AGREEMENT AND PLAN OF MERGER AND REORGANIZATION among: Kratos Defense & Security Solutions, Inc., a Delaware corporation; White & Shadow, Inc., a California corporation; and SYS, a California corporation Dated as of February 20, 2008
EXHIBIT 10.1
among:
Kratos
Defense & Security Solutions, Inc.,
a
Delaware corporation;
White
& Shadow, Inc.,
a
California corporation; and
SYS,
a
California corporation
___________________________
Dated as
of February 20, 2008
___________________________
TABLE OF
CONTENTS
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Section
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Page
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SECTION
1 DESCRIPTION OF TRANSACTION
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|
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1.1
Merger of Merger Sub into the Company
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2
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1.2
Effect of the Merger
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3
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1.3
Closing; Effective Time
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3
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1.4
Articles of Incorporation and Bylaws; Directors and Officers
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3
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1.5
Conversion of Shares
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3
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1.6
Closing of the Company’s Transfer Books
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4
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1.7
Exchange of Certificates
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4
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1.8
Treatment of Company Options and Other Equity-Based Awards
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5
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1.9 Tax
Consequences
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6
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1.10
Further Action
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6
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|
SECTION
2 REPRESENTATIONS AND WARRANTIES OF THE
COMPANY
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|
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2.1
Organization and Good Standing
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6
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2.2
Authority; No Conflict
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6
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2.3
Capitalization
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7
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2.4 SEC
Reports
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8
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2.5
Financial Statements
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9
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2.6
Property
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9
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2.7
Real Property; Equipment; Leasehold
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10
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2.8
Proprietary Rights
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10
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2.9 No
Undisclosed Liabilities
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13
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2.10
Taxes
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14
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|
2.11
Employee Benefits
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16
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2.12
Compliance with Legal Requirements; Governmental Authorizations
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19
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2.13
Environmental Matters
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19
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2.14
Legal Proceedings
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19
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2.15
Absence of Certain Changes and Events
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20
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2.16
Contracts; No Defaults
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20
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2.17
Insurance
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22
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2.18
Labor Matters
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23
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2.19
Government Contracting
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23
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2.20
Interests of Officers and Directors
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24
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2.21
Export Control Laws; Encryption and Other Restricted Technology
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24
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2.22
Business Relationships
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24
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2.23
International Trade Matters
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24
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2.24
Rights Plan
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24
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2.25
Opinion of Financial Advisor
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25
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2.26
Brokers
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25
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2.27
Full Disclosure
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25
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2.28
Sale of Products; Performance of Services
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25
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SECTION
3 REPRESENTATIONS AND WARRANTIES OF PARENT
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3.1
Organization and Good Standing
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26
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3.2
Authority; No Conflict
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26
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3.3
Capitalization
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28
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|
3.4 SEC
Reports
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28
|
|
3.5
Financial Statements
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29
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|
3.6
Absence of Certain Changes and Events
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30
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|
3.7
Operation of Merger Sub
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30
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3.8
Property
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30
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|
3.9
Proprietary Rights
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31
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|
3.10 No
Undisclosed Liabilities
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31
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|
3.11
Taxes
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31
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3.12
Employee Benefits
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34
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|
3.13
Compliance with Legal Requirements; Governmental Authorizations
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36
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3.14
Environmental Matters
|
36
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|
3.15
Legal Proceedings
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37
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3.16
Real Property; Equipment; Leasehold
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37
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3.17
Contracts; No Defaults
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37
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3.18
Insurance
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39
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3.19
Labor Matters
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39
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3.20
Government Contracting
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39
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3.21
Interests of Officers and Directors
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40
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|
3.22
Export Control Laws; Encryption and Other Restricted Technology
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40
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3.23
International Trade Matters
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40
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3.24
Brokers
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40
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|
3.25
Full Disclosure
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41
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3.26
Sale of Products; Performance of Services
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41
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SECTION
4 CONDUCT OF BUSINESS
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|
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4.1
Covenants of the Company
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41
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4.2
Covenants of Parent
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44
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4.3
Confidentiality
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45
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SECTION
5 ADDITIONAL AGREEMENTS
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|
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5.1 No
Solicitation
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45
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5.2
Joint Proxy Statement/Prospectus; Registration Statement
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47
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5.3
NASDAQ Quotation; AMEX Quotation
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48
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5.4
Access to Information
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48
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5.5
Stockholders’ Meeting
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48
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5.6
Legal Conditions to the Merger
|
49
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5.7
Public Disclosure
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50
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5.8
Section 368(a) Reorganization
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51
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5.9
NASDAQ Stock Market Listing
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51
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5.10
Shareholder Litigation
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51
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5.11
Indemnification
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51
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5.12
Employee Matters
|
52
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5.13
Employee Benefit Plan – 401(k) Plan
|
52
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5.14
Notification of Certain Matters
|
52
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|
5.15
Exemption from Liability Under Section 16(b)
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52
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5.16
Tax Matters
|
53
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5.17
Obligations of Merger Sub
|
53
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SECTION
6 CONDITIONS TO MERGER
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|
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6.1
Conditions to Each Party’s Obligation To Effect the Merger
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53
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6.2
Additional Conditions to Obligations of Parent and the Merger Sub
|
54
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6.3
Additional Conditions to Obligations of the Company
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55
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SECTION
7 TERMINATION AND AMENDMENT
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7.1
Termination
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56
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7.2
Effect of Termination
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57
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7.3
Fees and Expenses
|
57
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SECTION
8 MISCELLANEOUS PROVISIONS
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|
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8.1
Amendment
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58
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8.2
Remedies Cumulative; Waiver
|
59
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8.3 No
Survival
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59
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8.4
Entire Agreement
|
59
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8.5
Execution of Agreement; Counterparts; Electronic Signatures80
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59
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8.6
Governing Law
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59
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8.7
Consent to Jurisdiction; Venue
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59
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8.8
WAIVER OF JURY TRIAL
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59
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8.9
Disclosure Schedules
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60
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8.10
Attorneys’ Fees
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60
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8.11
Assignments and Successors
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60
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8.12 No
Third Party Rights
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60
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8.13
Notices
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61
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8.14
Construction; Usage
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62
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8.15
Enforcement of Agreement
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63
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8.16
Severability
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63
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8.17
Time of Essence
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63
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TABLE
OF CONTENTS
(continued)
EXHIBITS
|
Exhibit
A
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Certain
Definitions
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|
Exhibit
B
|
Form
of Company Voting Undertaking
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Exhibit
C
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Form
of Parent Voting Undertaking
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|
Exhibit
D
|
Articles
of Incorporation
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|
Exhibit
E
|
Agreement
of Merger
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Exhibit
F
|
Form
of Letter of Transmittal from Parent Exchange
Agent
|
|
Exhibit
G
|
Employment
Agreement for Key Employees
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|
Schedule
A
|
List
of Signatories for Company Voting
Undertakings
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Schedule
B
|
List
of Signatories for Parent Voting
Undertakings
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|
Schedule
6.2(c)
|
Key
Employees
|
This
Agreement and Plan of Merger and Reorganization (“Agreement”)
is made and entered into as of February 20, 2008, by and among: Kratos
Defense & Security Solutions, Inc, a Delaware corporation (“Parent”);
White
Shadow, Inc., a California corporation and a wholly owned subsidiary of
Parent (“Merger
Sub”); and SYS, a
California corporation (the “Company”). Capitalized
terms used in this Agreement are defined in Exhibit A.
RECITALS
A. Parent,
Merger Sub and the Company intend to effect a merger of Merger Sub into the
Company in accordance with this Agreement, Delaware Law and California Law (the
“Merger”). Upon
consummation of the Merger, Merger Sub will cease to exist, and the Company will
become a wholly owned subsidiary of Parent.
B. The
respective Boards of Directors of Parent, Merger Sub and the Company have deemed
it advisable and in the best interests of their respective corporations and
shareholders that Merger Sub and the Company consummate the Merger provided for
herein.
C. For
U.S. federal income tax purposes, the parties intend that the Merger will
qualify as a tax free reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the “Code”) and
intend for this Agreement to constitute a “plan of reorganization” within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
D. Concurrent
with the execution of this Agreement and as a condition to and inducement of
Parent’s willingness to enter into this Agreement, the executive officers and
certain directors of the Company set forth on Schedule
A are entering into voting undertakings in substantially the form
attached as Exhibit
B (the “Company Voting
Undertakings”).
E. Concurrent
with the execution of this Agreement and as a condition to and inducement of the
Company’s willingness to enter into this Agreement, the directors and executive
officers of Parent set forth on Schedule
B are entering into voting undertakings in substantially the form
attached as Exhibit
C (the “Parent Voting
Undertakings,” and, with the Company Voting Undertakings, the “Voting
Undertakings”).
F. The
respective boards of directors of Parent, Merger Sub and the Company have
approved this Agreement and approved the Merger.
G. Parent,
Merger Sub and the Company desire to make certain representations and
warranties and other agreements in connection with the Merger.
AGREEMENT
The
parties to this Agreement, intending to be legally bound, agree as
follows:
SECTION
1 DESCRIPTION
OF TRANSACTION.
1.1 Merger of Merger Sub into
the Company. Upon the terms and subject to the conditions set
forth in this Agreement, the Agreement of Merger (the “Merger
Agreement”) attached hereto as Exhibit
D and the applicable provisions of Delaware Law and California Law, at
the Effective Time, Merger Sub shall be merged with and into the Company, and
the separate existence of Merger Sub shall cease. Following the
Effective Time, the Company shall continue as the surviving corporation (the
“Surviving
Corporation”).
2
1.2 Effect of the
Merger. The Merger shall have the effects set forth in this
Agreement, the Merger Agreement and in the applicable provisions of Delaware Law
and California law. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time all the property, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving
Corporation.
1.3 Closing; Effective
Time. The consummation of the transactions contemplated by
this Agreement (the “Closing”)
shall take place at the offices of DLA Piper US LLP, 0000 Xxxxxxxxx Xxxxx, Xxx
Xxxxx, XX 00000, at 10:00 a.m. on a date to be designated by Parent (the “Closing
Date”), which shall be no later than the third business day after the
satisfaction or waiver of the last to be satisfied or waived of the conditions
set forth in Section 6
(other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or waiver of such
conditions). Subject to the provisions of this Agreement, the Merger
Agreement shall be duly executed by the Company and Merger Sub and,
simultaneously with or as soon as practicable following the Closing, filed with
the Secretary of State of the State of California (the “California
Secretary of State”). The Merger shall become effective upon
the later of: (a) the date and time of the filing of the
Agreement of Merger with the California Secretary of State, or (b) such
later date and time as may be specified in the Merger Agreement. The
date and time the Merger becomes effective is referred to in this Agreement as
the “Effective
Time.”
1.4 Articles
of Incorporation and Bylaws; Directors and Officers. At the Effective
Time:
1.4(a) the
Articles of Incorporation of the Surviving Corporation shall be amended and
restated in its entirety to read as set forth in Exhibit E;
1.4(b) the
Bylaws of the Surviving Corporation shall be the Bylaws of the Merger Sub, as in
effect immediately prior to the Effective Time, until thereafter amended;
and
1.4(c) the
directors and officers of the Surviving Corporation immediately after the
Effective Time shall be the respective individuals who are the directors and
officers of Merger Sub immediately prior to the Effective Time.
1.5 Conversion of
Shares.
1.5(a) At the
Effective Time, by virtue of the Merger and without any further action on the
part of Parent, Merger Sub, the Company or any shareholder of the
Company:
(i) any
shares of Company Common Stock then held by the Company or any wholly owned
Subsidiary of the Company shall be canceled and retired and shall cease to
exist, and no consideration shall be delivered in exchange
therefor;
(ii) any
shares of Company Common Stock then held by Parent, Merger Sub or any other
Subsidiary of Parent shall be canceled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor;
(iii) except as
provided in clauses (i) and (ii) above and subject to Sections 1.5(b) and 1.5(c), each share of Company
Common Stock then outstanding shall be converted into the right to receive
1.2582 shares of Parent Common Stock;
(iv) each
share of the common stock, $0.001 par value per share, of Merger Sub then
outstanding shall be converted into one share of common stock of the Surviving
Corporation.
3
The
fraction determined by the number of shares of Parent Common Stock to be issued
for each share of Company Common Stock as specified in Section 1.5(a)(iii) (as such fraction
may be adjusted in accordance with Section 1.5(b)) is referred to as the
“Exchange
Ratio.”
1.5(b) If,
between the date of this Agreement and the Effective Time, the outstanding
shares of Company Common Stock or Parent Common Stock are changed into a
different number or class of shares by reason of any stock split, stock
dividend, reverse stock split, reclassification, recapitalization or other
similar transaction, then the Exchange Ratio shall be appropriately
adjusted.
1.5(c) No
fractional shares of Parent Common Stock shall be issued in connection with the
Merger, and no certificates or scrip for any such fractional shares shall be
issued. Any holder of Company Common Stock who would otherwise be
entitled to receive a fraction of a share of Parent Common Stock (after
aggregating all fractional shares of Parent Common Stock issuable to such
holder) shall, in lieu of such fraction of a share and upon surrender of such
holder’s Company Stock Certificate(s) (as defined in Section 1.6), be paid in cash the
dollar amount (rounded to the nearest whole cent), without interest, determined
by multiplying such fraction by the average closing price of Parent Common Stock
during the three trading days immediately preceding the Closing
Date.
1.5(d) Prior to
the Effective Time, Parent shall reserve for issuance a sufficient number of
shares of Parent Common Stock adequate for the purpose of issuing its shares to
the shareholders of the Company in accordance with this Agreement and the
Company Warrants.
1.6 Closing of the Company’s
Transfer Books. At the Effective Time: (a) all
holders of certificates representing shares of Company Common Stock that were
outstanding immediately prior to the Effective Time shall cease to have any
rights as shareholders of the Company other than the right to receive shares of
Parent Common Stock (and cash in lieu of any fractional share of Parent Common
Stock) as contemplated by Section 1.5; and (b) the stock
transfer books of the Company shall be closed with respect to all shares of
Company Common Stock outstanding immediately prior to the Effective
Time. No further transfer of any such shares of Company Common Stock
shall be made on such stock transfer books after the Effective
Time. If, after the Effective Time, a valid certificate previously
representing shares of Company Common Stock (a “Company Stock
Certificate”) is presented to the Exchange Agent or to the Surviving
Corporation or Parent, such Company Stock Certificate shall be canceled and
shall be exchanged as provided in Section 1.7.
1.7 Exchange
of Certificates.
1.7(a) On or
prior to the Closing Date, Parent shall select a reputable bank or trust company
to act as exchange agent in the Merger (the “Exchange
Agent”). Promptly after the Effective Time, but in no event
later than two business days thereafter, Parent shall deposit with the Exchange
Agent (i) certificates representing the shares of Parent Common Stock
issuable pursuant to this Section 1, and (ii) cash
sufficient to make payments in lieu of fractional shares in accordance with
Section 1.5(c). The shares
of Parent Common Stock and cash amounts so deposited with the Exchange Agent,
together with any dividends or distributions received by the Exchange Agent with
respect to such shares, are referred to collectively as the “Exchange
Fund.”
1.7(b) As soon
as reasonably practicable after the Effective Time but in any event not later
than five business days after the Effective Time, the Exchange Agent will mail
to the record holders of Company Stock Certificates (i) a letter of
transmittal in the form attached hereto as Exhibit F, and
(ii) instructions for use in effecting the surrender of Company Stock
Certificates in exchange for certificates representing Parent Common
Stock. Upon surrender of a Company Stock Certificate to the Exchange
Agent for exchange, together with a duly executed letter of transmittal and such
other documents as may be reasonably required by the Exchange Agent or Parent,
(1) the holder of such Company Stock Certificate shall be entitled to
receive in exchange therefor a certificate or evidence of shares in book entry
form representing the number of whole shares of Parent Common Stock that such
holder has the right to receive pursuant to the provisions of Section 1.5 (and cash in lieu of any
fractional share of Parent Common Stock), and (2) the Company Stock
Certificate so surrendered shall be canceled. Until surrendered as
contemplated by this Section 1.7, each Company Stock
Certificate shall be deemed, from and after the Effective Time, to represent
only the right to receive shares of Parent Common Stock (and cash in lieu of any
fractional share of Parent Common Stock) as contemplated by this Section 1. If any
Company Stock Certificate shall have been lost, stolen or destroyed, Parent may,
in its discretion and as a condition precedent to the issuance of any
certificate representing Parent Common Stock, require the owner of such lost,
stolen or destroyed Company Stock Certificate to provide an appropriate
affidavit and to deliver a bond (in such sum as Parent may reasonably direct) as
indemnity against any claim that may be made against the Exchange Agent, Parent
or the Surviving Corporation with respect to such Company Stock
Certificate.
4
1.7(c) No
dividends or other distributions declared or made with respect to Parent Common
Stock with a record date after the Effective Time shall be paid to the holder of
any unsurrendered Company Stock Certificate with respect to the shares of Parent
Common Stock that such holder has the right to receive in the Merger until such
holder surrenders such Company Stock Certificate in accordance with this Section 1.7 (at which time such holder
shall be entitled, subject to the effect of applicable abandoned property laws,
escheat laws or similar laws, to receive all such dividends and distributions,
without interest).
1.7(d) Any
portion of the Exchange Fund that remains undistributed to holders of Company
Stock Certificates as of the date 180 days after the Effective Time shall be
delivered to Parent upon demand, and any holders of Company Stock Certificates
who have not theretofore surrendered their Company Stock Certificates in
accordance with this Section 1.7 shall thereafter look only
to Parent for satisfaction of their claims for Parent Common Stock, cash in lieu
of fractional shares of Parent Common Stock and any dividends or distributions
with respect to Parent Common Stock.
1.7(e) Each of
the Exchange Agent, Parent and the Surviving Corporation shall be entitled to
deduct and withhold from any consideration payable or otherwise deliverable
pursuant to this Agreement to any holder or former holder of Company Common
Stock such amounts as may be required to be deducted or withheld therefrom under
the Code or any provision of state, local or foreign tax law or under any other
applicable Legal Requirement. To the extent such amounts are so
deducted or withheld and paid over to the proper Governmental Body, such amounts
shall be treated for all purposes under this Agreement as having been paid to
the Person to whom such amounts would otherwise have been paid.
1.7(f) Neither
Parent nor the Surviving Corporation shall be liable to any holder or former
holder of Company Common Stock or to any other Person with respect to any shares
of Parent Common Stock (or dividends or distributions with respect thereto), or
for any cash amounts properly delivered to any public official pursuant to any
applicable abandoned property law, escheat law or similar Legal
Requirement.
1.8 Treatment
of Company Options and Other Equity-Based Awards.
1.8(a) At the
Effective Time each option granted (or previously assumed) by the Company to
purchase shares of Company Common Stock (each a “Company
Option”), which is outstanding and unexercised immediately prior to the
Effective Time (each an “Outstanding
Company Option”), other than the Company Warrants, shall cease to
represent a right to acquire shares of Company Common Stock and shall be
terminated. Prior to the Closing Date, the Company shall take all
action necessary to effect the termination of all Company Options as
contemplated by this Section 1.8(a), including without
limitation acceleration of the vesting of Outstanding Company Options in
accordance with their terms.
1.8(b) Prior to
the Effective Time, the Company shall take all actions (including, if
appropriate, amending the terms of the Company’s Employee Stock Purchase Plan
(the “ESPP”))
that are necessary to (i) cause the ending date of the then current
purchase period under the ESPP to occur on or before the last trading day prior
to the Effective Time (the “Final Purchase
Date”), (ii) cause all then existing offerings under the ESPP to
terminate immediately following the purchase on the Final Purchase Date,
(iii) suspend all future offerings that would otherwise commence under the
ESPP following the Final Purchase Date and (iv) cease all further payroll
deductions under the ESPP effective as of the Final Purchase Date. On
the Final Purchase Date, the Company shall apply the funds credited as of such
date under the ESPP within each participant’s payroll withholding account to the
purchase of whole shares of Company Common Stock in accordance with the terms of
the ESPP, which shares shall be treated in the manner described in Section 1.5.
1.8(c) No
Company Options, or any other equity compensation plans of the Company,
including plan documents governing options or any other equity-based award which
may have been assumed as a result of corporate acquisition transactions by the
Company, as applicable (collectively, and in each case as the same may be
amended to the date hereof, the “Company Stock
Plans”) will continue after the Effective time or be assumed or continued
by Parent or the Surviving Corporation; provided that Company Warrants will
continue to be in effect pursuant to their terms.
5
1.9 Tax
Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of
Section 368(a) of the Code. The parties to this Agreement hereby
adopt this Agreement as a “plan of reorganization” within the meaning of
Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
1.10 Further
Action. If, at any time after the Effective Time, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full right,
title and possession of and to all rights and property of Merger Sub and the
Company, the officers and directors of the Surviving Corporation and Parent
shall be fully authorized (in the name of Merger Sub, in the name of the Company
and otherwise) to take such action.
SECTION
2 REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
Except as
set forth in the Company Disclosure Schedule, the Company represents and
warrants to Parent and Merger Sub as follows:
2.1 Organization
and Good Standing.
2.1(a) The
Acquired Corporations are corporations or other Entities duly organized, validly
existing, and in good standing (where such concept is applicable) under the laws
of their respective jurisdictions of incorporation or organization, with full
corporate power or other Entity authority to conduct their respective businesses
as now being conducted, to own or use the respective properties and assets that
they purport to own or use, and to perform all their respective obligations
under Acquired Corporation Contracts. Each of the Acquired
Corporations is duly qualified to do business as a foreign corporation or other
Entity and is in good standing (where such concept is applicable) under the laws
of each state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification, except where the failure to be so qualified could
not reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect on the Acquired Corporations.
2.1(b) Part 2.1(b) of the Company
Disclosure Schedule lists, as of the date hereof, all Acquired Corporations and
indicates as to each the type of Entity, its jurisdiction of organization and,
except in the case of the Company, its shareholders or other equity
holders. Part 2.1(b) of the Company Disclosure Schedule lists,
and the Company has made available to Parent copies of, the certificate or
articles of incorporation, bylaws and other organizational documents
(collectively, the “Organizational
Documents”) of each of the Acquired Corporations, as currently in
effect. For the purposes of this Agreement, the phrase “made
available” when used in connection with either party shall constitute the
production by that party of such document(s) in an electronic dataroom for
purposes of review by the other party and its legal counsel and advisors in
connection with the negotiation of this Agreement.
2.1(c) The
Company has made available to Parent copies of, the charters of each committee
of the Company’s Board of Directors (the “Company
Board”) and any code of conduct or similar policy adopted by the
Company.
2.2 Authority;
No Conflict.
2.2(a) The
Company has all necessary corporate power and authority to execute and deliver
this Agreement and the other agreements referred to in this Agreement to which
it is a party, to perform its obligations hereunder and thereunder and to
consummate the Merger and the other transactions contemplated hereby and thereby
(collectively, and including the transactions contemplated by the Company Voting
Undertakings, the “Contemplated
Transactions”). The execution and delivery of this Agreement
by the Company and the consummation by the Company of the Contemplated
Transactions have been duly and validly authorized by all necessary corporate
action and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the Contemplated
Transactions (other than, with respect to the Merger, the Required Company
Shareholder Vote and the filing of appropriate merger documents as required by
Delaware Law and California Law). The Board of Directors of the
Company has unanimously approved this Agreement, declared it to be advisable and
resolved to recommend to the shareholders of the Company that they vote in favor
of the adoption of this Agreement in accordance with Delaware Law and California
Law. This Agreement has been duly and validly executed and delivered
by the Company and, assuming the due execution and delivery of this Agreement by
Parent and Merger Sub, constitutes the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
subject to the effect of (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to rights of creditors generally and (ii) rules of law and equity
governing specific performance, injunctive relief and other equitable
remedies.
6
2.2(b) Neither
the execution and delivery of this Agreement nor the consummation of any of the
Contemplated Transactions do or will, directly or indirectly (with or without
notice or lapse of time or both), (i) contravene, conflict with, or result
in a violation of (A) any provision of the Organizational Documents of any
of the Acquired Corporations, or (B) any resolution adopted by the board of
directors or the stockholders of any of the Acquired Corporations;
(ii) contravene, conflict with, or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief (other than
dissenter’s rights) under, any Legal Requirement or any order to which any of
the Acquired Corporations, or any of the assets owned or used by any of the
Acquired Corporations, is or may be subject; (iii) contravene, conflict
with, or result in a violation of any of the terms or requirements of, or give
any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate,
or modify, any Governmental Authorization that is held by any of the Acquired
Corporations or to which any Acquired Corporation is a party or by which any
Acquired Corporation or its assets are bound; (iv) cause any of the
Acquired Corporations to become subject to, or to become liable for the payment
of, any Tax; (v) cause any of the assets owned by any of the Acquired
Corporations to be reassessed or revalued by any Governmental Body;
(vi) contravene, conflict with, or result in a violation or breach of any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Acquired Corporation Contract; (vii) require a
Consent from any Person; or (viii) result in the imposition or creation of
any Encumbrance upon or with respect to any of the assets owned or used by any
of the Acquired Corporations, except, in the case of clauses (ii), (iii), (iv),
(v), (vi), (vii) and (viii), for any such conflicts, violations, breaches,
defaults or other occurrences that would not prevent or delay consummation of
the Merger in any material respect, or otherwise prevent the Company from
performing its obligations under this Agreement in any material respect, or
would not reasonably be expected, individually or in the aggregate, to result in
a Material Adverse Effect on the Acquired Corporations.
2.2(c) The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement and the consummation of the Contemplated
Transactions by the Company will not, require any Consent of, or filing with or
notification to, any Governmental Body, except for (i) (A) applicable
requirements, if any, of the Exchange Act, the Securities Act, the American
Stock Exchange and state securities or “blue sky” laws (“Blue Sky
Laws”), (B) the pre-merger notification requirements of the HSR Act,
(C) the filing of the Certificate of Merger as required by Delaware Law and
California Law and (D) any applicable non-United States competition,
antitrust and investment laws, and (ii) such other Consents, filings or
notifications where failure to obtain such Consents, or to make such filings or
notifications, would not prevent or delay the consummation of the Merger in any
material respect, or otherwise prevent the Company from performing its
obligations under this Agreement in any material respect, and would not
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect on the Acquired Corporations.
2.3 Capitalization. The
authorized capital stock of the Company consists of 48,000,000 shares of Company
Common Stock, 2,000,000 shares of Company Preference Stock, and 250,000 shares
of Company Preferred Stock. As of the date hereof,
(a) 19,722,108 shares of Company Common Stock are issued and
outstanding, all of which have been duly authorized and validly issued, and are
fully paid and nonassessable, (b) 2,140,200 shares of Company
Common Stock are reserved for issuance upon the exercise of outstanding Company
Options or the exercise, settlement or conversion of any other equity-based
awards outstanding under the Company Stock Plans, (c) 1,554,900 shares of
Company Common Stock are reserved for issuance and available for the future
grant of equity-based awards under the Company Stock Plans, (d) 508,401
shares of Company Common Stock are reserved for issuance upon the exercise of
the Company Warrants, (e) 1,118,261 shares of Company Common Stock are reserved
for issuance under the ESPP, (f) 868,000 shares of Company Common Stock reserved
for issuance upon the conversion of the outstanding convertible debt of the
Company, and (g) 877,406 shares of Company Common Stock reserved for
issuance under the Company’s 401(k) Plan. Except as described above,
there are not any bonds, debentures, notes or other indebtedness or other
securities of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
shareholders of the Company may vote. Except as set forth in this
Section 2.3, as of the date hereof no
shares of capital stock or other voting securities of the Company are issued,
reserved for issuance or outstanding, and no shares of capital stock or other
voting securities of the Company will be issued or become outstanding after the
date hereof and before the Effective Time other than upon exercise of the
Company Options or the exercise, settlement or conversion of any other
equity-based awards under the Company Stock Plans outstanding as of the date
hereof, the exercise of Company Warrants, the conversion of outstanding
convertible debt of the Company, or issuances under the ESPP or the Company
401(k) Plan. Except as set forth in this Section 2.3, as of the date hereof,
there are no Options relating to the issued or unissued capital stock of any of
the Acquired Corporations, or obligating any of the Acquired Corporations to
issue, grant or sell any shares of capital stock of, or other equity interests
in, or securities convertible into, or exercisable or exchangeable for, equity
interests in, the Company or any of its Subsidiaries. Since
December 28, 2007 through the date of this Agreement, the Company has not
issued any shares of its capital stock or Options in respect thereof except upon
the exercise of the Company Options, the exercise, settlement or conversion of
any other equity-based awards, or issuances under the ESPP or the Company 401(k)
Plan referred to above. All shares of Company Common Stock subject to
issuance as described above will, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, be duly
authorized, validly issued, fully paid and nonassessable. None of the
Acquired Corporations has any Contract or other obligation to repurchase, redeem
or otherwise acquire any shares of Company Common Stock or any capital stock of
any of the Company’s Subsidiaries, or make any investment (in the form of a
loan, capital contribution or otherwise) in any of the Company’s Subsidiaries or
any other Person. Each outstanding share of capital stock of each of
the Company’s Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and is owned by the Company or one of its Subsidiaries free and
clear of all Encumbrances other than Permitted Encumbrances. None of
the outstanding equity securities or other securities of any of the Acquired
Corporations was issued in violation of the Securities Act or any other Legal
Requirement. None of the Acquired Corporations owns, or has any
Contract or other obligation to acquire, any equity securities or other
securities of any Person (other than Subsidiaries of the Company) or any direct
or indirect equity or ownership interest in any other business. None
of the Acquired Corporations is a general partner of any general or limited
partnership. Each Company Option or other right to acquire Company
Common Stock or other equity of the Company has at all times since July 1,
2004 been properly accounted for in accordance with GAAP in the Company’s
audited financial statements.
7
2.4 SEC
Reports.
2.4(a) The
Company has filed on a timely basis all forms, reports and documents required to
be filed by it with the SEC since July 1, 2004. Except to the
extent available in full without redaction on the SEC’s web site through the
Electronic Data Gathering, Analysis and Retrieval System (“XXXXX”)
two days prior to the date of this Agreement, the Company has made available to
Parent copies in the form filed with the SEC (including the full text of any
document filed subject to a request for confidential treatment) of all of the
following that have been filed with the SEC prior to the date
hereof: (i) the Company’s Annual Reports on Form 10-K for
each fiscal year of the Company beginning on or after July 1, 2004,
(ii) the Company’s Quarterly Reports on Form 10-Q for each of the
first three fiscal quarters in each of the fiscal years of the Company referred
to in clause (i), (iii) all proxy and information statements relating to
the Company’s meetings of shareholders (whether annual or special) held, and all
information statements relating to shareholder consents, since the beginning of
the first fiscal year referred to in clause (i), (iv) the Company’s Current
Reports on Form 8-K filed since the beginning of the first fiscal year
referred to in clause (i), (v) all other forms, reports, registration
statements and other documents (other than drafts of such materials if the
corresponding definitive materials have been provided to Parent pursuant to this
Section 2.4) filed
by the Company with the SEC since the beginning of the first fiscal year
referred to in clause (i) (the forms, reports, registration statements and
other documents referred to in clauses (i), (ii), (iii), (iv) and (v) above,
whether or not available through XXXXX, are, collectively, the “Company SEC
Reports,” and, to the extent available in full without redaction through
XXXXX at least two business days prior to the date of this Agreement, the “Filed Company SEC
Reports,” (vi) all certifications and statements required by
Rules 13a-14 and 15d-14 under the Exchange Act and Sections 302 and
906 of the Xxxxxxxx-Xxxxx Act of 2002 (“SOX”), and
the rules and regulations of the SEC promulgated thereunder, with respect to any
report referred to in clause (i) or (ii) (collectively, the “Company
Certifications”), and (vii) all comment letters received by the
Company from the staff of the SEC since July 1, 2004 and all responses to
such comment letters by or on behalf of the Company. No Subsidiary of
the Company is, or since July 1, 2004 has been, required to file any form,
report, registration statement or other document with the SEC. As
used in this Section 2.4, the term “file” shall be
broadly construed to include any manner in which a document or information is
furnished, transmitted or otherwise made available to the SEC.
2.4(b) Each of
the Company SEC Reports (i) as of the date of the filing of such report,
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as the case may be, and, to the extent then applicable,
SOX, including in each case, the rules and regulations thereunder, and
(ii) as of its filing date (or, if amended or superseded by a subsequent
filing prior to the date hereof, on the date of such filing) 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 made therein, in
the light of the circumstances under which they were made, not
misleading.
2.4(c) The
Company Certifications complied with Rules 13a-14 and 15d-14 under the
Exchange Act and Sections 302 and 906 of SOX and the rules and regulations
of the SEC promulgated thereunder, and the statements contained in the Company
Certifications were true and correct as of the date of the filing
thereof.
2.4(d) The
Acquired Corporations have implemented and maintain disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
Act), and such controls and procedures are effective to ensure that (i) all
material information required to be disclosed by the Company in the reports that
it files under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC’s rules and forms, and
(ii) all such information is accumulated and communicated to the Company’s
management, including its principal executive officer and principal financial
officer, as appropriate to allow timely decisions regarding required
disclosure.
2.4(e) The
Company is, and since January 1, 2005 has been, in compliance in all
material respects with (i) the applicable listing and corporate governance
rules and regulations of the American Stock Exchange, and (ii) the
applicable provisions of SOX. The Company has made available to
Parent true, correct and complete copies of (i) all correspondence between
the Acquired Corporations and the SEC since July 1, 2004 and (ii) all
correspondence between the Acquired Corporations and the American Stock Exchange
since January 1, 2005.
8
2.4(f) The
Acquired Corporations have implemented and maintain a system of internal control
over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) sufficient to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP, including, without limitation,
that (i) transactions are executed in accordance with management’s general
or specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and
(iv) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to
any differences. Since December 28, 2007, (a) there have not
been any changes in the Acquired Corporations’ internal control over financial
reporting that have materially affected, or are reasonably likely to materially
affect, the Acquired Corporations’ internal control over financial reporting,
and (b) all “significant deficiencies” and “material weaknesses” (as such
terms are defined by the Public Accounting Oversight Board) have been disclosed
to the Company’s outside auditors and the audit committee of the Company
Board.
2.5 Financial
Statements.
2.5(a) Each of
the financial statements (including, in each case, any notes thereto) contained
or incorporated by reference in the Company SEC Reports complied with the rules
and regulations of the SEC (including Regulation S-X) as of the date of the
filing of such reports, was prepared in accordance with GAAP, and fairly
presents in all material respects the financial condition and the results of
operations, changes in stockholders’ equity and cash flow of the Company and its
consolidated Subsidiaries as at the respective dates of and for the periods
referred to in such financial statements, subject, in the case of interim
financial statements, to (i) the omission of notes to the extent permitted
by Regulation S-X (that, in the case of interim financial statements
included in the Company SEC Reports since the Company’s most recent Annual
Report on Form 10-K, would not differ materially from the notes to the
financial statements included in such Annual Report) (the consolidated balance
sheet included in such Annual Report, the “Company Balance
Sheet”), and (ii) normal, recurring year-end adjustments (the effect
of which will not, individually or in the aggregate, be materially adverse to
the Acquired Corporations, taken as a whole). The financial
statements referred to in this Section 2.5 reflect the consistent
application of such accounting principles throughout the periods involved,
except as disclosed in the notes to such financial statements. No
financial statements of any Person other than the Subsidiaries of the Company
are, or, since July 1, 2004 have been, required by GAAP to be included in
the consolidated financial statements of the Company.
2.5(b) Part 2.5(b) of the Company
Disclosure Schedule lists, and the Company has made available to Parent copies
of, the documents creating or governing all of the Company’s Off-Balance Sheet
Arrangements.
2.6 Property. The
Acquired Corporations (i) have good and valid title to all property
material to the business of the Acquired Corporations and reflected in the
latest audited financial statements included in the Filed Company SEC Reports as
being owned by the Acquired Corporations or acquired after the date thereof
(except for property sold or otherwise disposed of in the Ordinary Course of
Business since the date thereof), free and clear of all Encumbrances except
(A) the lien of the Company’s principal lender, (B) Permitted
Encumbrances and (C) such imperfections or irregularities of title or
Encumbrances as do not affect the use of the properties or assets subject
thereto or affected thereby or otherwise materially impair the business
operations in which such properties are used, in either case in such a manner as
to have a Material Adverse Effect on the Acquired Corporations, and
(ii) are collectively the lessee of all property material to the business
of the Acquired Corporations and reflected as leased in the latest audited
financial statements included in the Company SEC Reports (or on the books and
records of the Company as of the date thereof) or acquired after the date
thereof (except for leases that have expired by their terms) and are in
possession of the properties purported to be leased thereunder, and each such
lease is valid and in full force and effect without default thereunder by the
lessee or, to the Knowledge of the Company, the lessor, other than defaults that
would not have a Material Adverse Effect on the Acquired
Corporations. For the avoidance of doubt, the representations and
warranties set forth in this Section 2.6 do not apply to
Proprietary Rights, which matters are specifically addressed in Section 2.8.
9
2.7 Real Property; Equipment;
Leasehold. All material items of equipment and other tangible
assets owned by or leased to the Acquired Corporations are adequate for the uses
to which they are being put, are in good and safe condition and repair (ordinary
wear and tear excepted) and are adequate for the conduct of the business of the
Acquired Corporations in the manner in which such business is currently being
conducted. None of the Acquired Corporations own any material real
property or any material interest in real property. Part 2.7 of the Company Disclosure
Schedule contains an accurate and complete list of all the Acquired
Corporations’ material real property leases.
2.8 Proprietary
Rights.
2.8(a) Part 2.8(a) of the Company
Disclosure Schedule lists the following with respect to Proprietary Rights of
each Acquired Corporation:
(i) Part 2.8(a)(i)(A) lists all of the Patents
and Patent Applications owned by any of the Acquired Corporations and relating
to any Acquired Corporation Product, setting forth in each case the applicable
jurisdiction. Part
2.8(a)(i)(B) lists all of the Patents
and Patent Applications relating to any Acquired Corporation Product in which,
any of the Acquired Corporations has any right, title or interest (including,
without limitation, any interest acquired through a license, other right to use
or any covenant not to xxx/assert or other immunity from suit granted to any
Acquired Corporation) other than those owned by the Acquired Corporations, and
excluding nonexclusive licenses for “off the shelf” software widely available
through regular commercial distribution channels on standard terms and
conditions, setting forth in each case the applicable jurisdiction and the
nature of the right, title or interest held by any of the Acquired
Corporations. As used in this Section 2.8, “Knowledge” or “knowledge”
as it relates to an Acquired Corporation Product acquired by the Acquired
Corporations from a third-party shall limited to the actual knowledge either:
(i) acquired from materials and information provided during due diligence
undertaken during the acquisition; or (ii) acquired since acquisition of the
applicable Acquired Corporation Product. As used in this Section 2.8
and in Section 2.16, the phrase “related to” (and any substantially similar
phrase (e.g., “relating to”)) shall mean that absent the ownership of or a
license to such Proprietary Right, the using, making, selling, offering for
sale, marketing, importing, reproducing, modifying or distributing the Acquired
Corporation Product would infringe or misappropriate such Proprietary
Right.
(ii) Part 2.8(a)(ii)(A) lists all of the
Registered Trademarks owned by any of the Acquired Corporations and relating to
any Acquired Corporation Product, setting forth in each case the applicable
jurisdiction. Part
2.8(a)(ii)(B) lists all of the
Registered Trademarks relating to any Acquired Corporation Product in which, to
the Knowledge of the Company, any of the Acquired Corporations has any right,
title or interest, other than those owned by the Acquired Corporations
(including, without limitation, any interest acquired through a license or other
right to use), setting forth in each case the applicable jurisdiction and the
nature of the right, title or interest held by any of the Acquired
Corporations.
(iii) Part 2.8(a)(iii)(A) lists all of the
Registered Copyrights and applications for copyright registration owned by any
of the Acquired Corporations and relating to any Acquired Corporation Product,
setting forth in each case the applicable jurisdiction. Part 2.8(a)(iii)(B) lists all of the
Registered Copyrights relating to any Acquired Corporation Product in which, to
the Knowledge of the Company, any of the Acquired Corporations has any right,
title or interest, other than those owned by the Acquired Corporations
(including, without limitation, any interest acquired through a license or other
right to use), and excluding nonexclusive licenses for “off the shelf” software
widely available through regular commercial distribution channels on standard
terms and conditions, setting forth in each case the applicable
jurisdiction.
2.8(b) The
Acquired Corporations are the sole and exclusive owners of and have good and
valid title to all of the Acquired Corporation Proprietary Rights identified in
Parts 2.8(a)(i)(A), 2.8(a)(ii)(A) and 2.8(a)(iii)(A) of the Company Disclosure
Schedule and all Trade Secrets owned by any Acquired Corporation and relating to
any Acquired Corporation Product, free and clear of all Encumbrances, except for
(i) any lien for current taxes not yet due and payable, (ii) minor liens that
have arisen in the Ordinary Course of Business and that do not (individually or
in the aggregate) materially detract from the value of the assets subject
thereto or materially impair the operations of the Acquired Corporations and
(iii) general or blanket liens identified elsewhere in the Company Disclosure
Schedule. To the Knowledge of the Company, the Acquired Corporations
have the rights set forth in the Company Disclosure Schedule to exploit the
Proprietary Rights identified in Parts 2.8(a)(i)(B), 2.8(a)(ii)(B), and 2.8(c)(iii)(B) of the Company Disclosure
Schedule and all Trade Secrets used by any Acquired Corporation and relating to
any Acquired Corporation Product, other than those owned by the Acquired
Corporations (including without limitation interest acquired through a license
or other right to use). With respect to any Proprietary Rights
licensed from a third party, to the Knowledge of the Company, no third party
that has licensed Proprietary Rights to any Acquired Corporation has any
ownership or license rights to improvements or derivative works to such
Proprietary Rights made by or on behalf of such Acquired
Corporation. The Acquired Corporation Proprietary Rights identified
in Part 2.8(a), together with the
Trade Secrets used by any Acquired Corporation and relating to any Acquired
Corporation Product, constitutes, to the Knowledge of the Company all
Proprietary Rights used or currently proposed to be used in the business of any
of the Acquired Corporations relating to any Acquired Corporation Technology or
to any Acquired Corporation Product as such business was conducted prior to or
on the date of this Agreement.
10
2.8(c) Part 2.8(c) lists all Company
Material Contracts relating to any Acquired Corporation Proprietary Rights and
any Acquired Corporation Technology, as follows:
(i) Part 2.8(c)(i) lists Contracts that
grant, transfer or license any rights in any Acquired Corporation Proprietary
Rights to any Person, provided that Part 2.8(c)(i) does not list
any Acquired Corporation Contract entered into with customers in the Ordinary
Course of Business which Contracts are in the form of the Acquired Corporations’
standard form agreement without material modification and copies of such
standard forms have been provided to Parent or its counsel; and
(ii) Part 2.8(c)(ii) lists Contracts, other
than nonexclusive licenses for “off the shelf” software widely available through
regular commercial distribution channels on standard terms and conditions, that
grant, transfer or license to any Acquired Corporation any rights in any
Proprietary Rights or Technology relating to any Acquired Corporation Product or
any Acquired Corporation Technology that are not owned by the
Company. To the Knowledge of the Company, other than as provided in
the Contracts listed in Part 2.8(c)(ii), there are no royalties, fees or other
amounts payable by any of the Acquired Corporations to any Person by reason of
the ownership, use, sale or disposition of Acquired Corporation Proprietary
Rights, Acquired Corporation Technology or Acquired Corporation Products;
and
(iii) Except as
provided for in Contracts of the types listed in Part 2.8(c)(i-ii), none of the
Acquired Corporations has entered into any written or oral Contract, or other
arrangement to indemnify any other person against any charge of infringement by
any Acquired Corporation Proprietary Rights, Acquired Corporation Technology or
Acquired Corporation Product other than unaltered indemnification provisions
contained in standard form sales or other agreements with customers, end users
or distributors arising in the Ordinary Course of Business, the forms of which
have been made available to Parent or its counsel. No Acquired
Corporation is a party to any Contract limiting any Acquired Corporation’s
ability to market, sell or distribute an Acquired Corporation Product in any
market, field or geographical area or that restricts the use, transfer, delivery
or licensing of any Acquired Corporation Proprietary Rights or Acquired
Corporation Technology; and
(iv) Part 2.8(c)(iv) lists each Acquired
Corporation Product that, to the Knowledge of the Company, contains any software
that is subject to an open source license and lists the open source license
applicable to such Acquired Corporation Product. For purposes of the
foregoing the term “open source license” means any software that is distributed
as free software, open source software, or general public software (e.g.,
Linux), including without limitation software licensed or distributed under any
of the following licenses: (i) GNU’s General Public License
(GPL) or Lesser/Library GPL (LGPL); (ii) the Artistic License (e.g., PERL);
(iii) the Mozilla Public License; (iv) the Netscape Public License); (v) the Sun
Community Source License (SCSL); (vi) the Sun Industry Standards License (SISL);
(vii) the BSD License; and (viii) the Apache License. The Acquired
Corporations have complied with the terms and conditions in each such open
source license Contract.
2.8(d) Except as
listed in Part 2.8(d) of the Company
Disclosure Schedule,
(i) None of
the Acquired Corporations jointly owns, licenses or claims any right, title or
interest with any other Person any Acquired Corporation Proprietary Rights or
Acquired Corporation Technology,
(ii) No Person
has asserted or threatened a claim, against an Acquired Corporation, nor to the
Knowledge of the Company are there any facts which could give rise to a claim,
which would adversely affect (i) any Acquired Corporation’s ownership rights to,
or rights under, any Acquired Corporation Proprietary Rights or Acquired
Corporation Technology or (ii) any Contract under which any Acquired Corporation
claims any right, title or interest under any Acquired Corporation Proprietary
Rights or Acquired Corporation Technology;
(iii) None of
the Acquired Corporations is subject to any proceeding or outstanding decree,
order, judgment or stipulation restricting the use, transfer or licensing of any
Acquired Corporation Proprietary Rights, Acquired Corporation Technology or any
Acquired Corporation Products by any of the Acquired Corporations, or which
adversely affects the validity, use or enforceability of any Acquired
Corporation Proprietary Rights;
11
(iv) To the
Knowledge of the Company, no Acquired Corporation Proprietary Rights or Acquired
Corporation Technology owned by an Acquired Corporation have been infringed or
misappropriated by any Person. To the Knowledge of the Company, there
is no unauthorized use, disclosure or misappropriation of any Acquired
Corporation Proprietary Rights or Acquired Corporation Technology;
and
(v) To the
Knowledge of the Company, all Registered Copyrights, Registered Trademarks and
domain names owned by any Acquired Corporation and relating to any Acquired
Corporation Product (A) have been duly filed or registered (as applicable) with
the applicable Governmental Body, and maintained in accordance with the legal
and administrative requirements in the applicable jurisdictions, (B) have not
lapsed, expired or been abandoned and (C) no opposition proceedings have been
commenced related thereto. To the Knowledge of the Company, there
does not exist any fact with respect to the Trademarks owned by the Acquired
Corporations that would (i) preclude the issuance of any Registered Trademarks
from any trademark applications, or (ii) render any such Registered Trademarks
invalid or unenforceable. To the Knowledge of the Company, there does
not exist any fact with respect to any Copyrights owned by the Acquired
Corporations and relating to any Acquired Corporation Product that would (i)
preclude the issuance of any Registered Copyright from any copyright
applications, or (ii) render any such Copyrights invalid or
unenforceable.
2.8(e) Except as
listed in Parts 2.8
(a)-(d) of the Company Disclosure Schedule,
(i) (A) To
the Knowledge of the Company, all Patents in which any of the Acquired
Corporations has any ownership interest and relating to any Acquired Corporation
Product, have been prosecuted in good faith and are in good standing, (B) there
are no inventorship challenges, opposition or interference proceedings relating
to any such Patents, (C) to the Knowledge of the Company, all such Patents are
valid and enforceable, and (D) to the Knowledge of the Company, all prosecution,
maintenance and annual fees have been fully paid when due in the correct entity
status amount;
(ii) To
the Knowledge of the Company, there is no material fact with respect to any
Patent Application in which any of the Acquired Corporations has any ownership
interest and relating to any Acquired Corporation Product that would (i)
preclude the issuance of an Issued Patent from such Patent Application or (ii)
render any Issued Patent issuing from such Patent Application invalid or
unenforceable;
(iii) No Person
has asserted or threatened a claim against an Acquired Corporation, nor to the
Knowledge of the Company are there any facts which could give rise to a claim,
that any Acquired Corporation Product (or any Acquired Corporation Proprietary
Right or Acquired Corporation Technology embodied in any Acquired Corporation
Product) infringes or misappropriates or constitutes unlawful use of any
Person’s Proprietary Rights. Other than: (i) the parties granting
rights and identified in Part
2.8(c)(ii) or (ii) licensees for “off the shelf” software widely
available through regular commercial distribution channels on standard terms and
conditions, no Person has notified any Acquired Corporation that the Acquired
Corporation requires a license to any of that Person’s Proprietary Rights and no
Acquired Corporation has received any unsolicited written offer to license (or
any other notice of) any Person’s Proprietary Rights.
(iv) To the
knowledge of the Company, each of the Acquired Corporations has taken
commercially reasonable and customary measures and precautions necessary to
protect and maintain the confidentiality and restrict the use of all Trade
Secrets in which any of the Acquired Corporations has any right, title or
interest and which relate to any Acquired Corporation Product or any Acquire
Corporation Technology.
2.8(f) The
Acquired Corporations have not inserted into any Acquired Corporation Product or
system, program or software module included therein, any “back door,” “time
bomb,” “Trojan horse,” “worm,” “drop dead device,” “virus” or other software
routines or hardware components designed to permit unauthorized access or to
disable or erase software, hardware or data without the consent of the
user. To the knowledge of the Company, no Acquired Corporation
Product or system, program or software module included therein, includes any
“back door,” “time bomb,” “Trojan horse,” “worm,” “drop dead device,” “virus” or
other software routines or hardware components designed to permit unauthorized
access or to disable or erase software, hardware or data without the consent of
the user.
12
2.8(g) None of
the Acquired Corporations are and never have been a member or promoter of, or a
contributor to or made any commitments or agreements regarding any patent pool,
industry standards body, standard setting organization, industry or other trade
association or similar organization, in each case that could or does require or
obligate an Acquired Corporation to grant or offer to any other Person any
license or right to the Acquired Corporation Proprietary Rights and/or Acquired
Corporation Technology.
2.8(h) To the
knowledge of the Company, the execution, delivery or performance of this
Agreement or any ancillary agreement contemplated hereby, the consummation of
the transactions contemplated by this Agreement or such ancillary agreements and
the satisfaction of any closing condition will not contravene, conflict with or
result in any limitation on any Acquired Corporation’s, or the Parent’s right,
title or interest in or to the Acquired Corporation Proprietary Rights and/or
Acquired Corporation Technology.
2.8(i) The
Acquired Corporations have provided to Parent copies of all Contracts with
Governmental Bodies pursuant to which any Acquired Corporation Product or
Acquired Corporation Technology was developed or created, in whole or in part,
using the funding, facilities or personnel of any Governmental
Body. For such Acquired Corporation Products and the Acquired
Corporation Technology, the applicable Acquired Corporation has (i) timely made
all required disclosures regarding any Patents or patentable inventions
resulting from or conceived during the development of any portion of such
Acquired Corporation Technology or Acquired Corporation Products developed under
a Contract with any Governmental Body such that the Governmental Body does not
have the right to take or claim title to such Patents or patentable inventions
and (ii) timely made all required disclosures (on the appropriate Governmental
Body schedule) of all technical data and technical information resulting from
the development of any portion of any such Acquired Corporation Technology or
Acquired Corporation Products developed under any Contract with any Governmental
Body in which the Governmental Body has unlimited, limited, restricted,
government purpose or specifically negotiated rights. The Acquired
Corporations will provide to Parent prior to the Closing copies of any such
disclosures described in (i) and (ii) above.
2.8(j) Company
Products.
(i) To the
knowledge of the Company, all Technology and all Proprietary Rights that are
incorporated into or part of any Acquired Corporation Product or that are
necessary for the manufacture, test, sale and use of the Acquired Corporation
Products is owned or licensed by the Acquired Corporation.
(ii) To the
knowledge of the Company, no customer or other Person has asserted or, to the
Knowledge of the Company, threatened to assert any claim against any Acquired
Corporation under or based upon any other warranty relating to any Acquired
Corporation Product.
(iii) No
product liability claims have been threatened, alleged or filed against any
Acquired Corporation related to any Acquired Corporation Product.
2.9 No Undisclosed
Liabilities. The Acquired Corporations have no liabilities or
obligations of any nature (whether absolute, accrued, contingent, determined,
determinable, xxxxxx, inchoate or otherwise), except for (i) liabilities or
obligations reflected or reserved against in the Company Balance Sheet, or
(ii) current liabilities incurred in the Ordinary Course of Business since
the date of the Company Balance Sheet that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on the
Acquired Corporations.
13
2.10 Taxes.
2.10(a) Timely Filing of Tax
Returns. The Acquired Corporations have filed or will cause to
be filed all Tax Returns that are or were required to be filed by or with
respect to any of them, either separately or as a member of a group of
corporations, pursuant to applicable Legal Requirements for periods ending on or
prior to the Closing. All Tax Returns filed by (or that are included
on a consolidated basis) any of the Acquired Corporations were (and, as to Tax
Returns not filed as of the date hereof, will be) in all respects true, complete
and correct and filed on a timely basis.
2.10(b) Payment of
Taxes. The Acquired Corporations have, within the time and in
the manner prescribed by law, paid (and until Closing will pay within the time
and in the manner prescribed by law) all Taxes that are due and payable by the
Acquired Corporations.
2.10(c) Withholding
Taxes. Each of the Acquired Corporations have complied (and
until the Closing will comply) with all applicable laws, rules and regulations
relating to the withholding of Taxes and have, within the times and in the
manner prescribed by law, paid over (and until the Closing will pay over) to the
proper Governmental Body all amounts required to be paid under applicable laws,
rules and regulations relating to the paying over of Taxes.
2.10(d) Audits. To
Company’s Knowledge, no Tax Return of any of the Acquired Corporations is under
audit or examination by any Governmental Body, and no notice of such an audit or
examination has been received by any of the Acquired Corporations and none of
the Acquired Corporations has Knowledge of any threatened audits, investigations
or claims for or relating to Taxes, and there are no matters under discussion
with any Governmental Body with respect to Taxes. No issues relating
to Taxes were raised in writing by the relevant Governmental Body during any
presently pending audit or examination, and no issues relating to Taxes were
raised in writing by the relevant Governmental Body in any completed audit or
examination that can reasonably be expected to recur in a later taxable
period. Part 2.10(d) of the Company
Disclosure Schedule lists, and the Company has made available to Parent copies
of, all examiner’s or auditor’s reports, notices of proposed adjustments or
similar commissions received by any of the Acquired Corporations from any
Governmental Body since December 31, 2004.
2.10(e) Tax
Reserves. The charges, accruals, and reserves with respect to
Taxes on the respective books of each of the Acquired Corporations are adequate
(and until Closing will continue to be adequate) to pay all Taxes not yet due
and payable and have been determined in accordance with generally accepted
United States accounting principles. No differences exist between the
amounts of the book basis and the tax basis of assets (net of liabilities) that
are not accounted for on any accrual on the books of the Acquired Corporations
for federal income tax purposes. There exists no proposed assessment
of Taxes against any of the Acquired Corporations.
2.10(f) Tax
Liens. No Encumbrance for Taxes exists with respect to any
assets or properties of any of the Acquired Corporations, nor will any such
encumbrances exist at Closing except for statutory liens for Taxes not yet
due.
2.10(g) Tax Sharing
Agreements. Part 2.10(g) of the Company
Disclosure Schedule lists, and the Company has made available to Parent copies
of, any Tax sharing agreement, Tax allocation agreement, Tax indemnity
obligation or similar written or unwritten agreement, arrangement, understanding
or practice with respect to Taxes (including any advance pricing agreement,
closing agreement or other agreement relating to Taxes with any Governmental
Body) to which any of the Acquired Corporations is a party or by which any of
the Acquired Corporations is bound. No such agreements shall be
modified or terminated prior to Closing without the consent of
Parent.
2.10(h) Extensions of Time for
Filing Tax Returns. None of the Acquired Corporations has
requested any extension of time within which to file any Tax Return, which Tax
Return has not since been filed.
14
2.10(i) Waiver of Statutes of
Limitations. None of the Acquired Corporations has executed
any outstanding waivers or comparable consents regarding the application of the
statute of limitations with respect to any Taxes or Tax Returns.
2.10(j) Powers of
Attorney. No power of attorney currently in force has been
granted by any of the Acquired Corporations concerning any Taxes or Tax
Return.
2.10(k) Tax
Rulings. None of the Acquired Corporations has received or
been the subject of a Tax Ruling (as defined below) or a request for Tax
Ruling. None of the Acquired Corporations has entered into a Closing
Agreement (as defined below) with any Governmental Authority that would have a
continuing effect after the Closing Date. “Tax
Ruling” shall mean a written ruling of a Governmental Authority relating
to Taxes. “Closing
Agreement” shall mean a written and legally binding agreement with a
Governmental Authority relating to Taxes.
2.10(l) Availability of Tax
Returns. Part 2.10(l) of the Company
Disclosure Schedule lists, and Company has made available to Parent complete and
accurate copies of all Tax Returns, and any amendments thereto, filed by or on
behalf of, or which include, any of the Acquired Corporations, for all taxable
periods ending after December 31, 2004 and on or prior to the Closing
Date.
2.10(m) Opinions of
Counsel. Part 2.10(m) of the Company
Disclosure Schedule lists, and Company has provided to Parent true and complete
copies of all memoranda and opinions of counsel, whether inside or outside
counsel, and all memoranda and opinions of accountants or other tax advisors,
which have been received by any of the Acquired Corporations with respect to
Taxes.
2.10(n) Section 481
Adjustments. None of the Acquired Corporations is required to
include in income any adjustment pursuant to Internal Revenue Code
Section 481 by reason of a voluntary change in accounting method initiated
by any of the Acquired Corporations, and the Internal Revenue Service has not
proposed any such change in accounting method.
2.10(o) Net Operating Loss
Carryovers. The amount of each Acquired Corporation’s net
operating losses, and the dates on which they arose, are set forth in Part 2.10(o) of the Company
Disclosure Schedule.
2.10(p) Tax Credit
Carryovers. The amount of each Acquired Corporation’s tax
credit carryover, and the nature of those tax credits and years in which they
arose, are set forth in Part 2.10(p) of the Company
Disclosure Schedule.
2.10(q) Section 338
Election. No election under Section 338 of the Code has
been made by or with respect to any of the Acquired Corporations or any of their
respective assets or properties.
2.10(r) Intercompany
Transactions. None of the Acquired Corporations has engaged in
any transactions with Affiliates which would require the recognition of income
by any of the Acquired Corporations with respect to such transaction for any
period ending on or after the Closing Date.
2.10(s) Real Property Transfer
Tax. None of the Acquired Corporations owns any interest in
real estate as a result of which ownership the Merger or any related transaction
contemplated by this Agreement would be subject to any realty transfer Tax or
similar tax.
2.10(t) Section 162(m). The
disallowance of a deduction under Section 162(m) of the Code for employee
remuneration will not apply to any amount paid or payable by any of the Acquired
Corporations under any Acquired Corporation Contract, Benefit Plan, program,
arrangement or understanding currently in effect.
15
2.10(u) Section 280(G). None
of the Acquired Corporations is a party to any agreement, contract or
arrangement that could result separately or in the aggregate, in the payment of
an “excess parachute payment” within the meaning of Section 280G of the
Code.
2.10(v) Qualification as a
Reorganization. None of the Acquired Corporations has taken
any action, nor to the Company’s Knowledge is there any fact or circumstance,
that could reasonably be expected to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the
Code.
2.10(w) Deferred
Revenue. None of the Acquired Corporations has any material
deferred or unearned income that will be reportable in a taxable period
beginning after the Closing that is attributable to a transaction that occurred
prior to the Closing.
2.10(x) Tax
Shelters. None of the Acquired Corporations has participated
in any transaction that is either a “listed transaction” or that the Acquired
Corporation believes in good faith is a “reportable transaction” or a
“transaction of interest” (all as defined in Treas. Reg.
§ 1.6011-4).
2.10(y) Taxable
Presence. None of the Acquired Corporations has a permanent
establishment in any country other than its country of organization or is
subject to Tax in a jurisdiction outside its country of
organization.
2.10(z) Deferred
Compensation. No Acquired Corporation is a party to any
“nonqualified deferred compensation plan” subject to Section 409A of the
Code that would subject any Person to tax pursuant to Section 409A of the
Code based upon a good faith interpretation of all applicable regulations,
notices and regulatory guidance.
2.10(aa) Transfer
Pricing. All material related party transactions involving any
Acquired Corporation is in compliance with applicable U.S. and foreign transfer
pricing principles and is supported by a study prepared in compliance with
transfer pricing documentation requirements and, to the extent applicable,
Section 482 of the Code and the Treasury Regulations promulgated
thereunder, as well as any comparable provisions of state, local, or foreign
law, to the extent applicable.
2.10(bb) Joint
Venture. To the Knowledge of the Company, none of the Acquired
Corporations has ever been a party to any joint venture, partnership or other
agreement that could be treated as a partnership for Tax purposes.
2.10(cc) USRPHC. None
of the acquired corporations has ever been a “United States Real Property
Holding Corporation” within the meaning of Section 897(c)(2) of the
Code.
2.10(dd) FIN
48. Part 2.10(dd) of the Company
Disclosure Schedule lists all open or uncertain tax positions (as defined in
Financial Accounting Standards Board Interpretation No. 48) taken by the
Company, if any.
2.11 Employee
Benefits.
2.11(a) There has
not been (i) any adoption or material amendment by any of the Acquired
Corporations of any collective bargaining agreement or any bonus, pension,
profit sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, stock appreciation right,
retirement, vacation, severance, disability, death benefit, hospitalization,
medical, worker’s compensation, supplementary unemployment benefits, or other
plan, arrangement or understanding (whether or not legally binding, written or
unwritten) or any employment or service agreement providing compensation or
benefits to any current or former employee, officer, director or independent
contractor of the Company or any of its Subsidiaries or any beneficiary thereof
or entered into, maintained or contributed to, as the case may be, by any of the
Acquired Corporations (collectively, “Benefit
Plans”), or (ii) any adoption of, or amendment to, or change in
employee participation or coverage under, any Benefit Plans which would increase
materially the expense of maintaining such Benefit Plans above the level of the
expense incurred in respect thereof for the fiscal year ended on
December 31, 2006. Neither the execution and delivery of this
Agreement nor the consummation of the Contemplated Transactions will (either
alone or in conjunction with any other event) result in, cause the accelerated
vesting or delivery of, or increase the amount or value of, any payment or
benefit to any employee of the Acquired Corporations, and all Benefit Plans
permit assumption by Parent upon consummation of the Contemplated Transactions
without the consent of any participant or other party.
16
2.11(b) For
purposes of this Agreement, the following definitions apply: “Controlled Group
Liability” means any and all liabilities under (i) Title IV of
ERISA, (ii) section 302 of ERISA, (iii) sections 412 and 4971 of
the Code, (iv) the continuation coverage requirements of section 601
et seq. of ERISA and section 4980B of the Code, and (v) corresponding
or similar provisions of foreign laws or regulations, other than such
liabilities that arise solely out of, or relate solely to, the Plans; “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, and the
regulations thereunder; “ERISA
Affiliate” means, with respect to any entity, trade or business, any
other entity, trade or business that is a member of a group described in
Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1) of
ERISA that includes the first entity, trade or business, or that is a member of
the same “controlled group” as the first entity, trade or business pursuant to
Section 4001(a)(14) of ERISA.
2.11(c) Part 2.11(c) of the Company
Disclosure Schedule includes a complete list of all employee benefit plans,
programs, policies, practices, and other arrangements providing benefits to any
current or former employee, officer or director of any of the Acquired
Corporations or beneficiary or dependent thereof, whether or not written, and
whether covering one person or more than one person, including the Benefit
Plans, sponsored or maintained by any Acquired Corporation, to which any
Acquired Corporation contributes or is obligated to contribute, or with respect
to which an Acquired Corporation has or may have any liability (“Plans”). Without
limiting the generality of the foregoing, the term “Plans” includes all employee
welfare benefit plans within the meaning of Section 3(1) of ERISA, all
employee pension benefit plans within the meaning of Section 3(2) of ERISA,
and all other employee benefit, bonus, incentive, deferred compensation, stock
purchase, stock option, severance (or restriction on termination in the absence
of a notice period), change of control and fringe benefit plans, programs or
agreements.
2.11(d) With
respect to each Plan, the Company has made available to Parent a true, correct
and complete copy of: (i) each writing constituting a part of
such Plan, including without limitation all plan documents, benefit schedules,
trust agreements, and insurance contracts and other funding vehicles, and a
written description of any unwritten Plan; (ii) the three most recently
filed Annual Reports (Form 5500 Series) and accompanying schedules, if any, and
audit reports; (iii) the current summary plan description and any material
modifications thereto, if any; (iv) the most recent annual financial
report, if any; (v) the most recent actuarial report, if any; (vi) the
most recent advisory, opinion, and/or determination letter from the IRS, as
applicable; and (vii) all discrimination tests for the three most recent
plan years. Except as specifically provided in the foregoing
documents made available to Parent, there are no amendments to any Plan or any
new Plan that have been adopted or approved nor has the Company undertaken to
make any such amendments or adopt or approve any new Plan.
2.11(e) Part 2.11(e) of the Company
Disclosure Schedule identifies each Plan that is intended to be a “qualified
plan” within the meaning of Section 401(a) of the Code (“Qualified
Plans”). Each Qualified Plan is so qualified, and the Internal
Revenue Service has issued a currently applicable favorable determination letter
with respect to each Qualified Plan that has not been revoked or the Plan is a
prototype plan which may rely on a currently applicable opinion letter issued
with respect to the Plan, and, to the Knowledge of the Company, there are no
existing circumstances nor any events that have occurred that could adversely
affect the qualified status of any Qualified Plan or the related
trust. No act or omission has occurred with respect to any Qualified
Plan which could increase the cost of any such plan or result in the imposition
of any liability, lien, penalty, or tax under ERISA or the Code.
2.11(f) All
contributions required to be made to any Plan by applicable law or regulation or
by any plan document or other contractual undertaking, and all premiums due or
payable with respect to insurance policies funding any Plan, for any period
through the date hereof have been timely made or paid in full or, to the extent
not required to be made or paid on or before the date hereof, have been fully
reflected on the financial statements contained in the Company SEC
Reports.
2.11(g) The
Company has complied, and is now in compliance, in all material respects with
all provisions of ERISA, the Code and all laws and regulations applicable to the
Plans, and each Plan has been maintained, funded, and administered in accordance
with its terms. There is not now, nor do any circumstances exist that
could give rise to, any requirement for the posting of security with respect to
a Plan or the imposition of any Encumbrance on the assets of the Company under
ERISA or the Code. No prohibited transaction has occurred with
respect to any Plan.
17
2.11(h) Neither
the Acquired Companies nor any ERISA Affiliate maintains, contributes to (or has
ever maintained, contributed to or been required to contribute to), or has any
liability or potential liability under (or with respect to) any (a) plan or
arrangement which is subject to (i) the minimum funding requirements of
Code Section 412, (ii) Part 3 of Title I of ERISA, or
(iii) Title IV of ERISA, (b) “multiemployer plan” (as defined in
Section 3(37) of ERISA), (c) multiple employer plan, including any
multiple employer welfare arrangement (as defined in Section 3(40) of
ERISA), (d) voluntary employees’ beneficiary association (within the
meaning of Code Section 501(c)(9)), (e) welfare benefit fund (within
the meaning of Code Section 419), (f) nonqualified deferred
compensation plan as described in Code Section 409A, or
(g) self-funded group health plan.
2.11(i) All
liabilities in connection with the termination of any employee pension benefit
plan that was sponsored, maintained or contributed to by any Acquired
Corporation at any time within the past three years have been fully
satisfied. Each Plan can be amended, terminated or otherwise
discontinued at any time in accordance with its terms without liability on the
part of the Acquired Companies or any ERISA Affiliate.
2.11(j) To the
Knowledge of the Company, there does not now exist, nor do any circumstances
exist that could result in, any Controlled Group Liability that could be a
liability of any Acquired Corporation following the Closing. Without
limiting the generality of the foregoing, neither any Acquired Corporation nor
any ERISA Affiliate of any Acquired Corporation has engaged in any transaction
described in Section 4069 or Section 4204 of ERISA.
2.11(k) No
Acquired Corporation has any liability for life, health, medical or other
welfare benefits to former employees or beneficiaries or dependents thereof,
except for health continuation coverage as required by Section 4980B of the
Code or Part 6 of Title I of ERISA and at no expense to any Acquired
Corporation.
2.11(l) All Plans
covering foreign employees of the Acquired Corporations comply with applicable
local law and are fully funded and/or book reserved to the extent
applicable.
2.11(m) No labor
organization or group of employees of the Acquired Corporations has made a
pending demand for recognition or certification, and there are no representation
or certification proceedings or petitions seeking a representation proceeding
presently pending or threatened to be brought or filed, with the National Labor
Relations Board or any other labor relations tribunal or
authority. Each of the Acquired Corporations has complied with the
Worker Adjustment and Retraining Notification Act.
2.11(n) There are
no pending or threatened claims (other than claims for benefits in the ordinary
course), lawsuits or arbitrations which have been asserted or instituted against
the Plans, any fiduciaries thereof with respect to their duties to the Plans or
the assets of any of the trusts under any of the Plans which could reasonably be
expected to result in any liability of any Acquired Corporation to any Person
including the Pension Benefit Guaranty Corporation, the Department of Treasury,
or the Department of Labor.
2.11(o) Part 2.11(o) of the Company
Disclosure Schedule contains an accurate and complete list as of the date of
this Agreement of all currently outstanding loans and advances made
by any of the Acquired Corporations to any employee, director, consultant or
independent contractor, or an Affiliate of any of the foregoing, other than
routine travel and expense advances made to employees in the Ordinary Course of
Business. The Acquired Corporations have not, since July 1,
2004, extended or maintained credit, arranged for the extension of credit, or
renewed an extension of credit, in the form of a personal loan to or for any
director or executive officer of the Company, or an Affiliate of any such
director or executive officer. Part 2.11(o) of the Company
Disclosure Schedule identifies any extension of credit maintained by the
Acquired Corporations to which the second sentence of Section 13(k)(1) of
the Exchange Act applies.
2.11(p) Each of
the Acquired Corporations has complied, and are presently in material compliance
with all Legal Requirements relating to employment, equal opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, income tax withholding,
occupational safety and health, and/or privacy rights of
employees. During the three-year period prior to the date of this
Agreement, none of the Acquired Corporations has been a party to any action in
which any of the Acquired Corporations was, or is, alleged to have violated any
Legal Requirement relating to employment, equal opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, occupational safety and health, and/or
privacy rights of employees.
18
2.11(q) Except as
described on Part 2.11(q) of the Company
Disclosure Schedule, there are no retired employees, officers, managers or
directors of any of the Acquired Corporations, or their dependents, receiving
benefits or scheduled to receive benefits from any of the Acquired Corporations
in the future.
2.12 Compliance with Legal
Requirements; Governmental Authorizations. The Acquired
Corporations are, and at all times since July 1, 2004 have been, in
material compliance with each Legal Requirement that is or was applicable to any
of them or to the conduct or operation of their business or the ownership or use
of any of their assets; no event has occurred or circumstance exists that (with
or without notice or lapse of time or both) (A) may constitute or result in
a material violation by any of the Acquired Corporations of, or a substantial
failure on the part of any of the Acquired Corporations to comply with, any
Legal Requirement, or (B) may give rise to any obligation on the part of
any of the Acquired Corporations to undertake, or to bear all or any portion of
the cost of, any substantial remedial action of any nature; and none of the
Acquired Corporations has received, at any time since July 1, 2004, any
notice or other communication (whether oral or written) from any Governmental
Body or any other Person regarding (A) any actual, alleged, possible, or
potential violation of, or failure to comply with, any Legal Requirement, or
(B) any actual, alleged, possible, or potential obligation on the part of
any of the Acquired Corporations to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature. Part 2.12 of the Company
Disclosure Schedule lists, and the Company has made available to Parent copies
of, all reports made by any attorney to the Company’s chief legal officer, chief
executive officer, Company Board (or committee thereof) or other representative
pursuant to 17 CFR Part 205, and all responses thereto.
2.13 Environmental
Matters. Each of the Acquired Corporations is, and at all
times has been, in substantial compliance with, and has not been and is not in
material violation of or subject to any material liability under, any
Environmental Law. None of the Acquired Corporations has any basis to
expect, nor has any of them or, to the Company’s Knowledge, any other Person for
whose conduct they are or may be held to be responsible received,
any written order, notice, or other communication from (i) any
Governmental Body or private citizen acting in the public interest, or
(ii) the current or prior owner or operator of any Facilities, of any
actual or potential material violation by any of the Acquired Corporations, or
failure by any of the Acquired Corporations to comply with, any Environmental
Law, or of any actual or threatened material obligation by an Acquired
Corporation to undertake or bear the cost of any Environmental, Health, and
Safety Liabilities with respect to any of the Facilities or any other properties
or assets (whether real, personal, or mixed) in which any of the Acquired
Corporations has or has had an interest, or with respect to any property or
Facility at or to which Hazardous Materials were generated, manufactured,
refined, transferred, imported, used, or processed by any of the Acquired
Corporations or any other Person for whose conduct any of the Acquired
Corporations are or may be held legally responsible (“Acquired
Corporations Hazardous Material”), or from which Acquired Corporations
Hazardous Materials have been transported, treated, stored, handled,
transferred, disposed, recycled, or received. No underground storage
tanks or underground impoundments, including, without limitation, treatment or
storage tanks, sumps, or water, gas or oil xxxxx, have been used by the Acquired
Corporations, or, to the Company’s Knowledge, by others, at, on or under any
Facilities. To the Company’s Knowledge, no asbestos or
asbestos-containing material, formaldehyde or insulating material containing
urea formaldehyde, or material containing polychlorinated biphenyls, is present
in, on or at any of the Facilities. The Acquired Corporations have
delivered to Parent true and complete copies of all material investigations,
reports, studies, audits, tests, sampling results, monitoring, evaluations or
analyses possessed or initiated by the Acquired Corporations pertaining to any
Hazardous Material in, on, beneath or adjacent to any of the Facilities, or to
which the Acquired Companies have sent any Hazardous Material, or concerning
compliance by the Acquired Corporations, or any other person for whose conduct
the Acquired Corporations are legally responsible, with any Environmental
Law.
2.14 Legal
Proceedings.
2.14(a) There is
no pending Legal Proceeding (i) that has been commenced by or against any
of the Acquired Corporations or that otherwise relates to or may affect the
business of, or any of the assets owned or used by, any of the Acquired
Corporations, except for such Legal Proceedings as are normally incident to the
business carried on by the Acquired Corporations and could not reasonably be
expected to, individually or in the aggregate, result in a Material Adverse
Effect on the Acquired Corporations, (ii) that challenges, or that may have
the effect of preventing, delaying, making illegal, or otherwise interfering
with, any of the Contemplated Transactions, or (iii) against any director
or officer of any of the Acquired Corporations pursuant to Section 8A or
20(b) of the Securities Act or Section 21(d) or 21C of the Exchange
Act.
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2.14(b) To the
Knowledge of the Company, (i) no Legal Proceeding that if pending would be
required to be disclosed under the preceding paragraph has been threatened, and
(ii) no event has occurred or circumstance exists that may give rise to or
serve as a basis for the commencement of any such Legal Proceeding.
2.15 Absence of Certain Changes
and Events. From December 28, 2007, through the date of
this Agreement, the Acquired Corporations have conducted their businesses only
in the Ordinary Course of Business and there has not been any Material Adverse
Effect on the Acquired Corporations, and no event has occurred or circumstance
exists that may result in a Material Adverse Effect on the Acquired
Corporations, or:
2.15(a) any
material loss, damage or destruction to, or any material interruption in the use
of, any of the assets of any of the Acquired Corporations (whether or not
covered by insurance) that has had or could reasonably be expected to have a
Material Adverse Effect on the Acquired Corporations;
2.15(b) (i) any
declaration, accrual, set aside or payment of any dividend or any other
distribution in respect of any shares of capital stock of any Acquired
Corporation, or (ii) any repurchase, redemption or other acquisition by any
Acquired Corporation of any shares of capital stock or other
securities;
2.15(c) any sale,
issuance or grant, or authorization of the issuance of, (i) any capital
stock or other security of any Acquired Corporation (except for Company Common
Stock issued upon the valid exercise of Company Options or Company Warrants or
the exercise, settlement or conversion of equity-based awards under the Company
Stock Plans issuances under the ESPP, or issuances pursuant to the Company
401(k) Plan), (ii) any option, warrant or right to acquire any capital
stock or any other security of any Acquired Corporation (except for equity-based
awards described in Section 2.3), or (iii) any
instrument convertible into or exchangeable for any capital stock or other
security of any Acquired Corporation;
2.15(d) any
amendment or waiver of any of the rights of any Acquired Corporation under, or
acceleration of vesting under, (i) any provision of any of the Company
Stock Plans or (ii) any provision of any Contract evidencing any Company
Option or other equity-based award;
2.15(e) any
creation of any Subsidiary of an Acquired Corporation or acquisition by any
Acquired Corporation of any equity interest or other interest in any other
Person;
2.15(f) any
change of the methods of accounting or accounting practices of any Acquired
Corporation in any material respect;
2.15(g) any
material Tax election by any Acquired Corporation;
2.15(h) any
commencement or settlement of any Legal Proceeding by any Acquired Corporation;
or
2.15(i) any
agreement or commitment to take any of the actions referred to in clauses (a)
through (h) above.
2.16 Contracts;
No Defaults.
2.16(a) Part 2.16(a) of the Company
Disclosure Schedule lists as of the date hereof, and, except to the extent filed
in full without redaction as an exhibit to a Filed Company SEC Report, the
Company has made available to Parent copies of, each Acquired Corporation
Contract and other instrument or document (including any amendment to any of the
foregoing)
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(i) described
in paragraphs (b)(3), (b)(4), (b)(9) or (b)(10) of Item 601 of Regulation S-K of
the SEC;
(ii) with any
director, officer or Affiliate of the Company;
(iii) evidencing,
governing or relating to indebtedness for borrowed money,
(iv) not
entered into in the Ordinary Course of Business that involves expenditures or
receipts in excess of $250,000;
(v) that in
any way purports to limit the freedom of any Acquired Corporation or any of
their Affiliates to engage in any line of business or to compete with any Person
or in any geographic area or to hire or retain any Person, other than agreements
with third parties for the purpose of pursuing business opportunities with a
Governmental Body;
(vi) relating
to the employment of, or the performance of services by, any employee or
consultant, or pursuant to which any of the Acquired Corporations is or may
become obligated to make any severance, termination or similar payment in excess
of $100,000 to any current or former employee or director; or pursuant to which
any of the Acquired Corporations is or may become obligated to make any bonus or
similar payment (other than payments constituting base salary) in excess of
$100,000 to any current or former employee or director;
(vii) (A)
relating to the acquisition, transfer, development, sharing or license of any
Proprietary Rights and/or Technology relating to any Acquired Corporation
Product (except for any Contract pursuant to which (i) any Proprietary
Rights is licensed to the Acquired Corporations under any third party software
license generally available to the public, or (ii) any Proprietary Rights
is licensed by any of the Acquired Corporations to any Person on a non exclusive
basis pursuant to an unmodified standard license agreement, the form of which
has been provided to Parent) or (B) of the type referred to in Section 2.8(c);
(viii) providing
for indemnification of any officer, director, employee or agent;
(ix) (A) relating
to the acquisition, issuance, voting, registration, sale or transfer of any
securities, (B) providing any Person with any preemptive right, right of
participation, right of maintenance or any similar right with respect to any
securities, or (C) providing any of the Acquired Corporations with any
right of first refusal with respect to, or right to repurchase or redeem, any
securities, except for Contracts evidencing Company Options or employment
Contracts entered into in the Ordinary Course of Business which contemplate the
issuance of Company Options;
(x) incorporating
or relating to any guaranty, any warranty or any indemnity or similar
obligation, except for Contracts substantially identical to the standard forms
of end user licenses previously made available by the Company to
Parent;
(xi) relating
to any currency hedging;
(xii) imposing
or containing “standstill” or similar provisions;
(xiii) (A) to
which any Governmental Body is a party or under which any Governmental Body has
any rights or obligations, or (B) directly or indirectly benefiting any
Governmental Body (including any subcontract or other Contract between any
Acquired Corporation and any contractor or subcontractor to any Governmental
Body);
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(xiv) requiring
that any of the Acquired Corporations give any notice or provide any information
to any Person prior to considering or accepting any Acquisition Proposal or
similar proposal, or prior to entering into any discussions, agreement,
arrangement or understanding relating to any Acquisition Transaction or similar
transaction;
(xv) other
than in the Ordinary Course of Business contemplating or involving the payment
or delivery of cash or other consideration in an amount or having a value in
excess of $200,000 in the aggregate, or contemplating or involving the
performance of services having a value in excess of $200,000 in the aggregate;
and
(xvi) any other
Contract, if a breach of such Contract could reasonably be expected to have a
Material Adverse Effect on the Acquired Corporations.
Each of
the foregoing is a “Company Material
Contract.”
2.16(b) Each
Company Material Contract is valid and in full force and effect, and is
enforceable in accordance with its terms subject to the effect of
(i) applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to rights of creditors
generally and (ii) rules of law and equity governing specific performance,
injunctive relief and other equitable remedies.
2.16(c) (i) None
of the Acquired Corporations has violated or breached, or committed any default
under, any Acquired Corporation Contract, except for violations, breaches and
defaults that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations; and, to the Knowledge of the Company, no other Person has violated
or breached, or committed any default under, any Acquired Corporation Contract,
except for violations, breaches and defaults that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect on the Acquired Corporations; (ii) to the Knowledge of the
Company, no event has occurred, and no circumstance or condition exists, that
(with or without notice or lapse of time) will or would reasonably be expected
to, (A) result in a violation or breach of any of the provisions of any
Acquired Corporation Contract, (B) give any Person the right to declare a
default or exercise any remedy under any Acquired Corporation Contract,
(C) give any Person the right to receive or require a rebate, chargeback,
penalty or change in delivery schedule under any Acquired Corporation Contract,
(D) give any Person the right to accelerate the maturity or performance of
any Acquired Corporation Contract, (E) result in the disclosure, release or
delivery of any Acquired Corporation Source Code, or (F) give any Person
the right to cancel, terminate or modify any Acquired Corporation Contract,
except in each such case for defaults, acceleration rights, termination rights
and other rights that, individually or in the aggregate, have not had and would
not reasonably be expected to have a Material Adverse Effect on the Acquired
Corporations; and (iii) since December 28, 2007, none of the Acquired
Corporations has received any notice or other communication regarding any actual
or possible violation or breach of, or default under, any Acquired Corporation
Contract, except in each such case for defaults, acceleration rights,
termination rights and other rights that have not had and would not reasonably
be expected to have a Material Adverse Effect on the Acquired
Corporations.
2.17 Insurance. The
Acquired Corporations are covered by valid and currently effective insurance
policies issued in favor of the Company that are customary for companies of
similar size and financial condition and are adequate in amount to cover all
currently pending or overtly threatened claims, including without limitation any
claims for breach of warranty and claims for indemnification regarding any of
the Acquired Corporation’s products or services. All such policies
are in full force and effect, all premiums due thereon have been paid and the
Acquired Corporations have complied with the provisions of such
policies. The Acquired Corporations have not been advised of any
defense to coverage in connection with any claim to coverage asserted or noticed
by the Acquired Corporations under or in connection with any of their extant
insurance policies. The Acquired Corporations have not received any
written notice from or on behalf of any insurance carrier issuing policies or
binders relating to or covering any of the Acquired Corporations that there will
be a cancellation or non renewal of existing policies or binders, or that
alteration of any equipment or any improvements to real estate occupied by or
leased to or by the Acquired Corporations, purchase of additional equipment, or
material modification of any of the methods of doing business, will be
required.
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2.18 Labor
Matters. Except as disclosed in the Filed Company SEC Reports,
(i) none of the Acquired Corporations is a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization; (ii) none of the Acquired
Corporations is the subject of any Legal Proceeding asserting that any of the
Acquired Corporations has committed an unfair labor practice or seeking to
compel it to bargain with any labor organization as to wages or conditions of
employment; (iii) there is no strike, work stoppage or other labor dispute
involving any of the Acquired Corporations pending or, to the Company’s
Knowledge, threatened; (iv) no complaint, charge or Legal Proceeding by or
before any Governmental Body brought by or on behalf of any employee,
prospective employee, former employee, retiree, labor organization or other
representative of its employees is pending or, to the Company’s Knowledge,
threatened against any of the Acquired Corporations; (v) no material
grievance is pending or, to the Company’s Knowledge, threatened against any of
the Acquired Corporations; and (vi) none of the Acquired Corporations is a
party to, or otherwise bound by, any consent decree with, or citation by, any
Governmental Body relating to employees or employment practices.
2.19 Government
Contracting.
2.19(a) Except as
set forth in Part 2.19(a) of the Company
Disclosure Schedule, there are (i) no outstanding claims against the
Company, either by any Governmental Body or any prime contractor, subcontractor,
vendor or other third party arising under or relating to any Government
Contract, and (ii) no disputes between the Company and any Governmental
Body under the Contract Disputes Act or any other federal statute or between the
Company and any prime contractor, subcontractor or vendor arising under or
relating to any such Government Contract. Except as set forth in
Part 2.19(a) of the Company
Disclosure Schedule, to the Knowledge of the Company there are no facts that
could reasonably be expected to result in a claim or dispute under clause (i) or
(ii) of the immediately preceding sentence.
2.19(b) The
Company has submitted all required provisional bid labor and indirect rates
through fiscal year 2008 and final indirect rates to the cognizant U.S.
Government administrative contracting officer through fiscal year
2006. All such submissions are consistent with all government
regulations cost accounting rules and regulations, including but not limited to
the Federal Acquisition Regulations. No unallowable costs were
contained therein.
2.19(c) Except as
set forth in Part 2.19(c) of the Company
Disclosure Schedule, neither the Company nor, to the Knowledge of the Company,
any of its present employees, consultants or agents is (or during the last five
years has been) suspended or debarred from doing business with any Governmental
Body or is (or during such period was) the subject of a finding of
non-responsibility or ineligibility for any Governmental Body.
2.19(d) Except as
set forth in Part 2.19(d) of the Company
Disclosure Schedule, to the Knowledge of the Company, no statement,
representation or warranty made by Company in any Government Contract, any
government bid or any exhibit thereto or in any certificate, statement, list,
schedule or other document submitted or furnished to any Governmental Body in
connection with any Government Contract or government bid (i) contained on
the date so furnished or submitted any untrue statement of material fact, or
failed to state a material fact necessary to make the statements contained
therein, in light of the circumstances in which they are made, not misleading,
or (ii) contains any untrue statement of a material fact, or fails to state
a material fact necessary to make the statements contained therein, in light of
the circumstances in which they are made, not misleading, except where, in the
case of both clauses (i) and (ii), any untrue statement or failure to state a
fact would not have a Material Adverse Effect on the Company.
2.19(e) The
Company, in conducting the Business as it relates to government contracts, is in
material compliance with all government accounting principals and governing
regulations. No unidentified unallowable costs exist on the books and
records of the Company.
2.19(f) The
Company has submitted all required labor rate proposals, as well as all final
indirect rate submissions, to the cognizant Defense Contract Management Agency
(DCMA) Administrative Contracting Officer for prior years in accordance with
applicable Federal Acquisition Regulations, and there are no outstanding or
unresolved matters with respect thereto.
23
2.19(g) Except as
set forth in Part 2.19(g) of the Company
Disclosure Schedule: (i) none of the Company’s employees,
consultants or agents is (or during the last five years has been) under
administrative, civil or criminal investigation, indictment or request for
information by any Governmental Entity relating to the performance of his or her
duties to the Company; (ii) there is not pending any audit or investigation
of the Company, its officers, employees or representatives nor within the last
five years has there been any audit or investigation of the Company, officers,
employees or representatives resulting in a material adverse finding with
respect to any alleged irregularity, misstatement or omission arising under or
relating to any government contract; and (iii) during the last five years,
the Company has not made any voluntary disclosure to any Governmental Body with
respect to any alleged irregularity, misstatement or omission arising under or
relating to a government contract. Except as set forth in Part 2.19(g) of the Company
Disclosure Schedule, the Company has not had any irregularities, misstatements
or omissions arising under or relating to any government contract that has led
or is expected to lead, either before or after the Effective Time, to any of the
consequences set forth in clause (i) or (ii) of the immediately preceding
sentence or any other material damage, penalty assessment, recoupment of payment
or disallowance of cost.
2.20 Interests of Officers and
Directors. None of the officers or directors of any of the
Acquired Corporations or any of their respective Affiliates (other than the
Acquired Corporations) has any interest in any property, real or personal,
tangible or intangible, used in or pertaining to the business of the Acquired
Corporations, or in any supplier, distributor or customer of the Acquired
Corporations, or any other relationship, contract, agreement, arrangement or
understanding with the Acquired Corporations, except as disclosed in the Filed
Company SEC Reports and except for the normal rights of a stockholder and rights
under the Plans and the Company Options.
2.21 Export Control Laws;
Encryption and Other Restricted Technology. The Acquired
Corporations have complied with all U.S. export control Legal Requirements
regarding any export of its products or technology, including the Export
Administration Regulations (“EAR”)
maintained by the U.S. Department of Commerce and the International Traffic in
Arms Regulations (“ITAR”)
maintained by the Department of State. The Acquired Corporations’
business as currently conducted does not require any of the Acquired
Corporations to obtain a license from the United States Departments of Commerce
or State or an authorized body thereof under ITAR or EAR or other legislation
regulating the development, commercialization or export of
technology. The Acquired Corporations have not received any
correspondence from the export control authorities in any country, including the
U.S. Departments of Commerce or State, regarding any pre-penalty notice,
notice of penalty, subpoena or request for documents, or notice of audit,
investigation or inquiry by a special agent or other export control agent or
official.
2.22 Business
Relationships. To the Company’s Knowledge, the execution of
this Agreement and the consummation of the Merger and the other Contemplated
Transactions will not materially adversely affect the relationships of the
Acquired Corporations with any material customers, distributors, licensors,
designers and suppliers. None of the Acquired Corporations has
received any notification that any material distributor, reseller, original
equipment manufacturer, customer, supplier, foundry or manufacturer will
discontinue or materially reduce the purchase, supply or the manufacture, as the
case may be, of any Acquired Corporation Products.
2.23 International Trade
Matters. The Company is, and at all times since January 1,
2002 has been, in compliance with and has not been and is not in material
violation of any International Trade Law (defined below), including but not
limited to, all laws and regulations related to the import and export of
commodities, software, and technology from and into the United States, and the
payment of required duties and tariffs in connection with same. The
Company has no basis to expect, nor has any of them or any other person for
whose conduct they are or may be held to be responsible received, any actual or
threatened order, notice, or other communication from any governmental body of
any actual or potential violation or failure to comply with any International
Trade Law. “International
Trade Law” shall mean U.S. statutes, laws and regulations applicable to
international transactions, including, but not limited to, the Export
Administration Act, the Export Administration Regulations, the Foreign Corrupt
Practices Act, the Arms Export Control Act, the International Traffic in Arms
Regulations, the International Emergency Economic Powers Act, the Trading with
the Enemy Act, the U.S. Customs laws and regulations, the Foreign Asset Control
Regulations, and any regulations or orders issued thereunder.
2.24 Rights
Plan. The Company does not have any shareholder rights plan or
“poison pill” in effect, including without limitation any agreement with a third
party trust or fiduciary entity with respect thereto.
24
2.25 Opinion of Financial
Advisor. The Company’s Board of Directors has received the
opinion of Imperial Capital LLC (“Imperial”)
(a copy of whose engagement letter has been provided to Parent) dated February
20, 2008, to the effect that, as of such date, the Exchange Ratio in the Merger
is fair to the shareholders of the Company from a financial point of
view. A copy of that opinion has been delivered to Parent, for
informational purposes only.
2.26 Brokers. No
broker, finder, investment banker or other Person (other than Imperial) is
entitled to any brokerage, finder’s or other fee or commission in connection
with the Merger and the Contemplated Transactions based upon arrangements made
by or on behalf of any Acquired Corporation. There are no Acquired
Corporation Contracts between the Acquired Corporations and Imperial pursuant to
which such firm would be entitled to any payment relating to the Contemplated
Transactions other than the engagement letter described in Section 2.25.
2.27 Full
Disclosure. None of the information supplied or to be supplied
by or on behalf of the Company for inclusion or incorporation by reference in
the Form S-4 Registration Statement will, at the time the Form S-4
Registration Statement is filed with the SEC or at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading. None of the information supplied
or to be supplied by or on behalf of the Company for inclusion or incorporation
by reference in the Joint Proxy Statement/Prospectus will, at the time the Joint
Proxy Statement/Prospectus is mailed to the shareholders of the Company or the
stockholders of Parent or at the time of the Company Shareholders’ Meeting or
the Parent Stockholders’ Meeting contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading. Notwithstanding the foregoing,
no representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein about Parent supplied by Parent for
inclusion or incorporation by reference in the Form S-4 Registration Statement
or the Joint Proxy Statement/Prospectus.
2.28 Sale of
Products; Performance of Services.
2.28(a) To the
Knowledge of the Company, each Acquired Corporation product, system, program,
Proprietary Right or other asset designed, developed, manufactured, assembled,
sold, installed, licensed or otherwise made available by the Company since
July 1, 2004 or by any other Acquired Corporation since the later of
July 1, 2004 or the date of its acquisition by the Company to any
Person:
(i) materially
conformed and complied with the terms and requirements of any applicable
warranty or other Contract and with all applicable material Legal Requirements;
and
(ii) was free
of any bug, virus, design defect or other defect or deficiency at the time it
was sold or otherwise made available, other than any immaterial bug or similar
defect that would not adversely affect in any material respect such product,
system, program, Acquired Corporation Proprietary Rights or other asset (or the
operation or performance thereof).
2.28(b) To the
Knowledge of the Company, all installation services, programming services,
repair services, maintenance services, support services, training services,
upgrade services and other services that have been performed by the Acquired
Corporations were performed properly and in full conformity with the terms and
requirements of all applicable warranties and other Contracts and with all
applicable material Legal Requirements, and the financial results of the
performance of such services have been reflected in the financial statements
contained in the Filed Company SEC Reports in accordance with GAAP.
25
2.28(c) Since
December 31, 2006, no customer or other Person has asserted or overtly
threatened to assert any claim against any of the Acquired Corporations
(i) under or based upon any warranty provided by or on behalf of any of the
Acquired Corporations, or (ii) under or based upon any other warranty
relating to any product, system, program, Proprietary Rights or other asset
designed, developed, manufactured, assembled, sold, installed, repaired,
licensed or otherwise made available by any of the Acquired Corporations or any
services performed by any of the Acquired Corporations.
SECTION
3 REPRESENTATIONS
AND WARRANTIES OF PARENT.
Except as
set forth in Parent Disclosure Schedule, Parent represents and warrants to the
Company as follows:
3.1 Organization
and Good Standing.
3.1(a) Parent
and each of its Subsidiaries are corporations or other Entities duly organized,
validly existing, and in good standing (where such concept is applicable) under
the laws of their respective jurisdictions of incorporation or organization,
with full corporate power or other Entity authority to conduct their respective
businesses as now being conducted, to own or use the respective properties and
assets that they purport to own or use, and to perform all their respective
obligations under the Parent Contracts. Parent and its Subsidiaries
are duly qualified to do business as foreign corporations and are in good
standing (where such concept is applicable) under the laws of each state or
other jurisdiction in which either the ownership or use of the properties owned
or used by them, or the nature of the activities conducted by them, requires
such qualification, except where the failure to be so qualified could not
reasonably be expected to, individually or in the aggregate, result in a
Material Adverse Effect on Parent and its Subsidiaries.
3.1(b) Part 3.1(b) of the Parent
Disclosure Schedule lists, as of the date of this Agreement, all of Parent’s
Subsidiaries and indicates as to each the type of Entity and its jurisdiction of
organization. Parent has made available to the Company copies of the
Organizational Documents of Parent, as currently in effect.
3.1(c) Parent
has made available to the Company copies of the charters of each committee of
Parent’s Board of Directors and any code of conduct or similar policies adopted
by Parent.
3.2 Authority;
No Conflict.
3.2(a) Parent
has all necessary corporate power and authority to execute and deliver this
Agreement and the other agreements referred to in this Agreement to which it is
a party, to perform its obligations hereunder and thereunder and to consummate
the Contemplated Transactions. Except for the requirement, under
Parent’s agreement with the NASDAQ Stock Market and the NASDAQ Stock Market’s
rules incorporated by reference therein, to obtain the Required Parent
Stockholder Vote, the execution and delivery of this Agreement by Parent and the
consummation by Parent of the Contemplated Transactions have been duly and
validly authorized by all necessary corporate action and no other corporate
proceedings on the part of Parent are necessary to authorize this Agreement or
to consummate the Contemplated Transactions (other than, with respect to the
Merger, the filing the Merger Agreement required by Delaware Law and California
Law). The Board of Directors of Parent (the Parent Board) has
unanimously approved this Agreement and declared it to be
advisable. This Agreement has been duly and validly executed and
delivered by Parent and, assuming the due execution and delivery of this
Agreement by the Company, constitutes the legal, valid and binding obligation of
Parent, enforceable against Parent in accordance with its terms subject to the
effect of (i) applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to rights of creditors
generally and (ii) rules of law and equity governing specific performance,
injunctive relief and other equitable remedies.
26
3.2(b) Neither
the execution and delivery of this Agreement nor the consummation of any of the
Contemplated Transactions do or will, directly or indirectly (with or without
notice or lapse of time or both); (i) contravene, conflict with, or result
in a violation of (A) any provision of the Organizational Documents of
Parent or any of its Subsidiaries, or (B) any resolution adopted by the
Parent Board or the stockholders of Parent or any of its Subsidiaries;
(ii) contravene, conflict with, or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Contemplated
Transactions or to exercise any remedy or obtain any relief (other than
dissenter’s rights) under, any Legal Requirement or any order to which Parent or
any of its Subsidiaries, or any of the assets owned or used by Parent or any of
its Subsidiaries, may be subject; (iii) contravene, conflict with, or
result in a violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or
modify, any Governmental Authorization that is held by Parent or any of its
Subsidiaries to which Parent or any of its Subsidiaries is party or by which
Parent or any of its Subsidiaries or any of their respective assets are bound;
(iv) cause Parent or any of its Subsidiaries to become subject to, or to
become liable for the payment of, any Tax; (v) cause any of the assets
owned by Parent or any of its Subsidiaries to be reassessed or revalued by any
Governmental Body; (vi) contravene, conflict with, or result in a violation
or breach of any provision of, or give any Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any Parent Contract; (vii) require a
Consent from any Person; or (viii) result in the imposition or creation of
any Encumbrance upon or with respect to any of the assets owned or used by
Parent or any of its Subsidiaries, except, in the case of clauses (ii), (iii),
(iv), (v), (vi), (vii) and (viii), for any such conflicts, violations, breaches,
defaults or other occurrences that would not prevent or delay consummation of
the Merger in any material respect, or otherwise prevent Parent or Merger Sub
from performing its obligations under this Agreement in any material respect, or
would not reasonably be expected, individually or in the aggregate, to result in
a Material Adverse Effect on Parent and its Subsidiaries.
3.2(c) The
execution and delivery of this Agreement by Parent and Merger Sub do not, and
the performance of this Agreement and the consummation of the Contemplated
Transactions by Parent and Merger Sub will not, require any Consent of, or
filing with or notification to, any Governmental Body, except (i) for
(A) applicable requirements, if any, of the Exchange Act, the Securities
Act, the NASDAQ Stock Market and Blue Sky Laws, (B) the pre-merger
notification requirements of the HSR Act, (C) filing of appropriate merger
documents as required by Delaware Law and California Law and (D) any
applicable non-United States competition, antitrust and investment laws and
(ii) for such other Consents, filings or notifications where failure to
obtain such Consents, or to make such filings or notifications, would not
prevent or delay the consummation of the Merger in any material respect, or
otherwise prevent Parent and Merger Sub from performing their obligations under
this Agreement in any material respect, or would not reasonably be expected to,
individually or in the aggregate, result in a Material Adverse Effect on Parent
and its Subsidiaries.
3.2(d) Merger
Sub has all necessary corporate power and authority to execute and deliver this
Agreement and the other agreements referred to in this Agreement to perform its
obligations hereunder and thereunder and to consummate the Merger and the
Contemplated Transactions. The execution and delivery of this
Agreement by Merger Sub and the consummation by Merger Sub of the Contemplated
Transactions have been duly and validly authorized by all necessary corporate
action and no other corporate proceedings on the part of the Merger Sub are
necessary to authorize this Agreement or to consummate the Contemplated
Transactions (other than, with respect to the Merger, the approval and adoption
of this Agreement by Parent as the holder of a majority of the outstanding
shares of Merger Sub Common Stock and the filing of appropriate merger documents
as required by Delaware Law and California Law). The Board of
Directors of Merger Sub has unanimously approved this Agreement, declared it to
be advisable and resolved to recommend to Parent that it vote in favor of the
adoption of this Agreement in accordance with Delaware Law. This
Agreement has been duly and validly executed and delivered by Merger Sub and
constitutes the legal, valid and binding obligations of Merger Sub, enforceable
against the Merger Sub in accordance with its terms.
27
3.3 Capitalization. The
authorized capital stock of Parent consists of 195,000,000 shares of Parent
Common Stock. As of the date hereof, (a) 78,998,922 shares of Parent
Common Stock are issued and outstanding, all of which are duly authorized,
validly issued, fully paid and nonassessable, (b) 28,550 shares of Parent Common
Stock are reserved for issuance pursuant to Parent RSU Awards not yet granted,
(d) 2,916,250 shares of Parent Common Stock are reserved for issuance upon the
exercise of outstanding Parent RSU Awards and (e) 8,324,607 shares of
Parent Common Stock reserved for issuance pursuant to Parent Stock Option grants
not yet granted, (g) 6,133,018 shares of Parent Common Stock are reserved for
issuance upon the exercise of outstanding Parent Stock Option grants and (h)
there are 5,000,000 shares of Parent Preferred Stock authorized, of which
there are 3,646,363 undesignated shares, 63,637 designated as Series A shares,
90,000 designated as Series B shares, of which 10,000 shares are currently
issued and outstanding, and 1,200,000 designated as Series C shares.
Except as described above, there are not any bonds, debentures, notes or other
indebtedness or other securities of Parent having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matter on which the shareholders of Parent may vote. Except as
set forth in the second sentence of this Section 3.3, as of the
date hereof no shares of capital stock or other voting securities of Parent are
issued or reserved for issuance. Except as set forth in this Section 3.3, there are no
Options relating to the issued or unissued capital stock of Parent or any of its
Subsidiaries, or obligating Parent or any of its Subsidiaries to issue, grant or
sell any shares of capital stock of, or other equity interests in, or securities
convertible into equity interests in, Parent or any of its
Subsidiaries. Since December 31, 2007 through the date of this
Agreement, Parent has not issued any shares of its capital stock. All
shares of Parent Common Stock reserved for issuance, upon issuance on the terms
and conditions of the instruments pursuant to which they are issuable, will be
duly and validly issued, fully paid and nonassessable. Neither Parent
nor any of its Subsidiaries has any obligation to acquire any shares of Parent
Common Stock or any capital stock of Parent’s subsidiaries or make any
investment in or loan to, any other Person. Each outstanding share of
capital stock of each of Parent’s Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable and each such share owned by Parent or one
of its Subsidiaries is free and clear of all Encumbrances of any nature
whatsoever. None of the outstanding equity securities or other
securities of Parent or any of its Subsidiaries was issued in violation of the
Securities Act or any other Legal Requirement. Other than pursuant to
this Agreement, neither Parent nor any of its Subsidiaries owns, or has any
obligation to acquire, any securities of any Person (other than Subsidiaries of
Parent) or any direct or indirect equity or ownership interest in any other
business. Neither Parent nor any Subsidiary of Parent is a general
partner of any general or limited partnership. Each Parent Stock
Option or other right to acquire Parent Common Stock or other equity of Parent
has at all times since January 1, 2004 been properly accounted for in
accordance with GAAP in Parent’s audited financial statements.
3.4 SEC
Reports.
3.4(a) Parent
has on a timely basis filed all forms, reports and documents required to be
filed by it with the SEC since January 1, 2004. Parent has made
available to the Company copies in the form filed with the SEC (including the
full text of any document filed subject to a request for confidential treatment)
of all of the following that have been filed with the SEC prior to the date
hereof, except to the extent available in full without redaction on the SEC’s
web site through XXXXX two days prior to the date of this
Agreement: (i) Parent’s Annual Reports on Form 10-K for each
fiscal year of Parent beginning since January 1, 2005, (ii) its
Quarterly Reports on Form 10-Q for each of the first three fiscal quarters in
each of the fiscal years of Parent referred to in clause (i) above,
(iii) all proxy statements relating to Parent’s meetings of stockholders
(whether annual or special) held, and all information statements relating to
stockholder consents, since the beginning of the first fiscal year referred to
in clause (i) above, (iv) its Current Reports on Form 8-K filed since the
beginning of the first fiscal year referred to in clause (i) above, (v) all
other forms, reports, registration statements and other documents (other than
preliminary materials if the corresponding definitive materials have been
provided to the Company pursuant to this Section 3.4) filed by Parent with the
SEC since the beginning of the first fiscal year referred to in clause (i) above
(the forms, reports, registration statements and other documents referred to in
clauses (i), (ii), (iii), (iv) and (v) above, whether or not available
through XXXXX, are, collectively, the “Parent SEC
Reports”), (vi) all certifications and statements required by Rules
13a-14 and 15d-14 under the Exchange Act and Sections 302 and 906 of SOX, and
the rules and regulations of the SEC promulgated thereunder, with respect to any
report referred to in clause (i) or (ii) (the “Parent
Certifications”), and (vii) all comment letters received by Parent
from the Staff of the SEC since January 1, 2004 and all responses to such
comment letters by or on behalf of Parent. No Subsidiary of Parent
is, or since January 1, 2004 has been, required to file any document with
the SEC. As used in this Section 3.4, the term “file” shall be
broadly construed to include any manner in which a document or information is
furnished, supplied or otherwise made available to the SEC.
28
3.4(b) Each of
Parent SEC Reports (i) as of the date of the filing of such report,
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as the case may be, and, to the extent then applicable,
SOX, including in each case, the rules and regulations thereunder, and
(ii) as of its filing date (or, if amended or superseded by a subsequent
filing prior to the date hereof, on the date of such filing) 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 made therein, in
the light of the circumstances under which they were made, not
misleading.
3.4(c) The
Parent Certifications complied with Rules 13a-14 and 15d-14 under the Exchange
Act and Sections 302 and 906 of SOX, and the rules and regulations of the SEC
promulgated thereunder, and the statements contained in Parent Certifications
were true and correct as of the date of the filing thereof.
3.4(d) Parent
and its Subsidiaries have implemented and maintain disclosure controls and
procedures (as defined by Rule 13a-15 or 15d-15 under the Exchange Act), and
such controls and procedures are effective to ensure that (i) all material
information required to be disclosed by Parent in the reports that it files
under the Exchange Act is recorded, processed, summarized and reported with the
time periods specified in the SEC’s rules and forms, and (ii) all such
information is accumulated and communicated to Parent’s management, including
its principal executive officer and principal financial officer, as appropriate
to allow timely decisions regarding required disclosure. Parent has
made available to the Company copies of all policies, manuals and other material
documents promulgating, such disclosure controls and
procedures. Parent is, and since January 1, 2004 has been, in
compliance with (i) the applicable listing and corporate governance rules
of the NASDAQ Stock Market, and (ii) the applicable provisions of
SOX. Parent has made available to the Company true, correct and
complete copies of all correspondence between Parent and the NASDAQ Stock Market
and between Parent and the SEC since January 1, 2004.
3.4(e) Parent
and its Subsidiaries have implemented and maintain a system of internal control
over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) sufficient to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP, including, without limitation,
that (i) transactions are executed in accordance with management’s general
or specific authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization, and
(iv) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to
any differences. Since September 29, 2007, (a) there have
not been any changes in the internal control over financial reporting of Parent
and its Subsidiaries that have materially affected, or are reasonably likely to
materially affect, their internal control over financial reporting, and
(b) all “significant deficiencies” and “material weaknesses” (as such terms
are defined by the Public Accounting Oversight Board) have been disclosed to
Parent’s outside auditors and the audit committee of Parent’s
Board.
3.5 Financial
Statements.
3.5(a) The
financial statements and notes contained or incorporated by reference in Parent
SEC Reports fairly present the financial condition and the results of
operations, changes in stockholders’ equity, and cash flow of Parent and its
consolidated Subsidiaries as at the respective dates of and for the periods
referred to in such financial statements, all in accordance with GAAP and
Regulation S-X of the SEC, subject, in the case of interim financial
statements, to normal recurring year-end adjustments (the effect of which will
not, individually or in the aggregate, be materially adverse) and the omission
of notes to the extent permitted by Regulation S-X of the SEC (that, if
presented, would not differ materially from notes to the financial statements
included in Parent’s Annual Report on Form 10-K for the year ended
December 31, 2006 (the consolidated balance sheet included in such Annual
Report, the “Parent Balance
Sheet”); the financial statements referred to in this Section 3.5 reflect the consistent
application of such accounting principles throughout the periods involved,
except as disclosed in the notes to such financial statements. No
financial statements of any Person other than Parent and its Subsidiaries are,
or since January 1, 2004 have been, required by GAAP to be included in the
consolidated financial statements of the Parent.
3.5(b) Part 3.5(b) of the Parent
Disclosure Schedule lists, and Parent has made available to the Company copies
of, the documents creating or governing all of Parent’s Off-Balance Sheet
Arrangements.
29
3.6 Absence of Certain Changes
and Events. From September 29, 2007 through the date of
this Agreement, Parent and its Subsidiaries have conducted their business only
in the Ordinary Course of Business and there has not been any Material Adverse
Effect on Parent and its Subsidiaries, and no event has occurred or circumstance
exists that may result in a Material Adverse Effect on Parent and its
Subsidiaries, or:
3.6(a) any
material loss, damage or destruction to, or any material interruption in the use
of, any of the assets of Parent and its Subsidiaries (whether or not covered by
insurance) that has had or could reasonably be expected to have a Material
Adverse Effect on Parent;
3.6(b) (i) any
declaration, accrual, set aside or payment of any dividend or any other
distribution in respect of any shares of capital stock of Parent or its
Subsidiaries, or (ii) any repurchase, redemption or other acquisition by
Parent or its Subsidiaries of any shares of capital stock or other
securities;
3.6(c) any sale,
issuance or grant, or authorization of the issuance of, (i) any capital
stock or other security of Parent (except for Parent Common Stock issued upon
the valid exercise, settlement or conversion of each restricted stock unit award
granted (or previously assumed) by Parent representing a right to receive upon a
future date or dates shares of Parent Common Stock (each a “Parent RSU
Award”) or other equity-based awards under governing share-based plan
documents, including plan documents governing options that have previously been
assumed by Parent as a result of corporate acquisition transactions by the
Company, as applicable (collectively, and in each case, the “Parent Stock
Plans”), (ii) any option, warrant or right to acquire any capital
stock or any other security of Parent and its Subsidiaries (except for Parent
RSU Awards or other equity-based awards described in Section 3.3), or (iii) any
instrument convertible into or exchangeable for any capital stock or other
security of Parent and its Subsidiaries;
3.6(d) any
amendment or waiver of any of the rights of Parent or any Subsidiary of Parent
under, or acceleration of vesting under, (i) any provision of any of the
Parent Stock Plans or (ii) any provision of any Contract evidencing any
other equity-based award;
3.6(e) any
amendment to any Organizational Document of Parent or any Subsidiary of Parent,
any merger, consolidation, share exchange, business combination,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction involving Parent or any Subsidiary of
Parent;
3.6(f) any
change of the methods of accounting or accounting practices of Parent or any
Subsidiary of Parent in any material respect;
3.6(g) any
agreement or commitment to take any of the actions referred to in clauses (a)
through (f) above.
3.7 Operation of Merger
Sub. Merger Sub has been formed solely for the purpose of
engaging in the transactions contemplated hereby, has not engaged in any
business activities and will have no assets, liabilities or obligations other
than as contemplated by this Agreement.
3.8 Property. Parent
and its Subsidiaries (i) have good and valid title to all property material
to the business of Parent and its Subsidiaries as reflected in the latest
audited financial statements included in the Parent SEC Reports as being owned
by Parent or acquired after the date thereof (except for property sold or
otherwise disposed of in the Ordinary Course of Business since the date
thereof), free and clear of any Encumbrances except (A) the lien of
Parent’s principal lender, (B) Permitted Encumbrances, and (C) such
imperfections or irregularities of title or Encumbrances as do not affect the
use of the properties or assets subject thereto or affected thereby or otherwise
materially impair the business operations in which such properties are used, in
either case in such a manner as to have a Material Adverse Effect on Parent and
its Subsidiaries and (ii) are collectively the lessee of all property
material to the business of Parent and its Subsidiaries which are reflected as
leased in the latest audited financial statements included in Parent SEC Reports
(or on the books and records of Parent as of the date thereof) or acquired after
the date thereof (except for leases that have expired by their terms) and are in
possession of the properties purported to be leased thereunder, and each such
lease is valid and in full force and effect without default thereunder by the
lessee or, to the Knowledge of Parent, the lessor, other than defaults that
would not have a Material Adverse Effect on Parent. For the avoidance
of doubt, the representations and warranties set forth in this Section 3.8 do not apply to
Proprietary Rights, which matters are specifically addressed in Section 3.9.
30
3.9 Proprietary
Rights.
3.9(a) Parent
and its Subsidiaries own or have a valid right to use all Proprietary Rights
used or currently proposed to be used in the business of any of Parent and its
Subsidiaries as conducted prior to or on the date of this Agreement, and all
Proprietary Rights necessary or appropriate to make, use, offer for sale, sell
or import the Parent Product(s).
3.9(b) Claims.
(i) No Person
has asserted or threatened a claim, against Parent or its Subsidiaries, nor to
the Knowledge of the Parent are there any facts which could give rise to a
claim, which would adversely affect any Parent’s or its Subsidiaries’ ownership
rights to, or rights under, any Parent Proprietary Rights, or any Contract or
other arrangement under which Parent or its Subsidiaries claims any right, title
or interest under any Parent Proprietary Rights;
(ii) None of
Parent or its Subsidiaries is subject to any proceeding or outstanding decree,
order, judgment or stipulation restricting in any manner the use, transfer or
licensing of any Parent Proprietary Rights by Parent or its Subsidiaries, the
use, transfer or licensing of any Parent Products by Parent or its Subsidiaries,
or which may adversely affect the validity, use or enforceability of any Parent
Proprietary Rights;
(iii) No Person
has asserted or threatened a claim against Parent or its Subsidiaries, nor to
the Knowledge of the Parent are there any facts which could give rise to a
claim, that any Parent Product (or any Parent Proprietary Right embodied in any
Parent Product) infringes (directly or indirectly) or misappropriates or
constitutes unlawful use of any Person’s Proprietary Rights. No
Person has notified Parent or its Subsidiaries that Parent requires a license to
any of that Person’s Proprietary Rights and neither Parent or its Subsidiaries
has received any unsolicited written offer to license (or any other notice of)
any Person’s Proprietary Rights.
3.9(c) The
execution, delivery or performance of this Agreement or any ancillary agreement
contemplated hereby, the consummation of the transactions contemplated by this
Agreement or such ancillary agreements and the satisfaction of any closing
condition will not contravene, conflict with or result in any limitation on
Parent, or the Parent’s right, title or interest in or to the Parent Proprietary
Rights.
3.9(d) No
product liability claims have been threatened, alleged or filed against Parent
or its Subsidiaries related to any Parent Product.
3.10 No Undisclosed
Liabilities. Parent and its Subsidiaries have no liabilities
or obligations of any nature (whether absolute, accrued, contingent, determined,
determinable, xxxxxx, inchoate or otherwise), except for (i) liabilities or
obligations reflected or reserved against in the Parent Balance Sheet, or
(ii) current liabilities incurred in the Ordinary Course of Business since
the date of the Parent Balance Sheet that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on
Parent.
3.11 Taxes.
3.11(a) Timely Filing of Tax
Returns. Parent and its Subsidiaries have filed or caused to
be filed all Tax Returns that are or were required to be filed by or with
respect to any of them pursuant to applicable Legal Requirements. All
Tax Returns filed by Parent and its Subsidiaries were (and as to Tax Returns not
filed as of the date hereof, will be) in all material respects true, complete
and correct and filed on a timely basis.
31
3.11(b) Payment of
Taxes. Parent and its Subsidiaries have, within the time and
in the manner prescribed by law, paid (and until Closing, will pay within the
time and manner required by law) all Taxes that are due and payable by the
Parent and its Subsidiaries.
3.11(c) Withholding
Taxes. Parent and its Subsidiaries have complied (and until
Closing will comply) with all applicable laws, rules and regulations relating to
the withholding of Taxes and have, within the times and in the manner prescribed
by law, paid over (and until Closing will pay over) to the proper Governmental
Body all amounts required to be paid under applicable laws, rules and
regulations relating to the paying over of Taxes.
3.11(d) Audits. To
the Knowledge of Parent, no Tax Return of any of the Parent or its Subsidiaries
is under audit or examination by any Governmental Body, and no notice of such an
audit or examination has been received by any of the Parent or its Subsidiaries
and none of the Parent or its Subsidiaries has Knowledge of any threatened
audits, investigations or claims for or relating to Taxes, and there are no
matters under discussion with any Governmental Body with respect to
Taxes. No issues relating to Taxes were raised in writing by the
relevant Governmental Body during any presently pending audit or examination,
and no issues relating to Taxes were raised in writing by the relevant
Governmental Body in any completed audit or examination that can reasonably be
expected to recur in a later taxable period. Part 3.11(d) of the
Parent Disclosure Schedule lists, and the Parent has made available to Company
copies of, all examiner’s or auditor’s reports, notices of proposed adjustments
or similar commissions received by any of the Parent or its Subsidiaries from
any Governmental Body since December 31, 2004.
3.11(e) Tax
Reserves. The charges, accruals, and reserves with respect to
Taxes on the respective books of each of the Parent and its Subsidiaries are
adequate (and until Closing will continue to be adequate) to pay all Taxes not
yet due and payable and have been determined in accordance with generally
accepted United States accounting principles. No differences exist
between the amounts of the book basis and the tax basis of assets (net of
liabilities) that are not accounted for on any accrual on the books of the
Parent or its Subsidiaries for federal income tax purposes. There
exists no proposed assessment of Taxes against any of the Parent or its
Subsidiaries .
3.11(f) Tax
Liens. No Encumbrance for Taxes exists with respect to any
assets or properties of any of the Parent or its Subsidiaries , nor will any
such encumbrances exist at Closing except for statutory liens for Taxes not yet
due.
3.11(g) Tax Sharing
Agreements. Part 3.11(g) of the
Parent Disclosure Schedule lists, and Parent has made available to Company
copies of, any Tax sharing agreement, Tax allocation agreement, Tax indemnity
obligation or similar written or unwritten agreement, arrangement, understanding
or practice with respect to Taxes (including any advance pricing agreement,
closing agreement or other agreement relating to Taxes with any Governmental
Body) to which any of the Parent or its Subsidiaries is a party or by which any
of the Parent or its Subsidiaries is bound. No such agreements shall
be modified or terminated prior to Closing without the consent of
Company.
3.11(h) Extensions of Time for
Filing Tax Returns. None of the Parent or its Subsidiaries has
requested any extension of time within which to file any Tax Return, which Tax
Return has not since been filed.
3.11(i) Waiver of Statutes of
Limitations. None of the Parent or its Subsidiaries has
executed any outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns.
3.11(j) Powers of
Attorney. No power of attorney currently in force has been
granted by any of the Parent or its Subsidiaries concerning any Taxes or Tax
Return.
3.11(k) Tax
Rulings. None of the Parent or its Subsidiaries has received
or been the subject of a Tax Ruling or a request for Tax Ruling. None
of the Parent or its Subsidiaries has entered into a Closing Agreement with any
Governmental Authority that would have a continuing effect after the Closing
Date.
32
3.11(l) Availability of Tax
Returns. Part 3.11(l) of the
Parent Disclosure Schedule lists, and Parent has made available, and will
continue to make available, to Company complete and accurate copies of all Tax
Returns, and any amendments thereto, filed by or on behalf of, or which include,
any of the Parent and its Subsidiaries, for all taxable periods ending after
December 31, 2004 and on or prior to the Closing Date.
3.11(m) Opinions of
Counsel. Part 3.11(m) of the
Parent or its Subsidiaries Disclosure Schedule lists, and Parent has provided to
Company true and complete copies of all memoranda and opinions of counsel,
whether inside or outside counsel, and all memoranda and opinions of accountants
or other tax advisors, which have been received by any of the Parent or its
Subsidiaries with respect to Taxes.
3.11(n) Xxxxxxx 000
Xxxxxxxxxxx. Xxxx of the Parent or its Subsidiaries is
required to include in income any adjustment pursuant to Internal Revenue Code
Section 481 by reason of a voluntary change in accounting method initiated
by any of the Parent or its Subsidiaries, and the Internal Revenue Service has
not proposed any such change in accounting method.
3.11(o) Net Operating Loss
Carryovers. The amount of each Parent and its Subsidiaries’
net operating losses, and the dates on which they arose, are set forth in Part 3.11(o) of the
Parent Disclosure Schedule.
3.11(p) Tax Credit
Carryovers. The amount of tax credit carryover for each of
Parent and its Subsidiaries, and the nature of those tax credits and years in
which they arose, are set forth in Part 3.11(p) of the
Parent Disclosure Schedule.
3.11(q) Section 338
Election. No election under Section 338 of the Code has
been made by or with respect to any of the Parent or its Subsidiaries or any of
their respective assets or properties.
3.11(r) Intercompany
Transactions. None of the Parent or its Subsidiaries has
engaged in any transactions with Affiliates which would require the recognition
of income by any of the Parent or its Subsidiaries with respect to such
transaction for any period ending on or after the Closing Date.
3.11(s) Section 162(m). The
disallowance of a deduction under Section 162(m) of the Code for employee
remuneration will not apply to any amount paid or payable by any of the Parent
or its Subsidiaries under any program, arrangement or understanding currently in
effect.
3.11(t) Qualification as a
Reorganization. Neither Parent nor any of its Subsidiaries has
taken any action, nor to the Parent’s Knowledge is there any fact or
circumstance, that could reasonably be expected to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
3.11(u) Deferred
Revenue. None of the Parent or its Subsidiaries has any
material taxable income that will be reportable in a taxable period beginning
after the Closing that is attributable to a transaction that occurred prior to
the Closing.
3.11(v) Tax
Shelters. Neither the Parent nor any of its Subsidiaries has
participated in any transaction that is either a “listed transaction” or that
the Parent believes in good faith is a “reportable transaction” or a
“transaction of interest” (all as defined in Treas. Reg.
§ 1.6011-4).
3.11(w) Deferred
Compensation. None of the Parent or its Subsidiaries is a
party to any “nonqualified deferred compensation plan” subject to
Section 409A of the Code that would subject any Person to tax pursuant to
Section 409A of the Code based upon a good faith interpretation of all
applicable regulations, notices and regulatory guidance.
33
3.11(x) Transfer
Pricing. All material related party transactions involving the
Parent or its Subsidiaries is in compliance with applicable U.S. and foreign
transfer pricing principles and is supported by a study prepared in compliance
with transfer pricing documentation requirements and, to the extent applicable,
Section 482 of the Code and the Treasury Regulations promulgated
thereunder, as well as any comparable provisions of state, local, or foreign
law, to the extent applicable.
3.11(y) Joint
Venture. None of the Parent or its Subsidiaries has ever been
a party to any joint venture, partnership or other agreement that could be
treated as a partnership for Tax purposes.
3.11(z) USRPHC. None
of the Parent or its Subsidiaries has ever been a “United States Real Property
Holding Corporation” within the meaning of Section 897(c)(2) of the
Code.
3.11(aa) FIN
48. Part 3.11(aa) of the Parent
Disclosure Schedule lists all open or uncertain tax positions (as defined in
Financial Accounting Standards Board Interpretation No. 48) taken by the
Parent, if any.
3.11(bb) Taxable
Presence. Neither Parent nor any Subsidiary of Parent has a
permanent establishment in any country other than its country of organization or
is subject to Tax in a jurisdiction outside its country of
organization.
3.12 Employee
Benefits.
3.12(a) Parent
has complied, and is now in compliance, in all material respects with all
provisions of ERISA, the Code and all laws and regulations applicable to all of
Parent’s employee benefit plans, programs, policies, practices, and other
arrangements providing benefits to any current or former employee, officer or
director of Parent or beneficiary or dependent thereof, whether or not written,
and whether covering one person or more than one person sponsored or maintained
by Parent, to which Parent and any of its Subsidiaries contributes or is
obligated to contribute, or with respect to which Parent has or may
have any liability (each, a “Parent
Plan”), and each Parent Plan has been maintained, funded, and
administered in accordance with its terms. There is not now, nor do
any circumstances exist that could give rise to, any requirement for the posting
of security with respect to a Parent Plan or the imposition of any Encumbrance
on the assets of Parent under ERISA or the Code. No prohibited
transaction has occurred with respect to any Parent Plan.
3.12(b) There are
no pending or threatened claims (other than claims for benefits in the ordinary
course), lawsuits or arbitrations which have been asserted or instituted against
any Parent Plan, any fiduciaries thereof with respect to their duties to any
Parent Plan or the assets of any of the trusts under any Parent Plan which could
reasonably be expected to result in any liability of Parent or its Subsidiaries
to any Person including the Pension Benefit Guaranty Corporation, the Department
of Treasury, or the Department of Labor.
3.12(c) Part 3.12(c) of the
Parent Disclosure Schedule includes a complete list of all employee benefit
plans, programs, policies, practices, and other arrangements providing benefits
to any current or former employee, officer or director of Parent or its
Subsidiaries, or beneficiary or dependent thereof, whether or not written, and
whether covering one person or more than one person, including the Benefit Plans
sponsored or maintained by Parent, to which Parent contributes or is obligated
to contribute, or with respect to which Parent has or may have any liability
(“Parent
Plans”). Without limiting the generality of the foregoing, the
term “Parent Plans” includes all employee welfare benefit plans within the
meaning of Section 3(1) of ERISA, all employee pension benefit plans within
the meaning of Section 3(2) of ERISA, and all other employee benefit,
bonus, incentive, deferred compensation, stock purchase, stock option, severance
(or restriction on termination in the absence of a notice period), change of
control and fringe benefit plans, programs or agreements.
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3.12(d) With
respect to each Parent Plan, Parent has made available to the Company a true,
correct and complete copy of: (i) each writing constituting a
part of such Plan, including without limitation all plan documents, benefit
schedules, trust agreements, and insurance contracts and other funding vehicles,
and a written description of any unwritten Plan; (ii) the three most
recently filed Annual Reports (Form 5500 Series) and accompanying
schedules, if any, and audit reports; (iii) the current summary plan
description and any material modifications thereto, if any; (iv) the most
recent annual financial report, if any; (v) the most recent actuarial
report, if any; (vi) the most recent advisory, opinion, and/or
determination letter from the IRS, as applicable; and (vii) all
discrimination tests for the three most recent plan years. Except as
specifically provided in the foregoing documents made available to Parent, there
are no amendments to any Plan or any new Plan that have been adopted or approved
nor has the Company undertaken to make any such amendments or adopt or approve
any new Plan.
3.12(e) Part 3.12(e) of the
Parent Disclosure Schedule identifies each Plan that is intended to be a
“qualified plan” within the meaning of Section 401(a) of the Code (“Qualified
Plans”). Each Qualified Plan is so qualified, and the Internal
Revenue Service has issued a currently applicable favorable determination letter
with respect to each Qualified Plan that has not been revoked, or the Plan is a
prototype plan which may rely on a currently applicable opinion letter issued
with respect to the Plan, and, to the Knowledge of Parent, there are no existing
circumstances nor any events that have occurred that could adversely affect the
qualified status of any Qualified Plan or the related trust. No act
or omission has occurred with respect to any Qualified Plan which could increase
the cost of any such plan or result in the imposition of any liability, lien,
penalty, or tax under ERISA or the Code.
3.12(f) All
contributions required to be made to any Plan by applicable law or regulation or
by any plan document or other contractual undertaking, and all premiums due or
payable with respect to insurance policies funding any Plan, for any period
through the date hereof have been timely made or paid in full or, to the extent
not required to be made or paid on or before the date hereof, have been fully
reflected on the financial statements contained in the Company SEC
Reports.
3.12(g) Neither
Parent nor any ERISA Affiliate maintains, contributes to (or has ever
maintained, contributed to or been required to contribute to), or has any
liability or potential liability under (or with respect to) any (a) plan or
arrangement which is subject to (i) the minimum funding requirements of
Code Section 412, (ii) Part 3 of Title I of ERISA, or (iii) Title IV
of ERISA, (b) “multiemployer plan” (as defined in Section 3(37) of
ERISA), (c) multiple employer plan, including any multiple employer welfare
arrangement (as defined in Section 3(40) of ERISA), (d) voluntary
employees’ beneficiary association (within the meaning of Code
Section 501(c)(9)), (e) welfare benefit fund (within the meaning of
Code Section 419), (f) nonqualified deferred compensation plan as
described in Code Section 409A, or (g) self-funded group health
plan.
3.12(h) All
liabilities in connection with the termination of any employee pension benefit
plan that was sponsored, maintained or contributed to by Parent or any of its
Subsidiaries at any time within the past three years have been fully
satisfied. Each Plan can be amended, terminated or otherwise
discontinued at any time in accordance with its terms without liability on the
part of Parent or any ERISA Affiliate.
3.12(i) To
Parent’s Knowledge, there does not now exist, nor do any circumstances exist
that could result in, any Controlled Group Liability that could be a liability
of Parent following the Closing. Without limiting the generality of
the foregoing, neither Parent nor any ERISA Affiliate of Parent has engaged in
any transaction described in Section 4069 or Section 4204 of
ERISA.
3.12(j) Parent
has no liability for life, health, medical or other welfare benefits to former
employees or beneficiaries or dependents thereof, except for health continuation
coverage as required by Section 4980B of the Code or Part 6 of
Title I of ERISA and at no expense to Parent.
3.12(k) All Plans
covering foreign employees of Parent comply with applicable local law and are
fully funded and/or book reserved to the extent applicable.
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3.12(l) No labor
organization or group of employees of the Parent or its Subsidiaries has made a
pending demand for recognition or certification, and there are no representation
or certification proceedings or petitions seeking a representation proceeding or
any other labor relations tribunal or authority. The Parent and its
Subsidiaries have complied with the Worker Adjustment and Retraining
Notification Act.
3.12(m) Part 3.12(m) of the
Parent Disclosure Schedule contains an accurate and complete list as of the date
of this Agreement of all loans and advances made by Parent to any employee,
director, consultant or independent contract, other than routine travel and
expense advances made to employees in the Ordinary Course of
Business. Parent has not, since July 30, 2002, extended or
maintained credit, arranged for the extension of credit, or renewed an extension
of credit, in the form of a personal loan to or for any director or executive
officer of Parent. Part 3.12(m) of the
Parent Disclosure Schedule identifies any extension of credit maintained by
Parent to which the second sentence of Section 13(k)(1) of the Exchange Act
applies.
3.12(n) The
Parent and its Subsidiaries have complied, and are presently in material
compliance with all Legal Requirements relating to employment, equal
opportunity, nondiscrimination, immigration, wages, hours, benefits,
collectively bargaining, the payment of social security and similar taxes,
income tax withholding, occupational safety and health, and/or privacy rights of
employees. During the three-year period prior to the date of this
Agreement, neither the Parent nor its Subsidiaries have been a party to any
action in which the Parent or its Subsidiaries was, or is, alleged to have
violated any Legal Requirement relating to employment, equal opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and/or privacy rights of employees.
3.12(o) Except as
described on Part 3.12(o)
of the Parent Disclosure Schedule, there are no retired employees,
officers, managers or directors of any of Parent or its Subsidiaries, or their
dependents, receiving benefits or scheduled to receive benefits from any of
Parent or its Subsidiaries in the future.
3.13 Compliance with Legal
Requirements; Governmental Authorizations. Parent and its
Subsidiaries are, and at all times since January 1, 2004 have been, in
material compliance with each Legal Requirement that is or was applicable to any
of them or to the conduct or operation of their business or the ownership or use
of any of their assets; no event has occurred or circumstance exists that (with
or without notice or lapse of time or both) (A) may constitute or result in
a material violation by any of Parent or its Subsidiaries of, or a substantial
failure on the part of any of Parent or its Subsidiaries to comply with, any
Legal Requirement, or (B) may give rise to any obligation on the part of
any Parent or its Subsidiaries to undertake, or to bear all or any portion of
the cost of, any substantial remedial action of any nature; and none of Parent
or its Subsidiaries has received, at any time since January 1, 2004, any
notice or other communication (whether oral or written) from any Governmental
Body or any other Person regarding (A) any actual, alleged, possible, or
potential violation of, or failure to comply with, any Legal Requirement, or
(B) any actual, alleged, possible, or potential obligation on the part of
any of Parent or its Subsidiaries to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature. Part 3.13 of the Parent
Disclosure Schedule lists, and Parent has made available to Parent copies of,
all reports made by any attorney to Parent’s chief legal officer, chief
executive officer, Company Board (or committee thereof) or other representative
pursuant to 17 CFR Part 205, and all responses thereto.
3.14 Environmental
Matters. Each of Parent and its Subsidiaries is, and at all
times has been, in substantial compliance with, and has not been and is not in
material violation of or subject to any material liability under, any
Environmental Law. None of Parent or its Subsidiaries has any basis
to expect, nor has any of them or, to Parent’s Knowledge, any other Person for
whose conduct they are or may be held to be responsible received,
any written order, notice, or other communication from (i) any
Governmental Body or private citizen acting in the public interest, or
(ii) the current or prior owner or operator of any Facilities, of any
actual or potential material violation by any of Parent or its Subsidiaries, or
failure by any of Parent or its Subsidiaries to comply with, any Environmental
Law, or of any actual or threatened material obligation by Parent or its
Subsidiaries to undertake or bear the cost of any Environmental, Health, and
Safety Liabilities with respect to any of the Facilities or any other properties
or assets (whether real, personal, or mixed) in which any of Parent or its
Subsidiaries has or has had an interest, or with respect to any property or
Facility at or to which Hazardous Materials were generated, manufactured,
refined, transferred, imported, used, or processed by any of Parent and its
Subsidiaries or any other Person for whose conduct any of Parent and its
Subsidiaries are or may be held legally responsible (“Parent Hazardous
Material”), or from which Parent Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received. No underground storage tanks or underground impoundments,
including, without limitation, treatment or storage tanks, sumps, or water, gas
or oil xxxxx, have been used by any of the Parent and its Subsidiaries, or, to
the Parent’s Knowledge, by others, at, on or under any facilities. To
the Parent’s Knowledge, no asbestos or asbestos-containing material,
formaldehyde or insulating material containing urea formaldehyde, or material
containing polychlorinated biphenyls, is present in, on or at any of the
Parent’s facilities. The Parent has delivered to the Acquired
Corporations true and complete copies of all material investigations, reports,
studies, audits, tests, sampling results, monitoring, evaluations or analyses
possessed or initiated by any of the Parent and its Subsidiaries pertaining to
any Hazardous Material in, on, beneath or adjacent to any of the Parent’s
facilities, or to which the Parent and its Subsidiaries have sent any Hazardous
Material, or concerning compliance by the Parent and its Subsidiaries, or any
other person for whose conduct the Parent and its Subsidiaries are legally
responsible, with any Environmental Law.
36
3.15 Legal
Proceedings.
3.15(a) There is
no pending Legal Proceeding (i) that has been commenced by or against
Parent or any of its Subsidiaries or that otherwise relates to or may affect the
business of, or any of the assets owned or used by, Parent or any of its
Subsidiaries, except for such Legal Proceedings as are normally incident to the
business carried on by Parent and its Subsidiaries and could not reasonably be
expected to, individually or in the aggregate, result in a Material Adverse
Effect on Parent and its Subsidiaries, (ii) that challenges, or that may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the Contemplated Transactions, or (iii) against
any director or officer of Parent or any of its Subsidiaries pursuant to
Section 8A or 20(b) of the Securities Act or Section 21(d) or 21C of
the Exchange Act.
3.15(b) To the
Knowledge of Parent, (i) no Legal Proceeding that, if pending, would be
required to be disclosed under the preceding paragraph has been threatened, and
(ii) no event has occurred or circumstance exists that may give rise to or
serve as a basis for the commencement of any such Legal Proceeding.
3.16 Real Property; Equipment;
Leasehold. All material items of equipment and other tangible
assets owned by or leased to Parent are adequate for the uses to which they are
being put, are in good and safe condition and repair (ordinary wear and tear
excepted) and are adequate for the conduct of the business of Parent in the
manner in which such business is currently being conducted. Parent
does not own any material real property or any material interest in real
property.
3.17 Contracts;
No Defaults.
3.17(a) Part 3.17(a) of the
Parent Disclosure Schedule lists as of the date hereof, and, except to the
extent filed in full without redaction as an exhibit to a Parent SEC Report,
Parent has made available to the Company copies of, each Parent Contract and
other instrument or document (including any amendment to any of the
foregoing)
(i) described
in paragraphs (b)(3), (b)(4), (b)(9) or (b)(10) of Item 601 of Regulation S-K of
the SEC;
(ii) with any
director, officer or Affiliate of Parent;
(iii) evidencing,
governing or relating to indebtedness for borrowed money,
(iv) not
entered into in the Ordinary Course of Business that involves expenditures or
receipts in excess of $250,000;
(v) that in
any way purports to limit the freedom of Parent or any of its Affiliates to
engage in any line of business or to compete with any Person or in any
geographic area or to hire or retain any Person;
(vi) relating
to the employment of, or the performance of services by, any employee or
consultant, or pursuant to which Parent or any Subsidiary of Parent is or may
become obligated to make any severance, termination or similar payment in excess
of $100,000 to any current or former employee or director; or pursuant to which
Parent or any Subsidiary of Parent is or may become obligated to make any bonus
or similar payment (other than payments constituting base salary) in excess of
$100,000 to any current or former employee or director;
(vii) relating
to the acquisition, transfer, development, sharing or license of any Proprietary
Rights and/or Technology (except for any Contract pursuant to which (i) any
Proprietary Rights are licensed to Parent under any third party software license
generally available to the public, or (ii) any Proprietary Rights are
licensed by Parent to any Person on a non exclusive basis pursuant to an
unmodified standard license agreement, the form of which has been provided to
Parent);
37
(viii) providing
for indemnification of any officer, director, employee or agent;
(ix) (A) relating
to the acquisition, issuance, voting, registration, sale or transfer of any
securities, (B) providing any Person with any preemptive right, right of
participation, right of maintenance or any similar right with respect to any
securities, or (C) providing Parent or any Subsidiary of Parent with any
right of first refusal with respect to, or right to repurchase or redeem, any
securities, except for Contracts evidencing options or employment Contracts
entered into in the Ordinary Course of Business which contemplate the issuance
of Options;
(x) incorporating
or relating to any guaranty, any warranty or any indemnity or similar
obligation, except for Contracts substantially identical to the standard forms
of end user licenses previously made available by Parent to the
Company;
(xi) relating
to any currency hedging;
(xii) imposing
or containing “standstill” or similar provisions;
(xiii) (A) to
which any Governmental Body is a party or under which any Governmental Body has
any rights or obligations, or (B) directly or indirectly benefiting any
Governmental Body (including any subcontract or other Contract between Parent
and any contractor or subcontractor to any Governmental Body);
(xiv) requiring
that Parent give any notice or provide any information to any Person prior to
considering or accepting any Acquisition Proposal or similar proposal, or prior
to entering into any discussions, agreement, arrangement or understanding
relating to any Acquisition Transaction or similar transaction;
(xv) contemplating
or involving the payment or delivery of cash or other consideration in an amount
or having a value in excess of $200,000 in the aggregate, or contemplating or
involving the performance of services having a value in excess of $200,000 in
the aggregate; and
(xvi) any other
Contract, if a breach of such Contract could reasonably be expected to have a
Material Adverse Effect on Parent.
Each of
the foregoing is a “Parent Material
Contract.”
3.17(b) Each
Parent Material Contract is valid and in full force and effect, and is
enforceable in accordance with its terms, subject to the effect of
(i) applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to rights of creditors
generally and (ii) rules of law and equity governing specific performance,
injunctive relief and other equitable remedies.
3.17(c) (i) Neither
Parent nor any Subsidiary of Parent has violated or breached, or committed any
default under, any Contract to which it is a party, except for violations,
breaches and defaults that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Material Adverse Effect on Parent and
its Subsidiaries; and, to the Knowledge of Parent, no other Person has violated
or breached, or committed any default under, any such Contract, except for
violations, breaches and defaults that, individually or in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse Effect
on Parent and its Subsidiaries; (ii) to the Knowledge of Parent, no event
has occurred, and no circumstance or condition exists, that (with or without
notice or lapse of time) will or would reasonably be expected to,
(A) result in a violation or breach of any of the provisions of any such
Contract, (B) give any Person the right to declare a default or exercise
any remedy under any such Contract, (C) give any Person the right to
receive or require a rebate, chargeback, penalty or change in delivery schedule
under any such Contract, (D) give any Person the right to accelerate the
maturity or performance of any such Contract, or (E) give any Person the
right to cancel, terminate or modify any such Contract, except in each such case
for defaults, acceleration rights, termination rights and other rights that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect on Parent and its Subsidiaries; and
(iii) since September 29, 2007, neither Parent nor any Subsidiary of
Parent has received any notice or other communication regarding any actual or
possible violation or breach of, or default under, any such Contract, except in
each such case for defaults, acceleration rights, termination rights and other
rights that have not had and would not reasonably be expected to have a Material
Adverse Effect on Parent and its Subsidiaries.
38
3.18 Insurance. Parent
and its Subsidiaries are covered by valid and currently effective insurance
policies issued in favor of Parent and its Subsidiaries are that are customary
for companies of similar size and financial condition and are adequate in amount
to cover all currently pending or overtly threatened claims, including without
limitation any claims for breach of warranty and claims for indemnification
regarding any of the Acquired Corporation’s products or services. All
such policies are in full force and effect, all premiums due thereon have been
paid and Parent and its Subsidiaries have complied with the provisions of such
policies. Parent and its Subsidiaries have not been advised of any
defense to coverage in connection with any claim to coverage asserted or noticed
by Parent or any of its Subsidiaries under or in connection with any of its
extant insurance policies. Parent has not received any written notice
from or on behalf of any insurance carrier issuing policies or binders relating
to or covering that there will be a cancellation or non renewal of existing
policies or binders, or that alteration of any equipment or any improvements to
real estate occupied by or leased to or by Parent, purchase of additional
equipment, or material modification of any of the methods of doing business,
will be required.
3.19 Labor
Matters. Except as disclosed in the Parent SEC Reports,
(i) neither Parent nor any Subsidiary of Parent is a party to, or bound by,
any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization; (ii) neither Parent
nor any Subsidiary of Parent is the subject of any Legal Proceeding asserting
that it has committed an unfair labor practice or seeking to compel it to
bargain with any labor organization as to wages or conditions of employment;
(iii) there is no strike, work stoppage or other labor dispute involving
Parent or any of its Subsidiaries pending or, to Parent’s Knowledge, threatened;
(iv) no complaint, charge or Legal Proceeding by or before any Governmental
Body brought by or on behalf of any employee, prospective employee, former
employee, retiree, labor organization or other representative of its employees
is pending or, to Parent’s Knowledge, threatened against Parent or any of its
Subsidiaries; (v) no material grievance is pending or, to Parent’s
Knowledge, threatened against Parent or any of its Subsidiaries; and
(vi) neither Parent nor any Subsidiary of Parent is a party to, or
otherwise bound by, any consent decree with, or citation by, any Governmental
Body relating to employees or employment practices.
3.20 Government
Contracting.
3.20(a) Except as
set forth in Part 3.20(a)
of the Parent Disclosure Schedule, there are (i) no outstanding
claims against Parent, either by any Governmental Body or any prime contractor,
subcontractor, vendor or other third party arising under or relating to any
Government Contract, and (ii) no disputes between Parent and any
Governmental Body under the Contract Disputes Act or any other federal statute
or between the Company and any prime contractor, subcontractor or vendor arising
under or relating to any such Government Contract. Except as set
forth in Part 3.20(a)
of the Parent Disclosure Schedule, to the Knowledge of Parent there are
no facts that could reasonably be expected to result in a claim or dispute under
clause (i) or (ii) of the immediately preceding sentence.
3.20(b) Parent
has submitted all required provisional bid labor and indirect rates through
fiscal year 2008 and final indirect rates to the cognizant U.S. Government
administrative contracting officer through fiscal year 2006. All such
submissions are consistent with all government regulations cost accounting rules
and regulations, including but not limited to the Federal Acquisition
Regulations. No unallowable costs were contained
therein.
3.20(c) Except as
set forth in Part 3.20(c)
of the Parent Disclosure Schedule, neither Parent nor, to the Knowledge
of Parent, any of its present employees, consultants or agents is (or during the
last five years has been) suspended or debarred from doing business with any
Governmental Body or is (or during such period was) the subject of a finding of
non-responsibility or ineligibility for any Governmental Body.
3.20(d) Except as
set forth in Part 3.20(d)
of the Parent Disclosure Schedule, to the Knowledge of Parent, no
statement, representation or warranty made by Parent in any Government Contract,
any government bid or any exhibit thereto or in any certificate, statement,
list, schedule or other document submitted or furnished to any Governmental Body
in connection with any Government Contract or government bid (i) contained
on the date so furnished or submitted any untrue statement of material fact, or
failed to state a material fact necessary to make the statements contained
therein, in light of the circumstances in which they are made, not misleading,
or (ii) contains any untrue statement of a material fact, or fails to state
a material fact necessary to make the statements contained therein, in light of
the circumstances in which they are made, not misleading, except where, in the
case of both clauses (i) and (ii), any untrue statement or failure to state a
fact would not have a Material Adverse Effect on Parent.
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3.20(e) Parent,
in conducting its business as it relates to government contracts, is in material
compliance with all government accounting principals and governing
regulations. No unidentified unallowable costs exist on the books and
records of Parent.
3.20(f) Parent
has submitted all required labor rate proposals, as well as all final indirect
rate submissions, to the cognizant Defense Contract Management Agency (DCMA)
Administrative Contracting Officer for prior years in accordance with applicable
Federal Acquisition Regulations, and there are no outstanding or unresolved
matters with respect thereto.
3.20(g) Except as
set forth in Part 3.20(g)
of the Parent Disclosure Schedule: (i) none of Parent’s
employees, consultants or agents is (or during the last five years has been)
under administrative, civil or criminal investigation, indictment or request for
information by any Governmental Entity relating to the performance of his or her
duties to Parent; (ii) there is not pending any audit or investigation of
Parent, its officers, employees or representatives nor within the last five
years has there been any audit or investigation of Parent, officers, employees
or representatives resulting in a material adverse finding with respect to any
alleged irregularity, misstatement or omission arising under or relating to any
government contract; and (iii) during the last five years, Parent has not
made any voluntary disclosure to any Governmental Body with respect to any
alleged irregularity, misstatement or omission arising under or relating to a
government contract. Except as set forth in Part 3.20(g) of the
Parent Disclosure Schedule, Parent has not had any irregularities, misstatements
or omissions arising under or relating to any government contract that has led
or is expected to lead, either before or after the Effective Time, to any of the
consequences set forth in clause (i) or (ii) of the immediately preceding
sentence or any other material damage, penalty assessment, recoupment of payment
or disallowance of cost.
3.21 Interests of Officers and
Directors. None of the officers or directors of Parent or any
of its Subsidiaries has any interest in any property, real or personal, tangible
or intangible, used in or pertaining to the business of Parent or any of its
Subsidiaries, or in any supplier, distributor or customer of the Parent, or any
other relationship, contract, agreement, arrangement or understanding with
Parent, except as disclosed in the Parent SEC Reports and except for the normal
rights of a stockholder and rights under the employee benefit plans of
Parent.
3.22 Export Control Laws;
Encryption and Other Restricted Technology. Parent and its
Subsidiaries have complied with all U.S. export control Legal Requirements
regarding any export of its products or technology, including the Export
Administration Regulations (“EAR”)
maintained by the U.S. Department of Commerce and the International Traffic in
Arms Regulations (“ITAR”)
maintained by the Department of State. The business of Parent and its
Subsidiaries as currently conducted does not require any of them to obtain a
license from the United States Departments of Commerce or State or an authorized
body thereof under ITAR or EAR or other legislation regulating the development,
commercialization or export of technology. Neither Parent nor any
Subsidiary of Parent has received any correspondence from the export control
authorities in any country, including the U.S. Departments of Commerce or State,
regarding any pre-penalty notice, notice of penalty, subpoena or request for
documents, or notice of audit, investigation or inquiry by a special agent or
other export control agent or official.
3.23 International Trade
Matters. Parent and its Subsidiaries is, and at all times
since January 1, 2002 has been, in compliance with and have not been and is not
in material violation of any International Trade Law, including but not limited
to, all laws and regulations related to the import and export of commodities,
software, and technology from and into the United States, and the payment of
required duties and tariffs in connection with same. Parent and its
Subsidiaries have no basis to expect, nor has any of them or any other person
for whose conduct they are or may be held to be responsible received, any actual
or threatened order, notice, or other communication from any governmental body
of any actual or potential violation or failure to comply with any International
Trade Law.
3.24 Brokers. No
broker, finder, investment banker or other Person (other than Wachovia Capital
Markets, LLC) (a copy of whose engagement letter has been provided to the
Company) is entitled to any brokerage, finder’s or other fee or commission in
connection with the Merger and the Contemplated Transactions based upon
arrangements made by or on behalf of Parent.
40
3.25 Full
Disclosure. None of the information supplied or to be supplied
by or on behalf of Parent for inclusion or incorporation by reference in the
Form S-4 Registration Statement will, at the time the Form S-4
Registration Statement is filed with the SEC or at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading. None of the information supplied
or to be supplied by or on behalf of Parent for inclusion or incorporation by
reference in the Joint Proxy Statement/Prospectus will, at the time the Joint
Proxy Statement/Prospectus is mailed to the shareholders of the Company or the
stockholders of Parent or at the time of the Company Shareholders’ Meeting or
the Parent Stockholders’ Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not
misleading. Notwithstanding the foregoing, no representation or
warranty is made by Parent with respect to statements made or incorporated by
reference therein about the Company supplied by the Company for inclusion or
incorporation by reference in the Form S-4 Registration Statement or the
Joint Proxy Statement/Prospectus.
3.26 Sale of
Products; Performance of Services.
3.26(a) To the
Knowledge of Parent, each product, system, program, Proprietary Right or other
asset designed, developed, manufactured, assembled, sold, installed, licensed or
otherwise made available by Parent or any of its Subsidiaries to any Person
since January 1, 2004:
(i) materially
conformed and complied with the terms and requirements of any applicable
warranty or other Contract and with all applicable material Legal Requirements;
and
(ii) was free
of any bug, virus, design defect or other defect or deficiency at the time it
was sold or otherwise made available, other than any immaterial bug or similar
defect that would not adversely affect in any material respect such product,
system, program, Proprietary Right or other asset (or the operation or
performance thereof).
3.26(b) To the
Knowledge of Parent, all installation services, programming services, repair
services, maintenance services, support services, training services, upgrade
services and other services that have been performed by Parent or any Subsidiary
of Parent were performed properly and in full conformity with the terms and
requirements of all applicable warranties and other Contracts and with all
applicable material Legal Requirements, and the financial results of the
performance of such services have been reflected in the financial statements
contained in the Parent SEC Reports, in accordance with GAAP.
3.26(c) Since
December 31, 2006, no customer or other Person has asserted or overtly
threatened to assert any claim against Parent or any Subsidiary of Parent
(i) under or based upon any warranty provided by or on behalf of Parent any
Subsidiary of Parent, or (ii) under or based upon any other warranty
relating to any product, system, program, Proprietary Rights or other asset
designed, developed, manufactured, assembled, sold, installed, repaired,
licensed or otherwise made available by Parent or any Subsidiary of Parent or
any services performed by Parent or any Subsidiary of Parent.
SECTION
4 CONDUCT OF
BUSINESS.
4.1 Covenants of the
Company. Except as consented to in writing by Parent, which
consent shall not be unreasonably withheld, or as set forth in Section 4.1 of the Company Disclosure
Schedule or as otherwise expressly permitted by or provided for in this
Agreement, from and after the date of this Agreement until the earlier of the
termination of this Agreement in accordance with its terms or the Effective
Time, each of the Acquired Corporations shall carry on its business in the
Ordinary Course of Business, pay its debts and Taxes and perform its other
material obligations when due (subject to good faith disputes over such debts,
Taxes or material obligations), comply in all material respects with all
applicable Legal Requirements, and use commercially reasonable efforts in a
manner not less diligent than past practices to maintain and preserve its
business organization, assets and properties, keep available the services of its
present officers and key employees and preserve its advantageous business
relationships with customers, strategic partners, suppliers, distributors and
others having business dealings with it to the end that its goodwill and ongoing
business shall not be materially impaired between the date of this Agreement and
the Effective Time. Without limiting the generality of the foregoing,
except as listed on Schedule 4.1 of the Company Disclosure Schedule or as
otherwise permitted by or provided for in this Agreement, from and after the
date of this Agreement until the earlier of the termination of this Agreement in
accordance with its terms or the Effective Time, none of the Acquired
Corporations shall directly or indirectly, do any of the following without the
prior written consent of Parent, which consent shall not be unreasonably
withheld:
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4.1(a) (A) declare,
set aside or pay any dividends on, or make any other distributions (whether in
cash, securities or other property) in respect of, any of its capital stock
(other than dividends and distributions by a direct or indirect wholly owned
Subsidiary of the Company to its parent); (B) split, combine or reclassify
any of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock or any of its other securities; or (C) purchase, redeem or
otherwise acquire any shares of its capital stock or any other of its securities
or any rights, warrants or options to acquire any such shares or other
securities, except for reacquisition or repurchase upon forfeiture of unvested
restricted stock pursuant to the terms of any applicable restricted stock
purchase or grant agreement;
4.1(b) except as
permitted by Section 4.1(m), issue, deliver, sell,
grant, pledge or otherwise dispose of or encumber any shares of its capital
stock, any other voting securities or any securities convertible into or
exercisable or exchangeable for, or any rights, warrants or options to acquire,
any such shares, voting securities or convertible, exercisable or exchangeable
securities (other than upon the exercise, settlement or conversion of Company
Options or other equity-based awards or rights under the Company Stock Plans or
issued pursuant to the ESPP, the Company Warrants, the Company 401(k) Plan or
the convertible debt of the Company, in each case as outstanding or existing on
the date of this Agreement in accordance with their terms;
4.1(c) amend its
Organizational Documents, except for amendments required by any Legal
Requirement or the rules and regulations of the SEC or the American Stock
Exchange, or that are expressly required by this Agreement;
4.1(d) acquire
(A) by merging or consolidating with, or by purchasing all or a substantial
portion of the assets or any stock of, or by any other manner, any business or
any corporation, partnership, joint venture, limited liability company,
association or other business organization or division thereof or (B) any
assets that are material, in the aggregate, to the Acquired Corporations, taken
as a whole, except purchases of inventory, components or, subject to Section
4.1(i) below, property, plant or equipment (including engineering development
equipment) in the Ordinary Course of Business;
4.1(e) sell,
lease, license, pledge, or otherwise dispose of or encumber any properties or
assets of the Acquired Corporations, except for the sale of inventory in the
Ordinary Course of Business and transactions related thereto;
4.1(f) adopt or
implement any shareholder rights plan;
4.1(g) except
for agreements permitted by Section 5.1, enter into an agreement
with respect to any merger, consolidation, liquidation or business combination,
or any acquisition or disposition of all or substantially all of the assets or
securities of the Acquired Corporations;
4.1(h) (A) except
with respect to its existing revolving line of credit and term loan, incur or
suffer to exist any indebtedness for borrowed money other than such indebtedness
which existed as of December 28, 2007 as reflected on the Company Balance
Sheet or guarantee any such indebtedness of another Person, (B) issue, sell
or amend any debt securities or warrants or other rights to acquire any debt
securities of the Company or any of its Subsidiaries, guarantee any debt
securities of another Person, enter into any agreement to maintain any financial
statement condition of another Person or enter into any arrangement having the
economic effect of any of the foregoing, (C) make any loans, advances
(other than routine advances to employees of the Company and its Subsidiaries in
the Ordinary Course of Business) or capital contributions to, or investment in,
any other Person, other than the Company or any of its direct or indirect wholly
owned Subsidiaries, or (D) other than in the Ordinary Course of Business,
enter into any hedging agreement or other financial agreement or arrangement,
intended to protect the Company or its Subsidiaries against fluctuations in
commodities prices or exchange rates;
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4.1(i) make any
capital expenditures or other expenditures for the acquisition of property,
plant or equipment, or any rights to any of the foregoing, in excess of $250,000
for the Acquired Corporations, taken as a whole, other than in the Ordinary
Course of Business;
4.1(j) make any
changes in accounting methods, principles or practices, except as may be
required by a change in GAAP or Legal Requirements or, except as so required,
change any assumption underlying, or method of calculating, any bad debt,
contingency or other reserve;
4.1(k) pay,
discharge, settle or satisfy any claims, liabilities or obligations (whether
absolute, accrued, asserted or unasserted, contingent or otherwise) in excess of
$250,000 in the aggregate, other than payments, settlements, or satisfactions
made in the Ordinary Course of Business or in accordance with their terms as in
effect on the date of this Agreement, of claims, liabilities or obligations
reflected or reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) of the Company included
in the Company SEC Reports filed prior to the date of this Agreement (to the
extent so reflected or reserved against) or incurred since the date of such
financial statements in the Ordinary Course of Business;
4.1(l) waive any
material benefits of, release or eliminate any rights under or otherwise modify
in any material adverse respect, fail to enforce, or consent to any matter with
respect to which its consent is required under, any confidentiality, standstill
or similar agreements to which any of the Acquired Corporations is a party,
except as provided in Section 5.1;
4.1(m) modify,
amend or terminate any Company Material Contracts (except for modifications,
amendments or terminations in the Ordinary Course of Business of a Company
Material Contract referenced in Section 2.16(a)(xiii)), or knowingly
waive, release or assign any material rights or claims (including any write off
or other compromise of any accounts receivable of any of the Acquired
Corporations), except in the Ordinary Course of Business;
4.1(n) (A) enter
into any Company Material Contract or agreement except a Company Material
Contract referenced in Section
2.16(a)(xiii) in
the Ordinary Course of Business or (B) license any
material Proprietary Rights and/or Technology to or from any third party other
than in the Ordinary Course of Business;
4.1(o) except in
the Ordinary Course of Business or as required to comply with Legal Requirements
or agreements or pursuant to plans or arrangements existing on the date hereof,
(A) take any action with respect to, adopt, enter into, terminate or amend
any employment, severance, retirement, retention, incentive or similar
agreement, arrangement or benefit plan for the benefit or welfare of any current
or former director, officer, employee or consultant or any collective bargaining
agreement (provided, however, that the Company may hire employees or independent
contractors (i) for the sole purpose of replacing employees who have
terminated their employment, provided that the hired employees must be hired on
terms and conditions, including compensation, which are not materially greater
than the terms and conditions on which the employees being replaced were
retained, (ii) with respect to any open requisitions for employment
existing on the date hereof or (iii) who are temporary employees or
independent contractors hired in the Ordinary Course of Business terminable at
will with no more than 20 business days notice without severance or ongoing
benefit obligations), (B) except as may be approved by the Company Board in
connection with the transactions described in this Agreement, increase in any
respect the compensation or fringe benefits of, or pay any bonus to, any
director, officer, employee or consultant, (other than increases not in excess
of ten percent (10%) of base salary granted to non-officer employees,
(C) amend or accelerate the payment, right to payment or vesting of any
compensation or benefits, including any outstanding Company Options or other
equity-based awards, except pursuant to their terms or as otherwise contemplated
in this Agreement or as approved by the Company Board in connection with the
transactions described in this Agreement, (D) pay any material benefit not
provided for as of the date of this Agreement under any benefit plan,
(E) grant any awards under any bonus, incentive, performance or other
compensation plan or arrangement or benefit plan, including the grant of stock
options, stock appreciation rights, stock based or stock related awards,
performance units or restricted stock, or the removal of existing restrictions
in any benefit plans or agreements or awards made thereunder (other than any
such removal caused by this Agreement or the Contemplated Transactions pursuant
to the terms of a benefit plan, agreement or award), or (F) take any action
other than in the Ordinary Course of Business to fund or in any other way secure
the payment of compensation or benefits under any employee plan, agreement,
contract or arrangement or benefit plan;
43
4.1(p) make or
rescind any Tax election, settle or compromise any Tax Liability or amend any
Tax return;
4.1(q) initiate
any litigation against any third party, or compromise or settle any material
litigation or arbitration proceeding, for an amount in excess of
$250,000;
4.1(r) open or
close any facility or office;
4.1(s) fail to
maintain insurance at levels substantially comparable to levels existing as of
the date of this Agreement;
4.1(t) except
with respect to any amounts disputed in good faith by the Company, fail to pay
when due accounts payable and other obligations of the Acquired Corporations in
the Ordinary Course of Business; or
4.1(u) authorize
any of, or commit or agree, in writing or otherwise, to take any of, the
foregoing actions or any action that would materially impair, delay, or prevent
the satisfaction of any conditions in Section 6 hereof other than as
specifically provided for in Section 4.1 or Section 5.1.
4.2 Covenants of
Parent. From the date hereof until the Effective Time, unless
the Company shall otherwise consent in writing, which consent shall not be
unreasonably withheld, or except as listed on Schedule 4.2 of the
Parent Disclosure Schedule or as otherwise expressly permitted by or provided
for in this Agreement, Parent shall, and shall cause each of its Subsidiaries
to, conduct its business in the Ordinary Course of Business, pay its debts and
Taxes and perform its other material obligations when due (subject to good faith
disputes given such debts, Taxes or material obligations), comply with all
applicable material Legal Requirements, and use commercially reasonable efforts
to preserve intact its business organization, assets and properties, and
goodwill and relationships with third parties, and to keep available the
services of its current officers and key employees to the end that its goodwill
and ongoing business shall not be materially impaired between the date of this
Agreement and the Effective Time. In addition to and without limiting
the generality of the foregoing, except as listed on Schedule 4.2 of the
Parent Disclosure Schedule or as otherwise expressly permitted by or provided
for in this Agreement, from the date hereof until the Effective Time, without
the prior written consent of the Company, which consent shall not be
unreasonably withheld:
4.2(a) Parent
shall not adopt or propose any material change in its Organizational Documents
except for such amendments (A) required by any Legal Requirement or the
rules and regulations of the SEC or the NASDAQ or (B) that do not have a
Material Adverse Effect on Parent and would not materially restrict the
operations of Parent; and Parent shall not permit its Subsidiaries to adopt or
propose any material change in their Organizational Documents except for such
amendments that do not have a Material Adverse Effect on Parent and would not
materially restrict the operation of any business thereof;
4.2(b) Parent
shall not, and shall not permit its Subsidiaries to, change any method of
accounting or accounting principles or practices by Parent or any Subsidiary,
except for any such change required by any Legal Requirement or by a change in
any Legal Requirement or GAAP, or, except as so required, change any assumption
underlying, or method of calculating, any bad debt, contingency or other
reserve;
4.2(c) Parent
shall not, and shall not permit any of its Subsidiaries to, fail to
(A) timely file or furnish to or with the SEC all reports, schedules,
forms, statements and other documents required to filed or furnished (except
those filings by Affiliates of Parent required under Section 16(a) of the
Exchange Act which do not have a Material Adverse Effect on Parent), or
(B) comply in all material respects with the requirements of SOX applicable
to it; and
44
4.2(d) Parent
shall not, and shall not permit any of its Subsidiaries to, acquire (A) by
merging or consolidating with, or by purchasing all or a substantial portion of
the assets or any stock of, or by any other manner, any business or any
corporation, partnership, joint venture, limited liability company, association
or other business organization or division thereof or (B) any assets that
are material, in the aggregate, to Parent, except purchases of inventory,
components or property, plant or equipment (including engineering development
equipment) in the Ordinary Course of Business;
4.2(e) Parent
shall not, and shall not permit any of its Subsidiaries to, sell, lease, pledge,
or otherwise dispose of or encumber any properties or assets of Parent or its
Subsidiaries, except for the sale of inventory in the Ordinary Course of
Business and transactions related thereto;
4.2(f) Parent
shall not, and shall not permit any of its Subsidiaries to, enter into an
agreement with respect to any merger, consolidation, liquidation or business
combination, or any acquisition or disposition of all or substantially all of
the assets or securities of Parent or any of its Subsidiaries;
4.2(g) Parent
shall not, and shall not permit any of its Subsidiaries, to agree or commit to
do any of the foregoing or any action that would materially impair, delay, or
prevent the satisfaction of any conditions in Section 6 other than as
specifically provided for in Section 4.2.
4.3 Confidentiality. The
parties acknowledge that Parent and Company have previously executed a
confidentiality agreement dated as of August 24, 2007 (the “Confidentiality
Agreement”), which Confidentiality Agreement shall continue in full force
and effect in accordance with its terms, except as expressly modified
herein.
SECTION
5 ADDITIONAL
AGREEMENTS.
5.1 No
Solicitation.
5.1(a) No Solicitation or
Negotiation. From the date of this Agreement until the
Effective Time, except as set forth in this Section 5.1, none of the Acquired
Corporations shall, nor shall any of their directors, officers, investment
bankers, attorneys, accountants or other advisors or representatives (such
directors, officers, investment bankers, attorneys, accountants, other advisors
and representatives, collectively, “Representatives”),
directly or indirectly:
(i) solicit,
initiate, or knowingly or intentionally encourage or facilitate, any inquiries,
offers or proposals that constitute, or could reasonably be expected to lead to,
any Acquisition Proposal (including, without limitation, amending or granting
any waiver or release under any standstill or similar agreement with respect to
any Company Common Stock, except as expressly permitted by this Section);
or
(ii) enter
into, continue or otherwise participate in any discussions or negotiations
regarding, furnish to any Person any non-public information with respect to,
assist or participate in any effort or attempt by any Person with respect to, or
otherwise knowingly or intentionally cooperate in any way with, any Acquisition
Proposal (provided, however, that providing notice of the restrictions set forth
in this Section 5.1 to a third party in
response to any such inquiry, request or Acquisition Proposal shall not, in and
of itself, be deemed a breach of this Section).
Notwithstanding
the foregoing, prior to the time that the Required Company Shareholder Vote has
been obtained (the “Company Specified
Time”), the Company may, to the extent required by the fiduciary
obligations of the Company Board, as determined in good faith by the Company
Board after consultation with outside counsel, in response to an unsolicited,
bona fide written Acquisition Proposal made or received after the date of this
Agreement that the Company Board determines in good faith after consultation
with outside counsel and its financial advisor is reasonably likely to lead to a
“Superior
Proposal,” in each case that did not result from a breach by the Company
of, or actions by its Representatives inconsistent with, this Section, and
subject to compliance with Section 5.1(c), (x) furnish
non-public information with respect to the Company to the Person making such
Acquisition Proposal and its Representatives, and (y) participate in
discussions or negotiations with such Person and its Representatives regarding
such Acquisition Proposal, if, in the case of either clause (x) or (y), prior to
taking such action the Company enters into a customary confidentiality agreement
not less restrictive of the other party than the Confidentiality
Agreement. Without limiting the foregoing, it is agreed that any
violation of the restrictions set forth in this Section 5.1(a) by any
Representative of the Company or any of its Subsidiaries, whether or not such
Person is purported to act on behalf of the Company or otherwise, shall be
deemed to be a breach of this Section 5.1(a) by the
Company.
45
5.1(b) No Change
in Recommendation or Alternative Acquisition Agreement. Neither the
Company Board nor any committee thereof shall:
(i) except as
set forth in this Section, withdraw, qualify or modify, or publicly propose to
withdraw, qualify or modify, in a manner adverse to Parent or the Merger Sub,
the approval or recommendation by the Company Board or any such committee of the
adoption of this Agreement (a “Company Adverse
Recommendation Change”);
(ii) adopt,
approve or recommend, or publicly propose to adopt, approve or recommend, any
Acquisition Proposal; or
(iii) authorize,
cause or permit any of the Acquired Corporations to enter into any letter of
intent, memorandum of understanding, agreement in principle, acquisition
agreement, merger agreement or similar agreement (an “Alternative
Acquisition Agreement”) constituting or relating to any Acquisition
Proposal (other than a confidentiality agreement referred to in Section 5.1(a) entered into in the
circumstances referred to in Section 5.1(a)).
Notwithstanding
the foregoing, at any time prior to the Company Specified Time and subject to
Section 5.1(c), the Company Board may,
in response to an Acquisition Proposal that the Company Board determines in good
faith (after consultation with its outside counsel and its financial advisor)
constitutes a Superior Proposal and that was unsolicited and made after the date
hereof and that did not otherwise result from a breach of this Section 5.1, make an Adverse
Recommendation Change if the Company Board has concluded in good faith, after
consultation with its outside counsel, that, in light of such Superior Proposal,
the failure of the Company Board to effect a Company Adverse Recommendation
Change would result in a breach of its fiduciary duties under applicable Legal
Requirements; provided,
however, that the
Company shall not be entitled to exercise its right to make a Company Adverse
Recommendation Change pursuant to this sentence unless the Company has: (A)
provided to Parent five business days’ prior written notice (such notice, a
“Notice of
Superior Proposal”), which notice shall not be deemed to be a Company
Adverse Recommendation Change, advising Parent that the Company Board intends to
take such action and specifying the reasons therefor, including the then current
material terms and conditions of any Superior Proposal that is the basis of the
proposed action by the Company Board and the identity of the Person making the
proposal (it being understood and agreed that any material amendment to any term
of any such Superior Proposal shall require a new Notice of Superior Proposal
and a new three business day period), (B) during such five business day
period (or three business day period, in the case of an amendment) if requested
by Parent, the Company engaged in good faith negotiations with Parent to amend
this Agreement in such a manner that any Acquisition Proposal which was
determined to constitute a Superior Proposal no longer is a Superior Proposal
and (C) at the end of such period such Acquisition Proposal has not been
withdrawn and continues to constitute a Superior Proposal (taking into account
any changes to the terms of this Agreement proposed by Parent following a Notice
of Superior Proposal, as a result of the negotiations required by clause
(B) or otherwise).
Nothing
in this Section 5.1 shall be deemed to (A)
impermissibly circumscribe the ability of the Company Board to fulfill its
fiduciary duty; (B) create an inference of Parent’s consent to the Company’s
taking any action described in clauses (ii) or (iii) of the first sentence of
this Section 5.1(b), or (C) except upon a
termination of this Agreement pursuant to Section 7.1(i), limit the Company’s
obligation to call, give notice of, convene and hold the Shareholders’ Meeting,
regardless of whether the Company Board has effected a Company Adverse
Recommendation Change.
5.1(c) Notices to Parent;
Additional Negotiations. The Company shall promptly (within 24
hours) advise Parent in writing, upon the Company receiving any Acquisition
Proposal or any request for nonpublic information in connection with any
Acquisition Proposal, , the material terms and conditions of any such
Acquisition Proposal and the identity of the Person making any such Acquisition
Proposal. The Company shall not provide any information to or
participate in discussions or negotiations with the Person making any
Acquisition Proposal until after the Company has first notified Parent of such
Acquisition Proposal as required by the preceding sentence. The
Company shall keep Parent reasonably informed in all material respects of the
status of any such Acquisition Proposal and shall (i) promptly (within 24 hours)
notify Parent orally and in writing if it has begun to furnish information to,
or to participate in discussions or negotiations with, a Person making any such
Acquisition Proposal and shall promptly (within 24 hours) advise Parent in
writing of any material change in the terms of any such Acquisition Proposal,
(ii) provide to Parent as soon as practicable after receipt or delivery thereof
any proposed transaction documents received from or on behalf of any third party
relating to any Acquisition Proposal and (iii) if Parent shall make a
counterproposal (including, without limitation, following delivery of a written
notice to Parent pursuant to Section 5.1(b)), consider and cause
its financial and legal advisors to consider in good faith the terms of such
counterproposal. Contemporaneously with providing any non-public information to
a third party in connection with any such Acquisition Proposal, the Company
shall furnish a copy of such information to Parent (to the extent not already
previously provided). None of the Acquired Corporations shall enter
into any confidentiality agreement with any Person subsequent to the date hereof
which prohibits the Company from providing such information to
Parent.
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Certain Permitted
Disclosure. Nothing contained in this Section 5.1, in Section 5.5 or otherwise contained in
this Agreement shall be deemed to prohibit the Company from taking and
disclosing to its shareholders a position with respect to a tender offer
contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange
Act or from making any required disclosure to the Company’s shareholders if, in
the good faith judgment of the Company Board, after consultation with outside
counsel, such action would be required under applicable Legal
Requirements.
5.1(d) Cessation of Ongoing
Discussions. The Acquired Corporations shall, and shall cause
their Representatives to, cease immediately all discussions and negotiations
regarding any proposal that constitutes, or could reasonably be expected to lead
to, an Acquisition Proposal.
5.2 Joint
Proxy Statement/Prospectus; Registration Statement.
5.2(a) As
promptly as practicable after the execution of this Agreement, Parent and the
Company shall jointly prepare and file with the SEC the Joint Proxy
Statement/Prospectus and the Form S-4 Registration
Statement. Each of Parent and the Company shall provide promptly to
the other such information concerning its business affairs and financial
statements as, in the reasonable judgment of the providing party or its counsel,
may be required or appropriate for inclusion in the Joint Proxy
Statement/Prospectus and the Form S-4 Registration Statement, or in any
amendments or supplements thereto, shall cause its counsel to cooperate with the
other party’s counsel in the preparation of the Joint Proxy Statement/Prospectus
and the Form S-4 Registration Statement and shall request the cooperation
of such party’s auditors in the preparation of the Joint Proxy
Statement/Prospectus and the Form S-4 Registration
Statement. Each of Parent and the Company shall respond to any
comments of the SEC and shall use all commercially reasonable efforts to have
the Form S-4 Registration Statement declared effective under the Securities
Act as promptly as practicable after such filings, and each of Parent and the
Company will provide the other with a reasonable opportunity to review and
comment (which comments will be considered by the other party in good faith) on
any amendment or supplement on the Joint Proxy Statement/Prospectus or the
Form S-4 Registration Statement prior to the filing thereof with the
SEC. The Company and Parent shall cause the Joint Proxy
Statement/Prospectus to be mailed to their respective stockholders at the
earliest practicable time after the Form S-4 Registration Statement is
declared effective under the Securities Act. Each of Parent and the
Company shall notify the other promptly upon the receipt of any comments from
the SEC or its staff or any other government officials and of any request by the
SEC or its staff or any other government officials for amendments or supplements
to the Form S-4 Registration Statement, the Joint Proxy
Statement/Prospectus or any filing pursuant to Section 5.2 or for additional
information and shall supply the other with copies of all correspondence between
such party or any of its representatives, on the one hand, and the SEC, or its
staff or any other government officials, on the other hand, with respect to the
Form S-4 Registration Statement, the Joint Proxy Statement/Prospectus, the
Merger or any filing pursuant to Section 5.2(b). Each of
Parent and the Company shall use all commercially reasonable efforts to cause
all documents that it is responsible for filing with the SEC or other regulatory
authorities under this Section 5.2 to comply in all material
respects with all Legal Requirements.
5.2(b) If, at
any time prior to the Company Specified Time or the Parent Specified Time, any
information is discovered or any event occurs with respect to Parent or any of
the Acquired Corporations, or any change occurs with respect to the other
information included in the Form S-4 Registration Statement or the Joint
Proxy Statement/Prospectus which is required to be described in an amendment of,
or a supplement to, the Form S-4 Registration Statement or the Joint Proxy
Statement/Prospectus so that such document does not include any misstatement of
a material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, then (i) the party learning of such information shall
notify the other parties promptly of such event, and Parent and the Company
shall promptly file with the SEC any necessary amendment or supplement to the
Form S-4 Registration Statement or the Joint Proxy Statement/Prospectus,
respectively, (ii) Parent shall use its reasonable best efforts to have
such amendment or supplement cleared for mailing as soon as practicable, and,
Parent and the Company shall, as required by Legal Requirements, disseminate the
information contained in such amendment or supplement to holders of Company
Common Stock; provided that no amendment or supplement will be filed and no such
information shall be otherwise disseminated without prior consultation between
Parent and the Company and providing Parent and the Company with a reasonable
opportunity to review and comment on such amendment or supplement.
47
5.2(c) Parent
and the Company shall promptly make all necessary filings with respect to the
Merger under the Securities Act, the Exchange Act, applicable Blue Sky Laws and
the rules and regulations thereunder.
5.3 NASDAQ Quotation; AMEX
Quotation. Parent agrees to use commercially reasonable
efforts to continue the quotation of Parent Common Stock on the NASDAQ Stock
Market during the term of this Agreement. Company agrees to use
commercially reasonable efforts to continue the quotation of Company Common
Stock on the American Stock Exchange during the term of this
Agreement.
5.4 Access to
Information. Each of Parent and the Company shall afford to
each other’s officers, employees, accountants, counsel, financial advisors, and
other representatives, reasonable access (subject to Legal Requirements
regarding the sharing of such information), during normal business hours, and
upon reasonable prior notice, during the period from the date hereof through the
Effective Time or the termination of this Agreement, to its properties, books,
contracts, commitments, personnel and records in a manner commensurate with due
diligence conducted by any party prior to the date hereof. Any
investigation conducted pursuant to the access contemplated by this Section 5.4 shall be conducted in a
manner that does not unreasonably interfere with the conduct of the business of
the parties or their respective Subsidiaries, as the case may be, or create a
risk of damage or destruction to any property or assets of the parties or their
respective Subsidiaries. During such period, the Company and Parent
shall furnish or make available promptly to each other (except as otherwise
available on XXXXX) (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of federal or state securities laws and (b) all other
information concerning its business, properties, assets and personnel as the
other may reasonably request. Parent and the Company, as the case may
be, will hold any such information which is nonpublic in confidence in
accordance with the Confidentiality Agreement. No information or
knowledge obtained in any investigation pursuant to this Section 5.4 or otherwise shall affect
or be deemed to modify any representation or warranty contained in this
Agreement or the conditions to the obligations of the parties to consummate the
Merger. Notwithstanding the foregoing, Parent and the Company may
restrict or otherwise prohibit access to any documents or information to the
extent that (i) access to such documents or information would risk of
waiver of any attorney-client privilege, work product doctrine or other
applicable privilege applicable to such documents or information or
(ii) access to a contract to which any of the Acquired Corporations or
Parent and its Subsidiaries is a party or otherwise bound would violate or cause
a default under, or give a third party the right terminate or accelerate the
rights under, such contract.
5.5 Stockholders’
Meeting.
5.5(a) The
Company, acting through the Company Board, shall take all actions in accordance
with Legal Requirements, the Organizational Documents of the Company and the
rules of The American Stock Exchange to promptly and duly call, give notice of,
convene and hold as promptly as practicable, and in any event within 45 days
after the declaration of effectiveness of the Form S-4 Registration
Statement, the Company Shareholders’ Meeting for the purpose of considering and
voting upon the Company Voting Proposal. Subject to Section 5.1(b), to the fullest extent
permitted by applicable Legal Requirements, (i) the Company Board shall
recommend adoption of this Agreement by the shareholders of the Company (the
“Company
Voting Proposal”) and include such recommendation in the Joint Proxy
Statement/Prospectus, (ii) neither the Company Board nor any committee
thereof shall effect a Company Adverse Recommendation Change and (iii) the
Company shall use its reasonable best efforts to solicit from its shareholders
proxies in favor of the Company Voting Proposal and shall take all other action
necessary or advisable to secure the Required Company Shareholder
Vote. Without limiting the generality of the foregoing, (i) the
Company agrees that its obligation to duly call, give notice of, convene and
hold a meeting of the holders of Company Common Stock, as required by this
Section, shall not be affected by the withdrawal, amendment or modification of
the recommendation by the Company Board or committee thereof and (ii) the
Company agrees that its obligations pursuant to this Section shall not be
affected by the commencement, public proposal, public disclosure or
communication to the Company of any Acquisition Proposal.
5.5(b) Parent,
acting through Parent’s Board, shall take all actions in accordance with Legal
Requirements, the Organizational Documents of Parent and the rules of The NASDAQ
Stock Market to promptly and duly call, give notice of, convene and hold as
promptly as practicable, and in any event within 45 days after the declaration
of effectiveness of the Form S-4 Registration Statement, the Parent
Stockholders’ Meeting for the purpose of considering and voting upon the
issuance of Parent Common Stock in the Merger (the “Parent Voting
Proposal”). The Parent Board shall recommend approval of the
Parent Voting Proposal by the stockholders of Parent and include such
recommendation in the Joint Proxy Statement/Prospectus; neither the Parent Board
nor any committee thereof shall withdraw, qualify or modify, or publicly propose
to withdraw, qualify or modify in any manner adverse to the Company the
recommendation of the Parent Board that the Parent’s stockholders vote in favor
of the Parent Voting Proposal (a “Parent Adverse
Recommendation Change”); and Parent shall use its reasonable best efforts
to solicit from its stockholders proxies in favor of the Parent Voting Proposal
and shall take all other action necessary or advisable to secure the Required
Parent Stockholder Vote.
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5.5(c) Without
limiting the generality of the foregoing, Parent agrees that its obligation to
duly call, give notice of, convene and hold a meeting of the holders of Parent
Common Stock, as required by this Section, shall not be affected by a Parent
Adverse Recommendation Change. Nothing contained in this Section 5.5 or otherwise contained in
this Agreement shall be deemed to prohibit Parent from taking and disclosing to
its stockholders a position with respect to a tender offer contemplated by
Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act or from
making any required disclosure to Parent’s stockholders if, in the good faith
judgment of the Parent Board, after consultation with outside counsel, such
action is required under applicable Legal Requirements.
5.5(d) Unless
otherwise mutually agreed upon by the parties, the respective record dates and
meeting dates for the Company Shareholders Meeting and for the Parent
Shareholders Meeting shall be the same.
5.5(e) Except to
the extent required by Legal Requirements, the Company shall not (i) change
the date specified in the Joint Proxy Statement/Prospectus for the Company
Shareholders’ Meeting or (ii) postpone, delay or adjourn the Company
Shareholders’ Meeting, except, in each case, after consultation with Parent,
(A) to the extent necessary to ensure that any amendment or supplement to
the Joint Proxy Statement/Prospectus required by applicable Legal Requirements
is provided to the shareholders of the Company sufficiently in advance of the
Company Shareholders’ Meeting or (B) if there are an insufficient number of
shares of Company Common Stock represented in person or by proxy at the Company
Shareholders’ Meeting to constitute a quorum or to adopt this Agreement, in
which case the Company may adjourn the Company Shareholders’ Meeting and use its
reasonable best efforts to obtain a quorum and/or the Required Company
Shareholder Vote as promptly as practicable in the prevailing
circumstances. Except to the extent required by Legal Requirements,
Parent shall not (i) change the date specified in the Joint Proxy
Statement/Prospectus for the Parent Stockholders’ Meeting or (ii) postpone,
delay or adjourn the Parent Stockholders’ Meeting, except, in each case, after
consultation with the Company, (A) to the extent necessary to ensure that
any amendment or supplement to the Joint Proxy Statement/Prospectus required by
applicable Legal Requirements is provided to the stockholders of Parent
sufficiently in advance of the Parent Stockholders’ Meeting or (B) if there
are an insufficient number of shares of Parent Common Stock represented in
person or by proxy at the Parent Stockholders’ Meeting to constitute a quorum,
in which case Parent may adjourn the Parent Stockholders’ Meeting and use its
reasonable best efforts to obtain a quorum and/or the Required Parent
Stockholder Vote as promptly as practicable in the prevailing
circumstances.
5.6 Legal
Conditions to the Merger.
5.6(a) Subject
to the terms hereof, including Section 5.6(b), the Company and the
Parent shall each use all commercially reasonable efforts to (i) take, or
cause to be taken, all actions, and do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated hereby
as promptly as practicable, (ii) as promptly as practicable, obtain from
any Governmental Body or any other third party any consents, licenses, permits,
waivers, approvals, authorizations, or orders required to be obtained or made by
the Acquired Corporations or Parent in connection with the authorization,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, (iii) as promptly as practicable, make
all necessary filings, and thereafter make any other required submissions, with
respect to this Agreement and the Merger required under (A) the Securities
Act, the Exchange Act and any other applicable federal or state securities laws,
(B) the HSR Act, any foreign antitrust laws or regulations, and any related
governmental request thereunder, and (C) any other Legal Requirements, and
(iv) execute or deliver any additional instruments reasonably necessary to
consummate the transactions contemplated by, and to fully carry out the purposes
of, this Agreement. The Company and the Parent shall cooperate with
each other in connection with the making of all such filings (subject to Legal
Requirements regarding the sharing of information), including providing copies
of all such documents to the non-filing party and its advisors prior to filing
and, if requested, accepting all reasonable additions, deletions or changes
suggested in connection therewith. The Company and the Parent shall
each use all commercially reasonable efforts (subject to Legal Requirements
regarding the sharing of information) to furnish to each other all information
required for any application or other filing to be made pursuant to the rules
and regulations of any applicable law (including all information required to be
included in the Joint Proxy Statement/Prospectus and the Form S-4
Registration Statement) in connection with the transactions contemplated by this
Agreement. For the avoidance of doubt, Parent and the Company agree
that nothing contained in this Section 5.6 shall modify or affect
their respective rights and responsibilities under Section 5.6(b).
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5.6(b) Subject
to the terms hereof, Parent and the Company agree, and shall cause each of their
respective Subsidiaries, to cooperate and to use all commercially reasonable
efforts to obtain any government clearances, approvals, actions, or non-actions
required for Closing under the HSR Act, the Xxxxxxx Act, as amended, the Xxxxxxx
Act, as amended, the Federal Trade Commission Act, as amended, and any other
federal, state or foreign law, regulation or decree designed to prohibit,
restrict or regulate actions for the purpose or effect of monopolization or
restraint of trade and/or competition (collectively, “Antitrust
Laws”), to respond to any government requests for information under any
Antitrust Law, and to contest and resist any action, including any legislative,
administrative or judicial action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order (whether temporary,
preliminary or permanent) (an “Antitrust
Order”) that restricts, prevents or prohibits, or threatens to restrict,
prevent, or prohibit, the consummation of the Merger or any other transactions
contemplated by this Agreement under any Antitrust Law. The parties
hereto will consult and cooperate with one another, and consider in good faith
the views of one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to any Antitrust Law. Parent shall be entitled to
direct any proceedings or negotiations with any Governmental Body relating to
any of the foregoing, provided that it shall afford the Company a reasonable
opportunity to participate therein. In furtherance and not in
limitation of the foregoing, Company shall (i) keep Parent informed of any
communication received from, or given to, the United States Federal Trade
Commission, the United States Department of Justice, or any other United States
or foreign Governmental Body and of any communication received from or given to
any Person (other than the employees, agents, attorneys, representatives,
advisors, consultants, or Affiliates of Company) in connection with any
proceeding by a private party, in each case regarding any of the transactions
contemplated hereby; and (ii) permit Parent to review in advance any
communication given by Company to, and consult with Parent in advance of any
meeting or conference with, the United States Federal Trade Commission, the
United States Department of Justice, or any other United States or foreign
Governmental Body or, in connection with any proceeding by a private party, with
any other Person (other than the employees, agents, attorneys, representatives,
advisors, consultants, or Affiliates of Company) and, to the extent permitted by
the United States Federal Trade Commission, the United States Department of
Justice, or any other United States or foreign Governmental Body or other
Person, give Parent the opportunity to attend and participate in such meetings
and conferences.
5.6(c) Notwithstanding
anything in this Agreement to the contrary, neither Parent nor any of its
Affiliates shall be under any obligation to make proposals, execute or carry out
agreements or submit to orders providing for the sale, license or other
disposition or holding separate (through the establishment of a trust or
otherwise) of any assets of Parent or any of its Affiliates or the Company or
any of its Affiliates or the holding separate of the shares of Company Common
Stock (or shares of stock of the Surviving Corporation) or imposing or seeking
to impose any material limitation on the ability of Parent or any of its
Affiliates to conduct their business or own such assets or to acquire, hold or
exercise full rights of ownership of the shares of Company Common Stock (or
shares of stock of the Surviving Corporation).
5.6(d) At the
request of Parent, the Acquired Corporations shall agree to hold separate
(including by trust or otherwise) or to divest any of their respective
businesses, Subsidiaries or assets, or to take or agree to take any action with
respect to, or agree to any limitation on, any of their respective businesses,
Subsidiaries or assets, provided that any such action is conditioned upon the
consummation of the Merger.
5.6(e) Each of
Parent and the Acquired Corporations shall give any notices to third parties,
and use all commercially reasonable efforts to obtain any third party consents
related to or required in connection with the Merger that are (A) necessary
to consummate the transactions contemplated hereby, (B) disclosed or
required to be disclosed in the Company Disclosure Schedule or Parent Disclosure
Schedule, as the case may be, or (C) required to prevent the occurrence of
an event that could reasonably be expected to have a Material Adverse Effect on
the Company or Parent, as the case may be, prior to or after the Effective
Time.
5.7 Public
Disclosure. Parent and the Company shall consult with each
other before issuing any press release or otherwise making any public statement
with respect to the Merger or any of the other transactions contemplated by this
Agreement. In addition each of Parent and the Company shall not, and
shall not permit any of its Representatives to, make any disclosure regarding
the Merger or any of the other transactions contemplated by this Agreement
unless (a) the other party shall have approved such disclosure or
(b) such party shall have been advised in writing by its outside legal
counsel that such disclosure is required by applicable law.
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5.8 Section 368(a)
Reorganization. Parent and Company shall each use all
commercially reasonable efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368(a) of the
Code. The parties hereto hereby adopt this Agreement as a plan of
reorganization.
5.9 NASDAQ Stock Market
Listing. Parent shall, if required by the rules of The NASDAQ
Stock Market, file with The NASDAQ Stock Market a Notification Form
for Listing Additional Shares with respect to the shares of Parent Common Stock
issuable in connection with the Merger.
5.10 Shareholder
Litigation. Until the earlier of the termination of this
Agreement in accordance with its terms or the Effective Time, the Company shall
give Parent the opportunity to participate in the defense or settlement of any
shareholder litigation against the Company or the Company Board relating to this
Agreement or any of the transactions contemplated by this Agreement, and shall
not settle any such litigation without Parent’s prior written consent, which
will not be unreasonably withheld or delayed.
5.11 Indemnification.
5.11(a) From and
after the Effective Time, Parent shall, to the fullest extent permitted by law,
cause the Surviving Corporation, for a period of six years from the Effective
Time, to honor all of the Company’s obligations to indemnify and hold harmless
each present and former director and officer of any of the Acquired Corporations
(the “Indemnified
Parties”), against any costs or expenses (including attorneys’ fees),
judgments, fines, losses, claims, damages, liabilities or amounts paid in
settlement incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the extent that such obligations to indemnify and hold harmless exist
at the Effective Time.
5.11(b) For a
period of six years after the Effective Time, Parent shall cause the Surviving
Corporation to maintain (to the extent available in the market) in effect a
directors’ and officers’ liability insurance policy covering those Persons who
are currently covered by the Company’s directors’ and officers’ liability
insurance policy (a complete and accurate copy of which has been delivered or
made available to Parent prior to the date of this Agreement) with coverage in
amount and scope at least as favorable to such Persons as the Company’s existing
coverage; provided, that in no event shall Parent or the Surviving Corporation
be required to expend in excess of 200% of the annual premium currently paid by
the Company for such coverage.
5.11(c) If Parent
or the Surviving Corporation or any of its successors or assigns shall
(i) consolidate with or merge into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfer all or substantially all of its properties and assets to
any Person, then, and in each such case, proper provisions shall be made so that
the successors and assigns of Parent or the Surviving Corporation, as the case
may be, shall assume all of the obligations of Parent and the Surviving
Corporation set forth in this Section 5.11.
5.11(d) The
provisions of this Section are intended to be in addition to the rights
otherwise available to the current officers and directors of the Company by law,
charter, statute, by-law or agreement, and shall operate for the benefit of, and
shall be enforceable by, each of the Indemnified Parties, their heirs and their
representatives. Parent shall guarantee the obligations of the
Surviving Corporation with respect to any and all amounts payable under this
Section.
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5.12 Employee
Matters. With respect to the employees of the Acquired
Corporations who remain employed after the Effective Time by the Acquired
Corporations for a period of at least 180 days following the Effective Time (the
“Continuing
Employees”), and to the extent permitted under the terms of Parent’s
applicable benefit plans, Parent shall treat and cause its applicable benefit
plans to treat the service of the Continuing Employees with the Acquired
Corporations prior to the Effective Time as service rendered to Parent or any
Affiliate of Parent for purposes of eligibility to participate and vesting,
including applicability of minimum waiting periods for
participation. Parent shall use commercially reasonable efforts to
provide that no such Continuing Employee, or any of his or her eligible
dependents, who, at the Effective Time, are participating in the Acquired
Company’s group health plan shall be excluded from Parent’s group health plan,
or limited in coverage thereunder, by reason of any waiting period restriction
or pre-existing condition limitation. Notwithstanding the foregoing,
(a) any Continuing Employees who were employed with the Acquired Corporations
for at least four years prior to the Effective Time will continue to accrue
vacation time at the applicable rate under the Acquired Corporations vacation
policy, and (b) Parent shall not be required to provide any coverage, benefits
or credit inconsistent with the terms of any Parent benefit plans or which would
duplicate benefits provided through the Acquired Corporations’ Benefit
Plans. Furthermore, nothing contained in this Section shall require
or imply that the employment of the employees of the Acquired Corporations who
are employed at the Effective Time will continue for any particular period of
time following the Effective Time. This Section is not intended, and
shall not be deemed, to confer any rights or remedies upon any Person other than
the parties to this Agreement and their respective successors and permitted
assigns, to create any agreement of employment with any Person or to otherwise
create any third-party beneficiary hereunder, or to be interpreted as an
amendment to any plan of Parent or any Affiliate of Parent.
5.13 Employee Benefit Plan –
401(k) Plan. If requested in writing by Parent, the Company
shall take all action necessary to terminate, or cause to terminate, effective
as of the end of the last full payroll period prior to the Closing Date,
any Company Benefit Plan that is a 401(k) plan. If Parent provides
such a request to the Company, Parent shall receive from the Company evidence
that the Company’s 401(k) plan has been terminated pursuant to resolutions of
its Board of Directors (the form and substance of which resolutions shall be
subject to review and approval of Parent), effective as of the day referred
to above.
5.14 Notification of Certain
Matters. Parent shall give prompt notice to the Company, and
the Company shall give prompt notice to Parent, of the occurrence, or failure to
occur, of any event, which occurrence or failure to occur causes, or would be
reasonably likely to cause (a) (i) any representation or warranty of
such party contained in this Agreement that is qualified as to materiality or
that makes reference to a Material Adverse Effect to be untrue or inaccurate in
any respect or (ii) any other representation or warranty of such party
contained in this Agreement to be untrue or inaccurate in any material respect,
in each case at any time from and after the date of this Agreement until the
Effective Time, or (b) any material failure of Parent and the Merger Sub or
the Company, as the case may be, or of any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this
Agreement. Notwithstanding the above, the delivery of any notice
pursuant to this Section will not limit or otherwise affect the remedies
available hereunder to the party receiving such notice or the conditions to such
party’s obligation to consummate the Merger.
5.15 Exemption
from Liability Under Section 16(b).
5.15(a) The Board
of Directors of the Company, or a committee thereof consisting of non-employee
directors (as such term is defined for purposes of Rule 16b-3 under the
Exchange Act), shall adopt a resolution in advance of the Effective Time
providing that the receipt by the Company Insiders (as defined below) of Parent
Common Stock Awards, as applicable, in exchange for shares of Company Common
Stock or Outstanding Company Options pursuant to the transactions contemplated
hereby is intended to be exempt pursuant to Rule 16b-3 under the Exchange
Act.
5.15(b) The Board
of Directors of Parent, or a committee thereof consisting of non-employee
directors (as such term is defined for purposes of Rule 16b-3 under the
Exchange Act), shall adopt a resolution in advance of the Effective Time
providing that the receipt by Parent Insiders (as defined below) of Parent
Common Stock in exchange for shares of Company Common Stock pursuant to the
transactions contemplated hereby and to the extent such securities are listed in
the Section 16 Information, is intended to be exempt pursuant to
Rule 16b-3 under the Exchange Act.
52
5.15(c) For
purposes of this Agreement, “Section 16
Information” means information regarding the Company Insiders and the
number of shares of Company Common Stock or Outstanding Company Options deemed
to be beneficially owned by each such Company Insider and expected to be
exchanged for Parent Common Stock in connection with the Merger, which shall be
provided by the Company to Parent within 10 business days after the date of this
Agreement.
5.15(d) For
purposes of this Agreement, “Company
Insiders” mean those officers and directors of the Company who are
subject to the reporting requirements of Section 16(a) of the Exchange Act
with respect to Company equity securities, as listed in the Section 16
Information, and “Parent
Insiders” mean those Company Insiders, if any, who after the consummation
of the Merger will be subject to the reporting requirements of
Section 16(a) of the Exchange Act with respect to Parent equity
securities.
5.16 Tax
Matters.
5.16(a) From the
date of this Agreement until the Effective Time, each of Parent and its
Subsidiaries and the Acquired Corporations, consistent with past practice, shall
(i) duly and timely file all Tax Returns and other documents required by it
to be filed with federal, state and local Tax authorities the failure to file of
which could have a material negative impact, financial or otherwise, subject to
extensions permitted by law and properly granted by the appropriate authority,
provided that each such party notifies all other parties hereto that it is
availing itself of such extensions, and (ii) pay all Taxes shown due on
such Tax Returns.
5.16(b) Each
party shall reasonably cooperate in the preparation, execution, and filing of
all returns, questionnaires, applications, or other documents regarding any real
property transfer or gains, sales, use, transfer, value added, stock transfer
and stamp taxes, any transfer, recording, registration and other fees and any
similar taxes which become payable in connection with the transactions
contemplated by this Agreement. From the date hereof through the
Effective Time, the Acquired Corporations shall use reasonable efforts to
provide Parent with any other Tax information reasonably requested by
Parent.
5.17 Obligations of Merger
Sub. Parent shall take all action necessary to cause Merger
Sub and the Surviving Corporation to perform their respective obligations under
this Agreement and to consummate the transactions contemplated hereby upon the
terms and subject to the conditions set forth in this Agreement.
SECTION
6 CONDITIONS
TO MERGER.
6.1 Conditions to Each Party’s
Obligation To Effect the Merger. The respective obligations of
each party to this Agreement to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of the following
conditions:
6.1(a) Shareholder
Approval. The Company Voting Proposal shall have been approved
at the Company Shareholders’ Meeting by the Required Company Shareholder Vote
and the Parent Voting Proposal shall have been approved at the Parent
Stockholders’ Meeting by the applicable Required Parent Stockholder
Vote.
6.1(b) HSR Act and other Antitrust
Laws. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and all other
necessary approvals under applicable Antitrust Laws shall have been
obtained.
6.1(c) Governmental
Approvals. Other than the filing of the Agreement of Merger,
all authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any Governmental Body in
connection with the Merger and the consummation of the other transactions
contemplated by this Agreement, shall have been filed, been obtained or occurred
on terms and conditions which may not reasonably be expected to have a Material
Adverse Effect on the Company or Parent.
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6.1(d) Registration Statement;
Joint Proxy Statement/Prospectus. The Form S-4 Registration
Statement shall have become effective under the Securities Act and no stop order
suspending the effectiveness of the Form S-4 Registration Statement shall
have been issued and no proceeding for that purpose, and no similar proceeding
with respect to the Joint Proxy Statement/Prospectus, shall have been
initiated or threatened in writing by the SEC or its staff and not concluded or
withdrawn.
6.1(e) No
Injunctions. No Governmental Body of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any order,
executive order, stay, decree, judgment or injunction (preliminary or permanent)
or statute, rule or regulation which is in effect and which has the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger or
the other transactions contemplated by this Agreement.
6.1(f) Tax-Free
Reorganization. Each of Company and Parent shall have received
a written opinion from its respective counsel, dated as of the Closing Date, to
the effect that, for U.S. federal income tax purposes, the Merger will
constitute a reorganization within the meaning of Section 368 of the
Code. If the respective counsel to Parent or Company does not render
such opinion, this condition will nonetheless be deemed satisfied with respect
to such party if counsel to the other party renders such opinion to such
party. Parent, Merger Sub and the Company shall each execute and
deliver to such counsel tax representation letters requested by such counsel,
and upon which such counsel can rely, in connection with such written
opinions.
6.1(g) Third Party
Consents. All consents or approvals required to be obtained in
connection with the Merger and the other transactions contemplated by this
Agreement shall have been obtained and shall be in full force and
effect.
6.1(h) No
Litigation. There shall not be pending any legal proceeding:
(i) challenging or seeking to restrain or prohibit the consummation of the
Merger or any of the other transactions contemplated by this Agreement;
(ii) relating to the Merger and seeking to obtain from Parent or any of the
Acquired Corporations, any damages or other relief that would be material to any
party to this Agreement; (iii) seeking to prohibit or limit in any material
respect to Parent’s ability to vote, receive dividends with respect to or
otherwise exercise ownership rights with respect to any of the Company’s capital
stock; or (iv) which would affect adversely the right of Parent or Company
to own the assets or operate the business of Company.
6.2 Additional Conditions to
Obligations of Parent and the Merger Sub. The obligations of
Parent and the Merger Sub to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of each of the following additional
conditions, any of which may be waived, in writing, exclusively by Parent and
the Merger Sub:
6.2(a) Representations and
Warranties. The representations and warranties of the Company
set forth in this Agreement shall be true and correct as of the date
of this Agreement and as of the Closing Date as though made on the Closing Date,
except (i) to the extent such representations and warranties are
specifically made as of a particular date, in which case such representations
and warranties shall be true and correct as of such date, (ii) the
representations and warranties of the Company set forth in Section 2.3 shall be true and correct
in all material respects and (iii) as to all representations and warranties
of the Company other than those set forth in Section 2.3, where the failure to be
true and correct (without regard to any materiality qualifications contained
therein), individually or in the aggregate, has not had, and would not be
reasonably likely to have, a Material Adverse Effect on the Acquired
Corporations as a whole and Parent shall have received a certificate signed on
behalf of the Company by the chief executive officer and the chief financial
officer of the Company to such effect.
6.2(b) Performance of Obligations
of the Acquired Corporations. The Company shall have performed
in all material respects all obligations required to be performed by it under
this Agreement on or prior to the Closing Date; and Parent shall have received a
certificate signed on behalf of the Company by the chief executive officer and
the chief financial officer of the Company to such effect.
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6.2(c) Employment
Agreements. Each of the employees identified on Schedule 6.2(c) hereto as
“Key
Employees” shall have entered into employment agreements with Parent
and/or the Surviving Corporation pursuant to their execution of an offer letter
on Parent’s standard form substantially in the form attached as Exhibit G hereto, immediately
prior to the Effective Time which employment agreements shall be effective
immediately after the Effective Time.
6.2(d) No
Restraints. There shall not be instituted or pending any
action or proceeding by any Governmental Body (i) seeking to restrain,
prohibit, make illegal or otherwise interfere with the ownership or operation by
the Parent or any of its Subsidiaries of all or any material portion of the
business of the Acquired Corporations or of the Parent or any of its
Subsidiaries or to compel the Parent or any of its Subsidiaries to dispose of or
hold separate all or any material portion of the business or assets of the
Acquired Corporations or of the Parent or any of its Subsidiaries,
(ii) seeking to impose limitations on the ability of the Parent or any of
its Subsidiaries effectively to exercise full rights of ownership of the shares
of Company Common Stock (or shares of stock of the Surviving Corporation)
including the right to vote any such shares on any matters properly presented to
shareholders or (iii) seeking to require divestiture by the Parent or any
of its Subsidiaries of any such shares.
6.2(e) Material Adverse
Change. There shall not have occurred any change in the
financial condition, properties, assets (including intangible assets),
liabilities, business, operations, results of operations or prospects of the
Acquired Corporations, that, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect on the Acquired
Corporations. For purposes of illustration and clarity, and without
intending to impose any limitation, each of the following shall be deemed to be
an event which could reasonably be expected to have a Material Adverse Effect on
the Acquired Corporations: an indictment of an Acquired Corporation
or any current officer or director of an Acquired Corporation with regard to
matters involving an Acquired Corporation as could result in any of the Acquired
Corporations being barred from government contracting, or the cancellation or
termination of a Company Material Contract to which a U.S. federal governmental
agency or state governmental agency in a party and which represents 10% or
greater of the Acquired Corporations’ annual revenue forecasted for calendar
year 2008 (other than as a consequence of an expiration of a Material Contract
in accordance with its terms).
6.2(f) Resignation
Letters. Company shall have delivered to Parent written
resignations of all officers and directors of the Company effective as of the
Effective Time.
6.3 Additional Conditions to
Obligations of the Company. The obligation of the Company to
effect the Merger shall be subject to the satisfaction on or prior to the
Closing Date of each of the following additional conditions, any of which may be
waived, in writing, exclusively by the Company:
6.3(a) Representations and
Warranties. The representations and warranties of Parent and
the Merger Sub set forth in this Agreement shall be true and correct as of the
date of this Agreement and as of the Closing Date as if made on the Closing
Date, except (i) to the extent such representations and warranties are
specifically made as of a particular date, in which case such representations
and warranties shall be true and correct as of such date, and (ii) where
the failure to be true and correct (without regard to any materiality or
Material Adverse Effect qualifications contained therein), individually or in
the aggregate, has not had, and would not be reasonably likely to have, a
Material Adverse Effect on Parent and the Company shall have received a
certificate signed on behalf of Parent by the chief executive officer or the
chief financial officer of Parent to such effect.
6.3(b) Performance of Obligations
of Parent and the Merger Sub. Parent and Merger Sub shall have
performed in all material respects all obligations required to be performed by
them under this Agreement on or prior to the Closing Date; and the Company shall
have received a certificate signed on behalf of Parent by the chief executive
officer or the chief financial officer of Parent to such effect.
55
6.3(c) No Material Adverse
Change. There shall not have occurred any change in the
financial condition, properties, assets (including intangible assets),
liabilities, business, operations, results of operations or prospects of Parent
and its Subsidiaries that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on Parent. For purposes of
illustration and clarity, and without intending to impose any limitation, each
of the following shall be deemed to be an event which could reasonably be
expected to have a Material Adverse Effect on Parent: an indictment
of Parent or any Subsidiary of Parent or any current officer or director of
Parent or any Subsidiary of Parent with regard to matters involving Parent or
one of its Subsidiaries as could result in the Parent being barred from
government contracting, or the cancellation or termination of a Parent Material
Contract to which a U.S. federal governmental agency or state governmental
agency is a party and which represents 10% or greater of Parent’s annual revenue
forecasted for calendar year 2008 (other than as a consequence of an expiration
of a Material Contract in accordance with its terms).
6.3(d) NASDAQ. The
shares of Parent Common Stock to be issued in the Merger and the transactions
contemplated hereby shall have been authorized for listing on the NASDAQ Stock
Market, subject to official notice of issuance.
SECTION
7 TERMINATION
AND AMENDMENT.
7.1 Termination. This
Agreement may be terminated at any time prior to the Effective Time (with
respect to Sections 7.1(b) through 7.1(i), by written notice by
the terminating party to the other party), whether before or, subject to the
terms hereof, after the approval of the Company Voting Proposal by the
shareholders of the Company or the sole shareholder of the Merger
Sub:
7.1(a) by mutual
written consent of Parent and the Company;
7.1(b) by either
Parent or Company if the Merger shall not have been consummated by the six-month
anniversary of the date of this Agreement (such date, as it may be extended in
accordance with this Section 7.1(b), the “Outside
Date”), which date may be extended (i) for a three-month period upon
written notice of either Parent or the Company to the other party on or prior to
the six-month anniversary of the date of this Agreement and (ii) for an
additional three-month period upon written notice of either Parent or the
Company to the other party on or prior to the expiration of the three-month
period described in clause (i) above, provided (x) all waiting periods (and
any extensions thereof) applicable to the consummation of the Merger under the
HSR Act shall not have expired or been terminated or any other approval under
applicable Antitrust Laws as set forth in Section 6.1(b) shall not have been
obtained, in each case on or prior to the Outside Date and (y) all other
conditions to the closing of the Merger set forth in Section 6 shall have been
satisfied, other than those that by their nature can be satisfied only at
closing; provided that the right to terminate this Agreement under this Section 7.1(b) shall not be available
to any party whose material breach of this Agreement has been a principal cause
of, or resulted in the failure of, the Merger to occur on or before the Outside
Date);
7.1(c) by either
Parent or the Company if a Governmental Body of competent jurisdiction shall
have enacted a Legal Requirement or issued a nonappealable final order, decree,
regulation or ruling or taken any other nonappealable final action, in each case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger;
7.1(d) by either
Parent or the Company if, at the Company Shareholders’ Meeting (including any
adjournment or postponement thereof permitted by this Agreement) at which a vote
on the Voting Proposal is taken, the Required Company Shareholder Vote in favor
of the Voting Proposal shall not have been obtained (provided that the right to
terminate this Agreement under this Section 7.1(d) shall not be available
to any party seeking termination if, at such time, such party is in material
breach of its obligations under this Agreement);
56
7.1(e) by either
Parent or the Company if (i) the Parent Stockholders’ Meeting (including
any adjournments and postponements thereof) shall have been held and completed
and Parent’s stockholders shall have voted on the Parent Voting Proposal, and
(ii) the Parent Voting Proposal shall not have been approved at such
meeting (and shall not have been approved at any adjournment or postponement
thereof) by the Required Parent Stockholder Vote (provided that the right to
terminate this Agreement under this Section 7.1(e) shall not be available
to any party seeking termination if, at such time, such party is in material
breach of its obligations under this Agreement);
7.1(f) by
Parent, if: (i) the Company Board (or any committee thereof) shall have failed
to recommend approval of the Company Voting Proposal in the Joint Proxy
Statement/Prospectus, or shall have made a Company Adverse Recommendation
Change; (ii) the Company Board or any committee thereof shall have approved or
recommended to the shareholders of the Company an Acquisition Proposal (other
than the Merger); (iii) the Company shall have entered into any Alternative
Acquisition Agreement relating to any Acquisition Proposal; (iv) the Company
Board (or any committee thereof) shall have failed to reconfirm its
recommendation of the Company Voting Proposal within ten business days after
Parent requests in writing that the Company Board (or any committee thereof) do
so, provided such request may only be made in the event the Company has received
an Acquisition Proposal or any amendment to an Acquisition Proposal; or (v) the
Company shall have willfully breached its obligations under Section 5.1 or Section 5.5(a).
7.1(g) by
Parent, following a breach of or failure to perform any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement, which breach or failure to perform (i) would cause the
conditions set forth in Section 6.2(a) or 6.2(b) not to be satisfied, and
(ii) if curable, shall not have been cured prior to the earlier of
30 days following receipt by the Company of written notice from Parent of
such breach or failure to perform or the Outside Date;
7.1(h) by the
Company, if there has been a breach of or failure to perform any representation,
warranty, covenant or agreement on the part of Parent or the Merger Sub set
forth in this Agreement, which breach or failure to perform (i) would cause
the conditions set forth in Section 6.2(a) or Section 6.2(b) not to be satisfied, and
(ii) if curable, shall not have been cured prior to the earlier of
30 days following receipt by Parent of written notice from the Company of
such breach or failure to perform from the Company or the Outside Date;
or
7.1(i) by the
Company, if the Company Board (or any committee thereof) shall have made a
Company Adverse Recommendation Change in response to a Superior Proposal in
accordance with the terms and conditions of Section 5.1(b) the Company shall have
paid Parent the Termination Fee concurrently with the Company’s termination of
this Agreement, and following the termination of this Agreement, the Company
enters into a definitive acquisition agreement with respect to the Superior
Proposal which was the subject of such Company Adverse Recommendation
Change.
7.2 Effect of
Termination. In the event of termination of this Agreement as
provided in Section 7.1, this Agreement shall
immediately become void and there shall be no liability or obligation on the
part of Parent, the Company, the Merger Sub or their respective officers,
directors, stockholders, stockholders or Affiliates; provided that (i) any
such termination shall not relieve any party from liability for any willful
breach of this Agreement, fraud or knowing misrepresentation and (ii) the
provisions of Section 4.3 (Confidentiality), Section 7.3 (Effect of
Termination),
Section 7.3
(Fees and Expenses) and Section
8 (Miscellaneous Provisions) (to the extent applicable to such surviving
sections) of this Agreement and the Confidentiality Agreements shall remain in
full force and effect and survive any termination of this
Agreement.
7.3 Fees and
Expenses.
7.3(a) Except as
set forth in this Section, all fees and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such fees and expenses, whether or not the Merger is
consummated; provided however, that the Company and Parent shall share equally
(i) the filing fee of Parent’s pre-merger notification report under the HSR
Act and all fees and expenses incurred by Parent or the Company in seeking
approvals under all other applicable Antitrust Laws, and (ii) all fees and
expenses, other than accountants’ and attorneys’ fees, incurred with respect to
the printing, filing and mailing of the Joint Proxy Statement/Prospectus
(including any related preliminary materials) and the Form S-4 Registration
Statement and any amendments or supplements thereto.
57
7.3(b) The
Company shall pay Parent a termination fee equal to $2,394,000 (the “Termination
Fee”) in the event of the termination of this Agreement:
(i) by Parent
pursuant to Section 7.1(f); or
(ii) by the
Company pursuant to Section 7.1(i).
7.3(c) Any fee
due under this Section 7.3(b)(i) shall be paid by
wire transfer of same-day funds concurrently with the Company’s termination of
this Agreement.
7.3(d) The
parties acknowledge that the agreements contained in this Section 7.3 are an integral part of
the transactions contemplated by this Agreement, and that, without these
agreements, the parties would not enter into this Agreement. If the
Company fails to promptly pay to Parent any fee due hereunder, the Company shall
pay the costs and expenses (including legal fees and expenses) in connection
with any action, including the filing of any lawsuit or other legal action,
taken to collect payment, together with interest on the amount of any unpaid fee
at the publicly announced prime rate of Bank of America, N.A. plus 2.0% per
annum, compounded quarterly, from the date such fee was required to be
paid. Payment of the fees described in this Section 7.3 shall not be in lieu of
damages incurred in the event of a breach of this Agreement described in clause
(i) of Section 7.2.
SECTION
8 MISCELLANEOUS
PROVISIONS.
8.1 Amendment. This
Agreement may be amended at any time prior to the Effective Time by the parties
hereto, by action taken or authorized by their respective boards of directors,
whether before or after adoption of this Agreement by the shareholders of the
Company or Merger Sub; provided, however, that after any such shareholder
approval of this Agreement, no amendment shall be made to this Agreement that by
law requires further approval or authorization by the shareholders of the
Company or Merger Sub without such further approval or
authorization. This Agreement may not be amended, except by an
instrument in writing signed by or on behalf of each of the parties
hereto.
8.2 Remedies
Cumulative; Waiver.
8.2(a) The
rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither any failure nor any delay by any party in
exercising any right, power or privilege under this Agreement or any of the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege and no single or partial exercise of any such right, power or
privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To
the maximum extent permitted by Legal Requirements, (i) no waiver that may
be given by a party will be applicable except in the specific instance for which
it is given; and (ii) no notice to or demand on one party will be deemed to
be a waiver of any obligation of that party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this
Agreement.
8.2(b) At any
time prior to the Effective Time, Parent (with respect to the Company) and the
Company (with respect to Parent and Merger Sub), may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations
or other acts of such party to this Agreement, (ii) waive any inaccuracies
in the representation and warranties contained in this Agreement or any document
delivered pursuant to this Agreement and (iii) waive compliance with any
covenants, obligations or conditions contained in this Agreement. Any
agreement on the part of a party to this Agreement to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party.
58
8.3 No
Survival. None of the representations and warranties, or any
covenant to be performed prior to the Effective Time, contained in this
Agreement shall survive the Effective Time and only the covenants that by their
terms survive the Effective Time and this Section 8 shall survive the
Effective Time.
8.4 Entire
Agreement. This Agreement and the documents and instruments
and other agreements among the parties hereto as contemplated by or referred to
herein, including the Company Disclosure Schedule and Parent Disclosure
Schedule and the Confidentiality Agreement constitute the entire
agreement among the parties to this Agreement and supersede all prior agreements
and understandings, both written and oral, among or between any of the parties
with respect to the subject matter hereof.
8.5 Execution
of Agreement; Counterparts; Electronic Signatures.
8.5(a) This
Agreement may be executed in several counterparts, each of which shall be deemed
an original and all of which shall constitute one and the same instrument, and
shall become effective when counterparts have been signed by each of the parties
and delivered to the other parties; it being understood that all parties need
not sign the same counterpart.
8.5(b) The
exchange of copies of this Agreement and of signature pages by facsimile
transmission (whether directly from one facsimile device to another by means of
a dial-up connection or whether mediated by the World Wide Web), by electronic
mail via “portable document format” (“.pdf”), or by any other electronic means
intended to preserve the original graphic and pictorial appearance of a
document, or by a combination of such means, shall constitute effective
execution and delivery of this Agreement as to the parties and may be used in
lieu of an original Agreement for all purposes. Signatures of the
parties transmitted by facsimile shall be deemed to be their original signatures
for all purposes.
8.5(c) Notwithstanding
the Electronic Signatures in Global and National Commerce Act (15 U.S.C.
Sec. 7001 et
seq.), the Uniform Electronic Transactions Act, or any other Legal
Requirement relating to or enabling the creation, execution, delivery, or
recordation of any contract or signature by electronic means, and
notwithstanding any course of conduct engaged in by the parties, no party shall
be deemed to have executed this Agreement or any other document contemplated by
this Agreement (including any amendment or other change thereto) unless and
until such party shall have executed this Agreement or such document on paper by
a handwritten original signature or any other symbol executed or adopted by a
party with current intention to authenticate this Agreement or such other
document contemplated.
8.6 Governing
Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law
thereof.
8.7 Consent to Jurisdiction;
Venue. In any action or proceeding between any of the parties
arising out of or relating to this Agreement or any of the transactions
contemplated by this Agreement, each of the
parties: (a) irrevocably and unconditionally consents and
submits to the exclusive jurisdiction and venue of the Court of Chancery of the
State of Delaware; and (b) agrees that all claims in respect of such action
or proceeding may be heard and determined exclusively in the Court of Chancery
of the State of Delaware. Each of the parties hereto agrees that a
final judgment in any such action or proceeding and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Agreement shall affect the right of any party to
this Agreement to serve process in any other manner permitted by Legal
Requirements.
8.8 WAIVER OF JURY
TRIAL. EACH OF THE PARTIES IRREVOCABLY WAIVES ANY AND ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BETWEEN THE PARTIES ARISING
OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT.
59
8.9 Disclosure
Schedules.
8.9(a) The
Company Disclosure Schedule and Parent Disclosure Schedule shall be arranged in
separate Parts corresponding to the numbered and lettered sections contained in
Section 2 and Section 3
respectively. Unless otherwise provided in the respective Disclosure
Schedule, the information disclosed in any numbered or lettered “Part”
shall be deemed to relate to and to qualify only the particular representation
or warranty set forth in the corresponding numbered or lettered section in Section 2 or Section 3, as the case may be,
and shall not be deemed to relate to or to qualify any other representation or
warranty.
8.9(b) If there
is any inconsistency between the statements in this Agreement and those in the
Company Disclosure Statement or Parent Disclosure Schedule (other than an
exception set forth as such in the Company Disclosure Schedule or Parent
Disclosure Schedule), the statements in this Agreement will
control.
8.10 Attorneys’
Fees. In any action at law or suit in equity to enforce this
Agreement or the rights of any of the parties hereunder and except as provided
in Section 7.3, the prevailing party in
such action or suit shall be entitled to receive a reasonable sum for its
attorneys’ fees and all other reasonable costs and expenses incurred in such
action or suit.
8.11 Assignments and
Successors. This Agreement shall be binding upon, and shall be
enforceable by and inure solely to the benefit of, the parties hereto and their
respective successors and assigns; provided, however, that neither this
Agreement nor any of the Company’s rights hereunder may be assigned by the
Company without the prior written consent of Parent. Any attempted
assignment of this Agreement or of any such rights by the Company without such
consent shall be void and of no effect.
8.12 No Third Party
Rights. Nothing in this Agreement, express or implied, is
intended to or shall confer upon any Person (other than the parties hereto) any
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement; provided, however, that after the Effective Time, the Indemnified
Persons shall be third party beneficiaries of, and entitled to enforce, Section 5.11 “Indemnification.”
60
8.13 Notices. All
notices, Consents, waivers and other communications required or permitted by
this Agreement shall be in writing and shall be deemed given to a party when
(a) delivered to the appropriate address by hand or by nationally
recognized overnight courier service (costs prepaid); or (b) sent by
facsimile or e-mail with confirmation of transmission by the transmitting
equipment confirmed with a copy delivered as provided in clause (a), in each
case to the following addresses or facsimile numbers and marked to the attention
of the person (by name or title) designated below (or to such other address,
facsimile number, e-mail address or person as a party may designate by notice to
the other parties):
Company
(before the Closing):
SYS
0000
Xxxxxx Xxxxxx Xxxx, Xxxxx 000
Xxx
Xxxxx, XX 00000
Attention:
Chief Executive Officer
Fax no.:
(000) 000-0000
with a
copy to:
Xxxx,
Forward, Xxxxxxxx & Scripps LLP
00000 Xx
Xxxxxx Xxxx, Xxxxx 000
Xxx
Xxxxx, XX 00000
Attention:
Xxxx Xxxxxxxx
Fax no.:
(000) 000-0000
Parent
and Merger Sub:
Kratos
Defense & Security Solutions, Inc.
0000
Xxxxxxxx Xxxx
Xxx
Xxxxx, XX 00000
Attention:
President
Fax no.:
(000) 000-0000
with a
copy to:
DLA Piper
US LLP
0000
Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx
Xxxxx, XX 00000
Attention: Xxxxx
Xxxxxxx
Fax no.:
(000) 000-0000
61
8.14 Construction;
Usage.
8.14(a) Interpretation. In
this Agreement, unless a clear contrary intention appears:
(i) the
singular number includes the plural number and vice versa;
(ii) reference
to any Person includes such Person’s successors and assigns but, if applicable,
only if such successors and assigns are not prohibited by this Agreement, and
reference to a Person in a particular capacity excludes such Person in any other
capacity or individually;
(iii) reference
to any gender includes each other gender;
(iv) reference
to any agreement, document or instrument means such agreement, document or
instrument as amended or modified and in effect from time to time in accordance
with the terms thereof;
(v) reference
to any Legal Requirement means such Legal Requirement as amended, modified,
codified, replaced or reenacted, in whole or in part, and in effect from time to
time, including rules and regulations promulgated thereunder, and reference to
any section or other provision of any Legal Requirement means that provision of
such Legal Requirement from time to time in effect and constituting the
substantive amendment, modification, codification, replacement or reenactment of
such section or other provision;
(vi) “hereunder,”
“hereof,” “hereto,” and words of similar import shall be deemed references to
this Agreement as a whole and not to any particular Article, Section or other
provision hereof;
(vii) “including”
(and with correlative meaning “include”) means including without limiting the
generality of any description preceding such term;
(viii) “or” is
used in the inclusive sense of “and/or;”
(ix) with
respect to the determination of any period of time, “from” means “from and
including” and “to” means “to but excluding;”
(x) references
to documents, instruments or agreements shall be deemed to refer as well to all
addenda, exhibits, schedules or amendments thereto; and
(xi) any
dollar thresholds set forth herein shall not be used as a benchmark for
determination of what is or is not “material” or a “Material Adverse
Effect” under this Agreement.
8.14(b) Legal Representation of the
Parties. This Agreement was negotiated by the parties with the
benefit of legal representation and any rule of construction or interpretation
otherwise requiring this Agreement to be construed or interpreted against any
party shall not apply to any construction or interpretation hereof.
62
8.14(c) Headings. The
headings contained in this Agreement are for convenience of reference only,
shall not be deemed to be a part of this Agreement and shall not be referred to
in connection with the construction or interpretation of this
Agreement.
8.15 Enforcement of
Agreement. Except as otherwise expressly provided herein, any
and all remedies herein expressly conferred upon a party hereunder shall be
deemed cumulative with and not exclusive of any other remedy conferred hereby or
by law on such party, and the exercise of any one remedy shall not preclude the
exercise of any other. The parties acknowledge and agree that each
other party hereunder would be irreparably damaged if any of the provisions of
this Agreement are not performed in accordance with their specific terms and
that any breach of this Agreement by a party hereunder could not be
adequately compensated in all cases by monetary damages
alone. Accordingly, in addition to any other right or remedy to which
a party hereunder may be entitled, at law or in equity, it shall be entitled to
enforce any provision of this Agreement by a decree of specific performance and
temporary, preliminary and permanent injunctive relief to prevent breaches or
threatened breaches of any of the provisions of this Agreement, without posting
any bond or other undertaking.
8.16 Severability. If
any provision of this Agreement is held invalid or unenforceable by any court of
competent jurisdiction, the other provisions of this Agreement will remain in
full force and effect. Any provision of this Agreement held invalid
or unenforceable only in part or degree will remain in full force and effect to
the extent not held invalid or unenforceable.
8.17 Time of
Essence. With regard to all dates and time periods set forth
or referred to in this Agreement, time is of the essence.
[REMAINDER
OF PAGE LEFT BLANK – SIGNATURE PAGE FOLLOWS]
63
In witness
whereof, the parties have caused this Agreement to be executed as of the
date first above written.
| Kratos Defense & Security Solutions, Inc. | |
| By: /s/ Xxxx X. XxXxxxx | |
| Name: Xxxx X. XxXxxxx | |
| Title: Chief Executive Officer, President | |
| White Shadow, Inc. | |
| By: /s/Xxxxx Xxxxxxx | |
| Name: Xxxxx Xxxxxxx | |
| Title: Chief Executive Officer | |
| SYS | |
| By: /s/ Xxxxxxx X. Xxxxx, Xx. | |
| Name: Xxxxxxx X. Xxxxx, Xx. | |
| Title: Chief Executive Officer | |
64
Execution
Version
EXHIBIT
A
CERTAIN
DEFINITIONS
For
purposes of the Agreement (including this Exhibit A):
“Acquired
Corporation” means the Company or any of its Subsidiaries, and the “Acquired
Corporations” means the Company and all of its Subsidiaries.
“Acquired
Corporation Contract” shall mean any Contract: (a) to
which any of the Acquired Corporations is a party; (b) by which any of the
Acquired Corporations or any asset of any of the Acquired Corporations is or may
become bound or under which any of the Acquired Corporations has, or may become
subject to, any obligation; or (c) under which any of the Acquired
Corporations has or may acquire any right or interest.
“Acquired
Corporation Product(s)” means: (i) the Vigilys
product(s); (ii) the Logic Innovations digital broadcast products; (iii) the
cVideo Marathon product(s); (iv) the NeuralStar Network Management product(s);
and (v) the DopplerVUE Network Management product(s).
“Acquired
Corporation Proprietary Rights” shall mean any Proprietary Rights which
are owned by or licensed to any of the Acquired Corporations and which relate to
any Acquired Corporation Product. For purposes of the foregoing, the
phrase “which relate to” shall mean absent the ownership of or a license to such
Proprietary Right, the using, making, selling, offering for sale, importing,
reproducing, modifying or distributing an Acquired Corporation Product would
infringe or misappropriate such Proprietary Right.
“Acquired
Corporation Source Code” shall mean any source code, or any portion,
aspect or segment of any source code that forms part of or is included in any
Acquired Corporation Product.
“Acquired
Corporation Technology” means all Technology owned by any Acquired
Corporation or used in any Acquired Corporation Product or which is necessary or
required for the development, manufacturing or use of any Acquired Corporation
Product.
“Acquired
Corporations Hazardous Material” has the meaning set forth in
Section 2.13.
“Acquisition
Proposal” shall mean any proposal or offer, whether in one
transaction or a series of related transactions, for (i) a merger,
consolidation, dissolution, tender offer, exchange offer, recapitalization,
share exchange, business combination or other similar transaction involving any
of the Acquired Corporations, in which a Person or “group” (as defined in the
Exchange Act and the rules promulgated thereunder) of Persons directly or
indirectly acquires beneficial or record ownership of securities representing
more than 20% of the outstanding securities of any class of voting securities of
any of the Acquired Corporations; (ii) the issuance by any of the Acquired
Corporations of over 20% of its equity securities (other than pursuant to any
underwritten or broadly distributed offering), (iii) the acquisition
(including, without limitation, through any license or lease, other than
nonexclusive licenses in the Ordinary Course of Business) in any manner,
directly or indirectly, of assets that constitute or account for over 20% of the
consolidated net revenues, net income or assets of any of the Acquired
Corporations, (iv) any tender offer or exchange offer in which any Person
or “group” (as such term is defined under Section 13(d) under the Exchange
Act) shall acquire beneficial ownership (as such term is defined in Rule 13d-3
under the Exchange Act), or the right to acquire beneficial ownership, of 20% or
more of the outstanding shares of Company Common Stock, (v) any
recapitalization, restructuring, liquidation, dissolution or other similar type
of transaction with respect to the Acquired Corporations in which
a Person or “group” (as defined in the Exchange Act and the rules
promulgated thereunder) of Persons directly or indirectly shall acquire
beneficial ownership of 20% or more of the outstanding securities of any class
of voting securities of any of the Acquired Corporations; or (vi) any
transaction which is similar in form, substance or purpose to any of the
foregoing transactions; in each case other than the transactions contemplated by
this Agreement.
65
“Acquisition
Transaction” shall mean any transaction or series of transactions
involving an Acquisition Proposal.
“Affiliate” shall mean a Person under
the control of, controlling, or under common contact with another
Person.
“Agreement”
shall mean the Agreement and Plan of Merger and Reorganization to which this
Exhibit A is attached, as it may be amended from time to time.
“Alternative
Acquisition Agreement” has the meaning set forth in
Section 5.1(b)(iii).
“Antitrust
Laws” shall mean the HSR Act and any other antitrust, unfair competition,
merger or acquisition notification, or merger or acquisition control Legal
Requirements under any applicable jurisdictions, whether federal, state, local
or foreign.
“Antitrust
Order” has the meaning set forth in Section 5.6(a).
“Benefit
Plans” has the meaning set forth in Section 2.11(a).
“Blue Sky
Laws” has the meaning set forth in Section 2.2(c).
“California
Secretary of State” has the meaning set forth in
Section 0.
“Closing”
has the meaning set forth in Section 0.
“Closing
Agreement” has the meaning set forth in
Section 2.10(k).
“Closing
Date” has the meaning set forth in Section 0.
“Code” has
the meaning set forth in the third paragraph of the Recitals.
“Company”
has the meaning set forth in the first paragraph of this Agreement.
“Company Adverse
Recommendation Change” has the meaning set forth in
Section 5.1(b)(i).
“Company Balance
Sheet” has the meaning set forth in Section 2.5(a).
“Company
Board” has the meaning set forth in Section 2.1(c).
“Company
Certifications” has the meaning set forth in
Section 2.4(a).
“Company Common
Stock” shall mean the Common Stock, $0.001 par value per share, of the
Company.
66
“Company
Disclosure Schedule” shall mean the disclosure schedule that has been
prepared by the Company in accordance with the requirements of Section 8.9
and that has been delivered by the Company to Parent on the date of this
Agreement and signed by the President of the Company.
“Company
Insiders” has the meaning set forth in Section 5.15(d).
“Company
Material Contract” has the meaning set forth
in Section 2.16(a).
“Company
Option” has the meaning set forth in Section 1.8(a).
“Company SEC
Reports” has the meaning set forth in Section 2.4(a).
“Company
Shareholders’ Meeting” shall mean a meeting of the holders of Company
Common Stock to vote on the adoption of this Agreement.
“Company
Specified Time” has the meaning set forth in
Section 5.1(a).
“Company Stock
Certificate” shall have the meaning set forth in
Section 1.6.
“Company Stock
Plans” has the meaning set forth in Section 1.8(c).
“Company Voting
Proposal” has the meaning set forth in Section 5.5(a).
“Company Voting
Undertakings” has the meaning set for in the fourth paragraph under
Recitals.
“Company
Warrants” shall mean those certain warrants to purchase Company Common
Stock issued by the Company pursuant to a Securities Purchase Agreement dated as
of May 27, 2005 and otherwise as referenced in the Company Disclosure
Schedule.
“Confidentiality
Agreement” has the meaning set forth in Section 4.3.
“Consent”
shall mean any approval, consent, ratification, permission, waiver or
authorization (including any Governmental Authorization).
“Contemplated
Transactions” has the meaning set forth in
Section 2.2(a).
“Continuing
Employees” has the meaning set forth in Section 5.12.
“Contract”
shall mean any written, oral or other agreement, contract, subcontract, lease,
understanding, instrument, note, option, warranty, purchase order, license,
sublicense, insurance policy, benefit plan or legally binding commitment or
undertaking of any nature.
“Controlled Group
Liability” has the meaning set forth in
Section 2.11(b).
67
“Copyrights”
shall mean all copyrights, copyrightable works, semiconductor topography and
mask work rights, and applications for registration thereof, including all
rights of authorship, use, publication, reproduction, distribution, performance
transformation, moral rights and rights of ownership of copyrightable works,
semiconductor topography works and mask works, and all rights to register and
obtain renewals and extensions of registrations, together with all other
interests accruing by reason of international copyright, semiconductor
topography and mask work conventions.
“DGCL”
shall mean the Delaware General Corporation Law.
“EAR” has
the meaning set forth in Section 2.21.
“XXXXX”
has the meaning set forth in Section 2.4(a).
“Effective
Time” has the meaning set forth in Section 0.
“Encumbrance”
shall mean any lien, pledge, hypothecation, charge, mortgage, security interest,
encumbrance, claim, infringement, interference, option, right of first refusal,
equitable interest, title retention or title reversion agreement, preemptive
right, community property interest or restriction of any nature, whether
accrued, absolute, contingent or otherwise (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any
asset).
“Entity”
shall mean any corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any company limited by shares, limited
liability company or joint stock company), firm, society or other enterprise,
association, organization or entity.
“Environmental,
Health, and Safety Liabilities” shall refer to any cost, damages,
expense, liability, obligation, or other responsibility arising from or
under Environmental Law or Occupational Safety and Health Law and
consisting of or relating to:
(a) any
environmental, health, or safety matters or conditions (including on-site or
off-site contamination, occupational safety and health, and regulation of
chemical substances or products);
(b) fines,
penalties, judgments, awards, settlements, legal or administrative Legal
Proceedings, damages, losses, claims, demands and response, investigative,
remedial, or inspection costs and expenses arising under Environmental Law or
Occupational Safety and Health Law;
(c) financial
responsibility under Environmental Law or Occupational Safety and Health Law for
cleanup costs or corrective action, including any investigation, cleanup,
removal, containment, or other remediation or response actions (“Cleanup”)
required by applicable Environmental Law or Occupational Safety and Health Law
(whether or not such Cleanup has been required or requested by any Governmental
Body or any other Person) and for any natural resource damages; or
(d) any
other compliance, corrective, investigative, or remedial measures required under
Environmental Law or Occupational Safety and Health Law.
68
“Environmental
Law” shall refer to any Legal Requirement that requires or relates
to:
(a) advising
appropriate authorities, employees, and the public of intended or actual
releases of pollutants or hazardous substances or materials, violations of
discharge limits, or other prohibitions and of the commencements of activities,
such as resource extraction or construction, that could have significant impact
on the Environment;
(b) preventing
or reducing to acceptable levels the release of pollutants or hazardous
substances or materials into the Environment;
(c) reducing
the quantities, preventing the release, or minimizing the hazardous
characteristics of wastes that are generated;
(d) assuring
that products are designed, formulated, packaged, and used so that they do not
present unreasonable risks to human health or the Environment when used or
disposed of;
(e) protecting
resources, species, or ecological amenities;
(f) reducing
to acceptable levels the risks inherent in the transportation of hazardous
substances, pollutants, oil, or other potentially harmful
substances;
(g) cleaning
up pollutants that have been released, preventing the threat of release, or
paying the costs of such clean up or prevention; or
(h) making
responsible parties pay private parties, or groups of them, for damages done to
their health or the Environment, or permitting self-appointed representatives of
the public interest to recover for injuries done to public assets.
“ERISA”
has the meaning set forth in Section 2.11(b).
“ERISA
Affiliate” has the meaning set forth in
Section 2.11(b).
“ESPP” has
the meaning set forth in Section 1.8(b).
“Exchange
Act” shall mean the Securities Exchange Act of 1934, as
amended.
“Exchange
Agent” has the meaning set forth in Section 1.7(a).
“Exchange
Fund” has the meaning set forth in Section 1.7(a).
“Exchange
Ratio” has the meaning set forth in Section 1.5(a)(iv).
“Facilities”
shall mean any real property, leaseholds, or other interests currently or
formerly owned or operated by any Acquired Corporation and any buildings,
plants, structures, or equipment (including motor vehicles, tank cars, and
rolling stock) currently or formerly owned or operated by any Acquired
Corporation.
69
“Filed Company SEC
Reports” has the meaning set forth in Section 2.4(a).
“Final Purchase
Date” has the meaning set forth in Section 1.8(b).
“Form S-4
Registration Statement” shall mean the registration statement on Form S-4
to be filed with the SEC by Parent in connection with issuance of Parent Common
Stock in the Merger, as said registration statement may be amended prior to the
time it is declared effective by the SEC.
“GAAP”
shall mean generally accepted accounting principles for financial reporting in
the United States, applied on a basis consistent with the basis on which the
financial statements referred to in Section 2.5 and 3.5 were
prepared.
“Governmental
Authorization” shall mean any: (a) permit, license,
certificate, franchise, permission, variance, clearance, registration,
qualification or authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement; or (b) right under any Contract with any Governmental
Body.
“Governmental
Body” shall mean any: (a) nation, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government; or
(c) governmental or quasi-governmental authority of any nature (including
any governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or Entity and any court or other
tribunal).
“Government
Contract” means any contract to which the Company and any Governmental
Body is a party, and any active contracts pursuant to which the Company acts as
a vendor or a subcontractor for a party having a contract with a Governmental
Body A task, purchase or delivery order under a Government Contract shall not
constitute a separate Government Contract for purposes of this definition, but
shall be part of the Government Contract to which it relates.
“Hazardous
Materials” shall mean any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
“HSR Act”
shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended.
“Imperial”
has the meaning set forth in Section 2.22.
“Indemnification”
has the meaning set forth in Section 8.12.
“Indemnified
Parties” has the meaning set forth in Section 5.11(a).
“International
Trade Law” has
the meaning set forth in Section 2.23.
“Issued
Patents” shall mean all issued patents, reissued or reexamined patents,
revivals of patents, utility models, certificates of invention, registrations of
patents and extensions thereof, regardless of country or formal name, issued by
the United States Patent and Trademark Office and any other applicable
Governmental Body.
70
“ITAR” has
the meaning set forth in Section 2.21.
“Joint Proxy
Statement/Prospectus” shall mean the joint proxy statement/prospectus to
be sent to the Company’s stockholders in connection with the Company
Shareholders’ Meeting and to the Parent’s stockholders in connection with the
Parent Stockholders’ Meeting.
“Key
Employees” has the meaning set forth in Section 6.2(c).
“Knowledge” – an individual will be
deemed to have “Knowledge”
of a particular fact or other matter if (a) such individual is actually
aware of such fact or other matter; (b) such individual should reasonably
be aware of such fact or matter; or (c) a prudent individual could be
expected to discover or otherwise become aware of such fact or other matter in
the course of conducting a reasonable investigation concerning the existence of
such fact or other matter. The Company and Parent, respectively, will
be deemed to have “Knowledge”
of a particular fact or other matter if any executive officer (as such term is
defined under the rules promulgated by the SEC) of the Company or Parent,
respectively, has, or at any time had, Knowledge of such fact or other
matter.
“Legal
Proceeding” shall mean any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding), hearing, inquiry, audit, examination or investigation
commenced, brought, conducted or heard by or before, or otherwise involving, any
court or other Governmental Body or any arbitrator or arbitration
panel.
“Legal
Requirement” shall mean any federal, state, local, municipal, foreign or
other law, statute, constitution, principle of common law, resolution,
ordinance, code, edict, decree, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Body (or under the authority of the
NASDAQ Stock Market or the American Stock Exchange).
“Material Adverse
Effect” shall refer to the following:
An event,
violation, inaccuracy, circumstance or development will be deemed to have a
“Material
Adverse Effect” on the Acquired Corporations if such event, violation,
inaccuracy, circumstance or development had or would reasonably be likely to
have a material adverse effect on (i) the business, condition,
capitalization, assets, liabilities, operations or financial performance of the
Acquired Corporations taken as a whole, (ii) the ability of the Company to
consummate the Merger or any of the other transactions contemplated by the
Agreement or to perform any of its obligations under the Agreement, or
(iii) Parent’s ability to operate the business of the Acquired Corporations
after the Closing, except to the extent that an such event, violation,
inaccuracy, circumstance or development results directly and proximately
from: (A) changes in economic conditions in any country in which
the Acquired Corporations operate, except to the extent that the same
disproportionately impact the Acquired Corporations as compared to other
similarly situated companies; (B) changes to the conditions affecting the
industries in which the Acquired Corporations operate, except to the extent that
the same disproportionately impact the Acquired Corporations as compared to
other companies in the industries in which the Acquired Corporations operate;
(C) changes that are primarily attributable to the
announcement of this Agreement; (D) changes in the market price
or trading volume of the Company Common Stock (provided that the underlying
causes of such changes shall not be excluded); (E) changes in Legal
Requirements or GAAP, except to the extent that the same disproportionately
impact any of the Acquired Corporations as compared to other companies affected
by the change in Legal Requirements or GAAP.
71
An event,
violation, inaccuracy, circumstance or development will be deemed to have a
“Material
Adverse Effect” on Parent if such event, violation, inaccuracy,
circumstance or development had or would reasonably be likely to have a material
adverse effect on (i) the business, condition, capitalization, assets,
liabilities, operations or financial performance of Parent and its Subsidiaries
taken as a whole, (ii) the ability of Parent to consummate the Merger or
any of the other transactions contemplated by the Agreement or to perform any of
its obligations under the Agreement, or (iii) Parent’s ability to operate
the Acquired Corporations after the Closing, except to the extent that an such
event, violation, inaccuracy, circumstance or development results directly and
proximately from: (A) changes in economic conditions in any
country in which Parent or its Subsidiaries operates, except to the extent that
the same disproportionately impact Parent and its Subsidiaries, taken as a
whole, as compared to other similarly situated companies; (B) changes to
the conditions affecting the industries in which Parent or its Subsidiaries
operate, except to the extent that the same disproportionately impact Parent and
its Subsidiaries, taken as a whole, as compared to other companies in
the industries in which Parent and its Subsidiaries operate; (C) changes
that are primarily attributable to, the announcement of this Agreement;
(D) changes in the market price or trading volume of Parent Common Stock
(provided that the underlying causes of such changes shall not be excluded);
(E) changes in Legal Requirements or GAAP, except to the extent that the
same disproportionately impact Parent and its Subsidiaries, taken as a whole, as
compared to other companies affected by the change in Legal Requirements or
GAAP.
“Material
Contract” has the meaning set forth in Section 2.16.
“Merger”
shall have the meaning set forth in the first Recital of this
Agreement.
“Merger
Agreement” shall have the
meaning set forth in Section 1.1.
“Merger
Sub” shall have the meaning set forth in the first paragraph of this
Agreement.
“Notice of
Superior Proposal” has the meaning set forth in
Section 5.1(b).
“Occupational
Safety and Health Law” shall mean any Legal Requirement designed to
provide safe and healthful working conditions and to reduce occupational safety
and health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working
conditions.
“Off-Balance
Sheet Arrangement” means with respect to
any Person, any securitization transaction to which that Person or its
Subsidiaries is party and any other transaction, agreement or other contractual
arrangement to which an entity unconsolidated with that Person is a party, under
which that Person or its Subsidiaries, whether or not a party to the
arrangement, has, or in the future may have: (a) any obligation
under a direct or indirect guarantee or similar arrangement; (b) a retained
or contingent interest in assets transferred to an unconsolidated entity or
similar arrangement; (c) derivatives to the extent that the fair value
thereof is not fully reflected as a liability or asset in the financial
statements; or (d) any obligation or liability, including a contingent
obligation or liability, to the extent that it is not fully reflected in the
financial statements (excluding the footnotes thereto) (for this purpose,
obligations or liabilities that are not fully reflected in the financial
statements (excluding the footnotes thereto) include, without limitation:
obligations that are not classified as a liability according to generally
accepted accounting principles; contingent liabilities as to which, as of the
date of the financial statements, it is not probable that a loss has been
incurred or, if probable, is not reasonably estimable; or liabilities as to
which the amount recognized in the financial statements is less than the
reasonably possible maximum exposure to loss under the obligation as of the date
of the financial statements, but exclude contingent liabilities arising out of
litigation, arbitration or regulatory actions (not otherwise related to
off-balance sheet arrangements)).
“Options”
shall mean any options, stock appreciation rights, warrants or other rights,
Contracts, arrangements or commitments of any character for the issuance of
equity.
72
“Ordinary Course
of Business” shall mean the Ordinary Course of Business consistent with
past custom and practice (including with respect to frequency and
amount).
“Organizational
Documents” has the meaning set forth in Section 2.1(b).
“Outside
Date” has the meaning set forth in Section 7.1(b).
“Outstanding
Company Option” has the meaning set forth in
Section 1.8(a).
“Parent”
shall have the meaning set forth in the first paragraph of this
Agreement.
“Parent Adverse
Recommendation Change” has the meaning set forth in
Section 5.5(b)
“Parent Balance
Sheet” has the meaning set forth in Section 3.5.
“Parent
Board” has the meaning set forth in Section 3.2(a).
“Parent
Certifications” has the meaning set forth in
Section 3.4.
“Parent Common
Stock” shall mean the Common Stock, $.01 par value per share, of
Parent.
“Parent
Contract” means any Contract: (a) to which Parent or any
of its Subsidiaries is a party; (b) by which Parent or any of its
Subsidiaries or any of their assets is or may be bound or under which Parent or
any of its Subsidiaries has or may become subject to any obligation; or
(c) under which Parent or any of its Subsidiaries has or may acquire any
right or interest.
“Parent
Disclosure Schedule” shall mean the disclosure schedule that has been
prepared by Parent in accordance with the requirements of Section 3 and that has
been delivered by Parent to the Company on the date of this Agreement and signed
by the President of Parent.
“Parent Hazardous
Material” has the meaning set forth in Section 3.14.
“Parent
Insiders” has the meaning set forth in Section 5.15(d).
“Parent Material
Contract” has the meaning set forth in Section 3.17(a).
“Parent
Plan” has the meaning set forth in Section 3.12(a).
“Parent
Product(s)” means each and all of the products developed or distributed
by Parent and its Subsidiaries (including without limitation all software
products), whether currently being distributed, currently under development, or
otherwise anticipated to be distributed under any product “road map” of Parent
and its Subsidiaries.
73
“Parent
Proprietary Rights” shall mean any Proprietary Rights owned by or
licensed to any of the Parent Corporations or otherwise used in the business of
any Parent Corporation.
“Parent RSU
Award” has the meaning set forth in Section 3.6(c).
“Parent SEC
Reports” has the meaning set forth in Section 3.4.
“Parent Specified
Time” has the meaning set forth in Section 5.5(b).
“Parent Stock
Options” shall mean options to purchase shares of Parent Common
Stock.
“Parent Stock
Plans” has the meaning set forth in Section 3.6(c).
“Parent
Stockholders’ Meeting” shall mean a meeting of the holders of Parent
Common Stock to vote on the Parent Voting Proposal.
“Parent Voting
Proposal” has the meaning set forth in Section 5.5(b).
“Parent Voting
Undertakings” has the meaning set forth in the fifth paragraph in
Recitals.
“Part”
shall mean a part or section of the Company Disclosure Schedule or Parent
Disclosure Schedule.
“Patents”
shall mean the Issued Patents and the Patent Applications.
“Patent
Applications” shall mean all published and unpublished nonprovisional and
provisional patent applications, reexamination proceedings, invention
disclosures and records of invention, applications for certificates of invention
and priority rights, in any country and regardless of formal name, including
without limitation, substitutions, continuations, continuations-in-part,
divisions, renewals, revivals, reissues, re-examinations and extensions
thereof.
“Permitted
Encumbrances” means: (a) statutory liens for Taxes that
are not yet due and payable; (b) statutory liens to secure obligations to
landlords, lessors or renters under leases or rental agreements;
(c) deposits or pledges made in connection with, or to secure payment of,
workers’ compensation, unemployment insurance or similar programs mandated by
Legal Requirements; (d) statutory liens in favor of carriers, warehousemen,
mechanics and materialmen, to secure claims for labor, materials or supplies and
other like liens; or (e) Encumbrances imposed on the underlying fee
interest in leased property.
“Person”
shall mean any individual, Entity or Governmental Body.
“Plans”
has the meaning set forth in Section 2.11(c).
“Proprietary
Rights” shall mean any: (a)(i) Issued Patents, (ii) Patent
Applications, (iii) Trademarks, fictitious business names, domain names,
and domain name registrations, (iv) Copyrights, (v) Trade Secrets,
(vi) protections or rights under neighboring rights law, industrial design
rights law, semiconductor chip or mask work protection law, moral rights law,
database protection law, unfair competition law, publicity rights law, privacy
rights law, licenses and other conveyances, and all other intellectual
properties and rights (whether or not appropriate steps have been taken to
protect, under applicable law, such other intangible assets, properties or
rights); (b) renewals, extensions and restorations of any of the foregoing,
now or hereafter in force and effect, whether worldwide or in individual
countries or regions, or (c) any right to use or exploit any of the
foregoing.
74
“Qualified
Plans” has the meaning set forth in Section 2.11(e).
“Registered
Copyrights” shall mean all Copyrights for which registrations have been
obtained or applications for registration have been filed in the United States
Copyright Office and any other applicable Governmental Body, including mask work
and/or semiconductor topography registrations.
“Registered
Trademarks” means all Trademarks for which registrations have been
obtained or applications for registration have been filed in the United States
Patent and Trademark Office and any applicable Governmental Body.
“Representatives”
shall mean officers, directors, employees, agents, attorneys, accountants,
advisors and representatives.
“Required Company
Shareholder Vote” shall mean the affirmative vote to adopt this Agreement
by the holders of a majority of the shares of Company Common Stock outstanding
and entitled to vote at the Company Shareholders’ Meeting.
“Required Parent
Stockholder Vote” shall mean the vote to approve the issuance of Parent
Common Stock in the Merger by the holders of a majority of the shares of Parent
Common Stock present (in person or by proxy) at the Parent Stockholders’ Meeting
and constituting a quorum for the purpose of voting on such
approval.
“SEC”
shall mean the United States Securities and Exchange Commission.
“Secretary of
State” has the meaning set forth in Section 0.
“Section 16
Information” has the meaning set forth in
Section 5.15(c).
“Securities
Act” shall mean the Securities Act of 1933, as amended.
“SOX” has
the meaning set forth in Section 2.4(a).
“Subsidiary” – an Entity shall be deemed
to be a “Subsidiary”
of another Person if such Person directly or indirectly owns, beneficially or of
record, (a) an amount of voting securities or other interests in such
Entity that is sufficient to enable such Person to elect at least a majority of
the members of such Entity’s board of directors or other governing body, or
(b) at least 50% of the outstanding equity or financial interests of such
Entity.
“Superior
Proposal” shall mean any unsolicited, bona fide written Acquisition
Proposal (on its most recently amended or modified terms, if amended or
modified), made by a third party on terms which the Company Board determines in
its good faith judgment to be more favorable from a financial point of view to
the holders of Company Common Stock than the transactions contemplated by this
Agreement, after receiving advice from its financial advisor and taking into
account all the terms and conditions of such proposal and this Agreement
(including any proposal by Parent to amend the terms of this Agreement), the
likelihood of consummation and all financial, regulatory, legal and other
factors; provided, however, that for purposes of this definition, the references
to “20%” in the definition of “Acquisition Proposal” shall be deemed to be
references to “50%.”
“Surviving
Corporation” has the meaning set forth in Section 1.1.
75
“Tax”
shall mean any tax (including any income tax, franchise tax, capital gains tax,
gross receipts tax, value-added tax, surtax, excise tax, ad valorem tax,
transfer tax, stamp tax, sales tax, use tax, property tax, business tax,
withholding tax or payroll tax), levy, assessment, tariff, duty (including any
customs duty), deficiency or fee, and any related charge or amount (including
any fine, penalty or interest), imposed, assessed or collected by or under the
authority of any Governmental Body.
“Tax
Return” shall mean any return (including any information return), report,
statement, declaration, estimate, schedule, notice, notification, form,
election, certificate or other document or information filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection or payment of any Tax
or in connection with the administration, implementation or enforcement of or
compliance with any Legal Requirement relating to any Tax.
“Tax
Ruling” has the meaning set forth in Section 2.10(k).
“Technology” means all manufacturing and
operating specifications, data processes, process technology, plans, drawings,
blueprints, formulae, designs, algorithms, data, databases, data collections and
compilations, models, methodologies, theories, ideas, techniques, discoveries,
disclosures, inventions, improvements, logic, code, work of authorship and any
other tangible or intangible form of technology, information or
know-how.
“Termination
Fee” has the meaning set forth in Section 7.3(b).
“Trade
Secrets” means all product specifications, data, know-how, formulae,
compositions, processes, designs, sketches, photographs, graphs, drawings,
samples, inventions and ideas, research and development, manufacturing or
distribution methods and processes including fabrication process architecture
and process flow, customer lists, current and anticipated customer
requirements, price lists, market studies, business plans, computer software and
programs (including object code), computer software and database technologies,
systems, structures and architectures (and related processes, formulae,
composition, improvements, devices, know-how, inventions, discoveries, concepts,
ideas, designs, methods and information), and any other information, however
documented, that is a trade secret within the meaning of the
applicable trade-secret protection
law.
“Trademarks”
shall mean all (i) trademarks, service marks, marks, logos, insignias,
designs, trade dress, names or other symbols, (ii) applications for
registration of trademarks, service marks, marks, logos, insignias, designs,
trade dress, names or other symbols, and (iii) trademarks, service marks,
marks, logos, insignias, designs, trade dress, names or other symbols for which
registrations has been obtained.
“Voting
Undertakings” has the meaning set forth in the fifth paragraph under
Recitals.
76
|
|
Schedule
A
|
|
|
List
of Signatories for Company Voting
Undertakings
|
|
|
Xxxxxxx
X. Xxxxx, Xx.
|
|
|
Xxxxxx
X. Lake
|
77
|
|
Schedule
B
|
|
|
List
of Signatories for Parent Voting
Undertakings
|
|
|
Xxxxx
X. Xxxxxxxx
|
|
|
Xxxxxx
X. Xxxxxx
|
|
|
Xxxx
X. XxXxxxx
|
|
|
Xxxxxxx
X. Xxxxxxx
|
|
|
Xxxx
X. Xxxxxx
|
|
|
Xxxxxx
Xxxx
|
|
|
Xxxxx
Xxxxxx
|
78
|
|
Schedule
C
|
|
|
Schedule
6.2(c)
|
|
|
Key
Employees
|
|
|
Xxxxxxx
X. Xxxxx, Xx.
|
79
