EXHIBIT 10.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TAMTRON CORPORATION,
WARWICK ACQUISITION CORP.
AND
IMPATH INC.
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Dated as of January 7, 2002
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TABLE OF CONTENTS
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ARTICLE I CERTAIN DEFINITIONS...................................................................2
1.1 Certain Definitions...................................................................2
ARTICLE II THE MERGER............................................................................8
2.1 The Merger............................................................................8
2.2 Effective Time........................................................................9
2.3 Closing of the Merger.................................................................9
2.4 Consideration.........................................................................9
2.5 Purchase Price Adjustment and Post-Closing Adjustment.................................9
2.6 Effects of the Merger................................................................10
2.7 Articles of Incorporation and Bylaws.................................................10
2.8 Directors and Officers...............................................................10
ARTICLE III EFFECT OF MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS................11
3.1 Conversion of Shares.................................................................11
3.2 Exchange Procedures..................................................................12
(a) Company Capital Stock.......................................................12
(b) Company Stock Options.......................................................12
3.3 No Further Ownership Rights in Company Capital Stock or Options......................12
3.4 No Liability.........................................................................13
3.5 Lost, Stolen or Destroyed Certificates...............................................13
3.6 Withholding Rights...................................................................13
3.7 Stock Transfer Books.................................................................13
3.8 Options..............................................................................13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..............................13
4.1 Due Organization.....................................................................13
4.2 Authorization and Effect of Agreement................................................14
4.3 No Violations; Consents and Approvals................................................14
4.4 Litigation...........................................................................14
4.5 No Prior Activities..................................................................15
TABLE OF CONTENTS
(continued)
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................15
5.1 Due Organization.....................................................................15
5.2 Capitalization; Ownership of Shares; No Liens on Shares..............................16
5.3 Subsidiaries.........................................................................17
5.4 Authorization and Effect of Agreement................................................17
5.5 No Violations; Consents and Approvals................................................17
5.6 Financial Statements; Absence of Undisclosed Liabilities.............................17
5.7 Conduct of Business; Certain Actions.................................................18
5.8 Real Property........................................................................20
5.9 Tangible Personal Property...........................................................20
5.10 Environmental Matters................................................................20
5.11 Litigation...........................................................................21
5.12 Compliance with Laws.................................................................21
5.13 Licenses and Permits.................................................................21
5.14 Material Contracts...................................................................22
5.15 Intellectual Property Rights.........................................................23
5.16 Insurance............................................................................25
5.17 Employee Benefit Plans...............................................................26
5.18 Warranties...........................................................................27
5.19 Taxes................................................................................27
5.20 Personnel............................................................................30
5.21 Business Relations...................................................................30
5.22 Accounts Receivable..................................................................30
5.23 Accounts Payable.....................................................................30
5.24 Bank Accounts........................................................................31
5.25 Indebtedness to and from Officers, Directors, Shareholders and Employees.............31
5.26 Brokers..............................................................................31
5.27 Interest in Competitors, Vendors and Customers.......................................31
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TABLE OF CONTENTS
(continued)
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5.28 Information Furnished................................................................31
5.29 Minute Books; Stock Record Books.....................................................31
5.30 Books and Records....................................................................32
ARTICLE VI COVENANTS RELATED TO CONDUCT OF BUSINESS.............................................32
6.1 Financial Statements.................................................................32
6.2 Interim Operations of the Company....................................................32
ARTICLE VII ADDITIONAL AGREEMENTS......................................................................34
7.1 Inspection...........................................................................34
7.2 Compliance by the Company, Parent and Merger Sub.....................................35
7.3 Notification of Certain Matters......................................................35
7.4 Exclusivity..........................................................................35
7.5 Public Announcement..................................................................36
7.6 Continuation of Insurance Coverage...................................................36
7.7 Maintenance of Credit Terms..........................................................36
7.8 Third Party Consents.................................................................36
7.9 Commercially Reasonable Best Efforts and Certain Filings.............................36
7.10 Indemnification of Officers and Directors; Exculpation...............................36
7.11 Antitakeover Statutes................................................................37
7.12 Company Lines of Credit..............................................................37
7.13 Shareholder Indebtedness.............................................................37
7.14 Expenses.............................................................................37
7.15 Employee Benefits Matters............................................................37
ARTICLE VIII CONDITIONS TO CONSUMMATION OF THE MERGER..................................................38
8.1 Conditions to Each Party's Obligation to Effect the Merger...........................38
8.2 Conditions to the Obligations of Parent and Merger Sub...............................38
8.3 Conditions to Obligations of the Company.............................................40
ARTICLE IX TERMINATION..........................................................................41
9.1 Termination..........................................................................41
9.2 Extension; Waiver....................................................................41
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TABLE OF CONTENTS
(continued)
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ARTICLE X SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS; ESCROW PROVISIONS..........................................42
10.1 Survival of Representations, Warranties, Covenants and Agreements....................42
10.2 Establishment of the Escrow Fund.....................................................43
ARTICLE XI MISCELLANEOUS........................................................................43
11.1 Assignment...........................................................................43
11.2 Expenses.............................................................................43
11.3 Notices..............................................................................43
11.4 Further Assurances...................................................................44
11.5 Specific Performance; Injunctive Relief..............................................44
11.6 Governing Law........................................................................45
11.7 Arbitration..........................................................................45
11.8 Entire Agreement; Amendments and Waivers.............................................45
11.9 Headings.............................................................................46
11.10 Severability.........................................................................46
11.11 Counterparts.........................................................................46
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER is entered into as of
January 7, 2002 (this "Agreement") by and among Tamtron Corporation., a
California corporation, IMPATH Inc., a Delaware corporation ("Parent"), and
Warwick Acquisition Corp., a California corporation ("Merger Sub").
W I T N E S S E T H:
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WHEREAS, the Company (as hereinafter defined) develops,
markets and supports computer software which addresses certain financial,
administrative, clinical and practice management needs of anatomic pathology
laboratories (the "Business");
WHEREAS, the respective Boards of Directors of Parent, Merger
Sub and the Company have, subject to the terms and conditions set forth herein,
determined that the Merger (as hereinafter defined) is advisable and fair to,
and in the best interests of, their respective shareholders and have approved
this Agreement and the transactions contemplated hereby, including the Merger;
WHEREAS, shareholders of the Company holding (x) at least 50%
of the outstanding Series A Preferred (as hereinafter defined), voting as a
separate class, and (y) at least 50% of the currently outstanding Company Common
Stock (as hereinafter defined), voting as a separate class, have, subject to the
terms and conditions set forth herein, approved this Agreement and the
transactions contemplated hereby, including the Merger;
WHEREAS, at the Effective Time (as hereinafter defined),
Merger Sub will merge with and into the Company, the Company shall continue as
the Surviving Corporation (as hereinafter defined) and the separate corporate
existence of Merger Sub shall cease;
WHEREAS, pursuant to the Merger and subject to the terms and
conditions of this Agreement, all of the issued and outstanding shares of
Company Capital Stock (as hereinafter defined) and certain Options (as
hereinafter defined) shall be converted into the right to receive the Merger
Consideration (as hereinafter defined);
WHEREAS, a portion of the Merger Consideration otherwise
payable by Parent to certain shareholders of the Company in connection with the
Merger shall be placed in escrow by Parent (the "Escrow Fund"); and
WHEREAS, Parent, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger as set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
"Accounts Receivable" shall have the meaning set forth in
Section 5.22 hereto.
"Acquisition Proposal" shall mean any proposal or offer, other
than a proposal or offer by Parent or any of its Affiliates, with respect to a
sale, transfer, merger or other business combination involving the Company or
all or any portion of the assets of the Company (other than sales or licensing
of assets made in the Ordinary Course of Business).
"Action" shall mean any action, suit or proceeding at law or
in equity, arbitration, inquiry, investigation or governmental, administrative,
regulatory or other proceeding by or before any Governmental Entity.
"Affected Employees" shall have the meaning set forth in
Section 7.15(a) hereto.
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with such Person, which shall include any Subsidiary of such Person. For
purposes of the immediately preceding sentence, the term "control" (including,
with correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through ownership of voting
securities, by contract or otherwise.
"Affiliated Group" means any affiliated group within the
meaning of Section 1504 of the Code, or any consolidated, combined, unitary or
similar group defined under a similar provision of state, local or foreign Law.
"Agreement of Merger" shall have the meaning set forth in
Section 2.2 hereto.
"Annual Financial Statements" shall have the meaning set forth
in Section 5.6(a) hereto.
"Base Price" shall mean cash in an amount equal to the
difference between (a) $27,000,000 and (b) the sum of (i) the Expenses, (ii) the
Shareholder Indebtedness and (iii) the Estimated Purchase Price Differential.
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"Benefit Plans" shall mean all "employee benefit plans," as
defined in Section 3(3) of ERISA and all other employee benefit plans or other
benefit arrangements, including all bonus and other incentive compensation,
deferred compensation, incentive compensation, disability, severance, retention,
salary continuation, stock and stock-related award, stock option, stock
purchase, collective bargaining or workers' compensation agreements, plans,
policies and arrangements which the Company maintains, administers, is a party
to, contributed to or has any Liability for (contingent or otherwise) in respect
of current or former employees, officers and directors.
"Business" shall have the meaning set forth in the recitals
hereto.
"Business Day" shall mean any day, other than Saturday or
Sunday, on which commercial banks are not required or authorized to close in the
City of New York or San Jose, California.
"California Law" shall have the meaning set forth in Section
2.1 hereto.
"Certificates" shall have the meaning set forth in Section 3.2
hereto.
"CFO" shall have the meaning set forth in Section 2.5(b)
hereto.
"Closing" shall have the meaning set forth in Section 2.3
hereto.
"Closing Date" shall have the meaning set forth in Section 2.3
hereto.
"Closing Documents" shall have the meaning set forth in
Section 5.28 hereto.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Commercial Software" shall mean packaged commercially
available software programs generally available to the public through retail
dealers in computer software that have been licensed to the Company pursuant to
end-user licenses and which are used in the Company's business but are in no way
a component of or incorporated in or specifically required to develop or support
any of the Company's products and related trademarks, technology and know-how.
"Company" shall mean Tamtron Corporation, a California
corporation, together with all predecessor entities and their successors.
"Company Capital Stock" shall have the meaning set forth in
Section 5.2(a) hereto.
"Company Common Stock" shall have the meaning set forth in
Section 5.2(a) hereto.
"Company Consents" shall have the meaning set forth in Section
7.8 hereto.
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"Company Lines of Credit" shall have the meaning set forth in
Section 7.12 hereto.
"Company Option Plan" shall have the meaning set forth in
Section 3.2(b) hereto.
"Company's Charter" shall mean the Company's Amended and
Restated Articles of Incorporation, as filed with the Secretary of State of the
State of California on July 27, 2000.
"Contracts" shall mean all written or oral contracts,
agreements, leases, commitments, letters of intent, memoranda of understanding,
memoranda of agreement and other legally binding arrangements of the Company.
"Depositary Agent" shall have the meaning set forth in Section
10.2 hereto.
"Effective Time" shall have the meaning set forth in Section
2.2 hereto.
"Environmental Laws" shall mean any applicable Law enforceable
and binding as of the date hereof relating to the protection of or the
regulation of the human health and safety, environment or natural resources.
"Environmental Permits" shall have the meaning set forth in
Section 5.10 hereto.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"ERISA Plans" shall have the meaning set forth in Section
7.15(a) hereto.
"Escrow Fund" shall have the meaning set forth in the recitals
hereto.
"Escrowed Merger Consideration" shall have the meaning set
forth in Section 10.2 hereto.
"Escrow Shareholders" shall have the meaning set forth in
Section 8.2(j) hereto.
"Estimated Closing Cash" shall mean the estimated amount of
cash that would be required to be recorded on the books of the Company on the
Closing Date or reflected on financial statements as of the Closing Date
prepared on an accrual basis and in accordance with GAAP consistently applied
using the same accounting methods, practices and procedures as were used in
preparing the Financial Statements referred to in Section 5.6 hereto.
"Estimated Closing Accounts Receivable" shall mean the
estimated Accounts Receivable that would be required to be recorded on the books
of the Company on the Closing Date or reflected on financial statements as of
the Closing Date prepared on an accrual basis and in accordance with GAAP
consistently applied using the same accounting methods, practices and procedures
as were used in preparing the Financial Statements referred to in Section 5.6
hereto.
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"Estimated Purchase Price Differential" shall mean the amount,
if any, reflected on the Pre-Closing Statement by which the sum of (i) the
Estimated Closing Cash and (ii) the Estimated Closing Accounts Receivable is
less than $1,200,000.
"Excess Expenses" shall have the meaning set forth in Section
11.2 hereto.
"Expenses" shall have the meaning set forth in Section 7.14
hereto.
"Final Closing Cash" shall mean the amount of cash that would
have been required to be recorded on the books of the Company or reflected on
financial statements prepared on an accrual basis and in accordance with GAAP
consistently applied using the same accounting methods, practices and procedures
as were used in preparing the Pre-Closing Statement.
"Final Closing Accounts Receivable" shall mean the Accounts
Receivable that would have been required to be recorded on the books of the
Company or reflected on financial statements prepared on an accrual basis and in
accordance with GAAP consistently applied using the same accounting methods,
practices and procedures as were used in preparing the Pre-Closing Statement.
"Final Purchase Price Differential" shall mean the amount, if
any, by which the sum of (i) the Final Closing Cash and (ii) the Final Closing
Accounts Receivable is less than $1,200,000.
"Financial Statements" shall have the meaning set forth in
Section 5.6(a) hereto.
"GAAP" shall mean generally accepted accounting principles in
the United States of America, as in effect on the date of this Agreement.
"Governmental Entity" shall mean any foreign, federal, state
or local government or any court, arbitral tribunal, administrative or
regulatory agency or commission or other governmental authority or agency,
domestic, foreign or international.
"Indemnification and Escrow Agreement" shall have the meaning
set forth in Section 8.2(k) hereto.
"Intellectual Property" shall mean (i) all inventions (whether
patentable or not patentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, divisions, continuations,
continuations-in-part, revisions, renewals, extensions, and reexaminations
thereof in the United States and all equivalents of the foregoing in any other
jurisdiction, (ii) all registered and unregistered trademarks, service marks,
trade dress, logos, trade names, and corporate names, together with all
translations, adaptations, derivations, and combinations thereof and including
all goodwill associated therewith, and all applications, registrations and
renewals in connection therewith, (iii) all works of authorship, including
limitation, all copyrightable works, all copyrights, and all applications,
registrations and renewals in connection therewith in the United States and all
equivalents of the foregoing in any other jurisdiction, and all moral rights,
(iv) all databases, data compilations and data collections, (v) all trade
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secrets and confidential information (including limitation, ideas, research and
development, know-how, processes, methods, techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business, technical and marketing plans and proposals), (vi)
all domain names, web addresses and websites, (vii) all computer software,
source code and object code, whether embodied in software, firmware or otherwise
(including related data and documentation), (viii) all other intellectual
property and proprietary rights, and (ix) all copies and tangible embodiments of
all of the foregoing (i) through (viii) in any form or medium.
"Interim Financial Statements" shall have the meaning set
forth in Section 5.6(a) hereto.
"Laws" shall mean all laws, statutes, constitutions, treaties,
rules, regulations, ordinances, codes, judgments, rulings, orders, writs,
decrees, stipulations, injunctions, restraining orders and binding
determinations of all Governmental Entities.
"Liability" shall mean any and all debts, liabilities,
obligations and commitments, whether known or unknown, asserted or unasserted,
fixed, absolute or contingent, matured or unmatured, accrued or unaccrued,
liquidated or unliquidated, due or to become due, whenever or however arising
(including whether arising out of any Contract or similar arrangement or tort
based on negligence, strict liability or otherwise) and whether or not the same
would be required by GAAP to be reflected as a liability in financial statements
or disclosed in the notes thereto.
"Liens" shall mean, with respect to any property or assets,
any mortgage, deed of trust, pledge, hypothecation, assignment, security
interest, lien, charge, easement, encumbrance, preference, priority or other
security agreement or preferential arrangement of any kind or nature with
respect to such property or assets (including any conditional sale or other
title retention agreement having substantially the same economic effect as any
of the foregoing).
"Losses" shall mean all losses, direct damages, Liabilities,
fines, penalties, judgments, claims, Actions, causes of Actions, settlements,
interest, deficiencies, assessments, costs and expenses (including reasonable
attorneys' fees and expenses and reasonable accounting and other costs and
expenses of professionals) incurred in connection with investigating, defending,
settling or satisfying any and all demands, claims, Actions, causes of Action,
and in seeking indemnification therefor, provided, however, that Losses shall
not include incidental or consequential damages unless imposed as part of a
final non-appealable judgment of an arbitrator or a court of competent
jurisdiction.
"Material Adverse Effect" shall mean a material adverse effect
on the business, condition (financial or otherwise), revenues, earnings,
properties, assets or results of operations of the Company.
"Material Contracts" shall have the meaning set forth in
Section 5.14 hereto.
"Merger Consideration" shall have the meaning set forth in
Section 2.4 hereto.
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"Option Cancellation Election Form" shall have the meaning set
forth in Section 3.2(b) hereto.
"Optionholder" shall have the meaning set forth in Section
3.2(b) hereto.
"Option Notice" shall have the meaning set forth in Section
3.2(b) hereto.
"Options" shall have the meaning set forth in Section 3.2(b)
hereto.
"Ordinary Course of Business" shall mean the ordinary and
usual course of normal, day-to-day operations of the Business, consistent with
past custom and practice.
"Permits" shall mean all licenses, permits, authorizations,
consents, certificates, registrations, variances, exemptions, waivers,
franchises and other approvals from any Person, including environmental
licenses.
"Permitted Lien" means a statutory Lien not yet delinquent; a
purchase money Lien arising in the Ordinary Course of Business; a Lien reflected
in the financial statements of the applicable party; a Lien which does not
materially detract from the value or impair the use of the asset or property in
question or a Lien for Taxes not yet due and payable or which are being
contested in good faith and have been fully reserved against.
"Person" shall mean any individual, partnership, association,
joint venture, trust, corporation, limited liability entity, unincorporated
organization or other entity (including a Governmental Entity).
"Personal Guarantees" shall have the meaning set forth in
Section 7.12 hereto.
"Post-Closing Statement" shall have the meaning set forth in
Section 2.5(b) hereto.
"Pre-Closing Statement" shall have the meaning set forth in
Section 2.5(a) hereto.
"Real Property Leases" shall have the meaning set forth in
Section 5.8 hereto.
"Representatives" shall have the meaning set forth in Section
10.1 hereto.
"Returns" shall mean all information, notices, accounts,
computations, returns, declarations, reports, estimates, information returns and
statements of any nature regarding Taxes.
"Series A Preferred" shall have the meaning set forth in
Section 5.2(a) hereto.
"Series A Preferred Merger Consideration" shall have the
meaning set forth in Section 3.1(b) hereto.
"Shareholder Agent" shall have the meaning set forth in the
Indemnification and Escrow Agreement.
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"Shareholder Indebtedness" shall have the meaning set forth in
Section 7.13 hereto.
"Subsidiary" of a specified Person shall mean any Person of
which securities or other ownership interests having ordinary voting power to
elect a majority of the Board of Directors or other Persons performing similar
functions are directly or indirectly owned by such Person.
"Surviving Corporation " shall have the meaning set forth in
Section 2.1 hereto.
"Surviving Corporation Bylaws" shall have the meaning set
forth in Section 2.7 hereto.
"Surviving Corporation Charter" shall have the meaning set
forth in Section 2.7 hereto.
"Taxes" shall mean all taxes, charges, duties, fees, levies or
other assessments, including income, excise, property, sales, use, gross
receipts, recording, insurance, value added, profits, license, withholding,
payroll, employment, net worth, capital gains, transfer, stamp, social security,
environmental, occupation and franchise taxes, imposed by any Governmental
Entity, and including any interest, penalties and additions attributable thereto
and any Liability in respect of any of the foregoing amounts as a transferee or
as an indemnitor, guarantor or surety or in a similar capacity under any
Contract or similar arrangement.
"Third Party Claim" means any claim or Action made or brought
by any Person who or which is not a party to this Agreement or an Affiliate of a
party to this Agreement.
1.2 Unless the context otherwise requires, (i) all references to
Sections, Articles, Exhibits or Schedules are to Sections, Articles, Exhibits or
Schedules of or to this Agreement, (ii) each term defined in this Agreement has
the meaning assigned to it, (iii) "or" is disjunctive but not necessarily
exclusive, (iv) words in the singular include the plural and vice versa, and (v)
the words "include," "includes," or "including" shall be deemed to be followed
by the words "without limitation." All references to "$" or dollar amounts will
be to lawful currency of the United States of America. The phrases "know" or
"knowledge" means, with respect to the Company, the actual knowledge, after
reasonable inquiry, of the officers and directors of the Company.
ARTICLE II
THE MERGER
2.1 The Merger. At the Effective Time and upon the terms and subject to
the conditions of this Agreement and in accordance with the applicable
provisions of the General Corporations Law of the State of California
("California Law"), Merger Sub shall be merged with and into the Company (the
"Merger"). Following the Merger, the Company shall continue as the surviving
corporation (the "Surviving Corporation") and the separate corporate existence
of Merger Sub shall cease.
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2.2 Effective Time. Subject to the provisions of this Agreement,
Parent, Merger Sub and the Company shall cause the Merger to be consummated by
filing an agreement of merger, in a form to be mutually agreed upon by the
parties hereto (the "Agreement of Merger"), or other appropriate documents with
the Secretary of State of the State of California in such form as required by,
and executed in accordance with, the relevant provisions of California Law, as
soon as practicable on the Closing Date. The Merger shall become effective upon
such filing or at such time thereafter as is provided in the Agreement of Merger
(the "Effective Time").
2.3 Closing of the Merger. Upon the terms and subject to the conditions
of this Agreement, the closing of the transactions contemplated hereby (the
"Closing") shall be at 10:00 A.M. (Eastern Standard Time), at Weil, Gotshal &
Xxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, on the second Business
Day following the date on which all of the conditions set forth in Article VIII
hereto (other than those conditions designating instruments, certificates or
other documents to be delivered at the Closing) shall have been satisfied or
waived (the "Closing Date"), or such other location, date and time as Parent and
the Company shall mutually agree upon in writing. The parties shall use their
respective commercially reasonable best efforts to satisfy the conditions set
forth in Article VIII hereof.
2.4 Consideration. The aggregate merger consideration (the "Merger
Consideration") payable by Parent to the shareholders and Optionholders of the
Company in exchange for the Company Capital Stock and Options shall consist of
the Base Price less the aggregate exercise price for all Options outstanding on
the date hereof which are cancelled in accordance with the provisions of Section
3.2(b) hereto.
2.5 Purchase Price Adjustment and Post-Closing Adjustment.
(a) The Company shall, in good faith, prepare and deliver to
Parent on the date that is five (5) days prior to the estimated Closing Date, a
statement of the Company (the "Pre-Closing Statement") setting forth the
Estimated Closing Cash and the Estimated Closing Accounts Receivable. The
Pre-Closing Statement shall fairly present the Estimated Closing Cash and the
Estimated Closing Accounts Receivable of the Company as of the Closing Date.
(b) As soon as practicable following the Closing Date, but in
any event no later than thirty (30) days following the Closing Date, the
Surviving Corporation shall, in good faith, prepare and deliver to Parent a
statement of the Company (the "Post-Closing Statement") setting forth the Final
Closing Cash and the Final Closing Accounts Receivable. The Post-Closing
Statement shall fairly present the Final Closing Cash and Final Closing Accounts
Receivable of the Company as of the Closing Date. Notwithstanding Section 0
hereto, in the event of a dispute with regard to the amount of the Final Closing
Cash or Final Closing Accounts Receivable, all disputed items shall be submitted
to the Chief Financial Officer of Parent (the "CFO") and the Shareholder Agent,
or to such other individuals as may be agreed to in writing between Parent and
the Surviving Corporation. The CFO and the Shareholder Agent shall attempt in
good faith to resolve any issues in dispute within thirty (30) days after
receiving notice thereof . If the CFO and the Shareholder Agent are unable to
resolve such issues within such thirty (30) day period, all unresolved matters
shall be submitted to arbitration in accordance with Section 0 hereto.
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(c) In the event that the Final Purchase Price Differential
exceeds the Estimated Purchase Price Differential, the amount by which the Final
Purchase Price Differential exceeds the Estimated Purchase Price Differential
shall be released from the Escrow Fund in accordance with the terms hereof and
the Indemnification and Escrow Agreement and delivered to Parent within ten (10)
days of the delivery of the Post-Closing Statement or, if a dispute exists as to
the amount reflected on the Post-Closing Statement, within ten (10) days of
resolution of all such disputes.
(d) In the event that the Final Purchase Price Differential is
less than the Estimated Purchase Price Differential, the Merger Consideration
payable by Parent shall be adjusted upward by an amount equal to the difference
between the Final Purchase Price Differential and the Estimated Purchase Price
Differential; provided, however, in no event shall the Merger Consideration be
adjusted upward by an amount in excess of the Estimated Purchase Price
Differential. Parent shall pay, or cause to be paid, to the shareholders and
Optionholders of the Company the increase in the Merger Consideration resulting
from such adjustment within ten (10) days of the delivery of the Post-Closing
Statement, or, if a dispute exists as to the amount reflected on the
Post-Closing Statement, within ten (10) days of resolution of all such disputes.
2.6 Effects of the Merger. The Merger shall have the effects set forth
in this Agreement, the Agreement of Merger and the applicable provisions of
California Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all of the properties, rights, privileges,
powers and licenses of the Company and Merger Sub shall vest in the Surviving
Corporation, and all Liabilities and duties of the Company and Merger Sub shall
become the Liabilities and duties of the Surviving Corporation.
2.7 Articles of Incorporation and Bylaws. Effective immediately
following the Merger, the articles of incorporation of the Company shall be
amended and restated in the form attached hereto as Exhibit A and as so amended
shall be the articles of incorporation of the Surviving Corporation (the
"Surviving Corporation Charter"). Effective immediately following the Merger,
the bylaws of the Company shall be amended and restated in the form attached
hereto as Exhibit B, and as so amended, shall be the bylaws of the Surviving
Corporation (the "Surviving Corporation Bylaws").
2.8 Directors and Officers. The directors of Merger Sub at the
Effective Time shall be the directors of the Surviving Corporation and shall
hold office in accordance with the articles of incorporation and bylaws of the
Surviving Corporation until their successors are duly elected or appointed and
qualified or until their earlier resignation or removal. The officers of Merger
Sub at the Effective Time shall be the officers of the Surviving Corporation and
shall hold office in accordance with the articles of incorporation and bylaws of
the Surviving Corporation until their successors are duly elected or appointed
and qualified or until their earlier resignation or removal.
10
ARTICLE III
EFFECT OF MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
3.1 Conversion of Shares.
(a) At the Effective Time, each outstanding share of common
stock, no par value, of Merger Sub shall, by virtue of the Merger and without
any action on the part of Parent, Merger Sub or the Company, be converted into
one fully paid and non-assessable share of common stock of the Surviving
Corporation.
(b) At the Effective Time, subject to the provisions of the
Indemnification and Escrow Agreement, each share of Series A Preferred issued
and outstanding immediately prior to the Effective Time (other than shares of
Series A Preferred held by the Company, Parent or Merger Sub) shall, in
accordance with terms of the Company's Charter and by virtue of the Merger and
without any action on the part of Parent, Merger Sub or the Company, be
converted into and exchangeable for the right to receive an amount of cash equal
to $0.4167 per share (the "Series A Preferred Merger Consideration"); provided,
that the aggregate amount of cash payable to a holder of Series A Preferred
pursuant to this Section 3.1(b) shall be rounded to the nearest cent.
(c) At the Effective Time, subject to the provisions of the
Indemnification and Escrow Agreement, each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (other than shares of
Company Common Stock held by the Company, Parent or Merger Sub) shall, by virtue
of the Merger and without any action on the part of Parent, Merger Sub or the
Company, be converted into and exchangeable for the right to receive an amount
of cash (the "Per Share Price") equal to the quotient determined by dividing (i)
the difference between (A) the Base Price and (B) the aggregate Series A
Preferred Merger Consideration by (ii) the sum of (A) the aggregate number of
shares of Company Common Stock issued and outstanding at the Effective Time and
(B) the number of shares of Company Common Stock issuable upon the exercise of
the Options as to which an Option Cancellation Election Form shall have been
delivered in accordance with Section 3.2(b) hereto; provided, that the aggregate
amount of cash payable to a holder of Company Common Stock pursuant to this
Section 3.1(c) shall be rounded to the nearest cent.
(d) At the Effective Time, subject to the provisions of the
Indemnification and Escrow Agreement, each Option as to which an Option
Cancellation Election Form shall have been delivered to Merger Sub in accordance
with Section 3.2(b) hereto shall, by virtue of the Merger and without any action
on the part of Parent, Merger Sub or the Company, be converted into and
exchangeable for the right to receive an amount of cash equal to (i) the product
of (A) the Per Share Price multiplied by (B) the number of shares of Company
Common Stock issuable upon the exercise of such Option less (ii) the aggregate
exercise price for such Option; provided, that the aggregate amount of cash
payable to a Optionholder pursuant to this Section 3.1(d) shall be rounded to
the nearest cent.
11
(e) At the Effective Time, each share of Company Capital Stock
owned by Parent or Merger Sub immediately prior to the Effective Time shall be
cancelled and extinguished without any conversion thereof.
3.2 Exchange Procedures.
(a) Company Capital Stock. Upon surrender of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Company Capital Stock (the "Certificates") to the
Surviving Corporation, wire transfer instructions (if applicable) and such other
documents as may reasonably be required by the Surviving Corporation, the holder
of any such Certificate shall be entitled to receive in exchange therefor its
portion of the Merger Consideration (less such holder's portion, if any, of the
Escrowed Merger Consideration to be placed in the Escrow Fund, which shall be
deposited with the Depositary Agent (as hereinafter defined) pursuant to the
provisions of Article X). At Closing, each holder of a Certificate shall deliver
such Certificate to Merger Sub and Merger Sub shall deliver or cause to be
delivered to such holder a wire transfer of immediately available funds
representing the Merger Consideration such holder is entitled to receive (less
such holder's portion, if any, of the Escrowed Merger Consideration to be placed
in the Escrow Fund, which shall be deposited with the Depositary Agent pursuant
to the provisions of Article X).
(b) Company Stock Options. In accordance with the terms and
conditions of the Company's 1998 Stock Option Plan (the "Company Option Plan"),
pursuant to Article XIII of the Company Option Plan, the Company shall deliver,
within three (3) days after the execution of this Agreement, notice of the
Merger ("Option Notice") to each holder (each an "Optionholder") of outstanding
stock options ("Options") issued pursuant to the Company Option Plan. Upon
delivery by an Optionholder of the Election and Acknowledgement Form, attached
hereto as Exhibit C (the "Option Cancellation Election Form"), indicating the
Optionholder's election to receive cash for all or a portion of such
Optionholder's Options, the Optionholder shall be entitled to receive in
exchange therefor its portion of the Merger Consideration. At Closing, each
Optionholder shall deliver such Option Cancellation Election Form to Merger Sub
and Merger Sub shall deliver or cause to be delivered to such Optionholder a
wire transfer of immediately available funds representing the Merger
Consideration such Optionholder is entitled to receive in accordance with the
terms of Section 3.1(c) hereof. Notwithstanding anything stated to the contrary
herein, this Agreement shall not restrict the right of any Optionholder to
exercise any Options outstanding as of the date hereof pursuant to the terms of
the Company Option Plan and the respective Optionholder's Stock Option Agreement
(including the payment to the Company of the exercise price) at anytime prior to
the Effective Time and to condition any such exercise on the consummation of the
Merger.
3.3 No Further Ownership Rights in Company Capital Stock or Options.
All of the Merger Consideration paid upon conversion of the shares of Company
Capital Stock and Options in accordance with the terms of Article 2 and this
Article 3 shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of Company Common Stock and Options.
12
3.4 No Liability. None of Parent, Merger Sub, the Company or the
Surviving Corporation shall be liable to any Person in respect of any Merger
Consideration delivered, in good faith, to a public official pursuant to any
applicable abandoned property, escheat or similar Law.
3.5 Lost, Stolen or Destroyed Certificates. If any Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the Person claiming such Certificate to be lost, stolen or destroyed
and, if reasonably required by the Surviving Corporation, the posting by such
Person of a bond in such reasonable amount as the Surviving Corporation may
direct as indemnity by such Person against any claim that may be made against
the Surviving Corporation with respect to such Certificate, the Surviving
Corporation shall deliver in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration with respect to the shares of Company
Capital Stock formerly represented thereby, pursuant to this Agreement.
3.6 Withholding Rights. Each of Merger Sub, the Surviving Corporation
and Parent shall be entitled to deduct and withhold from the Merger
Consideration otherwise payable pursuant to this Agreement to any holder of
shares of Company Capital Stock or Options such amounts as it is required to
deduct and withhold with respect to the making of such payment under the Code,
the rules and regulations thereunder, or any provision of a Tax law. To the
extent that amounts are so withheld, such withheld amounts shall be treated for
all purposes as having been paid to the holder of Company Capital Stock or
Options in respect to which such deduction and withholding was made by Merger
Sub, the Surviving Corporation or Parent, as the case may be.
3.7 Stock Transfer Books. The stock transfer books of the Company shall
be closed immediately upon the Effective Time and there shall be no further
registration of transfers of shares of Company Capital Stock thereafter on the
records of the Company.
3.8 Options. All Options, whether exercised or unexercised, shall
terminate upon the later of the expiration of fifteen (15) days following the
delivery of the Option Notice or the consummation of the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub each represents and warrants to, and
covenants and agrees with, Company, as of the date hereof and as of the Closing
Date, as though made on and as of the Closing Date that:
4.1 Due Organization. Each of Parent and Merger Sub is a corporation
duly organized, validly existing and in good standing under the Laws of the
jurisdiction of its incorporation and has full corporate power and authority to
own, lease and operate its properties and assets and to conduct the business in
which it is now engaged.
13
4.2 Authorization and Effect of Agreement. Each of Parent and Merger
Sub have all the requisite corporate power and authority to execute and deliver
this Agreement and the Closing Documents and to consummate the transactions
contemplated hereby and thereby and to perform fully its obligations hereunder
and thereunder. No other corporate proceedings on the part of Parent or Merger
Sub are necessary to authorize this Agreement or the Closing Documents or to
consummate the transactions contemplated hereby or thereby. This Agreement and
the Closing Documents and the performance by each of Parent and Merger Sub of
the transactions contemplated hereby and thereby to be performed by it have been
duly and validly authorized, executed and delivered by each of Parent and Merger
Sub and (assuming the due authorization, execution and delivery by the Company
and all other parties hereto and thereto) constitutes the legal, valid and
binding obligations of each of Parent and Merger Sub, enforceable against each
of Parent and Merger Sub in accordance with their respective terms, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar Laws affecting the enforcement of creditors' rights in general and
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at Law).
4.3 No Violations; Consents and Approvals. The execution and delivery
of this Agreement and the Closing Documents by each of Parent and Merger Sub
does not, and the performance by each of Parent and Merger Sub of the
transactions contemplated hereby to be performed by either will not, with or
without the giving of notice, the lapse of time, or both, (a) conflict with, or
result in the breach of, any provision of the certificate of incorporation or
bylaws of Parent or the articles of incorporation or bylaws of Merger Sub, (b)
except for matters that would not have a material adverse effect on the ability
of Parent or Merger Sub to perform their respective obligations under this
Agreement or the Closing Documents, conflict with, violate, result in the breach
or termination of, or constitute a default or give rise to any "takeback" right
or right of termination or acceleration or right to increase the obligations or
otherwise modify the terms thereof under any Contract to which Parent or Merger
Sub is a party or by which either is bound, or (c) constitute a violation of any
Law applicable to Parent or Merger Sub or any order, writ or injunction of any
Governmental Entity. Except for any filings, permits, authorizations, consents
and approvals required under the Securities Exchange Act of 1934, as amended,
and for the filing of the Agreement of Merger with the Secretary of State of the
State of California, no consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity or any other
Person are required to be obtained or made by or with respect to Parent or
Merger Sub in connection with the execution and delivery of this Agreement or
the Closing Documents by each of Parent and Merger Sub or the performance by
either party of the transactions contemplated hereby or thereby to be performed
by it.
4.4 Litigation. Except as set forth in the public filings of Parent
filed with the SEC prior to the date hereof and except for matters that would
not have a material adverse effect on the ability of Parent or Merger Sub to
perform their respective obligations under this Agreement or the Closing
Documents, (a) there are no claims or Actions pending, or, to the knowledge of
Parent or Merger Sub, threatened, against or affecting Parent or Merger Sub
before any Governmental Entity, and neither Parent or Merger Sub is aware of any
basis for such a valid claim or Action; and (b) no inquiry, claim or Action has
been asserted, instituted or, to the best knowledge of Parent and Merger Sub,
14
threatened to restrain or prohibit the carrying out of the transactions
contemplated by this Agreement or to challenge the validity of such transactions
or any part thereof or seeking damages on account thereof.
4.5 No Prior Activities. Merger Sub was incorporated for the sole
purpose of consummating the transactions contemplated by this Agreement and the
Closing Documents. Except for obligations incurred in connection with its
incorporation or the negotiation and consummation of this Agreement and the
Closing Documents and the transactions contemplated hereby and thereby, Merger
Sub has neither incurred any Liability nor engaged in any business or activity
of any type or kind whatsoever or entered into any Contract with any Person.
4.6 Financing. Parent and Merger Sub jointly possess sufficient cash
funds and/or have adequate resources available to them to enable them to acquire
all of the issued and outstanding Company Common Stock and Options pursuant to
the Merger and to pay all fees and expenses payable by Parent and Merger Sub
related to the transactions contemplated by this Agreement. No "event of
default" or other similar event or circumstance under any of such resources has
occurred or is continuing that would materially and adversely affect the ability
of Parent or Merger Sub to draw upon such resources in order to finance the cash
payments required in connection with the Merger and this Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedules delivered by
the Company to Parent prior to the execution of this Agreement annexed hereto as
Annex A, each of which exceptions shall specifically identify a section,
subsection or other clause of a single section or subsection hereto as
applicable to each such exception, the Company hereby represents and warrants
to, and covenants and agrees with, Parent, as of the date hereof and as of the
Closing Date, as though made on and as of the Closing Date, that:
5.1 Due Organization. The Company is duly organized, validly
existing and in good standing under the Laws of the State of California and has
full corporate power and authority to own, lease and operate its properties and
assets and to conduct the businesses in which it is now engaged and as currently
conducted, including the Business. The Company is duly qualified or authorized
to do business as a foreign corporation and is in good standing under the Laws
of the jurisdictions set forth on Schedule 5.1 attached hereto, which
jurisdictions represent every jurisdiction where the conduct of the business
conducted by the Company or the ownership of assets by it requires such
qualification or authorization, other than where the failure to be so qualified
or authorized would not result in a Material Adverse Effect. The Company has
heretofore made available to Parent accurate and complete copies of the
Company's Charter and bylaws (or other similar organizational and governing
documents), as currently in effect.
15
5.2 Capitalization; Ownership of Shares; No Liens on Shares.
(a) The authorized capital stock of the Company consists of
(x) fifteen million (15,000,000) shares of common stock, no par value (the
"Company Common Stock"), of which seven million, nine hundred twenty-three
thousand (7,923,000) shares are issued and outstanding as of the date hereof and
(y) five million (5,000,000) shares of Preferred Stock, no par value, three
million (3,000,000) shares of which are designated Series A Preferred Stock
("Series A Preferred" and collectively with the Company Common Stock, the
"Company Capital Stock"), of which one million, four hundred eighty-two thousand
(1,482,000) shares are issued and outstanding as of the date hereof. All of such
issued and outstanding shares of Company Capital Stock are duly authorized,
validly issued, fully paid and nonassessable, and are free and clear of all
Liens. None of the shares of Company Capital Stock were issued or will be
transferred under this Agreement in violation of any preemptive or preferential
rights of any Person.
(b) A true and complete list of record holders of the issued
and outstanding Company Capital Stock as of the date hereof is set forth on
Schedule 5.2(b) hereto.
(c) As of the date hereof, seven hundred forty one thousand,
seven hundred fifty (741,750) shares of Company Common Stock are reserved for
issuance and issuable upon or otherwise deliverable in connection with the
exercise of Options issued pursuant to the Company Option Plan. Schedule 5.2(c)
hereto sets forth true and complete information with respect to each holder of
Options regarding the current exercise price, the date of grant, the term, the
vesting schedule, whether the holder is an employee of the Company on the date
of this Agreement, and the number of Options granted. No restrictions or
conditions to the exercise or the sale of the Options (or with respect to shares
of Company Common Stock isssuable upon exercise thereof) exist other than as set
forth in the Company's standard forms of stock option agreements. The Company
has heretofore made available to Parent true, correct and complete copies of all
stock options plans and agreements. All outstanding Options (and shares issuable
upon exercise thereof) have been issued pursuant to valid exemptions from the
Securities Act and all applicable state securities Laws.
(d) As of the date hereof, except as set forth on Schedules
5.2(c) and 5.2(d)(i) hereto, there are no outstanding options, warrants, calls,
subscriptions, conversion or other similar rights or Contracts to acquire from
the Company any shares of capital stock or any other securities convertible
into, exchangeable for or evidencing the right to subscribe for any shares of
capital stock of the Company. Except as set forth on Schedule 5.2(d)(ii) hereof,
there are no shareholder agreements, voting trusts or other Contracts to which
the Company is a party or to which it is bound, or to the knowledge of the
Company, to which any shareholder of the Company is a party or which it is
bound, relating to the voting of any shares of capital stock of the Company. The
Company has not issued any stock appreciation rights or other rights related to
equity participation, equity equivalents, interests in the ownership or earnings
of the Company or other similar rights or employee incentive plans (including
phantom stock or stock appreciation rights) and the Company has no debt
instruments outstanding that have any voting, veto or other similar rights.
16
5.3 Subsidiaries. The Company does not directly or indirectly have (or
possess any options or other rights to acquire) any Subsidiaries or any direct
or indirect equity ownership interests in any Person.
5.4 Authorization and Effect of Agreement. The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and the Closing Documents and to consummate the transactions contemplated hereby
and thereby and to perform fully its obligations hereunder and thereunder. No
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or the Closing Documents or to consummate the
transactions contemplated hereby or thereby. This Agreement and the Closing
Documents and the performance by the Company of the transactions contemplated
hereby and thereby to be performed by it have been duly and validly authorized,
executed and delivered by the Company and (assuming the due authorization,
execution and delivery by Parent and Merger Sub of this Agreement and the
Closing Documents) constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar Laws affecting the enforcement of creditors' rights
in general and subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law).
5.5 No Violations; Consents and Approvals. Except as set forth on
Schedule 5.5(a), the execution and delivery of this Agreement and the Closing
Documents and the consummation of the transactions contemplated hereby and
thereby does not and will not, with or without the giving of notice, the lapse
of time, or both, (a) conflict with, or result in the breach of, any provision
of the Company's Charter or bylaws; (b) conflict with, violate, result in the
breach or termination of, or constitute a default or give rise to any "takeback"
right or right of termination or acceleration or right to increase the
obligations or otherwise modify the terms thereof under any Contract to which
the Company is a party or by which the Company or its assets are bound; (c)
constitute a violation of any Law applicable to the Company or any order, writ
or injunction of any Governmental Entity; or (d) result in the creation of any
Lien upon any of its assets, except in the case of (b), (c) and (d) above where
such conflict, violation, breach, termination, acceleration or creation of Lien
would not, or would not reasonably be likely to, result in a Material Adverse
Effect. Except as set forth on Schedule 5.5(b) hereto and the filing of the
Agreement of Merger with the Secretary of State of California and appropriate
documents with the relevant authorities of other states in which the Company is
required to be qualified to do business, no consent, approval, order or
authorization of, or registration, declaration or filing with any Governmental
Entity or any other Person are required to be obtained or made by or with
respect to the Company in connection with the execution and delivery of this
Agreement or the Closing Documents by the Company or the performance by either
party of the transactions contemplated hereby or thereby to be performed by it.
5.6 Financial Statements; Absence of Undisclosed Liabilities.
(a) The following financial statements of the Company have
been delivered to Parent and Merger Sub by the Company:
17
(i) the audited balance sheets and related statements of
income, retained earnings, and cash flows of the Company as of and for the year
ended March 31, 2001, together with any previously prepared notes thereto and
the unaudited balance sheets and related statements of income, retained
earnings, and cash flows of the Company as of and for the years ended March 31,
2000, and March 31, 1999, together with any previously prepared notes thereto
(collectively, the "Annual Financial Statements"); and
(ii) the unaudited balance sheet and related statements
of income, retained earnings, and cash flows of the Company, as of and for the
six months ended September 30, 2001 (the "Interim Financial Statements", and
together with the Annual Financial Statements, the "Financial Statements").
(b) The Financial Statements present fairly the financial
position, results of operations and changes in financial position of the Company
as of the indicated dates and for the indicated periods.
(c) Except for matters relating to the transactions
contemplated by this Agreement and the Closing Documents, there are no material
Liabilities or financial obligations of the Company of any kind whatsoever
(whether absolute, accrued, contingent or otherwise, and whether due or to
become due) nor to the best knowledge of the Company is there any fact or
circumstance that forms the basis for any valid claim or Action against or
Liability of the Company, other than Liabilities: (i) provided for or reserved
against in the Financial Statements, (ii) arising after September 30, 2001 in
the Ordinary Course of Business, or (iii) disclosed in Schedule 5.6(c)(i).
Except as set forth on Schedule 5.6(c)(ii), the Financial Statements, including
the notes thereto, (i) were prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby and (ii) present fairly
in all material respects the financial position and results of operations of the
Company as of such dates and for the periods then ended (subject, in the case of
unaudited Financial Statements, to normal year-end audit adjustments and the
absence of notes thereto).
5.7 Conduct of Business; Certain Actions. Except as set forth on
Schedule 5.7 attached hereto, since September 30, 2001, the Company has
conducted its business and operations in the Ordinary Course of Business and has
not:
(a) paid or declared any dividend or distribution or purchased
or retired any indebtedness from any shareholder thereof, (ii) purchased,
retired or redeemed any capital stock of the Company from any shareholder or
(iii) issued or became obligated to issue any shares of capital stock of the
Company or any security convertible into or exchangeable for capital stock of
the Company;
(b) increased the compensation of any of the directors,
officers or key employees of, or consultants to, the Company or, except for wage
and salary increases made in the Ordinary Course of Business, increased the
compensation of any other employees of the Company;
(c) made any capital expenditures in excess of $50,000 in the
aggregate;
18
(d) entered into any Contract on or prior to the date hereof
relating to any acquisition or disposition of any assets or business in excess
of $50,000 in the aggregate;
(e) discharged or satisfied any material Lien or paid any
material Liability, absolute or contingent, other than current Liabilities
incurred and paid in the Ordinary Course of Business;
(f) entered into any settlement or compromise of any
individual claim or Action requiring a payment in excess of $25,000;
(g) made or guaranteed any loans or advances to any Person
whatsoever (excluding travel and other business advances in the Ordinary Course
of Business);
(h) suffered or permitted any Lien to arise or be granted or
created against or upon any of the assets of the Company, real or personal,
tangible or intangible, other than Permitted Liens;
(i) canceled, waived, released or forgiven any debts or
obligations of, or rights, claims or Actions against, third parties;
(j) amended the Company's Charter or bylaws;
(k) made or paid any severance or termination payment to any
employees or consultants in excess of $15,000 in the aggregate;
(l) made any change in methods of financial or Tax accounting
of the Company;
(m) made any investment or commitment therefor in any Person;
(n) made, entered into, amended or terminated any written
employment or consulting Contract, created, made, amended or terminated any
bonus, stock option, pension, retirement, profit sharing or other employee
benefit plan or arrangement, or withdrawn from any "multi-employer plan" (as
defined in Section 414(f) of the Code) so as to create any Liability under
Article IV of ERISA to any Person;
(o) amended a material term or experienced a termination of
any Material Contract;
(p) entered into any other material transactions except in the
Ordinary Course of Business;
(q) agreed to do any acts described in the foregoing clauses
(a)-(r) of this Section 5.7;
(r) suffered any material Loss (whether or not covered by
insurance) to any assets of the Company;
19
(s) experienced any strike, slowdown or demand for recognition
by a labor organization by or with respect to any of the employees of the
Company; or
(t) experienced any event or condition that has had or could
reasonably be expected to result in a Material Adverse Effect.
5.8 Real Property.
(a) The Company does not own any real property.
(b) Schedule 5.8(b) (i) hereto sets forth all leases,
subleases and other Contracts (the "Real Property Leases") under which the
Company is a party or pursuant to which the Company or any of its Subsidiaries
uses or occupies or has the right to use or occupy, now or in the future, any
real property. The Company has heretofore made available to Parent true, correct
and complete copies of all Real Property Leases (and all modifications,
amendments and supplements thereto). Each Real Property Lease constitutes the
valid and legally binding obligation of the Company, enforceable in accordance
with its terms, and, to the knowledge of the Company, is in full force and
effect except that such enforcement may be subject to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other Laws, now
or hereafter in effect, affecting the enforceability of creditors' rights
generally and by general equitable principles which may limit the right to
obtain equitable remedies (regardless of whether such enforceability is
considered in a proceeding in equity or Law). No termination event or condition
or uncured default of a material nature on the part of the Company or, to the
knowledge of the Company, the landlord, exists under any Real Property Lease.
The Company has a good and valid leasehold interest in each parcel of real
property leased by it free and clear of all Liens, except (i) Liens for general
and special assessments not in default and payable without penalty and interest
and (ii) Permitted Liens. No party to any such Real Property Lease has given
written notice to the Company of or made a claim in writing or instituted any
Action against the Company in respect of any breach or default thereunder.
Except as set forth on Schedule 5.8(b)(ii) hereto, the transactions contemplated
by this Agreement and the Closing Documents will not give rise to any right on
the part of any party other than the Company to terminate or accelerate the
terms of or modify the material terms of any Real Property Lease.
5.9 Tangible Personal Property. The Company has good and marketable
title in all tangible personal property necessary for the operation of the
Business as currently conducted, free and clear of all Liens except as set forth
on Schedule 5.9 hereto. All items of tangible personal property currently owned
or used by the Company are in good condition and repair, consistent with the
respective ages thereof, and are fully usable in the Ordinary Course of
Business.
5.10 Environmental Matters. Except as set forth on Schedule 5.10
hereto, (a) the Company possess all material permits, authorizations, and
approvals required by Environmental Laws for its operations (collectively,
"Environmental Permits"); (b) the Company is in compliance in all material
respects with all Environmental Laws and Environmental Permits; (c) there are no
claims or proceedings pending or, to the knowledge of the Company, threatened
against the Company alleging the violation of or non-compliance with
Environmental Laws; and (d) the Company is not aware of any facts, circumstances
20
or conditions that could result in the Company incurring Liabilities under
Environmental Laws.
5.11 Litigation. Except as set forth on Schedule 5.11 hereto, there are
no claims or Actions pending, or, to the knowledge of the Company, threatened,
against or affecting the Company or any of its properties or assets, and the
Company is not aware of any basis for such a valid claim or Action. No claim or
Action has been asserted, instituted or, to the best knowledge of the Company,
threatened to restrain or prohibit the carrying out of the transactions
contemplated by this Agreement or the Closing Documents or to challenge the
validity of such transactions or any part thereof or seeking damages on account
thereof. There is no basis for any claim or Action that would, or could
reasonably be expected to (individually or in the aggregate), have a Material
Adverse Effect.
5.12 Compliance with Laws.
(a) The Company is not in default under any, and has complied
with all, material Laws relating to the Business and to the Company.
(b) The Company, with respect to the Business or otherwise,
does not and has never (i) received reimbursement or other funds for its
services from any Governmental Entity or contractor, (ii) been subject to
regulation by, or needed any approvals from, the Food and Drug Administration or
any other Governmental Entity, with respect to any of its products or services,
(iii) engaged in the practice of medicine, the rendering of diagnoses with
respect to any disease or the formulation of testing protocols, (iv) rendered
advice with respect to appropriate coding or engaged in the coding of or billing
for any health service, (v) provided interactive communication between
laboratories and their physician clients, (vi) offered the ability for a
laboratory's physician clients to use the Company's products to order pathology
services or for the laboratory to use the Company's products to report or xxxx
for pathology services, or (vii) engaged in offering or held itself out as able
to offer or obtain regulatory approvals for laboratories.
(c) Neither the Company nor any of its Affiliates is a party
to any Contract which involves any activities which are prohibited under federal
statutes 42 U.S.C. ss.1320a-7a and 7b, or the regulations promulgated pursuant
to such statutes, or which are prohibited by rules of professional conduct or
which otherwise could constitute fraud under Law.
(d) Without limiting the foregoing, the structure and
operations of the Company, including the Business, are in compliance with
applicable Laws, including Laws relating to fee-splitting, and any Laws relating
to the prohibition on referrals to Persons with which a healthcare provider or
supplier has a financial relationship.
(e) The Company has complied and continues to comply with any
and all applicable Laws relating to the privacy and confidentiality of
personally identifiable information.
5.13 Licenses and Permits. Set forth on Schedule 5.13 hereto is a
complete and accurate list of all Permits issued by Governmental Entities held
by the Company. The Permits set forth in Schedule 5.13 are all the material
Permits required for the conduct of the Business. To the knowledge of the
21
Company, all of such material Permits are in full force and effect and the
Company has not engaged in any activity which would cause or permit revocation
or suspension of any such Permit, and no claim or Action contemplating the
revocation or suspension of any such Permit is pending or, to the Company's
knowledge, threatened. There are no existing defaults or events of default or
events or state of facts which with notice or lapse of time or both would
constitute a material default by the Company under any such Permit. The Company
has no knowledge of any default or claimed, purported or alleged default or
state of facts which with notice or lapse of time or both would constitute a
material default on the part of any party in the performance of any obligation
to be performed or paid by any party under any Permit. The consummation of the
transactions contemplated hereby and by the Closing Documents will in no way
affect the continuation, validity or effectiveness of the Permits or require the
authorization, consent or approval of any Person.
5.14 Material Contracts.
(a) Schedule 5.14(a) hereto sets forth a list of all of the
Company's Material Contracts. The Company has heretofore made available to
Parent true and complete copies of all written Contracts (and all amendments,
modifications and supplements thereto) to which the Company is a party or by
which any of its assets or properties are bound that are in excess of $50,000
and are material to the business, assets or properties of the Company taken as a
whole or entered into outside of the Ordinary Course of Business, including all:
(i) employment, severance, consulting, non-competition or indemnification
Contracts; (ii) licensing Contracts (other than software shrink-wrap agreements,
click-wrap agreements and licensing rights contained in marketing agreements);
(iii) Contracts granting a right of first refusal or first negotiation; (iv)
partnership or joint venture Contracts; (v) Contracts for the acquisition, sale
or lease of material assets or properties of the Company (by merger, purchase or
sale of assets or stock or otherwise) entered into since March 31, 1998; (vi)
loan or credit agreements, mortgages, indentures or other Contracts evidencing
indebtedness for borrowed money by the Company or any such Contract pursuant to
which indebtedness for borrowed money may be incurred; (vii) Contracts that
purport to limit, curtail or restrict the ability of the Company to compete in
any geographic area or line of business; and (viii) Contracts to enter into any
of the foregoing (collectively, the "Material Contracts").
(b) With respect to each Material Contract: (i) the Material
Contract is legal, valid, binding, enforceable and in full force and effect with
respect to the Company, and to the knowledge of the Company, with respect to any
third party (except where such failure would not, or would not reasonably be
expected to, result in a Material Adverse Effect); (ii) the execution of this
Agreement and the Closing Documents and the consummation of the transactions
contemplated hereby and thereby will not (with or without the giving of notice
or the lapse of time or both) cause or result in a breach or default of any such
Material Contract or accelerate any rights of any parts thereto (except where
such breach or default would not, or would not reasonably be expected to, result
in a Material Adverse Effect); and (iii) neither the Company nor, to the
knowledge of the Company, any other party is in breach or default in any
material respect thereunder (except where such breach or default would not, or
would not reasonably be expected to, result in a Material Adverse Effect).
22
(c) No party to any Material Contract has, within the twelve
months preceding the date hereof, provided a written notice or, to the Company's
knowledge, indicated an intention to exercise any right of cancellation,
termination or non-renewal thereof.
5.15 Intellectual Property Rights.
(a) Except as set forth on Schedule 5.15(a), the Company
exclusively owns all right, title, and interest in, free and clear of any Lien,
or otherwise possesses legally enforceable rights to use pursuant to written
license, sublicense or Contract, all Intellectual Property used in the operation
of its business (including the Business) as presently conducted, or reasonably
expected to be conducted, including the design, development, manufacture, use,
import, marketing, sale, distribution, and provision of products, technology and
services.
(b) Schedule 5.15(b) identifies: (i) each issued patent owned
by the Company; (ii) each pending patent application filed by or on behalf of
the Company; (iii) each trademark registration, service xxxx registration, and
copyright registration owned by the Company; (iv) each application for trademark
registration, service xxxx registration, and copyright registration made by the
Company; (v) each domain name registered by the Company; (vi) each computer
program owned by the Company, including limitation, all software developed or
owned by the Company used by or in production of the Company's products; (vii)
each trade name, d/b/a, unregistered trademark, and unregistered service xxxx
used by the Company in connection with its business; and (viii) all equivalents
of (i)-(iv) above in any foreign jurisdiction.
(c) Schedule 5.15(c) identifies all Intellectual Property that
any third party owns and that the Company uses pursuant to license, sublicense,
Contract, or other permission (excluding Commercial Software). The Company has
delivered to Parent correct and complete copies of all such licenses,
sublicenses, Contracts, and permissions (as amended to date). Except as set
forth in Schedule 5.15(c), no third party who has licensed Intellectual Property
to the Company has any ownership rights or license rights to any improvements
made by or for the Company to such Intellectual Property.
(d) To the knowledge of the Company, all registered
Intellectual Property rights are valid and subsisting. All necessary
registration, maintenance, renewal, and other relevant filing fees due through
the date hereof in connection with such registered Intellectual Property rights
have been timely paid and all necessary documents and certificates in connection
with such registered Intellectual Property rights have been timely filed with
the relevant patent, copyright, trademark, or other authorities in the United
States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such registered Intellectual Property rights.
(e) The Company is not in breach of material license,
sublicense or other Material Contract relating to any Intellectual Property of
the Company or any third party nor will be in such breach as a result of the
execution and delivery of this Agreement or the Closing Documents, the
performance of its obligations hereof and thereof, or the operation of its
business (including the Business) as presently conducted, or reasonably expected
to be conducted, including the design, development, manufacture, use, import,
marketing, sale, distribution, and provision of products, technology and
23
services (including products, technology or services currently under
development).
(f) Except as set forth on Schedule 5.15(f) hereto, there are
no Contracts, judgments, orders or decrees to which the Company is a party or by
which it is bound which involve indemnification by the Company with respect to
infringement or misappropriation of Intellectual Property.
(g) Except as set forth on Schedule 5.15(g), there are no
Contracts or licenses between the Company and any third party relating to any
Intellectual Property of the Company or any third party under which there is, or
reasonably expected to be, any material dispute regarding the scope or
performance of such Contract.
(h) The Company has not transferred, or granted any exclusive
license or right to use, or authorized the retention of any exclusive rights to
use or joint ownership of, any Intellectual Property of the Company to any
Person.
(i) Except as set forth on Schedule 5.15(i), the Company has
not licensed any Intellectual Property in source code form to any third party.
(j) The Company has not, under the Laws of any jurisdiction,
interfered with, infringed upon, misappropriated, or otherwise violated any
Intellectual Property rights of any third party (including rights to privacy or
publicity) or engaged in any operation or act that constitutes unfair
competition or trade practices.
(k) There is no claim or Action, pending or, to the knowledge
of the Company, threatened, before any court, tribunal (including the United
States Patent and Trademark Office or equivalent authority anywhere in the
world) relating to any of the Company's Intellectual Property, nor has any claim
or demand been made that challenges the legality, validity, enforceability, use
or ownership of any of the Company's Intellectual Property, or alleges any
interference, infringement, misappropriation, violation, or unfair competition
or trade practices (including any claim that the Company must license or refrain
from using any Intellectual Property rights of any third party), nor is the
Company aware of any basis therefor.
(l) To the knowledge of the Company, no third party has
interfered with, infringed upon, violated, misappropriated, or otherwise come
into conflict with any of the Company's Intellectual Property rights, or of any
right of any third party (to the extent licensed by or through the Company), or
breached any license or Contract involving Intellectual Property. The Company
has not brought any Action or asserted any claim against any Person for
interfering with, infringing upon, misappropriating, or otherwise coming into
conflict with any Intellectual Property or breach of any license or Contract
involving any Intellectual Property.
(m) None of the Company's Intellectual Property, products or
services are subject to any Action or outstanding injunction, decree, order,
judgment, ruling, settlement agreement, or stipulation that restricts in any
manner the use, transfer or licensing by the Company or affects the validity,
use, or enforceability of any Intellectual Property.
24
(n) To the knowledge of the Company, there has been no
unauthorized use or disclosure of the Company's confidential information by any
former or current employee or consultant of the Company.
(o) The Company has taken and shall continue to take all
reasonable security measures to protect the secrecy, confidentiality and value
of all Intellectual Property of the Company or provided by any third party to
the Company. Except as set forth in Schedule 5.15(o), each former or current
employee or consultant of the Company who has or has had knowledge of or access
to information about any of the Company's Intellectual Property has entered into
a written Contract with the Company which provides that the Company's
Intellectual Property is proprietary to the Company and is not to be disclosed,
misused or misappropriated.
(p) The Company has taken, and shall continue to take, all
reasonable efforts to maintain its ownership of all right, title and interest in
and to all Intellectual Property of the Company. Except as set forth in Schedule
5.15(p), all Persons that have created, developed, invented, discovered,
conceived, reduced to practice, derived, programmed or designed any of the
Company's Intellectual Property have entered into a proprietary information
agreement with the Company, in substantially the form provided to Parent,
whereby such employee or other Person assigns to the Company all of such
employee's or other Person's right, title and interest in and to such
Intellectual Property. The Company has heretofore made available to Parent true
and complete copies of all such proprietary information agreements (and all
amendments, modifications and supplements thereto). The Company is not aware
that any of its former or current employees or consultants are in violation of
any such agreement, and the Company shall use its best efforts to prevent any
such violation.
(q) Except as set forth in Schedule 5.15(q), no Person has
listed any prior inventions to be excluded from the scope of any proprietary
information agreement entered into with the Company. The Company does not
believe it is or will be necessary to use any inventions of any of its employees
made prior to their employment by the Company, and, to date, the Company has not
used or incorporated into its products any such inventions.
(r) To the knowledge of the Company, none of the Company's
employees is obligated under any Contract, or subject to any judgment, decree or
order of any Governmental Entity, that would interfere with the use of such
employee's best efforts to promote the interests of the Company or that would
conflict with the Company's business as presently conducted, or reasonably
expected to be conducted. Neither the execution nor delivery of this Agreement,
nor the carrying on of the Company's business by the employees of the Company,
nor the conduct of the Company's business as presently conducted, or reasonably
expected to be conducted, will, to the Company's knowledge, conflict with or
result in a material breach of the terms, conditions or provisions of, or
constitute a material default under, any Contract under which any of such
employees is now obligated.
5.16 Insurance. Schedule 5.16 hereto sets forth a list of all policies
of insurance of any kind or nature applicable to the Company (including the
Business), and all claims made under such policies (including all outstanding
claims and the current status thereof). All such policies are in full force and
25
effect and are adequate to cover the risks associated with the Company as
currently operated are in such amount and is of such type and scope as is
customary for a company in the industry in which the Company is engaged. All
policies of such insurance are binding and effective upon the issuers thereof in
accordance with their respective terms. All premiums due on such insurance
policies on or prior to the Closing Date have been or will be paid on or prior
to the Closing Date. To the knowledge of the Company, there is no existing
default under any of such insurance policies.
5.17 Employee Benefit Plans.
(a) Schedule 5.17(a) sets forth a true and complete list of
each Benefit Plan that is maintained, administered, contributed to or required
to be contributed to (contingent or otherwise) by the Company as of the date of
this Agreement.
(b) The Company does not maintain or contribute to, or on or
after the date which is six years prior to the date of this Agreement (the
"6-Year Look Back Date") has maintained or contributed to, any "multiemployer
plan," as such term is defined in Section 3(37) or Section 4001(a)(3) of ERISA,
or any single-employer defined benefit plans covered by Title IV of ERISA. Each
Employee Benefit Plan which is intended to be qualified under Section 401(a)
and, if applicable, Section 401(k) of the Code, has obtained from the Internal
Revenue Service an opinion letter or favorable determination letter as to its
initial qualified status under the Code, including all amendments to the Code,
and no officer or other employee of the Company is aware of any event or
condition which would cause any such plan to lose such qualified status.
(c) Except as disclosed in Schedule 5.17(c), no Action
relating to any Employee Benefit Plan is pending or, to the knowledge of the
Company, threatened against the Company or any Employee Benefit Plan before any
Governmental Entity. The Company has not failed to make contributions to any
Employee Benefit Plan that are required to be made on or after the 6-Year Look
Back Date under the terms of such Employee Benefit Plans or under applicable
Law. Neither the Company nor any of the Employee Benefit Plans which are subject
to ERISA, or any trusts created thereunder, or any trustee or administrator
thereof, to the knowledge of the Company, has engaged in a "prohibited
transaction", as such term is defined in Section 4975 of the Code or under ERISA
on or after the 6-Year Look Back Date, which could reasonably subject the
Company, any officer of the Company or any of such Employee Benefit Plans or any
trust to any material tax or penalty on prohibited transactions or any other
Liability imposed by such Section 4975 of the Code or under ERISA. The Company
is in good faith material compliance with the continuation coverage requirements
of group health plans as described in Section 4980B of the Code.
(d) Except as set forth on Schedule 5.17(d), no employee or
former employee of the Company will become entitled to any material bonus,
severance or similar benefit (including acceleration of vesting or exercise of
an incentive award) as a result of the transactions contemplated hereby or by
the Closing Documents, and there is no Contract covering any employee or former
employee of the Company that, individually or collectively, could reasonably be
26
expected to give rise to a payment that would not be deductible by Parent or the
Company by reason of Sections 280G or 162 (m) of the Code.
(e) With respect to each Employee Benefit Plan, where
applicable, the Company has made available to Parent true and complete copies of
(i) the most recent IRS Form 5500 filing, (ii) the most recent financial
statement, and (iii) the most recent actuarial report.
(f) The Company has no Liability under any retiree life or
retiree health plans that provide for continuing coverage for current or former
officers, directors, or employees of the Company except (i) as may be required
under Part 6 of Title I of ERISA and at the sole expense of the participant or
the participant's beneficiary (except where the Company has by contract agreed
to pay some or all of the premium cost for such continuing coverage under Part 6
of Title I of ERISA) or (ii) a medical expense reimbursement account plan
pursuant to Section 125 of the Code.
5.18 Warranties. Attached hereto as Schedule 5.18 is a list and brief
description of all warranties and guarantees made by the Company to third
parties with respect to any products sold or services rendered by it. Except as
set forth on Schedule 5.18 attached hereto, no claims for breach of product or
service warranties to customers have been made against the Company since March
31, 1998 other than ordinary course claims made through the Company's customer
support department. To the knowledge of the Company, no state of facts exists,
or event has occurred, which may form the basis of any present claim against the
business of the Company for Liability on account of any express or implied
warranty to any third party.
5.19 Taxes.
(a) Except as set forth on Schedule 5.19(a), (i) all federal,
state, local and foreign Returns required to be filed by, or on behalf of, the
Company and each Affiliated Group of which the Company is or ever has been a
member have been filed on a timely basis with the appropriate Governmental
Entity in all jurisdictions in which such Returns are required to be filed
(after giving effect to any valid extensions of time in which to make such
filings), and all such Returns were true, correct and complete in all material
respects; (ii) all Taxes due and payable in respect of such Returns (whether or
not shown on such returns) have been fully and timely paid or are adequately
provided for in the Financial Statements; and (iii) all Taxes not yet due and
payable by the Company have been fully accrued on its books and adequate
reserves have been established therefor, and all such Taxes that are not yet due
and payable for all periods covered by the Financial Statements have been
adequately provided for in the Financial Statements.
(b) The Company has duly and timely withheld and paid over to
the appropriate Governmental Entities all Taxes and other amounts required to be
so withheld and paid over for all periods under all applicable Laws in
connection with amounts paid or owing to any employee, independent contractor,
subcontractor, lender, stockholder or other third party.
(c) Schedule 5.19(c) indicates all Returns that currently are
the subject of audit (including any jurisdictions for which only a written
notice of audit has been received) or as to which there are other pending
27
proceedings with any Governmental Entity with respect to any Taxes for which the
Company may be liable, including any known criminal proceedings. The Company has
made available to Parent complete copies of all income, franchise and sales or
use Tax Returns, and statements of deficiencies assessed against or agreed to
by, the Company for all taxable periods ended after March 31, 1997. All
positions taken on such federal income tax Returns that could give rise to a
substantial understatement of federal income Tax within the meaning of Section
6662 of the Code have been disclosed in such Returns in accordance with Section
6662. Except as otherwise expressly set forth on the Company's Tax Returns, all
material elections in effect as of the date hereof with respect to Taxes
affecting the Company are set forth on Schedule 5.19(c).
(d) Except as set forth on Schedule 5.19(d), (i) the Company
has not received notice (written or oral) of any assessment or intent to make
any assessment by any Governmental Entity regarding Taxes for any period for
which Returns have been filed by or on behalf of the Company; (ii) there are no
pending requests for rulings from any Governmental Entity with respect to Taxes
of the Company; (iii) no claim has been made during the last seven years by a
Governmental Entity in a jurisdiction where the Company does not file Returns
that the Company is or may be subject to taxation by that jurisdiction or is
obliged to act as withholding agent under the Laws of that jurisdiction; (iv)
there is no dispute or claim concerning any Tax Liability of the Company claimed
or raised by any Governmental Entity during any presently pending audit or
proceeding; and (v) no waiver or extension of any statute of limitations has
been given or requested with respect to the Company in connection with any
Returns.
(e) There are no Liens on any of the assets of the Company
that arose in connection with any failure (or alleged failure) to pay any Tax.
(f) Except as set forth on Schedule 5.19(f), (i) the Company
is not a party to or bound by any Contract providing for the allocation, sharing
or indemnification of Taxes, and (ii) there are no powers of attorney currently
in effect with respect to any matter related to Taxes of the Company.
(g) Except as set forth on Schedule 5.19(g), (i) the Company
is not nor has it ever been a member of any Affiliated Group and (ii) the
Company does not have Liability for the Taxes of any Person under Treasury
Regulation ss. 1.1502-6 (or any similar provision of state, local or foreign
Law).
(h) The Merger will not (either alone or upon the occurrence
of any additional or subsequent event) result in any payment, or the assumption
of any obligation to make a payment, that would constitute an "excess parachute
payment" within the meaning of Section 280G of the Code.
(i) No portion of the cost of any of the assets of the Company
was financed directly or indirectly from the proceeds of any tax-exempt state or
local government obligation described in Section 103(a) of the Code.
28
(j) The Company is not a party to any joint venture,
partnership or other Contract that could be treated as a partnership for federal
income tax purposes.
(k) The Company utilizes the accrual method of accounting for
federal income tax purposes.
(l) The Company is not and has never been a "United States
real property holding corporation" within the meaning of Section 897(c)(2) of
the Code.
(m) Except as set forth on Schedule 5.19(m), neither the
Company nor any other Person on behalf of the Company (i) has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a "subsection (f) asset" (as such term is
defined in Section 341(f)(4) of the Code) owned by the Company; (ii) has
executed or entered into a closing agreement pursuant to Section 7121 of the
Code or any predecessor provision thereof or any similar provision of Law or any
other Contract relating to Taxes with any Governmental Entity; or (iii) has
agreed to or is required to make any adjustments pursuant to Section 481(a) of
the Code or any similar provision of state, local or foreign Law by reason of a
change in accounting method initiated by the Company. The Internal Revenue
Service has not proposed any such adjustment or change in accounting method, nor
does the Company have an application pending with any Governmental Entity
requesting permission for any changes in accounting methods that relate to the
business or operations of the Company.
(n) Except as set forth on Schedule 5.19(n), none of the
assets of the Company is (i) property required to be treated as being owned by
another Person pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986; (ii) "tax-exempt use property" within
the meaning of Section 168(h)(l) of the Code; (iii) "tax exempt bond financed
property" within the meaning of Section 168(g) of the Code; or (iv) "limited use
property" (as that term is used in Rev. Proc. 76-30).
(o) The Company does not constitutes either a "distributing
corporation" or a "controlled corporation" (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution of shares qualifying for tax-free
treatment under Section 355 of the Code (i) in the two years prior to the date
of this Agreement or (ii) in a distribution that could otherwise constitute part
of a "plan" or "series of related transactions" (within the meaning of Section
355(e) of the Code) in conjunction with this acquisition.
(p) No indebtedness of the Company is (A) "corporate
acquisition indebtedness" within the meaning of Code Section 279(b), (B) an
"applicable high yield discount obligation" within the meaning of Code Section
163(i), or (C) debt on which any portion of the interest thereon is
"disqualified interest" within the meaning of Section 163(f).
(q) The Company anticipates that the amount of federal and
state income taxes due for the taxable period of the Company beginning April 1,
2001 and ending on the Closing Date will not exceed $900,000.
29
5.20 Personnel. Attached hereto as Schedule 5.20 is a list of the names
and annual rates of compensation of the directors and officers of the Company,
and of all of the employees of the Company (including base salary, bonus,
commissions and incentive pay). Schedule 5.20 attached hereto also sets forth
the bonus, company automobile, club membership and other like benefits, if any,
paid or payable to the directors, officers and employees of the Company during
2000 and 2001 and the identity of such directors, officers and employees who
have received or are entitled to receive such benefits. Schedule 5.20 attached
hereto also contains a list of all employment Contracts, deferred compensation
Contracts, consulting Contracts and confidentiality Contracts to which the
Company is a party, and all severance benefits which any director, officer,
consultant or employee of the Company is or may be entitled to receive. The
employee relations of the Company are good and there is no pending or, to the
knowledge of the Company, threatened labor dispute or union organization
campaign. None of the employees of the Company are represented by any labor
union or organization. The Company is in compliance in all material respects
with all Laws respecting employment and employment practices, terms and
conditions of employment and wages and hours and are not engaged in any unfair
labor practices. There is no unfair labor practice claim against the Company
before the National Labor Relations Board or any strike, labor dispute, work
slowdown or work stoppage pending or, to the knowledge of the Company,
threatened against or involving the Company.
5.21 Business Relations. To the Company's knowledge, the Company has
not received any notice that any customer or vendor of the Company will, as a
result of the actions contemplated hereby, cease to do business with the
Surviving Corporation after the consummation of the transactions contemplated
hereby or by the Closing Documents in the same manner as previously conducted
with the Company. To the Company's knowledge, the Company has not received any
notice of any disruption (including delayed deliveries or allocations by
vendors) in the availability of the materials or products used or distributed by
the Company, nor is the Company aware of any facts which would indicate that the
business (including the Business) of the Company will be subject to any such
material disruption.
5.22 Accounts Receivable. Except as set forth on Schedule 5.22 attached
hereto, all of the accounts, notes and loans receivable (collectively, the
"Accounts Receivable") that have been recorded on the books of the Company or
would be required to be recorded on the books of the Company or reflected on
financial statements prepared on an accrual basis and in accordance with GAAP
are bona fide and represent amounts validly due. All of such Accounts Receivable
are free and clear of any Liens; none of such Accounts Receivable are subject to
any offsets or claims of offset; and no obligor of any such Accounts Receivable
exceeding $1,000 has given notice that it will or may refuse to pay the full
amount thereof or any portion thereof. The total amount of Accounts Receivable
as of the date hereof is $1,292,989.82
5.23 Accounts Payable. All accounts payable and current Liabilities of
the Company that would be required to be recorded on the books of the Company or
reflected on financial statements prepared on an accrual basis and in accordance
with GAAP (applied on a consistent basis throughout the periods covered thereby)
as of September 30, 2001 (i) arose from bona fide purchases in the Ordinary
Course of Business, and (ii) are accurately and fairly reflected on Schedule
5.23(a) or, with respect to accounts payable and current Liabilities of the
30
Company created after September 30, 2001, are accurately and fairly reflected on
Schedule 5.23(b) to be provided at Closing.
5.24 Bank Accounts. Attached hereto as Schedule 5.24 is a list of all
banks or other financial institutions with which the Company has an account or
maintains a safe deposit box, showing the type and account number of each such
account and safe deposit box and the names of the Persons authorized as
signatories thereon or to act or deal in connection therewith.
5.25 Indebtedness to and from Officers, Directors, Shareholders and
Employees. Except as set forth on Schedule 5.25 hereto, the Company does not owe
any indebtedness to any of its officers, directors, shareholders or employees
(other than accrued salaries or benefits payable in the Ordinary Course of
Business) or have indebtedness owed to it from any of its officers, directors,
shareholders or employees, excluding indebtedness for reasonable travel advances
and business expenses.
5.26 Brokers. Except as set forth on Schedule 5.26, no Person has
acted, directly or indirectly, as a broker, finder or financial advisor for the
Company or any of its Affiliates in connection with the negotiations relating to
or the transactions contemplated by this Agreement and no Person is entitled to
any fee or commission or like payment in respect thereof based in any way on
Contracts made by or on behalf of the Company or any of its Affiliates.
5.27 Interest in Competitors, Vendors and Customers. To the knowledge
of the Company, no officer or director of the Company or any affiliate of any
such officer or director has any ownership interest in any competitor, vendor or
customer of the Company or any property used in the operation of the Business.
5.28 Information Furnished. No representation or warranty made by the
Company in this Agreement or in any document required to be delivered hereby,
including the Indemnification and Escrow Agreement (collectively with this
Agreement, the "Closing Documents"), is false or inaccurate in any material
respect, and no statement of fact made by the Company herein or therein contains
any material untrue statement of fact or omits to state any fact of which the
Company is aware that is necessary in order to make the statement herein or
therein not misleading. The representations and warranties contained in this
Agreement or in any other Closing Document shall not be affected or deemed
waived by reason of any due diligence or other investigation by or on behalf of
Parent or the fact that Parent and/or its Representatives should have known that
any such representation or warranty is or might be inaccurate in any respect.
All Schedules and Exhibits to this Agreement are integral parts of this
Agreement.
5.29 Minute Books; Stock Record Books. True and correct copies of the
Company's minute books and stock record books have been provided to Parent and
Merger Sub. The minute books of the Company contain true and complete originals
or copies of all minutes of meetings of and actions by the shareholders, Board
of Directors and all committees of the Board of Directors of the Company, and
accurately reflect in all material respects all corporate actions of the Company
which are required by Law to be passed upon by the Board of Directors or
shareholders of the Company. The stock record books accurately reflect all
transactions in shares of capital stock of the Company.
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5.30 Books and Records. All of the records, data, information,
databases, systems and controls maintained, operated or used by the Company in
connection with the conduct or administration of its Business (including all
means of access thereto and therefrom) are located on the premises of the
Company and are under the exclusive ownership or direct control of the Company.
ARTICLE VI
COVENANTS RELATED TO CONDUCT OF BUSINESS
6.1 Financial Statements. From and after the date of this Agreement and
continuing until the Closing, as soon as available, and in any event within
twenty days after the end of each calendar month, the Company shall furnish to
Parent a month-end balance sheet with supporting schedules reflecting detail and
amounts for cash, Accounts Receivable, fixed assets, accounts payable, and
Liabilities that would be required to be recorded on the books of the Company or
reflected on financial statements prepared on an accrual basis and in accordance
with GAAP and the related statements of income and cash flows of the Company for
such month prepared using the same accrual basis of accounting. Such monthly
financial statements shall fairly present the financial position, results of
operations and changes in financial position of the Company as of the indicated
dates and for the indicated periods and shall be prepared in accordance with
Section 5.6 hereto.
6.2 Interim Operations of the Company.
(a) From the date hereof to the Closing, the Company shall
conduct its business (including the Business) only in the Ordinary Course of
Business, and the Company shall not, unless Parent or Merger Sub gives its prior
written approval or as otherwise set forth on Schedule 6.2:
(i) amend or otherwise change the Company's Charter or
bylaws, as each such document is in effect on the date hereof;
(ii) issue or sell, or authorize for issuance or sale,
additional shares of any class of capital stock other than shares of Company
Common Stock issued upon the conversion of shares of Series A Preferred
outstanding on the date hereof or issued upon the exercise of Options
outstanding on the date hereof;
(iii) issue, grant or enter into any subscription
relating to, any option, warrant, right, convertible security or other Contract
of any character obligating the Company to issue securities;
(iv) declare, set aside, make or pay any dividend or
other distribution with respect to the Company Capital Stock;
(v) redeem, purchase or otherwise acquire, directly or
indirectly, any of the Company Capital Stock;
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(vi) authorize any capital expenditures or sell or
subject to Liens or agree to sell or subject to Liens, any assets of the Company
except for sales of assets in the Ordinary Course of Business and in any event
shall not sell or subject to Liens or agree to sell or subject to Liens any
assets in an aggregate amount in excess of $25,000;
(vii) acquire (by merger, share exchange, consolidation,
combination or acquisition of stock or assets) any Person thereof or enter into
any Contract with respect to any of the foregoing;
(viii) other than in accordance with the terms hereof,
incur any indebtedness for borrowed money, issue any debt securities or enter
into or modify any Contract with respect thereto;
(ix) enter into any new Material Contract (excluding any
license agreements with new customers entered into in the Ordinary Course of
Business), or amend or terminate any existing Material Contract (except in the
Ordinary Course of Business);
(x) enter into, amend or terminate any employment or
consulting Contract with any director, officer, consultant or key employee of
the Company, enter into, amend or terminate any employment Contract with any
other Person, or take any action with respect to the grant or payment of any
severance or termination pay other than pursuant to policies or Contracts of the
Company in effect on the date hereof as set forth in Schedule 5.17;
(xi) enter into, extend or renew any lease for
equipment, office space or other space;
(xii) fail to pay any Accounts Payable of the Company in
accordance with their terms, other than in the Ordinary Course of Business;
(xiii) sell or otherwise transfer any Accounts
Receivable of the Company;
(xiv) except as required by Law, adopt, amend or
terminate any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or other employee benefit plan,
Contract, trust, fund or arrangement for the benefit or welfare of any officer
or employee of the Company, or withdraw from any multi-employer plan so as to
create any Liability under Article IV of ERISA to any Person;
(xv) pay (except for salary under existing employment
Contracts, advances to salesmen in the Ordinary Course of Business, and
directors' fees under standard terms in effect prior to the date hereof), loan
or advance any amount to, or sell, transfer or lease any properties or assets
to, or enter into any Contract with, any of their officers or directors or any
Affiliate, associate or near relative of any of their officers or directors;
(xvi) except in the Ordinary Course of Business, write
down (or write up) the value of any inventory or write off as uncollectible any
Accounts Receivable;
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(xvii) cancel any debts or waive any claims or rights of
substantial value, other than in the Ordinary Course of Business;
(xviii) dispose of or permit to lapse any rights to the
use of any patent, trademark, trade name, copyright or other intangible asset,
or dispose of or disclose to any Person any trade secret, formula, process or
know-how not theretofore a matter of public knowledge;
(xix) change any of the banking or safe deposit
arrangements described in Schedule 5.24 hereto, except in the Ordinary Course of
Business;
(xx) grant or extend any power of attorney or act as
guarantor, surety, co-signer, endorser, co-maker, indemnitor or otherwise, in
respect of the obligation of any Person;
(xxi) make any change in financial or tax accounting
methods, principles or practices or make or cause to be made any elections on
Returns of the Company, unless required by GAAP or applicable Law;
(xxii) extend credit in the sale of products, collection
of receivables or otherwise, other than in the Ordinary Course of Business;
(xxiii) fail to maintain its books, accounts and records
in the usual, regular and ordinary manner on a basis consistent with prior
years;
(xxiv) grant any increase in compensation, or grant or
make any bonus or other compensatory payments, to any director, employee or
consultant of the Company;
(xxv) make or revoke any Tax election that could
reasonably be expected to have a Material Adverse Effect, or compromise any
material Tax Liability, file any amended Tax Return, or file any Tax Return
other than Tax Returns with respect to current Taxes that become due after the
date of this Agreement; or
(xxvi) agree, whether in writing or otherwise, to do any
of the foregoing.
(b) From the date hereof to the Closing, the Company shall use
its commercially reasonable best efforts to preserve intact the business
organization of the Company, to keep available in all material respects the
services of their present officers and employees, to preserve intact their
banking relationships and credit facilities, to preserve intact their
relationships with their customers and vendors, to preserve the goodwill of
those having business relationships with them, and to comply with all applicable
Laws in all material respects.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Inspection. From and after the date hereof and until the Closing,
the Company shall, upon reasonable advance notice to the Chief Financial Officer
of the Company: (a) give to each of Parent and Merger Sub and its officers,
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attorneys, accountants and Representatives reasonable access during normal
business hours to all books, records, Returns, files, correspondence, facilities
and properties of the Company; (b) provide each of Parent and Merger Sub and its
officers, attorneys, accountants and representatives all information and
material pertaining to the business and affairs of the Company as Parent and
Merger Sub may deem reasonably necessary or appropriate; (c) without limiting
the generality of the foregoing, to permit Parent's and Merger Sub's accountants
to examine the Company's financial statements for any fiscal period; and (d) use
its reasonable efforts to afford each of Parent and Merger Sub the opportunity
to meet with certain mutually agreed-upon customers, employees and vendors of
the Company to discuss the business, condition (financial or otherwise),
operations and prospects of the Company. Parent and Merger Sub agree to use
reasonable care in handling, using, accessing or interacting with all
facilities, property, materials or employees of the Company prior to the
Closing. All information and actions taken in connection herewith shall be
subject to that certain Confidentiality Agreement dated January 2, 2001 by and
between the Company and Parent.
7.2 Compliance by the Company, Parent and Merger Sub. From the date
hereof to the Closing, none of the Company, Parent or Merger Sub shall take or
fail to take any action, which action or failure to take such action would
intentionally cause the representations and warranties made by such party herein
to be untrue or incorrect as of the Closing.
7.3 Notification of Certain Matters. Each party shall give prompt
notice to the other party of: (i) the occurrence, or failure to occur, of any
event or the existence of any condition that has caused or could reasonably be
expected to cause any of its representations or warranties contained in this
Agreement to be untrue or inaccurate in any material respect, or any
representation or warranty qualified by materiality, to be untrue or inaccurate
in any respect, at any time after the date of this Agreement, up to and
including the Closing Date (except to the extent such representations and
warranties are given as of a particular date or period and relate solely to such
particular date or period); (ii) the occurrence of any Material Adverse Effect
or any material casualty or damage (whether or not insured) to any facility,
property or equipment owned or used by the Company; and (iii) any failure on its
part to comply with or satisfy, in any material respect, any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement.
7.4 Exclusivity. From the date hereof until the earlier of the Closing
Date or the termination of this Agreement, the Company shall not, nor shall it
authorize or permit any of its Affiliates or any officer, director, employee,
agent, investment banker, attorney, financial advisor or other representative of
the Company to, directly or indirectly (i) solicit, initiate, participate in or
encourage (including by way of furnishing information or assistance) or take any
other action to facilitate any inquiries or the submission of any offers or
proposals that constitute or may reasonably be expected to lead to an
Acquisition Proposal from any third party or (ii) provide any confidential,
proprietary or non-public information regarding the Company to any Person or
(iii) engage in any negotiations relating to any Acquisition Proposal or in
furtherance thereof or accept or enter into any Contract (whether binding or
non-binding) with respect to any Acquisition Proposal.
35
7.5 Public Announcement. The parties shall cooperate with respect to
any public announcement relating to the transactions contemplated by this
Agreement. No party hereto will issue any public statement announcing such
transaction without the prior written consent of the other party, except as such
party in good faith (based upon the advice of outside counsel) believes is
required by Law or, in the case of Parent, the rules or regulations of any
securities exchange and following notice to the other parties. The parties have
agreed to the form of a joint press release announcing the execution of this
Agreement and the transactions contemplated hereby, which press release shall be
publicly released by the parties as promptly as practicable following the
execution of this Agreement.
7.6 Continuation of Insurance Coverage. From the date hereof to the
Closing, the Company shall keep in full force and effect insurance coverage for
the Company and its assets and operations comparable in amount and scope to the
coverage now maintained covering the Company and its assets and operations.
7.7 Maintenance of Credit Terms. From the date hereof to the Closing,
the Company shall continue to effect sales of its products and services only on
the terms that have historically been offered by the Company or on such other
terms as market conditions may dictate consistent with commercially reasonable
practices.
7.8 Third Party Consents. The Company shall use its commercially
reasonable best efforts to obtain at the earliest practicable date all consents
of third parties (including those listed on Schedule 5.5(b)) material to the
business of the Company and necessary to the consummation of the transactions
contemplated hereby (the "Company Consents") and shall provide to Parent and
Merger Sub copies of each such Company Consent promptly after it is obtained.
7.9 Commercially Reasonable Best Efforts and Certain Filings. Subject
to the terms and conditions of this Agreement, the Company, Parent and Merger
Sub shall use their respective commercially reasonable best efforts to maintain
the accuracy of their representations and warranties hereunder and to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable to consummate the transactions contemplated by this
Agreement and the Closing Documents. None of the Company, Parent or Merger Sub
shall take, agree to take or knowingly permit to be taken any action or do or
knowingly permit to be done anything in the conduct of the business of the
companies, or otherwise, which would be contrary to or in breach of any of the
terms or provisions of this Agreement or the Closing Documents.
7.10 Indemnification of Officers and Directors; Exculpation.
(a) Parent agrees not to modify, in an adverse manner, for a
period of not less than six (6) years, the Surviving Corporation Charter or the
Surviving Corporation Bylaws with regard to the rights of current or former
directors or officers of the Company to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the Effective Time.
(b) The provisions of this Section 7.10 are intended to be for
the benefit of, and shall be enforceable by, each party entitled to
indemnification under the Surviving Corporation Charter or the Surviving
Corporation Bylaws, his or her heirs and his or her representatives.
36
7.11 Antitakeover Statutes. If any takeover statute becomes applicable
to the Merger, each of Parent and the Company shall take such actions as are
commercially reasonable so that the transactions contemplated by this Agreement
and the Closing Documents may be consummated as promptly as practicable on the
terms contemplated hereby and otherwise act to eliminate or minimize the effects
of any takeover statute on the Merger.
7.12 Company Lines of Credit. Prior to the Effective Time, the Company
shall use commercially reasonable best efforts to have released and terminated,
as of the Effective Time, the personal guaranties of Xxxxx Xxxxxx, Xxxx Xxxxxx
and Xxxxxx Xxxxxx (collectively, the "Personal Guarantees") under that certain
Loan and Security Agreement dated November 10, 1998 by and between the Company
and Comerica Bank-California and that certain Variable Rate-Installment Note
Agreement dated March 26, 1999 by and between the Company and Comerica Bank-
California (collectively, the "Company Lines of Credit"). Parent shall
reasonably cooperate with any requests from the Company in connection therewith,
but, for the avoidance of doubt, Parent shall not be requested to become liable
in any manner with regard to such obligations.
7.13 Shareholder Indebtedness. At the Effective Time, Parent shall
advance to the Company all cash amounts necessary to repay in full all of the
indebtedness of the Company owed to the parties identified on Schedule 5.25 that
is outstanding at the Effective Time ("Shareholder Indebtedness"). The parties
acknowledge that the Parent shall not be required to advance any amounts in
excess of the amounts set forth on Schedule 5.25 and that any such amounts
advanced shall have the effect of reducing the Merger Consideration in
accordance with Section 2.4 hereto. The Company shall cause any and all
evidences of Shareholder Indebtedness to be delivered to the Company and upon
repayment in full of such Shareholder Indebtedness, such Shareholder
Indebtedness shall immediately be cancelled and of no further force and effect.
7.14 Expenses. At the Effective Time, Parent shall advance to the
Company all cash amounts necessary to pay the expenses set forth on Schedule
7.14 hereto which are outstanding at the Effective Time and incurred by the
Company in connection with the negotiation and preparation of this Agreement and
the other Closing Documents and the consummation of the transactions
contemplated hereby and thereby (the "Expenses"). The parties acknowledge that
any such amounts advanced shall have the effect of reducing the Merger
Consideration in accordance with Section 2.4 hereto.
7.15 Employee Benefits Matters.
(a) Individuals who become employed by Parent or the Surviving
Corporation from and after the Effective Time shall be referred to herein as
"Affected Employees." Each Affected Employee shall be eligible to participate in
"employee benefit plans" as defined in Section 3(3) of ERISA ("ERISA Plans")
that are substantially similar to the ERISA Plans of Parent in which similarly
situated employees of Parent are eligible to participate.
37
(b) Parent shall, or shall cause the Surviving Corporation to,
recognize the employment service of each Affected Employee with the Company for
purposes of eligibility to initially participate and vesting (other than with
respect to stock options and other incentive compensation) under any ERISA Plans
of Parent. Each Affected Employee's years of service with the Company shall be
otherwise recognized for all seniority, vacation, personal time and similar
general employment purposes in accordance with the policies of Parent, as may be
amended from time to time in the sole discretion of Parent.
(c) After the Effective Time, the Surviving Corporation and
the "buying group" within the meaning of Treasury Regulation 54.4980B-9 shall be
responsible for complying with the regulations under Section 4980B of the Code.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to consummate the transactions contemplated
by this Agreement are subject to the fulfillment at or prior to the Effective
Time of each of the following conditions, any or all of which may be waived in
whole or in part by the party being benefited thereby, to the extent permitted
by applicable Law:
(a) The Company, Parent and Merger Sub shall have timely
obtained from each Governmental Entity all material approvals, waivers and
consents, if any, necessary for consummation of or in connection with the
transactions contemplated hereby.
(b) There shall not be in effect any Law enjoining or
otherwise preventing consummation of the transactions contemplated by this
Agreement.
8.2 Conditions to the Obligations of Parent and Merger Sub. The
respective obligations of Parent and Merger Sub to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at or prior to the
Effective Time of each of the following additional conditions, any or all of
which may be waived in whole or part by Parent and Merger Sub, as the case may
be, to the extent permitted by applicable Law:
(a) The representations and warranties of the Company
contained in this Agreement, to the extent qualified by materiality or Material
Adverse Effect, shall be true and correct at and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of the Closing Date, and to the extent not so qualified, shall be true and
correct in all material respects at and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
the Closing Date; the Company shall have performed and complied in all material
respects with all agreements required by this Agreement to be performed or
complied with by the Company at or prior to the Closing Date; and Parent and
Merger Sub shall have received a certificate, dated as of the Closing Date,
signed by a duly elected officer of the Company to the foregoing effects;
38
(b) The Company shall have delivered to Parent and Merger Sub
a certificate as to the good standing of the Company in the State of California,
together with copies of the Company's Charter, certified by the Secretary of the
State of California;
(c) Prior to the Closing, there shall not have occurred any
Material Adverse Effect or any material casualty or damage (whether or not
insured) to any facility, property or equipment owned or used by the Company and
the business of the Company shall have been conducted only in the Ordinary
Course of Business;
(d) The Company shall have delivered to Parent the minute
books and stock transfer records of the Company;
(e) The Company Consents set forth on Schedule 8.2(e) shall
have been obtained, including, a customary pay-off letter from Comerica
Bank-California in the event the amounts outstanding under the Company Lines of
Credit have been paid off in full;
(f) The Company shall deliver to Parent at or prior to the
Closing the resignation of each director of the Company identified by Parent to
the Company;
(g) Parent and Merger Sub shall have received a legal opinion
from counsel to the Company in the form attached hereto as Exhibit D;
(h) Non-Competition Agreements and Employment Agreements. The
Confidentiality, Non-Solicitation And Non-Competition Agreements and Employment
Agreements set forth on Schedule 8.2(h) shall be in full force and effect;
(i) Proprietary Information Agreements. Each of the employees
set forth on Schedule 8.2(j) hereto shall have entered into a Proprietary
Information Agreement with the Company, in substantially the form attached
hereto as Exhibit E;
(j) Indemnification and Escrow Agreement. The shareholders of
the Company set forth on Schedule 8.2(j) (the "Escrow Shareholders") shall have
entered into the Indemnification and Escrow Agreement with Parent, the Company
and the Depositary Agent (the "Indemnification and Escrow Agreement"), in
substantially the form attached hereto as Exhibit F;
(k) The Buy-Sell Agreement dated October 7, 1995 between X.
Xxxxxx, S. Tablak, X. Xxxxxx, Xxx Support Services, Inc., Xxxxxxxx & Yu
Accountancy Corporation (trustee) shall have been terminated and all insurance
policies required to be maintained by such agreement shall have been cancelled
or transferred to the subject employee (provided the Company is relieved of all
obligations under such insurance policy);
(l) The Company shall have delivered to Parent a certificate,
in form and substance satisfactory to Parent, satisfying the provisions of
Treasury Regulation Section 1.1445-2(c)(3) certifying that interests in Company
do not constitute U.S. real property interests; and
39
(m) The Company shall have delivered to Parent a certificate,
in form and substance satisfactory to Parent, certifying as to (i) the amount of
the Company's direct and indirect expenses incurred in connection with the
negotiation and preparation of this Agreement and the other Closing Documents
and the consummation of the transactions contemplated hereby and thereby, (ii)
the accuracy of the Pre-Closing Statement, (iii) the number of shares of issued
and outstanding capital stock of the Company as of the Closing Date, (iv) the
number of shares of Company Common Stock issuable upon the exercise of all
outstanding Options as of the Closing Date, and (v) the fact that all
Shareholder Indebtedness has been repaid in full.
The decision of Parent and Merger Sub to consummate the
transactions contemplated by this Agreement without the satisfaction of any of
the preceding conditions shall not constitute a waiver of any of the Company's
representations, warranties, covenants or indemnities herein.
8.3 Conditions to Obligations of the Company. The obligations of the
Company to consummate the transactions contemplated by this Agreement are
subject to the fulfillment at or prior to the Effective Time of the following
additional conditions, which may be waived in whole or part by the Company, as
the case may be, to the extent permitted by applicable Law:
(a) The representations and warranties of Parent and Merger
Sub contained in this Agreement to the extent qualified by materiality or
material adverse effect, shall be true and correct at and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of the Closing Date, and to the extent not so qualified, shall be true
and correct in all material respects at and as of the Closing Date with the same
effect as though such representations and warranties had been made on and as of
the Closing Date; all agreements to be performed hereunder by Parent and Merger
Sub at or prior to the Closing Date shall have been performed in all material
respects; and the Company shall have received a certificate, dated as of the
Closing Date, signed by an officer of Parent to the foregoing effects;
(b) Indemnification and Escrow Agreement. Parent and Merger
Sub shall have entered into the Indemnification and Escrow Agreement with the
Escrow Shareholders, the Company and the Depositary Agent;
(c) Release and Termination of Personal Guarantees. The
Personal Guaranties shall have been fully and completely released and terminated
by Comerica Bank-California; and
(d) Employment Agreements. The Xxxxx Xxxxxx employment
agreement identified on Schedule 8.2(h) shall be in full force and effect;
provided, however, that the Company may not assert the failure of this condition
if the failure of such condition is the result of a breach of such agreement by
Xx. Xxxxxx.
The decision of the Company to consummate the
transactions contemplated by this Agreement without the satisfaction of any of
the preceding conditions shall not constitute a waiver of any of Parent's or
Merger Sub's covenants contained herein.
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ARTICLE IX
TERMINATION
9.1 Termination.
(a) Notwithstanding anything contained in this Agreement to
the contrary, this Agreement may be terminated and the Merger may be abandoned
on or prior to the Closing Date by the Company or Parent only as follows:
(i) by mutual written consent of the Company and Parent
by action of their respective Boards of Directors;
(ii) at the election of either the Company or Parent, if
the Closing Date shall not have occurred on or before January 31, 2002, or such
later date as shall be mutually agreed upon in writing by the Company and
Parent, provided that no party shall be entitled to terminate this Agreement
pursuant to this Section 9.1(a)(ii) if such party's failure to fulfill any
obligation under this Agreement has been a cause of, or resulted in, the failure
of the Closing to occur on or before such date;
(iii) by either the Company or Parent if a Governmental
Entity shall have issued an order, decree or ruling permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling or other Action shall have become
final and nonappealable; or
(iv) by either the Company or Parent if, prior to the
Closing Date, the other party is in material breach of any representation,
warranty, covenant or agreement herein contained which, individually or in the
aggregate together with any other breach, has or would reasonably be expected to
have, a Material Adverse Effect on the Company (in the case of termination by
Parent or Merger Sub) or a material adverse effect on the ability of Parent to
consummate the deal (in the case of termination by the Company), the terminating
party has provided written notice of the default to the breaching party and such
breach has continued without cure for a period of (30) days after the date of
notice of default served by the terminating party; provided that such
terminating party shall not also be in material breach of this Agreement at the
time notice of termination is delivered.
(b) The termination of this Agreement shall be effectuated by
the delivery of a written notice of such termination from the party terminating
this Agreement to the other party.
(c) In the event that this Agreement shall be terminated
pursuant to Section 9.1(a) hereof, all obligations of the parties hereto under
this Agreement shall terminate and there shall be no Liability of any party
hereto to any other party, except that nothing herein shall relieve any party
from Liability for any breach of this Agreement.
9.2 Extension; Waiver. At any time prior to the Effective Time, each
party hereto (for these purposes, Parent and Merger Sub shall together be deemed
one party and the Company shall be deemed the other party) may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations and warranties of the
41
other party contained herein or in any document, certificate or writing
delivered pursuant hereto, or (c) waive compliance by the other party with any
of the agreements or conditions contained herein. Any agreement on the part of
either party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure of
any party hereto to assert any of its rights hereunder shall not constitute a
waiver of such rights.
ARTICLE X
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS; ESCROW PROVISIONS
10.1 Survival of Representations, Warranties, Covenants and Agreements.
Notwithstanding any right of Parent, Merger Sub or the Company (whether or not
exercised) to investigate the affairs of Parent, Merger Sub or the Company, each
party shall have the right to rely fully upon the representations, warranties,
covenants and agreements of the other party contained in this Agreement or in
any of the Closing Documents; provided, however, that, except in the case of
fraud or an intentional or willful breach of a representation, warranty or
covenant contained herein or in any of the Closing Documents, no reliance can be
made on, or claim made in respect of, any representation, warranty, covenant or
agreement specific compliance with which was waived in writing, including the
waiver of any related closing condition contained in Article VII. The covenants
and agreements of the Company, Parent and Merger Sub contained in this Agreement
or any of the Closing Documents that by their terms apply or are to be performed
in whole or in part after the Effective Time shall survive the Effective Time.
The representations and warranties of Parent and Merger Sub contained in this
Agreement or any of the Closing Documents shall not survive the Merger. The
representations and warranties of the Company contained in this Agreement or any
of the Closing Documents shall survive the Merger and continue until the second
anniversary of the Closing Date (the "Expiration Date"); provided, however,
notwithstanding anything stated to the contrary either herein or in the
Indemnification and Escrow Agreement, the representations and warranties set
forth in Section 5.2 of this Agreement shall survive indefinitely after the
Closing Date. The indemnification obligation relating to a breach of such
representation and warranties are set forth in the Indemnification and Escrow
Agreement. Each of the parties hereto agrees that, except for the
representations and warranties contained in this Agreement or the Closing
Documents, none of Parent, Merger Sub or the Company has made any
representations or warranties, and except for the representations and warranties
contained in this Agreement or the Closing Documents, each of Parent, Merger Sub
and the Company acknowledges that no representations or warranties have been
made by, and it has not relied upon any representations or warranties made by,
any of the parties hereto or any of their respective officers, directors,
employees, agents, financial and legal advisors or other representatives
(collectively, "Representatives") with respect to this Agreement and any of the
Closing Documents and the transactions contemplated hereby and thereby,
notwithstanding the delivery or disclosure to such party or its Representatives
of any documentation or other information with respect to any one or more of the
foregoing. The inclusion of any entry on Annex A shall not constitute an
admission by, or agreement of, the Company that such matter is material to the
Company.
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10.2 Establishment of the Escrow Fund. As soon as practicable after the
Effective Time, without any act of any Escrow Shareholders, Parent shall deposit
$3.25 million (the "Escrowed Merger Consideration") of the Merger Consideration
otherwise payable to the Escrow Shareholders with State Street Bank (the
"Depositary Agent"). The Escrow Fund shall be governed by the terms set forth
herein and in the Indemnification and Escrow Agreement. Such deposit by Parent
shall for purposes hereof be treated as a contribution to the Escrow Fund made
on behalf of each Escrow Shareholder in the amount obtained by multiplying (i)
the percentage amount set forth opposite such Escrow Shareholder's name on
Schedule 8.2(k) hereto by (ii) the Escrowed Merger Consideration.
ARTICLE XI
MISCELLANEOUS
11.1 Assignment. Neither the Company, Parent nor Merger Sub may assign
this Agreement without the other parties' written consents; provided, however,
that (x) Parent may assign this Agreement without the consent of the Company to
any Affiliate of Parent, which assignment shall not relieve Parent of any
obligation hereunder and (y) Merger Sub may assign this Agreement without the
consent of the Company to any newly formed subsidiary of Parent formed for the
sole purpose of acting as the merger subsidiary in the Merger. This Agreement
shall be binding on and shall inure to the benefit of the parties to this
Agreement, and their successors and permitted assigns. Subject to the foregoing
sentence and other than (a) the rights of the Shareholder Agent set forth in
Section 2.5 hereto, (b) the right of the Escrow Shareholders to receive the
Escrow Fund in accordance with the terms of the Indemnification and Escrow
Agreement, (c) the rights of the parties set forth in Section 7.10(b) hereto and
(d) the rights provided to the parties that delivered the Personal Guarantees as
set forth in Section 7.12 hereto, no Person not a party to this Agreement, other
than successors and permitted assigns, shall have any right under or by virtue
of this Agreement.
11.2 Expenses. Each of the parties hereto shall bear such party's own
direct and indirect expenses incurred in connection with the negotiation and
preparation of this Agreement and the other Closing Documents and the
consummation of the transactions contemplated hereby and thereby; provided,
however, that in accordance with Section 2.4 hereto, at the Closing the Merger
Consideration shall be reduced by the amount of the Expenses; and thereafter,
Parent shall have the right to make a claim against the Escrow Fund for the
amount of any additional expenses in excess of the Expenses incurred by the
Company either prior to or after the Closing Date in accordance with the terms
hereof and the Indemnification and Escrow Agreement ("Excess Expenses").
11.3 Notices. Any notices required or permitted to be given under this
Agreement (and, unless otherwise expressly provided therein, under any document
delivered pursuant to this Agreement) shall be given in writing and shall be
deemed received (a) when personally delivered to the relevant party at such
party's address as set forth below, (b) if sent by mail (which must be certified
or registered mail, postage prepaid) or overnight courier, when received or
rejected by the relevant party at such party's address indicated below, or (c)
if sent by facsimile transmission, when confirmation of delivery is received by
the sending party:
43
Parent: IMPATH Inc.
000 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
With a copy to: Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
The Company : Tamtron Corporation
0000 Xxx Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxx, President and CEO
Facsimile No.: (000) 000-0000
With a copy to: Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Each party may change its address for purposes of this Section
11.3 by proper notice to the other parties.
11.4 Further Assurances. Each party to this Agreement agrees (a) to
furnish upon request to the other party such further information, (b) to execute
and deliver to the other party such other documents and (c) to do such other
acts and things as the other party reasonably requests for the purpose of
carrying out the intent of this Agreement and the documents and instruments
referred to herein.
11.5 Specific Performance; Injunctive Relief. The parties recognize
that if the Company, Parent, Merger Sub or the Escrow Shareholders refuse to
perform under the provisions of this Agreement, monetary damages alone shall not
be adequate to compensate any injuries to such parties. Therefore,
notwithstanding Section 0 hereto, the Company, Parent and Merger Sub agree that,
in the event of any breach or threatened breach by any of the parties hereto of
any covenant or obligation contained in this Agreement, the Company, Parent and
Merger Sub shall be entitled (in addition to any other remedy that may be
available to them, including monetary damages) to seek and obtain (a) a decree
or order of specific performance to enforce the observance and performance of
such covenant or obligation, and (b) an injunction restraining such breach or
44
threatened breach. If any Action is brought by the Company, Parent or Merger Sub
to enforce this Agreement, all other parties hereto shall waive the defense that
there is an adequate remedy at law. In the event of litigation or arbitration
pertaining to any controversy, claim or dispute between the parties hereto
arising out of or relating to this Agreement or the breach of any provision
thereof, the substantially prevailing party shall be entitled to recover from
the losing party reasonable expenses, attorneys' fees and costs.
Governing Law. Except to the extent that the provisions of California
Law govern the Merger, this Agreement shall be governed by and construed in
accordance with the Laws of the State of New York without regard to conflict of
law provisions.
Arbitration. Subject to Section 2.5(b) hereto or unless otherwise
expressly set forth in a Closing Document, any controversy or claim arising out
of or relating to this Agreement or the Closing Documents, or the breach
thereof, shall be settled exclusively by arbitration conducted in the City of
New York, State of New York, United States of America, in accordance with the
then existing commercial rules of the American Arbitration Association. The
parties hereby agree that service of any notices in the course of such
arbitration at their respective addresses as provided for in Section 11.3 of
this Agreement shall be valid and sufficient. In any arbitration, the award
shall be rendered by a majority of the members of a Board of Arbitration
consisting of three (3) members, one of whom shall be appointed by Parent, the
second by the Shareholder Agent, and the third by mutual agreement of the first
two said arbitrators, and none of whom shall be affiliated with either party or
its Affiliates. In the event of failure of said first two arbitrators to agree
within sixty (60) days after commencement of the arbitration proceeding upon the
appointment of the third member, the third arbitrator shall be appointed by the
American Arbitration Association in accordance with its then existing rules.
Notwithstanding the foregoing, in the event that either such party shall fail to
appoint an arbitrator within thirty (30) days after commencement of the
arbitration proceeding, such arbitrator and the third arbitrator shall be
appointed by the American Arbitration Association in accordance with its then
existing rules. For the purposes of this paragraph, the "commencement of
arbitration proceeding" shall be deemed to be the date upon which a written
demand for arbitration is received by the American Arbitration Association from
one of the parties. A judgment upon the award rendered may be entered
exclusively in the U.S. District Court for the Southern District of New York.
11.6 Entire Agreement; Amendments and Waivers. This Agreement
(including the Schedules and Exhibits hereto and the other Closing Documents)
represents the entire understanding and agreement between the parties hereto
with respect to the subject matter hereof and can be amended, supplemented or
changed, and any provision hereof can be waived, only by written instrument
making specific reference to this Agreement signed by the parties hereto. No
action taken pursuant to this Agreement, including any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party taking
such action of compliance with any representation, warranty, covenant or
agreement contained herein. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a further or
continuing waiver of such breach or as a waiver of any other or subsequent
breach. No failure on the part of any party to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right, power or remedy
45
by such party preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. All remedies hereunder are cumulative and are
not exclusive of any other remedies provided by Law. In the event of any
conflict between the provisions of this Agreement and the provisions of any
Closing Documents, the provisions of this Agreement shall control.
11.7 Headings. The section headings of this Agreement are for reference
purposes only and are to be given no effect in the construction or
interpretation of this Agreement.
11.8 Severability. If any term, provision, covenant or condition of
this Agreement or part thereof, or the application thereof to any Person, place
or circumstance shall be held to be invalid, unenforceable or void by a court of
competent jurisdiction, the remainder of this Agreement and such term,
provision, covenant or condition shall remain in full force and effect, and any
such invalid, unenforceable or void term, provision, covenant or condition shall
be deemed, without further action on the part of the parties hereto, modified,
amended and limited, and the court shall have the power to modify, amend, and
limit such term, provision, covenant or condition, to the extent necessary to
render the same and the remainder of this Agreement valid, enforceable and
lawful.
11.9 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
[THE REMAINDER OF THE PAGE IS INTENTIONALLY LEFT BLANK]
46
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year set forth above.
TAMTRON CORPORATION
/s/ Xxxxxx Xxxxxx
--------------------------------------------
By: Xxxxxx Xxxxxx
Its: CEO and President
IMPATH INC.
/s/ Xxxxxxx X. Xxxxxxxxxx
--------------------------------------------
By: Xxxxxxx X. Xxxxxxxxxx
Its: Secretary and General Counsel
WARWICK ACQUISITION CORP.
/s/ Xxxxxxx X. Xxxxxxxxxx
--------------------------------------------
By: Xxxxxxx X. Xxxxxxxxxx
Its: Vice President and General Counsel
