated Series A Convertible
Preferred Stock, none of which as of the date hereof are issued and outstanding. As of the date
hereof, 1,866,500 Company Common Shares are reserved for issuance under the OMAX Corporation 2005
Stock Option Plan, including carryover from the issuance of options for Company Common Shares are
reserved for issuance under the OMAX Corporation 1993 Stock Option Plan (together, the “Incentive
Plans”). Options for 1,501,850 Company Common Shares (“Company Options”) have been granted and
remain outstanding. All Company Shares, Company Options, and any other securities of Company
outstanding as of the date hereof (collectively referred to as “Company Securities”), and the
record owners of such securities are as set forth in Section 3.1.2 of the Company Disclosure
Schedule, and no such securities are held by Company in its treasury. True and complete copies of
all Company stock option plans and the forms of any other instruments setting forth the rights of
all Company Securities as of the date hereof have been delivered to Parent or its counsel.
(b) All outstanding Company Common Shares are, and Company Shares issued upon exercise of any
Company Options when issued in accordance with the respective terms thereof will be, validly
issued, fully paid, nonassessable, and not subject to any preemptive rights or similar rights under
the WBCA, Company’s articles of incorporation or bylaws, or to any agreement to which Company is a
party or by which Company may be bound. Except for the shares described above issuable in
connection with the exercise of Company Options (all as set forth in Section 3.1.2(a) of the
Company Disclosure Schedule) there are no options, warrants, calls, conversion rights, commitments,
agreements, contracts, understandings, restrictions, equity-linked securities, or rights of any
character to which
Company is a party or by which Company may be bound obligating Company to issue additional
shares of the capital stock of Company. Other than as set forth in Section 3.1.2(a) Company does
not have outstanding any bonds, debentures, notes nor does it owe any other indebtedness, the
holders of
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which (i) have the right to vote (or are convertible or exercisable into securities
having the right to vote) with holders of Company Common Shares on any matter or (ii) are or will
become entitled to receive any payment as a result of the Transactions. Other than as set forth in
Section 3.1.2(a) Company does not have outstanding any restricted stock, restricted stock units,
stock appreciation rights, stock performance awards, dividend equivalents, or other stock-based or
equity-linked securities of a similar nature. There is no agreement or right allowing for the
repurchase or redemption of any capital stock or convertible securities of Company, and Company has
not repurchased any of its capital stock. There are no agreements requiring Company to contribute
to the capital of, or lend or advance funds to, any subsidiaries of Company. Company is not party
to nor to its knowledge is any shareholder of Company a party to, any voting agreement, voting
trust, or similar agreement or arrangement relating to any class or series of its capital stock, or
any agreement or arrangement providing for registration rights with respect to any capital stock or
other securities of Company. There are no accrued and unpaid dividends with respect to any
outstanding shares of Company capital stock. Company does not own or hold the right to acquire any
shares of capital stock or any other security or interest in any other Person.
(c) All of the issued and outstanding Company Securities have been offered, issued, and sold
by Company in compliance with applicable federal and state securities laws.
(d) To Company’s knowledge, no shareholder of Company has granted options or other rights to
purchase any Company Securities from such shareholder.
3.1.3 Authority. Company has all requisite corporate power and authority to execute and
deliver this Agreement, subject to approval of the shareholders of Company to consummate the
Transactions. The execution and delivery by Company of this Agreement and the performance of
Company’s obligations hereunder have been duly and validly authorized by all necessary corporate
action on the part of Company, subject only to approval of the Merger and this Agreement by the
shareholders of Company. This Agreement has been duly executed and delivered by Company and
constitutes a valid and binding obligation of Company enforceable in accordance with its terms,
except to the extent that enforceability may be limited by the effect of (a) any applicable
bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting the enforcement
of creditors’ rights generally, and (b) general equitable principles, regardless of whether such
enforceability is considered in a proceeding at law or in equity.
3.1.4 Consents and Approvals; No Violations. Subject to the satisfaction of the conditions
in Sections 7.1 and 7.3, the execution and delivery of this Agreement or any other agreement or
document contemplated by this Agreement do not, and the consummation of the Transactions will not,
conflict with or result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation, or acceleration of any
obligation or to loss of a material benefit under, or the creation of a lien, pledge, security
interest, charge, or other encumbrance on assets (any such conflict, violation, default, right,
loss, or creation, a “Violation”) under (a) any provision of the articles of incorporation or
bylaws of Company or the comparable governing instruments of any subsidiary of Company, or (b) any
loan or credit agreement, note, bond, mortgage, indenture, contract, lease, or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule, or regulation applicable to Company or its properties or assets, other than, in
the case of clause (b), any such Violation
that would not result, or reasonably be expected to result, individually or in the aggregate, in a
Company Material Adverse Effect. No consent, approval, order, or authorization of, or
registration, declaration, or filing with or exemption by, any court, administrative agency, or
commission or other governmental authority or instrumentality, whether domestic or foreign (each a
“Governmental Entity”) (collectively any consents or waivers with respect to Violations under
clauses (a) and (b) of the first sentence of this Section 3.1.4, “Consents”), is required by or
with respect
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to Company in connection with the execution and delivery of this Agreement or the
consummation by Company of the Transactions, except for Consents, if any, relating to the filing of
the Articles of Merger in accordance with the WBCA and except for such other Consents that if not
obtained or made would not result, or reasonably be expected to result, individually or in the
aggregate, in a Company Material Adverse Effect.
3.1.5 Financial Statements. The (a) audited consolidated balance sheets of Company and its
subsidiaries as of December 31, 2006 and December 31, 2007 (the “Balance Sheet Date”) and the
related audited consolidated statements of income, changes in owner’s equity, and cash flow for the
12 months ended December 31, 2005, December 31, 2006 and December 31, 2007, and (b) an unaudited
consolidated balance sheet of Company and its subsidiaries as of March 31, 2008 (the “Interim
Balance Sheet Date”), and the related unaudited consolidated statements of income, changes in
owner’s equity, and cash flow for the year then ended (collectively, the “Financial Statements”)
that have been provided to Parent or will be provided prior to Closing comply in all material
respects with all accounting requirements applicable to Company and its subsidiaries, have been
prepared in accordance with generally accepted accounting principles (“GAAP”) consistently applied
(except as may be indicated in the notes thereto), and fairly present, in all material respects,
the consolidated financial position of Company and its subsidiaries as at the dates thereof and the
results of its operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal, recurring audit adjustments not material in scope or amount).
There has been no change in Company’s accounting policies or the methods of making accounting
estimates or changes in estimates that are material to the Financial Statements. Section 3.1.5 of
the Company Disclosure Schedule lists, and Company has delivered to Parent copies of the
documentation creating or governing, all securitization transactions and “off-balance sheet
arrangements” (as defined in Item 303(c) of Regulation S-K promulgated by the SEC) effected by
Company or its subsidiaries since the Balance Sheet Date. There are no material liabilities,
claims or obligations of any nature, whether accrued, absolute, contingent, anticipated or
otherwise, whether due or to become due, that are not reflected in the Financial Statements or the
notes thereto. Except as disclosed in the Financial Statements, neither Company nor its
subsidiaries is a guarantor or indemnitor of any indebtedness or other liability of any other
Person.
3.1.6 No Defaults. Company is not, and has not received notice that it would be with the
passage of time, in default or violation of any term, condition, or provision of (i) the articles
of incorporation or bylaws of Company or any comparable governing instrument of any subsidiary,
(ii) any judgment, decree, or order, or (iii) any loan or credit agreement, note, bond, mortgage,
indenture, contract, agreement, lease, license, or other instrument to which Company is now a party
or by which it or any of its properties or assets may be bound, except with respect to (iii) for
Violations that would not result, or reasonably be expected to result, individually or in the
aggregate, in a Company Material Adverse Effect.
3.1.7 Litigation. There is no claim, action, suit, or proceeding pending or, to the knowledge of Company,
threatened, against or affecting Company, any of its officers, directors, or employees, or any of
its properties before any court or arbitrator or any Governmental Entity. There is no
investigation pending or, to the knowledge of Company, threatened against Company, before any
Governmental Entity. Section 3.1.7 of the Company Disclosure Schedule sets forth as of the date
hereof, with respect to any pending action, suit, proceeding, or investigation to which Company is
a party, the forum, the parties thereto, the subject matter thereof, and the amount of damages
claimed, or the nature of any other relief sought.
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3.1.8 No Material Adverse Change. Since the Balance Sheet Date, there has not been a
Company Material Adverse Effect. Except as contemplated by this Agreement, since the Balance Sheet
Date, there has not been:
(a) any declaration, setting aside, or payment of any dividend or other distribution, stock
split, reclassification, subdivision, or exchange with respect to any Company Shares;
(b) any amendment of any provision of the articles of incorporation or bylaws of, or of any
term of any outstanding security issued by, Company;
(c) any incurrence, assumption, or guarantee by Company of any indebtedness for borrowed
money, or any mortgage, pledge, imposition of any security interest, claim, encumbrance, or other
restriction on any of the assets, tangible or intangible, of Company;
(d) a material change to any tax election or any accounting method, or any settlement or
consent to any claim or assessment relating to taxes incurred, or incurrence of any obligation to
make any payment of, or in respect of, taxes, except in the ordinary course of business, or
agreement to extend or waive the statutory period of limitations for the assessment or collection
of taxes;
(e) any (i) grant of severance or termination pay to any director, officer, or employee of
Company, (ii) entry into any employment, deferred compensation (based upon the meaning of such term
before the adoption of Code Section 409A), or other similar agreement (or any material amendment to
any such existing agreement) with any director, officer, or employee of Company, (iii) increase in
benefits payable under any existing severance or termination pay policies or employment agreements,
(iv) increase in compensation, bonus, or other benefits payable to directors, officers, or
employees of Company in excess of 4% of total compensation for such individual as of January 1,
2008, in each case other than those required by written contractual agreements, or (v)
acceleration of, or amendment or change to, the period of exercisability, vesting, or exercise
price of options, restricted stock, stock bonus, or other awards granted under the Incentive Plans
(including any discretionary acceleration of the exercise periods by Company’s board of directors,
the compensation committee of Company’s board of directors, or a committee overseeing the Incentive
Plans as permitted under such plans) or authorization of cash payments in exchange for any options,
warrants, restricted stock, stock bonus, or other awards granted under any of such plans except, in
each case, as may be required under applicable law or the existing terms of the Incentive Plans or
other related agreements;
(f) any issuance of capital stock or securities convertible into capital stock of Company
(including grants or other issuances of options, warrants, or other rights to acquire capital stock
of Company) other than in accordance with the exercise of Company Options;
(g) any acquisition or disposition of assets (other than in the ordinary course of business),
any acquisition or disposition of capital stock of any third party, or any merger or consolidation
with any third party;
(h) any entry by Company into any joint venture, partnership, or limited liability company or
operating agreement with any Person;
(i) any damage, destruction, or loss (whether or not covered by insurance) affecting Company’s
properties or business that has resulted, or would reasonably be expected to result, individually
or in the aggregate, in a Company Material Adverse Effect;
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(j) any granting by Company of a security interest in or lien on any material property or
assets of Company;
(k) any cancellation of debt or waiver of any claim or right individually or in the aggregate
in excess of $25,000;
(l) any capital expenditure or acquisition of any property, plant, and equipment by Company
for a cost in excess of $100,000 in the aggregate;
(m) any discharge or satisfaction by Company of any lien or encumbrance, or any payment of any
obligation or liability (absolute or contingent) other than current liabilities shown on the
balance sheet included in the Financial Statements as of the Balance Sheet Date and current
liabilities incurred since the Balance Sheet Date in the ordinary course of business;
(n) any termination, modification, or rescission of, or waiver by Company of rights under, any
existing contract resulting, or reasonably likely to result, individually or in the aggregate, in a
Company Material Adverse Effect;
(o) any material grant or assignment of Company Intellectual Property;
(p) any event or condition resulting individually or in the aggregate in a Company Material
Adverse Effect; or
(q) any agreement, authorization, or commitment, whether in writing or otherwise, to take any
action described in this Section 3.1.8.
3.1.9 Absence of Undisclosed Liabilities. Company has no liabilities, obligations, or
contingencies (whether absolute, accrued, or contingent) except (i) liabilities, obligations, or
contingencies (each a “Liability” and collectively, “Liabilities”) that are accrued or reserved
against in the consolidated balance sheet of Company as of the Balance Sheet Date; (ii) additional
Liabilities reserved against since the Balance Sheet Date that (x) have arisen in the ordinary
course of business, and (y) are accrued or reserved against on the books and records of Company;
(iii) additional Liabilities incurred since the Balance Sheet Date that (x) have arisen in the
ordinary course of business, and (y) are not accrued or reserved against on the books and records
of Company and none of which, individually or in the aggregate, are expected to exceed $100,000;
(iv) additional Liabilities that are expressly provided for in any of Company’s contracts that are
not required to be reflected in Company’s financial statements under GAAP; or (v) Liabilities
reflecting
expenses with respect to any litigation or dispute between Company and Parent as set forth in
Section 3.1.9 (v) of the Company Disclosure Schedule.
3.1.10 No Violations. Company is in compliance with all applicable federal, state, local,
or foreign statutes, laws, ordinances, rules, judgments, orders, and regulations of any
Governmental Entity applicable to its business and operations, except for violations that would not
result, or reasonably be expected to result, individually or in the aggregate, in a Company
Material Adverse Effect. Neither Company, nor any Person acting on behalf of Company has, directly
or indirectly, on behalf of or with respect to Company (i) made or received any unreported
political contribution, (ii) made or received any payment that was not legal to make or receive,
(iii) created or used any “off-book” bank or cash account or “slush fund,” or (iv) violated the
Foreign Corrupt Practices Act of 1977, as amended. All permits required to conduct the business of
Company as currently conducted have been obtained, are in full force and effect, and are being
complied with, except where the failure to hold or to be in compliance with such
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permits would not
result, or reasonably be expected to result, individually or in the aggregate, in a Company
Material Adverse Effect.
3.1.11 Certain Agreements. Except as contemplated by this Agreement, neither the execution
and delivery of this Agreement nor the consummation of the Transactions will (i) result in any
payment (including severance, unemployment compensation, parachute payment, bonus, or otherwise)
becoming due to any director, employee, or independent contractor of Company, from Company under
any Plan (as defined in Section 3.1.13), agreement, document, or otherwise, (ii) increase any
benefits payable under any Plan, agreement, or document, or (iii) result in the acceleration of the
time of payment or vesting of any such benefits.
3.1.12 Employees. Since the inception of Company (or any predecessor entity, if
applicable), Company has been in compliance with all then applicable laws and regulations
respecting employment, termination of employment, hiring, discrimination in employment, terms and
conditions of employment, wages, hours, and occupational safety and health and employment
practices, and has not engaged in any unfair labor practice. Since the inception of Company (or
any predecessor entity, if applicable), Company has withheld all amounts required by law or by
agreement to be withheld from the wages, salaries, and other payments to its employees, including
any common law employees, and is not liable for any arrears of wages (including commissions,
bonuses, or other compensation), or any taxes or any penalty for failure to comply with any of the
foregoing (or, if any arrears, penalty, or interest were assessed against Company regarding the
foregoing, it has been fully satisfied). Company is not liable for any payment to any trust or
other fund or to any governmental or administrative authority with respect to unemployment
compensation benefits, social security, social benefits, or other benefits or obligations for
employees (other than routine payments to be made in the normal course of business and consistent
with past practice). There are no pending claims against Company under any workers’ compensation
plan or policy or for long-term disability. There are no controversies pending or, to Company’s
knowledge, threatened, between Company and any of its employees, or any works council or similar
body, which controversies have or could reasonably be expected to result in an action, suit,
proceeding, claim, arbitration, or investigation before any agency, court, or tribunal, foreign or
domestic, including claims for compensation, severance benefits, vacation time, vacation pay, or
pension benefits, or any other claim pending in any court or administrative agency from any current
or former employee or any other Person arising out of Company’s status as employer or purported
employer or any workplace practices or policies whether in the form of claims for discrimination,
harassment, unfair labor practices, grievances, wage and hour violations, wrongful discharge, or
otherwise. Company is not a party to any collective bargaining agreement or other labor union
contract nor does Company know of any activities or proceedings of any labor union to organize any
employees of Company. Section 3.1.12 of the Company Disclosure Schedule lists all countries in which a works council or
similar employee organization represents employees of Company. To Company’s knowledge, no
employees of Company are or have in the past been in violation of any term of any employment
contract, non-competition agreement, or any restrictive covenant to a former employer relating to
the right of any such employee to be employed by Company because of the nature of the business
conducted by Company or work performed by the employee or to the use of trade secrets or
proprietary information of others. All releases of employment claims in favor of Company obtained
from employees during the three-year period preceding the Effective Date are effective and binding
to release all employment claims for each such employee.
3.1.13 Employee Benefit Plans.
(a) Section 3.1.13(a) of the Company Disclosure Schedule lists each employee benefit, equity
incentive plan, or compensation plan or program covering currently active, former, or retired
employees of Company (“Plan”). Company has provided or made available to Parent a
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copy of each Plan document (or, if there is no Plan document, a written description), and where applicable, any
related trust agreement, annuity, or insurance contract and, where applicable, the three most
recent annual reports (Form 5500) filed with the U.S. Department of Labor-EBSA, including all
attachments and schedules thereto. To the extent applicable, each Plan complies in all material
respects with the requirements of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”) and the Code, and any Plan intended to be qualified under Code Section 401(a) or 423 is
so qualified and has been so qualified since its creation, and its related trust is tax-exempt and
has been since its creation. No Plan is covered by Title IV of ERISA or Code Section 412. No
“prohibited transaction,” as defined in ERISA Section 406 or Code Section 4975, has occurred with
respect to any Plan. Each Plan has been maintained and administered in compliance with its terms
and with the requirements prescribed by all statutes, orders, rules, and regulations, including
ERISA and the Code, applicable to such Plans. There are no pending or anticipated claims against
or otherwise involving any of the Plans (excluding claims for benefits incurred in the ordinary
course of Plan activities) and no suit, action, or other litigation has been brought against or
with respect to any Plan. All contributions, reserves, or premium payments to each Plan accrued to
the date hereof have been made or provided for. Company has not incurred any liability under
Subtitle C or D of Title IV of ERISA with respect to any “single-employer plan,” within the meaning
of ERISA Section 4001(a)(15), currently or formerly maintained by Company, or any entity that is
considered one employer with Company under ERISA Section 4001(a)(14). Company has not incurred,
and will not incur as a result of the Transactions, any withdrawal liability under Subtitle E of
Title IV of ERISA with respect to any “multiemployer plan,” within the meaning of ERISA
Section 4001(a)(3). Company has no obligation for retiree health or life benefits under any Plan,
except as required by applicable law or to avoid excise taxes under Code Section 4980B. There are
no restrictions on the rights of Company to amend or terminate any Plan without incurring any
liability thereunder (other than ordinary administrative expenses) and satisfaction of applicable
notice. There have been no unwritten or unexpected amendments to, written interpretation of, or
announcements (whether or not written) by Company relating to coverage under, any Plan. No tax
under Code Section 4980B (other than a tax that has been fully satisfied) has been incurred in
respect of any Plan that is a group health plan, as defined in Code Section 5000(b)(1). No act or
omission has occurred (or will occur as a result of the transactions contemplated by this
Agreement) and no condition exists with respect to any employee benefit plan (within the meaning of
Section 3(3) of ERISA), equity incentive plan, or compensation plan or program, currently or
previously sponsored, contributed to, maintained or administered by the Company or any subsidiary
entity that is or was an ERISA Affiliate of the Company (as defined below) that would subject the
Company (or the assets of any such plan or program) to any fine, penalty, tax or liability of any
kind imposed under ERISA, the Code or other
applicable legal requirements (other than liabilities for benefits accrued under plans or
programs for employees of the Company and their beneficiaries).
(b) Neither Company nor any entity that is or was considered one employer with Company under
ERISA Section 4001(a)(14) or Code Sections 414(b), (c), or (m) (“ERISA Affiliate”) has ever
maintained, had an obligation to contribute to, contributed to, or had any liability with respect
to any current or former employee benefit plan that is or has been subject to Title IV of ERISA
(including any “multiemployer plan” within the meaning of ERISA Section 4001(a)(3)). No Plan is a
multiple employer welfare arrangement as defined in ERISA Section 3(40).
(c) All Plans that are subject to the laws of any jurisdiction outside the United States are
in compliance with and have been operated consistent with their terms and all applicable laws
(including relevant tax laws), and the requirements of any trust deed under which they were
established, in all material respects. Section 3.1.13(c) of the Company Disclosure Schedule
identifies all of Company’s employee benefit plans that are subject to the laws of any jurisdiction
outside the United States. With respect to each Plan, no event has occurred, and there exists no
condition or set of
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circumstances, that would subject Company, directly or indirectly, to any
material liability arising under any applicable laws, including relevant tax laws (including any
liability to or under any such Plan or any indemnity agreement to which Company is a party),
excluding liability for routine benefit claims and funding obligations. With respect to each such
Plan, there are no funded benefit obligations for which the contributions have not been made or
properly accrued and there are no unfunded benefit obligations that have not been accounted for by
reserves, or otherwise properly footnoted, on the Financial Statements.
(d) No Plan is subject to any ongoing or scheduled audit, investigation, or other
administrative proceeding of the Internal Revenue Service (“IRS”), the U.S. Department of Labor, or
any other federal, state, or local governmental entity.
(e) No event has occurred or circumstance exists that could result in a material increase in
premium costs of Plans that are insured, or a material increase in benefit costs of such Plans that
are self-insured. For avoidance of doubt, general increases in the cost of medical services or
supplies or prescription pharmaceuticals are not considered events or circumstances to be
considered. Each Plan that provides self-insured benefits is subject to a stop-loss insurance
policy under which the Company is an insured party and the Company has complied with all terms of
such stop-loss policy and has timely paid all premiums owing with respect to such stop-loss policy
through the date of this Agreement. The transaction contemplated by this Agreement will not
cancel, impair, or reduce amounts payable under any such stop-loss insurance policy.
3.1.14 Real Property; Leases. Company does not own, and has never owned, real property.
Company has made available to Parent copies of all leases or subleases in effect on the date hereof
under which Company leases (i) real property (as either a tenant, subtenant, or lessor), or
(ii) personal property that requires annual payments in excess of $25,000 with respect to each such
lease or sublease of personal property (in case of either clause (i) or (ii), a “Company Lease”).
No default exists under any Company Lease. No Company Lease is terminable because of the execution
of this Agreement or the consummation of the Transactions. Section 3.1.14 of the Company
Disclosure Schedule lists each Company Lease. Each Company Lease is in full force and effect in
accordance with its respective terms. No consent is required from any party under any Company
Lease in connection with the completion of the Transactions, and Company has not received notice
that a party to any Company Lease intends to cancel, terminate, or refuse to renew any Company
Lease or to exercise any option or other right thereunder, except where the failure
to receive such consent, or where such cancellation, termination, or refusal, would not result, or
reasonably be expected to result, individually or in the aggregate, in a Company Material Adverse
Effect.
3.1.15 Environmental.
(a) Except as would not result, or reasonably be expected to result, individually or in the
aggregate, in a Company Material Adverse Effect, no Hazardous Material (as defined below) has been
released by Company (except as specifically authorized, such as by permits issued by a Governmental
Entity), onto or under any property occupied by Company or any affiliate of Company, nor, to
Company’s knowledge, has any Hazardous Material migrated beneath such properties.
(b) Except as would not result, or reasonably be expected to result, individually or in the
aggregate, in a Company Material Adverse Effect, Company has not transported, stored, used,
manufactured, disposed of, released, or exposed its employees or others to, Hazardous Materials
(collectively, “Hazardous Materials Activities”) in violation of any Environmental Law (as defined
below) in effect on or before the Effective Time.
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(c) Company currently holds all environmental approvals, permits, licenses, clearances, and
consents necessary for the conduct of Company’s Hazardous Material Activities and other businesses
of Company as such activities and businesses are currently being conducted (collectively,
“Environmental Permits”), except where the absence of such Environmental Permits would not result,
or reasonably be expected to result, individually or in the aggregate, in a Company Material
Adverse Effect.
(d) No legal action, proceeding, revocation proceeding, amendment procedure, writ, or
injunction is pending and, to Company’s knowledge, no action, proceeding, revocation proceeding,
amendment procedure, writ, or injunction has been threatened by any Governmental Entity against
Company concerning any Environmental Permit, Hazardous Material, or any Hazardous Materials
Activity of Company. Company has received no written notification that it is or may be liable for
natural resource damages, the investigation or cleanup of Hazardous Materials, or for the response
costs incurred by others in conducting such investigation or cleanup, which, in either case would
not result, or reasonably be expected to result, individually or in the aggregate, in a Company
Material Adverse Effect. To the knowledge of Company, no fact or circumstance currently exists
that is reasonably likely to involve Company in any material environmental litigation or impose
upon Company any material environmental liability.
(e) Company has not, either by agreement or (to Company’s knowledge) by operation of law,
assumed or undertaken any liability (including future or contingent liabilities) of another person
or entity under any Environmental Law, including any obligation for investigation, cleanup,
corrective action, or natural resource damages with respect to Hazardous Materials.
(f) Neither Company nor, to the knowledge of Company, any of its agents, possess copies of any
reports concerning the presence or possible presence of released Hazardous Materials on real
property currently or formerly owned, leased, or occupied by Company, including any environmental
site assessment reports.
(g) “Hazardous Material” means any substance that any Governmental Entity, in accordance with
applicable federal, state, or local law, has designated to be radioactive, toxic, hazardous, or
otherwise a danger to health or the environment, including PCBs,
friable asbestos, petroleum, urea-formaldehyde, and all substances listed as hazardous
substances in accordance with the Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, as amended, or defined as a hazardous waste in accordance with the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations promulgated in
accordance with said laws, but excluding office and janitorial supplies lawfully used or stored for
their intended purposes.
(h) “Environmental Law” means all applicable foreign, domestic, federal, state, local, or
other laws, regulations, ordinances, or other binding requirements of Governmental Entities, all
applicable orders, judgments, or binding determinations of administrative or judicial authorities,
and any required permit, license, or other authorization, concerning public health and safety,
worker health and safety, and pollution or protection of the environment, including all those
relating to the presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any Hazardous Material.
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3.1.16 Customers and Suppliers.
(a) As of the date hereof: (i) Company has no material outstanding dispute in excess of
$50,000 that has been communicated orally or in writing, concerning its business operations,
including any Company Technology (as defined in Section 3.1.20) or services with any distributor or
customer who, in the 24 months ended as of the date of this Agreement, was one of the 20 largest
sources of revenues recognized under GAAP for Company during such period (each, a “Significant
Customer”); (ii) Section 3.1.16(a) of the Company Disclosure Schedule lists each Significant
Customer and the percentage of Company’s total revenues such Significant Customer represented
during such period; (iii) Company has not received any oral or written notice from any Significant
Customer that such Significant Customer will not continue as a customer or distributor of Surviving
Corporation after Closing or that such distributor or customer intends to terminate or materially
modify existing agreements with Company or Surviving Corporation; and (iv) no purchaser, reseller,
or distributor of Company’s services has asserted any claims of breach of warranty in excess of
$5,000 with regard to such services nor does Company have any indemnity liability for any such
services to purchasers, resellers, or distributors. To Company’s knowledge, Company could not
reasonably be expected as a result of warranty or liability claims against it to be required to
modify in any material respect any of Company’s services that are material to Company.
(b) As of the date hereof: (i) Company has no material outstanding dispute in excess of
$50,000 that has been communicated orally or in writing, concerning technology, products, or
services provided by any supplier who, in the 24 months ended as of the date of this Agreement, was
(a) one of the ten largest suppliers of technology, products, or services to Company, based on
amounts paid or payable, or (b) provided third-party software used in connection with any Company
Technology, products, or services during such period (each, a “Significant Supplier”);
(ii) Section 3.1.16(b) of the Company Disclosure Schedule lists each Significant Supplier; and
(iii) Company has not received any oral or written notice from any Significant Supplier that such
supplier will not continue as a supplier to the Surviving Corporation after the Closing or that
such supplier intends to terminate or materially modify existing agreements with Company or the
Surviving Corporation.
(c) To Company’s knowledge no supplier, distributor, or customer has any interest in any real
or personal, tangible or intangible property, including Company Owned Intellectual Property (as
defined in Section 3.1.20(a)(ii)), used in or pertaining to the business of Company.
3.1.17 Material Contracts.
(a) Section 3.1.17 of the Company Disclosure Schedule sets forth all of the following
contracts to which Company is a party as of the date of this Agreement (the “Material Contracts”):
(i) any agreement (A) relating to the employment of, or the performance of services by, any
employee, consultant, or other Person other than ordinary course, at-will written or oral offers or
agreements terminable without notice and without the payment of any severance or penalty and other
than employment arrangements required by law, (B) in accordance with which Company is or may become
obligated to make any severance, termination, or similar payment to any current or former employee
or director, other than with respect to agreements listed or described in the Company
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Disclosure Schedule as applicable to all Company employees generally, or applicable to all Company employees
in specified jurisdictions outside of the United States, (C) in accordance with which Company is or
may become obligated to make any bonus, commission, or similar payment to any current or former
employee or director, other than with respect to agreements listed or described in the Company
Disclosure Schedule as applicable to all Company employees generally, or applicable to all Company
employees in specified jurisdictions outside of the United States, or (D) in accordance with which
Company may be required to provide, or accelerate the vesting of, any payments, benefits, or equity
rights upon the occurrence of any of the Transactions, other than with respect to the acceleration
of Options pursuant to their terms or pursuant to this Agreement;
(ii) any agreement that provides for indemnification of any officer, director, employee, or
agent of Company;
(iii) any agreement imposing any restriction on the right or ability of Company, or that,
after consummation of the Merger, would impose a restriction on the right or ability of Parent or
any of its subsidiaries, to compete in any line of business or in any geographic region with any
other Person or to transact business or deal in any other manner with any other Person;
(iv) any agreement with a third party in accordance with which Company (A) has paid $100,000
or more during the year ended December 31, 2007, or (B) is obligated to pay $100,000 or more during
the year beginning January 1, 2008;
(v) any agreement with a distributor, VAR, reseller, OEM, marketing partner, or Significant
Customer;
(vi) any agreement of partnership or joint venture, limited liability company or operating
agreement that would give rise to an obligation on the part of Company to form a joint venture or
to acquire securities of a third party;
(vii) any In-Licenses (as defined in Section 3.1.20);
(viii) any other contract, agreement, or commitment not otherwise listed in Section 3.1.17 of
the Company Disclosure Schedule, (A) the termination of which would result, or reasonably be
expected to result, individually or in the aggregate, in a Company Material Adverse Effect, or
(B) that, if no required consent regarding the Transactions is obtained, would result, or
reasonably be expected to result, individually or in the aggregate, in a Company Material Adverse
Effect or a material
adverse effect on the operation of the business of Company in the same manner as the business
of Company is currently operated;
(ix) any union contract or collective bargaining agreement;
(x) any material Company Lease;
(xi) except for trade indebtedness incurred in the ordinary course of business and except as
disclosed in the Financial Statements, any instrument evidencing or related in any way to
indebtedness for borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee, or otherwise.
(b) Each Material Contract is in full force and effect and is a valid and binding obligation
of Company, and neither Company nor, to the knowledge of Company, any other party thereto is in
breach of, or default under, any such Material Contract, except for such failures to be in full
force and effect and such breaches and defaults that would not result, or reasonably be expected to
result, individually or in the aggregate, in a Company Material Adverse Effect. As of the date
hereof, none of the parties to any of the Material Contracts identified in Section 3.1.17 of the
Company Disclosure
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Schedule has expressed in writing an intent to terminate or materially reduce
the amount of its business with Company in the future.
(c) Company acknowledges that it has provided only blank form versions of certain Material
Contracts to Parent or Parent’s counsel in the course of due diligence leading to the execution of
this Agreement. The actual Material Contracts corresponding to such disclosed form versions do not
contain materially different terms than such form versions.
3.1.18 Taxes.
(a) For the purposes of this Agreement, the terms “tax” and “taxes” mean all federal, state,
local, and foreign income taxes (including any tax on or based upon net income, gross income,
income as specially defined, earnings, profits or selected items of income, earnings or profits),
capital taxes, gross receipts taxes, environmental taxes, sales taxes, use taxes, ad valorem taxes,
value added taxes, transfer taxes, franchise taxes, license taxes, withholding taxes or other
withholding obligations, payroll taxes, employment taxes, excise, severance, social security
premiums, workers’ compensation premiums, employment insurance or compensation premiums, stamp
taxes, occupation taxes, premium taxes, property taxes, windfall profits taxes, alternative or
add-on minimum taxes, goods and services tax, customs duties or other taxes of any kind whatsoever
imposed by any taxing authority (domestic or foreign) on such entity or for which such entity is
responsible, and any interest, penalties, additional taxes, additions to tax or other amounts
imposed with respect to the foregoing.
(b) Company has timely filed (or caused to be filed) all federal, state, local, and foreign
tax returns, reports, information statements, and similar statements (“Returns”) required to be
filed, which Returns are true, correct, and complete in all respects. Company has timely paid when
due, or fully accrued in accordance with GAAP on the Financial Statements, all taxes in respect of
all periods (or portions thereof), whether or not any Return reflects such taxes. The unpaid taxes
of Company will not, as of the Closing Date, exceed the reserves for tax liability set forth on the
Closing Balance Sheet. Company has not engaged in any “reportable transaction” within the meaning
of Code Section 6707A(c)(1). Company has not taken any position on any Return that is or would be
subject to penalties under Code Section 6662. Company is not currently the beneficiary of any
extension of time to
file any Return that has not yet been filed. All material elections with respect to taxes
made by or with respect to Company are set forth in Section 3.1.18(b) of the Company Disclosure
Schedule. Company has provided to Parent or made available true and correct copies of all filed
Returns and related work papers, all correspondence with any taxing authorities, any tax planning
memoranda, or other material tax data of Company, in each case with respect to taxes and Returns
for which the statute of limitations has not expired.
(c) No deficiencies or adjustments that remain outstanding for any tax have been claimed,
proposed, assessed, or threatened. No authority in a jurisdiction where Company does not file
Returns has ever made any claim that Company is or may be subject to taxation by that jurisdiction.
Section 3.1.18(c) of the Company Disclosure Schedule accurately sets forth the years for which
Company’s federal, state, local, and foreign Returns have been audited and any years that are the
subject of a pending audit by the IRS or any applicable state, local, or foreign taxing
authorities. Except as so disclosed, Company has not received written notice of any pending or
threatened tax audit or examination and Company has not waived or entered into any other agreement
with respect to any statute of limitation with respect to its taxes or Returns. Section 3.1.18(c)
of the Company Disclosure Schedule sets forth as of the date hereof (i) the tax basis of Company in
its assets, (ii) the current and accumulated earnings and profits of Company, (iii) the amount of
any net operating loss carryover, net capital loss carryover, unused investment credit or other
credit carryover and charitable contribution carryover of Company, and
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(iv) the amount of any
deferred gain or loss allocable to Company or excess loss account of Company. Section 3.1.18(c) of
the Company Disclosure Schedule sets forth as of the date hereof a list of all joint ventures,
partnerships, limited liability companies, or other business entities (within the meaning of
Treasury Regulation Section 301.7701-3) in which Company has an interest. No consent or agreement
has been made under former Code Section 341(f) by or on behalf of Company or any predecessor
thereof. Company has no interests in real estate that would be subject to any real estate excise,
transfer, or other similar tax because of the consummation of the Transactions.
(d) There are no liens for taxes upon the assets of Company except for taxes not yet due and
payable. Company has withheld all taxes required to be withheld by it in respect of wages,
salaries, and other payments to all employees, officers, and directors and any taxes required to be
withheld from any other Person and has timely paid all such amounts withheld to the proper taxing
authority. Company is not party to any tax sharing or tax allocation agreements and has not been a
member of any affiliated group of corporations within the meaning of Code Section 1504 (other than
the group of which Company is currently the common parent). Company has no liability for taxes of
any other Person under Treasury Regulation Section 1.1502-6 (or any similar provisions of state,
local or foreign law) as a transferee or successor, by contract, or otherwise. Company neither has
nor had a “permanent establishment” (as defined in any applicable income tax treaty) in any country
other than the United States. There are no outstanding rulings or requests for rulings from any
taxing authority with respect to Company. Company neither is nor has ever been a “United States
real property holding corporation” within the meaning of Code Section 897. The use of any net
operating loss carryover, net capital loss carryover, unused investment credit, or other credit
carryover of Company is not subject to any limitation in accordance with Code Section 382 or
otherwise.
(e) Company has not participated in, or cooperated with, an international boycott within the
meaning of Code Section 999. Company is not required to include in income any adjustment in
accordance with Code Section 481(a) (or similar provisions of other law or regulations) in its
current or in any future taxable period, because of a change in accounting method, nor has the IRS
(or other taxing authority) proposed any such change in accounting method. In connection with the
consummation of the Transactions, no payments of money or other property, acceleration of benefits,
or provisions of other rights have or will be made hereunder, under any agreement contemplated by
this Agreement, or under any other agreement or arrangement to which Company is a party that would
be reasonably likely to result in imposition of the sanctions imposed under Code Sections 280G
and 4999, determined without regard to whether such payment is reasonable compensation for services
performed or to be performed in the future, and whether or not some other later action or event
would be required to cause such payment, acceleration, or provision to be triggered. Neither
Company, Parent, or any affiliate of Parent will be obligated to pay, or reimburse any individual
for, any excise taxes or similar taxes imposed on any employee or former employee of, or individual
providing services to, Company under Code Section 4999 or any similar provisions as a result of the
consummation of the Transactions, either alone or in connection with any other event. None of the
assets of Company is property that is required to be treated as owned by any other Person in
accordance with the “safe harbor lease” provisions of former Section 168(f)(8) of the Internal
Revenue Code of 1954 as amended and in effect immediately before the enactment of the Tax Reform
Act of 1986 and none of the assets of Company is “tax exempt use property” within the meaning of
Code Section 168(h). None of the assets of Company secures any debt the interest on which is tax
exempt under Code Section 103.
(f) Company has not constituted either a “distributing corporation” or a “controlled
corporation” in a distribution of stock qualifying for tax-free treatment under Code Section 355
(i) in the two years before the date of this Agreement, or (ii) in a distribution that could
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otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of
Code Section 355(e)) in conjunction with the Transactions.
(g) All Plans or arrangements to which Company is a party that are “nonqualified deferred
compensation plans” within the meaning of Code Section 409A(d)(1) satisfy the requirements of Code
Sections 409A(a)(2), 409A(a)(3) and 409A(a)(4) and the guidance thereunder and have been operated
in accordance with such requirements.
(h) No outstanding Company Share is non-transferable and subject to a substantial risk of
forfeiture within the meaning of Section 83 of the Code, and no payment to any holder of Company
Shares of any Conversion Payments in accordance with this Agreement will result in compensation
income to such holder of Company Shares.
3.1.19 Interests of Officers. None of Company’s officers, directors or employees has any
interest in any property, real or personal, tangible or intangible, including inventions,
copyrights, trademarks, or trade names, used in the business of Company, nor to the knowledge of
Company does any supplier, distributor, or customer of Company.
3.1.20 Technology and Intellectual Property Rights.
(a) Definitions:
(i) “Intellectual Property” means any or all of the following and all rights in, arising out
of, or associated therewith: (x) all United States, international, and foreign: (1) patents,
utility models, and applications therefor, and all reissues, divisions, re-examinations, renewals,
extensions, provisionals, continuations and continuations-in-part thereof, and equivalent or
similar rights anywhere in the world in inventions and discoveries, including invention
disclosures; (2) all trade secrets and other rights in know-how and confidential or proprietary
information; (3) all mask works and copyrights, registrations and applications therefor, and all
other rights
corresponding thereto (including moral rights), throughout the world; (4) all rights in World
Wide Web addresses and domain names and applications and registrations therefor, all trade names,
logos, common law trademarks and service marks, trade dress, trademark and service xxxx
registrations, and applications therefor, and all goodwill associated therewith throughout the
world; and (5) any similar, corresponding, or equivalent rights to any of the foregoing in (1)
through (4) above, anywhere in the world (items (1) through (5) collectively, “Intellectual
Property Rights”); and (y) any and all of the following: computer software and code, including
software and firmware listings, assemblers, applets, compilers, source code, object code, net
lists, design tools, user interfaces, application programming interfaces, protocols, formats,
documentation, annotations, comments, data, data structures, databases, data collections, system
build software and instructions, design documents, schematics, diagrams, product specifications,
know-how, show-how, techniques, algorithms, routines, works of authorship, processes, prototypes,
test methodologies, supplier and customer lists, trade secrets, materials that document design or
design processes, or that document research or testing (including design, processes, and results);
any media on which any of the foregoing is recorded; and any other tangible embodiments of any of
the foregoing or of Intellectual Property Rights (“Technology”).
(ii) “Company Owned Intellectual Property” means all Intellectual Property owned by Company.
(iii) “Company Licensed Intellectual Property” means all Intellectual Property owned by third
Persons and licensed to Company. Unless otherwise noted, all
-24-
references to “Company Intellectual
Property” refer to both Company Owned Intellectual Property and Company Licensed Intellectual
Property.
(b) Section 3.1.20(b) of the Company Disclosure Schedule lists:
(i) all of Company’s registrations and applications for registration for Company Owned
Intellectual Property (including without limitation all patents issued and/or assigned to Company
and all applications for patents filed or held by Company);
(ii) all licenses, sublicenses, reseller, distribution, customer, and other agreements or
arrangements in accordance with which any other Person is authorized by Company to have access to,
resell, distribute, or use Company Owned Intellectual Property or to exercise any other right with
regard thereto;
(iii) all agreements and licenses in accordance with which Company has been granted a license
to any Company Licensed Intellectual Property (other than license agreements for standard “shrink
wrapped, off-the-shelf” third party Intellectual Property that is otherwise commercially available
for a cost of not more than U.S. $5,000 for a perpetual license for a single user or work station
(or $50,000 in the aggregate for all users and work stations)) where such Company Licensed
Intellectual Property is used by Company in connection with the development, support, or
maintenance of Company’s products, Technology or service offerings (“In-Licenses”);
(iv) any obligations of exclusivity (including license rights granted by Company to any third
party in Company Intellectual Property or other exclusivity grants), covenants not to xxx,
noncompetition, nonsolicitation, right of first refusal, parity of treatment and/or most favored
nation status, or right of first refusal or negotiation, parity of treatment, or most favored
nation status to which
Company is subject and that relate to and/or restrict any Company Intellectual Property Rights
or Company Technology, products or services that are provided using Company Intellectual Property,
including without limitation for each such obligation an identification of any territorial
limitations on such obligation;
(v) any grants to Company of exclusivity (including exclusive license rights granted to
Company by any third party in Company Licensed Intellectual Property or other exclusivity grants),
covenants not to xxx, noncompetition, nonsolicitation, right of first refusal or negotiation,
parity of treatment, or most favored nation status; and
(vi) all current Company products, Technology, and service offerings made commercially
available by Company.
(c) Company owns free and clear of conditions, liens, pledges, security interests, claims, or
other encumbrances, adverse claims, or other restrictions or any requirement of any past, present,
or future royalty payments, all rights necessary to carry out, or that otherwise are material to,
the current and anticipated future (as contemplated by Company) business of Company and has had all
rights reasonably necessary to carry out, or that otherwise were material to, the business of
Company.
(d) Company is not, nor as a result of the execution or delivery of this Agreement, or
performance of Company’s obligations hereunder, will Company be, in violation of any license,
sublicense, or other agreement relating to Company Intellectual Property, including any In-License.
Without limiting the foregoing, (i) the “License Agreement” between Aesop, Inc. and Company dated
April 15, 1997 (last signed June 29, 1997), remains in force as of the Effective Date; (ii) Company
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has renewed the exclusivity provisions under that agreement at least through the Closing Date and
given any renewal notices required to be given on or before Closing Date to continue such
exclusivity; and (iii) to Company’s knowledge, as of the Closing Date Robomatics, Inc. has not
marketed water-jet cutting equipment utilizing the Aesop technology licensed to Company under that
agreement.
(e) Neither the (i) use, reproduction, modification, manufacturing, distribution, licensing,
sublicensing, sale, offering for sale, import, or any other exercise of rights in Company Owned
Intellectual Property, (ii) operation of Company’s business, including Company’s provision of
Technology, products or services, nor (iii) the use, reproduction, modification, manufacture,
distribution, licensing, sublicensing, sale, offering for sale or other exploitation of any of
Company’s products, services, or Technology, infringes any Intellectual Property Rights, or any
other intellectual property, proprietary, or personal right, of any Person, or constitutes unfair
competition or unfair trade practice under the laws of the applicable jurisdiction. To the
knowledge of Company, there is no unauthorized use, infringement, or misappropriation of any of the
Company Owned Intellectual Property by any third party, employee, or former employee.
(f) Company has not received written notice of any claims (i) challenging the validity,
effectiveness or ownership by Company of any Company Owned Intellectual Property, or (ii) that any
of the actions described in Section 3.1.20(e)(i), (ii) or (iii) above infringes, or will infringe
on, any third party Intellectual Property Right or constitutes unfair competition or unfair trade
practices under the laws of the applicable jurisdiction, nor, to the knowledge of Company, are
there any valid grounds for any bona fide claim of any such kind.
(g) No parties other than Company possess any current or contingent rights of any kind to any
source code included in Company Owned Intellectual Property, nor has Company granted
any current or contingent rights of any kind to any source code that is part of any Company
Licensed Intellectual Property.
(h) Section 3.1.20(h) of the Company Disclosure Schedule lists all parties who have created
any material portion of, or otherwise have any rights in or to, Company Owned Intellectual Property
other than employees of Company who meet all of the following requirements: (i) their work in any
Company product, Technology, or service was created by them entirely within the scope of their
employment by Company, (ii) their copyrightable work product in any Company product, Technology, or
service is owned by Company as a work made for hire under U.S. copyright law, and (iii) any
inventions of such employees that are included or implemented in any Company product, Technology,
or service have been assigned to Company under Company’s standard form employee invention
assignment agreement.
(i) Company has secured from all current and former non-employee consultants and contractors
of Company who have created any material portion of, or otherwise have any rights in or to, any
Company Owned Intellectual Property, valid and enforceable written assignments to Company of any
such consultants’ and contractors’ contribution or rights therein and Company has provided true and
complete copies of such assignments or licenses to Parent.
(j) Company has taken commercially reasonable steps to protect rights in confidential
information (both of Company and that of third Persons that Company has received under an
obligation of confidentiality). Company has obtained legally binding written agreements from all
employees and third parties with whom Company has shared its confidential information or
confidential information that Company is obligated to treat as confidential and that require those
employees and third parties to keep such information confidential.
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(k) Company is in compliance in all material respects with all applicable laws, rules,
regulations, and Company contractual obligations governing the collection, interception, storage,
receipt, purchase, sale, transfer and use (“Collection and Use”) of personal, consumer, or customer
information, including name, address, telephone number, electronic mail address, social security
number, bank account number or credit card numbers (collectively, “Customer Information”).
Company’s Collection and Use of such Customer Information are in accordance in all material
respects with Company’s privacy policy as published on its website or any other privacy policies
presented to consumers or customers and to which Company is bound or otherwise subject and any
contractual obligations of Company to its customers regarding privacy. Company does not use in
connection with the provision of its Technology, products or services or collect or receive social
security numbers or credit card numbers. Company takes commercially reasonable steps to protect the
confidentiality, integrity and security of its software, databases, systems, networks and Internet
sites and all information stored or contained therein or transmitted thereby from unauthorized or
improper Collection and Use. The execution or delivery of this Agreement or any other agreement or
document contemplated by this Agreement, or the performance of Company’s obligations hereunder or
thereunder, will not materially violate any such applicable law, rule, or regulation or any of
Company’s privacy policies or any contractual obligation of Company governing the Collection and
Use of Customer Information.
(l) Section 3.1.20(l)(i) of the Company Disclosure Schedule identifies all licenses entered
into by Company with regard to any third party source code. Section 3.1.20(l)(ii) of the Company
Disclosure Schedule identifies all such licenses that may not be assigned to Parent.
(m) No Company software or software used in any Company Technology, product or service
(including Company software under development) has been, is, or, upon consummation of the Merger,
will be, in whole or in part, governed by an Excluded License. For purposes of this Agreement, an
“Excluded License” is any license that requires, as a condition of modification or distribution of
software subject to the Excluded License, that (i) such software and/or other software combined or
distributed with such software be disclosed or distributed in source code form, or (ii) such
software and/or other software combined or distributed with such software and any associated
intellectual property be licensed on a royalty free basis (including for the purpose of making
additional copies or derivative works).
(n) Company has not incorporated into any Company software or software used in any Company
product, Technology, or service any code, modules, utilities, or libraries that are covered in
whole or in part by a license that triggers the discontinuance of some or all license rights if
certain patent enforcement suits are brought by Company.
(o) Company has not incorporated into any Company software or software used in any Company
product, Technology, or service any code, modules, utilities, or libraries that are covered in
whole or in part by a license that requires that Company give attribution for its use of such code,
modules, utilities, or libraries.
(p) Company has not participated in any standards-setting organizations or activities that
would affect the proprietary nature of any Company Intellectual Property or restrict the ability of
Company to enforce, license or exclude others from using any Company Intellectual Property.
(q) The Merger will not give rise to, any Company obligations of exclusivity (including
exclusive license rights granted by Company to any third party in Company Intellectual Property or
other exclusivity grants), covenants not to xxx, non-competition, non-solicitation, right of first
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refusal or negotiation, parity of treatment, most favored nation status, or other material
restriction on the operation of Company’s business.
(r) The Merger will not give rise to or cause under any agreements relating to Company
Intellectual Property (i) a right of termination under, or a breach of, or any loss or change in
the rights or obligations of Company, (ii) an obligation to pay any royalties or other amounts to
any third Person in excess of those that Company is otherwise obligated to pay absent a Merger, or
(iii) Parent’s granting to any third party any right to or with respect to any of Parent’s
Intellectual Property.
(s) Company is not under any contractual obligation (i) to include any Company Licensed
Intellectual Property in any Company product, Technology, or service, or (ii) to obtain a third
party’s approval of any Company product, Technology, or service at any stage in the development,
licensing, distribution, or sale of that product, Technology, or service.
(t) Company has no obligation to perform services for any third party other than (i) customer
support and maintenance services for those customers listed in Section 3.1.20(t)(i) of the Company
Disclosure Schedule, and (ii) professional services for those customers listed in Section
3.1.20(t)(ii) of the Company Disclosure Schedule.
(u) All granted or issued patents and all mask works, registered trademarks, and copyright
registrations held by Company at any time, are valid, enforceable, and subsisting.
Section 3.1.20(u) of the Company Disclosure Schedule accurately identifies and describes each
filing,
payment, and action that must be made or taken on or before the date that is 120 days after
the date of this Agreement in order to maintain each such item of Company Owned Intellectual
Property in full force and effect.
(v) Company has not exported or re-exported its products, services, or Technology, directly or
indirectly, in violation of law either to: (i) any countries that are subject to U.S., Canadian,
or European Union export restrictions or export restrictions of any other jurisdiction in which
Company operates or is otherwise subject; or (ii) any end-user who Company knows or has reason to
know will utilize them in the design, development, or production of nuclear, chemical, or
biological weapons; and Company has complied with all end-user, end-use, and destination
restrictions issued by the U.S., Canada, the European Union, and any other jurisdiction to which
Company operates or is subject.
(w) The Company software or software used in any Company Technology, product or service:
(i) has sufficiently documented source code enabling a reasonably skilled software developer to
understand, modify, compile and otherwise utilize all aspects of the related Technology without
reference to other sources of information; (ii) is complete; (iii) is free from known material
defects or deficiencies, errors in design, and operating defects; (iv) to Company’s knowledge, does
not require a material upgrade or replacement within the 12-month period after the Closing Date and
none are planned; and (v) does not contain any disabling mechanisms or protection features which
are designed to disrupt or prevent the use of the Company Technology, product or service, including
computer viruses, time locks or any code, instruction or device that may be used without authority
to access, modify, delete or damage any of the Company software or any system or equipment on which
any of the Company software is installed or in connection with which it may operate.
3.1.21 Vote Required. The affirmative vote of the holders of a majority of the outstanding
Company Common Shares (the “Company Shareholder Approval”) voting together as a single class at a
shareholder meeting or in accordance with a written consent is the only vote of the
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holders of Company’s capital stock necessary to approve this Agreement and the consummation of the
Transactions.
3.1.22 Brokers’ and Other Fees. Neither Company nor its shareholders, directors, officers,
or employees has employed any investment banker, broker, finder, or other intermediary that has
been retained by, or is authorized to act on behalf of, Company that would be entitled to any fee
or commission from Company, Parent, or any of Parent’s affiliates in connection with or upon
consummation of the Transactions.
3.1.23 Change of Control. With regard to any Company Options granted under the Incentive
Plans that do not presently provide for automatic acceleration of vesting upon a change of control,
Company shall take action to make such options exercisable or vested immediately prior to Closing.
Section 3.1.23 of the Company Disclosure Schedule sets forth the number of Company Common Shares
that are subject to options, warrants, or awards that are not exercisable or vested before the
Effective Time and that are subject to partial or complete acceleration of vesting or
exercisability as a result of the Merger or termination of any employment or contractor
arrangement, the name of the Person who holds such option, warrant, or other award, and the
applicable percentage of acceleration of the vesting or exercisability.
3.1.24 Complete Copies of Materials. Company has delivered or made available to Parent or its counsel true and complete copies of
each document listed in the Company Disclosure Schedule.
3.1.25 Board Recommendation. Company’s board of directors has unanimously (i) determined
that this Agreement and the Transactions, including the Merger, are advisable and in the best
interests of Company and its shareholders, (ii) approved and adopted this Agreement and the
Transactions, including the Merger, and (iii) subject to the other terms and conditions of this
Agreement, resolved to recommend the Merger and approval and adoption of this Agreement and each of
the Transactions by Company’s shareholders, and, as of the date of this Agreement, none of such
actions by Company’s board of directors has been amended, rescinded, or modified.
3.1.26 Insurance. Company has made available to Parent or its counsel a copy of all
insurance policies and all self-insurance programs and arrangements relating to the business,
assets, and operations of Company. All premiums due and payable under all such policies have been
paid and Company is otherwise in compliance with the terms of such policies and bonds. As of the
date of this Agreement, there has been no threatened termination of, or premium increase with
respect to, any such policies.
3.1.27 Accounts Receivable. All of the accounts receivable shown on the consolidated
balance sheet of Company as of the Interim Balance Sheet Date have been collected or are current
and collectible in the aggregate recorded amounts thereof (less the allowance for doubtful accounts
also appearing in such balance sheet and net of returns and payment discounts allowable by
Company’s policies) and can reasonably be anticipated to be paid in full without outside collection
efforts within 90 days of the due date, and are not subject to counterclaims or setoffs.
3.1.28 Personal Property. As of the date hereof Company has good and marketable title,
free and clear of all title defects, security interests, pledges, options, claims, liens,
encumbrances, and restrictions of any nature whatsoever (including leases, chattel mortgages,
conditional sale contracts, purchase money security interests, collateral security arrangements,
and other title or interest-retaining agreements) to all inventory, receivables, furniture,
machinery, equipment, and other personal property,
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tangible or otherwise, reflected on the
consolidate balance sheet of Company as of the Interim Balance Sheet Date or used in Company’s
business as of the Interim Balance Sheet Date even if not reflected thereon. Section 3.1.28 of the
Company Disclosure Schedule lists (i) all computer equipment and (ii) all other personal property
having a depreciated book value of $5,000 or more currently used by Company in the conduct of its
business, and all such equipment and property, in the aggregate, is in good operating condition and
repair, reasonable wear and tear excepted.
3.1.29 Guarantees and Suretyships. Company has no powers of attorney outstanding, (other
than those issued in the ordinary course of business with respect to tax matters). Company has no
obligations or liabilities (absolute or contingent) as guarantor, surety, cosigner, endorser,
co-maker, indemnitor, or otherwise with respect to the obligations or liabilities of any Person.
3.1.30 Certain Transactions. Except for (a) relationships with Company as an officer, director, or employee (and
compensation by Company in consideration of such services) and (b) relationships with Company as
holders of Company Securities, none of the directors, officers, or holders of 5% or more of the
Company Shares, or any member of any of their families, is presently a party to, or was a party to
during the year preceding the date of this Agreement, any transaction with Company, including any
contract, agreement, or other arrangement (i) providing for the furnishing of services to or by,
(ii) providing for rental of real or personal property to or from, or (iii) otherwise requiring
payments to or from, any such person or any corporation, partnership, trust, or other entity in
which any such person has or had a 5% or more interest (as a shareholder, partner, beneficiary, or
otherwise) or is or was a director, officer, employee, or trustee.
3.1.31 Government Contracts.
(a) “Government Contracts” means any agreement, commitment, undertaking, or arrangement of any
kind with a government agency, government prime contractor, government grant recipient, or
higher-tier government subcontractor to which Company is a party as of the date of this Agreement.
(b) Company is in compliance with all legal requirements of all Government Contracts.
(c) Company has not, in obtaining or performing any Government Contract, violated any material
aspect or provision of any of the following: (i) the Federal Acquisition Regulation or any
applicable agency supplement thereto; (ii) any state procurement law or regulation; and (iii) any
other applicable procurement law or regulation.
(d) To the knowledge of Company, there are not and have not been any irregularities,
misstatements, or omissions relating to any Government Contracts, including certifications.
(e) Company is not undergoing, and has not undergone, any audit of any Government Contract,
and Company has no knowledge of any basis for any impending audit, arising under or relating to any
Government Contract, except for routine audits conducted during the ordinary course of business.
(f) Company has taken adequate steps to ensure that its right, title and interest in
inventions, technical data, computer software, and copyrightable material developed under any
Government Contract have been retained and protected.
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3.1.32 Disclosure. No representation or warranty made by Company in this Agreement, nor
any document, written information, financial statement, certificate, or exhibit prepared and
furnished or to be prepared and furnished by Company or its Representatives (as defined in
Section 4.1.2) under this Agreement, or in connection with the Transactions, including information
supplied by Company for inclusion in the Registration Statement on Form S-4 of Parent (or such
other or successor form as shall be appropriate, the “Registration Statement”) pursuant to which
the shares of Parent Common Stock to be issued in the Merger will be registered with the Securities
and Exchange Commission (“SEC”) , when read together in their entirety, contains as of the date
hereof or will contain, at the time the Registration Statement is declared effective by the SEC or
upon the consummation of the Merger any untrue statement of a material fact, or omits as of the
date hereof or will omit upon the
consummation of the Merger to state a material fact necessary to make the statements or facts
contained herein or therein, not misleading, in light of the circumstances under which they were
made.
3.1.33 Reliance. Company makes the foregoing representations and warranties with the
knowledge and expectation that Parent and Sub are placing reliance thereon.
3.2 Representations and Warranties of Major Shareholders. Each Major Shareholder
represents and warrants, severally but not jointly, to and for the benefit of Parent and Sub as
follows:
3.2.1 Authority. Each Major Shareholder has full power and authority to execute and
deliver this Agreement and all other documents and agreements to be executed by such Major
Shareholder as contemplated hereunder, and to perform his, her, or its obligations hereunder and
thereunder. This Agreement and all other documents and agreements to be executed by Major
Shareholder as contemplated hereunder constitutes the valid and legally binding obligations of such
Major Shareholder enforceable against each in accordance with their terms, except as such
enforcement may be limited by bankruptcy, insolvency, moratorium, or other similar laws affecting
or relating to the enforcement of creditors’ rights generally and general principles of equity.
3.2.2 Voting Agreements. Except as contemplated by this Agreement, each Major Shareholder
is not a party to any voting agreement, voting trust, or similar agreement or arrangement relating
to any class or series of its capital stock, or any agreement or arrangement providing for
registration rights with respect to any capital stock or other securities of Company.
3.2.3 Non-Contravention; Consents. The execution and delivery of this Agreement, and all
other documents and agreements to be executed by the Major Shareholders as contemplated by this
Agreement, and the consummation of the Transactions will not, conflict with, or result in any
Violation of (i) any injunction, judgment, order, decree, ruling, charge, or other restriction of
any Governmental Entity to which a Major Shareholder is subject, or (ii) any agreement, contract,
lease, license, instrument, or other arrangement to which a Major Shareholder is a party, or by
which it is bound, or to which any of its Company Securities are subject. No Major Shareholder
was, is, or will be required to make a filing with, give any notice to, or to obtain any consent
from, any Person or any Governmental Entity in connection with the execution and delivery of this
Agreement or any other agreement or document contemplated by this Agreement or the consummation or
performance of any of the Transactions.
3.2.4 Reliance. Each Major Shareholder makes the foregoing representations and warranties
with the knowledge and expectation that Parent and Sub are placing reliance thereon.
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3.3 Representations and Warranties of Parent and Sub. Parent and Sub represent to Company
as follows:
3.3.1 Organization; Standing and Power. Each of Parent and Sub is a corporation duly
organized and validly existing and in good standing, as applicable, under the laws of its
jurisdiction of incorporation or organization. Each of Parent and Sub has all requisite corporate
power and authority to own, lease, and operate its properties and to carry on its businesses as now
being conducted, and is duly qualified to do business in each jurisdiction in which the character
of the property owned, leased, or operated by it or the nature of its activities makes such
qualification necessary, except in such jurisdictions in which a failure to so qualify would not
result, or be reasonably expected to result, individually or in the aggregate, in a material
adverse effect on the financial condition, business, assets, or results of operations of Parent,
Sub and either of their subsidiaries, taken as a whole, or that would materially impair the ability
of Parent or Sub to consummate the Transactions (“Parent Material Adverse Effect”).
3.3.2 Authority. Each of Parent and Sub has all requisite corporate power and authority to
execute and deliver this Agreement, to consummate the Transactions. The execution and delivery by
Parent and Sub of this Agreement and the performance of Parent’s and Sub’s respective obligations
hereunder have been duly and validly authorized by all necessary corporate action on the part of
Parent and Sub, as applicable. This Agreement has been duly executed and delivered by Parent and
Sub and constitutes a valid and binding obligation of Parent and Sub enforceable in accordance with
its terms, except to the extent that enforceability may be limited by the effect of (i) any
applicable bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting the
enforcement of creditors’ rights generally, and (ii) general equitable principles, regardless of
whether such enforceability is considered in a proceeding at law or in equity.
3.3.3 Consents and Approvals; No Violations. Subject to satisfaction of the conditions set
forth in Sections 7.1 and 7.2, the execution and delivery of this Agreement do not, and the
consummation of the Transactions will not, conflict with or result in any Violation of (a) any
provision of the restated articles of incorporation or bylaws of Parent or the articles of
incorporation or bylaws of Sub, or (b) any loan or credit agreement, note, bond, mortgage,
indenture, contract, lease, or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule, or regulation applicable to Parent
or Sub or their respective properties or assets, other than, in the case of (b), any such Violation
that would not result, or reasonably be expected to result, individually or in the aggregate in a
Parent Material Adverse Effect. No Consent is required by or with respect to Parent or Sub in
connection with the execution and delivery of this Agreement by Parent or Sub or the consummation
by Parent and Sub of the Transactions, except for the filing of the Articles of Merger in
accordance with the WBCA, the filing with the SEC and NASD of the Registration Statement, the
filing of a Form 8-K with the SEC and NASD within the statutory period following the date of this
Agreement, any filings as may be required under applicable state securities laws, the securities
laws of any foreign country, or under the rules and regulations of The NASDAQ Global Market, and
except for such other Consents that if not obtained would not result, or reasonably be expected to
result, in a Parent Material Adverse Effect.
3.3.4 Disclosure. No representation or warranty made by Parent or Sub, nor any document,
written information, statement, financial statement, certificate, or exhibit prepared and furnished
or to be prepared and furnished by Parent or its Representatives under this Agreement, when read
together in their entirety, contains upon the date hereof or will contain upon the consummation of
the Merger any untrue statement of a material fact, or omits upon the date hereof or will omit upon
the
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consummation of the Merger to state a material fact necessary to make the statements or facts
contained herein or therein, not misleading, in light of the circumstances under which they were
made.
3.3.5 SEC Reports. Parent has filed all reports and other documents with the SEC required
to be filed or furnished by Parent since April 30, 2007 (such documents, together with any current
reports filed during such period by Parent with the SEC on a voluntary basis on Form 8-K, the
(“Parent SEC Reports”). As of their respective filing dates, the Parent SEC Reports (i) complied
in all material respects with, to the extent in effect at the time of filing, the applicable
requirements of the Securities Act and the Exchange Act and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances under which they
were made, not misleading.
3.3.6 Compliance with Law. Except as would not, individually or in the aggregate,
materially impair the ability of Parent or Sub to consummate the transactions contemplated hereby,
neither Parent nor any of its Subsidiaries is in violation of, or in default under, any Law, in
each case, applicable to Parent or any of its Subsidiaries or any of their respective assets and
properties.
3.3.7 Operations of Sub. Sub was formed solely for the purpose of engaging in the
transactions contemplated hereby and has not owned any assets, engaged in any business activities
or conducted any operations other than in connection with the transactions contemplated hereby.
3.3.8 Proxy Materials. None of the information supplied by Parent or Sub for inclusion in
the proxy materials distributed by Company will, at the date such materials are first mailed to
shareholders of the Company or at the time of the Company Special Meeting of Shareholders, 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 were made, not misleading.
3.3.9 Brokers or Finders. No investment banker, broker, finder, consultant or intermediary
other than Xxxxxxxx Xxxxx Xxxxxx & Xxxxx Capital, Inc. and Cascadia Capital, LLC, the fees and
expenses of which will be paid by Parent, is entitled to any investment banking, brokerage,
finder’s or similar fee or commission in connection with this Agreement or the transactions
contemplated hereby based upon arrangements made by or on behalf of Parent or any of its
Subsidiaries.
3.3.10 Sufficient Funds. Parent has, and as of the Closing will have, sufficient
immediately available funds (through existing credit arrangements or otherwise) to pay when due the
aggregate Conversion Payments and to pay when due all of its fees and expenses related to the
transactions contemplated by this Agreement.
3.3.11 Acquiring Person. None of Parent, Sub or their respective Affiliates is or ever has
been, with respect to the Company, an “acquiring person”, or an “affiliate” or “associate” of an
“acquiring person” (as such terms are defined in Chapter 23B.19 of the WBCA). Sub will not be,
with respect to the Company after the Merger, an “affiliate or associate” of an “acquiring person”
(as such terms are defined in Chapter 23B.19 of the WBCA).
3.3.12 Reliance. Parent makes the foregoing representations and warranties with the
knowledge and expectation that Company is placing reliance thereon.
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ARTICLE IV
COVENANTS OF COMPANY
COVENANTS OF COMPANY
All references in the subsections of this Article IV to “Company” includes Company’s
subsidiaries except to the extent specifically excluded or except as otherwise clearly required by
the context. During the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time, Company agrees (except as expressly
contemplated by this Agreement, or with Parent’s prior written consent) that:
4.1 Conduct of Business.
4.1.1 Ordinary Course. Company will carry on its business in the ordinary course
consistent with past practice, will continue to observe its obligations to comply with the
requirements of all applicable laws and regulations, and will use commercially reasonable efforts
to: preserve intact its present business organization; keep available the services of its present
officers, consultants, and employees; and maintain satisfactory relationships with licensors,
licensees, customers, suppliers, contractors, distributors, and others having business
relationships with it. Company will promptly notify Parent of any event or occurrence or emergency
not in the ordinary course of business of Company that would result, or reasonably be expected to
result, individually or in the aggregate, in a Company Material Adverse Effect. Without limiting
the above, Company will not, without the prior written consent of Parent, which consent shall not
be unreasonably withheld:
(a) grant any severance or termination pay to any officer, director, or employee of Company,
other than those made in Company’s ordinary course of business and consistent with past practices
and to the extent required by law, or by Company’s existing severance plans and agreements as
disclosed in the Company Disclosure Schedule;
(b) transfer to any third Person ownership of Company Intellectual Property Rights;
(c) except as contemplated by Company Disclosure Schedule 4.1.1(c), declare, set aside, or pay
any dividend or other distribution with respect to any shares of capital stock of Company, or
repurchase, redeem, or acquire any outstanding shares of capital stock or other equity securities
of, or other ownership interests in, Company, or effect any stock split (forward or reverse) or
otherwise change its capitalization or capital structure in any manner from the way it existed
on the date hereof;
(d) split, combine, or reclassify any class of capital stock of Company;
(e) amend any provision of the articles of incorporation or bylaws of Company, or any term of
any outstanding security issued by Company;
(f) incur, assume, or guarantee any indebtedness for borrowed money, other than draw-downs in
the ordinary course of business on lines of credit existing as of the date of this Agreement;
(g) change any method of accounting or accounting practice by Company, except for any such
change required by reason of a change in GAAP or with prior agreement with Company’s auditor;
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(h) commence a lawsuit other than: (i) for the routine collection of bills; or (ii) in such
cases where Company in good faith determines that failure to commence a suit would result in a
material impairment of a valuable aspect of Company’s business, provided Company consults with
Parent before filing a suit described in (i) or (ii);
(i) extend an offer of employment to a candidate for an officer position of vice president or
above or any position with annual compensation in excess of $100,000 without prior consultation
with Parent;
(j) grant or issue or accelerate the vesting (except, in the case of acceleration of vesting,
as permitted under the Company’s stock option plans for options outstanding as of the date of this
Agreement) of any capital stock, securities convertible into capital stock of Company, restricted
stock, restricted stock units, stock appreciation rights, stock options, warrants, or other equity
rights ;
(k) except as contemplated by Company Disclosure Schedule 4.1.1(k), adopt or pay, accelerate,
or accrue salary or other payments or benefits or promise or make discretionary employer
contributions to, under, or with respect to any pension, profit-sharing, bonus, extra compensation,
incentive, deferred compensation, group insurance, severance pay, retirement, or other employee
benefit plan, agreement, or arrangement, or any employment or consulting agreement with or for the
benefit of any Company director, officer, employee, agent, or consultant, whether past or present,
or amend any such existing plan, agreement, or arrangement, in each case other than in the ordinary
course of business or as required by law;
(l) assign, transfer, dispose of, or license assets of Company, grant any license of any
assets of Company, or acquire or dispose of capital stock of any third party or merge or
consolidate with any third party in each case other than in the ordinary course of business;
(m) enter into any joint venture, partnership, limited liability company, or operating
agreement with any Person;
(n) breach, modify, amend, or terminate any of Company’s Material Contracts, or waive,
release, or assign any rights or claims under any of Company’s Material Contracts, except as
expressly required by this Agreement or except in the ordinary course of business;
(o) settle, compromise, or otherwise terminate any litigation, claim, investigation, or other
settlement negotiation;
(p) fail to keep in full force insurance policies covering Company’s properties and assets
under substantially similar terms and conditions as Company’s current policies;
(q) enter into any Material Contract or any other contract that would require Company to
expend a sum in excess of $100,000, except in the ordinary course of business;
(r) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization, or other reorganization (other than the Merger);
(s) acquire or agree to acquire by merging or consolidating with, or by purchasing any equity
interest in or a portion of the assets of, or by any other manner, any business or any corporation,
partnership, association, or other business organization or division thereof, or otherwise acquire
or agree to acquire any assets;
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(t) except as contemplated by Company Disclosure Schedule 4.1.1(t), adopt or amend any
employee benefit plan or employee stock purchase or employee stock option plan or grant agreement
(other than amendments required by law or to comply with the Code or as requested by Parent under
Section 6.8(c)), or enter into any employment contract, pay any special bonus or special
remuneration to any director, officer, consultant, or employee, or increase the salaries or wage
rates or fringe benefits (including rights to severance or indemnification) of its directors,
officers, consultants, or employees other than increases as required by law, or make any change in
its existing borrowing or lending arrangements for or on behalf of any of such Persons under an
employee benefit plan or otherwise;
(u) except as contemplated by Company Disclosure Schedule 4.1.1(u), pay or make any accrual or
arrangement for payment of any pension, retirement allowance, or other employee benefit under any
existing plan, agreement, or arrangement to any officer, director, or employee or pay or agree to
pay or make any accrual or arrangement for payment to any officers, directors, or employees of
Company or any amount relating to unused vacation days, other than in the ordinary course of
business consistent with past practice and except as required by law;
(v) grant rights or licenses to Company Intellectual Property to any standards organization or
to any third Person in compliance with the requirements of any standards organization, or use or
incorporate any intellectual property from any standards organization in Company’s software or
software used in any Company product, Technology, or service;
(w) except as required or permitted under this Agreement, knowingly take any action that would
or is reasonably likely to (i) make any representation or warranty of Company contained in this
Agreement inaccurate, (ii) result in any of the conditions to the Merger in Article VII not being
satisfied, or (iii) impair the ability of Company to consummate the Merger in accordance with the
terms of this Agreement;
(x) make any capital expenditure in excess of $100,000; or
(y) authorize, commit, or agree to take any of the foregoing actions except as otherwise
permitted by this Agreement.
4.1.2 Exclusivity; Acquisition Proposals.
(a) Unless and until this Agreement has been terminated by either party in accordance with
Section 9.1 hereof, Company agrees that it will not (and will use its commercially reasonable
efforts to ensure that none of its officers, directors, agents, employees, or affiliates, or any
investment banker, financial advisor, attorney, accountant, or other advisor, agent, or
representative (collectively, “Representatives”)) take or cause or permit any Person to take,
directly or indirectly, any of the following actions with any party other than Parent and its
designees: (i) solicit, encourage, initiate, or participate in any negotiations, inquiries, or
discussions with respect to any offer or proposal to acquire all or any significant part of
Company, its business, assets, or capital shares, whether by merger, consolidation, other business
combination, purchase of capital stock purchase of assets, license (but excluding non-exclusive
licenses entered into in the ordinary course of business), lease, tender or exchange offer, or
otherwise (each of the foregoing, a “Restricted Transaction”); (ii) disclose, in connection with a
Restricted Transaction, any nonpublic information to any Person other than Parent or its
Representatives concerning Company’s business or properties or afford to any Person other than
Parent or its Representatives access to its properties, books, or records, except as required by
law or in
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accordance with a governmental request for information; (iii) enter into or execute any
agreement relating to a Restricted Transaction; or (iv) make or authorize any public statement,
recommendation, or solicitation in support of any Restricted Transaction or any offer or proposal
relating to a Restricted Transaction other than with respect to the Merger. If Company is
contacted by any third party expressing an interest in discussing a Restricted Transaction, Company
will promptly, but in no event later than 24 hours following Company’s knowledge of such contact,
notify Parent in writing of such contact and the identity of the party so contacting Company and
any information conveyed to Company by such third party in connection with such contact or relating
to such Restricted Transaction, and will promptly, but in no event later than 24 hours, advise
Parent of any material modification or proposed modification thereto.
(b) Neither the board of directors of Company nor any committee thereof will directly or
indirectly (i) (A) withdraw (or amend or modify in a manner adverse to Parent), or publicly propose
to withdraw (or amend or modify in a manner adverse to Parent), the approval, recommendation, or
declaration of advisability by the board of directors of Company or any such committee thereof of
this Agreement, the Merger, or the Transactions, or (B) recommend, adopt, or approve, or propose
publicly to recommend, adopt, or approve, any Acquisition Proposal (any action described in this
clause (i) being referred to as a “Change of Recommendation”) or (ii) approve or recommend, or
publicly propose to approve or recommend, or allow Company or any subsidiary of Company to execute
or enter into, any letter of intent, memorandum of understanding, agreement in principle, merger
agreement, acquisition agreement, option agreement, joint venture agreement, partnership agreement,
or other similar agreement, arrangement, or understanding (X) constituting or related to, or that
is intended to or could reasonably be expected to lead to, any Acquisition Proposal or
(Y) requiring it to abandon, terminate, or fail to consummate the Merger or any other transaction
contemplated by this Agreement.
(c) The obligation of Company to call, give notice of, convene, and hold a shareholders’
meeting will not be limited or otherwise affected by the commencement, disclosure, announcement, or
submission to it of any Acquisition Proposal.
(d) “Acquisition Proposal” means any inquiry, proposal, or offer from any Person relating to,
or that could reasonably be expected to lead to a Restricted Transaction.
4.2 Breach of Representations and Warranties; Notification; Access to Information.
(a) Despite anything in this Agreement to the contrary, from the date hereof to the earlier of
the Effective Time or the termination of this Agreement in accordance with Section 9.1, Company
will (i) confer with Parent and its respective Representatives, at such times as they may request,
about operational and integration matters to the extent permitted by law, (ii) in the event of, and
promptly after becoming aware of, the occurrence of or the pending or threatened occurrence of any
event that would cause or constitute a breach of any of the representations and warranties in
Section 3.1, give detailed written notice thereof to Parent and use commercially reasonable efforts
to promptly remedy any such material breach or inaccuracy, and (iii) promptly notify Parent of any
change in the normal course of any business, operations, or financial condition of Company or its
assets or properties, or any emergency related thereto. Without limiting the generality of the
foregoing, Company will promptly notify Parent of (A) any discussions or actions (of any type,
preliminary or otherwise) relating to bankruptcy of Company, (B) any complaints, investigations, or
hearings (or communications indicating that any complaints, investigations, or hearings may be
contemplated) of any Governmental Entity (for which Company has received written or oral notice),
(C) any loss of or damage to any material property owned by Company, (D) any change in material
existing relationships with outside third parties (for which Company has received written or oral
notice), (E) the institution or threat of any litigation that could affect Company,
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(F) the failure of Company to comply with or satisfy any covenant, condition, or agreement to be complied with or
satisfied by it in accordance with this Agreement, or (G) any other matter that could result,
individually or in the aggregate, in a Company Material Adverse Effect.
(b) Company will, subject to applicable law, afford Parent and its respective Representatives
reasonable access during normal business hours during the period before the Effective Time to
(i) Company’s properties, books, contracts, commitments, communications (including e-mail), and
records, and (ii) all other information concerning the business, properties, and personnel of
Company, as Parent may reasonably request that is necessary to complete the transaction and prepare
for an orderly transition of operations after the Effective Time. Company agrees to provide to
Parent and its Representatives copies of monthly internal financial statements within 30 days of
completion of such month. No information or knowledge obtained in any investigation in accordance
with this Section 4.2 will affect or be deemed to modify any representation or warranty in this
Agreement or the conditions to the obligations of Parent to consummate the Merger. Company will
permit Parent’s Representatives to meet with the officers of Company responsible for the financial
statements and internal controls of Company and its subsidiaries to discuss such matters as Parent
may deem reasonably necessary or appropriate to satisfy its obligations under Section 302 and 906
of the Xxxxxxxx-Xxxxx Act of 2002 and any rules and regulations relating thereto.
4.3 Consents and Notices. Company will promptly apply for or otherwise seek, and use
commercially reasonable efforts to obtain, all Consents and to provide all notices set forth in
Company Disclosure Schedule 4.3 (without the expenditure of any out-of-pocket payments to a third
party to obtain such third party’s consent or approval), and make all filings, required with
respect to Company for the consummation of the Merger.
4.4 Commercially Reasonable Efforts.
Company will use commercially reasonable best efforts in good faith to, and the Major
Shareholders will use their commercially reasonable best efforts in good faith to cause Company to,
effect the Transactions and to fulfill and cause to be fulfilled the conditions to Closing under
this Agreement as promptly as practicable and otherwise to enable consummation of the Transactions.
4.5 Notice to Holders of Company Shares. Company will promptly comply with the shareholder
notice requirements of the WBCA.
4.6 Tax Returns. Except as set forth in Company Disclosure Schedule 4.6, before the
Closing Date, Company will properly and timely file or cause to be filed all Returns with respect
to Company and any of its subsidiaries for all taxable periods that have ended before the Closing
Date and will pay (or cause any applicable subsidiaries to pay) all taxes required to be paid for
such periods. All such Returns will be prepared consistent with past practice, and will be subject
to approval of Parent, which will not be unreasonably withheld. Company will (i) notify Parent
promptly if Company receives written notice of any tax audit, the assessment of any tax, the
assertion of any tax lien, or any request, notice, or demand for taxes by any taxing authority,
(ii) provide Parent a description of any such matter in reasonable detail (including a copy of any
written materials received from the taxing authority), and (iii) take no action with respect to
such matter without the consent of Parent, which will not be unreasonably withheld. Company will
not (v) amend any Return previously filed, (w) incur any obligation to make any payment of, or in
respect of, any taxes, except in the ordinary course of business, (x) make or revoke any tax
election that may affect Company, (y) agree to extend or waive the statutory period of limitations
for the assessment or collection of any tax, or (z) enter into any agreement or settlement with
respect to any tax without the approval of Parent, which will not be unreasonably withheld.
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4.7 Intellectual Property. Company will not incorporate any software that is subject to an
Excluded License into any part of any Company software or service; use any software that is subject
to an Excluded License in whole or in part in the development of any Company software or services
in a manner that may subject the software, services, or content available therefrom, in whole or in
part, to an Excluded License; or combine or distribute Company software or services (including any
content available therefrom) with any software that is subject to an Excluded License.
4.8 Parachute Payments. Before the Effective Time, Company will submit to all Persons
entitled to vote (within the meaning of the Treasury Regulations under Code Section 280G) the
material facts concerning all payments that Parent reasonably believes, in the absence of
shareholder approval of such payments, would be “parachute payments” as defined in Code
Section 280G(b)(2) (“Parachute Payments”), in form and substance reasonably satisfactory to Parent
and its counsel, which will satisfy all requirements of the WBCA and Code Section 280G(b)(5)(B) and
the Treasury Regulations thereunder, and Company will solicit the consent of holders of Company
Shares to the Parachute Payments. Company’s board of directors will recommend approval of the
Parachute Payments, unless Company’s board of directors believes in good faith, after consultation
with Company’s counsel, that such recommendation would be inconsistent with the fiduciary duties of
Company’s board of directors under applicable law.
4.9 Deliveries.
Company will deliver to Parent (i) audited balance sheets of Company as of December 31, 2007
and the related audited statements of income, changes in owner’s equity, and cash flow for the 12
months then ended; (ii) an unaudited balance sheet of Company as of month-end for the month
immediately preceding the month of Closing (or as of month-end for the month that is 2 months
preceding the month of Closing if Closing occurs on any of the first 10 business days of a month)
(in either case, the “Pre-Closing Balance Sheet Date”), and the related unaudited statements of
income, changes in owner’s equity, and cash flow from the period from January 1, 2008 until the
Pre-Closing Balance Sheet Date; (iii) the Preliminary Closing Balance Sheet no later than three
business days before the anticipated Closing Date; and (iv) all minute books of Company and its
subsidiaries before Closing.
4.10 Shareholder Approval. Company will take all action, and the Major Shareholders will
use their best efforts to cause Company to take all action, necessary in accordance with the WBCA
and Company’s articles of incorporation and bylaws to solicit consent or to hold and convene a
special meeting of the shareholders of the Company to be held as soon as practicable to submit this
Agreement, the Merger, and related matters for the consideration and approval of the shareholders
of the Company.
4.11 Option Agreements. As soon as practicable (and in no event later than 30 days prior
to Closing), the Company shall amend those grant agreements governing Company Options as shall be
mutually identified by Company and Parent, to provide that such Company Options shall only become
vested and exercisable immediately prior to a Change in Control, as defined under Code Section 409A
and the Treasury regulations and available guidance issued thereunder. The Company shall take all
actions necessary for such amendments to be enforceable, including, without limitation, obtaining
the written consent of each affected option holder to the amendment to his or her option grant
agreement.
ARTICLE V
COVENANTS OF PARENT
COVENANTS OF PARENT
During the period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, Parent agrees (except as expressly
contemplated by this Agreement or with Company’s prior written consent, which will not be
unreasonably withheld) that:
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5.1 Breach of Representations and Warranties. In the event of, and promptly after becoming
aware of, the occurrence of or the pending or threatened occurrence of any event that would cause
or constitute a breach of any of the representations and warranties set forth in Section 3.3,
Parent will give detailed notice thereof to Company and will use commercially reasonable efforts to
prevent or promptly remedy such breach or inaccuracy.
5.2 Commercially Reasonable Efforts. Parent will use commercially reasonable best efforts
in good faith to effect the Transactions and to fulfill and cause to be fulfilled the conditions to
Closing under this Agreement as promptly as practicable and otherwise to enable consummation of the
Transactions.
ARTICLE VI
ADDITIONAL AGREEMENTS
ADDITIONAL AGREEMENTS
In addition to the foregoing, Parent and Company each agree to take the following actions
after the execution of this Agreement.
6.1 Non-Disclosure Agreement. Company and Parent agree that the Non-Disclosure Agreement
by and among Company and Parent dated October 24, 2007 (“Non-Disclosure Agreement”), the Agreement
on Confidentiality of Settlement Communications between Company and Parent dated October 24, 2007
(“Settlement Communications Agreement”) and any supplements and addendums to those agreements
subsequently executed, will continue in full force and effect and will be applicable to all
Confidential Information (as defined in the Non-Disclosure Agreement) and Settlement Communications
(as defined in the Settlement Communications Agreement) exchanged in connection with this Agreement
and the Transactions.
6.2 Legal Conditions to the Merger. Subject to Section 9.1(c), each of Parent, Sub, and
Company (a) will take all reasonable actions necessary to comply promptly with all legal
requirements that may be imposed on it with respect to the Merger and will promptly cooperate with
and furnish information to each other in connection with any such requirements imposed upon the
other, and (b) will take, and will cause its respective subsidiaries to take, all reasonable
actions to obtain (and to cooperate with the other parties in obtaining) any consent, approval,
order, or authorization of, or any exemption by, any Governmental Entity, or other third party,
required to be obtained or made by Company or Parent or their respective subsidiaries in connection
with the Merger or the taking of any action contemplated thereby or by this Agreement.
6.3 Proxy Statement and Registration Statement. As promptly as practicable after the
execution of this Agreement, Company and Parent shall prepare, and (i) Company shall distribute to
the shareholders of the Company, a proxy statement and materials relating to the adoption of this
Agreement by the shareholders of Company, and (ii) Parent shall file with the SEC, the Registration
Statement. As promptly as practicable following receipt of SEC comments thereon and with the
cooperation of Company, Parent shall file with the SEC amendments to the Registration Statement
which comply in form with applicable SEC requirements, and shall use all commercially reasonable
efforts to cause the Registration Statement to become effective as soon thereafter as practicable.
Parent will notify Company promptly of the receipt of any comments from the SEC or its staff and of
any request by the SEC or its staff or any
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other government officials for amendments or supplements
to the Registration Statement or for additional information. Whenever any event occurs that is
required to be set forth in an amendment or supplement to the Registration Statement and/or the
proxy statement and related materials, Each party shall promptly inform the other of such
occurrence and cooperate in filing with the SEC or its staff or any other government officials,
and/or mailing to shareholders of Company, such amendment or supplement. The proxy statement of
Company shall solicit the adoption of this Agreement by the shareholders of Company and shall
include the approval of this Agreement and the Merger by the Board of Directors of Company and the
recommendation of the Board of Directors of Company to Company’s shareholders that they vote in
favor of the adoption of this Agreement. Company and Parent agree to cooperate and provide
information and disclosure as required for the completion of the proxy statement and Registration
Statement.
6.4 Officers and Directors. Parent will cause the Surviving Corporation to maintain
Company’s existing indemnification provisions (including with respect to advancement of expenses)
as of the date hereof with respect to present and former directors, officers, employees, and agents
of Company and all other Persons who may presently serve or have served at Company’s request as a
director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise (collectively, the “Indemnified Parties”) for all expenses, judgments, fines, and
amounts paid in settlement by reason of actions or omissions or alleged actions or omissions
occurring at or before the Effective Time to the fullest extent permitted or required under
applicable law and Company’s articles of incorporation and bylaws in effect as of the date of this
Agreement (to the extent consistent with applicable law), for a period of five years after the
Effective Time, as well as any rights to indemnification and advancement of expenses provided in
employment agreements or indemnification agreements between Company and any Indemnified Parties,
and will cause Surviving Corporation to perform (and guarantees that Surviving Corporation will
perform) its obligations under such indemnification provisions and agreements in accordance with
their respective terms. The provisions of this Section 6.4 are for the benefit of, and will be
enforceable by, each of the Indemnified Parties, their heirs, and their Representatives.
6.5 Expenses. All costs and expenses incurred in connection with this Agreement and
the Transactions will be paid by the party incurring such expense.
6.6 Additional Agreements. In case at any time after the Effective Time any further
action is reasonably necessary or desirable to carry out the purposes of this Agreement or to vest
the Surviving Corporation with full title to all properties, assets, rights, approvals, immunities,
and franchises of Company or Sub, the proper officers and directors of each corporation that is a
party to this Agreement will take all such action.
6.7 Public Announcements. Neither Parent nor Company will make any public
announcement concerning this Agreement and the Transactions without the prior written consent of
the other party, and will furnish to the other party all releases before publication. Promptly
following the receipt of the Federal Trade Commission’s approval of the Merger, Parent will
distribute a public announcement substantially in the form attached hereto as Exhibit 6.7(a).
Promptly following the execution of this Agreement, Parent will distribute a public announcement
substantially in the form attached hereto as Exhibit 6.7(b). Nothing in this Agreement will
prevent Company or Parent at any time from furnishing any information to any Governmental Entity or
from issuing any release, each as required by law, in which circumstance Company or Parent, as
applicable will make commercially reasonable efforts to consult with Parent or Company as
applicable in advance to the extent practicable and in any event will notify Parent or Company as
applicable as soon as practicable. Neither Parent nor Company will not make any communication to
customers or announcements to its employees with respect to the Transactions without the prior
written consent of Parent or Company, as applicable.
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6.8 Employee Matters.
(a) Company will cooperate with regard to the recruitment and hiring of employees by Parent or
continuing employment with Company. Company will present offers of continued employment to such
employees of Company as are designated by Company prior to Closing. Such offers will be in a form
acceptable to Parent and will be presented in a manner and at times acceptable to Parent, provided
that offers will be made to the Company executives set forth on Company Disclosure Schedule 6.8
substantially in the forms attached hereto as Exhibit 6.8(a). Except as expressly agreed to in
writing by Sub or Parent, no specific terms and conditions of employment, including terms and
conditions pertaining to length of employment, are guaranteed. Company will use commercially
reasonable efforts to assist Parent with its recruitment efforts and to satisfy the requirements of
Section 7.2.6 before Closing.
(b) Company will cooperate with Parent to develop appropriate communications to Company
employees regarding the Transactions and a transition plan in contemplation of Closing, including
delivering other notices to employees as requested by Parent and which are reasonably acceptable to
Company.
(c) (i) At Parent’s request and immediately before the Effective Time, Company will terminate
or cause to be terminated any or all of the Plans set forth in Section 3.1.13 of the Company
Disclosure Schedule that are intended to be qualified within the meaning of Code Section 401(a),
with such termination to be effective before the Effective Time. Additionally, at Parent’s
request, and before the Effective Time, Company will terminate or cause to be terminated or amend
or cause to be amended any or all other employee benefit plans, policies, and arrangements set
forth in Section 3.1.13 of the Company Disclosure Schedule, at the time and in such manner as
Parent may direct, with Parent having sole and exclusive authority to determine the continuation,
amendment, or termination of such plans in accordance with applicable federal and state laws. Any
continuation, amendment or termination under this subsection (i) shall not be effective until
immediately prior to the Effective Time (with the effectiveness of such amendment or termination
being conditioned upon the occurrence of Closing).
(ii) In the event that Company, pursuant to Parent’s request, terminates or causes to be
terminated prior to the Effective Time any or all of the Plans or other employee benefit plans,
policies, and arrangements as described in subsection (i) above, then Parent shall take all
reasonable action so that employees of Company shall be entitled to participate in the Parent
Benefit Plans (as defined in subparagraph (iii) below) that are of a similar type as such
terminated Company plans to the same extent as similarly-situated employees of Parent as of the
Effective Time (it being understood that inclusion of the employees of Company in the Parent
Benefit Plans may occur at different times with respect to different plans), provided that nothing
contained herein shall require Parent to make any grants to any former employee of Company under
any discretionary equity compensation plan of Parent or to establish new Parent Benefit Plans that
do not exist at the time such Company plans are terminated, and subject to the other limitations
set forth in subsection (iii) below. Each of Company and Parent acknowledge and agree that all
provisions contained within this Section 6.08(c)(ii) with respect to employees are included for the
sole benefit of Company and Parent and shall not create any right (a) in any other person,
including, any current participant in any Parent Benefit Plans or Company benefit plans or any
beneficiary thereof or (b) to continued employment with Company, Parent or any of their respective
affiliates.
(iii) In the event Parent does not have Company terminate or amend any or all Company Plans or
other employee benefit plans, policies, and arrangements as set forth in (i)
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above, then as soon as
Parent determines, in its sole discretion, that such actions are administratively practicable,
Parent shall take all reasonable action so that employees of Company shall be entitled to
participate in each comparable employee benefit plan, program or arrangement of Parent of general
applicability (the “Parent Benefit Plans”) to the same extent as similarly-situated employees of
Parent (it being understood that inclusion of the employees of Company in the Parent Benefit Plans
may occur at different times with respect to different plans), provided that coverage shall be
continued under the corresponding benefit plans of Company until such employees are permitted to
participate in the comparable Parent Benefit Plan and provided further, however, that nothing
contained herein shall require Parent to make any grants to any former employee of Company under
any discretionary equity compensation plan of Parent. Parent shall use commercially reasonable
efforts to cause each Parent Benefit Plan in which employees of Company are eligible to participate
to recognize, for purposes of determining eligibility to participate in the vesting of benefits
under the Parent Benefit Plans, the service of such employees with Company to the same extent as
such service was credited for such purpose by Company, provided, however, that such service shall
not be recognized to the extent that such recognition would result in a duplication of benefits.
At such time as employees of Company become eligible to participate in a medical, dental or health
plan of Parent, Parent shall use commercially reasonable efforts to cause each such plan to (a)
waive any preexisting condition limitations to the extent such conditions are covered under the
applicable medical, health or dental plans of Parent, (b) provide full credit under such
plans for any deductibles, co-payment and out-of-pocket expenses incurred by the employees and
their beneficiaries during the portion of the calendar year prior to such participation and (c)
waive any waiting period limitation or evidence of insurability requirement which would otherwise
be applicable to such employee on or after the Effective Time to the extent such employee had
satisfied any similar limitation or requirement under an analogous Plan prior to the Effective
Time. Nothing in this Agreement (including this Section 6.8) will be deemed to (i) require Parent
to establish an employee benefit plan; (ii) limit or otherwise affect the right of Parent to modify
or terminate any Parent Benefit Plan without establishing a replacement plan, in each case as
Parent may determine in its sole discretion; (iii) require Parent to provide employee benefits to
any former employee of the Company after such employee’s employment with Company or Parent has
terminated; or (iv) incur material additional costs to obtain waivers or recognition from any
insurance carrier or benefit plan administrator. Each of Company and Parent acknowledge and agree
that all provisions contained within this Section 6.08(c)(iii) with respect to employees are
included for the sole benefit of Company and Parent and shall not create any right (x) in any other
person, including, without limitation, any third party beneficiary rights or any right in any
current participant in any Parent Benefit Plans or Company benefit plans or any beneficiary thereof
or (y) to continued employment with Company, Parent or any of their respective affiliates.
(d) As set forth in Section 2.2.2 above, Parent agrees to designate the Employee Retention
Pool Amount for (i) retention bonuses for certain Company employees selected by Company after
consultation with Parent, (ii) fees and expenses of the Employee Retention Escrow, and (iii) the
employer’s share of FICA (OASDI and Medicare) taxes on such retention bonuses. The initial
allocation of the portion of the Employee Retention Pool Amount that is left after taking into
account the estimated amount of the employer’s share of FICA taxes on the bonuses and fees and
expenses of the Employee Retention Escrow (“Initial Bonus Allocation”) among such employees will be
at Company’s discretion after consultation with Parent. The retention bonuses will be subject to
certain conditions and retention requirements determined by Company after consultation with Parent.
Each such employee will have the opportunity to earn the amount allocated for that individual
should he or she meet the requirements contained in Exhibit 2.2.2. In the event that any
individual employee does not earn the amounts allocated to him or her due to his or her failure to
meet applicable conditions or retention requirements, such amounts (plus the portion of the
Employee Retention Pool Amount allocated for the estimated employer’s share of FICA on such amount,
“FICA Allocation”) will not be paid or reallocated to other employees. Any bonus amounts that are
not earned as of the six-month anniversary of the Closing plus the FICA Allocation on such unearned
amounts will remain in the Employee Retention
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Escrow until such time as the Escrow Amount is to be
distributed, at which time such amounts shall be paid to the Escrow Agent under the Escrow
Agreement pursuant to Section 2.2.2 above and the terms of the Employee Retention Escrow Agreement.
6.9 Additional Payments. Parent agrees to pay, within five business days following the
Effective Time, those fees and expenses of litigation as set forth in Section 3.1.9(v) of the
Company Disclosure Schedule.
6.10 Certain Payments. Contemporaneous with the execution of this Agreement, Parent shall
deposit or cause to be deposited a cash amount equal to $3,000,000 with Xxxxxx Pepper PLLC, as
Escrow Agent under that Escrow Agreement dated as of December 4, 2007, subject to the terms
thereof.
6.11 Escrow Note. Contemporaneous with the Closing, Parent shall deposit the duly executed
Escrow Note with the Escrow Agent.
ARTICLE VII
CONDITIONS PRECEDENT
CONDITIONS PRECEDENT
7.1 Conditions to Each Party’s Obligation to Effect the Merger. The respective obligations
of each party to consummate the Merger are subject to the satisfaction, or to the extent permitted
by applicable law, the written waiver at or before the Effective Time, of each of the following
conditions:
7.1.1 Shareholder Approval. This Agreement and the Transactions will have received
Company Shareholder Approval.
7.1.2 Registration Statement. The Registration Statement shall have been declared
effective by the SEC, and no stop orders or injunctions shall have been filed with respect to such
Registration Statement, and all requisite filings and approvals shall have been made and obtained
from the NASD and The NASDAQ Global Market, as appropriate.
7.1.3 Consents. Other than the filing of the Articles of Merger with the Secretary of
State of Washington, all Consents, third party consents, and notices that are legally required to
be obtained or provided for the consummation of the Merger and the Transactions, including those
listed on Schedule 4.3, will have been satisfied, filed, occurred, or been obtained, in accordance
with the terms and conditions of all applicable agreements other than such Consents and third party
consents as Parent and Company agree Company and Parent will not seek or obtain.
7.1.4 No Order. No Governmental Entity of competent jurisdiction will have enacted,
issued, promulgated, enforced, or entered any statute, rule, regulation, executive order, decree,
injunction, or other order (whether temporary, preliminary, or permanent) that (i) is in effect,
and (ii) has the effect of making the Merger illegal or otherwise prohibiting consummation of the
Merger (which illegality or prohibition would have a material impact on Company if the Merger were
consummated notwithstanding such statute, rule, regulation, executive order, decree, injunction, or
other order).
7.2 Conditions of Obligations of Parent and Sub. The obligations of Parent and Sub to
consummate the Merger are further subject to the satisfaction or waiver at or before the Effective
Time of each of the following conditions:
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7.2.1 Representations and Warranties of Company. The representations and warranties
of Company in this Agreement will be true and correct in all respects on the date hereof and as of
the Closing Date with the same force and effect as if made on the Closing Date, except to the
extent the failure of such representations and warranties of Company to be true and correct has not
resulted, individually or in the aggregate, in a Company Material Adverse Effect (and except that
those representations and warranties which address matters only as of a particular date will have
been true and correct only on such date), it being understood that, for purposes of determining the
accuracy of such representations and warranties, all materiality qualifications and other
qualifications based on the word “material” in such representations and warranties will be
disregarded. Parent and Sub will have received a certificate with respect to the foregoing signed
on behalf of Company by the Chief Executive Officer and the Chief Financial Officer of Company.
7.2.2 Performance of Obligations of Company. Company will have performed in all
material respects all agreements and covenants required to be performed by it under this Agreement
before
the Closing Date. Parent will have received a certificate signed on behalf of Company by the
Chief Executive Officer and the Chief Financial Officer of Company to such effect.
7.2.3 No Company Material Adverse Effect. From the date of this Agreement until the
Closing Date, there has been no change, event, circumstance, development, or effect that resulted,
individually or in the aggregate, in a Company Material Adverse Effect, and Parent will have
received a certificate to that effect signed on behalf of Company by the Chief Executive Officer
and the Chief Financial Officer of Company.
7.2.4 Legal Action. There will not be pending any action, proceeding, or other
application brought by any Governmental Entity: (i) challenging or seeking to restrain or prohibit
the consummation of the Transactions, or seeking to obtain any material damages in connection
therewith; or (ii) seeking to prohibit or impose any material limitations on Parent’s or Surviving
Corporation’s ownership or operation of all or any portion of Company’s business or to compel
Parent or Surviving Corporation to dispose of or hold separate all or any material portion of the
assets of Company as a result of the Transactions.
7.2.5 Resignations. Parent will have received the resignations of all of the officers
and directors of Company as officers and directors and any subsidiaries thereof as Parent shall
designate (which resignations, other than the right to serve as an officer or director, will not
impair the rights of any officer or director as employees of the Surviving Corporation).
7.2.6 Certain Employees. As of immediately before Closing, (a) each individual set
forth in Company Disclosure Schedule 7.2.6 who is offered employment with Parent or continued
employment with Company with Parent’s approval will have received (and executed, as applicable) an
offer and employee agreement in the form provided by Parent and an employee proprietary information
and nondisclosure agreement in the form provided by Parent, and (b) each individual set forth on
Schedule 6.8(a) will have executed an offer and employment agreement as provided in Section 6.8(a),
and each individual in (a) and (b) above will not have taken any action or expressed any intent to
terminate or modify such acceptance, and will have in place all certifications, clearances, and
authorizations required to perform the duties of the specified position.
7.2.7 Noncompetition Agreement. Each individual set forth on Schedule 6.8(a) will
have executed a non-competition and non-solicitation agreement with Parent in the form attached
hereto as Exhibit 7.2.7, and will not have taken any action or expressed any intent to terminate or
modify such agreement.
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7.2.8 Termination of Certain Agreements. All agreements set forth in Company
Disclosure Schedule 7.2.8 will have been terminated by the parties thereto.
7.2.9 Amendment of Certain Agreements. All agreements set forth in Company Disclosure
Schedule 7.2.9 will have been amended as provided in such schedule, and such amendments will be in
full force and effect.
7.2.10 Opinion of Counsel. Parent will have received an opinion dated as of the Closing
Date of Xxxxxx Pepper PLLC reasonably satisfactory to Parent, substantially in the form attached
hereto as Exhibit 7.2.10. Parent will also have received an opinion dated as of the Closing Date
from Xxxxxx Pepper PLLC, reasonably satisfactory to Parent and upon which Parent can rely under
U.S. Treasury Department
Circular 230, opining as to whether the exercise of options in April 2008 and the exercise of any
options immediately prior to Closing, which are intended by the Company to be incentive stock
options may be properly reported as incentive stock options (within the meaning of Code Section
422).
7.2.11 Assignment of Rights to Company Intellectual Property. Company and the employees,
independent contractors (including former employees and independent contractors) and customers of
Company will have executed such assignments and other documentation as may be reasonably requested
by Parent to effectively transfer or confirm the transfer of all right, title, and interest to
Company Intellectual Property to Company and/or Parent as its successor.
7.2.12 Escrow Agreements. Shareholders’ Representative and BNY Mellon Shareowner Services
will have executed and delivered each of the Escrow Agreements.
7.2.13 Deliveries. Company will have made the deliveries required by Section 4.9.
7.2.14 Appraisal Rights. Not more than five percent (5%) of the holders of Company Shares
that are outstanding on the record date for the determination of those shares entitled to vote for
or against the Merger will have demanded and perfected appraisal rights, and not effectively
withdrawn or lost such appraisal rights.
7.2.15 Company Option Holders. Company shall have amended those designated Company
Options in accordance with Section 4.11 above, and all holders of Company Options will have
provided Parent with written consent to the exercise of each of their respective Company Options in
exchange for the right to receive the Conversion Payment for such Company Options as set forth in
Section 2.1.3 hereof, and such consents will be in full force and effect.
7.2.16 FIRPTA Certificate. Company will have delivered to Parent a duly authorized and
executed certificate stating that no interest in the Company is a United States real property
interest within the meaning of Section 897 of the Code, which certificate (and delivery thereof)
will comply in all respects with the requirements set forth in Treasury Regulation Sections
1.1445-2(c)(3) and 1.897-2(h).
7.2.17 Shareholders’ Agreements. Each of the agreements of even date herewith, entered
into between Parent, Company, each of the Major Shareholders and such other shareholders of the
Company as necessary to provide agreements representing a majority of the outstanding shares of the
Company, shall be in full force and effect.
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7.3 Conditions of Obligation of Company. The obligation of Company to consummate the
Merger is subject to the satisfaction, or to the extent permitted by applicable law, the written
waiver at or before the Effective Time of each of the following conditions:
7.3.1 Representations and Warranties of Parent and Sub. The representations and
warranties of Parent and Sub contained in this Agreement will be true and correct in all respects
on the date hereof and as of the Closing Date with the same force and effect as if made on the
Closing Date, except to the extent the failure of such representations and warranties of Company to
be true and correct has not resulted, individually or in the aggregate, in a Company Material
Adverse Effect (and except that those representations and warranties which address matters only as
of a particular date will have been true and correct only on such date), except, individually or in
the aggregate, as does not constitute a Parent Material Adverse Effect at the Closing Date (it
being understood that, for purposes of determining the accuracy of
such representations and warranties, all “Material Adverse Effect” and materiality
qualifications and other qualifications based on the word “material” in such representations and
warranties will be disregarded). Company will have received a certificate with respect to the
foregoing signed on behalf of Parent, with respect to the representations and warranties of Parent,
by an authorized officer of Parent and a certificate with respect to the foregoing signed on behalf
of Sub, with respect to the representations and warranties of Sub, by an authorized officer of Sub.
7.3.2 Performance of Obligations of Parent and Sub. Parent and Sub will have
performed all agreements and covenants required to be performed by them under this Agreement before
the Closing Date, and Company will have received a certificate signed on behalf of Parent and Sub
by an authorized officer of Parent and Sub to such effect.
7.3.3 Escrow Agreements. Parent and BNY Mellon Shareowner Services will have executed and
delivered each of the Escrow Agreements.
ARTICLE VIII
INDEMNIFICATION
INDEMNIFICATION
8.1 Indemnification Relating to Agreement. Subject to the limitations set forth in this
Article VIII, the holders of the Company Shares and Company Options jointly and severally (except
as to those matters described in Section 8.5(b)(i) and (ii) below, as to which matters the
indemnification obligations hereunder shall be several and not joint for any amounts in excess of
the then-available Escrow Amount) will defend, indemnify, and hold Parent and Surviving Corporation
harmless from and against, and reimburse Parent and Surviving Corporation with respect to, any and
all losses, damages, liabilities, claims, judgments, settlements, fines, costs, and expenses
(including reasonable attorneys’ fees) (“Indemnifiable Amounts”) of every nature whatsoever
incurred by Parent and Surviving Corporation by reason of or arising out of or in connection with
(i) any breach, or any claim (including claims by parties other than Parent) that if true, would
constitute a breach of any representation or warranty of Company in this Agreement (as modified by
the Company Disclosure Schedule as of the date hereof) or in any certificate or other document
delivered to Parent in accordance with this Agreement, (ii) the failure, partial or total, of
Company to perform any agreement or covenant required by this Agreement to be performed by it,
(iii) any Working Capital Deficit adjustment to the extent not paid in accordance with Section 2.3
and (iv) all taxes of Company relating to all taxable periods ended on or before the Closing Date
and the portion of taxes of Company attributable to the portion of any Straddle Period beginning as
of the first day of such Straddle Period and ending as of the end of the Closing Date (a
“Pre-Closing Period”) (calculated in the manner set forth in Section 8.3(c) (Straddle Period)); in
each case of (i) and (ii) above, without giving effect to any “materiality” limitations or
references to “material adverse effect” set forth therein. The availability of the Escrow Amount
to indemnify Parent will be
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determined without regard to any right to indemnification to which any
holder of any interest in the Escrow Amount may have in his or her capacity as an officer,
director, employee, agent, or any other capacity of Company and no such holder will be entitled to
any indemnification from Company or Surviving Corporation for amounts paid hereunder. Any payment
to Parent in accordance with this Article VIII will be treated for tax purposes as an adjustment to
the consideration for the Company Common Shares.
8.2 Third Party Claims.
(a) If any third party shall notify Parent with respect to any matter (a “Third-Party Claim”)
which may give rise to a claim for indemnification against any other party hereto (the
“Indemnifying Party”) under this Article VII, then Parent shall promptly (and in any event
within 30 business days after receiving notice of the Third-Party Claim) notify each Indemnifying
Party thereof in writing.
(b) Any Indemnifying Party will have the right at any time to assume and thereafter conduct
the defense of the Third-Party Claim with counsel of his or its choice reasonably satisfactory to
Parent; provided, that the Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third-Party Claim without the prior written consent
of the Parent (not to be withheld unreasonably).
(c) If the Indemnifying Party assumes the defense of such claim or litigation resulting
therefrom, Parent shall be entitled to participate in the defense of the claim, but Parent shall
bear the fees and expenses of any additional counsel retained by it to conduct its defense unless
any of the following shall apply: (i) the employment of such counsel shall have been authorized in
writing by the Indemnifying Party or (ii) the Indemnifying Party’s legal counsel shall advise the
Indemnifying Party in writing, with a copy to Parent, that there is a conflict of interest that
would make it inappropriate under applicable standards of professional conduct to have common
counsel. If clause (i) or (ii) in the immediately preceding sentence is applicable, then Parent
may employ separate counsel at the reasonable expense of the Indemnifying Party to represent
Parent, but in no event shall the Indemnifying Party be obligated to pay the costs and expenses of
more than one such separate counsel for any one complaint, claim, action or proceeding in any one
jurisdiction.
(d) Unless and until an Indemnifying Party assumes the defense of the Third-Party Claim as
provided in this Section 8.2, however, Parent may defend against the Third-Party Claim in any
manner it reasonably and in good faith may deem appropriate.
8.3 Tax Contests.
(a) To the extent Taxes paid by the Company for the Pre-Closing Period (other than those items
identified in Schedule 8.6) are not reserved for and reflected in the Final Working Capital, the
Company shall be entitled to withdraw from the Escrow Amount, without defense, at or prior to the
filing of the Return, the amount due in excess of the reserve.
(b) Parent shall prepare and file, or shall cause to be prepared and filed, all Returns
required to be filed by or with respect to the Company, other than those Returns described under
Section 4.6.
(c) For purposes of Section 8.1(iv), in the case of any taxable period that includes but does
not end on the Closing Date (a “Straddle Period”), the amount of any taxes based on
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or measured by
income or receipts of Company deemed to relate to a Pre-Closing Period will be determined based on
an interim closing of the books as of the close of business on the Closing Date, and the amount of
other taxes of Company for a Straddle Period which relate to a Pre-Closing Period will be deemed to
be the amount of such tax for the entire taxable period multiplied by a fraction the numerator of
which is the number of days in the taxable period ending on the Closing Date and the denominator of
which is the total number of days in such Straddle Period.
(d) Parent, the Company and the Shareholders’ Representative shall cooperate fully, as and to
the extent reasonably requested, in connection with the preparation and filing of Returns pursuant
to this Section 8.3 and any audit, investigation, litigation or other proceeding with respect to
Taxes that may be instituted after the Closing Date. Shareholders’ Representative shall
control the conduct, through counsel of Shareholders’ Representative’s own choosing at his expense
(which expense shall be reimbursable from the Escrow Amount), of any audit or administrative or
judicial proceeding involving any asserted Tax liability of the Company (any such audit or
proceeding relating to an asserted Tax liability referred to herein as a “Tax Contest”) relating
solely to Pre-Closing Periods, but Parent shall have the right to participate in any such Tax
Contest at its own expense and, with the written consent of the Shareholders’ Representative, and
at its expense, may assume control of the conduct of such Tax Contest. If Shareholders’
Representative fails to assume control of the conduct of any such Tax Contest within a reasonable
period following the receipt by any party of notice of such Tax Contest, Parent shall have the
right to assume control of such Tax Contest and shall be able to settle, compromise and/or concede
such Tax Contest in its sole discretion. Parent shall exercise the same level of client advocacy,
diligence and continuity of tax positions as Parent maintains for its own tax matters prior to the
merger.
(e) (i) From and after the Closing Date, the holders of the Company Shares and Company Options
shall indemnify and hold Parent harmless from and against and shall compensate and reimburse Parent
for any and all Losses (which will not be subject to any dollar threshold) arising out of or in
connection with any and all Taxes of the Company for all Pre-Closing Periods, or which relate to an
event or transaction occurring on or before the Closing Date, to the extent such Losses exceed the
amount, if any, reserved for and reflected in the Final Working Capital.
(ii) In the event that any of the Parent or the Surviving Corporation pays or receives a
request by a taxing authority to pay any Taxes relating to or arising from Pre-Closing Periods,
Parent shall notify the Shareholders’ Representative of any such payments or requests for payment.
Parent shall receive from the Escrow Amount amounts equal to such payments or requests for payment
no later than twenty (20) business days after the Shareholders’ Representative receives such
notification, unless the Shareholders’ Representative timely elects to contest any such Tax in
accordance herewith, in which case Parent shall not receive any reimbursement for any such Tax that
it is required to pay until the conclusion of such contest.
(iii) If any third party notifies the Shareholders’ Representative of the existence of any
audit, litigation or other proceeding relating to Taxes of the Company for a Pre-Closing Period (a
“Third-Party Tax Claim”), the Shareholders’ Representative shall give notice to Parent within
fifteen (15) days of the notice of the Third-Party Tax Claim. The Shareholders’ Representative
covenants and agrees not to settle or otherwise dispose of any Third-Party Tax Claim, if such claim
shall have adverse Tax consequences to Parent, without first obtaining written consent from Parent
of such settlement or disposition.
(f) Parent shall pay, or cause the Surviving Corporation to pay, to the Shareholders’
Representative any tax refunds, that are received by Parent or the Surviving Corporation
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which relate to Company tax periods or portions thereof ending on or before the Closing Date, net of any
reasonable expenses incurred by Parent in connection therewith, within 30 days after receipt
thereof. To the extent the Company receives an expense deduction as a result of the
exercise of Company Options pursuant to Section 2.1.3(b), and such deduction results in a tax loss
for such taxable period, the loss will first be applied as a tax loss carry-back to prior tax
periods, and the prior federal tax returns of the Company will be so amended to the extent
permitted under the Code. Tax receivables derived from the carryback of a net operating loss
calculated at Closing, where such net operating loss carryback relates to the expense deduction
described in the preceding sentence, will not be included as a part of Current Assets for purposes
of determining Net Working Capital. The parties agree to treat any indemnification payment
made pursuant to Section 8.3(e) and this Article VIII, as the case may be, as an adjustment to
the consideration for the Merger for federal, state, local and foreign income Tax purposes.
8.4 Binding Effect. The indemnification provisions in this Article VIII are an integral
part of this Agreement and Merger in the absence of which Parent would not have entered into this
Agreement.
8.5 Time Limit.
(a) The representations, warranties, covenants, and agreements of Company and Major
Shareholders set forth in this Agreement will survive Closing and will continue for eighteen (18)
months thereafter (the “Termination Date”), at which time all representations and warranties will
expire.
(b) Despite Section 8.5(a), no time limit will apply (other than the date that is 30 days
after the expiration of the applicable statute of limitations period) for indemnification arising
from: (i) fraud, willful breach, or intentional misrepresentation by Company or the holders of
Company Shares; (ii) any breaches of representations and warranties in Sections 3.1.2 (Capital
Structure) and Sections 3.1.3 and 3.2.1 (Authority). Despite the above, no representation,
warranty, covenant, or agreement will expire to the extent Parent has provided to the Shareholders’
Representative written notice of Parent’s claim for indemnification in accordance with the terms of
the Escrow Agreement before the expiration of the applicable survival period.
8.6 Limitations. Despite any other provision in this Article VIII, with respect
indemnification under Section 8.1(i) Parent and Surviving Corporation will be entitled to
indemnification thereunder only:
(a) if the aggregate Indemnifiable Amounts exceed $500,000 (the “Threshold Amount”); if and
when the aggregate Indemnifiable Amounts exceed the Threshold Amount, Parent will be entitled to be
indemnified for all Indemnifiable Amounts in excess of the Threshold Amount; and
(b) in an aggregate amount up to the Escrow Amount.
Provided, however, that the limitations of this Section 8.6 do not apply to, and any calculation of
the Threshold Amount as it relates to other Indemnifiable Amounts will not include, Indemnifiable
Amounts arising out of (i) fraud, willful breach, or intentional misrepresentation by Company or
the holders of Company Shares or Company Options; (ii) any breaches of representations and
warranties in Sections 3.1.2 (Capital Structure) and Sections 3.1.3 and 3.2.1 (Authority); and
(iii) any taxes of Company as described in Section 8.1(iv) and any breaches of representations and
warranties in
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Section 3.1.18 (Taxes) and by reason of or arising out of or in connection with those
matters identified in Schedule 8.6 attached hereto.
8.7 Contribution. Holders of Company Shares will have no right of contribution from the
Surviving Corporation for liabilities for such holders’ obligations under this Article VIII.
8.8 Exclusive Remedy. With the exception of (a) claims based upon fraud, willful breach,
or intentional misrepresentation, (b) claims under Section 8.1(iv), (c) claims arising out of
breaches of the representations and warranties in Section 3.1.2 (Capital Structure), Sections 3.1.3
and 3.2.1 (Authority) and Section 3.1.18 (Taxes), from and after the Effective Time, resort to
indemnification under this Article VIII will be the exclusive right and remedy of Parent and
Surviving Corporation for Indemnifiable Amounts or other damages under this Agreement (it being
understood that nothing in this Section 8.8 or
elsewhere in this Agreement will affect Parent’s or Surviving Corporation’s rights to equitable
remedies to the extent available).
ARTICLE IX
TERMINATION, AMENDMENT, AND WAIVER
TERMINATION, AMENDMENT, AND WAIVER
9.1 Termination. Despite anything in this Agreement to the contrary, this Agreement may be
terminated and the Transactions abandoned at any time before the Effective Time:
(a) by mutual written consent of Parent and Company, duly authorized by Parent and by the
board of directors of Company;
(b) by either Parent or Company (provided that the terminating party is not then in material
breach of any representation, warranty, covenant, or agreement contained in this Agreement) if (i)
there has been a material breach by the non-terminating party of any representation, warranty,
covenant, or agreement as set forth in the Agreement that results in the closing conditions in
Article VII in the terminating party’s favor not being capable of being met by the date set forth
in Section 9.1(c) below or (ii) if any representation or warranty of the non-terminating party is
or has been untrue or inaccurate such that, in the aggregate, such untruths or inaccuracies would
result, or reasonably be expected to result, in a Company Material Adverse Effect or a material
adverse effect on a party’s ability to consummate the Transactions; provided, however, that if in
each case such breach is curable, then this Agreement may not be terminated under this Section
9.1(b) until the earlier of (i) 30 days after delivery of written notice of such untruth or
inaccuracy or breach, or (ii) the date on which the non-terminating party ceases to exercise
commercially reasonable efforts to cure such untruth or inaccuracy or breach;
(c) by either Parent or Company if the Merger has not been consummated on or before the date
which is 180 days following the termination or expiration of all statutory waiting periods (and any
extension thereof) applicable to the Merger under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended (the “Outside Date”); provided, however, that the right to terminate this
Agreement under this Section 9.1 will not be available to any party whose action or failure to act
has been the principal cause of or resulted in the failure of the Merger to have been consummated
on or before such date and such action or failure to act constitutes a breach of this Agreement; or
(d) by either Parent or Company if any permanent injunction or other order of a court or other
competent authority preventing the Merger will have become final and not subject to appeal;
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9.2 Effect of Termination. In the event of termination of this Agreement by either Company
or Parent as provided in Section 9.1, this Agreement will become void and have no effect, and there
will be no liability or obligation on the part of Parent, Sub, or Company, or their respective
officers or directors, except that (i) the provisions of Sections 6.1 (Non-Disclosure Agreement),
6.7 (Public Announcements), 9.2 (Effect of Termination), 10.6 (Governing Law), 10.10 (Specific
Performance), 10.12 (Submission to Jurisdiction), and 10.13 (Shareholders’ Representative) and the
Non-Disclosure Agreement will survive any such termination and abandonment, and (ii) no party will
be released or relieved from any liability arising from the willful breach by such party of any of
its representations, warranties, covenants, or agreements as set forth in this Agreement.
ARTICLE X
GENERAL PROVISIONS
GENERAL PROVISIONS
10.1 Notices. All notices, requests, demands, or other communications required or
permitted to be given under this Agreement will be in writing and deemed given upon: (i) personal
delivery, (ii) confirmed delivery by a standard overnight courier or when delivered by hand, (iii)
when mailed in the United States by certified or registered mail, postage prepaid, addressed at the
following addresses (or at such address for a party as will be specified by notice given
hereunder), or (iv) transmitter’s confirmation of a receipt of a facsimile transmission:
| (a) | if to Parent or Sub, to: | Flow International Corporation | ||||
| 00000 00xx Xxxxxx Xxxxx | ||||||
| Xxxx, XX 00000 | ||||||
| Attention: Xxxx Xxxxxx, General Counsel | ||||||
| Facsimile No.: (000) 000-0000 | ||||||
| With a copy to: | K&L Gates llp | |||||
| 000 Xxxxxx Xxxxxx, Xxxxx 0000 | ||||||
| Xxxxxxx, XX 00000-0000 | ||||||
| Attention: Xxxxxx X. Xxxxx | ||||||
| Facsimile No.: 206-623-7022 | ||||||
| (b) | if to Company, to: | OMAX Corporation | ||||
| 00000 00xx Xxx. Xxxxx | ||||||
| Xxxx, XX 00000 | ||||||
| Attention: Xxxxx X’Xxxxxx | ||||||
| Facsimile No.: (000) 000-0000 | ||||||
| With a copy to: | Xxxxxx Pepper PLLC | |||||
| 0000 Xxxxx Xxxxxx | ||||||
| Xxxxxxx, XX 00000-0000 | ||||||
| Attention: Xxxxxx Xxxxxxx | ||||||
| Facsimile No.: 000-000-0000 |
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| (c) | if to Shareholders’ | |||||
| Representative to: | Xxxx X. Xxxxxx | |||||
| Xxxx X. Xxxxxx, Inc. | ||||||
| 0000 Xxxxxxxx Xx. X.X. | ||||||
| Xxxxxxxx, XX 00000 | ||||||
| Telephone No.: 000-000-0000 | ||||||
10.2 Interpretation. For purposes of this Agreement, “subsidiary” or “subsidiaries” means
with respect to any Person, any entity or entities of which securities or other ownership interests
having voting power sufficient to elect a majority of its board of directors or other governing
body are at any time directly or indirectly owned by such Person. For purposes of this Agreement,
“Person” means an individual, corporation, partnership, association, limited liability company,
trust, estate, organization, or other entity. The words “include,” “includes,” and “including”
when used in this Agreement will be
deemed in each case to be followed by the words “without limitation.” The table of contents and
headings contained in this Agreement are for reference purposes only and will not affect in any way
the meaning or interpretation of this Agreement. The “knowledge of” or other derivations of “know”
in this Agreement with respect to a party will mean the knowledge of the executive officers of such
party, after the exercise of reasonable inquiry and investigation by such executive officers. As
used in this Agreement, the term “affiliate” has the meaning set forth in Rule 12b-2 promulgated
under the Exchange Act. As used in this Agreement, the term “business day” means any day other
than a Saturday, Sunday, or a day on which banking institutions in Seattle, Washington are
permitted or obligated by law to be closed for regular banking business. The respective parties
hereto and their attorneys have negotiated this Agreement and the language hereof will not be
construed for or against either party, as drafter. A reference to a section, schedule, or an
exhibit will mean a section in, or schedule or exhibit to, this Agreement unless otherwise
explicitly set forth.
10.3 Counterparts. This Agreement may be executed (i) in one or more partially or fully
executed counterparts, each of which will be deemed an original and will bind the signatory, but
all of which together will constitute the same instrument, and (ii) by facsimile. The execution
and delivery of a Signature Page — Agreement and Plan of Merger, in the form annexed to this
Agreement, by any party hereto who will have been furnished the final form of this Agreement will
constitute the execution and delivery of this Agreement by such party.
10.4 Miscellaneous. This Agreement, the Non-Disclosure Agreement, and the documents
referred to in this Agreement (i) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof; (ii) is not intended to confer
upon any other Person any rights or remedies hereunder (except as otherwise expressly provided in
this Agreement and except that Section 6.4 is for the benefit of the Indemnified Parties); and
(iii) will not be assigned by operation of law or otherwise except as otherwise specifically
provided.
10.5 No Joint Venture. Nothing in this Agreement will be deemed or construed as creating a
joint venture or partnership between any of the parties hereto. No party is by virtue of this
Agreement authorized as an agent, employee, or legal representative of any other party. No party
will have the power to control the activities and operations of any other and their status is, and
at all times, will continue to be, that of independent contractors with respect to each other. No
party will have any power or authority to bind or commit any other. No party will hold itself out
as having any authority or relationship in contravention of this Section 10.5.
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10.6 Governing Law. This Agreement will be governed in all respects, including validity,
interpretation, and effect, by the laws of the State of Washington, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
10.7 Amendment. Except as may otherwise be provided in this Agreement, any provision of
this Agreement may be amended or modified by the parties hereto before the Closing Date, if, and
only if such amendment or modification is in writing and signed on behalf of each of the parties
hereto; provided that after the approval of this Agreement by the shareholders of Company, no such
amendment will be made except as allowed under applicable law.
10.8 Extension, Waiver. At any time before the Effective Time, any party hereto may, to
the extent legally allowed, (i) extend the time for the performance of any of the obligations or
other acts of the
other parties hereto, (ii) waive any inaccuracies in the representations and warranties in this
Agreement or in any document delivered pursuant hereto made to such party, and (iii) waive
compliance with any of the agreements, covenants, or conditions in this Agreement for the benefit
of such party. Any agreement on the part of a party hereto to any such extension or waiver will be
valid only if set forth in an instrument in writing and signed by the party against whom the waiver
is to be effective.
10.9 Successors and Assigns. This Agreement will not be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior written consent of the
other parties, except that Sub may assign, in its sole discretion and without the consent of any
other party, any or all of its rights, interests, and obligations hereunder to (a) Parent, or (b)
Parent and one or more direct or indirect wholly-owned subsidiaries of Parent. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and assigns.
10.10 Specific Performance. The parties acknowledge and agree that any 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
will 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.
10.11 Severability. If any term or other provision of this Agreement is invalid,
illegal, or incapable of being enforced by any rule of law, or public policy, all other conditions
and provisions of this Agreement will nevertheless remain in full force and effect so long as the
economic or legal substance of the Transactions are not 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 will 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.
10.12 Submission to Jurisdiction. All actions and proceedings arising out of or
relating to this Agreement will be heard and determined exclusively in any Washington state or
federal court sitting in King County. The parties hereto hereby (a) submit to the exclusive
jurisdiction of any state or federal court sitting in King County for the purpose of any action
arising out of or relating to this Agreement brought by any party hereto, and (b) irrevocably
waive, and agree not to assert by way of motion, defense, or otherwise, in any such action, any
claim that it is not subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that the action is brought in an
inconvenient forum, that the venue of the action is improper, or that this Agreement or the
Transactions may not be enforced in or by any of the above-named courts.
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10.13 Shareholders’ Representative.
(a) By virtue of the Company Shareholder Approval, and without any further act of any holder
of Company Shares, the holders of Company Shares will be deemed to have appointed Xxxx X. Xxxxxx,
Inc. (previously defined as the Shareholders’ Representative) as agent and attorney-in-fact for
each holder of Company Shares (except such shareholders, if any, holding Appraisal Shares) for all
matters relating to this Agreement, including to give and receive notices and communications; to
bind the holders of Company Shares to the terms of the Escrow Agreements; to authorize delivery of
cash and the exercise of the Escrow Note from the Escrow Amount in satisfaction of claims by Parent
or Surviving Corporation; to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with orders of courts and awards
of arbitrators with respect to such
claims; and to take all actions necessary or appropriate in the judgment of the Shareholders’
Representative for the accomplishment of the foregoing.
(b) The Shareholders’ Representative may be changed by the holders of Company Shares from time
to time upon not less than 30 days’ prior written notice to Parent, provided that holders of a
majority interest of the Escrow Amount agree to such removal of Xxxx X. Xxxxxx, Inc. and any
successors thereto and to the identity of the substituted agent. A Shareholders’ Representative may
resign at any time upon giving at least 30 days’ written notice to the holders of interest in the
Escrow Account, except that no such resignation will become effective until the appointment of a
successor Shareholders’ Representative. Upon resignation of a Shareholders’ Representative or a
successor Shareholders’ Representative thereto, the holders of a majority interest of the Escrow
Amount will agree on a successor Shareholders’ Representative thereto within 30 days after
receiving such notice. If holders of a majority interest of the Escrow Amount fail to agree upon a
successor Shareholders’ Representative within such time, the resigning Shareholders’ Representative
will have the right to appoint a successor Shareholders’ Representative, or if a Shareholders’
Representative is not designated within 45 days after receipt of the initial notice, Parent will
designate a successor Shareholders’ Representative. Any successor Shareholders’ Representative
will execute and deliver an instrument accepting such appointment and, without further acts, will
be vested with all the rights, powers, and duties of the predecessor Shareholders’ Representative
as if originally named as Shareholders’ Representative and thereafter the resigning Shareholders’
Representative will be discharged from any further duties and liability under this Agreement. No
bond will be required of any Shareholders’ Representative, and no Shareholders’ Representative will
receive compensation for his or her services. Notices or communications to or from the
Shareholders’ Representative will constitute notice to or from each of the holders of interest of
the Escrow Amounts for all matters relating to this Agreement.
(c) The Shareholders’ Representative will not be liable for any act done or omitted hereunder
as the Shareholders’ Representative while acting in good faith. Holders of Company Shares on whose
behalf the Escrow Amounts are contributed will severally indemnify the Shareholders’ Representative
and hold the Shareholders’ Representative harmless against all loss, liability, or expense incurred
without bad faith or willful misconduct on the part of such Shareholders’ Representative and
arising out of or in connection with the acceptance or administration of such Shareholders’
Representative’s duties hereunder, including the reasonable fees and expenses of any legal counsel
retained by the Shareholders’ Representative. The Shareholders’ Representative will be entitled to
the advance and reimbursement of costs and expenses incurred by or on behalf of the Shareholders’
Representative in the performance of their duties hereunder, including the reasonable fees and
expenses of any legal counsel retained by the Shareholders’ Representative, in accordance with the
terms of the Escrow Agreements.
-55-
(d) A decision, act, consent, or instruction of the Shareholders’ Representative relating to
this Agreement will constitute a decision of the holders of Company Shares and will be final,
binding, and conclusive upon each such holder. Parent, and all other persons entitled to
indemnification under the Escrow Agreements or any other document or agreement entered into in
connection herewith or therewith (the “Indemnified Persons”), may rely upon any such decision, act,
consent, or instruction of the Shareholders’ Representative as being the decision, act, consent, or
instruction of the holders of Company Shares. Parent and all other Indemnified Persons are hereby
relieved from any liability to any person for any acts done by them in accordance with such
decision, act, consent, or instruction of the Shareholders’ Representative.
[remainder of page intentionally blank]
-56-
SIGNATURE PAGE—AGREEMENT AND PLAN OF MERGER
IN WITNESS WHEREOF, Parent, Sub, Company, the Major Shareholders, and the Shareholders’
Representative have signed or caused their respective duly authorized officers to sign this
Agreement, all as of the date first written above.
| FLOW INTERNATIONAL CORPORATION | ||||||
| By | /s/ Xxxxxxx X. Xxxxx
|
|||||
| Its President and CEO | ||||||
| ORANGE ACQUISITION CORPORATION | ||||||
| By | /s/ Xxxx Xxxxxx | |||||
| Its President | ||||||
| OMAX CORPORATION | ||||||
| By | /s/ Xxxx X. Xxxxxx | |||||
| Its Chairman and CEO | ||||||
| SHAREHOLDERS’ REPRESENTATIVE | ||||||
| /s/ Xxxx X. Xxxxxx | ||||||
| (signature page continues) | ||||||
SIGNATURE PAGE—AGREEMENT AND PLAN OF MERGER
| /s/ Xxxx X. Xxxxxx
|
||||
| Major Shareholder | ||||
| (signature page continues) |
-58-
SIGNATURE PAGE—AGREEMENT AND PLAN OF MERGER
| /s/ Xxxx X. Xxxxx
|
||||
| Major Shareholder |
(signature page continues)
SIGNATURE PAGE—AGREEMENT AND PLAN OF MERGER
| /s/ Xxxxx X. X’Xxxxxx
|
||||
| Major Shareholder |
(signature page continues)
SIGNATURE PAGE—AGREEMENT AND PLAN OF MERGER
| PUGET PARTNERS, L.P. | ||||||
| Major Shareholder | ||||||
| By | /s/ Xxxx X. Xxxxxx
|
|||||
| Its General Partner | ||||||
(signature page continues)
FLOW INTERNATIONAL CORPORATION
ORANGE ACQUISITION CORPORATION
OMAX CORPORATION
SHAREHOLDERS OF OMAX CORPORATION
SHAREHOLDERS’ REPRESENTATIVE
AGREEMENT AND PLAN OF MERGER
Dated as of September 9, 2008
TABLE OF CONTENTS
| Page | ||||||||||||
| ARTICLE I THE MERGER | ||||||||||||
| 1.1 | Effective Time of the Merger | 1 | ||||||||||
| 1.2 | Closing | 1 | ||||||||||
| 1.3 | Effects of the Merger | 1 | ||||||||||
| ARTICLE II EFFECT OF THE MERGER; DELIVERY OF CONSIDERATION | ||||||||||||
| 2.1 | Effect on Capital Stock | 2 | ||||||||||
| 2.1.1 | Capital Stock of Sub | 2 | ||||||||||
| 2.1.2 | Cancellation of Company Shares | 2 | ||||||||||
| 2.1.3 | Conversion of Company Securities | 2 | ||||||||||
| 2.1.4 | Stock Consideration | 4 | ||||||||||
| 2.1.5 | Contingent Consideration | 4 | ||||||||||
| 2.1.6 | Appraisal Rights | 5 | ||||||||||
| 2.2 | Escrow | 5 | ||||||||||
| 2.2.1 | Escrow Amount | 5 | ||||||||||
| 2.2.2 | Employee Retention Pool | 6 | ||||||||||
| 2.3 | Net Working Capital | 6 | ||||||||||
| 2.4 | Delivery of Consideration | 9 | ||||||||||
| 2.4.1 | Disbursing Agent | 9 | ||||||||||
| 2.4.2 | Exchange Procedures | 9 | ||||||||||
| 2.4.3 | No Further Ownership Rights in Company Shares | 10 | ||||||||||
| 2.4.4 | Return to Parent | 10 | ||||||||||
| 2.4.5 | Withholding Rights | 10 | ||||||||||
| ARTICLE III REPRESENTATIONS AND WARRANTIES | ||||||||||||
| 3.1 | Representations and Warranties of Company | 10 | ||||||||||
| 3.1.1 | Organization, Standing, and Power | 10 | ||||||||||
| 3.1.2 | Capital Structure | 11 | ||||||||||
| 3.1.3 | Authority | 12 | ||||||||||
| 3.1.4 | Consents and Approvals; No Violations | 12 | ||||||||||
| 3.1.5 | Financial Statements | 13 | ||||||||||
| 3.1.6 | No Defaults | 13 | ||||||||||
| 3.1.7 | Litigation | 14 | ||||||||||
| 3.1.8 | No Material Adverse Change | 14 | ||||||||||
| 3.1.9 | Absence of Undisclosed Liabilities | 15 | ||||||||||
| 3.1.10 | No Violations | 16 | ||||||||||
| 3.1.11 | Certain Agreements | 16 | ||||||||||
| 3.1.12 | Employees | 16 | ||||||||||
| 3.1.13 | Employee Benefit Plans | 17 | ||||||||||
| 3.1.14 | Real Property; Leases | 18 | ||||||||||
| 3.1.15 | Environmental | 19 | ||||||||||
| 3.1.16 | Customers and Suppliers | 20 | ||||||||||
| 3.1.17 | Material Contracts | 21 | ||||||||||
| 3.1.19 | Taxes | 22 | ||||||||||
| 3.1.19 | Interests of Officers | 24 | ||||||||||
| 3.1.20 | Technology and Intellectual Property Rights | 24 | ||||||||||
| 3.1.21 | Vote Required | 29 | ||||||||||
| 3.1.22 | Brokers’ and Other Fees | 29 | ||||||||||
| 3.1.23 | Change of Control | 29 | ||||||||||
| 3.1.24 | Complete Copies of Materials | 29 | ||||||||||
| 3.1.25 | Board Recommendation | 30 | ||||||||||
| 3.1.26 | Insurance | 30 | ||||||||||
| Page | ||||||||||||
| 3.1.27 | Accounts Receivable | 30 | ||||||||||
| 3.1.28 | Personal Property | 30 | ||||||||||
| 3.1.29 | Guarantees and Suretyships | 30 | ||||||||||
| 3.1.30 | Certain Transactions | 30 | ||||||||||
| 3.1.31 | Government Contracts | 31 | ||||||||||
| 3.1.32 | Disclosure | 31 | ||||||||||
| 3.1.33 | Reliance | 31 | ||||||||||
| 3.2 | Representations and Warranties of Major Shareholders | 31 | ||||||||||
| 3.2.1 | Authority | 31 | ||||||||||
| 3.2.2 | Voting Agreements | 32 | ||||||||||
| 3.2.3 | Non-Contravention; Consents | 32 | ||||||||||
| 3.2.4 | Reliance | 32 | ||||||||||
| 3.3 | Representations and Warranties of Parent and Sub | 32 | ||||||||||
| 3.3.1 | Organization; Standing and Power | 32 | ||||||||||
| 3.3.2 | Authority | 32 | ||||||||||
| 3.3.3 | Consents and Approvals; No Violations | 33 | ||||||||||
| 3.3.4 | Disclosure | 33 | ||||||||||
| 3.3.4 | SEC Reports | 33 | ||||||||||
| 3.3.46 | Compliance with Law | 33 | ||||||||||
| 3.3.47 | Operations of Sub | 33 | ||||||||||
| 3.3.48 | Proxy Materials | 34 | ||||||||||
| 3.3.49 | Brokers or Finders | 34 | ||||||||||
| 3.3.4 | Sufficient Funds | 34 | ||||||||||
| 3.3.4 | Acquiring Person | 34 | ||||||||||
| 3.3.12 | Reliance | 34 | ||||||||||
| ARTICLE IV COVENANTS OF COMPANY | ||||||||||||
| 4.1 | Conduct of Business | 34 | ||||||||||
| 4.1.1 | Ordinary Course | 34 | ||||||||||
| 4.1.2 | Exclusivity; Acquisition Proposals | 37 | ||||||||||
| 4.2 | Breach of Representations and Warranties; Notification; Access to Information | 38 | ||||||||||
| 4.3 | Consents and Notices | 39 | ||||||||||
| 4.4 | Commercially Reasonable Efforts | 39 | ||||||||||
| 4.5 | Notice to Holders of Company Shares | 39 | ||||||||||
| 4.6 | Tax Returns | 39 | ||||||||||
| 4.7 | Intellectual Property | 39 | ||||||||||
| 4.8 | Parachute Payments | 39 | ||||||||||
| 4.9 | Deliveries | 40 | ||||||||||
| 4.10 | Shareholder Approval | 40 | ||||||||||
| 4.10 | Option Agreements | 40 | ||||||||||
| ARTICLE V COVENANTS OF PARENT | ||||||||||||
| 5.1 | Breach of Representations and Warranties | 40 | ||||||||||
| 5.2 | Commercially Reasonable Efforts | 40 | ||||||||||
| ARTICLE VI ADDITIONAL AGREEMENTS | ||||||||||||
| 6.1 | Non-Disclosure Agreement | 41 | ||||||||||
| 6.2 | Legal Conditions to the Merger | 41 | ||||||||||
| 6.4 | Proxy Statement and Registration Statement | 41 | ||||||||||
| 6.4 | Officers and Directors | 41 | ||||||||||
| 6.5 | Expenses | 42 | ||||||||||
| 6.6 | Additional Agreements | 42 | ||||||||||
| 6.7 | Public Announcements | 42 | ||||||||||
| 6.8 | Employee Matters | 42 | ||||||||||
| 6.7 | Additional Payments | 44 | ||||||||||
| Page | ||||||||||||
| 5.2 | Certain Payments | 44 | ||||||||||
| ARTICLE VII CONDITIONS PRECEDENT | ||||||||||||
| 7.1 | Conditions to Each Party’s Obligation to Effect the Merger | 44 | ||||||||||
| 7.1.1 | Shareholder Approval | 44 | ||||||||||
| 7.1.3 | Registration Statement | 45 | ||||||||||
| 7.1.3 | Consents | 45 | ||||||||||
| 7.1.44 | No Order | 45 | ||||||||||
| 7.2 | Conditions of Obligations of Parent and Sub | 45 | ||||||||||
| 7.2.1 | Representations and Warranties of Company | 45 | ||||||||||
| 7.2.2 | Performance of Obligations of Company | 46 | ||||||||||
| 7.2.3 | No Company Material Adverse Effect | 46 | ||||||||||
| 7.2.4 | Legal Action | 46 | ||||||||||
| 7.2.5 | Resignations | 46 | ||||||||||
| 7.2.6 | Certain Employees | 46 | ||||||||||
| 7.2.7 | Noncompetition Agreement | 46 | ||||||||||
| 7.2.8 | Termination of Certain Agreements | 46 | ||||||||||
| 7.2.9 | Amendment of Certain Agreements | 47 | ||||||||||
| 7.2.10 | Opinion of Counsel | 47 | ||||||||||
| 7.2.11 | Assignment of Rights to Company Intellectual Property | 47 | ||||||||||
| 7.2.12 | Escrow Agreements | 47 | ||||||||||
| 7.2.13 | Deliveries | 47 | ||||||||||
| 7.2.14 | Appraisal Rights | 47 | ||||||||||
| 7.2.15 | Company Option Holders | 47 | ||||||||||
| 7.2.16 | FIRPTA Certificate | 47 | ||||||||||
| 7.2.16 | Shareholders’ Agreements | 47 | ||||||||||
| 7.3 | Conditions of Obligation of Company | 47 | ||||||||||
| 7.3.1 | Representations and Warranties of Parent and Sub | 48 | ||||||||||
| 7.3.2 | Performance of Obligations of Parent and Sub | 48 | ||||||||||
| 7.3.3 | Escrow Agreements | 48 | ||||||||||
| ARTICLE VIII INDEMNIFICATION | ||||||||||||
| 8.1 | Indemnification Relating to Agreements | 48 | ||||||||||
| 8.2 | Third Party Claims | 49 | ||||||||||
| 8.3 | Tax Contests | 49 | ||||||||||
| 8.4 | Binding Effect | 51 | ||||||||||
| 8.5 | Time Limit | 51 | ||||||||||
| 8.6 | Limitations | 51 | ||||||||||
| 8.7 | Contribution | 52 | ||||||||||
| 8.8 | Exclusive Remedy | 52 | ||||||||||
| ARTICLE IX TERMINATION, AMENDMENT, AND WAIVER | ||||||||||||
| 9.1 | Termination | 52 | ||||||||||
| 9.2 | Effect of Termination | 53 | ||||||||||
| ARTICLE X GENERAL PROVISIONS | ||||||||||||
| 10.1 | Notices | 53 | ||||||||||
| 10.2 | Interpretation | 54 | ||||||||||
| 10.3 | Counterparts | 54 | ||||||||||
| 10.4 | Miscellaneous | 54 | ||||||||||
| 10.5 | No Joint Venture | 54 | ||||||||||
| 10.6 | Governing Law | 55 | ||||||||||
| 10.7 | Amendment | 55 | ||||||||||
| 10.8 | Extension, Waiver | 55 | ||||||||||
| 10.9 | Successors and Assigns | 55 | ||||||||||
| Page | ||||||||||||
| 10.10 | Specific Performance | 55 | ||||||||||
| 10.11 | Severability | 55 | ||||||||||
| 10.12 | Submission to Jurisdiction | 55 | ||||||||||
| 10.13 | Shareholders’ Representative | 56 | ||||||||||
LIST OF EXHIBITS AND SCHEDULES
Exhibit 2.2.1(a)
|
Form of Escrow Agreement | |
Exhibit 2.2.1(b)
|
Form of Escrow Note | |
Exhibit 2.2.2
|
Form of Employee Retention Escrow Agreement | |
Exhibit 6.7
|
Form of Public Announcement | |
Exhibit 6.8(a)
|
Forms of Employment Agreement | |
Exhibit 7.2.7
|
Form of Non-Competition and Non-Solicitation Agreement | |
Exhibit 7.2.10
|
Form of Opinion of Counsel | |
Company Disclosure Schedule |
||
Schedule 2.1
|
Pro Forma Calculations | |
Schedule 2.3(c)
|
Preliminary Closing Balance Sheet | |
Schedule 4.3
|
Required Consents | |
Schedule 4.6
|
Tax Returns | |
Schedule 7.2.6
|
Certain Employees | |
Schedule 7.2.8
|
List of Agreements to be Terminated | |
Schedule 7.2.9
|
List of Agreements to be Amended |
INDEX OF DEFINED TERMS
Accounting Arbitrator |
8 | |||
Acquisition Proposal |
39 | |||
affiliate |
56 | |||
Agreement |
1 | |||
Appraisal Shares |
5 | |||
Articles of Merger |
1 | |||
Average Share Price |
5 | |||
Balance Sheet Date |
14 | |||
Base Cash Amount |
3 | |||
business day |
56 | |||
Certificate |
3 | |||
Change of Recommendation |
39 | |||
Closing |
1 | |||
Closing Balance Sheet |
9 | |||
Closing Date |
1 | |||
Closing Date NWC |
8 | |||
Closing Share Price |
4 | |||
Code |
11 | |||
Collection and Use |
28 | |||
Company |
1 | |||
Company Common Shares |
2 | |||
Company Disclosure Schedule |
11 | |||
Company Intellectual Property |
26 | |||
Company Lease |
19 | |||
Company Licensed Intellectual Property |
26 | |||
Company Material Adverse Effect |
11 | |||
Company Options |
3 | |||
Company Options |
12 | |||
Company Owned Intellectual Property |
26 | |||
Company Preferred Shares |
12 | |||
Company Securities |
12 | |||
Company Shareholder Approval |
30 | |||
Company Shares |
2 | |||
Consents |
14 | |||
Conversion Payment |
2 | |||
Counter Proposed Closing Balance Sheet |
8 | |||
Customer Information |
28 | |||
Debt |
7 | |||
Determination Materials |
8 | |||
Disbursing Agent |
9 | |||
Effective Time |
1 | |||
Employee Retention Escrow |
6 | |||
Employee Retention Escrow Agreement |
6 | |||
Employee Retention Pool Amount |
6 | |||
Environmental Law |
21 | |||
Environmental Permits |
20 | |||
ERISA |
18 | |||
Escrow Agreement |
6 | |||
Escrow Agreements |
6 | |||
Escrow Amount |
6 | |||
Escrow Amounts |
6 | |||
Escrow Note |
6 | |||
Excluded License |
29 | |||
Expenses |
4 | |||
FICA Allocation |
46 | |||
Final Closing Date NWC |
8 | |||
Financial Statements |
14 | |||
GAAP |
14 | |||
Government Contracts |
32 | |||
Governmental Entity |
14 | |||
Gross Distributable Cash Amount |
4 | |||
Gross Distributable Contingent Consideration |
4 | |||
Gross Distributable Stock Consideration |
4 | |||
Hazardous Material |
20 | |||
Hazardous Materials Activities |
20 | |||
Incentive Plans |
12 | |||
include |
56 | |||
includes |
56 | |||
including |
56 | |||
Indemnifiable Amounts |
51 | |||
Indemnified Parties |
43 | |||
Indemnified Persons |
59 | |||
Indemnifying Party |
51 | |||
Initial Bonus Allocation |
46 | |||
In-Licenses |
26 | |||
Intellectual Property |
25 | |||
Intellectual Property Rights |
26 | |||
Interim Balance Sheet Date |
14 | |||
IRS |
19 | |||
know |
56 | |||
knowledge of |
56 | |||
Letter of Transmittal |
10 | |||
Liabilities |
16 | |||
Liability |
16 | |||
Major Shareholders |
1 | |||
Material Contracts |
22 | |||
Maximum Working Capital |
7 | |||
Merger |
1 | |||
Minimum Working Capital |
7 | |||
Net Working Capital |
7 | |||
Non-Disclosure Agreement |
43 | |||
Option Consideration |
4 | |||
Outside Date |
55 | |||
Parachute Payments |
41 | |||
Parent |
1 | |||
Parent Benefit Plans |
45 | |||
Parent Common Stock |
4 | |||
Parent Material Adverse Effect |
34 | |||
Parent SEC Reports |
35 | |||
Participating Common Stock Equivalents |
4 | |||
PCSEs |
4 | |||
Per Share Consideration |
4 | |||
Per Share Contingent Consideration |
4 | |||
Per Share Stock Consideration |
4 |
Person |
56 | |||
Plan |
18 | |||
Pre-Closing Balance Sheet Date |
42 | |||
Pre-Closing Period |
51 | |||
Preliminary Closing Balance Sheet |
7 | |||
Preliminary Closing Date NWC |
8 | |||
Proposed Closing Balance Sheet |
8 | |||
Reconciliation Deadline |
8 | |||
Registration Statement |
32 | |||
Representatives |
39 | |||
Restricted Transaction |
39 | |||
Returns |
23 | |||
Review Notice |
8 | |||
SEC |
32 | |||
Settlement Communications Agreement |
43 | |||
Shareholders’ Representative |
1 | |||
Significant Customer |
21 | |||
Significant Supplier |
21 | |||
Straddle Period |
52 | |||
Sub |
1 | |||
subsidiaries |
56 | |||
subsidiary |
56 | |||
Surviving Corporation |
1 | |||
Surviving Corporation Common Stock |
2 | |||
tax |
23 | |||
Tax Contest |
52 | |||
taxes |
23 | |||
Technology |
26 | |||
Termination Date |
53 | |||
Third-Party Claim |
51 | |||
Third-Party Tax Claim |
53 | |||
Threshold Amount |
54 | |||
Total Current Assets |
7 | |||
Total Current Liabilities |
7 | |||
Violation |
13 | |||
WBCA |
1 | |||
without limitation |
56 | |||
Working Capital Credit |
7 | |||
Working Capital Deficit |
7 |
