EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
P-COM, INC.
XT CORPORATION
AND
TELAXIS COMMUNICATIONS CORPORATION
DATED AS OF SEPTEMBER 9, 2002
Table of Contents
Page
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Article I THE MERGER.........................................................1
1.1 The Merger.................................................1
1.2 Effective Time.............................................2
1.3 Effect of the Merger.......................................2
1.4 Articles of Organization; By-laws..........................2
1.5 Directors and Officers.....................................2
1.6 Effect on Capital Stock....................................2
1.7 Surrender of Certificates..................................4
1.8 No Further Ownership Rights in Company Common Stock........6
1.9 Lost, Stolen or Destroyed Certificates.....................6
1.10 Tax Consequences...........................................6
1.11 Taking of Necessary Actions; Further Action................6
Article II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................6
2.1 Organization of the Company................................6
2.2 Company Capital Structure..................................7
2.3 Obligations With Respect to Capital Stock..................8
2.4 Authority..................................................8
2.5 SEC Filings; Company Financial Statements..................9
2.6 Absence of Certain Changes or Events......................10
2.7 Taxes.....................................................10
2.8 Absence of Liens and Encumbrances.........................12
2.9 Intellectual Property.....................................12
2.10 Agreements, Contracts and Commitments.....................13
2.11 No Default................................................14
2.12 Governmental Authorization................................14
2.13 Litigation................................................14
2.14 Environmental Matters.....................................14
2.15 Brokers' and Finders' Fees................................15
2.16 Labor Matters.............................................15
2.17 Employee Benefit Plans....................................15
2.18 Compliance With Laws......................................17
2.19 Registration Statement; Proxy Statement/Prospectus........17
2.20 Board Approval............................................17
2.21 Fairness Opinion..........................................18
2.22 Antitakeover Laws.........................................18
2.23 Rights Agreement..........................................18
Article III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.........18
3.1 Organization of Parent and Merger Sub.....................18
3.2 Capital Structure.........................................19
3.3 Obligations With Respect to Capital Stock.................19
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Table of Contents (Continued)
Page
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3.4 Authority.................................................20
3.5 SEC Filings, Parent Financial Statements..................21
3.6 Absence of Certain Changes or Events......................22
3.7 Taxes.....................................................22
3.8 Absence of Liens and Encumbrances.........................23
3.9 Intellectual Property.....................................23
3.10 Agreements, Contracts and Commitments.....................24
3.11 No Default................................................25
3.12 Governmental Authorization................................25
3.13 Litigation................................................25
3.14 Environmental Matters.....................................25
3.15 Broker's and Finders' Fees................................26
3.16 Labor Matters.............................................26
3.17 Employee Benefit Plans....................................26
3.18 Compliance With Laws......................................28
3.19 Registration Statement; Proxy Statement/Prospectus........28
3.20 Board Approval............................................28
3.21 Fairness Opinion..........................................28
3.22 Section 203 of the DGCL Not Applicable....................28
3.23 Rights Agreement..........................................29
Article IV CONDUCT PRIOR TO THE EFFECTIVE TIME..............................29
4.1 Conduct of Business of the Company........................29
4.2 Conduct of Business of Parent.............................32
Article V ADDITIONAL AGREEMENTS.............................................36
5.1 Proxy Statement/Prospectus; Registration Statement........36
5.2 Meetings of Stockholders..................................37
5.3 Access to Information, Confidentiality....................38
5.4 No Solicitation...........................................38
5.5 Expenses..................................................41
5.6 Public Disclosure.........................................41
5.7 Auditors' Letters.........................................42
5.8 FIRPTA....................................................42
5.9 Legal Requirements........................................42
5.10 Blue Sky Laws.............................................42
5.11 Reasonable Best Efforts and Further Assurances............42
5.12 Stock Options and Warrants................................43
5.13 Form S-8..................................................44
5.14 Certain Benefit Plans.....................................44
5.15 Tax-Free Reorganization...................................45
5.16 Board Representation and Officers.........................45
5.17 Change of Name of Parent..................................45
5.18 Retention Agreements......................................46
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Table of Contents (Continued)
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5.19 No Solicitation of Employees..............................46
5.20 Rights Agreements; Takeover Statutes......................46
5.21 Indemnification...........................................46
5.22 Section 16 Matters........................................47
Article VI CONDITIONS TO THE MERGER.........................................47
6.1 Conditions to Obligations of Each Party to Effect the
Merger...................................................47
6.2 Additional Conditions to Obligations of Company...........48
6.3 Additional Conditions to the Obligations of Parent
and Merger Sub...........................................49
Article VII TERMINATION, AMENDMENT AND WAIVER...............................51
7.1 Termination...............................................51
7.2 Effect of Termination.....................................52
7.3 Notice of Termination.....................................52
7.4 Amendment.................................................53
7.5 Extension; Waiver.........................................53
Article VIII GENERAL PROVISIONS.............................................53
8.1 Non-Survival of Representations and Warranties............53
8.2 Notices...................................................53
8.3 Interpretation............................................54
8.4 Counterparts..............................................54
8.5 Entire Agreement..........................................54
8.6 Severability..............................................54
8.7 Other Remedies............................................55
8.8 Governing Law and Choice of Forum.........................55
8.9 Rules of Construction.....................................55
8.10 Assignment................................................55
8.11 Certain Definitions.......................................55
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AGREEMENT AND PLAN OF MERGER
----------------------------
This AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of September 9, 2002 among P-COM, Inc., a Delaware corporation
("Parent"), XT Corporation, a Massachusetts corporation and a wholly owned
subsidiary of Parent ("Merger Sub"), and Telaxis Communications Corporation, a
Massachusetts corporation (the "Company").
RECITALS
--------
A. Upon the terms and subject to the conditions of this Agreement and
in accordance with the Massachusetts Business Corporation Law (the "MBCL"),
Parent and the Company will enter into a business combination transaction
pursuant to which Merger Sub will merge with and into the Company (the
"Merger").
B. The Board of Directors of each of the Company, Parent and Merger Sub
(i) has determined that the Merger is in the best interests of each company and
their respective stockholders, and (ii) has approved this Agreement, the Merger
and the other transactions contemplated by this Agreement.
C. The Company, Parent and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
Article I
THE MERGER
----------
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the MBCL, Merger Sub shall be merged with and into the
Company, the separate corporate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation. The Company as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation." The name of the Surviving Corporation shall be
Telaxis Communications Corporation. At the Effective Time, the purpose of the
Surviving Corporation shall be to conduct and engage in all lawful activities
and businesses to the maximum extent permitted by the MBCL.
1.2 Effective Time. Subject to the provisions of this Agreement, the
parties hereto shall cause the Merger to be consummated by filing Articles of
Merger (the "Articles of Merger") with the Secretary of State of the
Commonwealth of Massachusetts, in accordance with the relevant provisions of the
MBCL (the time of such filing or such subsequent date or time as the parties
shall agree and specify in the Articles of Merger being the "Effective Time"),
as soon as practicable on or after the Closing Date (as herein defined). The
closing of the Merger (the "Closing") shall take place at the Boston,
Massachusetts offices of Xxxxx Xxxx LLP at a time and date to be specified by
the parties, which shall be no later than the second business day after the
satisfaction or waiver of the conditions set forth in Sections 6.1 and 6.2(h) or
at such other time, date and location as the parties hereto agree (the "Closing
Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
the MBCL. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
1.4 Articles of Organization; By-laws.
(a) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time, the Articles of Organization of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Articles of
Organization of the Surviving Corporation until thereafter amended as provided
by law and such Articles of Organization; provided, however, that Article I of
the Articles of Organization of the Surviving Corporation shall be amended to
read as follows: "The name of the corporation is Telaxis Communications
Corporation." At the Effective Time, the authorized capital stock of the
Surviving Corporation shall be 1,000 shares of Common Stock, par value $0.01 per
share.
(b) The By-laws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. The directors of Merger Sub shall be the
initial directors of the Surviving Corporation, until their respective
successors are duly elected or appointed and qualified. The officers of Merger
Sub shall be the initial officers of the Surviving Corporation, until their
respective successors are duly elected or appointed and qualified. Parent and
Merger Sub agree that, as of immediately before the Effective Time, the
directors and officers of Merger Sub shall be the same persons as are intended
to be, immediately after the Effective Time, the directors and officers of
Parent as contemplated by this Agreement.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the following securities:
(a) Conversion of Company Common Stock. Each share of Common
Stock, par value $.01 per share, of the Company (the "Company Common Stock") and
the associated Company Right (as defined in Section 2.23) issued and outstanding
immediately prior
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to the Effective Time (other than any shares of Company Common Stock to be
canceled pursuant to Section 1.6(b) and Company Dissenting Shares) will be
canceled and extinguished and be automatically converted (subject to Sections
1.6(f) and (g)) into the right to receive 1.117 (the "Exchange Ratio") shares of
Common Stock, par value $.0001 per share, of Parent (the "Parent Common Stock")
together with cash in lieu of fractional shares pursuant to Section 1.6(g)
(collectively, the "Merger Consideration") upon surrender of the certificate
representing such share of Company Common Stock in the manner provided in
Section 1.7 (or in the case of a lost, stolen or destroyed certificate, upon
delivery of an affidavit (and bond, if required) in the manner provided in
Section 1.9.
(b) Cancellation of Parent-Owned Stock. Each share of Company
Common Stock held in the treasury of the Company or owned by Merger Sub, Parent
or any direct or indirect wholly owned subsidiary of Parent or of the Company
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
(c) Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, shares of Company Common Stock that have not been voted for
adoption of this Agreement and with respect to which appraisal rights shall have
been properly perfected in accordance with Sections 85 through 98 of the MBCL
(the "Company Dissenting Shares") shall not be converted into the right to
receive the Merger Consideration in accordance with this Agreement, at or after
the Effective Time, unless and until the holder of such Company Dissenting
Shares withdraws its demand for such appraisal in accordance with the MBCL or
becomes ineligible for such appraisal. If a holder of Company Dissenting Shares
shall withdraw its demand for such appraisal in accordance with the MBCL, or
shall become ineligible for such appraisal, then, as of the later of the
Effective Time or the occurrence of such event, such holder's Company Dissenting
Shares shall cease to be Company Dissenting Shares and shall be deemed to have
converted as of the Effective Time into the right to receive the Merger
Consideration into which its Company Common Stock would otherwise have converted
as of the Effective Time pursuant to this Agreement. The Company shall give
prompt notice to Parent of any demands received by the Company for appraisal of
any shares of capital stock of the Company, and Parent shall have the right to
participate in all negotiations, proceedings and settlements with respect to
such demands. Before the Effective Time, the Company shall not, without the
prior written consent of Parent, which consent shall not be unreasonably
withheld or delayed, make any payment with respect to, or settle or offer to
settle, any such demands, or agree to do any of the foregoing.
(d) Stock Options and Warrants. At the Effective Time, all
options to purchase Company Common Stock then outstanding under the Company's
1986 Stock Plan, 1987 Stock Plan, 1988 Stock Plan, 1996 Stock Plan, 1997 Stock
Plan, 1999 Stock Plan and 2001 Nonqualified Stock Option Plan (collectively, the
"Company Stock Option Plan") shall be assumed by Parent in accordance with
Section 5.12 hereof. In addition, at the Effective Time, all outstanding
warrants which provide for the issuance of Company Common Stock upon exercise of
the warrant (collectively, the "Company Warrants") shall be adjusted in
accordance with their respective terms to provide for the issuance of an
appropriate number of shares of Parent Common Stock (instead of the issuance of
Company Common Stock) and an appropriate adjustment of the warrant exercise
price, all as contemplated by Section 5.12(e) hereof.
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(e) Capital Stock of Merger Sub. Each share of Common Stock, par
value $.01 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of Common Stock, par value $.01 per share, of
the Surviving Corporation. Each stock certificate of Merger Sub evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
(f) Adjustments to Exchange Ratio. If between the date hereof and
the Effective Time, the outstanding shares of Parent Common Stock or Company
Common Stock shall be changed into a different number of shares by reason of any
reclassification, recapitalization, reorganization, split-up, combination or
exchange of shares, or if any dividend payable in stock or other securities
shall be declared thereon with a record date within such period, or if the
Parent Rights (as defined in Section 3.23) become exercisable or are exercised,
the Exchange Ratio shall be adjusted accordingly to provide to the holders of
Company Common Stock the same economic benefit as was contemplated by this
Agreement prior to such reclassification, recapitalization, reorganization,
split-up, combination, exchange, dividend or other event. If the Company Rights
become exercisable or are exercised, Parent, Merger Sub and the Company shall
promptly negotiate in good faith an amendment to this Agreement that will adjust
the Exchange Ratio accordingly and make such other changes to this Agreement so
as to provide the holders of each share of Company Common Stock and the holders
of each one one-thousandth (1/1,000th) of a share of Class One Participating
Cumulative Preferred Stock, par value $.01 per share, of the Company (other than
an Acquiring Person as defined in the Company Rights Plan (as defined in Section
2.23)) the same economic benefit as was contemplated hereunder prior to such
event for a holder of each share of Company Common Stock.
(g) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Common Stock who would otherwise be entitled to a fraction of
a share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock to be received by such holder) shall receive from Parent an
amount of cash (rounded to the nearest whole cent) equal to the product of (i)
such fraction, multiplied by (ii) the average closing price of a share of Parent
Common Stock for the ten most recent days that Parent Common Stock has traded
ending on the trading day immediately prior to the Effective Time, as reported
on Nasdaq.
1.7 Surrender of Certificates.
(a) Exchange Agent. Equiserve Trust Company, or another similar
institution selected by Parent, shall act as the exchange agent (the "Exchange
Agent") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the Effective
Time, Parent shall make available to the Exchange Agent for exchange in
accordance with this Article I, through such reasonable procedures as Parent may
adopt, the shares of Parent Common Stock issuable pursuant to Section 1.6 in
exchange for outstanding shares of Company Common Stock, and cash in an amount
sufficient for payment in lieu of fractional shares pursuant to Section 1.6(f).
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(c) Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock whose
shares were converted into the right to receive shares of Parent Common Stock
and cash in lieu of fractional shares pursuant to Section 1.6, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock and cash in lieu of fractional
shares. Upon surrender of a Certificate for cancellation to the Exchange Agent
or to such other agent or agents as may be appointed by Parent, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing the number of whole
shares of Parent Common Stock and payment in lieu of fractional shares which
such holder has the right to receive pursuant to Section 1.6, and the
Certificate so surrendered shall forthwith be canceled. Until so surrendered,
each outstanding Certificate that, prior to the Effective Time, represented
shares of Company Common Stock will be deemed from and after the Effective Time,
for all corporate purposes, other than the payment of dividends, to evidence the
right to receive the number of full shares of Parent Common Stock into which
such shares of Company Common Stock shall have been so converted and the right
to receive an amount in cash in lieu of the issuance of any fractional shares in
accordance with Section 1.6.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date of this
Agreement with respect to Parent Common Stock with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, at the time
of such surrender, the amount of dividends or other distributions with a record
date after the Effective Time payable with respect to such whole shares of
Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Parent Common Stock in any name other than that of the registered
holder of the certificate surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.7, none of the Exchange Agent, the Surviving Corporation or any
party hereto shall be liable to a holder of shares of Parent Common Stock or
Company Common Stock for any
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amount properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
1.8 No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Common Stock in accordance with the terms hereof (including any cash paid in
respect thereof) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Common Stock, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing shares of Company Common Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall, upon the making of an affidavit
of that fact by the holder thereof, issue in exchange for such shares of Company
Common Stock, such shares of Parent Common Stock and cash in lieu of fractional
shares, if any, as may be required pursuant to Section 1.6; provided, however,
that Parent may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Parent, the Surviving Corporation or the Exchange
Agent with respect to the certificates alleged to have been lost, stolen or
destroyed.
1.10 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code.
1.11 Taking of Necessary Actions; Further Action. If, at any time after
the Effective Time, any other action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is consistent with this Agreement.
Article II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to Parent and Merger Sub, subject
to the exceptions specifically disclosed in writing in the disclosure letter
supplied by the Company to Parent (the "Company Letter") and dated as of the
date hereof, as follows:
2.1 Organization of the Company. The Company and each of its material
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power to own, lease and operate its property and to carry on its
business as now being conducted and as proposed to be conducted,
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and is duly qualified to do business and in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified would
have a Material Adverse Effect (as defined below) on the Company. Except as set
forth in the Company SEC Reports (as defined below in Section 2.5), the Company
owns, directly or indirectly through one or more subsidiaries, 100% of the
capital stock of each of its subsidiaries, and does not directly or indirectly
own any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any interest in, any corporation, partnership,
joint venture or other business association or entity other than the securities
of any publicly traded entity held for investment only and constituting less
than 5% of the outstanding capital stock of any such entity. The Company has
made available to counsel for Parent a true and correct copy of the Articles of
Organization and By-laws of the Company and similar governing instruments of its
material subsidiaries, each as amended to date. For purposes of this Agreement,
"Material Adverse Effect" shall mean a material adverse effect on the business,
properties, assets (including intangible assets), financial condition, or
results of operations of a Person (as defined below), taken as a whole, but
shall not include any of the foregoing arising out of, related to or otherwise
by virtue of (a) conditions affecting the economy or the financial markets
generally (except to the extent that such conditions have a disproportionate
adverse effect on such Person compared to other companies similarly situated as
to size, financial strength and/or other relevant factors), (b) the announcement
of or pendency of any of the transactions contemplated by this Agreement, (c)
events, circumstances or conditions generally affecting the industry in which
such Person operates (except to the extent that such events, circumstances or
conditions have a disproportionate adverse effect on such Person compared to
other companies similarly situated as to size, financial strength and/or other
relevant factors), (d) any change in law or generally accepted accounting
principles, or (e) any change in the market price or trading volume of the
securities of such Person (provided, that if such change in market price or
trading volume is caused by an underlying cause or effect which would otherwise
constitute a Material Adverse Effect, such underlying cause or effect shall
nonetheless continue to constitute and qualify hereunder as a Material Adverse
Effect). For purposes of this Agreement, "Person" shall mean any natural person,
corporation, general partnership, limited partnership, limited liability
company, proprietorship or other business organization.
2.2 Company Capital Structure. The authorized capital stock of the
Company consists of 100,000,000 shares of Company Common Stock, of which
16,708,313 shares (each together with one Company Right) were issued and
outstanding as of September 6, 2002, and 4,500,000 shares of Preferred Stock,
$.01 par value, of which 1,000,000 shares have been designated as Class One
Participating Cumulative Preferred Stock ("Company Class One Preferred Stock")
and none of which is issued or outstanding. All such shares have been duly
authorized, and all such issued and outstanding shares have been validly issued,
are fully paid and nonassessable and are free of any liens or encumbrances other
than any liens or encumbrances created by or imposed upon the holders thereof.
As of September 6, 2002, the Company had reserved 4,882,720 shares of Company
Common Stock for issuance pursuant to the Company Stock Option Plan, under which
options are outstanding for 3,698,284 shares, 912,521 shares of Company Common
Stock for issuance upon the exercise of the Company Warrants (which as of
September 6, 2002 are outstanding for an aggregate of 912,521 shares of Company
Common Stock) and 1,000,000 shares of Company Class One Preferred Stock for
issuance upon exercise of Company Rights from time to time outstanding. All
shares of Company Common Stock subject to issuance as aforesaid, upon issuance
on the terms and
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conditions specified in the instruments pursuant to which they are issuable,
shall be duly authorized, validly issued, fully paid and nonassessable. Since
August 1, 2002, there have been no amendments of any Company stock options or
warrants and no changes in the capital structure of the Company other than
issuances of Company Common Stock and associated Company Rights upon the
exercise of options granted under the Company Stock Option Plan.
2.3 Obligations With Respect to Capital Stock.
(a) Except as set forth in Section 2.2, there are no equity
securities of any class of the Company, or any security convertible or
exchangeable into or exercisable for such equity securities, issued, reserved
for issuance or outstanding. Except for securities the Company owns, directly or
indirectly through one or more subsidiaries, there are no equity securities of
any class of any subsidiary of the Company, or any security convertible or
exchangeable into or exercisable for such equity securities, issued, reserved
for issuance or outstanding. Except as set forth in Section 2.2, there are no
options, warrants, equity securities, calls, rights, commitments or agreements
of any character to which the Company or any of its subsidiaries is a party or
by which it is bound obligating the Company or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock of the Company or any of its subsidiaries or obligating the
Company or any of its subsidiaries to grant, extend, accelerate the vesting of
or enter into any such option, warrant, equity security, call, right, commitment
or agreement;
(b) Except as contemplated by this Agreement and the Company
Rights Agreement, there are no registration rights, and there is no voting
trust, proxy, rights agreement, "poison pill" anti-takeover plan or other
agreement or understanding to which the Company or any of its subsidiaries is a
party or by which it or any of its subsidiaries is bound with respect to any
security of any class of the Company or with respect to any security,
partnership interest or similar ownership interest of any class of any of its
subsidiaries. The execution and delivery of this Agreement by the Company, the
performance by the Company of its obligations hereunder and consummation by the
Company of the transactions contemplated by this Agreement will not, alone or
together with any other event, nor has any event occurred that would, (i)
entitle any Person to any payment under any security, option, warrant, call,
right, commitment or agreement of the Company, or (ii) other than as
contemplated by Section 5.12 hereof, result in an acceleration of vesting (other
than a standard acceleration of vesting of 50% of the then-unvested shares under
an option), a change in post-service exercisability period, or an adjustment to
the exercise price or number of shares issuable upon exercise of any security,
option, warrant, call, right, commitment or agreement of the Company.
2.4 Authority.
(a) The Company has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval of the
Merger by the vote of the holders of two-thirds of the Company Common Stock.
This Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding obligation of the Company, enforceable against
8
the Company in accordance with its terms, except as enforceability may be
limited by bankruptcy and other similar laws and general principles of equity.
The execution and delivery of this Agreement by the Company does not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit under (i) any provision of
the Articles of Organization or By-laws of the Company or similar governing
instruments of any of its subsidiaries or (ii) any material mortgage, indenture,
lease, contract or other agreement, or any material permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Company or its properties or assets.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity"), is required by or with respect to the Company in connection with the
execution and delivery of this Agreement by the Company or the consummation by
the Company of the transactions contemplated hereby, except for (i) the filing
of the Articles of Merger with the Massachusetts Secretary of State, (ii) the
filing of the Proxy Statement (as defined in Section 2.19) with the Securities
and Exchange Commission ("SEC") in accordance with the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), (iii) the filing of a Form 8-K with
the SEC, (iv) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws and the laws of any foreign country and (v) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not have a Material Adverse Effect on the Company.
2.5 SEC Filings; Company Financial Statements.
(a) The Company has filed all forms, reports and documents
required to be filed with the SEC since January 1, 1999 and has made available
to Parent, in the form filed with the SEC, (i) its Annual Report on Form 10-K
for the fiscal years ended December 31, 1999, 2000 and 2001, (ii) its Quarterly
Reports on Form 10-Q for the periods ended March 31 and June 30, 2002, (iii) all
proxy statements relating to the Company's meetings of stockholders (whether
annual or special) held since January 1, 2000, (iv) all other reports or
registration statements filed by the Company with the SEC since January 1, 1999,
and (v) all amendments and supplements to all such reports, proxy statements and
registration statements filed by the Company with the SEC; and the Company will
make available to Parent in the form filed with the SEC, as soon as practicable,
its Quarterly Report on Form 10-Q for the period ended September 30, 2002. All
such required forms, reports and documents (including those enumerated in
clauses (i) through (v) of the preceding sentence and the Company's September
30, 2002 Form 10-Q, when filed) are referred to herein as the "Company SEC
Reports." As of their respective dates, the Company SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC thereunder applicable to such Company SEC
Reports, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which
9
they were made, not misleading. None of the Company's subsidiaries is required
to file any forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Company SEC Reports (the
"Company Financials"), including any Company SEC Reports filed after the date
hereof until the Closing, (x) complied or will comply as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (y) was or will be prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto) and (z)
fairly presented or will fairly present the consolidated financial position of
the Company and its subsidiaries as at the respective dates thereof and the
consolidated results of its operations, cash flows and changes in stockholders'
equity (if presented) for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not, or are not expected to be, material in
amount. The unaudited balance sheet of the Company as of June 30, 2002 contained
in the Company SEC Reports is hereinafter referred to as the "Company Balance
Sheet."
(c) The Company has heretofore furnished to Parent a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by the Company with the SEC
pursuant to the Securities Act or the Exchange Act.
2.6 Absence of Certain Changes or Events. Except with respect to the
actions contemplated by this Agreement or disclosed in the Company SEC Reports,
since the date of the Company Balance Sheet, the Company and its subsidiaries
have conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been (a) any
Material Adverse Effect on the Company, or any development that reasonably would
be expected to have a Material Adverse Effect on the Company, (b) any material
liability (direct or contingent) which did not arise in the ordinary course of
business, or (c) any other action or event that would have required the consent
of Parent pursuant to Section 4.1 had such action or event occurred after the
date of this Agreement.
2.7 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or "Taxes" refers to any and all federal, state, local and foreign taxes,
assessments and other government charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts, net
operating losses, income, profits, sales, use and occupation, and value added,
ad valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts and any obligations under any agreements or
arrangements with any other person with respect to such amounts and including
any liability for taxes of a predecessor entity.
10
(b) Tax Returns and Audits.
(i) Each of Company and its subsidiaries has timely filed all
federal, state, local and foreign returns, estimates, information statements and
reports ("Returns") relating to Taxes required to be filed by the Company and
each of its subsidiaries, except such Returns which are not material to the
Company. All such Returns were correct and complete in all material respects.
Each of Company and its subsidiaries has paid all Taxes shown to be due on such
Returns, or is contesting them in good faith. None of the Company and its
subsidiaries currently is the beneficiary of any extension of time within which
to file any Return.
(ii) Except as is not material to the Company, each of the
Company and its subsidiaries will have withheld as of the Effective Time with
respect to its employees all income Taxes, FICA, FUTA and other Taxes required
to be withheld.
(iii) Except as is not material to the Company, neither the
Company nor any of its subsidiaries has been delinquent in the payment of any
Tax nor is there any Tax deficiency outstanding, proposed or assessed against
the Company or any of its subsidiaries, nor has the Company or any of its
subsidiaries executed any waiver of any statute of limitations on or extending
the period for the assessment or collection of any Tax.
(iv) Except as is not material to the Company, no audit or other
examination of any Return of the Company or any of its subsidiaries is presently
in progress, nor has the Company or any of its subsidiaries been notified of any
request for such an audit or other examination.
(v) Neither the Company nor any of its subsidiaries has any
liability for unpaid Taxes which have not been accrued for or reserved against
on the Company Balance Sheet in accordance with GAAP, whether asserted or
unasserted, contingent or otherwise, which is material to the Company, except
liability for unpaid Taxes which have accrued since June 30, 2002 in the
ordinary course of business.
(vi) None of the Company's assets is treated as "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(vii) There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of the Company or any of its subsidiaries that,
individually or collectively, could give rise to the payment of any amount for
which a deduction will be disallowed by reason of Sections 280G, 404 or 162(b)
through (o) of the Code.
(viii) Neither the Company nor any of its subsidiaries has filed
any consent agreement under 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
defined in Section 341(f)(4) of the Code) owned by the Company or any of is
subsidiaries.
(ix) The Company is not, and has not been at any time, a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
11
(x) None of the Company and its subsidiaries is a party to any
tax allocation or sharing agreement. None of the Company and its subsidiaries
(A) has been a member of an Affiliated Group (within the meaning of Section
1504(a) of the Code, or any similar group defined under a similar provision of
state, local, or foreign law) filing a consolidated federal Return (other than a
group the common parent of which was the Company) or (B) has any liability for
the taxes of any person (other than any of the Company and its subsidiaries)
under Treas. Reg. ss.1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
2.8 Absence of Liens and Encumbrances. Each of Company and its
subsidiaries has good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its material tangible
properties and assets, real, personal and mixed, used in its business, free and
clear of any liens or encumbrances except as reflected in the Company Financial
Statements and except for liens for taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not materially detract from the value,
or materially interfere with the present use, of the property subject thereto or
affected thereby.
2.9 Intellectual Property.
(a) The Company, directly or indirectly, owns, or is licensed or
otherwise possesses legally enforceable rights to use, all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
maskworks, net lists, schematics, technology, know-how, computer software
programs or applications (in both source code and object code form), and
tangible or intangible proprietary information or material (excluding Commercial
Software as defined in Paragraph (c) below) that are material to the business of
the Company as currently conducted or as proposed to be conducted by the Company
(the "Company Intellectual Property Rights").
(b) The Company is not in violation of any license, sublicense or
agreement related directly to the Company Intellectual Property Rights except
such violations as do not materially impair the Company's rights under such
license, sublicense or agreement. The execution and delivery of this Agreement
by the Company, and the consummation of the transactions contemplated hereby,
will neither cause the Company to be in violation or default under any such
license, sublicense or agreement, nor entitle any other party to any such
license, sublicense or agreement to terminate or modify such license, sublicense
or agreement except such violations or defaults as do not materially impair the
Company's rights under such license, sublicense or agreement. No material claims
with respect to the Company Intellectual Property Rights have been asserted or,
to the knowledge of the Company, are threatened by any person nor, to the
knowledge of the Company, are there any valid grounds for any bona fide material
claims (i) to the effect that the manufacture, sale, licensing or use of any of
the products of the Company or any of its subsidiaries as now manufactured,
sold, licensed or used or proposed for manufacture, sale, licensing or use by
the Company infringes on any copyright, patent, trade xxxx, service xxxx or
trade secret, (ii) against the use by the Company or any of its subsidiaries of
any trademarks, service marks, trade names, trade secrets, copyrights, patents,
technology, know-how or computer software programs and applications used in the
Company's business as currently conducted or as proposed to be conducted, or
(iii) challenging the ownership by the
12
Company, validity or effectiveness of any of the Company Intellectual Property
Rights. All material registered trademarks, service marks and copyrights held by
the Company are valid and subsisting. To the knowledge of the Company, there is
no material unauthorized use, infringement or misappropriation of any of the
Company Intellectual Property Rights by any third party, including any employee
or former employee of the Company. No Company Intellectual Property Right owned
by the Company or product of the Company or any of its subsidiaries, or to the
knowledge of the Company, Company Intellectual Property Right licensed by the
Company or its subsidiaries, is subject to any outstanding decree, order,
judgment, or stipulation restricting in any manner the licensing thereof by the
Company or any of its subsidiaries. Neither the Company nor any of its
subsidiaries has entered into any agreement under which the Company or its
subsidiaries is restricted from selling, licensing or otherwise distributing any
of its products to any class of customers, in any geographic area, during any
period of time or in any segment of the market.
(c) "Commercial Software" means packaged commercially available
software programs generally available to the public through retail dealers in
computer software which have been licensed to the Company (or, in the case of
Section 3.9, to Parent) pursuant to end-user licenses and which are used in the
Company's business (or in Parent's business in the case of Section 3.9) but are
in no way a component of or incorporated in or specifically required to develop
or support any of the Company's (or of Parent's in the case of Section 3.9)
products and related trademarks, technology and know-how.
2.10 Agreements, Contracts and Commitments. Except as disclosed in the
Company SEC Reports, neither the Company nor any of its subsidiaries has, nor is
it a party to nor is it bound by:
(a) any collective bargaining agreements;
(b) any bonus, deferred compensation, incentive compensation,
pension, profit-sharing or retirement plans, or any other employee benefit plans
or arrangements (except for those plans and arrangements relating solely to
employees of the Company's foreign subsidiaries who earn less than $100,000
annual base salary);
(c) any employment or consulting agreement, contract or
commitment with any officer or director-level employee, not terminable by the
Company on thirty days' notice without liability, except to the extent general
principles of wrongful termination law may limit the Company's ability to
terminate employees at will and except for those agreements, contracts and
commitments with employees of the Company's foreign subsidiaries who earn less
than $100,000 annual base salary;
(d) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement; or
13
(e) any agreement, contract or commitment (excluding real and
personal property leases) which involves payment by the Company of $100,000 or
more (excluding amounts which are already owing by the Company or such
subsidiary at June 30, 2002) and is not cancelable without penalty within thirty
(30) days.
2.11 No Default. Neither the Company nor any of its subsidiaries has
breached in any material respect, or received in writing any claim or threat
that it has breached in any material respect, any of the terms or conditions of
any (i) agreement, contract or commitment that was or is required to be filed as
an exhibit to the Company SEC Reports or (ii) any agreement under which the
Company or any of its subsidiaries licenses from a third party any Company
Intellectual Property Rights included in the Company's products in such a manner
as would permit any other party to cancel or terminate the same or would permit
any other party to seek material damages from the Company thereunder. Each of
the agreements, contracts and commitments referred to in clauses (i) and (ii)
above that has not expired or been terminated in accordance with its terms is in
full force and effect and, except as otherwise disclosed, is not subject to any
material default thereunder of which the Company is aware by any party obligated
to the Company pursuant thereto.
2.12 Governmental Authorization. The Company holds all permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities which are material to the operation of the Company's business as
currently conducted (the "Company Permits"). The Company is in material
compliance with the terms of the Company Permits. Except as disclosed in the
Company SEC Reports filed before the date of this Agreement, the business of the
Company is not being conducted in violation of any law, ordinance or regulation
of any Governmental Entity, except for violations or possible violations which
individually or in the aggregate would not have a Material Adverse Effect on the
Company. As of the date of this Agreement, no investigation or review by any
Governmental Entity with respect to the Company is pending or, to the knowledge
of the Company, threatened, nor to the knowledge of the Company, has any
Governmental Entity indicated an intention to conduct the same, other than, in
each case, those the outcome of which would not have a Material Adverse Effect
on the Company.
2.13 Litigation. Except as disclosed in the Company SEC Reports, there
is no action, suit, proceeding, claim, arbitration or investigation pending, or
as to which the Company or any of its subsidiaries has received any notice of
assertion nor, to the Company's knowledge, is there a reasonable basis to expect
such notice of assertion against the Company or any of its subsidiaries which it
is reasonable to expect that, if determined adversely to the Company or any of
its subsidiaries, would have a Material Adverse Effect on the Company, or which
in any manner challenges or seeks to prevent, enjoin, alter or delay any of the
transactions contemplated by this Agreement.
2.14 Environmental Matters. Neither the Company nor any of its
subsidiaries has been or is currently in material violation of any applicable
statute, law or regulation relating to the environment or occupational health
and safety ("Environmental and Occupational Laws"). Each of the Company and its
subsidiaries has all permits and other governmental authorizations currently
required by all applicable statutes, laws or regulations relating to the
environment or occupational health and safety necessary for the conduct of its
business. Neither the Company
14
nor any of its subsidiaries has received any communication from a Governmental
Entity, or any written communication from any Person other than a Governmental
Entity, that alleges that it is not in full compliance with Environmental or
Occupational Laws, except for matters alleging items which would not have a
Material Adverse Effect on the Company. There is no claim of a violation of
Environmental and Occupational Laws pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries, except for matters
alleging items which would not have a Material Adverse Effect on the Company.
2.15 Brokers' and Finders' Fees. Except for fees payable to Xxxxxx,
Xxxxx Xxxxx, Incorporated pursuant to the engagement letter dated May 28, 2002,
a copy of which has been provided to Parent, the Company has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with this
Agreement, the Merger or any transaction contemplated hereby.
2.16 Labor Matters. There are no pending material claims against the
Company or any of its subsidiaries under any workers' compensation plan or
policy or for long-term disability. Each of the Company and its United States
subsidiaries has complied in all material respects with all applicable
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and has no material obligations with respect to any former employees
or qualifying beneficiaries thereunder.
2.17 Employee Benefit Plans.
(a) The Company has made available to Parent (i) accurate and
complete copies of all Benefit Plan documents and all other material documents
relating thereto, including (if applicable) all summary plan descriptions,
summary annual reports and insurance contracts, (ii) accurate and complete
detailed summaries of all unwritten Benefit Plans, (iii) accurate and complete
copies of the most recent financial statements and actuarial reports with
respect to all Benefit Plans for which financial statements or actuarial reports
are required or have been prepared and (iv) accurate and complete copies of all
annual reports for all Benefit Plans (for which annual reports are required)
prepared within the last three years. "Benefit Plans" means all employee benefit
plans within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and any related or separate
contracts, plans, trusts, programs, policies, arrangements, practices, customs
and understandings, in each case whether formal or informal, that provide
benefits of economic value to any present or former employee of the Company (or,
in the case of Section 3.17, Parent) or present or former beneficiary, dependent
or assignee of any such employee or former employee.
(b) All Benefit Plans of the Company conform (and at all times
have conformed) in all material respects to, and are being administered and
operated (and have at all time been administered and operated) in material
compliance with, the requirements of ERISA, the Code and all other applicable
laws or governmental regulations. All returns, reports and disclosure statements
required to be made under ERISA and the Code with respect to all Benefit Plans
have been timely filed or delivered. There have not been any "prohibited
transactions," as such term is defined in Section 4975 of the Code or Section
406 of ERISA involving any of the Benefit Plans, that could subject the Company
to any material penalty or tax imposed under the Code or ERISA.
15
(c) Any Benefit Plan that is intended to be qualified under
Section 401(a) of the Code and exempt from tax under Section 501(a) of the Code
has been determined by the Internal Revenue Service to be so qualified or an
application for such determination is pending. Any such determination that has
been obtained remains in effect and has not been revoked, and with respect to
any application that is pending, the Company has no reason to suspect that such
application for determination will be denied. Nothing has occurred since the
date of any such determination that is reasonably likely to affect adversely
such qualification or exemption, or result in the imposition of excise taxes or
income taxes on unrelated business income under the Code or ERISA with respect
to any Benefit Plan.
(d) The Company does not sponsor a defined benefit plan subject
to Title IV of ERISA, nor does it have a current or contingent obligation to
contribute to any multiemployer plan (as defined in Section 3(37) of ERISA). The
Company does not have any material liability with respect to any employee
benefit plan (as defined in Section 3(3) of ERISA) other than with respect to
the Benefit Plans. For purposes of this Section 2.17, the term "the Company"
shall include any corporation that is a member of any controlled group of
corporations (as defined in Section 414(b) of the Code) that includes the
Company, any trade or business (whether or not incorporated) that is under
common control (as defined in Section 414(c) of the Code) with the Company, any
organization (whether or not incorporated) that is a member of an affiliated
service group (as defined in Section 414(m) of the Code) that includes the
Company and any other entity required to be aggregated with the Company pursuant
to the regulations issued under Section 414(o) of the Code.
(e) There are no pending or, to the knowledge of the Company,
threatened claims by or on behalf of any Benefit Plans, or by or on behalf of
any individual participants or beneficiaries of any Benefit Plans, alleging any
breach of fiduciary duty on the part of the Company or any of its officers,
directors or employees under ERISA or any other applicable regulations, or
claiming benefit payments (other than those made in the ordinary operation of
such plans), nor is there, to the knowledge of the Company, any basis for such
claim, except in any such case as reasonably would not be expected to have a
Material Adverse Effect on the Company. The Benefit Plans are not the subject of
any pending (or to the knowledge of the Company, any threatened) investigation
or audit by the Internal Revenue Service, the Department of Labor or the Pension
Benefit Guaranty Corporation ("PBGC").
(f) The Company has timely made all required contributions under
the Benefit Plans including the payment of any premiums payable to the PBGC and
other insurance premiums.
(g) With respect to any Benefit Plan that is an employee welfare
benefit plan (within the meaning of Section 3(1) of ERISA) (a "Welfare Plan"),
(i) each Welfare Plan for which contributions are claimed by the Company as
deductions under any provision of the Code is in material compliance with all
applicable requirements pertaining to such deduction, (ii) with respect to any
welfare benefit fund (within the meaning of Section 419 of the Code) related to
a Welfare Plan, there is no disqualified benefit (within the meaning of Section
4976(b) of the Code) that would result in the imposition of a tax under Section
4976(a) of the Code, (iii) any Benefit Plan that is a group health plan (within
the meaning of Section 4980B(g)(2) of the Code) complies, and in each and every
case has complied, with all of the applicable material
16
requirements of Section 4980B of the Code, ERISA, Title XXII of the Public
Health Service Act and the Social Security Act, and (iv) all Welfare Plans may
be amended or terminated at any time on or after the Closing Date. No Benefit
Plan provides any health, life or other welfare coverage to employees of the
Company beyond termination of their employment with the Company by reason or
retirement or otherwise, other than coverage as may be required under Section
4980B of the Code or Part 6 of ERISA, or under the continuation of coverage
provisions of the laws of any state or locality.
2.18 Compliance With Laws. Each of the Company and its subsidiaries has
complied in all material respects with, is not in material violation of, and has
not received any notices of violation with respect to, any federal, state or
local statute, law or regulation with respect to the conduct of its business, or
the ownership or operation of its business, except in any such case as
reasonably would not be expected to have a Material Adverse Effect on the
Company.
2.19 Registration Statement; Proxy Statement/Prospectus. The
information supplied by the Company specifically for inclusion in the
Registration Statement (as defined in Section 3.19) shall not at the time the
Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. The
information supplied by the Company specifically for inclusion in the proxy
statement/prospectus to be sent to the stockholders of the Company and
stockholders of Parent in connection with the meeting of the Company's
stockholders to consider the Merger (the "Company Stockholders' Meeting") and in
connection with the meeting of Parent's stockholders to consider the Merger (the
"Parent Stockholders' Meeting") (such proxy statement/prospectus as amended or
supplemented is referred to herein as the "Proxy Statement") shall not, on the
date the Proxy Statement is first mailed to the Company's stockholders and
Parent's stockholders, at the time of the Company Stockholders' Meeting, at the
time of the Parent Stockholders' Meeting or at the Effective Time (in each case
as supplemented or amended through such time), contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Stockholders' Meeting or Parent Stockholders' Meeting which has become false or
misleading. If at any time prior to the Effective Time any information relating
to the Company or any of its affiliates, officers or directors shall be
discovered by the Company which should be set forth in an amendment to the
Registration Statement or a supplement to the Proxy Statement, the Company shall
promptly inform Parent. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information supplied by Parent or
Merger Sub which is contained in any of the foregoing documents.
2.20 Board Approval. On or prior to the date of this Agreement, the
Board of Directors of the Company, by votes duly adopted by unanimous approval
of those voting at a meeting duly called and held and not subsequently rescinded
or modified in any way, has duly (a) determined that this Agreement and the
Merger are in the best interests of the Company and its stockholders, (b)
approved this Agreement and the Merger, and (c) recommended that the
17
stockholders of the Company adopt this Agreement and directed that this
Agreement and the transactions contemplated hereby be submitted for
consideration by the Company's stockholders at the Company Stockholders'
Meeting.
2.21 Fairness Opinion. The Company has received a written opinion from
Xxxxxx, Xxxxx Xxxxx, Incorporated dated on or about the date hereof, that the
Merger is fair to the Company's stockholders from a financial point of view, and
has delivered to Parent a copy of such opinion.
2.22 Antitakeover Laws. No "fair price," "business combination,"
"moratorium," "control share acquisition" or other form of antitakeover statute
or regulation (a "Takeover Statute"), including Chapter 110C of the General Laws
of the Commonwealth of Massachusetts, is or will be applicable (as to the
Company) to the execution, delivery or performance of this Agreement or the
consummation of the Merger or the other transactions contemplated by this
Agreement.
2.23 Rights Agreement. Immediately prior to the execution of the
Agreement, the Company has (a) duly entered into an appropriate amendment to the
Company Rights Plan, which amendment has been provided to Parent and approved by
the Board of Directors of the Company and (b) taken all other action necessary
or appropriate so that the entering into of this Agreement by the Company does
not and will not result in the ability of any Person to exercise any Company
Rights under the Company Rights Plan or enable or require the Company Rights
issued thereunder to separate from the shares of Company Common Stock to which
they are attached or to be triggered or become exercisable. "Company Rights
Plan" means the Rights Agreement dated as of May 18, 2001 between the Company
and Registrar and Transfer Company as rights agent, as amended to date. "Company
Rights" has the same meaning as the term "Rights" under the Company Rights Plan.
Article III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
-------------------------------------------------------
Parent and Merger Sub represent and warrant to the Company, subject to
the exceptions specifically disclosed in the disclosure letter supplied by
Parent to the Company (the "Parent Letter") and dated as of the date hereof, as
follows:
3.1 Organization of Parent and Merger Sub. Each of Parent, its material
subsidiaries and Merger Sub is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation,
has the corporate power to own, lease and operate its property and to carry on
its business as now being conducted and as proposed to be conducted, and is duly
qualified to do business and in good standing as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect on Parent. Except as set forth in the Parent SEC Reports (as
defined in Section 3.5), Parent owns, directly or indirectly through one or more
subsidiaries, 100% of the capital stock of each of its subsidiaries and does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for any interest in, any
corporation, partnership, joint venture or other business association or entity
other than
18
the securities of any publicly-traded entity held for investment only and
constituting less than 5% of the outstanding capital stock of any such entity.
Parent has made available to counsel for the Company a true and correct copy of
the Certificate of Incorporation and By-laws or other charter documents of
Parent, Merger Sub and similar governing instruments of its material
subsidiaries, each as amended to date.
3.2 Capital Structure.
(a) The authorized capital stock of Parent consists of 69,000,000
shares of Parent Common Stock, of which 31,104,311 shares (together with the
appropriate number of Parent Rights) were issued and outstanding as of September
6, 2002, and 2,000,000 shares of Preferred Xxxxx, x.0000 par value, of which
500,000 shares have been designated as Series A Junior Participating Preferred
Stock and none of which is issued or outstanding. The authorized capital stock
of Merger Sub consists of 1,000 shares of Common Stock, $.01 par value, 100
shares of which, as of the date hereof, are issued and outstanding and are held
by Parent. All such shares have been duly authorized, and all such issued and
outstanding shares have been validly issued, are fully paid and nonassessable
and are free of any liens or encumbrances other than any liens or encumbrances
created by or imposed upon the holders thereof. As of September 6, 2002, Parent
had reserved 5,786,892 shares of Parent Common Stock for issuance pursuant to
Parent's 1995 Stock Option/Stock Issuance Plan (the "Parent Stock Option Plan"),
under which options were outstanding for 3,192,051.4 shares, and 1,695,508
shares of Parent Common Stock for issuance upon exercise of outstanding warrants
(which as of September 6, 2002 are outstanding for an aggregate of 1,695,508
shares of Parent Common Stock). As of September 6, 2002, Parent had outstanding
$24,118,000 principal amount of 4.25% Convertible Subordinated Notes
("Convertible Notes"), convertible into 9,647,200 shares of Parent Common Stock.
All shares of Parent Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, shall be duly authorized, validly issued, fully paid
and nonassessable. Since August 1, 2002, there have been no amendments of any
Parent stock options, warrants or Convertible Notes and no changes in the
capital structure of Parent other than issuances of Parent Common Stock and
associated Parent Rights upon the exercise of options granted under the Parent
Stock Option Plan.
(b) The shares of Parent Common Stock to be issued pursuant to
the Merger will, upon issuance, be duly authorized, validly issued, fully paid
and non-assessable.
3.3 Obligations With Respect to Capital Stock.
(a) Except as set forth in Section 3.2, there are no equity
securities of any class of Parent, or any security convertible or exchangeable
into or exercisable for such equity securities, issued, reserved for issuance or
outstanding. Except for securities Parent owns, directly or indirectly through
one or more subsidiaries, there are no equity securities of any class of any
subsidiary of Parent, or any security convertible or exchangeable into or
exercisable for such equity securities, issued, reserved for issuance or
outstanding. Except as set forth in Section 3.2, there are no options, warrants,
equity securities, calls, rights, commitments or agreements of any character to
which Parent or any of its subsidiaries is a party or by which it is bound
obligating Parent or any of its subsidiaries to issue, deliver or sell, or cause
to be issued,
19
delivered or sold, additional shares of capital stock of Parent or any of its
subsidiaries or obligating Parent or any of its subsidiaries to grant, extend,
accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement.
(b) Except as contemplated by this Agreement and the Parent
Rights Agreement, there are no registration rights (except under registration
rights agreements for which resale registration statements have already been
filed), and there is no voting trust, proxy, rights agreement, "poison pill"
anti-takeover plan or other agreement or understanding to which Parent or any of
its subsidiaries is a party or by which it or any of its subsidiaries is bound
with respect to any security of any class of Parent or with respect to any
security, partnership interest or similar ownership interest of any class of any
of its subsidiaries. The execution and delivery of this Agreement by Parent and
Merger Sub, the performance by Parent and Merger Sub of their obligations
hereunder and consummation by Parent and Merger Sub of the transactions
contemplated by this Agreement will not, alone or together with any other event,
nor has any event occurred that would, (i) entitle any Person to any payment
under any security, option, warrant, call, right, commitment or agreement of
Parent or Merger Sub, or (ii) result in an acceleration of vesting, a change in
post-service exercisability period, or an adjustment to the exercise price or
number of shares issuable upon exercise of any security, option, warrant, call,
right, commitment or agreement of Parent or Merger Sub.
3.4 Authority.
(a) Parent and Merger Sub have all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub subject
only to the approval of the issuance of Parent Common Stock in the Merger by the
vote of a majority of the Parent Common Stock present or represented by proxy at
the Parent Stockholders' Meeting. This Agreement has been duly executed and
delivered by Parent and Merger Sub and constitutes the valid and binding
obligations of Parent and Merger Sub, enforceable against Parent and Merger Sub
in accordance with its terms, except as enforceability may be limited by
bankruptcy and other similar laws and general principles of equity. The
execution and delivery of this Agreement does not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a benefit under (i) any provision of the Certificate
of Incorporation or By-laws of Parent, the Articles of Organization or By-laws
of Merger Sub or similar governing instruments of any of its subsidiaries or
(ii) any material mortgage, indenture, lease, contract or other agreement, or
any material permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or its
properties or assets.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to Parent and Merger Sub in connection with the execution and
delivery of this Agreement by Parent and Merger Sub or the consummation by
Parent and Merger Sub of the transactions contemplated hereby, except for (i)
the filing of the Form S-4 Registration Statement with the SEC in accordance
with the Securities Act, (ii) the filing of the Articles of Merger with the
Massachusetts Secretary of State, (iii) the filing of the Proxy Statement with
the SEC in
20
accordance with the Exchange Act, (iv) the filing of a Form 8-K with the SEC,
(v) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws and the laws of any foreign country, and (vi) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not have a Material Adverse Effect on Parent.
3.5 SEC Filings, Parent Financial Statements.
(a) Parent has filed all forms, reports and documents required to
be filed with the SEC since January 1, 1996 and has made available to the
Company, in the form filed with the SEC, (i) its Annual Reports on Form 10-K for
the fiscal years ended December 31, 1999, 2000 and 2001, (ii) its Quarterly
Reports on Form 10-Q for the periods ended March 31 and June 30, 2002, (iii) all
proxy statements relating to Parent's meetings of stockholders (whether annual
or special) held since January 1, 1996, (iv) all other reports or registration
statements filed by Parent with the SEC since January 1, 1996, and (v) all
amendments and supplements to all such reports, proxy statements and
registration statements filed by Parent with the SEC; and Parent will make
available to the Company in the form filed with the SEC, as soon as practicable,
its Quarterly Report on Form 10-Q for the period ended September 30, 2002. All
such required forms, reports and documents (including those enumerated in
clauses (i) through (v) of the preceding sentence and Parent's September 30,
2002 Form 10-Q, when filed) are referred to herein as the "Parent SEC Reports."
As of their respective dates, the Parent SEC Reports (i) were prepared in
accordance with the requirements of the Securities Act or the Exchange Act, as
the case may be, and the rules and regulations of the SEC thereunder applicable
to such Parent SEC Reports and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing) contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. None of Parent's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Except to the extent later restated in Parent SEC Reports
which were filed before 2002, each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the Parent SEC
Reports (the "Parent Financials"), including any Parent SEC Reports filed after
the date hereof until the Closing, (x) complied or will comply as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, (y) was or will be prepared in accordance with GAAP applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto) and (z) fairly presented or will fairly present the
consolidated financial position of Parent and its subsidiaries as at the
respective dates thereof and the consolidated results of its operations, cash
flows and changes in stockholders' equity (if presented) for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount. The unaudited balance sheet of Parent as of
June 30, 2002 contained in the Parent SEC Reports is hereinafter referred to as
the "Parent Balance Sheet."
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(c) Parent has heretofore furnished to the Company a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by Parent with the SEC
pursuant to the Securities Act or the Exchange Act.
3.6 Absence of Certain Changes or Events. Except with respect to the
actions contemplated by this Agreement or disclosed in the Parent SEC Reports,
since the date of the Parent Balance Sheet, Parent and its subsidiaries have
conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been (a) any
Material Adverse Effect on Parent, or any development that reasonably would be
expected to have a Material Adverse Effect on Parent, (b) any material liability
(direct or contingent) which did not arise in the ordinary course of business,
or (c) any other action or event that would have required the consent of the
Company pursuant to Section 4.2 had such action or event occurred after the date
of this Agreement.
3.7 Taxes.
(a) Each of Parent and its subsidiaries has timely filed all
Returns relating to Taxes required to be filed by Parent and each of its
subsidiaries, except such Returns which are not material to Parent. All such
Returns were correct and complete in all material respects. Each of Parent and
its subsidiaries has paid all Taxes shown to be due on such Returns, or is
contesting them in good faith. None of the Parent and its subsidiaries currently
is the beneficiary of any extension of time within which to file any Return.
(b) Except as is not material to Parent, each of Parent and its
subsidiaries will have withheld as of the Effective Time with respect to its
employees all income Taxes, FICA, FUTA and other Taxes required to be withheld.
(c) Except as is not material to Parent, neither Parent nor any
of its subsidiaries has been delinquent in the payment of any Tax nor is there
any Tax deficiency outstanding, proposed or assessed against Parent or any of
its subsidiaries, nor has Parent or any of its subsidiaries executed any waiver
of any statute of limitations on or extending the period for the assessment or
collection of any Tax.
(d) Except as is not material to Parent, no audit or other
examination of any Return of Parent or any of its subsidiaries is presently in
progress, nor has Parent or any of its subsidiaries been notified of any request
for such an audit or other examination.
(e) Neither Parent nor any of its subsidiaries has any liability
for unpaid Taxes which have not been accrued for or reserved against on the
Parent Balance Sheet in accordance with GAAP, whether asserted or unasserted,
contingent or otherwise, which is material to Parent, except liability for
unpaid Taxes which have accrued since June 30, 2002 in the ordinary course of
business.
(f) None of Parent's assets is treated as "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
22
(g) There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of Parent or any of its subsidiaries that,
individually or collectively, could give rise to the payment of any amount for
which a deduction will be disallowed by reason of Sections 280G, 404 or 162(b)
through (o) of the Code.
(h) Neither Parent nor any of its subsidiaries has filed any
consent agreement under 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
defined in Section 341(f)(4) of the Code) owned by Parent or any of its
subsidiaries.
(i) Parent is not, and has not been at any time, a "United States
real property holding corporation" within the meaning of Section 897(c)(2) of
the Code.
(j) None of the Parent and its subsidiaries is a party to any tax
allocation or sharing agreement. None of the Parent and its subsidiaries (A) has
been a member of an Affiliated Group (within the meaning of Section 1504(a) of
the Code, or any similar group defined under a similar provision of state,
local, or foreign law) filing a consolidated federal Return (other than a group
the common parent of which was the Parent) or (B) has any liability for the
taxes of any person (other than any of the Parent and its subsidiaries) under
Treas. Reg. ss.1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise.
3.8 Absence of Liens and Encumbrances. Each of Parent and its
subsidiaries has good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its material tangible
properties and assets, real, personal and mixed, used in its business, free and
clear of any liens or encumbrances except as reflected in the Parent Financial
Statements and except for liens for taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not materially detract from the value,
or materially interfere with the present use, of the property subject thereto or
affected thereby.
3.9 Intellectual Property.
(a) Parent, directly or indirectly, owns, or is licensed or
otherwise possesses legally enforceable rights to use, all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
maskworks, net lists, schematics, technology, know-how, computer software
programs or applications (in both source code and object code form), and
tangible or intangible proprietary information or material (excluding Commercial
Software) that are material to the business of Parent as currently conducted or
as proposed to be conducted by Parent (the "Parent Intellectual Property
Rights").
(b) Parent is not in violation of any license, sublicense or
agreement related directly to the Parent Intellectual Property Rights except
such violations as do not materially impair Parent's rights under such license,
sublicense
23
or agreement. The execution and delivery of this Agreement by Parent, and the
consummation of the transactions contemplated hereby, will neither cause Parent
to be in violation or default under any such license, sublicense or agreement,
nor entitle any other party to any such license, sublicense or agreement to
terminate or modify such license, sublicense or agreement except such violations
or defaults as do not materially impair Parent's rights under such license,
sublicense or agreement. No material claims with respect to Parent Intellectual
Property Rights have been asserted or, to the knowledge of Parent, are
threatened by any person, nor, to the knowledge of Parent, are there any valid
grounds for any bona fide material claims (i) to the effect that the
manufacture, sale, licensing or use of any of the products of Parent or any of
its subsidiaries as now manufactured, sold, licensed or used or proposed for
manufacture, sale, licensing or use by Parent infringes on any copyright,
patent, trade xxxx, service xxxx or trade secret, (ii) against the use by Parent
or any of its subsidiaries of any trademarks, service marks, trade names, trade
secrets, copyrights, patents, technology, know-how or computer software programs
and applications used in Parent's business as currently conducted or as proposed
to be conducted, or (iii) challenging the ownership by Parent, validity or
effectiveness of any of Parent Intellectual Property Rights. All material
registered trademarks, service marks and copyrights held by Parent are valid and
subsisting. To the knowledge of Parent, there is no material unauthorized use,
infringement or misappropriation of any Parent Intellectual Property Rights by
any third party, including any employee or former employee of Parent. No Parent
Intellectual Property Right owned by Parent or product of Parent or any of its
subsidiaries, or to the knowledge of Parent, Parent Intellectual Property Right
licensed by Parent or its subsidiaries, is subject to any outstanding decree,
order, judgment, or stipulation restricting in any manner the licensing thereof
by Parent or any of its subsidiaries. Neither Parent nor any of its subsidiaries
has entered into any agreement under which Parent or its subsidiaries is
restricted from selling, licensing or otherwise distributing any of its products
to any class of customers, in any geographic area, during any period of time or
in any segment of the market.
3.10 Agreements, Contracts and Commitments. Except as disclosed in the
Parent SEC Reports, neither Parent nor any of its subsidiaries has, nor is it a
party to nor is it bound by:
(a) any collective bargaining agreements;
(b) any bonus, deferred compensation, incentive compensation,
pension, profit-sharing or retirement plans, or any other employee benefit plans
or arrangements (except for those plans and arrangements relating solely to
employees of Parent's foreign subsidiaries who earn less than $100,000 annual
base salary);
(c) any employment or consulting agreement, contract or
commitment with any officer or director-level employee, not terminable by Parent
on thirty days notice without liability, except to the extent general principles
of wrongful termination law may limit Parent's ability to terminate employees at
will and except for those agreements, contracts and commitments with employees
of Parent's foreign subsidiaries who earn less than $100,000 annual base salary;
(d) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of
24
which will be calculated on the basis of any of the transactions contemplated by
this Agreement; or
(e) any agreement, contract or commitment (excluding real and
personal property leases) which involves payment by Parent of $100,000 or more
(excluding amounts which are already owing by Parent or such subsidiary at June
30, 2002) and is not cancelable without penalty within thirty (30) days.
3.11 No Default. Neither Parent nor any of its subsidiaries has
breached in any material respect, or received in writing any claim or threat
that it has breached in any material respect, any of the terms or conditions of
any (i) agreement, contract or commitment that was or is required to be filed as
an exhibit to the Parent SEC Reports or (ii) any agreement under which Parent or
any of its subsidiaries licenses from a third party any Parent Intellectual
Property Rights included in Parent's products in such a manner as would permit
any other party to cancel or terminate the same or would permit any other party
to seek material damages from Parent thereunder. Each of the agreements,
contracts and commitments referred to in clauses (i) and (ii) above that has not
expired or been terminated in accordance with its terms is in full force and
effect and, except as otherwise disclosed, is not subject to any material
default thereunder of which Parent is aware by any party obligated to Parent
pursuant thereto.
3.12 Governmental Authorization. Parent holds all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities which
are material to the operation of Parent's business as currently conducted (the
"Parent Permits"). Parent is in material compliance with the terms of the Parent
Permits. Except as disclosed in the Parent SEC Reports filed before the date of
this Agreement, the business of Parent is not being conducted in violation of
any law, ordinance or regulation of any Governmental Entity, except for
violations or possible violations which individually or in the aggregate would
not have a Material Adverse Effect on Parent. As of the date of this Agreement,
no investigation or review by any Governmental Entity with respect to Parent is
pending or, to the knowledge of Parent, threatened, nor to the knowledge of
Parent, has any Governmental Entity indicated an intention to conduct the same,
other than, in each case, those the outcome of which would not have a Material
Adverse Effect on Parent.
3.13 Litigation. Except as disclosed in the Parent SEC Reports, there
is no action, suit, proceeding, claim, arbitration or investigation pending, or
as to which Parent or any of its subsidiaries has received any notice of
assertion nor, to Parent's knowledge, is there a reasonable basis to expect such
notice of assertion against Parent or any of its subsidiaries which it is
reasonable to expect that, if determined adversely to Parent or any of its
subsidiaries, would have a Material Adverse Effect on Parent, or which in any
manner challenges or seeks to prevent, enjoin, alter or delay any of the
transactions contemplated by this Agreement.
3.14 Environmental Matters. Neither Parent nor any of is subsidiaries
has been or is currently in material violation of any applicable Environmental
and Occupational Laws. Each of Parent and its subsidiaries has all permits and
other governmental authorizations currently required by all applicable statutes,
laws or regulations relating to the environment or occupational health and
safety necessary for the conduct of its business. Neither Parent nor any of its
subsidiaries has received any communication from a Governmental Entity, or any
written
25
communication from any Person other than a Governmental Entity, that alleges
that it is not in full compliance with Environmental or Occupational Laws,
except for matters alleging items which would not have a Material Adverse Effect
on Parent. There is no claim of a violation of Environmental and Occupational
Laws pending or, to the knowledge of Parent, threatened against Parent, except
for matters alleging items which would not have a Material Adverse Effect on
Parent.
3.15 Broker's and Finders' Fees. Except for fees payable to Xxxxx
McAfee Capital Partners, LLC pursuant to the engagement letter dated December
10, 2001, as amended to date, including by an addendum dated June 13, 2002, a
copy of which (including all addendums and amendments) has been provided to the
Vice President - Legal of the Company, Parent has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement,
the Merger or any transaction contemplated hereby.
3.16 Labor Matters. There are no pending material claims against Parent
or any of its subsidiaries under any workers' compensation plan or policy or for
long-term disability. Parent and each of its United States subsidiaries has
complied in all material respects with all applicable provisions of COBRA and
has no material obligations with respect to any former employees or qualifying
beneficiaries thereunder.
3.17 Employee Benefit Plans.
(a) Parent has made available to the Company (i) accurate and
complete copies of all Benefit Plan documents and all other material documents
relating thereto, including (if applicable) all summary plan descriptions,
summary annual reports and insurance contracts, (ii) accurate and complete
detailed summaries of all unwritten Benefit Plans, (iii) accurate and complete
copies of the most recent financial statements and actuarial reports with
respect to all Benefit Plans for which financial statements or actuarial reports
are required or have been prepared and (iv) accurate and complete copies of all
annual reports for all Benefit Plans (for which annual reports are required)
prepared within the last three years.
(b) All Benefit Plans of Parent conform (and at all times have
conformed) in all material respects to, and are being administered and operated
(and have at all time been administered and operated) in material compliance
with, the requirements of ERISA, the Code and all other applicable laws or
governmental regulations. All returns, reports and disclosure statements
required to be made under ERISA and the Code with respect to all Benefit Plans
have been timely filed or delivered. There have not been any "prohibited
transactions," as such term is defined in Section 4975 of the Code or Section
406 of ERISA involving any of the Benefit Plans, that could subject Parent to
any material penalty or tax imposed under the Code or ERISA.
(c) Any Benefit Plan that is intended to be qualified under
Section 401(a) of the Code and exempt from tax under Section 501(a) of the Code
has been determined by the Internal Revenue Service to be so qualified or an
application for such determination is pending. Any such determination that has
been obtained remains in effect and has not been revoked, and with respect to
any application that is pending, Parent has no reason to
26
suspect that such application for determination will be denied. Nothing has
occurred since the date of any such determination that is reasonably likely to
affect adversely such qualification or exemption, or result in the imposition of
excise taxes or income taxes on unrelated business income under the Code or
ERISA with respect to any Benefit Plan.
(d) Parent does not sponsor a defined benefit plan subject to
Title IV of ERISA, nor does it have a current or contingent obligation to
contribute to any multiemployer plan (as defined in Section 3(37) of ERISA).
Parent does not have any material liability with respect to any employee benefit
plan (as defined in Section 3(3) of ERISA) other than with respect to the
Benefit Plans. For purposes of this Section 3.17, the term "Parent" shall
include any corporation that is a member of any controlled group of corporations
(as defined in Section 414(b) of the Code) that includes Parent, any trade or
business (whether or not incorporated) that is under common control (as defined
in Section 414(c) of the Code) with Parent, any organization (whether or not
incorporated) that is a member of an affiliated service group (as defined in
Section 414(m) of the Code) that includes Parent and any other entity required
to be aggregated with Parent pursuant to the regulations issued under Section
414(o) of the Code.
(e) There are no pending or, to the knowledge of Parent,
threatened claims by or on behalf of any Benefit Plans, or by or on behalf of
any individual participants or beneficiaries of any Benefit Plans, alleging any
breach of fiduciary duty on the part of Parent or any of its officers, directors
or employees under ERISA or any other applicable regulations, or claiming
benefit payments (other than those made in the ordinary operation of such
plans), nor is there, to the knowledge of Parent, any basis for such claim,
except in any such case as reasonably would not be expected to have a Material
Adverse Effect on Parent. The Benefit Plans are not the subject of any pending
(or to the knowledge of Parent, any threatened) investigation or audit by the
Internal Revenue Service, the Department of Labor or the PBGC.
(f) Parent has timely made all required contributions under the
Benefit Plans including the payment of any premiums payable to the PBGC and
other insurance premiums.
(g) With respect to any Benefit Plan that is a Welfare Plan, (i)
each Welfare Plan for which contributions are claimed by Parent as deductions
under any provision of the Code is in material compliance with all applicable
requirements pertaining to such deduction, (ii) with respect to any welfare
benefit fund (within the meaning of Section 419 of the Code) related to a
Welfare Plan, there is no disqualified benefit (within the meaning of Section
4976(b) of the Code) that would result in the imposition of a tax under Section
4976(a) of the Code, (iii) any Benefit Plan that is a group health plan (within
the meaning of Section 4980B(g)(2) of the Code) complies, and in each and every
case has complied, with all of the applicable material requirements of Section
4980B of the Code, ERISA, Title XXII of the Public Health Service Act and the
Social Security Act, and (iv) all Welfare Plans may be amended or terminated at
any time on or after the Closing Date. No Benefit Plan provides any health, life
or other welfare coverage to employees of the Company beyond termination of
their employment with the Company by reason or retirement or otherwise, other
than coverage as may be required under Section 4980B of the Code or Part 6 of
ERISA, or under the continuation of coverage provisions of the laws of any state
or locality.
27
3.18 Compliance With Laws. Each of Parent and its subsidiaries has
complied in all material respects with, is not in material violation of, and has
not received any notices of violation with respect to, any federal, state or
local statute, law or regulation with respect to the conduct of its business, or
the ownership or operation of its business, except in any such case as
reasonably would not be expected to have a Material Adverse Effect on Parent.
3.19 Registration Statement; Proxy Statement/Prospectus. Subject to the
accuracy of the representations of the Company made in Section 2.19, the
registration statement on Form S-4 (or such other or successor form as shall be
appropriate), (including any amendments or supplements thereto, the
"Registration Statement"), pursuant to which the shares of Parent Common Stock
to be issued in the Merger will be registered with the SEC shall not, at the
time the Registration Statement is filed with the SEC, at the time it becomes
effective under the Securities Act, at the time of the Company Stockholders'
Meeting or at the time of the Parent Stockholders' Meeting (in each case as
supplemented or amended through such time), contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements included therein not misleading. The information supplied by Parent
specifically for inclusion in the Proxy Statement shall not, on the date the
Proxy Statement is first mailed to stockholders, at the time of the Company
Stockholders' Meeting or Parent Stockholders' Meeting or at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not false or
misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Stockholders' Meeting or Parent Stockholders' Meeting
which has become false or misleading. If at any time prior to the Effective Time
any information relating to Parent, Merger Sub or any of their respective
affiliates, officers or directors shall be discovered by Parent or Merger Sub
which should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, Parent or Merger Sub will promptly inform the
Company. Notwithstanding the foregoing, Parent and Merger Sub make no
representation or warranty with respect to any information supplied by the
Company which is contained in any of the foregoing documents.
3.20 Board Approval. On or prior to the date of this Agreement, the
Board of Directors of Parent, by resolutions duly adopted by unanimous vote of
those voting at a meeting duly called and held and not subsequently rescinded or
modified in any way, has duly (a) determined that this Agreement and the Merger
are fair to and in the best interests of Parent and its stockholders, (b)
approved this Agreement and the Merger, and determined that the execution,
delivery and performance of this Agreement is advisable and (c) recommended that
the stockholders of Parent approve the issuance of Parent Common Stock pursuant
to this Agreement and directed that the issuance of such shares be submitted for
consideration by Parent's stockholders at the Parent Stockholders' Meeting.
3.21 Fairness Opinion. Parent has received a written opinion from Xxxxx
McAfee Capital Partners, LLC, dated on or about the date hereof, that the
Exchange Ratio is fair to Parent from a financial point of view, and has
delivered to the Company a copy of such opinion.
28
3.22 Section 203 of the DGCL Not Applicable. The restrictions contained
in Section 203 of the Delaware General Corporation Law applicable to a "business
combination" (as defined therein) will not apply to, and (as to Parent) no other
Takeover Statute will apply to, the execution, delivery or performance of this
Agreement or the consummation of the Merger or the other transactions
contemplated by this Agreement.
3.23 Rights Agreement. The entering into of this Agreement by Parent
and Merger Sub does not and will not result in the ability of any Person to
exercise any Parent Rights under the Parent Rights Plan or enable or require the
Parent Rights issued thereunder to separate from the shares of Parent Common
Stock to which they are attached or to be triggered or become exercisable.
"Parent Rights Plan" means the Rights Agreement dated as of October 1, 1997
between Parent and BankBoston, N.A. as rights agent, as amended to date. "Parent
Rights" has the same meaning as the term "Rights" under the Parent Rights Plan.
Article IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
-----------------------------------
4.1 Conduct of Business of the Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms and the Effective Time, the Company (which for
the purposes of this Section 4.1 shall include the Company and each of its
subsidiaries) agrees, except to the extent that Parent shall otherwise consent
in writing, to carry on its business in the usual, regular and ordinary course,
in substantially the same manner as heretofore conducted and in compliance in
all material respects with all applicable laws and regulations, to pay its debts
and Taxes when due subject to good faith disputes over such debts or Taxes, to
pay or perform other material obligations when due, and to use all reasonable
efforts consistent with past practices and policies to preserve intact the
Company's present business organizations, keep available the services of its
present officers and employees and preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with the Company, to the end that the Company's goodwill and ongoing
businesses shall not be impaired in any material respect at the Effective Time.
"Ordinary course" is deemed to intrinsically include full compliance with the
short-term cost reduction plan delivered by the Company to Parent on or before
the date of this Agreement. The Company shall promptly notify Parent of any
event or occurrence not in the ordinary course of business of the Company, and
will not enter into or amend any agreement or take any action which reasonably
would be expected to have a Material Adverse Effect on the Company. Except as
expressly contemplated by this Agreement or in compliance with Section 5.4(a),
the Company shall not prior to the Effective Time or earlier termination of this
Agreement pursuant to its terms, without the prior written consent of Parent's
Chief Executive Officer:
(a) Waive any stock repurchase rights, accelerate, amend or
change the period of exercisability of options or repurchase of restricted
stock, or reprice options granted under the employee stock plans of the Company
or authorize cash payments in exchange for any options granted under any of such
plans, or by inaction suffer any of the foregoing to occur when unilateral
action by the Company (other than action involving termination of such options)
could have prevented it, all unless otherwise expressly required pursuant to the
terms of the Company Stock Option Plan, or take any such action (or by inaction
suffer such to occur when unilateral
29
action by the Company could have prevented it) with regard to any warrant or
other right to acquire capital stock of the Company;
(b) Enter into partnership arrangements, joint development
agreements or strategic alliances;
(c) Grant any severance or termination pay (i) to any executive
officer or (ii) to any other employee except payments made in connection with
the termination of employees who are not executive officers in amounts
consistent with the Company's policies and past practices or pursuant to written
agreements outstanding, or policies existing, on the date hereof and as
previously disclosed in writing to Parent or pursuant to written agreements
consistent with the Company's past agreements under similar circumstances;
(d) Transfer or license to any person or entity or otherwise
extend, amend or modify any rights to the Company's Intellectual Property Rights
or enter into grants of future patent rights, other than non-exclusive licenses
in connection with the sale of goods or services entered into in the ordinary
course of business consistent with past practices; (e) Commence any litigation
other than (i) for the routine collection of bills, (ii) for software piracy, or
(iii) in such cases where the Company in good faith determines that failure to
commence suit would result in the material impairment of a valuable aspect of
the Company's business, provided that the Company consults with Parent prior to
the filing of such a suit;
(f) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, securities or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of the Company;
(g) Purchase, redeem or otherwise acquire, directly or
indirectly, any shares of its capital stock or its subsidiaries' capital stock
except from former employees, directors and consultants in accordance with
agreements existing as of the date hereof requiring the repurchase of shares in
connection with any termination of service to the Company;
(h) Issue, deliver or sell or pledge or authorize or propose the
issuance, delivery, sale or pledge of, any shares of its capital stock of any
class or securities convertible or exchangeable into or exercisable for, or
subscriptions, rights, warrants or options to acquire, or enter into other
agreements or commitments of any character obligating it to issue, any such
shares or other securities, other than (i) the issuance of shares of Company
Common Stock pursuant to the exercise of Company stock options or warrants
therefor outstanding as of the date of this Agreement, (ii) options to purchase
shares of Company Common Stock granted to new employees in the ordinary course
of business, consistent with past practice, (iii) shares of Company Common Stock
issuable upon the exercise of the options referred to in clause (ii), and (iv)
the issuance of the Company Rights (and shares of Company Class One Preferred
Stock upon the exercise thereof) in accordance with the terms of the Company
Rights Plan, as in effect on the date hereof.
30
(i) Cause, permit or propose any amendments to the Company's
Articles of Organization or By-laws or other charter documents or similar
governing instruments of any of its subsidiaries;
(j) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any equity interest in or a material portion of the assets of,
or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to the business of the Company, or enter into any joint ventures,
strategic partnerships or alliances or purchase any distributors;
(k) Sell, lease, license, encumber or otherwise dispose of any of
the Company's properties or assets which are material, individually or in the
aggregate, to the business of the Company, except in the ordinary course of
business consistent with past practice;
(l) Incur any indebtedness for borrowed money (other than
ordinary course trade payables or pursuant to existing credit facilities in the
ordinary course of business) or guarantee any such indebtedness or issue or sell
any debt securities or warrants, calls or other rights to acquire debt
securities of the Company or guarantee any debt securities of others or enter
into any "keep well" or other agreement to maintain any financial statement
condition or enter into any arrangement having the economic effect of the
foregoing;
(m) Adopt or amend any employee benefit or stock purchase or
option plan, or enter into any employment contract or collective bargaining
agreement (other than offer letters and letter agreements entered into in the
ordinary course of business consistent with past practices with employees who
are terminable "at will"), pay any special bonus or special remuneration to any
director or employee, or increase the salaries or wage rates or fringe benefits
(including rights to severance or indemnification) of its directors, officers,
employees or consultants other than in the ordinary course of business,
consistent with past practice or change in any material respect any management
policies or procedures;
(n) Revalue any of the Company's assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business consistent with past
practice or, except as required by GAAP, make any change in accounting methods,
principles or practices;
(o) Pay, discharge or satisfy in an amount in excess of $50,000
(in any one case) or $100,000 (in the aggregate), any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business of liabilities of the type reflected or reserved against in the Company
Financials (or the notes thereto);
(p) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, file any material
Return or any amendment to a material Return, enter into any closing agreement,
settle any claim or assessment in respect of Taxes (except settlements effected
solely through payment of immaterial sums of money), or
31
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(q) Make any capital expenditures outside the ordinary course of
business or in excess of $250,000 in the aggregate;
(r) Modify, amend or terminate any material contract or agreement
to which the Company or any of its subsidiaries is a party or enter into any
contract or agreement which provides for the Company to incur or pay any amounts
in excess of $100,000 over the life of such contract or agreement;
(s) Settle any material litigation or waive, release or assign
any material rights or claims thereunder;
(t) Take any action that would be reasonably likely to interfere
with the treatment of the Merger as a "reorganization" within the meaning of
Section 368 of the Code;
(u) Enter into, modify, amend or cancel any development services,
licensing, distribution, sales, sales representation or other similar agreement
or obligation with respect to any material Company Intellectual Property Rights
other than such agreements entered into in the ordinary course of business
consistent with past practices;
(v) Except as otherwise contemplated by Sections 2.23 and 5.20,
redeem the Company Rights or amend or terminate the Company Rights Plan;
(w) Engage in any action with the intent directly or indirectly
to impact adversely any of the transactions contemplated by this Agreement,
including with respect to the Company Rights Plan, or with respect to any other
"poison pill" or similar plan, agreement or arrangement, or any Takeover
Statute;
(x) Take any action that would (i) entitle any Person to any
payment under any security, option, warrant, call, right, commitment or
agreement of the Company, or (ii) result in an adjustment to the exercise price
or number of shares issuable upon exercise of any security, option, warrant,
call, right, commitment or agreement of the Company; or by inaction suffer any
of the foregoing to occur when unilateral action by the Company (other than
action involving termination of any options) could have prevented it;
(y) Take any action that would result in the Company having more
"restricted cash" than the amount of "restricted cash" shown on the Company
Balance Sheet; or
(z) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.l(a) through (y) above, or any action which
would cause or would be reasonably likely to cause any of the conditions to the
Merger set forth in Sections 6.1 or 6.3 not to be satisfied.
4.2 Conduct of Business of Parent. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms and the Effective Time, Parent (which for the
purposes of this Section 4.2 shall include
32
Parent and each of its subsidiaries) agrees, except to the extent that the
Company shall otherwise consent in writing, to carry on its business in the
usual, regular and ordinary course, in substantially the same manner as
heretofore conducted and in compliance in all material respects with all
applicable laws and regulations, to pay its debts and Taxes when due subject to
good faith disputes over such debts or Taxes, to pay or perform other material
obligations when due, and to use all reasonable efforts consistent with past
practices and policies to preserve intact Parent's present business
organizations, keep available the services of its present officers and employees
and preserve its relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with Parent, to the
end that Parent's goodwill and ongoing businesses shall not be impaired in any
material respect at the Effective Time. Parent shall promptly notify the Company
of any event or occurrence not in the ordinary course of business of Parent, and
will not enter into or amend any agreement or take any action which reasonably
would be expected to have a Material Adverse Effect on Parent. Except as
expressly contemplated by this Agreement or in compliance with Section 5.4(b),
Parent shall not prior to the Effective Time or earlier termination of this
Agreement pursuant to its terms, without the prior written consent of the
Company's Chairman:
(a) Waive any stock repurchase rights, accelerate, amend or
change the period of exercisability of options or repurchase of restricted
stock, or reprice options granted under the employee stock plans of Parent or
authorize cash payments in exchange for any options granted under any of such
plans, or by inaction suffer any of the foregoing to occur when unilateral
action by Parent could have prevented it, all unless otherwise expressly
required pursuant to the terms of the Parent Stock Option Plan, or take any such
action (or by inaction suffer such to occur when unilateral action by Parent
could have prevented it) with regard to any warrant or other right to acquire
capital stock of Parent;
(b) Enter into partnership arrangements, joint development
agreements or strategic alliances;
(c) Grant any severance or termination pay (i) to any executive
officer or (ii) to any other employee except payments made in connection with
the termination of employees who are not executive officers in amounts
consistent with Parent's policies and past practices or pursuant to written
agreements outstanding, or policies existing, on the date hereof and as
previously disclosed in writing to the Company or pursuant to written agreements
consistent with Parent's prior agreements under similar circumstances;
(d) Transfer or license to any person or entity or otherwise
extend, amend or modify any rights to Parent's Intellectual Property Rights or
enter into grants to future patent rights, other than non-exclusive licenses in
connection with the sale of goods or services entered into in the ordinary
course of business consistent with past practices;
(e) Commence any litigation other than (i) for the routine
collection of bills, (ii) for software piracy, or (iii) in such cases where
Parent in good faith determines that failure to commence suit would result in
the material impairment of a valuable aspect of Parent's business, provided that
Parent consults with the Company prior to the filing of such a suit;
33
(f) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, securities or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of Parent; provided, that Parent may
without such consent effect a reverse stock split if doing so is both necessary
and sufficient in the opinion of The Nasdaq Stock Market, Inc. to prevent the
Parent Common Stock from being forthwith delisted from the Nasdaq SmallCap
Market -- but only the smallest size of reverse stock split as is necessary to
prevent such delisting;
(g) Purchase, redeem or otherwise acquire, directly or
indirectly, any shares of its capital stock or its subsidiaries' capital stock
except from former employees, directors and consultants in accordance with
agreements existing as of the date hereof requiring the repurchase of shares in
connection with any termination of service to Parent;
(h) Issue, deliver, sell or pledge or authorize or propose the
issuance, delivery, sale or pledge of any shares of its capital stock of any
class or securities convertible into, or subscriptions, rights, warrants or
options to acquire, or enter into other agreements or commitments of any
character obligating it to issue any such shares or other securities, other than
the issuance of (i) shares of Parent Common Stock pursuant to the exercise or
conversion of Parent stock options, warrants or Convertible Notes outstanding as
of the date of this Agreement, (ii) options to purchase shares of Parent Common
Stock granted to new employees in the ordinary course of business, consistent
with past practice, (iii) shares of Parent Common Stock issuable upon the
exercise of the options referred to in clause (ii), (iv) up to 1,500,000 shares
of Parent Common Stock, at a price per share no less than $0.70 (subject to
adjustment for any reverse stock split), to trade creditors other than Heli-Oss
in satisfaction of trade debt, (v) shares of Parent Common Stock to Heli-Oss in
satisfaction of trade debt, in an amount and on terms consistent with the
conceptual discussion framework statement delivered by Parent to the Company on
or before the date of this Agreement, (vi) warrants to purchase up to 300,000
shares of Parent Common Stock to a lender to induce the initiation of a credit
agreement contemplated by Section 4.2(l) hereof, (vii) shares of Parent Common
Stock to investors, at a price per share no less than $1.00 (subject to
adjustment for any reverse stock split), for a total consideration not to exceed
$5,000,000, and (viii) the Parent Rights (and shares of the Parent's Preferred
Stock upon the exercise thereof) in accordance with the terms of the Parent
Rights Plan, as in effect on the date hereof; provided, however, that Parent may
not make any issuance permitted by this Section 4.2(h) if the issuance would
entitle any Person to any payment or result in any adjustment under the Share
Purchase Agreement dated June 6, 2002 among Parent, the State of Wisconsin
Investment Board, Xxxxx McAfee Capital Partners, LLC and certain other
investors;
(i) Cause, permit or propose any amendments to Parent's
Certificate of Incorporation or By-laws or other charter documents or similar
governing instruments of any of its subsidiaries;
(j) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any equity interest in or a material portion of the assets of,
or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material,
34
individually or in the aggregate, to the business of Parent, or enter into any
joint ventures, strategic partnerships or alliances or purchase any
distributors;
(k) Sell, lease, license, encumber or otherwise dispose of any of
Parent's properties or assets which are material, individually or in the
aggregate, to the business of Parent, except in the ordinary course of business
consistent with past practices;
(l) Incur any indebtedness for borrowed money (other than
ordinary course trade payables or pursuant to existing credit facilities or New
Credit Facilities in the ordinary course of business) or guarantee any such
indebtedness or issue or sell any debt securities or warrants, calls or other
rights to acquire debt securities of Parent or guarantee any debt securities of
others or enter into any "keep well" or other agreement to maintain any
financial statement condition or enter into any arrangement having the economic
effect of the foregoing; "New Credit Facilities" means the proposed arrangements
described in the letter agreement dated July 17, 2002 between Parent and Silicon
Valley Bank, provided that the actual final arrangements are not materially
different from such proposed arrangements;
(m) Adopt or amend any employee benefit or stock purchase or
option plan or enter into any employment contract or collective bargaining
agreement (other than offer letters and letter agreements entered into in the
ordinary course of business consistent with past practices with employees who
are terminable "at will"), pay any special bonus or special remuneration to any
director or employee, or increase the salaries or wage rates or fringe benefits
(including rights to severance or indemnification) of its directors, officers,
employees or consultants other than in the ordinary course of business,
consistent with past practice or change in any material respect any management
policies or procedures;
(n) Revalue any of Parent's assets, including without limitation
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business consistent with past practices or,
except as required by GAAP, make any change in accounting methods, principles or
practices;
(o) Pay, discharge or satisfy in an amount in excess of $50,000
(in any one case) or $100,000 (in the aggregate), any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business or as allowed by Section 4.2(h)(iv)-(v) of liabilities of the type
reflected or reserved against in the Parent Financials (or the notes thereto);
(p) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, file any material
Return or any amendment to a material Return, enter into any closing agreement,
settle any claim or assessment in respect of Taxes (except settlements effected
solely through payment of immaterial sums of money), or consent to any extension
or waiver of the limitation period applicable to any claim or assessment in
respect of Taxes ;
(q) Make any capital expenditures outside the ordinary course of
business or in excess of $500,000 in the aggregate;
35
(r) Modify, amend or terminate any material contract or agreement
to which Parent or any of its subsidiaries is a party or enter into any contract
or agreement which provides for Parent to incur or pay any amounts in excess of
$200,000 over the life of such contract or agreement (excluding any Indenture
amendment which is substantially consistent with the Letter of Intent described
in Section 6.2(h) hereof and also excluding matters allowed by Sections
4.2(h)(iv)-(v)-(vi)-(vii) or 4.2(l) hereof);
(s) Settle any material litigation or waive, release or assign
any material rights or claims thereunder;
(t) Take any action that would be reasonably likely to interfere
with the treatment of the Merger as a "reorganization" within the meaning of
Section 368 of the Code;
(u) Enter into, modify, amend or cancel any development services,
licensing, distribution, sales, sales representation or other similar agreement
or obligation with respect to any material Parent Intellectual Property Rights
other than such agreements entered into in the ordinary course of business
consistent with past practices;
(v) Except as otherwise contemplated by Sections 3.23 and 5.20,
redeem the Parent Rights or amend or terminate the Parent Rights Plan;
(w) Engage in any action with the intent directly or indirectly
to impact adversely any of the transactions contemplated by this Agreement,
including with respect to the Parent Rights Plan, or with respect to any other
"poison pill" or similar plan, agreement or arrangement, or any Takeover
Statute;
(x) Take any action that would (i) entitle any Person to any
payment under any security, option, warrant, call, right, commitment or
agreement of Parent or Merger Sub, or (ii) result in an adjustment to the
exercise price or number of shares issuable upon exercise of any security,
option, warrant, call, right, commitment or agreement of Parent or Merger Sub
(other than antidilution adjustments arising from issuances allowed by Section
4.2(h) hereof); or by inaction suffer any of the foregoing to occur when
unilateral action by Parent could have prevented it; or
(y) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.2(a) through (x) above, or any action which
would cause or would be reasonably likely to cause any of the conditions to the
Merger set forth in Sections 6.1 or 6.2 not to be satisfied.
Article V
ADDITIONAL AGREEMENTS
---------------------
5.1 Proxy Statement/Prospectus; Registration Statement.
(a) As promptly as practicable after the execution of this
Agreement, Parent and the Company shall prepare and file with the SEC the Proxy
Statement and Parent
36
shall prepare and file with the SEC the Registration Statement in which the
Proxy Statement will be included as a prospectus. Each of Parent and Company
shall use its reasonable best efforts to (i) cause the Registration Statement
and the Proxy Statement to comply as to form in all material respects with the
Securities Act, the Exchange Act and the rules and regulations thereunder, (ii)
respond promptly to any comments of the SEC or its staff with respect to the
Registration Statement, the Proxy Statement or any other report, statement or
other document it may have filed with the SEC, (iii) cause the Registration
Statement to be declared effective under the Securities Act as soon thereafter
as practicable, (iv) as soon as practicable after the Registration Statement
shall have been declared effective, cause the Proxy Statement and forms of proxy
to be mailed to its stockholders, and (v) notify the other party promptly of any
stop order or threatened stop order of which it becomes aware with respect to
the Registration Statement or similar proceeding with respect to the Proxy
Statement. Each of Parent and the Company shall afford the other party a
reasonable opportunity to review and comment upon the Registration Statement,
the Proxy Statement, any amendment or supplement to either document or any other
document filed with the SEC prior to its filing. The Proxy Statement shall
include the fairness opinions of Xxxxxx, Xxxxx Xxxxx, Incorporated and Xxxxx
McAfee Capital Partners, LLC referred to in Sections 2.21 and 3.21,
respectively. The Proxy Statement shall also include the recommendations of (i)
the Board of Directors of the Company in favor of the Merger which shall not be
withdrawn, modified or withheld except in compliance with Section 5.4(a) and
(ii) the Board of Directors of Parent in favor of the Merger which shall not be
withdrawn, modified or withheld except in compliance with Section 5.4(b).
(b) Each of Parent and the Company shall notify the other party
promptly upon the receipt of any comments from the SEC or its staff or any other
government official in connection with any filing made pursuant hereto and of
any request by the SEC or its staff or any other government official for any
amendment or supplement to the Registration Statement, the Proxy Statement or
any other filing with the SEC or for additional information and shall provide to
the other party copies of all correspondence between such party or any of its
representatives, on the one hand, and the SEC or its staff or any other
government official, on the other hand, with respect to the Registration
Statement, the Proxy Statement or any other such filing.
(c) Promptly after Parent or the Company shall notify the other
party of the discovery of information required to be disclosed to the other
party pursuant to Section 2.19 or Section 3.19, as the case may be, the parties
shall prepare and file appropriate amendments or supplements to the Registration
Statement and the Proxy Statement, as the case may be, and, to the extent
required by law, disseminate such amendment or supplement to the stockholders of
Parent and the Company.
5.2 Meetings of Stockholders. Promptly after the date hereof, the
Company shall take all action necessary in accordance with the MBCL and its
Articles of Organization and By-laws to convene the Company Stockholders'
Meeting to be held as promptly as practicable for
37
the purpose of voting upon this Agreement and the Merger. The Company shall
consult with Parent and use all reasonable efforts to hold the Company
Stockholders' Meeting on the same day as the Parent Stockholders' Meeting.
Promptly after the date hereof, Parent shall take all action necessary in
accordance with Delaware law and its Certificate of Incorporation and By-laws to
convene the Parent Stockholders' Meeting to be held as promptly as practicable
for the purpose of voting upon this Agreement and the Merger. Parent shall
consult with the Company and use all reasonable efforts to hold the Parent
Stockholders' Meeting on the same day as the Company Stockholders' Meeting.
5.3 Access to Information, Confidentiality.
(a) Each party shall afford the other party and its accountants,
counsel and other representatives reasonable access during normal business hours
during the period prior to the Effective Time to all information concerning the
business, including the status of product development efforts, properties and
personnel of such party as the other party may reasonably request. No
information or knowledge obtained in any investigation pursuant to this Section
5.3 shall affect or be deemed to modify any representation or warranty contained
herein or the conditions to the obligations of the parties to consummate the
Merger.
(b) The parties acknowledge that Parent and the Company have
previously executed a Confidentiality Agreement dated March 4, 2002 (the
"Confidentiality Agreement"), which Confidentiality Agreement shall continue in
full force and effect in accordance with its terms.
5.4 No Solicitation.
(a) (i) From and after the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, the Company
and its subsidiaries will not, and will cause their respective directors,
officers, employees, representatives, investment bankers, agents and affiliates
not to, directly or indirectly, (i) solicit or encourage submission of any
inquiries, proposals or offers by any person, entity or group (other than
Parent, Merger Sub and their affiliates, agents and representatives), or (ii)
participate in any discussions or negotiations with, or disclose any information
concerning the Company or any of its subsidiaries to, or afford any access to
the properties, books or records of the Company or any of its subsidiaries to,
or otherwise assist, facilitate or encourage, or enter into any agreement or
understanding with, any person, entity or group (other than Parent, Merger Sub
and their affiliates, agents and representatives), in connection with any
Acquisition Proposal with respect to the Company. For the purposes of Section
5.4(a) of this Agreement, an "Acquisition Proposal" shall mean any proposal
relating to the possible acquisition of the Company, whether by way of merger,
purchase of at least 50% of the capital stock of the Company, purchase of all or
substantially all of the assets of the Company, or otherwise. In addition,
subject to the other provisions of this Section 5.4, from and after the date of
this Agreement until the earlier of the Effective Time or the termination of
this Agreement, the Company and its subsidiaries will not, and will cause their
respective directors, officers, employees, representatives, investment bankers,
agents and affiliates not to, directly or indirectly, make or authorize any
statement, recommendation or solicitation in support of any Acquisition Proposal
with respect to the Company made by any person, entity or group (other than
Parent, Merger Sub and their affiliates). The Company will immediately cease any
and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing.
(ii) Notwithstanding the provisions of paragraph (i) above, prior
to the approval of this Agreement and the Merger by the stockholders of the
Company at
38
the Company Stockholders' Meeting, the Company may, to the extent the Board of
Directors of the Company determines, in good faith, after consultation with
outside legal counsel, that the Board's fiduciary duties under applicable law
require it to do so, participate in discussions or negotiations with, and,
subject to the requirements of paragraph (iii) below, furnish information to any
person, entity or group after such person, entity or group shall have delivered
to the Company in writing, a Superior Proposal. For the purposes of Sections
5.4(a) and 7.1(f) of this Agreement, a "Superior Proposal" means an unsolicited
bona fide Acquisition Proposal which the Board of Directors of the Company in
its good faith reasonable judgment determines, after consultation with its
independent financial advisors, could reasonably be expected to result in a
transaction more favorable to the stockholders of the Company from a financial
point of view than the Merger and for which financing, to the extent required,
is then committed or which, in the good faith reasonable judgment of the Board
of Directors (after consultation with independent financial advisors), is
reasonably capable of being financed by such person, entity or group and which
is likely to be consummated.
(iii) The Company may furnish information to a person, entity or
group that has made a Superior Proposal only if the Company (a) first notifies
Parent of the information proposed to be disclosed, (b) first complies with the
provisions of paragraph (v) below and (c) provides such information pursuant to
a confidentiality agreement at least as restrictive as the Confidentiality
Agreement.
(iv) If the Company receives a Superior Proposal, nothing
contained in this Agreement shall prevent the Board of Directors of the Company
from approving such Superior Proposal or recommending such Superior Proposal to
the Company's stockholders, if the Board determines in good faith, after
consultation with outside legal counsel, that such action is required by its
fiduciary duties under applicable law; in such case, the Board may amend or
withdraw its recommendation of the Merger.
(v) The Company will (i) notify Parent immediately if any inquiry
or proposal is made or any information or access is requested in connection with
an Acquisition Proposal or potential Acquisition Proposal and (ii) immediately
communicate to Parent the terms and conditions of any such Acquisition Proposal
or potential Acquisition Proposal or inquiry and the identity of the offeror or
potential offeror. In addition to the foregoing, the Company shall provide
Parent with at least forty-eight (48) hours prior written notice (or such lesser
prior written notice as provided to the members of the Company's Board of
Directors but in no event less than eight (8) hours) of any meeting of the
Company's Board of Directors at which the Company's Board of Directors is
reasonably expected to consider a Superior Proposal and provide Parent with at
least two (2) business days prior written notice (or such lesser prior notice as
provided to the members of the Company's Board of Directors but in no event less
than eight (8) hours) of a meeting at which the Company's Board of Directors is
reasonably expected to recommend a Superior Proposal to its stockholders.
(vi) Nothing contained in this Section 5.4 shall prevent the
Company or its Board of Directors from complying with the provisions of Rules
14e-2 and 14d-9 promulgated under the Exchange Act.
39
(b) (i) From and after the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, Parent and
its subsidiaries will not, and will cause their respective directors, officers,
employees, representatives, investment bankers, agents and affiliates not to,
directly or indirectly, (i) solicit or encourage submission of any inquiries,
proposals or offers by any person, entity or group (other than the Company and
its affiliates, agents and representatives), or (ii) participate in any
discussions or negotiations with, or disclose any information concerning Parent
or any of its subsidiaries to, or afford any access to the properties, books or
records of Parent or any of its subsidiaries to, or otherwise assist, facilitate
or encourage, or enter into any agreement or understanding with, any person,
entity or group (other than the Company and its affiliates, agents and
representatives), in connection with any Acquisition Proposal with respect to
Parent. For the purposes of Section 5.4(b) of this Agreement, an "Acquisition
Proposal" shall mean any proposal relating to the possible acquisition of
Parent, whether by way of merger, purchase of at least 50% of the capital stock
of Parent, purchase of all or substantially all of the assets of Parent, or
otherwise. In addition, subject to the other provisions of this Section 5.4,
from and after the date of this Agreement until the earlier of the Effective
Time or the termination of this Agreement, Parent and its subsidiaries will not,
and will cause their respective directors, officers, employees, representatives,
investment bankers, agents and affiliates not to, directly or indirectly, make
or authorize any statement, recommendation or solicitation in support of any
Acquisition Proposal with respect to Parent made by any person, entity or group
(other than the Company and its affiliates). Parent will immediately cease any
and all existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing.
(ii) Notwithstanding the provisions of paragraph (i) above, prior
to the approval of this Agreement and the Merger by the stockholders of Parent
at the Parent Stockholders' Meeting, Parent may, to the extent the Board of
Directors of Parent determines, in good faith, after consultation with outside
legal counsel, that the Board's fiduciary duties under applicable law require it
to do so, participate in discussions or negotiations with, and, subject to the
requirements of paragraph (iii) below, furnish information to any person, entity
or group after such person, entity or group shall have delivered to Parent in
writing, a Superior Proposal. For the purposes of Sections 5.4(b) and 7.1(g) of
this Agreement, a "Superior Proposal" means an unsolicited bona fide Acquisition
Proposal which the Board of Directors of Parent in its good faith reasonable
judgment determines, after consultation with its independent financial advisors,
could reasonably be expected to result in a transaction that, without the
Merger, is more favorable to the stockholders of Parent from a financial point
of view than such transaction with the Merger and for which financing, to the
extent required, is then committed or which, in the good faith reasonable
judgment of the Board of Directors (after consultation with independent
financial advisors), is reasonably capable of being financed by such person,
entity or group and which is likely to be consummated.
(iii) Parent may furnish information to a person, entity or group
that has made a Superior Proposal only if Parent (a) first notifies the Company
of the information proposed to be disclosed, (b) first complies with the
provisions of paragraph (v) below and (c) provides such information pursuant to
a confidentiality agreement at least as restrictive as the Confidentiality
Agreement.
40
(iv) If Parent receives a Superior Proposal, nothing contained in
this Agreement shall prevent the Board of Directors of Parent from approving
such Superior Proposal or recommending such Superior Proposal to Parent's
stockholders, if the Board determines in good faith, after consultation with
outside legal counsel, that such action is required by its fiduciary duties
under applicable law; in such case, the Board may amend or withdraw its
recommendation of the Merger.
(v) Parent will (i) notify the Company immediately if any inquiry
or proposal is made or any information or access is requested in connection with
an Acquisition Proposal or potential Acquisition Proposal and (ii) immediately
communicate to the Company the terms and conditions of any such Acquisition
Proposal or potential Acquisition Proposal or inquiry and the identity of the
offeror or potential offeror. In addition to the foregoing, Parent shall provide
the Company with at least forty-eight (48) hours prior written notice (or such
lesser prior written notice as provided to the members of Parent's Board of
Directors but in no event less than eight (8) hours) of any meeting of Parent's
Board of Directors at which Parent's Board of Directors is reasonably expected
to consider a Superior Proposal and provide the Company with at least two (2)
business days prior written notice (or such lesser prior notice as provided to
the members of Parent's Board of Directors but in no event less than eight (8)
hours) of a meeting at which Parent's Board of Directors is reasonably expected
to recommend a Superior Proposal to its stockholders.
(vi) Nothing contained in this Section 5.4 shall prevent Parent
or its Board of Directors from complying with the provisions of Rules 14e-2 and
14d-9 promulgated under the Exchange Act.
5.5 Expenses.
(a) Except as set forth in this Section 5.5, if the Merger is not
consummated, all fees and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses, provided that Parent and the Company shall share equally all fees
and expenses, other than attorneys, accountants and financial advisor's fees,
incurred in connection with the printing and filing of the Registration
Statement (including financial statements and exhibits) and any amendments or
supplements thereto. If the Merger is consummated, all fees and expenses,
including attorneys, accountants and financial advisor's fees (but excluding the
printing and filing fees referenced in the preceding sentence) incurred by or
for the benefit of the Company or its stockholders shall be paid by the
Surviving Corporation. Parent and the Company shall mutually agree on the
financial printer to use for the Registration Statement and any amendments or
supplements thereto.
(b) If this Agreement is terminated by Parent pursuant to Section
7.1(b)(ii) or by any party pursuant to Section 7.1(f), the Company shall
immediately upon such termination pay to Parent a termination fee of $200,000 by
wire transfer of immediately available funds to an account designated by Parent.
(c) If this Agreement is terminated by the Company pursuant to
Section 7.1(c)(ii) or by any party pursuant to Section 7.1(g), Parent shall
immediately upon such
41
termination pay to the Company a termination fee of $200,000 by wire transfer of
immediately available funds to an account designated by the Company.
5.6 Public Disclosure. Parent and the Company shall consult with each
other before issuing any press release or otherwise making any public statement
with respect to the Merger or this Agreement and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or any listing agreement with a national securities
exchange or The Nasdaq Stock Market, Inc. and in any event in accordance with
the terms of the Confidentiality Agreement.
5.7 Auditors' Letters. The Company shall use its reasonable best
efforts to cause to be delivered to Parent a letter of PricewaterhouseCoopers
LLP, independent auditors to the Company, dated a date within two business days
before the date on which the Registration Statement becomes effective, and
addressed to Parent, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement. The Parent shall use its reasonable best efforts to be
delivered to the Company a letter of PricewaterhouseCoopers LLP, independent
auditors to the Parent, dated a date within two business days before the date on
which the Registration Statement becomes effective, and addressed to the
Company, in form and substance reasonably satisfactory to the Company and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement.
5.8 FIRPTA. The Company shall deliver to the Internal Revenue Service a
notice that the Company Common Stock is not a "U.S. Real Property Interest" as
defined in and in accordance with the requirements of Treasury Regulation
Section 1.897-2(h)(2).
5.9 Legal Requirements. Each of Parent, Merger Sub and the Company will
take all reasonable actions necessary or desirable to comply promptly with all
legal requirements which may be imposed on them with respect to the consummation
of the transactions contemplated by this Agreement (including furnishing all
information required in connection with approvals of or filings with any
Governmental Entity and prompt resolution of any litigation prompted hereby) and
will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such requirements imposed upon any of them or
their respective subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement, and will take all reasonable
actions necessary to obtain (and will cooperate with the other parties hereto in
obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any Governmental Entity or other
public or private third party required to be obtained or made in connection with
the Merger or taking of any action contemplated by this Agreement.
5.10 Blue Sky Laws. Parent shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of Parent Common Stock pursuant hereto. Parent shall
pay all fees and expenses, including filing fees and Parent's attorneys' fees
and expenses, incurred by Parent in connection with such compliance. The Company
shall use its reasonable best efforts to assist Parent as may
42
be necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable in connection with the issuance of Parent
Common Stock pursuant hereto.
5.11 Reasonable Best Efforts and Further Assurances. Each of the
parties to this Agreement shall use its reasonable best efforts to effectuate
the transactions contemplated hereby and to fulfill and cause to be fulfilled
the conditions to closing under this Agreement (including prompt resolution of
any litigation prompted hereby). Each party hereto, at the reasonable request of
another party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things as may be necessary or desirable for
effecting completely the consummation of the transactions contemplated hereby.
5.12 Stock Options and Warrants.
(a) At the Effective Time, each outstanding option to purchase
shares of Company Common Stock (each a "Company Stock Option") under the Company
Stock Option Plan, whether vested or unvested, will be assumed by Parent. Each
Company Stock Option so assumed by Parent under this Agreement shall continue to
have, and be subject to, the same terms and conditions set forth in the Company
Stock Option Plan immediately prior to the Effective Time, except that (i) such
Company Stock Option shall entitle the holder to purchase (subject to the same
vesting provisions set forth in such Company Stock Option) that number of whole
shares of Parent Common Stock equal to the product of the number of shares of
Company Common Stock that were issuable upon exercise of such Company Stock
Option immediately prior to the Effective Time (without regard to vesting)
multiplied by the Exchange Ratio, rounded down to the nearest whole number of
shares of Parent Common Stock, (ii) the per share exercise price for the shares
of Parent Common Stock issuable upon exercise of such assumed Company Stock
Option shall be equal to the quotient determined by dividing the exercise price
per share of Company Common Stock at which such Company Stock Option was
exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded down to the nearest whole cent, and (iii) such Company Stock Option
shall no longer be exercisable for Company Common Stock.
(b) Promptly after the Effective Time, Parent or the Surviving
Corporation shall issue to each holder of an outstanding Company Stock Option a
document evidencing the foregoing assumption of such Company Stock Option by
Parent.
(c) It is the intention of the parties that the Company Stock
Options assumed by Parent qualify following the Effective Time as incentive
stock options as defined in Section 422 of the Code to the extent the Company
Stock Options qualified as incentive stock options immediately prior to the
Effective Time.
(d) For purposes of determining vesting under any Company Stock
Option, employees of the Company or any of its subsidiaries who become employees
of Parent or any of its subsidiaries shall be credited for the full term during
which they were employed by the Company or any of its subsidiaries.
(e) At the Effective Time, the Company Warrants shall be
exercisable for
43
the appropriate number of shares of Parent Common Stock instead of being
exercisable for shares of Company Common Stock, and the exercise price of the
Company Warrants shall be appropriately adjusted, all in accordance with the
terms of the respective Company Warrants.
(f) Prior to the Effective Time, Parent shall take all corporate
action necessary to reserve for issuance a sufficient number of shares of Parent
Common Stock for delivery upon exercise of the Company Stock Options assumed
pursuant to this Section 5.12 and upon exercise of the Company Warrants.
5.13 Form S-8. Parent agrees to file at or before the opening of
business on the first business day after the Closing a registration statement on
Form S-8 for the shares of Parent Common Stock issuable with respect to assumed
Company Stock Options.
5.14 Certain Benefit Plans.
(a) Parent shall take such reasonable actions as are necessary to
allow eligible employees of the Company to participate in the benefit programs
of Parent, or alternative benefit programs substantially comparable in the
aggregate to those applicable to employees of Parent, as soon as practicable
after the Effective Time in accordance with the terms of such programs. Parent
shall assume all of the Company's liability under Section 4980B of the Code and
Part 6 of Title I of ERISA with respect to COBRA participants (other than any
liability of the Company to pay, or reimburse any such participants for, COBRA
premiums) in accordance with Treasury Regulation Section 54-4980B-9 as if the
Company had terminated coverage under its group health plans on the Effective
Date.
(b) Parent shall cause each such benefit program in which
employees of Parent and its subsidiaries are eligible to participate to take
into account for purposes of eligibility and vesting thereunder the service of
such employees with the Company and its subsidiaries to the same extent as such
service was credited for such purpose by the Company; provided, that in no
circumstances shall the crediting of such service create duplicative benefits.
(c) Parent shall honor and continue to be obligated to perform,
in accordance with their terms, all benefit obligations to, and contractual
rights of, current and former employees of the Company existing as of the
Effective Date, as well as all employment or severance agreements of the
Company.
(d) If former or active employees of the Company or any of its
subsidiaries become eligible to participate in a medical, dental or vision plan
of Parent, Parent shall cause each such plan to (i) waive any preexisting
condition limitations to the extent such conditions are covered unconditionally
for such person under the applicable medical, dental or vision plans of the
Company, (ii) honor under such plans any deductible, co-payment and
out-of-pocket expenses incurred by the employees and their beneficiaries during
the portion of the calendar year prior to such participation, and (iii) waive
any waiting period limitation or evidence of insurability requirement which
would otherwise be applicable to such employee on or after the Effective Time to
the extent such employee had satisfied any similar limitation or requirement
under an analogous Company benefit program prior to the Effective Time.
(e) If the Company is required to terminate its plan which is
qualified under Section 401(k) of the Code (the "Company's 401(k) Plan"), Parent
will, with the approval
44
of the plan administrator of the Parent's tax-qualified 401(k) plan (the
"Parent's 401(k) Plan"), which approval will not be unreasonably withheld, cause
Parent's 401(k) Plan to accept rollovers or direct rollovers of "eligible
rollover distributions" within the meaning of Section 402(c) of the Code made
with respect to the Company's employees pursuant to the Company's 401(k) Plan by
reason of the transactions contemplated by this Agreement. Rollover amounts
contributed to Parent's 401(k) Plan in accordance with this Section 5.14(e)
shall at all times be 100% vested (to the extent they were 100% vested in the
Company's 401(k) Plan at the time of rollover) and shall be invested in
accordance with the provisions of the Parent's 401(k) Plan. In this regard, the
Company represents (i) that the Company's 401(k) Plan has obtained a
determination letter from the Internal Revenue Service to the effect that the
Company's 401(k) Plan is qualified under Section 401(a) of the Code and that the
related trust is exempt from federal income taxes under Section 501(a) of the
Code, or (ii) that Company's 401(k) Plan has been established under a
standardized prototype plan for which an IRS opinion letter has been obtained by
the plan sponsor and is valid as to the adopting employer. The Company has
furnished to Parent a copy of the most recent IRS determination or opinion
letter with respect to Company's 401(k) Plan, and nothing has occurred which
could reasonably be expected to cause the loss of the tax-qualified status of
the Company's 401(k) Plan. In the case of any Company employee, the Parent's
401(k) Plan will take into account, for eligibility and vesting purposes, such
employee's pre-Closing service creditable to such employee for purposes of
Company's 401(k) Plan.
(f) If the employment of any person who is an employee of the
Company immediately prior to the Effective Time is terminated (other than for
cause) by the Company or Parent or any of their subsidiaries within the first 30
days following the Effective Time, such employee shall receive severance
benefits at least as generous as the Company's past practices with regard to
employees of such rank.
5.15 Tax-Free Reorganization. Parent and the Company shall each
use all reasonable efforts to cause the Merger to be treated as a reorganization
within the meaning of Section 368 of the Code. Without limiting the generality
of the foregoing, Parent will cause the Surviving Corporation to continue at
least one significant historic business line of the Company, or use at least a
significant portion of the Company's business assets in a business, in each case
within the meaning of Treasury Regulation Section 1.368-1(d).
5.16 Board Representation and Officers. The Board of Directors of
Parent shall take appropriate actions (the effectiveness of which are subject
only to the consummation of the Merger) to effectuate the following. To the
extent applicable, such actions shall be taken promptly before the Effective
Time:
(a) to cause the number of directors comprising the full Board of
Directors of Parent to be seven persons,
(b) to appoint to the Board of Directors of Parent, in addition
to four incumbent directors of Parent, Xxxxx Xxxxxxxxxx (for a term ending upon
Parent's 2003 annual meeting of stockholders), Xxxxxx Xxxxxxxx (for a term
ending upon Parent's 2004 annual meeting of stockholders) and Xxxx Xxxxxxxxxx
(for a term ending upon Parent's 2005 annual meeting of stockholders),
45
(c) to elect Xxxx Xxxxxxxxxx to serve as Chief Executive Officer
and President of Parent, and
(d) to elect Xxxxxx Xxxxxxx to serve as non-executive Chairman of
the Board of Directors of Parent.
5.17 Change of Name of Parent. At or before the Effective Time, Parent
shall take all such corporate and other action as shall be necessary to change
the corporate name of Parent to Radiohead, Inc. or to such other new name as
Parent and the Company shall mutually agree.
5.18 Retention Agreements. Parent will use its commercially reasonable
efforts to negotiate and execute before the initial filing of the Registration
Statement an employment agreement with Xxxx Xxxxxxxxxx and retention agreements
with the persons mutually agreed by Parent and the Company pursuant to terms and
conditions mutually acceptable to the parties thereto and the Company; provided,
however, in no event will the failure to enter into any such retention
agreements be deemed a breach of this Agreement or failure of a closing
condition.
5.19 No Solicitation of Employees. Each party agrees that for a period
of 12 months following termination, if any, of this Agreement pursuant to the
provisions of Article VII hereof, neither party shall solicit, induce or recruit
any of the other party's employees to leave their employment. This Section 5.19
shall not prohibit the advertisement in any publication of general circulation
of positions available at such party.
5.20 Rights Agreements; Takeover Statutes. The Board of Directors of
the Company shall take all further action (in addition to that referred to in
Section 2.23) necessary (including, as necessary, redeeming the Company Rights
immediately prior to the Effective Time or amending the Company Rights Plan) in
order to render the Company Rights inapplicable to the Merger and the other
transactions contemplated by this Agreement. The Board of Directors of Parent
shall take all further action (in addition to that referred to in Section 3.23)
necessary (including, as necessary, redeeming the Parent Rights immediately
prior to the Effective Time or amending the Parent Rights Plan) in order to
render the Parent Rights inapplicable to the Merger and the other transactions
contemplated by this Agreement. If any anti-takeover, control share acquisition,
fair price, moratorium or other similar statute is or may become applicable to
the Merger or the other transactions contemplated by this Agreement, each of
Parent and the Company and their respective Boards of Directors shall grant such
approvals and take such lawful actions as are necessary to ensure that such
transactions may be consummated as promptly as practicable on the terms
contemplated by this Agreement, and otherwise act to eliminate or minimize the
effects of such statute and any regulations promulgated thereunder on such
transactions.
5.21 Indemnification.
(a) After the Effective Time, to the extent permitted by law
Parent and the Surviving Corporation shall indemnify and hold harmless each
person who has at any time prior to the Effective Time been an officer, director
or employee of the Company or other person entitled to be indemnified by the
Company pursuant to its Articles of Organization or By-laws as
46
they are currently in effect on the date hereof or any indemnification agreement
which is in effect on the date hereof between the Company and such person to the
same extent as provided in such Articles of Organization, By-laws or
indemnification agreement.
(b) After the Effective Time, Parent and the Surviving
Corporation shall indemnify the persons who immediately prior to the Effective
Time were directors or officers of the Company against (i) all actions, claims,
damages, costs, expenses, liabilities or judgments or amounts that are paid in
settlement with the approval of the indemnifying party of or in connection with
any claim, action, suit, proceeding or investigation based in whole or in part
on or arising in whole or in part out of the fact that such person is or was a
director or officer of the Company, in each case to the full extent a
corporation is permitted under Delaware or Massachusetts law to indemnify its
own directors and officers (and Parent and the Surviving Corporation, as the
case may be, will pay expenses in advance of the final disposition of any such
actual proceeding to each indemnified party to the full extent permitted by law
upon receipt of any undertaking contemplated by Section 145 of the Delaware
General Corporation Law or Section 67 of the MBCL, as the case may be). In
connection with such indemnification, (x) any counsel retained by the
indemnified parties for any period after the Effective Time shall be reasonably
satisfactory to Parent and the Surviving Corporation, (y) after the Effective
Time, the Surviving Corporation and Parent shall to the extent permitted by law
pay the reasonable fees and expenses of such counsel, promptly after statements
therefor are received and (z) the Surviving Corporation and Parent will
cooperate in the defense of any such matter; provided, that neither the
Surviving Corporation nor Parent shall be liable for any settlement effected
without its prior written consent, which consent will not unreasonably be
withheld. Neither the Surviving Corporation nor Parent shall be liable for the
fees and expenses of more than one law firm for all the indemnified parties,
with respect to any single action unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between the positions
of any two or more indemnified parties.
(c) For a period of five years after the Effective Time, Parent
and the Surviving Corporation shall maintain in effect, if available, directors'
and officers' liability insurance covering those persons who are currently
covered by the Company's directors' and officers' liability insurance policy (a
copy of which has been heretofore delivered to Parent) on terms comparable to
those applicable to the then current directors and officers of Parent.
(d) This Section 5.21 shall survive the consummation of the
Merger, is intended to benefit the indemnified parties, shall be binding on all
successors and assigns of Parent and the Surviving Corporation, and shall be
enforceable by the indemnified parties.
5.22 Section 16 Matters. Before the Effective Time, the Board of
Directors of Parent shall adopt such resolutions, in form and substance
reasonably satisfactory to Parent and the Company, as are necessary to exempt
from the application of Section 16(b) of the Exchange Act the acquisition of any
security of Parent pursuant to or in connection with the Merger by any person
who becomes a director or officer of Parent, as those terms are defined in Rule
16a-1 under the Exchange Act, pursuant to this Agreement or otherwise in
connection with the Merger and the other transactions contemplated hereby, but
only to the extent that Section 16 and the regulations thereunder then enable
any resolutions to have such effect.
47
Article VI
CONDITIONS TO THE MERGER
------------------------
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Stockholder Approval. This Agreement, the Merger and the
issuance of Parent Common Stock in the Merger, as applicable, shall have been
approved and adopted by the requisite vote of the stockholders of each of the
Company and Parent under applicable law and under applicable Nasdaq Marketplace
Rules.
(b) Registration Statement Effective. The SEC shall have declared
the Registration Statement effective. No stop order suspending the effectiveness
of the Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose, and no similar proceeding in respect of the Proxy
Statement, shall have been initiated or threatened by the SEC; and all requests
by the SEC for additional information shall have been complied with to the
reasonable satisfaction of the parties hereto.
(c) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect.
(d) Dissenters' Rights. Following the Company Stockholders'
Meeting, no more than ten percent (10%) of the Company's outstanding shares
shall be in a position to exercise dissenters' rights under the MBCL.
(e) Approvals. Other than the filing provided for under Section
1.2, all orders, consents, waivers, exemptions, approvals, or authorizations of,
or declarations, filings or registrations with, or giving of notice to, any
Person or Governmental Entity required of Parent, the Company or any of their
subsidiaries to consummate this Agreement, the Merger or any other transaction
contemplated hereby, the failure of which to be obtained or made (i) is
reasonably expected to have a Material Adverse Effect on Parent or the Company
or (ii) will result in a material violation of any law, shall have been obtained
or made, all in form and substance reasonably satisfactory to Parent and the
Company.
6.2 Additional Conditions to Obligations of Company. The obligations of
the Company to consummate and effect the Merger and the other transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be true
and correct in all material respects both when made and at and as of the
Effective Time, except for changes contemplated by this Agreement and except for
those representations and warranties which
48
address matters only as of a particular date (which shall remain true and
correct as of such date), with the same force and effect as if made on and as of
the Effective Time.
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them at or prior
to the Effective Time.
(c) Bringdown. The Company shall have received a certificate,
dated the Closing Date, to the effect of Sections 6.2(a), 6.2(b), 6.2(d), and
6.2(f) signed by the President and Chief Financial Officer of Parent.
(d) No Material Adverse Effect on Parent. There shall not have
been any Material Adverse Effect on Parent, and there shall not have been any
development that reasonably would be expected to have a Material Adverse Effect
on Parent.
(e) Resignation of Parent Directors. Prior to the Effective Time,
all but four of the members of the Board of Directors of Parent shall have
submitted written resignations, effective as of the Effective Time, to Parent in
accordance with Section 5.16, and copies of such resignations shall have been
delivered to the Company.
(f) Nasdaq Stock Market Listing. From the date hereof until the
Effective Time, the Parent Common Stock shall be listed on the Nasdaq SmallCap
Market. Parent shall not have received written or oral notice that the Parent
Common Stock will be delisted from the Nasdaq SmallCap Market prior to the
Effective Time. (For avoidance of doubt: references in this Agreement to "the
Nasdaq SmallCap Market" do not include the OTC Bulletin Board.)
(g) Listing of Additional Shares. Parent shall have executed and
delivered to The Nasdaq Stock Market, Inc. a listing of additional shares
notification form with respect to the shares of Parent Common Stock issuable to
stockholders of the Company pursuant to the Merger and such other shares
required to be reserved for issuance in connection with this Agreement, together
with such other agreements, instruments and documents as shall be required under
the rules of the Nasdaq Stock Market to permit the trading of such shares in the
Nasdaq SmallCap Market immediately after the Effective Time.
(h) Note Restructuring. The Company shall be reasonably satisfied
that (i) the Convertible Note restructuring transaction contemplated by the
Letter of Intent dated April 11, 2002 by and among Parent and the holders of not
less than $23.5 million in principal amount of its Convertible Notes shall have
been consummated (or shall be consummated simultaneously with the Closing)
substantially in accordance with the terms of such Letter of Intent or upon such
other terms as are more favorable to Parent, (ii) no more than $1.7 million in
principal amount of Convertible Notes shall be due and payable between November
1, 2002 and the Closing Date (inclusive), and (iii) there shall not have
occurred any default which enables Convertible Notes covered by the Letter of
Intent to be accelerated or to not have their maturity date deferred.
(i) Change of Name of Parent. Parent shall have changed its
corporate name in accordance with Section 5.17.
49
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate and effect the Merger and
the other transactions contemplated hereby shall be subject to the satisfaction
at or prior to the Effective Time of each of the following conditions, any of
which may be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects both when made and at and as of the Effective Time,
except for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a particular
date (which shall remain true and correct as of such date), with the same force
and effect as if made on and as of the Effective Time.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time.
(c) Bringdown. Parent and Merger Sub shall have received a
certificate, dated the Closing Date, to the effect of Sections 6.3(a), 6.3(b),
6.3(d) and 6.3(e), signed by the President and Chief Financial Officer of the
Company.
(d) Cash Requirement. The Company shall have had cash, restricted
cash, cash equivalents, marketable securities and short-term investments of
(i) if the Closing occurs on or before November 15, 2002: not
less than $12,000,000 as of the earlier of the Closing Date or October 31, 2002,
(ii) if the Closing occurs between November 16 and November
30, 2002, inclusive: not less than $11,000,000 as of November 15, 2002;
(iii) if the Closing occurs between December 1 and December
15, 2002, inclusive: not less than $10,000,000 as of November 30, 2002, and
(iv) if the Closing occurs after December 15, 2002 inclusive:
not less than $9,500,000 as of December 15, 2002.
For this purpose it shall be deemed that any cash equivalents,
marketable securities and short-term investments held by the Company at the end
of a month and still held in the next month shall retain the same value, during
such next month, as they had at such month-end; and all figures shall be
reported using the same accounting principles as have been used in the Company
SEC Reports.
The foregoing condition is expressly based on the assumption that the
Company shall have made no special arrangements to accelerate the collection of
accounts receivable in order to meet this condition and shall not have, in order
to meet this condition, have specifically deferred the payment of accounts
payable which would otherwise have been paid in the ordinary course of business
before the applicable date or entered into new arrangements calling for payments
to be made after the applicable date when, in the ordinary course of business
had this Section 6.3(d)
50
not existed, such payments would have been called for to be made before the
applicable date. If such assumption proves to have been incorrect, the affected
amount shall be subtracted back in determining whether the Section 6.3(d)
condition has been met.
For purposes of this Section 6.3(d), (Y) an account payable to a vendor
or supplier shall be deemed not to have been specially deferred if the
applicable measurement date is less than 60 days after the date of the
applicable invoice, and (Z) any amounts paid before the applicable measurement
date, in connection with this Agreement and the transactions contemplated
hereby, to the Company's outside lawyers, independent certified public
accountants, financial advisers, proxy solicitors and financial printers shall
be added back in determining whether the Section 6.3(d) condition has been met.
(e) No Material Adverse Effect on the Company. There shall not
have been any Material Adverse Effect on the Company, and there shall not have
been any development that reasonably would be expected to have a Material
Adverse Effect on the Company.
Article VII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
7.1 Termination. This Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time:
(a) by mutual written consent of the Company and Parent;
(b) by Parent if:
(i) there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of the
Company and such breach has not been cured within thirty days after written
notice to the Company (provided, that Parent is not in material breach of the
terms of this Agreement; and provided further, that no cure period shall be
required for a breach which by its nature cannot be cured) such that the
conditions set forth in Section 6.3(a) or Section 6.3(b), as the case may be,
will not be satisfied, or
(ii) the Board of Directors of the Company amends, withholds
or withdraws its recommendation of the Merger (provided that Parent is not in
material breach of the terms of this Agreement);
(c) by the Company if:
(i) there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
Parent or Merger Sub and such breach has not been cured within thirty days after
written notice to Parent (provided, that the Company is not in material breach
of the terms of this Agreement; and provided further, that no cure period shall
be required for a breach which by its nature cannot be
51
cured) such that the conditions set forth in Section 6.2(a) or Section 6.2(b),
as the case may be, will not be satisfied;
(ii) the Board of Directors of Parent amends, withholds or
withdraws its recommendation of the Merger (provided the Company is not in
material breach of the terms of this Agreement);
(d) by any party hereto if (i) there shall be a final,
non-appealable order of a federal or state court in effect preventing
consummation of the Merger; (ii) there shall be any final action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity which would make
consummation of the Merger illegal or which would prohibit Parent's ownership or
operation of all or a material portion of the business of the Company, or compel
Parent to dispose of or hold separate all or a material portion of the business
or assets of the Company or Parent as a result of the Merger; (iii) if the
Company's stockholders do not approve the Merger and this Agreement at the
Company Stockholders' Meeting (provided that the Company may not terminate in
these circumstances if it is in material breach of the terms of this Agreement);
or (iv) if Parent's stockholders do not approve the Merger, this Agreement, and
the issuance of Parent Common Stock in the Merger at the Parent Stockholders'
Meeting (provided that Parent may not terminate in these circumstances if it is
in material breach of the terms of this Agreement);
(e) by any party hereto if the Merger shall not have been
consummated by January 6, 2003; provided, that the right to terminate this
Agreement under this Section 7.1(e) shall not be available to any party whose
willful failure to fulfill any material obligation under this Agreement has been
the cause of, or resulted in, the failure of the Effective Time to occur on or
before such date; or
(f) by any party hereto if the Board of Directors of the Company
accepts or approves a Superior Proposal, or recommends a Superior Proposal to
the stockholders of the Company (provided that the terminating party is not in
material breach of the terms of this Agreement).
(g) by any party hereto if the Board of Directors of Parent
accepts or approves a Superior Proposal, or recommends a Superior Proposal to
the stockholders of Parent (provided that the terminating party is not in
material breach of the terms of this Agreement).
Where action is taken to terminate this Agreement pursuant to this
Section 7.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
7.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent, Merger Sub,
the Company or their respective officers, directors, stockholders or affiliates,
except to the extent that such termination results from the breach by a party
hereto of any of its representations, warranties, covenants or agreements set
forth in this Agreement, and, provided that the provisions of Sections 5.3(b),
5.5
52
and 5.19 of this Agreement shall remain in full force and effect and survive
any termination of this Agreement.
7.3 Notice of Termination. Any termination of this Agreement under
Section 7.1 above will be effective immediately upon the delivery of written
notice by the terminating party to the other parties hereto.
7.4 Amendment. This Agreement may be amended by the parties hereto at
any time, but only by execution of an instrument in writing signed on behalf of
each of the parties hereto.
7.5 Extension; Waiver. At any time prior to the Effective Time any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements, covenants or conditions for the
benefit of such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
Article VIII
GENERAL PROVISIONS
------------------
8.1 Non-Survival of Representations and Warranties. The representations
and warranties of the Company, Parent and Merger Sub contained in this Agreement
shall terminate at the Effective Time, and only the covenants that by their
terms survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as the party shall specify by like notice). If so mailed,
they shall be deemed given upon the earlier of actual receipt or three business
days after mailing:
(a) if to Parent or Merger Sub, to:
0000 X. Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
53
with a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
00000 Xx Xxxxxx Xxxx
Xxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Xxxxx Xxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
00 Xxxxxxxxxx Xxxxx Xxxx
Xxxxx Xxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxx Xxxx LLP
000 Xxxxxxx Xxxxxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Facsimile No.: (000) 000-0000
8.3 Interpretation. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When reference is made herein to "the business
of" an entity, such reference shall be deemed to include the business of all
direct and indirect subsidiaries of such entity. Reference to the subsidiaries
of an entity shall be deemed to include all direct and indirect subsidiaries of
such entity.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement. This Agreement and the documents and instruments
and other agreements among the parties hereto as contemplated by or referred to
herein, including the Company Letter and the Parent Letter (a) constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, it being understood that
the Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as specifically set forth in Sections 5.14(f) and 5.21.
54
8.6 Severability. If any provision of this Agreement or the application
thereof, becomes or is declared by a court of competent jurisdiction to be
illegal, void or unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision; and, if they do not act to replace the
provision, the Agreement will be interpreted as if they had replaced it with
such a provision.
8.7 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
8.8 Governing Law and Choice of Forum.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, regardless of the
laws that might otherwise govern under applicable principles of conflicts of law
thereof.
(b) Any dispute or controversy arising out of or relating to this
Agreement, any document or instrument delivered pursuant to or in connection
herewith, or any breach of this Agreement or any such document or instrument
shall be resolved exclusively (as to court proceedings initiated by the Company,
including any counterclaims or crossclaims later brought by Parent or Merger
Sub) in the state or federal courts whose local geographic jurisdiction includes
Campbell, California, or exclusively (as to court proceedings initiated by
Parent or Merger Sub, including any counterclaims or crossclaims later brought
by the Company) in the state or federal courts whose local geographic
jurisdiction includes South Deerfield, Massachusetts. Each of the parties hereto
irrevocably consents to the exclusive jurisdiction of any such state or federal
court, in connection with any matter based upon or arising out of this Agreement
or the matters contemplated herein, agrees that process may be served upon them
in any manner authorized by the laws of the State of California or the
Commonwealth of Massachusetts, as the case may be, for such persons and waives
and covenants not to assert or plead any objection which they might otherwise
have to such forum, such jurisdiction and such process.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other parties.
8.11 Certain Definitions. For purposes of this Agreement, the term:
55
(a) "business day" means any day on which the principal offices
of the SEC in Washington D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day (other than a Saturday or a
Sunday) on which banks are not required or authorized to close in Massachusetts;
(b) "knowledge" means with respect to any fact, circumstance,
event or other matter in question, that such fact, circumstance, event or other
matter was actually known by or upon reasonable inquiry or investigation would
have been actually known by (i) an individual, if used in reference to an
individual, or (ii) Xxxxxx Xxxxxxx, Xxxxxxxx Xxxxxxxxxx, Xxxxxxxx Xxxx, Xxx
Xxxxxx, Xxxx Xxxxxx, Xxxxx Xxxxxxxxx or Xxxxx Xxxx, if used in reference to
Parent or Merger Sub, or (iii) Xxxx Xxxxxxxxxx, Xxxxxx Xxxxxxx, Xxxxx Xxxxxxx,
Xxxxxxx Xxxx, Xxxxxxx Xxxx or Xxxx Xxxxx, if used in reference to the Company.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
56
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be signed by their respective duly authorized officers, all as of
the date first written above.
[Seal] P-COM, INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxx
--------------------------------
Chief Executive Officer
[Seal] TELAXIS COMMUNICATIONS
CORPORATION
By: /s/ Xxxx X. Xxxxxxxxxx
--------------------------------
Name: Xxxx X. Xxxxxxxxxx
--------------------------------
President
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxx
--------------------------------
Treasurer
[Seal] XT CORPORATION
By: /s/ Xxxxxxxx X. Xxxx
--------------------------------
Name: Xxxxxxxx X. Xxxx
--------------------------------
President
By: /s/ Xxxxxxxx X. Xxxx
--------------------------------
Name: Xxxxxxxx X. Xxxx
--------------------------------
Treasurer
