EXHIBIT 2.3
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
Among
COLOR KINETICS INCORPORATED
PHILIPS HOLDING USA INC.
and
BLACK & WHITE MERGER SUB, INC.
Dated as of June 18, 2007
TABLE OF CONTENTS
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ARTICLE I
The Merger; Closing; Effective Time
1.1. The Merger.......................................................... 1
1.2. Closing............................................................. 1
1.3. Effective Time...................................................... 1
ARTICLE II
Certificate of Incorporation and By-Laws of the Surviving Corporation
2.1. The Certificate of Incorporation.................................... 2
2.2. The By-Laws......................................................... 2
ARTICLE III
Directors of the Surviving Corporation
3.1. Directors........................................................... 2
ARTICLE IV
Effect of the Merger on Capital Stock; Exchange of Certificates
4.1. Effect on Capital Stock............................................. 2
4.2. Exchange of Certificates............................................ 3
4.3. Treatment of Stock Plans............................................ 5
4.4. Adjustments to Prevent Dilution..................................... 6
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company....................... 6
5.2. Representations and Warranties of Parent and Merger Sub............. 23
ARTICLE VI
Covenants
6.1. Interim Operations.................................................. 25
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6.2. Acquisition Proposals............................................... 28
6.3. Proxy Filing; Information Supplied.................................. 31
6.4. Stockholders Meeting................................................ 31
6.5. Filings; Other Actions; Notification................................ 32
6.6. Access and Reports.................................................. 34
6.7. Stock Exchange De-listing........................................... 34
6.8. Publicity........................................................... 34
6.9. Employee Benefits................................................... 34
6.10. Expenses............................................................ 35
6.11. Indemnification; Directors' and Officers' Insurance................. 35
6.12. Other Actions by the Company........................................ 37
6.13. Pending Litigation.................................................. 37
ARTICLE VII
Conditions
7.1. Conditions to Each Party's Obligation to Effect the Merger.......... 38
7.2. Conditions to Obligations of Parent and Merger Sub.................. 38
7.3. Conditions to Obligation of the Company............................. 39
ARTICLE VIII
Termination
8.1. Termination by Mutual Consent....................................... 40
8.2. Termination by Either Parent or the Company......................... 40
8.3. Termination by the Company.......................................... 40
8.4. Termination by Parent............................................... 41
8.5. Effect of Termination and Abandonment............................... 41
ARTICLE IX
Miscellaneous and General
9.1. Survival............................................................ 42
9.2. Modification or Amendment........................................... 43
9.3. Waiver of Conditions................................................ 43
9.4. Counterparts........................................................ 43
9.5. Governing Law and Venue; Waiver of Jury Trial; Specific
Performance......................................................... 43
9.6. Notices............................................................. 44
9.7. Entire Agreement.................................................... 45
9.8. No Third Party Beneficiaries........................................ 45
9.9. Obligations of Parent and of the Company............................ 46
9.10. Definitions......................................................... 46
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9.11. Severability........................................................ 46
9.12. Interpretation; Construction........................................ 46
9.13. Assignment.......................................................... 47
Annex A Defined Terms................................................. A-1
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "AGREEMENT"), dated
as of June 18, 2007 among Color Kinetics Incorporated, a Delaware corporation
(the "COMPANY"), Philips Holding USA Inc., a Delaware corporation ("PARENT"),
and Black & White Merger Sub, Inc., a Delaware corporation and a wholly owned
direct subsidiary of Parent ("MERGER SUB," Parent and Merger Sub sometimes being
hereinafter collectively referred to as the "CONSTITUENT CORPORATIONS").
RECITALS
WHEREAS, the respective boards of directors of each of Parent, Merger Sub
and the Company have approved the merger of Merger Sub with and into the Company
(the "MERGER") upon the terms and subject to the conditions set forth in this
Agreement and have approved and declared advisable this Agreement; and
WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained, the parties
hereto agree as follows:
ARTICLE I
The Merger; Closing; Effective Time
1.1. The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time (as defined in Section 1.3), Merger Sub
shall be merged with and into the Company and the separate corporate existence
of Merger Sub shall thereupon cease. The Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "SURVIVING
CORPORATION"), and the separate corporate existence of the Company, with all its
rights, privileges, immunities, powers and franchises, shall continue unaffected
by the Merger. The Merger shall have the effects specified in the Delaware
General Corporation Law, as amended (the "DGCL").
1.2. Closing. Unless otherwise mutually agreed in writing between the
Company and Parent, the closing for the Merger (the "CLOSING") shall take place
at the offices of Xxxxxxxx & Xxxxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx,
at 9:00 A.M. on the second business day (the "CLOSING DATE") following the day
on which the last to be satisfied or waived of the conditions set forth in
Article VII (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions) shall be satisfied or waived in accordance with this Agreement. For
purposes of this Agreement, the term "BUSINESS DAY" shall mean any day ending at
11:59 p.m. (Eastern Time) other than a Saturday or Sunday or a day on which
banks are required or authorized to close in the City of New York.
1.3. Effective Time. As soon as practicable following the Closing, the
Company and Parent will cause a Certificate of Merger (the "DELAWARE CERTIFICATE
OF MERGER") to be executed, acknowledged and filed with the Secretary of State
of the State of Delaware as provided in Section 251 of the DGCL. The Merger
shall become effective at the time when the
Delaware Certificate of Merger has been duly filed with the Secretary of State
of the State of Delaware or at such later time as may be agreed by the parties
in writing and specified in the Delaware Certificate of Merger (the "EFFECTIVE
TIME").
ARTICLE II
Certificate of Incorporation and By-Laws
of the Surviving Corporation
2.1. The Certificate of Incorporation. The certificate of incorporation of
the Company as in effect immediately prior to the Effective Time shall be the
certificate of incorporation of the Surviving Corporation (the "CHARTER"), until
duly amended as provided therein or by applicable Laws , except that Article
Fourth of the Charter shall be amended to read in its entirety as follows: "The
aggregate number of shares that the Corporation shall have the authority to
issue is 1,000 shares of Common Stock, par value $1.00 per share."
2.2. The By-Laws. The parties hereto shall take all actions necessary so
that the by-laws of the Merger Sub in effect immediately prior to the Effective
Time shall be the by-laws of the Surviving Corporation (the "By-Laws"), until
thereafter amended as provided therein or by applicable law.
ARTICLE III
Directors of the Surviving Corporation
3.1. Directors. The parties hereto shall take all actions necessary so
that the board of directors of Merger Sub at the Effective Time shall, from and
after the Effective Time, be the directors of the Surviving Corporation until
their successors have been duly elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Charter and
the By-Laws.
ARTICLE IV
Effect of the Merger on Capital Stock;
Exchange of Certificates
4.1. Effect on Capital Stock. At the Effective Time, as a result of the
Merger and without any action on the part of the holder of any capital stock of
the Company:
(a) Merger Consideration. Each share of the Common Stock, par value
$0.001 per share, of the Company (a "SHARE" or, collectively, the "SHARES")
issued and outstanding immediately prior to the Effective Time other than (i)
Shares owned by Parent, Merger Sub or any other direct or indirect wholly-owned
subsidiary of Parent and Shares owned by the Company or any direct or indirect
wholly-owned subsidiary of the Company, and in each case not held on behalf of
third parties, and (ii) Shares that are owned by stockholders ("DISSENTING
STOCKHOLDERS") who have perfected and not withdrawn a demand for appraisal
rights pursuant to Section 262 of the DGCL (each, an "EXCLUDED SHARE" and
collectively, "EXCLUDED SHARES")) shall be converted into the right to receive
$34.00 per Share (the "PER SHARE MERGER CONSIDERATION"). At the Effective Time,
all of the Shares shall cease to be outstanding, shall be cancelled and shall
cease to exist, and each certificate (a "CERTIFICATE")
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formerly representing any of the Shares (other than Excluded Shares) shall
thereafter represent only the right to receive the Per Share Merger
Consideration, without interest.
(b) Cancellation of Excluded Shares. Each Excluded Share shall, by
virtue of the Merger and without any action on the part of the holder of the
Excluded Share, cease to be outstanding, be cancelled without payment of any
consideration therefor and shall cease to exist, subject to any rights that
Dissenting Stockholders who are holders thereof may have under Section 4.2(f).
(c) Merger Sub. At the Effective Time, each share of Common Stock,
par value $0.01 per share, of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into one share of common stock,
par value $1.00 per share, of the Surviving Corporation.
4.2. Exchange of Certificates.
(a) Paying Agent. Parent shall make available or cause to be made
available to a paying agent selected by Parent with the Company's prior
approval, which shall not be unreasonably withheld (the "PAYING AGENT"), amounts
sufficient in the aggregate from time to time as needed to provide all funds
necessary for the Paying Agent to make payments of the Per Share Merger
Consideration pursuant to Section 4.1(a) (such cash being hereinafter referred
to as the "EXCHANGE FUND"). The Paying Agent agreement pursuant to which Parent
shall appoint the Paying Agent shall be in form and substance reasonably
acceptable to the Company.
(b) Exchange Procedures. Promptly after the Effective Time (and in
any event within three business days), the Surviving Corporation shall cause the
Paying Agent to mail to each holder of record of Shares (other than holders of
Excluded Shares) (i) a letter of transmittal in customary form specifying that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates (or affidavits of loss in lieu of
the Certificates as provided in Section 4.2(e)) to the Paying Agent, such letter
of transmittal to be in such form and have such other provisions as Parent and
the Company may reasonably agree, and (ii) instructions for use in effecting the
surrender of the Certificates (or affidavits of loss in lieu of the Certificates
as provided in Section 4.2(e)) in exchange for the Per Share Merger
Consideration. Upon surrender of a Certificate (or affidavit of loss in lieu of
the Certificate as provided in Section 4.2(e)) to the Paying Agent in accordance
with the terms of such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor a cash amount in
immediately available funds (after giving effect to any required tax
withholdings as provided in Section 4.2(g)) equal to (x) the number of Shares
represented by such Certificate (or affidavit of loss in lieu of the Certificate
as provided in Section 4.2(e)) multiplied by (y) the Per Share Merger
Consideration, and the Certificate so surrendered shall forthwith be cancelled.
No interest will be paid or accrued on any amount payable upon due surrender of
the Certificates. In the event of a transfer of ownership of Shares that is not
registered in the transfer records of the Company, a check for any cash to be
exchanged upon due surrender of the Certificate may be issued to such transferee
if the Certificate formerly representing such Shares is presented to the Paying
Agent, accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer taxes have been paid
or are not applicable.
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(c) Transfers. From and after the Effective Time, there shall be no
transfers on the stock transfer books of the Company of the Shares that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, any Certificate is presented to the Surviving Corporation, Parent or the
Paying Agent for transfer, it shall be cancelled and exchanged for the cash
amount in immediately available funds to which the holder of the Certificate is
entitled pursuant to this Article IV.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
(including the proceeds of any investments of the Exchange Fund) that remains
unclaimed by the stockholders of the Company for 180 days after the Effective
Time shall be delivered to the Surviving Corporation. Any holder of Shares
(other than Excluded Shares) who has not theretofore complied with this Article
IV shall thereafter look only to the Surviving Corporation for payment of the
Per Share Merger Consideration (after giving effect to any required tax
withholdings as provided in Section 4.2(g)) upon due surrender of its
Certificates (or affidavits of loss in lieu of the Certificates), without any
interest thereon. Notwithstanding the foregoing, none of the Surviving
Corporation, Parent, the Paying Agent or any other Person shall be liable to any
former holder of Shares for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar Laws. For the
purposes of this Agreement, the term "PERSON" shall mean any individual,
corporation (including not-for-profit), general or limited partnership, limited
liability company, joint venture, estate, trust, association, organization,
Governmental Entity (as defined in Section 5.1(d)) or other entity of any kind
or nature.
(e) Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and, if required by Parent, the posting by such Person of a
bond in customary amount and upon such terms as may be required by Parent as
indemnity against any claim that may be made against it or the Surviving
Corporation with respect to such Certificate, the Paying Agent will issue a
check in the amount (after giving effect to any required tax withholdings) equal
to the number of Shares represented by such lost, stolen or destroyed
Certificate multiplied by the Per Share Merger Consideration.
(f) Appraisal Rights. No Person who has perfected a demand for
appraisal rights pursuant to Section 262 of the DGCL shall be entitled to
receive the Per Share Merger Consideration with respect to the Shares owned by
such Person unless and until such Person shall have effectively withdrawn or
lost such Person's right to appraisal under the DGCL. Each Dissenting
Stockholder shall be entitled to receive only the payment provided by Section
262 of the DGCL with respect to Shares owned by such Dissenting Stockholder. The
Company shall give Parent (i) prompt notice of any written demands for
appraisal, attempted withdrawals of such demands, and any other instruments
served pursuant to applicable law that are received by the Company relating to
stockholders' rights of appraisal and (ii) the opportunity to direct all
negotiations and proceedings with respect to demand for appraisal under the
DGCL. The Company shall not, except with the prior written consent of Parent,
voluntarily make any payment with respect to any demands for appraisal, offer to
settle or settle any such demands or approve any withdrawal of any such demands.
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(g) Withholding Rights. Each of Parent, the Surviving Corporation
and the Paying Agent shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
Shares such amounts as it is required to deduct and withhold with respect to the
making of such payment under the Internal Revenue Code of 1986, as amended, or
any other applicable state, local or foreign Tax (as defined in Section 5.1(n))
law. To the extent that amounts are so withheld by the Surviving Corporation,
Parent or the Paying Agent, as the case may be, such withheld amounts (i) shall
be remitted by Parent, the Surviving Corporation or the Paying Agent, as
applicable, to the applicable Governmental Entity, and (ii) shall be treated for
all purposes of this Agreement as having been paid to the holder of Shares in
respect of which such deduction and withholding was made by the Surviving
Corporation, Parent or Paying Agent, as the case may be.
4.3. Treatment of Stock Plans.
(a) Treatment of Options. Immediately after the Effective Time each
outstanding option to purchase Shares (a "COMPANY OPTION") under the Stock Plans
(as defined in Section 5.1(b)), vested or unvested, shall be cancelled and shall
only entitle the holder of such Company Option to receive, as soon as reasonably
practicable after the Effective Time (and in any event within five business
days), an amount in cash equal to the product of (x) the total number of Shares
subject to the Company Option (without regard to any vesting provisions thereof)
times (y) the excess, if any, of the Per Share Merger Consideration over the
exercise price per Share under such Company Option less applicable Taxes
required to be withheld with respect to such payment. After the completion of
the offer period ending July 31, 2007 under the Company's 2004 Employee Stock
Purchase Plan, the Company will not initiate any new offer period thereunder.
(b) Company Awards. Immediately after the Effective Time, each right
of any kind, contingent or accrued, to acquire or receive Shares or benefits
measured by the value of Shares, and each award of any kind consisting of Shares
that may be held, awarded, outstanding, payable or reserved for issuance under
the Stock Plans and any other Benefit Plans, other than Company Options (the
"COMPANY AWARDS"), shall be cancelled and shall only entitle the holder of such
Company Award to receive, as soon as reasonably practicable after the Effective
Time (and in any event within five business days), an amount in cash equal to
(x) the number of Shares subject to such Company Award immediately prior to the
Effective Time (without regard to any vesting provisions thereof) times (y) the
Per Share Merger Consideration (or, if the Company Award provides for payments
to the extent the value of the Shares exceed a specified reference price, the
amount, if any, by which the Per Share Merger Consideration exceeds such
reference price), less applicable Taxes required to be withheld with respect to
such payment.
(c) Corporate Actions. At or prior to the Effective Time, the
Company, the board of directors of the Company and the compensation committee of
the board of directors of the Company, as applicable, shall adopt any
resolutions and take any actions which are necessary to effectuate the
provisions of Section 4.3(a) and 4.3(b). The Company shall take all actions
necessary to ensure that after the Effective Time neither Parent nor the
Surviving Corporation will be required to deliver Shares or other capital stock
of the Company to any Person pursuant to or in settlement of Company Options or
Company Awards.
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(d) Amounts Withheld. To the extent that amounts are so withheld in
respect of Taxes by the Surviving Corporation or Parent, as the case may be,
pursuant to subsections 4.3(a) or (b) above, such withheld amounts (i) shall be
remitted by Parent or the Surviving Corporation, as applicable, to the
applicable Governmental Entity, and (ii) shall be treated for all purposes of
this Agreement as having been paid to the holder of Company Options or Company
Awards in respect of which such deduction and withholding was made by the
Surviving Corporation or Parent, as the case may be.
(e) Notice. As soon as practicable following the execution of this
Agreement, the Company shall mail to each person who is a holder of Company
Options or Company Awards a letter approved in advance by Parent describing the
treatment of and payment for such Company Options or Company Awards pursuant to
this Section 4.3 and providing instructions for use in obtaining payment for
such Company Options or Company Awards.
4.4. Adjustments to Prevent Dilution. In the event that the Company
changes the number of Shares or securities convertible or exchangeable into or
exercisable for Shares issued and outstanding prior to the Effective Time as a
result of a reclassification, stock split (including a reverse stock split),
stock dividend or distribution, recapitalization, merger, issuer tender or
exchange offer, or other similar transaction, the Per Share Merger Consideration
shall be equitably adjusted.
ARTICLE V
Representations and Warranties
5.1. Representations and Warranties of the Company. Except as set forth in
the Company Reports (as defined in Section 5.1(e)) filed with the SEC prior to
the date of this Agreement (excluding, in each case, any disclosures set forth
in any risk factor section and in any section relating to forward looking
statements to the extent that they are cautionary, predictive or forward-looking
in nature) or in the corresponding sections or subsections of the disclosure
letter delivered to Parent by the Company prior to entering into this Agreement
(the "COMPANY DISCLOSURE LETTER") the Company hereby represents and warrants to
Parent and Merger Sub that:
(a) Organization, Good Standing and Qualification. Each of the
Company and its Subsidiaries is a legal entity duly organized, validly existing
and (to the extent such concept is applicable) in good standing under the Laws
(as defined in Section 5.1(i)) of its respective jurisdiction of organization
and has all requisite corporate or similar power and authority to own, lease and
operate its properties and assets and to carry on its business as presently
conducted and is qualified to do business and is in good standing as a foreign
corporation or other legal entity in each jurisdiction where the ownership,
leasing or operation of its assets or properties or conduct of its business
requires such qualification, except where the failure to be so organized,
qualified or in good standing, or to have such power or authority, are not,
individually or in the aggregate, reasonably likely to result in a Material
Adverse Effect (as defined below). The Company has made available to Parent
complete and correct copies of the Company's and its Subsidiaries' certificates
of incorporation and by-laws or comparable governing documents, each as amended
to the date of this Agreement, and each as so delivered is in full force and
effect. Section 5.1(a) of the Company Disclosure Letter contains a correct and
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complete list of each jurisdiction where the Company and its Subsidiaries are
organized and qualified to do business.
As used in this Agreement, the term (i) "SUBSIDIARY" means, with respect
to any Person, any other Person of which at least a majority of the securities
or ownership interests having by their terms ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
is directly or indirectly owned or controlled by such Person and/or by one or
more of its Subsidiaries, (ii) "SIGNIFICANT SUBSIDIARY" is as defined in Rule
1.02(w) of Regulation S-X promulgated pursuant to the Securities Exchange Act of
1934, as amended (the "EXCHANGE Act") and (iii) "MATERIAL ADVERSE EFFECT" means
a material adverse effect on the financial condition, properties, assets,
liabilities, business, prospects or results of operations of the Company and its
Subsidiaries taken as a whole; provided, however, that none of the following, in
and of itself or themselves, shall constitute a Material Adverse Effect:
(A) changes in the economy or financial markets
generally in the United States;
(B) changes that are the result of factors generally
affecting the industry in which the Company and its Subsidiaries operate;
(C) changes in United States generally accepted
accounting principles after the date of this Agreement;
(D) a decline in the price of the Company Common Stock
on NASDAQ, provided that the exception in this clause shall not prevent or
otherwise affect a determination that any change, effect, circumstance or
development underlying such decline has resulted in, or contributed to, a
Material Adverse Effect;
(E)changes that are the result of acts of war, terrorism
or natural disasters;
(F) any loss of, or adverse change in, the relationship
of the Company with its customers, employees or suppliers that the Company
establishes was caused by the pendency or the announcement of the
transactions contemplated by this Agreement;
(G) any action expressly required by this Agreement,
including actions required to be taken by this Agreement upon the specific
request of Parent; or
(H) failure of the Company to meet any estimates or
projections, including of revenues or earnings, for any period; provided
that the exception in this clause shall not prevent or otherwise affect a
determination that any change, effect, circumstance or development
underlying such failure has resulted in, or contributed to, a Material
Adverse Effect;
provided, further, that, with respect to clauses (A), (B) and (E), such change,
event, circumstance or development does not (i) primarily relate only to (or
have the effect of primarily relating to) the Company and its Subsidiaries or
(ii) disproportionately adversely affect the Company and its
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Subsidiaries compared to other companies of similar size operating in the same
industry in which the Company and its Subsidiaries operate.
(b) Capital Structure.
(i) The authorized capital stock of the Company consists of
100,000,000 Shares, of which 21,470,150 Shares were outstanding as of the
close of business on the date of this Agreement. All of the outstanding
Shares have been duly authorized and are validly issued, fully paid and
nonassessable. Other than 4,338,230 Shares reserved for issuance under the
Company's plans disclosed in Section 5.1(b)(i) of the Company Disclosure
Letter (the "STOCK PLANS"), the Company has no Shares reserved for
issuance. Section 5.1(b)(i) of the Company Disclosure Letter contains a
correct and complete list of options, restricted stock, and other stock
rights under the Stock Plans, including the holder, date of grant, term,
number of Shares and exercise price. Each of the outstanding shares of
capital stock or other securities of each of the Company's Subsidiaries is
duly authorized, validly issued, fully paid and nonassessable and owned by
the Company or by a direct or indirect wholly-owned Subsidiary of the
Company, free and clear of any lien, charge, pledge, security interest,
claim or other encumbrance, except any encumbrance for Taxes or other
governmental charges that are not yet due and payable (each, a "LIEN").
Except as set forth above, or as set forth in Section 5.1(b)(i) of the
Company Disclosure Letter, there are no preemptive or other outstanding
rights, options, warrants, conversion rights, stock appreciation rights,
redemption rights, repurchase rights, agreements, arrangements, calls,
commitments or rights of any kind that obligate the Company or any of its
Subsidiaries to issue or sell any shares of capital stock or other
securities of the Company or any of its Subsidiaries or any securities or
obligations convertible or exchangeable into or exercisable for, or giving
any Person a right to subscribe for or acquire, any securities of the
Company or any of its Subsidiaries, and no securities or obligations
evidencing such rights are authorized, issued or outstanding. Upon any
issuance of any Shares in accordance with the terms of the Stock Plans,
such Shares will be duly authorized, validly issued, fully paid and
nonassessable and free and clear of any Liens. The Company does not have
outstanding any bonds, debentures, notes or other obligations the holders
of which have the right to vote (or convertible into or exercisable for
securities having the right to vote) with the stockholders of the Company
on any matter.
(ii) Section 5.1(b)(ii) of the Company Disclosure Schedule
sets forth (x) each of the Company's Subsidiaries and the ownership
interest of the Company in each such Subsidiary, as well as the ownership
interest of any other Person or Persons in each such Subsidiary and (y)
the Company's or its Subsidiaries' capital stock, equity interest or other
direct or indirect ownership interest in any other Person other than
securities in a publicly traded company held for investment by the Company
or any of its Subsidiaries and consisting of less than 1% of the
outstanding capital stock of such company. The Company does not own,
directly or indirectly, any voting interest in any Person, acquisition of
which would require an additional filing by Parent under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
ACT").
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(iii) Each Company Option (A) was granted in compliance with
all applicable Laws and all of the terms and conditions of the Company
Stock Plan pursuant to which it was issued, (B) qualifies for the tax and
accounting treatment afforded to such Company Option in the Company's tax
returns and the Company Reports, respectively, and (C) was otherwise
properly disclosed in the Company Reports.
(c) Corporate Authority; Approval and Fairness.
(i) The Company has all requisite corporate power and
authority and has taken all corporate action necessary in order to
execute, deliver and perform its obligations under this Agreement and to
consummate the Merger, subject only to adoption of this Agreement by the
holders of a majority of the outstanding Shares entitled to vote on such
matter at a stockholders' meeting duly called and held for such purpose
(the "REQUISITE COMPANY VOTE"). This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding agreement of
the Company enforceable against the Company in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar Laws of general applicability relating to or
affecting creditors' rights and to general equity principles (the
"BANKRUPTCY AND EQUITY EXCEPTION").
(ii) The board of directors of the Company has (A) unanimously
determined that the Merger is fair to, and in the best interests of, the
Company and its stockholders, approved and declared advisable this
Agreement and the Merger and the other transactions contemplated hereby
and resolved to recommend adoption of this Agreement to the holders of
Shares (the "COMPANY RECOMMENDATION"), (B) directed that this Agreement be
submitted to the holders of Shares for their adoption and (C) received the
opinion of its financial advisor, Deutsche Bank Securities, Inc., to the
effect that the Per Share Merger Consideration is fair from a financial
point of view to such holders of Shares. The board of directors of the
Company has taken all action so that Parent will not be an "interested
stockholder" or prohibited from entering into or consummating a "business
combination" with the Company (in each case as such term is used in
Section 203 of the DGCL) as a result of the execution of this Agreement or
the consummation of the transactions in the manner contemplated hereby.
(d) Governmental Filings; No Violations; Certain Contracts.
(i) Other than the filings, approvals and/or notices pursuant
to Section 1.3, Section 6.3, under the HSR Act or under any other
antitrust, competition or premerger notification, trade regulation Law,
regulation or Order (the "COMPANY APPROVALS"), no notices, reports or
other filings are required to be made by the Company with, nor are any
consents, registrations, approvals, permits or authorizations required to
be obtained by the Company from, any domestic or foreign governmental or
regulatory authority, agency, commission, body, court or other
legislative, executive or judicial governmental entity (each a
"GOVERNMENTAL ENTITY"), in connection with the execution, delivery and
performance of this Agreement by the Company and the consummation of the
Merger and the other transactions contemplated hereby, or to permit the
continuing operation of the business of the Company and its Subsidiaries
in light of such
- 9 -
consummation, except those that the failure to make or obtain which are
not, individually or in the aggregate, reasonably likely to result in a
Material Adverse Effect or prevent, materially delay or materially impair
the consummation of the transactions contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement
by the Company do not, and the consummation of the Merger and the other
transactions contemplated hereby will not, constitute or result in (A) a
breach or violation of, or a default under, the certificate of
incorporation or by-laws of the Company or the comparable governing
documents of any of its Subsidiaries, (B) with or without notice, lapse of
time or both, a breach or violation of, a termination (or right of
termination) or default under, the creation or acceleration of any
obligations under or the creation of a Lien on any of the assets of the
Company or any of its Subsidiaries pursuant to (x) any agreement, lease,
license, contract, note, mortgage, indenture, arrangement or other
obligation not otherwise terminable by the other party thereto on 90 days'
or less notice (each, a "CONTRACT") that is binding upon the Company or
any of its Subsidiaries, or (y), assuming (solely with respect to
performance of this Agreement and consummation of the Merger and the other
transactions contemplated hereby), compliance with the matters referred to
in Section 5.1(d)(i), any Law to which the Company or any of its
Subsidiaries is subject, or (C) any change in the rights or obligations of
any party under any Contract that is binding upon the Company or any of
its Subsidiaries, except, in the case of clause (B) or (C) above, for any
such breaches, violations, terminations, defaults, creations,
accelerations or changes that are not, individually or in the aggregate,
reasonably likely to result in a Material Adverse Effect or prevent,
materially delay or materially impair the consummation of the transactions
contemplated by this Agreement. Section 5.1(d)(ii) of the Company
Disclosure Letter sets forth a correct and complete list of Material
Contracts (as defined in Section 5.1(j)(i)(J)) pursuant to which consents
or waivers are required prior to consummation of the transactions
contemplated by this Agreement (whether or not subject to the exception
set forth with respect to clauses (B) and (C) above).
(iii) The Company and its Subsidiaries are not creditors or
claimants with respect to any debtor or debtor-in-possession subject to
proceedings under chapter 11 of title 11 of the United States Code with
respect to claims that, in the aggregate, constitute more than 25% of the
gross assets of the Company and its Subsidiaries (excluding cash and cash
equivalents).
(e) Company Reports; Financial Statements.
(i) The Company has filed or furnished, as applicable, all
forms, statements, certifications, reports and documents required to be
filed or furnished by it with the SEC pursuant to the Exchange Act or the
Securities Act since December 31, 2003 (the "APPLICABLE DATE") (the forms,
statements, reports and documents filed or furnished since the Applicable
Date and those filed or furnished subsequent to the date of this Agreement
and prior to the Closing, including any amendments thereto, the "COMPANY
REPORTS"). Each of the Company Reports, at the time of its filing or being
furnished complied or, if not yet filed or furnished, will comply in all
material respects
- 10 -
with the applicable requirements of the Securities Act, the Exchange Act
and the Xxxxxxxx-Xxxxx Act of 2002 (the "XXXXXXXX-XXXXX ACT"), and any
rules and regulations promulgated thereunder applicable to the Company
Reports. As of their respective dates (or, if amended prior to the date of
this Agreement, as of the date of such amendment), the Company Reports did
not, and any Company Reports filed with or furnished to the SEC subsequent
to the date of this Agreement will not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading.
(ii) The Company is in compliance in all material respects
with the applicable listing and corporate governance rules and regulations
of NASDAQ. Except as permitted by the Exchange Act, including Sections
13(k)(2) and (3) or rules of the SEC, since the enactment of the
Xxxxxxxx-Xxxxx Act, neither the Company nor any of its Affiliates has
made, arranged or modified (in any material way) any extensions of credit
in the form of a personal loan to any executive officer or director of the
Company. For purposes of this Agreement, the term "AFFILIATE" when used
with respect to any party shall mean any Person who is an "affiliate" of
that party within the meaning of Rule 405 promulgated under the Securities
Act.
(iii) The Company maintains disclosure controls and procedures
required by and in accordance with Rule 13a-15 or 15d-15, as applicable,
under the Exchange Act. The Company maintains internal control over
financial reporting, as required by and in accordance with Rule 13a-15 or
15d-15, as applicable, under the Exchange Act. The Company has disclosed,
based on the most recent evaluation by its chief executive officer and its
chief financial officer prior to the date of this Agreement, to the
Company's auditors and the audit committee of the Company's board of
directors (A) any significant deficiencies in the design or operation of
its internal control over financial reporting that are reasonably likely
to adversely affect the Company's ability to record, process, summarize
and report financial information and has identified for the Company's
auditors and audit committee of the Company's board of directors any
material weaknesses in internal control over financial reporting and (B)
any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal control
over financial reporting. The Company has made available to Parent (i) a
summary of any such disclosure made by management to the Company's
auditors and audit committee since the Applicable Date and (ii) any
communication since the Applicable Date made in writing by management or
the Company's auditors to the audit committee and required or contemplated
by listing standards of the NASDAQ, the audit committee's charter or
professional standards of the Public Company Accounting Oversight Board.
Since the Applicable Date, no complaints from any source regarding
accounting, internal accounting controls or auditing matters, and no
material concerns from Company employees regarding questionable accounting
or auditing matters, have been received by the Company. The Company has
made available to Parent a summary of all complaints or concerns made
since the Applicable Date through the Company's whistleblower hot line or
equivalent system for receipt of employee concerns regarding possible
violations of Law. No attorney representing the Company or any of its
Subsidiaries, whether or not employed by the Company or any of
- 11 -
its Subsidiaries, has reported evidence of a violation of securities laws,
breach of fiduciary duty or similar violation by the Company or any of its
officers, directors, employees or agents to the Company's chief legal
officer, audit committee (or other committee designated for the purpose)
of the board of directors or the board of directors pursuant to the rules
adopted pursuant to Section 307 of the Xxxxxxxx-Xxxxx Act or any Company
policy contemplating such reporting, including in instances not required
by those rules.
(iv) Each of the consolidated balance sheets included in or
incorporated by reference into the Company Reports (including the related
notes and schedules) fairly presents in all material respects, or, in the
case of Company Reports filed after the date of this Agreement, will
fairly present in all material respects the consolidated financial
position of the Company and its consolidated Subsidiaries as of its date
and each of the consolidated statements of income, changes in
shareholders' equity (deficit) and cash flows included in or incorporated
by reference into the Company Reports (including any related notes and
schedules) fairly presents in all material respects, or in the case of
Company Reports filed after the date of this Agreement, will fairly
present in all material respects the results of operations, retained
earnings (loss) and changes in financial position, as the case may be, of
such companies for the periods set forth therein (subject, in the case of
unaudited statements, to notes and normal year-end audit adjustments that
will not be material in amount or effect), in each case in accordance with
U.S. generally accepted accounting principles ("GAAP") consistently
applied during the periods involved, except as may be noted therein.
(f) Absence of Certain Changes. Since December 31, 2006, the Company
and its Subsidiaries have conducted their respective businesses only in, and
have not engaged in any material transaction other than in accordance with, the
ordinary course of such businesses consistent with past practices and there has
not been:
(i) any change in the financial condition, properties, assets,
liabilities, business, prospects, or results of their operations or any
circumstance, occurrence or development (including any adverse change with
respect to any circumstance, occurrence or development existing on or
prior to December 31, 2006) of which management of the Company has
knowledge which, individually or in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect;
(ii) any material damage, destruction or other casualty loss
with respect to any material asset or property owned, leased or otherwise
used by the Company or any of its Subsidiaries, whether or not covered by
insurance;
(iii) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital stock
of the Company or any of its Subsidiaries (except for dividends or other
distributions by any direct or indirect wholly-owned Subsidiary to the
Company or to any wholly-owned Subsidiary of the Company), or any
repurchase, redemption or other acquisition by the Company or any of its
Subsidiaries of any outstanding shares of capital stock or other
securities of the Company or any of its Subsidiaries;
- 12 -
(iv) any material change in any method of accounting or
accounting practice by the Company or any of its Subsidiaries, except as
required by GAAP and disclosed in the Company Reports filed prior to the
date hereof;
(v) (A) any increase in the compensation payable or to become
payable to its officers or employees (except for increases in the ordinary
course of business and consistent with past practice) or (B) any
establishment, adoption, entry into or amendment of any collective
bargaining, bonus, profit sharing, thrift, compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee, except
to the extent required by applicable Laws or as disclosed in the Company
Reports filed prior to the date hereof; or
(vi) any agreement to do any of the foregoing.
(g) Litigation and Liabilities. There are no civil, criminal or
administrative actions, suits, claims, hearings, arbitrations, investigations or
other proceedings pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries, except for those that,
individually or in the aggregate, have not had, and are not reasonably likely to
result in, a Material Adverse Effect or to prevent, materially delay or
materially impair the consummation of the transactions contemplated by this
Agreement. Except as reflected or reserved against in the Company's consolidated
balance sheets (and the notes thereto) included in the Company Reports filed
prior to the date hereof, and except for obligations or liabilities incurred in
the ordinary course of business since March 31, 2007 consistent with past
practice, there are no material obligations or material liabilities of the
Company or any of its Subsidiaries, whether or not accrued, contingent or
otherwise, and whether or not required to be disclosed. Except as disclosed in
the Company Reports filed prior to the date hereof, neither the Company nor any
of its Subsidiaries is a party to or subject to the provisions of any judgment,
order, writ, injunction, decree or award of any Governmental Entity.
(h) Employee Benefits.
(i) All benefit and compensation plans, contracts, policies or
arrangements covering current or former employees of the Company and its
subsidiaries (the "EMPLOYEES") and current or former directors of the
Company to which the Company or any of its Subsidiaries contributes or has
any obligation to contribute or has or could have any liability in respect
thereof, including, but not limited to, "employee benefit plans" within
the meaning of Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), and deferred compensation, severance, stock
option, stock purchase, stock appreciation rights, stock based, incentive
and bonus plans (the "BENEFIT PLANS"), other than Benefit Plans maintained
outside of the United States primarily for the benefit of employees
working outside of the United States ("NON-U.S. BENEFIT PLANS"), are
listed on Section 5.1(h)(i) of the Company Disclosure Letter, and each
Benefit Plan which has received a favorable opinion letter from the
Internal Revenue Service National Office, including any master or
prototype plan, has been separately identified. True and complete copies
of all Benefit Plans listed on Section 5.1(h)(i) of the Company Disclosure
Letter, including, but not limited to, any
- 13 -
trust instruments, insurance contracts and, with respect to any employee
stock ownership plan, loan agreements forming a part of any Benefit Plans,
and all amendments thereto have been provided or made available to Parent.
(ii) All Benefit Plans, other than "multiemployer plans"
within the meaning of Section 3(37) of ERISA (each, a "MULTIEMPLOYER
PLAN") and Non-U.S. Benefit Plans (collectively, "U.S. BENEFIT PLANS") are
in substantial compliance with ERISA, the Internal Revenue Code of 1986,
as amended (the "CODE") and other applicable laws. Each U.S. Benefit Plan
which is subject to ERISA (an "ERISA PLAN") that is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA (a "PENSION
PLAN") intended to be qualified under Section 401(a) of the Code, has
received a favorable determination letter from the Internal Revenue
Service (the "IRS") covering all tax law changes prior to the Economic
Growth and Tax Relief Reconciliation Act of 2001 or has applied to the IRS
for such favorable determination letter within the applicable remedial
amendment period under Section 401(b) of the Code, and the Company is not
aware of any circumstances likely to result in the loss of the
qualification of such Plan under Section 401(a) of the Code. Any voluntary
employees' beneficiary association within the meaning of Section 501(c)(9)
of the Code which provides benefits under a U.S. Benefit Plan has (i)
received an opinion letter from the IRS recognizing its exempt status
under Section 501(c)(9) of the Code and (ii) filed a timely notice with
the IRS pursuant to Section 505(c) of the Code, and the Company is not
aware of circumstances likely to result in the loss of such exempt status
under Section 501(c)(9) of the Code. Neither the Company nor any of its
Subsidiaries has engaged in a transaction with respect to any ERISA Plan
that, assuming the taxable period of such transaction expired as of the
date of this Agreement, could subject the Company or any Subsidiary to a
tax or penalty imposed by either Section 4975 of the Code or Section
502(i) of ERISA in an amount which would be material. Neither the Company
nor any of its Subsidiaries has incurred or reasonably expects to incur a
tax or penalty imposed by Section 4980F of the Code or Section 502 of
ERISA or any material liability under Section 4071 of ERISA.
(iii) No liability under Subtitle C or D of Title IV of ERISA
has been or is expected to be incurred by the Company or any of its
Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any of them, or the
single-employer plan of any entity which is considered one employer with
the Company under Section 4001 of ERISA or Section 414 of the Code (an
"ERISA AFFILIATE"). The Company and its Subsidiaries have not incurred and
do not expect to incur any withdrawal liability with respect to a
Multiemployer Plan under Subtitle E of Title IV of ERISA (regardless of
whether based on contributions of an ERISA Affiliate). No notice of a
"reportable event", within the meaning of Section 4043 of ERISA for which
the reporting requirement has not been waived or extended, other than
pursuant to Pension Benefit Guaranty Corporation ("PBGC") Reg. Section
4043.33 or 4043.66, has been required to be filed for any Pension Plan or
by any ERISA Affiliate within the 12 month period ending on the date of
this Agreement or will be required to be filed in connection with the
transactions contemplated by this Agreement. No notices have been required
to
- 14 -
be sent to participants and beneficiaries or the PBGC under Section 302 or
4011 of ERISA or Section 412 of the Code (including Section 412(m)).
(iv) All contributions required to be made under each Benefit
Plan, as of the date of this Agreement, have been timely made and all
obligations in respect of each Benefit Plan have been properly accrued and
reflected in the most recent consolidated balance sheet filed or
incorporated by reference in the Company Reports prior to the date of this
Agreement. Neither any Pension Plan nor any single-employer plan of an
ERISA Affiliate has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of
ERISA and no ERISA Affiliate has an outstanding funding waiver. Neither
any Pension Plan nor any single-employer plan of an ERISA Affiliate has
been required to file information pursuant to Section 4010 of ERISA for
the current or most recently completed plan year. It is not reasonably
anticipated that required minimum contributions to any Pension Plan under
Section 412 of the Code will be materially increased by application of
Section 412(l) of the Code. Neither the Company nor any of its
Subsidiaries has provided, or is required to provide, security to any
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant
to Section 401(a)(29) of the Code.
(v) Under each Pension Plan which is a single-employer plan,
as of the last day of the most recent plan year ended prior to the date of
this Agreement, the actuarially determined present value of all "benefit
liabilities", within the meaning of Section 4001(a)(16) of ERISA (as
determined on the basis of the actuarial assumptions contained in such
Pension Plan's most recent actuarial valuation), did not exceed the then
current value of the assets of such Pension Plan, and there has been no
material change in the financial condition, whether or not as a result of
a change in funding method, of such Pension Plan since the last day of the
most recent plan year.
(vi) As of the date of this Agreement, there is no material
pending or, to the knowledge of the Company threatened, litigation
relating to the Benefit Plans. Neither the Company nor any of its
subsidiaries has any obligations for retiree health and life benefits
under any ERISA Plan or collective bargaining agreement, other than in
accordance with the requirements of Part 6 of Title I of ERISA and Section
4980 of the Code ("COBRA"). The Company or its Subsidiaries may amend or
terminate any such plan at any time without incurring any liability
thereunder other than in respect of claims incurred prior to such
amendment or termination.
(vii) There has been no amendment to, announcement by the
Company or any of its subsidiaries relating to, or change in employee
participation or coverage under, any Benefit Plan which would increase
materially the expense of maintaining such plan above the level of the
expense incurred therefor for the most recent fiscal year. Neither the
execution of this Agreement, stockholder adoption of this Agreement nor
the consummation of the transactions contemplated hereby will (w) entitle
any employees of the Company or any of its Subsidiaries to severance pay
or any increase in severance pay upon any termination of employment after
the date of this Agreement, (x) accelerate the time of payment or vesting
or result in any payment or funding (through a grantor trust or otherwise)
of compensation or benefits under, increase the amount payable or result
in
- 15 -
any other material obligation pursuant to, any of the Benefit Plans, (y)
limit or restrict the right of the Company or, after the consummation of
the transactions contemplated hereby, Parent to merge, amend or terminate
any of the Benefit Plans or (z) result in payments under any of the
Benefit Plans which would not be deductible under Section 162(m) or
Section 280G of the Code.
(viii) All Non-U.S. Benefit Plans comply in all material
respects with applicable local law. All Non-U.S. Benefit Plans are listed
on Section 5.1(h)(viii) of the Company Disclosure Letter. The Company and
its Subsidiaries have no material unfunded liabilities with respect to any
such Non-U.S. Benefit Plan. As of the date of this Agreement, there is no
pending or, to the knowledge of the Company, threatened material
litigation relating to Non-U.S. Benefit Plans.
(i) Compliance with Laws; Licenses. The businesses of each of the
Company and its Subsidiaries have not been, and are not being, conducted in
violation of any federal, state, local or foreign law, statute or ordinance,
common law, or any rule, regulation, standard, judgment, order, writ,
injunction, decree, arbitration award, agency requirement, license or permit of
any Governmental Entity (collectively, "LAWS"), except for violations that are
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect or prevent, materially delay or materially impair the
consummation of the transactions contemplated by this Agreement. To the
knowledge of the Company, no investigation or review by any Governmental Entity
with respect to the Company or any of its Subsidiaries is pending or threatened,
nor has any Governmental Entity indicated an intention to conduct the same. To
the knowledge of the Company, no material change is required in the Company's or
any of its Subsidiaries' processes, properties or procedures in connection with
any such Laws, and the Company has not received from any Governmental Entity or
any Person acting on behalf of any Governmental Entity any notice or
communication of any material noncompliance with any such Laws that has not been
cured as of the date of this Agreement. The Company and its Subsidiaries each
has obtained and is in compliance with all permits, certifications, approvals,
registrations, consents, authorizations, franchises, variances, exemptions and
orders issued or granted by a Governmental Entity ("LICENSES") necessary to
conduct its business as presently conducted, except those the absence of or
failure to comply with which, individually or in the aggregate, would not
reasonably be expected to result in a Material Adverse Effect or prevent,
materially delay or materially impair the consummation of the transactions
contemplated by this Agreement.
(j) Material Contracts and Government Contracts.
(i) Except for this Agreement and except for Contracts filed
as exhibits to the Company Reports, as of the date of this Agreement, none
of the Company or its Subsidiaries is a party to or bound by any Contract:
(A) that would be required to be filed by the Company as
a "material contract" pursuant to Item 601(b)(10) of Regulation S-K under
the Securities Act;
(B) that is reasonably likely to require aggregate
payments of royalties or other amounts to or from the Company and its
Subsidiaries in 2007 or any
- 16 -
subsequent calendar year of more than $150,000, or is reasonably likely to
require aggregate payments to or from the Company and its Subsidiaries in
any time period of more than $500,000;
(C) that would prevent, materially delay or materially
impede the Company's ability to consummate the Merger or the other
transactions contemplated hereby;
(D) that (i) purports to limit in any material respect
either the type of business in which the Company or its Subsidiaries (or,
after the Effective Time, Parent or its Subsidiaries) may engage or the
manner or locations in which any of them may so engage in any business,
(ii) could require the disposition of any material assets or line of
business of the Company or its Subsidiaries or, after the Effective Time,
of Parent or its Subsidiaries, (iii) grants "most favored nation" status
that, following the Merger, would apply to Parent and its Subsidiaries,
including the Company and its Subsidiaries or (iv) prohibits or limits in
any material respect the right of the Company or any of its Subsidiaries
to make, sell or distribute any products or services or use, transfer,
license, distribute or enforce any of their respective Intellectual
Property rights;
(E) to which the Company or any of its Subsidiaries is a
party containing a standstill or similar agreement pursuant to which the
Company or any Subsidiary has agreed not to acquire assets or securities
of the other party or of any of the Affiliates of such party;
(F) between the Company or any of its Subsidiaries and
any director or executive officer of the Company or any Person
beneficially owning five percent or more of the outstanding Shares;
(G) providing for indemnification by the Company or any
of its Subsidiaries of any Person, except for such indemnification
provisions as are (x) customary in the Company's industry or incidental to
the routine conduct of its business, (y) not reasonably likely to be
material to the Company or any of its Subsidiaries and (z) entered into in
the ordinary course of business (an "Ordinary Course Indemnity"); and
(H) that contains a put, call or similar right pursuant
to which the Company or any of its Subsidiaries could be required to
purchase or sell, as applicable, any equity interests of any Person or
assets that have a fair market value or purchase price of more than
$100,000; and
(I) Each such Contract described in clauses (A) through
(H) is referred to herein as a "MATERIAL CONTRACT".
(ii) A correct and complete copy of each Material Contract has
previously been delivered or made available to Parent. Each of the
Material Contracts (and those Contracts which would be Material Contracts
but for the exception of being filed as exhibits to the SEC Reports) is
valid and binding on the Company or its Subsidiaries, as the case may be,
and is in full force and effect, except for such failures to be valid and
binding or to be in full force and effect as would not, or would not
- 17 -
reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect. There is no default under any such Contracts by
the Company or its Subsidiaries and no event has occurred that with the
lapse of time or the giving of notice or both would constitute a default
thereunder by the Company or its Subsidiaries, in each case except as
would not, or would not reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect.
(iii) (A) With respect to each Government Contract (as
hereinafter defined), except as would not reasonably be expected to have a
Material Adverse Effect, (x) all representations and certifications
executed, acknowledged or set forth in such Governmental Contract were
complete and correct in all material respects as of their effective date,
and the Company and each of its Subsidiaries have complied in all material
respects with all such representations and certifications: (y) neither a
Governmental Entity nor any prime contractor, subcontractor or other
Person acting on behalf of the a Governmental Entity or under a Government
Contract has notified the Company or any of its Subsidiaries that the
Company or any such Subsidiary has breached or violated any material
certification, representation, clause, provision or requirement,
pertaining to such Government Contract; and (z) no termination for
convenience, termination for default, cure notice or show cause notice is
in effect as of the date hereof pertaining to any Government Contract.
(iv) (x) to the knowledge of the Company, neither the Company
nor any of its Subsidiaries nor any of their respective personnel is or
has been under administrative, civil, or criminal investigation, or
indictment or audit by any Governmental Entity with respect to any alleged
irregularity, misstatement or omission arising under or relating to any
Government Contract; (y) neither the Company nor any of its Subsidiaries
has conducted or initiated any internal investigation or made a voluntary
disclosure to the United States government with respect to any alleged
irregularity, misstatement or omission arising under or relating to a
Government Contract; and (z) neither the Company nor any of its
Subsidiaries nor, to the knowledge of the Company, any of their respective
personnel has been suspended or debarred from doing business with the
United States government or is, or at any time has been, the subject of a
finding of non-responsibility or ineligibility for United States
government contracting.
As used herein, "GOVERNMENT CONTRACT" means any contract to which the
Company or any of its Subsidiaries is a party, or by which any of them are
bound, the ultimate contracting party of which is, to the knowledge of the
Company, a Governmental Entity (including any subcontract with a prime
contractor or other subcontractor who is a party to any such contract).
(k) Real Property.
(i) No real property is owned by the Company or its
Subsidiaries, and the Company and its Subsidiaries are not parties to any
outstanding options or rights of first refusal to purchase any real
property.
(ii) With respect to the real property leased or subleased to
the Company or its Subsidiaries (the "LEASED REAL PROPERTY"), the lease or
sublease for
- 18 -
such property is valid, legally binding, enforceable and in full force and
effect, and none of the Company or any of its Subsidiaries is in breach of
or default under such lease or sublease, and no event has occurred which,
with notice, lapse of time or both, would constitute a breach or default
by any of the Company or its Subsidiaries or permit termination,
modification or acceleration by any third party thereunder, or prevent,
materially delay or materially impair the consummation of the transactions
contemplated by this Agreement, except in each case for such invalidity,
failure to be binding, unenforceability, ineffectiveness, breaches,
defaults, terminations, modifications, accelerations or repudiations that
are not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect.
(l) Takeover Statutes. Except for Section 203 of the DGCL, no "fair
price," "moratorium," "control share acquisition" or other similar anti-takeover
statute or regulation (each, a "TAKEOVER STATUTE") or any anti-takeover
provision in the Company's certificate of incorporation or by-laws is applicable
to the Company, the Shares, the Merger or the other transactions contemplated by
this Agreement. The board of directors of the Company has taken all actions
necessary to render inapplicable to this Agreement (and the transactions
contemplated hereby) the restrictions set forth in Section 203 of the DGCL.
(m) Environmental Matters. (i) the Company and its Subsidiaries have
at all times been in material compliance with all applicable Environmental Laws;
(ii) no property currently owned or operated by the Company or any of its
Subsidiaries (including soils, groundwater, surface water, buildings or other
structures) is contaminated with any Hazardous Substance to the extent that such
property could reasonably be expected to require performance of any response
actions under any Environmental Law; (iii) no property formerly owned or
operated by the Company or any of its Subsidiaries was contaminated by the
Company or any of its Subsidiaries with any Hazardous Substance during such
period of ownership or operation to the extent that such property could
reasonably be expected to require performance of any response actions under any
Environmental Law ; (iv) neither the Company nor any of its Subsidiaries is
subject to liability for any Hazardous Substance disposal or contamination on
any third party property; (v) neither the Company nor any of its Subsidiaries
has received any notice, demand, letter, claim or request for information
alleging that the Company or any of its Subsidiaries may be in violation of or
subject to liability under any Environmental Law; (vi) neither the Company nor
any of its Subsidiaries is subject to any order, decree, injunction or other
arrangement with any Governmental Entity or any indemnity (other than an
Ordinary Course Indemnity) or other agreement with any third party relating to
liability under any Environmental Law or relating to Hazardous Substances; (vii)
there are no other circumstances or conditions involving the Company or any of
its Subsidiaries that could reasonably be expected to result in any claim,
liability, investigation, cost or restriction on the ownership, use, or transfer
of any property pursuant to any Environmental Law; and (viii) the Company has
delivered to Parent copies of all environmental reports, studies, assessments,
sampling data and other environmental information in its possession relating to
Company or its Subsidiaries or their respective current and former properties or
operations.
As used herein, the term "ENVIRONMENTAL LAW" means any federal, state,
local or foreign statute, law, regulation, order, decree, permit, authorization,
opinion, common law or agency requirement relating to: (A) the protection,
investigation or restoration of the environment,
- 19 -
health, safety, or natural resources, (B) the handling, use, presence, disposal,
release or threatened release of any Hazardous Substance or (C) noise, odor,
indoor air, employee exposure, wetlands, pollution, contamination or any injury
or threat of injury to persons or property relating to any Hazardous Substance.
As used herein, the term "HAZARDOUS SUBSTANCE" means any substance that
is: (A) listed, classified or regulated pursuant to any Environmental Law; and
(B) any petroleum product or by product, asbestos-containing material,
lead-containing paint or plumbing, polychlorinated biphenyls, radioactive
material or radon.
(n) Taxes. The Company and each of its Subsidiaries (i) have
prepared in good faith and duly and timely filed (taking into account any
extension of time within which to file) all Tax Returns (as defined below)
required to be filed by any of them and all such filed Tax Returns are complete
and accurate in all material respects; (ii) have paid all material Taxes (as
defined below) that are required to be paid by any of them or that the Company
or any of its Subsidiaries are obligated to withhold from amounts owing to any
employee, creditor or third party, except with respect to matters contested in
good faith and that have been properly and fully reserved for in the Company
Reports in accordance with GAAP; and (iii) have not waived any statute of
limitations with respect to Taxes which has not yet expired or agreed to any
extension of time with respect to a Tax assessment or deficiency, which
assessment or deficiency has not yet been paid. As of the date of this
Agreement, there are not pending or, to the knowledge of the Company, threatened
in writing, any audits, examinations, investigations or other proceedings in
respect of Taxes or Tax matters. There are not, to the knowledge of the Company,
any unresolved questions or claims concerning the Company's or any of its
Subsidiaries' Tax liability that are, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect and are not disclosed or
provided for in the Company Reports. The Company has made available to Purchaser
true and correct copies of the United States federal income Tax Returns filed by
the Company and its Subsidiaries for each of the three fiscal years ended
December 31, 2005. Neither the Company nor any of its Subsidiaries has any
liability with respect to income, franchise or similar Taxes that accrued on or
before December 31, 2006 in excess of the amounts accrued with respect thereto
that are reflected in the financial statements included in the Company Reports
filed on or prior to the date of this Agreement. Neither the Company nor any of
its Subsidiaries has participated in any "reportable transactions" within the
meaning of Section 1.6011-4 of the regulations promulgated by the U.S.
Department of the Treasury pursuant to the Code (the "TREASURY REGULATIONS") nor
has the Company or any of its Subsidiaries been a "material advisor" to any such
transactions within the meaning of Section 6111 of the Code. None of the Company
or any of its Subsidiaries has any liability for the Taxes of any person (other
than members of the consolidated group of which the Company is the common
parent) (i) under Treasury Regulation Section 1.1502-6 (or any similar provision
of state, local, or foreign Law), (ii) as a transferee or successor, or (iii) by
contract, except in each case where such liability for Taxes would not,
individually or in the aggregate, have a Material Adverse Effect with respect to
the Company. Neither the Company nor any of its Subsidiaries is a party to, is
bound by or has any obligation under any material Tax sharing or material Tax
indemnity agreement or similar material contract or agreement other than any
agreement or contract between or among the Company and any of its Subsidiaries.
Neither the Company nor any of its Subsidiaries has distributed stock of another
person, or has had its stock distributed by another person, in a transaction
that was purported or intended to be governed in whole or in part
- 20 -
by Section 355 or Section 361 of the Code. There are no material Liens on any of
the assets of the Company or any of its Subsidiaries that arose in connection
with any failure (or alleged failure) to pay any Tax.
As used in this Agreement, (i) the term "TAX" (including, with correlative
meaning, the term "TAXES") includes all federal, state, local and foreign
income, profits, franchise, gross receipts, environmental, customs duty, capital
stock, severance, stamp, payroll, sales, employment, unemployment, disability,
use, property, withholding, excise, production, value added, occupancy and other
taxes, duties or assessments that are in the nature of a tax, together with all
interest, penalties and additions imposed with respect to such amounts and any
interest in respect of such penalties and additions, and (ii) the term "TAX
RETURN" includes all returns and reports (including elections, declarations,
disclosures, schedules, estimates and information returns, as well as amendments
thereof and schedules and attachments thereto) required to be supplied to a Tax
authority relating to Taxes.
(o) Labor Matters. Neither the Company nor any of its Subsidiaries
is a party to or otherwise bound by any collective bargaining agreement or other
Contract with a labor union or labor organization, nor is the Company or any of
its Subsidiaries the subject of any material proceeding that asserts that the
Company or any of its Subsidiaries has committed an unfair labor practice or
that seeks to compel it to bargain with any labor union or labor organization
nor is there pending or, to the knowledge of the Company, threatened, nor has
there been for the past five years, any labor strike, dispute, walk-out, work
stoppage, slow-down or lockout involving the Company or any of its Subsidiaries.
To the knowledge of the Company, there are no organizational efforts with
respect to the formation of a collective bargaining unit presently being made
involving employees of the Company or any of its Subsidiaries. The Company has
previously made available to Parent correct and complete copies of all labor and
collective bargaining agreements, Contracts or other agreements or
understandings with a labor union or labor organization to which the Company or
any of its Subsidiaries is party or by which any of them are otherwise bound, if
any (collectively, the "COMPANY LABOR AGREEMENTS"). The consummation of the
Merger and the other transactions contemplated by this Agreement will not
entitle any third party (including any labor union or labor organization) to any
payments under any of the Company Labor Agreements. The Company and its
Subsidiaries have complied in all material respects with the reporting
requirements of the Labor Management Reporting and Disclosure Act.
(p) Intellectual Property.
(i) The Company and its Subsidiaries have sufficient rights to
use all Intellectual Property used in their business as presently
conducted, all of which rights shall survive unchanged the consummation of
the transactions contemplated by this Agreement. The Intellectual Property
owned by the Company and its Subsidiaries is, to the knowledge of the
Company, valid, subsisting and enforceable, and is not subject to any
outstanding order, judgment, decree or agreement adversely affecting in
any material respect the Company's or its Subsidiaries' use of, or its
rights to, such Intellectual Property. The Company and its Subsidiaries
have not, to the knowledge of the Company, infringed or otherwise violated
the Intellectual Property rights of any third party during the five (5)
year period immediately preceding the date of this Agreement.
- 21 -
(ii) The Company and its Subsidiaries have taken reasonable
measures to protect the confidentiality and value of all Trade Secrets
that are owned, used or held by the Company and its Subsidiaries, and to
the Company's knowledge, no material Trade Secrets have been used,
disclosed to or discovered by any person except pursuant to valid and
appropriate non-disclosure and/or license agreements which have not been
breached. All employees and consultants of the Company have executed
Intellectual Property and confidentiality agreements for the benefit of
the Company pursuant to which each such employee and consultant has
assigned each of her inventions to the Company and has agreed to treat
confidentially all Trade Secrets.
(iii) The Company and its Subsidiaries have not granted any
licenses or other rights to third parties to use any of their Intellectual
Property, that are in effect as of the date of this Agreement or will
become effective after the date of this Agreement, other than
non-exclusive licenses granted in the ordinary course of business all of
which licenses have been previously been made available to Parent. More
specifically, the Company and its Subsidiaries have not granted or
undertaken to grant a royalty free, paid-up license or cross license to
use any of their Intellectual Property to any third party. The Company and
its Subsidiaries have not obtained any rights to use third party
intellectual property pursuant to sublicenses or pursuant to
cross-licenses, settlement-agreements or other royalty free agreements,
and, except as set forth in Section 5.1(p)(iii) of the Company Disclosure
Letter, no such third party intellectual property is incorporated in the
Company's products or is otherwise material to the business of the Company
and its Subsidiaries.
(iv) The IT Assets owned, used or held for use by the Company
or any of its Subsidiaries operate and perform in all material respects in
accordance with their documentation and functional specifications and
otherwise as required by the Company and its Subsidiaries in connection
with its business, except as would not reasonably be expected to have a
Material Adverse Effect. To the Company's knowledge, no person has gained
unauthorized access to the IT Assets. The Company and its Subsidiaries
have implemented reasonable backup and disaster recovery technology
consistent with industry practices. To the Company's knowledge, none of
the IT Assets or any software used by the Company in its products or
operation contains any shareware, open source code or other software whose
use requires disclosure of source code or licensing of Intellectual
Property.
(v) For purposes of this Agreement, the following terms have
the following meanings:
"INTELLECTUAL PROPERTY" means all (i) trademarks, service marks, brand
names, certification marks, collective marks, d/b/a's, Internet domain names,
logos, symbols, trade dress, trade names, and other indicia of origin, all
applications and registrations for the foregoing, and all goodwill associated
therewith and symbolized thereby, including all renewals of same; (ii)
inventions and discoveries, whether patentable or not, and all patents,
registrations, invention disclosures and applications therefor, including
divisions, continuations, continuations-in-part and renewal applications, and
including renewals, extensions and reissues; (iii) confidential information,
trade secrets and know-how, including processes, schematics,
-22-
business methods, formulae, drawings, prototypes, models, designs, customer
lists and supplier lists (collectively, "TRADE SECRETS"); (iv) published and
unpublished works of authorship, whether copyrightable or not (including,
without limitation, databases and other compilations of information), copyrights
therein and thereto, and registrations and applications therefor, and all
renewals, extensions, restorations and reversions thereof; and (v) all other
intellectual property or proprietary rights.
"IT ASSETS" means computers, computer software, firmware, middleware,
servers, workstations, routers, hubs, switches, data communications lines, and
all other information technology equipment, and all associated documentation,
other than commercially available off the shelf software.
(q) Insurance. All material fire and casualty, general liability,
business interruption, product liability, and sprinkler and water damage
insurance policies maintained by the Company or any of its Subsidiaries
("INSURANCE POLICIES") are with insurance carriers believed by the Company to be
reputable, provide coverage for risks incident to the business of the Company
and its Subsidiaries and their respective properties and assets that are
believed by the Company to be normal and customary for persons engaged in
similar businesses, and are in character and amount generally consistent with
that carried by persons engaged in similar businesses and subject to the same or
similar perils or hazards, except for any such failures to maintain insurance
policies that, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect. Each Insurance Policy is in full force and
effect and all premiums due with respect to all Insurance Policies have been
paid, with such exceptions that, individually or in the aggregate, are not
reasonably likely to have a Material Adverse Effect.
(r) Brokers and Finders. Neither the Company nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders, fees in connection
with the Merger or the other transactions contemplated in this Agreement, except
that the Company has employed Deutsche Bank Securities, Inc. as its financial
advisor. The Company has made available to Parent a complete and accurate copy
of all agreements pursuant to which Deutsche Bank Securities, Inc. is entitled
to any fees and expenses in connection with any of the transactions contemplated
by this Agreement.
5.2. Representations and Warranties of Parent and Merger Sub. Parent and
Merger Sub each hereby represent and warrant to the Company that:
(a) Organization, Good Standing and Qualification. Each of Parent
and Merger Sub is a legal entity duly organized, validly existing and in good
standing under the Laws of its respective jurisdiction of organization and has
all requisite corporate or similar power and authority to own, lease and operate
its properties and assets and to carry on its business as presently conducted
and is qualified to do business and is in good standing as a foreign corporation
in each jurisdiction where the ownership, leasing or operation of its assets or
properties or conduct of its business requires such qualification, except where
the failure to be so organized, qualified or in such good standing, or to have
such power or authority, would not, individually or in the aggregate, reasonably
be expected to prevent, materially delay or impair the ability of Parent and
Merger Sub to consummate the Merger and the other transactions
-23-
contemplated by this Agreement. Parent has made available to the Company a
complete and correct copy of the certificate of incorporation and by-laws of
Parent and Merger Sub, each as in effect on the date of this Agreement.
(b) Corporate Authority. No vote of holders of capital stock of
Parent is necessary to approve this Agreement and the Merger and the other
transactions contemplated hereby. Each of Parent and Merger Sub has all
requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement and to consummate the Merger. This Agreement has been duly executed
and delivered by each of Parent and Merger Sub and is a valid and binding
agreement of, Parent and Merger Sub, enforceable against each of Parent and
Merger Sub in accordance with its terms, subject to the Bankruptcy and Equity
Exception. This Agreement has been duly adopted by Parent, the sole stockholder
of Merger Sub, in accordance with applicable Law and the certificate of
incorporation and by-laws of Merger Sub.
(c) Governmental Filings; No Violations; Etc.
(i) Other than the filings, approvals and/or notices pursuant
to Section 1.3, under the HSR Act or under any other applicable antitrust,
competition or premerger notification, trade regulation Law, regulation or
Order (the "PARENT APPROVALS"), no notices, reports or other filings are
required to be made by Parent or Merger Sub with, nor are any consents,
registrations, approvals, permits or authorizations required to be
obtained by Parent or Merger Sub from, any Governmental Entity in
connection with the execution, delivery and performance of this Agreement
by Parent and Merger Sub and the consummation by Parent and Merger Sub of
the Merger and the other transactions contemplated hereby, except those
that the failure to make or obtain would not, individually or in the
aggregate, reasonably be expected to prevent or materially delay the
ability of Parent or Merger Sub to consummate the Merger and the other
transactions contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement
by Parent and Merger Sub do not, and the consummation by Parent and Merger
Sub of the Merger and the other transactions contemplated hereby will not,
constitute or result in (A) a breach or violation of, or a default under,
the certificate of incorporation or by-laws of Parent or Merger Sub or the
comparable governing instruments of any of its Subsidiaries, (B) with or
without notice, lapse of time or both, a breach or violation of, a
termination (or right of termination) or a default under, the creation or
acceleration of any obligations under or the creation of a Lien on any of
the assets of Parent or any of its Subsidiaries pursuant to, any Contracts
binding upon Parent or any of its Subsidiaries or any Laws or governmental
or non-governmental permit or license to which Parent or any of its
Subsidiaries is subject; or (C) any change in the rights or obligations of
any party under any of such Contracts, except, in the case of clause (B)
or (C) above, for any breach, violation, termination, default, creation,
acceleration or change that would not, individually or in the aggregate,
reasonably be expected to prevent or materially delay the ability of
Parent or Merger Sub to consummate the Merger and the other transactions
contemplated by this Agreement.
-24-
(d) Available Funds. Parent will have available to it as of the
Closing Date all funds necessary for the payment to the Paying Agent of the
aggregate Per Share Merger Consideration and to satisfy all of its other
obligations under this Agreement.
(e) Capitalization of Merger Sub. The authorized capital stock of
Merger Sub consists solely of 1,000 shares of Common Stock, par value $0.01 per
share, all of which are validly issued and outstanding. All of the issued and
outstanding capital stock of Merger Sub is, and at the Effective Time will be,
owned by Parent. Merger Sub has not conducted any business prior to the date of
this Agreement and has no, and prior to the Effective Time will have no, assets,
liabilities or obligations of any nature other than those incident to its
formation and pursuant to this Agreement and the Merger and the other
transactions contemplated by this Agreement.
ARTICLE VI
Covenants
6.1. Interim Operations.
(a) The Company covenants and agrees as to itself and its
Subsidiaries that, after the date of this Agreement and prior to the Effective
Time (unless Parent shall otherwise approve in writing, and except as otherwise
expressly contemplated by this Agreement) and except as required by applicable
Laws, the business of it and its Subsidiaries shall be conducted in all material
respects in the ordinary and usual course and, to the extent consistent
therewith, it and its Subsidiaries shall use commercially reasonable efforts to
preserve their business organizations intact and maintain existing relations and
goodwill with Governmental Entities, customers, suppliers, distributors,
creditors, lessors, employees and business associates. Without limiting the
generality of, and in furtherance of, the foregoing, from the date of this
Agreement until the Effective Time, except (A) as otherwise expressly required
by this Agreement, (B) as Parent may approve in writing (such approval not to be
unreasonably withheld or delayed) or (C) as set forth in Section 6.1 of the
Company Disclosure Letter, the Company will not and will not permit its
Subsidiaries to:
(i) adopt or propose any change in its certificate of
incorporation or by-laws or other applicable governing instruments;
(ii) merge or consolidate the Company or any of its
Subsidiaries with any other Person, except for any such transactions among
wholly-owned Subsidiaries of the Company, or restructure, reorganize or
completely or partially liquidate or otherwise enter into any agreements
or arrangements imposing material changes or restrictions on its assets,
operations or businesses;
(iii) acquire assets outside of the ordinary course of
business from any other Person with a value or purchase price in the
aggregate in excess of $100,000 in any transaction or series of related
transactions, other than acquisitions pursuant to Material Contracts in
effect as of the date of this Agreement or pursuant to Section 6.1(a)(x)
below;
-25-
(iv) issue, sell, pledge, dispose of, grant, transfer,
encumber, or authorize the issuance, sale, pledge, disposition, grant,
transfer, lease, license, guarantee or encumbrance of, any shares of
capital stock of the Company or any of its Subsidiaries (other than the
issuance of shares by a wholly-owned Subsidiary of the Company to the
Company or another wholly-owned Subsidiary), or securities convertible or
exchangeable into or exercisable for any shares of such capital stock, or
any options, warrants or other rights of any kind to acquire any shares of
such capital stock or such convertible or exchangeable securities, other
than upon the exercise of Company Options or warrants to purchase Shares
that are outstanding on the date of this Agreement;
(v) create or incur any Lien material to the Company or any of
its Subsidiaries on any assets of the Company or any of its Subsidiaries
having a value in excess of $500,000;
(vi) make any loans, advances, guarantees or capital
contributions to or investments in any Person (other than the Company or
any direct or indirect wholly-owned Subsidiary of the Company) in excess
of $500,000 in the aggregate;
(vii) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock (except for dividends paid by any direct or
indirect wholly-owned Subsidiary to the Company or to any other direct or
indirect wholly-owned Subsidiary) or enter into any agreement with respect
to the voting of its capital stock;
(viii) reclassify, split, combine, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital
stock or securities convertible or exchangeable into or exercisable for
any shares of its capital stock;
(ix) incur any indebtedness for borrowed money or guarantee
such indebtedness of another Person, or issue or sell any debt securities
or warrants or other rights to acquire any debt security of the Company or
any of its Subsidiaries, except for indebtedness for borrowed money
incurred in the ordinary course of business consistent with past practices
not to exceed $500,000 in the aggregate;
(x) except as set forth in the capital budgets set forth in
Section 6.1(i)(x) of the Company Disclosure Letter and consistent
therewith, make or authorize any capital expenditure in excess of $500,000
in the aggregate during any 12 month period;
(xi) other than in the ordinary course of business consistent
with past practice, enter into any Contract that would have been a
Material Contract had it been entered into prior to this Agreement;
(xii) except for non-exclusive standard license agreements
with customers that are entered into in the ordinary course of business
upon terms and royalty rates that are consistent with the Company's past
practice and do not include any cross-license of existing Intellectual
Property of the licensee, and that are not individually
-26-
material to the business of the Company, enter into any new license
agreement with respect to the Intellectual Property or IT Assets of the
Company;
(xiii) amend any existing license agreement with respect to
the Intellectual Property or IT Assets of the Company other than in the
ordinary course of business consistent with past practice and in a manner
that is not adverse to the Company;
(xiv) make any changes with respect to accounting policies or
any material change in accounting procedures, except as required by
changes in GAAP;
(xv) except in the ordinary course of business consistent with
past practice, settle any litigation or other proceedings before a
Governmental Entity for an amount in excess of $250,000 (net of insurance
coverage), or any disputed obligation or liability of the Company in
excess of such amount;
(xvi) other than in the ordinary course of business consistent
with past practice, amend, modify or terminate any Material Contract, or
cancel, modify or waive any debts or claims held by it or waive any rights
having in each case a value in excess of $250,000;
(xvii) make any Tax election, change an annual accounting
period, file any amended Tax Return, enter into any closing agreement,
waive or extend any statute of limitation with respect to Taxes, settle or
compromise any Tax liability, claim or assessment (other than the payment
in the ordinary course of business of Taxes that are due and payable), or
surrender any right to claim a refund of Taxes;
(xviii) transfer, sell, lease, license, mortgage, pledge,
surrender, encumber, divest, cancel, abandon or allow to lapse or expire
or otherwise dispose of any material assets, licenses (other than licenses
to customers that lapse or expire in accordance with their terms),
operations, rights, product lines, businesses or interests therein of the
Company or its Subsidiaries, including capital stock of any of its
Subsidiaries, except in connection with the sale of Company products and
services in the ordinary course of business and sales of obsolete assets
and except for sales, leases, licenses or other dispositions of assets
with a fair market value not in excess of $500,000 in the aggregate, other
than pursuant to Contracts in effect prior to the date of this Agreement;
(xix) except as required pursuant to existing written, binding
agreements in effect prior to the date of this Agreement and set forth in
Section 5.1(h)(i) of the Company Disclosure Letter, or as otherwise
required by applicable Law, (i) grant or provide any severance or
termination payments or benefits to any director, officer or employee of
the Company or any of its Subsidiaries, (ii) increase the compensation,
bonus or pension, welfare, severance or other benefits of, pay any bonus
to, or make any new equity awards to any director, officer or employee of
the Company or any of its Subsidiaries, except for increases in base
salary in the ordinary course of business consistent with past practice
for employees who are not officers, (iii) establish, adopt,
-27-
amend or terminate any Benefit Plan or amend the terms of any outstanding
equity-based awards, (iv) take any action to accelerate the vesting or
payment, or fund or in any other way secure the payment, of compensation
or benefits under any Benefit Plan, to the extent not already provided in
any such Benefit Plan, (v) change any actuarial or other assumptions used
to calculate funding obligations with respect to any Benefit Plan or to
change the manner in which contributions to such plans are made or the
basis on which such contributions are determined, except as may be
required by GAAP; or (vi) forgive any loans to directors, officers or
employees of the Company or any of its Subsidiaries;
(xx) knowingly take any action or omit to take any action that
is reasonably likely to result in any of the conditions to the Merger set
forth in Article VIII not being satisfied or is reasonably likely to
prevent the consummation of the Merger; or
(xxi) agree, authorize or commit to do any of the foregoing.
(b) Prior to making any written or material oral communications to
the directors, officers or employees of the Company or any of its Subsidiaries
pertaining to compensation or benefit matters that are affected by the
transactions contemplated by this Agreement (other than an oral communication
with any individual director, officer or employee), the Company shall provide
Parent with a copy of the intended communication; Parent shall have a reasonable
period of time to review and comment on the communication; and Parent and the
Company shall cooperate in providing any such mutually agreeable communication.
(c) Parent shall not knowingly take or permit any of its
Subsidiaries to take any action that is reasonably likely to prevent the
consummation of the Merger.
6.2. Acquisition Proposals.
(a) No Solicitation or Negotiation. The Company agrees that, except
as expressly permitted by this Section 6.2, neither it nor any of its
Subsidiaries nor any of the officers and directors of it or its Subsidiaries
shall, and that it shall use reasonable best efforts to instruct and cause its
and its Subsidiaries' employees, investment bankers, attorneys, accountants and
other advisors or representatives (such directors, officers, employees,
investment bankers, attorneys, accountants and other advisors or
representatives, collectively, "REPRESENTATIVES") not to, directly or
indirectly:
(i) initiate, solicit or encourage any inquiries or the making
of any proposal or offer that constitutes, or could reasonably be expected
to lead to, any Acquisition Proposal (as defined below); or
(ii) engage in, continue or otherwise participate in any
discussions or negotiations regarding, or provide any non-public
information or data to any Person relating to, any Acquisition Proposal;
or
(iii) otherwise facilitate any effort or attempt to make an
Acquisition Proposal.
-28-
Notwithstanding anything in the foregoing to the contrary, prior to the
time, but not after, the Requisite Company Vote is obtained, the Company may (A)
provide information in response to a request therefor by a Person who has made
an unsolicited bona fide written Acquisition Proposal providing for the
acquisition of more than 50% of the assets (on a consolidated basis) or more
than 50% of the total voting power of the equity securities of the Company if
the Company receives from the Person so requesting such information an executed
confidentiality agreement on terms not less restrictive to the other party than
those contained in the Confidentiality Agreement (as defined in Section 9.7) and
promptly discloses (and, if applicable, provides copies of) any such information
to Parent to the extent not previously provided to Parent; (B) engage or
participate in any discussions or negotiations with any Person who has made such
an unsolicited bona fide written Acquisition Proposal; or (C) after having
complied with Section 6.2(c), approve, recommend, or otherwise declare advisable
or propose to approve, recommend or declare advisable (publicly or otherwise)
such an Acquisition Proposal, if and only to the extent that, (x) prior to
taking any action described in clause (A), (B) or (C) above, the board of
directors of the Company determines in good faith after consultation with
outside legal counsel that failure to take such action would be reasonably
likely to result in a breach of the directors' fiduciary duties under applicable
Law, (y) in each such case referred to in clause (A) or (B) above, the board of
directors of the Company has determined in good faith based on the information
then available and after consultation with its financial advisor that such
Acquisition Proposal either constitutes a Superior Proposal (as defined below)
or is reasonably likely to result in a Superior Proposal, and (z) in the case
referred to in clause (C) above, the board of directors of the Company
determines in good faith (after consultation with its financial advisor and
outside legal counsel) that such Acquisition Proposal is a Superior Proposal.
(b) Definitions. For purposes of this Agreement:
"ACQUISITION PROPOSAL" means (i) any inquiry, proposal or offer with
respect to a merger, joint venture, partnership, consolidation, dissolution,
liquidation, tender offer, recapitalization, reorganization, share exchange,
business combination or similar transaction involving the Company or any of its
Significant Subsidiaries and (ii) any inquiry proposal or offer to acquire in
any manner, directly or indirectly, 15% or more of the total voting power or 15%
of the outstanding shares of any class of equity securities of the Company or
those of any of its Subsidiaries, or 15% or more of the consolidated total
assets (including, without limitation, equity securities of its Subsidiaries) of
the Company, in each case other than the transactions contemplated by this
Agreement.
"SUPERIOR PROPOSAL" means an unsolicited bona fide Acquisition Proposal
involving more than 50% of the assets (on a consolidated basis) or more than 50%
of the total voting power of the equity securities of the Company that the board
of directors of the Company has determined in its good faith judgment is
reasonably likely to be consummated in accordance with its terms, taking into
account all legal, financial and regulatory aspects of the proposal and the
Person making the proposal, and, if consummated, would result in a transaction
more favorable to the Company's stockholders from a financial point of view than
the transaction contemplated by this Agreement (after taking into account any
revisions to the terms of the transaction contemplated by Section 6.2(c) of this
Agreement) pursuant to Section 6.2(c) and the time likely to be required to
consummate such Acquisition Proposal.
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(c) No Change in Recommendation or Alternative Acquisition
Agreement. The board of directors of the Company and each committee of the board
of directors shall not:
(i) withhold, withdraw, qualify or modify (or publicly propose
or resolve to withhold, withdraw, qualify or modify), in a manner adverse
to Parent, the Company Recommendation with respect to the Merger; or
(ii) except as expressly permitted by, and after compliance
with, Section 8.3(a) hereof, cause or permit the Company to enter into any
letter of intent, memorandum of understanding, agreement in principle,
acquisition agreement, merger agreement or other agreement (other than a
confidentiality agreement referred to in Section 6.2(a) entered into in
compliance with Section 6.2(a)) (an "ALTERNATIVE ACQUISITION AGREEMENT")
relating to any Acquisition Proposal.
Notwithstanding anything to the contrary set forth in this Agreement,
prior to the time, but not after, the Requisite Company Vote is obtained, the
board of directors of the Company may withhold, withdraw, qualify or modify the
Company Recommendation or approve, recommend or otherwise declare advisable any
Superior Proposal made after the date of this Agreement that was not solicited,
initiated, encouraged or facilitated in breach of this Agreement, if the board
of directors of the Company determines in good faith, after consultation with
outside counsel, that failure to do so would be reasonably likely to constitute
a breach of the directors' fiduciary duties under applicable Law (a "CHANGE OF
RECOMMENDATION"); provided, however, that no Change of Recommendation may be
made until after at least 48 hours following Parent's receipt of notice from the
Company advising that management of the Company currently intends to recommend
to its board of directors that it take such action and the basis therefor,
including all necessary information under Section 6.2(f). In determining whether
to make a Change of Recommendation in response to a Superior Proposal or
otherwise, the Company board of directors shall consider any changes to the
terms of this Agreement proposed by Parent and any other information provided by
Parent in response to such notice. Any material amendment to any Acquisition
Proposal will be deemed to be a new Acquisition Proposal for purposes of this
Section 6.2(a), including with respect to the notice period referred to in this
Section 6.2(a).
(d) Certain Permitted Disclosure. Nothing contained in this Section
6.2 shall be deemed to prohibit the Company from complying with its disclosure
obligations under U.S. federal or state law with regard to an Acquisition
Proposal; provided, however, that (except in the case of a
"stop-look-and-listen" communication pursuant to Rule 14d-9(f) under the
Exchange Act) if any such disclosure does not reaffirm the Company
Recommendation or has the effect of withdrawing or adversely modifying the
Company Recommendation, such disclosure shall be deemed to be a Change in
Recommendation and Parent shall have the right to terminate this Agreement as
set forth in Section 8.5(b).
(e) Existing Discussions. The Company agrees that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal. The Company agrees that it will take the necessary
steps to promptly inform the individuals or entities referred to in the first
sentence hereof of the obligations undertaken in this Section 6.2 and in the
Confidentiality
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Agreement. The Company also agrees that it will promptly request each Person
that has heretofore executed a confidentiality agreement in connection with its
consideration of acquiring it or any of its Subsidiaries to return or destroy
all confidential information heretofore furnished to such Person by or on behalf
of it or any of its Subsidiaries.
(f) Notice. The Company agrees that it will promptly (and, in any
event, within 24 hours) notify Parent if any inquiries, proposals or offers with
respect to an Acquisition Proposal are received by, any non-public information
is requested from, or any such discussions or negotiation are sought to be
initiated or continued with, it or any of its Representatives indicating, in
connection with such notice, the name of such Person and the material terms and
conditions of any proposals or offers (including, if applicable, copies of any
written requests, proposals or offers, including proposed agreements) and
thereafter shall keep Parent informed, on a reasonably current basis, of any
material developments affecting the status and terms of any such proposals or
offers (including any amendments thereto) and the status of any such discussions
or negotiations, including any change in the Company's intentions as previously
notified.
6.3. Proxy Filing; Information Supplied. The Company shall prepare and
file with the SEC, as promptly as practicable after the date of this Agreement,
and in any event within ten days after the date of this Agreement, a proxy
statement in preliminary form relating to the Stockholders Meeting (as defined
in Section 6.4) (such proxy statement, including any amendment or supplement
thereto, the "PROXY STATEMENT"). The Company agrees, as to itself and its
Subsidiaries, that (i) the Proxy Statement will comply in all material respects
with the applicable provisions of the Exchange Act and the rules and regulations
thereunder and (ii) none of the information supplied by it or any of its
Subsidiaries for inclusion or incorporation by reference in the Proxy Statement
will, at the date of mailing to stockholders of the Company or at the time of
the Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Parent shall cooperate, and shall cause
Koninklijke Philips Electronics N.V. ("ROYAL PHILIPS") and its Subsidiaries to
cooperate, with the Company in preparing the Proxy Statement. Parent agrees that
none of the information supplied by it or any Subsidiaries of Royal Philips for
inclusion or incorporation by reference in the Proxy Statement will, at the date
of mailing to stockholders of the Company or at the time of the Stockholders
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
6.4. Stockholders Meeting. The Company will take, in accordance with
applicable Law and its certificate of incorporation and by-laws, all action
necessary to convene a meeting of holders of Shares (the "STOCKHOLDERS MEETING")
as promptly as practicable after the execution of this Agreement, and in any
event within 75 days of the date of this Agreement, to consider and vote upon
the adoption of this Agreement, and shall not postpone or adjourn such meeting
except that, after consultation with the Parent, the Company may adjourn or
postpone the Stockholders Meeting to the extent legally necessary to ensure that
any required supplement or amendment to the Proxy Statement is provided to the
Company's stockholders or, if as of the time for which the Stockholders Meeting
is originally scheduled (as set forth in the Proxy
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Statement) there are insufficient shares of the Company's common stock
represented (either in person or by proxy) to constitute a quorum necessary to
conduct the business of the Stockholders Meeting. The Company will prepare and
distribute as promptly as practicable any such required supplement or amendment
to the Proxy Statement and following any such adjournment or postponement of the
Stockholder Meeting, the Company shall take all action necessary to reconvene
the Stockholders Meeting as promptly as practicable after such adjournment or
postponement. Subject to Section 6.2(a) hereof, the board of directors of the
Company shall recommend the adoption and shall take all lawful action to solicit
such adoption of this Agreement.
6.5. Filings; Other Actions; Notification. (a) Proxy Statement. The
Company shall promptly notify Parent of the receipt of all comments of the SEC
with respect to the Proxy Statement and of any request by the SEC for any
amendment or supplement thereto or for additional information and shall promptly
provide to Parent copies of all correspondence between the Company and/or any of
its Representatives and the SEC with respect to the Proxy Statement. The Company
and Parent shall each use its reasonable best efforts to promptly provide
responses to the SEC with respect to all comments received on the Proxy
Statement by the SEC and the Company shall cause the definitive Proxy Statement
to be mailed as promptly as possible after the date the SEC staff advises that
it has no further comments thereon or that the Company may commence mailing the
Proxy Statement.
(b) Cooperation. Subject to the terms and conditions set forth in
this Agreement, the Company and Parent shall cooperate with each other and use
(and shall cause their respective Subsidiaries to use) their respective
reasonable best efforts to take or cause to be taken all actions, and do or
cause to be done all things, reasonably necessary, proper or advisable on its
part under this Agreement and applicable Laws to consummate and make effective
the Merger and the other transactions contemplated by this Agreement as soon as
practicable, including preparing and filing as promptly as practicable all
documentation to effect all necessary notices, reports and other filings and to
obtain as promptly as practicable all consents, registrations, approvals,
permits and authorizations necessary or advisable to be obtained from any third
party and/or any Governmental Entity in order to consummate the Merger or any of
the other transactions contemplated by this Agreement; provided, however, that
(i) nothing in this Agreement, including, without limitation, this Section 6.5,
shall require, or be construed to require, Parent to proffer to, or agree to,
sell, divest, lease, license, transfer, dispose of or otherwise encumber or hold
separate and agree to sell, divest, lease, license, transfer, dispose of or
otherwise encumber before or after the Effective Time, any assets, licenses,
operations, rights, product lines, businesses or interest therein of Parent, the
Company or any of their respective Affiliates (or to consent to any sale,
divestiture, lease, license, transfer, disposition or other encumberment by the
Company of any of its assets, licenses, operations, rights, product lines,
businesses or interest therein or to any agreement by the Company to take any of
the foregoing actions) or to agree to any material changes (including, without
limitation, through a licensing arrangement) or restriction on, or other
impairment of Parent's ability to own or operate, any of any such assets,
licenses, operations, rights, product lines, businesses or interests therein or
Parent's ability to vote, transfer, receive dividends or otherwise exercise full
ownership rights with respect to the stock of the Surviving Company and (ii)
nothing in this Agreement shall require, or be construed to require, Parent or
any of its Affiliates to take any other action under this Section 6.5 if the
United States Department of Justice or the United States Federal Trade
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Commission authorizes its staff to seek a preliminary injunction or restraining
order to enjoin consummation of the Merger. Subject to applicable Laws relating
to the exchange of information, Parent shall have the right to direct all
matters with any Governmental Entity consistent with its obligations hereunder;
provided that Parent and the Company shall have the right to review in advance
and, to the extent practicable, each will consult with the other on and consider
in good faith the views of the other in connection with, all of the information
relating to Parent or the Company, as the case may be, and any of their
respective Subsidiaries, that appears in any filing made with, or written
materials submitted to, any third party and/or any Governmental Entity in
connection with the Merger and the other transactions contemplated by this
Agreement (including the Proxy Statement). In exercising the foregoing rights,
each of the Company and Parent shall act reasonably and as promptly as
practicable.
(c) Information. The Company and Parent each shall, upon request by
the other, furnish the other with all information concerning itself, its
Subsidiaries, directors, officers and stockholders and such other matters as may
be reasonably necessary or advisable in connection with the Proxy Statement or
any other statement, filing, notice or application made by or on behalf of
Parent, the Company or any of their respective Subsidiaries to any third party
and/or any Governmental Entity in connection with the Merger and the
transactions contemplated by this Agreement.
(d) Status. Subject to applicable Laws and the requirements of any
Governmental Entity, the Company and Parent each shall keep the other apprised
of the status of matters relating to completion of the transactions contemplated
hereby, including promptly furnishing the others with copies of notices or other
communications received by Parent or the Company, as the case may be, or any of
its Subsidiaries, from any third party and/or any Governmental Entity with
respect to the Merger and the other transactions contemplated by this Agreement.
The Company shall give prompt notice to Parent of any change, fact or condition
that is reasonably expected to result in a Material Adverse Effect or of any
failure of any condition to Parent's obligations to effect the Merger. Neither
the Company nor Parent shall permit any of its officers or any other
representatives or agents to participate in any meeting with any Governmental
Entity in respect of any filings, investigation or other inquiry relating to the
transactions contemplated hereby unless it consults with the other party in
advance and, to the extent permitted by such Governmental Entity, gives the
other party the opportunity to attend and participate thereat.
(e) Antitrust Matters. Subject to the terms and conditions set forth
in this Agreement, without limiting the generality of the undertakings pursuant
to this Section 6.5, each of the Company and Parent agree to promptly provide to
each and every federal, state, local or foreign court or Governmental Entity
with jurisdiction over enforcement of any applicable antitrust or competition
Laws ("GOVERNMENT ANTITRUST ENTITY") such non-privileged information and
documents as are requested by any Government Antitrust Entity or that are
necessary, proper or advisable to permit consummation of the transactions
contemplated by this Agreement.
(f) For purposes of this Section 6.5, the term Parent shall include
Royal Philips. Parent shall cause Royal Philips to comply with this Section 6.5
as if Royal Philips was a party to this Agreement.
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6.6. Access and Reports. Subject to applicable Law, upon reasonable
notice, the Company shall (and shall cause its Subsidiaries to) afford Parent's
officers and other authorized Representatives reasonable access, during normal
business hours and in a manner which does not materially disrupt or interfere
with its business operations, throughout the period prior to the Effective Time,
to its employees, properties, books, contracts and records and, during such
period, the Company shall (and shall cause its Subsidiaries to) furnish promptly
to Parent all information concerning its business, properties and personnel as
may reasonably be requested, provided that no investigation pursuant to this
Section 6.6 shall affect or be deemed to modify any representation or warranty
made by the Company herein, and provided, further, that the foregoing shall not
require the Company (i) to permit any inspection, or to disclose any
information, that in the reasonable judgment of the Company would result in the
disclosure of any trade secrets of third parties or violate any of its
obligations with respect to confidentiality if the Company shall have used
reasonable best efforts to obtain the consent of such third party to such
inspection or disclosure or (ii) to disclose any privileged information of the
Company or any of its Subsidiaries. All requests for information made pursuant
to this Section 6.6 shall be directed to the executive officer or other Person
designated by the Company. All such information shall be governed by the terms
of the Confidentiality Agreement.
6.7. Stock Exchange De-listing. Prior to the Closing Date, the Company
shall cooperate with Parent and use reasonable best efforts to take, or cause to
be taken, all actions, and do or cause to be done all things, reasonably
necessary, proper or advisable on its part under applicable Laws and rules and
policies of the NASDAQ to enable the de-listing by the Surviving Corporation of
the Shares from the NASDAQ and the deregistration of the Shares under the
Exchange Act as promptly as practicable after the Effective Time, and in any
event no more than ten (10) days after the Closing Date.
6.8. Publicity. The initial press release regarding the Merger shall be a
joint press release and thereafter the Company and Parent each shall consult
with each other prior to issuing any press releases or otherwise making public
announcements with respect to the Merger and the other transactions contemplated
by this Agreement and prior to making any filings with any third party and/or
any Governmental Entity (including any national securities exchange or
interdealer quotation service) with respect thereto, except as may be required
by Law or by obligations pursuant to any listing agreement with or rules of any
national securities exchange or interdealer quotation service or by the request
of any Government Entity.
6.9. Employee Benefits. (a) Parent agrees that, during the period
commencing at the Effective Time and ending on the first anniversary of the
Effective Time, the employees of the Company and its Subsidiaries will continue
to be provided with pension and welfare benefits under employee benefit plans
that are no less favorable in the aggregate than those currently provided by the
Company and its Subsidiaries to such employees. Parent will cause any employee
benefit plans of Parent which the employees of the Company and its Subsidiaries
are entitled to participate in to take into account for purposes of eligibility
and vesting thereunder, except for purposes of qualifying for subsidized early
retirement benefits or to the extent it would result in a duplication of
benefits, service by employees of the Company and its Subsidiaries as if such
service were with Parent, to the same extent such service was credited under a
comparable plan of the Company. Parent shall cause the Surviving Corporation to
honor all employee benefit obligations to current and former employees under the
Benefit Plans listed
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in Section 6.9(a) of the Company Disclosure Letter. Notwithstanding the
foregoing, nothing contained herein shall (1) be treated as an amendment of any
particular Compensation and Benefit Plan, (2) give any third party any right to
enforce the provisions of this Section 6.9 or (3) obligate Parent, the Surviving
Corporation or any of their Affiliates to (i) maintain any particular benefit
plan or (ii) retain the employment of any particular employee.
(b) Prior to the Effective Time, if requested by Parent in writing,
to the extent permitted by applicable Law and the terms of the applicable plan
or arrangement, the Company shall (i) cause to be amended the employee benefit
plans and arrangements of it and its Subsidiaries to the extent necessary to
provide that no employees of Parent and its Subsidiaries shall commence
participation therein following the Effective Time unless the Surviving
Corporation or such Subsidiary explicitly authorizes such participation and (ii)
cause the Company 401(k) Plan to be terminated effective immediately prior to
the Effective Time.
(c) The Company agrees to cause each of its officers and directors
to repay any outstanding liens or notes to the Company or its Subsidiaries prior
to the Effective Time.
6.10. Expenses. Except as otherwise provided in Section 8.5, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the Merger and the other transactions contemplated by
this Agreement shall be paid by the party incurring such expense.
6.11. Indemnification; Directors' and Officers' Insurance. (a) From and
after the Effective Time, the Parent and the Surviving Corporation agree that
they will indemnify and hold harmless each present and former director and
officer of the Company or any of its Subsidiaries (in each case, when acting in
such capacity), determined as of the Effective Time (the "INDEMNIFIED PARTIES"),
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities (collectively, "COSTS") incurred
in connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, to the fullest extent that the
Company would have been permitted under Delaware law and its certificate of
incorporation or by-laws in effect on the date of this Agreement to indemnify
such Person (and Parent or the Surviving Corporation shall also advance expenses
as incurred to the fullest extent permitted under applicable Law; provided that
the Person to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such Person is not entitled to
indemnification); and provided, further, that any determination required to be
made with respect to whether an officer's or director's conduct complies with
the standards set forth under Delaware law and the Company's certificate of
incorporation and by-laws shall be made by independent counsel selected by the
Surviving Corporation.
(b) Any Indemnified Party wishing to claim indemnification under
paragraph (a) of this Section 6.11, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify Parent thereof, but the
failure to so notify shall not relieve Parent or the Surviving Corporation of
any liability it may have to such Indemnified Party except to the extent such
failure materially prejudices the indemnifying party. In the event of any such
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective
-35-
Time), (i) Parent or the Surviving Corporation shall have the right to assume
the defense thereof and Parent and the Surviving Corporation shall not be liable
to such Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if Parent or the Surviving Corporation elects
not to assume such defense or counsel for the Indemnified Parties advises that
there are issues which raise conflicts of interest between Parent or the
Surviving Corporation and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and Parent or the Surviving Corporation
shall pay all reasonable fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received; provided, however, that
Parent and the Surviving Corporation shall be obligated pursuant to this
paragraph (b) to pay for only one firm of counsel for all Indemnified Parties in
any jurisdiction unless the use of one counsel for such Indemnified Parties
would present such counsel with a conflict of interest, provided that the fewest
number of counsels necessary to avoid conflicts of interest shall be used; (ii)
the Indemnified Parties will cooperate in the defense of any such matter, and
(iii) Parent and the Surviving Corporation shall not be liable for any
settlement effected without their prior written consent; and provided, further,
that Parent and the Surviving Corporation shall not have any obligation
hereunder to any Indemnified Party if and when a court of competent jurisdiction
shall ultimately determine, and such determination shall have become final, that
the indemnification of such Indemnified Party in the manner contemplated hereby
is prohibited by applicable Law.
(c) Prior to the Effective Time, the Company shall and, if the
Company is unable to, Parent shall cause the Surviving Corporation as of the
Effective Time to obtain and fully pay for "tail" insurance policies (providing
only for the Side A coverage for Indemnified Parties where the existing policies
also include Side B coverage for the Company) with a claims period of at least
six years from and after the Effective Time from an insurance carrier with the
same or better credit rating as the Company's current insurance carrier with
respect to directors' and officers' liability insurance and fiduciary liability
insurance (collectively, "D&O INSURANCE") with benefits and levels of coverage
at least as favorable as the Company's existing policies with respect to matters
existing or occurring at or prior to the Effective Time (including in connection
with this Agreement or the transactions or actions contemplated hereby);
provided, however, that in no event shall the Company expend for such policies a
premium amount in excess of 175% of the current annual premium paid by the
Company for D&O Insurance. If the Company and the Surviving Corporation for any
reason fail to obtain such "tail" insurance policies as of the Effective Time,
the Surviving Corporation shall, and Parent shall cause the Surviving
Corporation to, continue to maintain in effect for a period of at least six
years from and after the Effective Time the D&O Insurance in place as of the
date of this Agreement with benefits and levels of coverage at least as
favorable as provided in the Company's existing policies as of the date of this
Agreement, or the Surviving Corporation shall, and Parent shall cause the
Surviving Corporation to, use reasonable best efforts to purchase comparable D&O
Insurance for such six-year period with benefits and levels of coverage at least
as favorable as provided in the Company's existing policies as of the date of
this Agreement; provided, however, that in no event shall Parent or the
Surviving Corporation be required to expend for such policies an annual premium
amount in excess of 175% of the current annual premiums currently paid by the
Company for D&O Insurance; and, provided further that if the annual premiums of
such insurance coverage exceed such amount, the Surviving Corporation shall
obtain a policy with the greatest coverage available for a cost not exceeding
such amount.
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(d) If Parent or the Surviving Corporation or any of their
respective successors or assigns (i) shall consolidate with or merge into any
other corporation or entity and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii) shall transfer all
or substantially all of its properties and assets to any individual, corporation
or other entity, then, and in each such case, proper provisions shall be made so
that the successors and assigns of Parent or the Surviving Corporation shall
assume all of the obligations set forth in this Section 6.11.
(e) The provisions of this Section 6.11 are intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified Parties and
their respective heirs and legal representatives.
(f) The rights of the Indemnified Parties under this Section 6.11
shall be in addition to any rights such Indemnified Parties may have under the
certificate of incorporation or by-laws of the Company or any of its
Subsidiaries, or under any applicable Contracts or Laws.
6.12. Other Actions by the Company.
(a) Takeover Statutes. If any Takeover Statute is or may become
applicable to the Merger or the other transactions contemplated by this
Agreement, the Company and its board of directors shall grant such approvals and
take such actions as are necessary so 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 or regulation
on such transactions.
(b) Section 16 Matters. The board of directors of the Company shall,
prior to the Effective Time, take all such actions as may be necessary or
appropriate pursuant to Rule 16b-3(e) under the Exchange Act to exempt the
conversion to cash of all Shares, Company Options and Company Awards by officers
and directors of the Company who are subject to the reporting requirements of
Section 16(a) of the Exchange Act or by employees or directors of the Company
who may become an officer or director of Parent subject to the reporting
requirements of Section 16(a) of the Exchange Act. Each of Parent and the
Company shall provide to counsel for the other party for its review copies of
such resolutions to be adopted by its board of directors prior to such adoption
and the Company shall provide Parent with such information as shall be
reasonably necessary for Parent's board of directors to set forth the
information required in the resolutions of Parent's board of directors.
6.13. Pending Litigation. Promptly following the date of this Agreement,
the Company and Parent agree to take all action necessary to suspend all
activities in connection with the pending litigation in Boston, Massachusetts
and Xxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxxxx between the Company and the Parent's
indirect wholly-owned subsidiary, TIR Systems Ltd. Such suspension shall remain
in place until either the Closing Date or the Termination Date.
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ARTICLE VII
Conditions
7.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) Stockholder Approval. This Agreement shall have been duly
adopted by holders of Shares constituting the Requisite Company Vote in
accordance with applicable Law and the certificate of incorporation and by-laws
of the Company.
(b) Regulatory Consents. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been earlier
terminated and all filings or registrations with, or consents or approvals of,
any Governmental Entity required under the Laws of Germany shall have been made
or obtained.
(c) Litigation. No court or other Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Law (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Merger or the
other transactions contemplated by this Agreement (collectively, an "ORDER").
7.2. Conditions to Obligations of Parent and Merger Sub. The obligations
of Parent and Merger Sub to effect the Merger are also subject to the
satisfaction or waiver by Parent at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties of Company. The representations
and warranties of the Company set forth in this Agreement shall be true and
correct in all material respects as of the Closing Date as though made on and as
of such date and time (except to the extent that any such representation and
warranty expressly speaks as of an earlier date, in which case such
representation and warranty shall be true and correct as of such earlier date);
provided, however, that notwithstanding anything herein to the contrary, the
condition set forth in this Section 7.2(a) shall be deemed to have been
satisfied even if any representations and warranties of the Company (other than
Section 5.1(b) hereof, which must be true and correct in all material respects)
are not so true and correct unless the failure of such representations and
warranties of the Company to be so true and correct, individually or in the
aggregate, has had or is reasonably likely to have a Material Adverse Effect.
Parent shall have received at the Closing a certificate signed on behalf of the
Company by the Chief Executive Officer and the Chief Financial Officer of the
Company to the effect that such officers have read this Section 7.2(a) and the
conditions set forth in Section 7.2(a) have been satisfied.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent shall
have received a certificate signed on behalf of the Company by the Chief
Executive Officer of the Company to such effect.
(c) No Restraints. There shall not be threatened, instituted or
pending any suit, action or proceeding in which a Governmental Entity of
competent jurisdiction is seeking
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(i) an Order or (ii) to (A) prohibit, limit, restrain or impair Parent's ability
to own or operate or to retain or change all or a material portion of the
assets, licenses, operations, rights, product lines, businesses or interest
therein of the Company or its Subsidiaries or other Affiliates from and after
the Effective Time or any of the assets, licenses, operations, rights, product
lines, businesses or interest therein of Parent or its Subsidiaries (including,
without limitation, by requiring any sale, divestiture, transfer, license,
lease, disposition of or encumbrance or hold separate arrangement with respect
to any such assets, licenses, operations, rights, product lines, businesses or
interest therein) or (B) prohibit or limit in Parent's ability to vote,
transfer, receive dividends or otherwise exercise full ownership rights with
respect to the stock of the Surviving Corporation, and no Governmental Entity of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any Law deemed applicable to the Merger individually or in the aggregate
resulting in, or that is reasonably likely to result in, any of the foregoing.
(d) Governmental Consents. All Company Approvals and all Parent
Approvals shall have been obtained or made. Other than the filing pursuant to
Section 1.3, all other authorizations, consents, orders or approvals of, or
declarations, notices or filings with, or expirations of waiting periods imposed
by, any Governmental Entity in connection with the Merger and the consummation
of the other transactions contemplated hereby by the Company, Parent and Merger
Sub ("GOVERNMENTAL CONSENTS") shall have been made or obtained (as the case may
be).
(e) No Material Adverse Effect. Since the date of this Agreement,
there shall not have occurred or been disclosed any change, event, circumstances
or development that has had, or is reasonably likely to have, a Material Adverse
Effect.
(f) Dissenters Rights. Holders of Shares representing in excess of
7% of the outstanding Shares shall not have exercised (or, if exercised, shall
not have withdrawn such exercise by the close of business on the day after the
day of the Stockholders Meeting) rights of dissent in connection with the
Merger.
7.3. Conditions to Obligation of the Company. The obligation of the
Company to effect the Merger is also subject to the satisfaction or waiver by
the Company at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub set forth in this Agreement shall be true
and correct in all material respects as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date (except to the
extent any such representation and warranty expressly speaks as of an earlier
date, in which case such representation and warranty shall be true and correct
as of such earlier date), and the Company shall have received a certificate
signed on behalf of Parent and Merger Sub by an Authorized Representative of
Parent and Merger Sub to such effect
(b) Performance of Obligations of Parent and Merger Sub. Each of
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and the Company shall have received a certificate signed on
behalf of Parent and Merger Sub by an Authorized Representative of Parent and
Merger Sub.
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ARTICLE VIII
Termination
8.1. Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the adoption of this Agreement by the stockholders of the
Company referred to in Section 7.1(a), by mutual written consent of the Company
and Parent by action of their respective boards of directors.
8.2. Termination by Either Parent or the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the board of directors of either Parent or the Company if (a)
the Merger shall not have been consummated by December 31, 2007, whether such
date is before or after the date of adoption of this Agreement by the
stockholders of the Company referred to in Section 7.1(a), provided, however,
that if Parent determines that additional time is necessary in order to
forestall any action to restrain, enjoin or prohibit the Merger by any
Government Antitrust Entity or Section 6.5(e)(iii) is applicable, the
Termination Date may be extended by Parent to a date not beyond April 30, 2008
(the "TERMINATION DATE"), (b) the Stockholders Meeting shall have been held (and
not adjourned) and the adoption of this Agreement by the stockholders of the
Company referred to in Section 7.1(a) shall not have been obtained thereat, or
(c) any Order permanently restraining, enjoining or otherwise prohibiting
consummation of the Merger shall become final and non-appealable (whether before
or after the adoption of this Agreement by the stockholders of the Company
referred to in Section 7.1(a)); provided that the right to terminate this
Agreement pursuant to this Section 8.2 shall not be available to any party that
has breached in any material respect its obligations under this Agreement in any
manner that shall have proximately contributed to the occurrence of the failure
of a condition to the consummation of the Merger.
8.3. Termination by the Company. This Agreement may be terminated and the
Merger may be abandoned:
(a) at any time prior to the time the Requisite Company Vote is
obtained, if (i) the Company is not in material breach of any of the terms of
this Agreement, (ii) the board of directors of the Company authorizes the
Company, subject to complying with the terms of this Agreement, to enter into an
Alternative Acquisition Agreement with respect to a Superior Proposal and the
Company notifies Parent in writing that it intends to enter into such an
agreement, attaching the most current version of such agreement to such notice,
(iii) Parent does not make, within three business days of receipt of the
Company's written notification of its intention to enter into a binding
agreement for a Superior Proposal, a binding offer that the board of directors
of the Company determines, in good faith after consultation with its financial
advisors, is at least as favorable, from a financial point of view, to the
stockholders of the Company as the Superior Proposal (it being understood that,
if accepted by the Company board of directors, such an offer shall become an
enforceable amendment to this Agreement without further action by Parent, Merger
Sub or the Company) and (iv) the Company prior to such termination pays to
Parent in immediately available funds any fees required to be paid pursuant to
Section 8.5. The Company agrees (x) that it will not enter into the binding
agreement referred to in clause (ii) above until at least the fourth business
day after it has provided the notice to Parent required thereby, (y) to notify
Parent promptly if its intention to enter into the written
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agreement referred to in its notification and (z) during such four-day period,
to negotiate with Parent with respect to any revisions to the terms of the
transaction contemplated by this Agreement proposed by Parent in response to a
Superior Proposal, if any; or
(b) if there has been a breach of any representation, warranty,
covenant or agreement made by Parent or Merger Sub in this Agreement, or any
such representation and warranty shall have become untrue after the date of this
Agreement, such that Section 7.3(a) or 7.3(b) would not be satisfied and such
breach or condition is not curable or, if curable, is not cured within the
earlier of (x) thirty (30) days after written notice thereof is given by the
Company to Parent and (y) the Termination Date.
8.4. Termination by Parent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time by action of the
board of directors of Parent if (a) the board of directors of the Company shall
have made a Change of Recommendation, (b) the Company shall have failed to take
a vote of stockholders on the Merger prior to the Termination Date, (c) at any
time following receipt of an Acquisition Proposal and a written request by
Parent to do so, the Company board of directors shall have failed to reaffirm
its approval or recommendation of this Agreement and the Merger as promptly as
practicable (but in any event (i) within five (5) business days after receipt of
the written request to do so from Parent), (d) a tender offer or exchange offer
for outstanding shares of Company Common Stock shall have been publicly
disclosed (other than by Parent or an Affiliate of Parent) and the Company board
of directors recommends that the stockholders of the Company tender their shares
in such tender or exchange offer or, prior to the earlier of (x) the date prior
to the date of the Stockholders Meeting and (y) either (A) within ten (10)
business days after the commencement of such tender or exchange offer pursuant
to Rule 14d-2 under the Exchange Act or (B) at any time thereafter, the Company
board of directors fails to recommend against acceptance of such offer, (e)
there has been a breach of any representation, warranty, covenant or agreement
made by the Company in this Agreement, or any such representation and warranty
shall have become untrue after the date of this Agreement, such that Section
7.2(a) or 7.2(b) would not be satisfied and such breach or condition is not
curable or, if curable, is not cured within the earlier of (x) thirty (30) days
after written notice thereof is given by Parent to the Company and (y) the
Termination Date.
8.5. Effect of Termination and Abandonment.
(a) Except as provided in paragraph (b) below, in the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article VIII, this Agreement shall become void and of no effect with no
liability to any Person on the part of any party hereto (or of any of its
Representatives or Affiliates); provided, however, and notwithstanding anything
in the foregoing to the contrary, that (i) no such termination shall relieve any
party hereto of any liability or damages to the other party hereto resulting
from any material breach of this Agreement and (ii) the provisions set forth in
this Section 8.5 and the second sentence of Section 9.1 shall survive the
termination of this Agreement.
(b) In the event that (i) a bona fide Acquisition Proposal shall
have been made to the Company or any of its Subsidiaries or any of its
stockholders or any Person shall have publicly announced an intention (whether
or not conditional) to make an Acquisition Proposal
-41-
with respect to the Company or any of its Subsidiaries (and such Acquisition
Proposal or publicly announced intention shall not have been publicly withdrawn
without qualification at least (A) thirty (30) business days prior to, with
respect to any termination pursuant to Section 8.2(a) and (B) at least ten (10)
business days prior to, with respect to termination pursuant to Section 8.2(b)),
and thereafter this Agreement is terminated by either Parent or the Company
pursuant to Section 8.2(a) or 8.2(b) (ii) this Agreement is terminated (A) by
Parent pursuant to Section 8.4 (other than subsection 8.4(e)) or (B) by the
Company pursuant to Section 8.2(b) and, on or prior to the date of the
Stockholders Meeting, any event giving rise to Parent's right to terminate under
Section 8.4 (other than subsection 8.4(e)) shall have occurred or (iii) this
Agreement is terminated by the Company pursuant to Section 8.3(a), then the
Company shall promptly, but in no event later than two days after the date of
such termination, pay Parent a termination fee of $28 million (the "TERMINATION
FEE") (provided, however, that the Termination Fee to be paid pursuant to clause
(iii) shall be paid as set forth in Section 8.3), payable by wire transfer;
provided, however, that no Termination Fee shall be payable to Parent pursuant
to clause (i) of this paragraph (b) unless and until within 12 months of such
termination the Company or any of its Subsidiaries shall have entered into an
Alternative Acquisition Agreement with respect to, or shall have consummated or
shall have approved or recommended to the Company's stockholders or otherwise
not opposed, an Acquisition Proposal (substituting "50%" for "15%" in the
definition of "Acquisition Proposal"); provided that for purposes of this
Agreement, an Acquisition Proposal shall not be deemed to have been "publicly
withdrawn" by any Person if, within 12 months of such termination, the Company
or any of its Subsidiaries shall have entered into an Alternative Acquisition
Agreement (other than a confidentiality agreement) with respect to, or shall
have consummated or shall have approved or recommended to the Company's
stockholders or otherwise not opposed, an Acquisition Proposal made by or on
behalf of such Person or any of its Affiliates. The Company acknowledges that
the agreements contained in this Section 8.5(b) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
Parent and Merger Sub would not enter into this Agreement; accordingly, if the
Company fails to promptly pay the Termination Fee pursuant to this Section
8.5(b), and, in order to obtain such payment, Parent or Merger Sub commences a
suit that results in a judgment against the Company for the fee set forth in
this Section 8.5(b) or any portion of such fee, the Company shall pay to Parent
or Merger Sub its costs and expenses (including attorneys' fees) in connection
with such suit, together with interest on the amount of the fee at the prime
rate of Citibank N.A. in effect on the date such payment was required to be made
through the date of payment. Notwithstanding anything to the contrary in this
Agreement, the parties hereto acknowledge that in the event that the Termination
Fee becomes payable and is promptly paid by the Company and accepted by Parent
pursuant to this Section 8.5(b), the Termination Fee shall be Parent's and
Merger Sub's sole and exclusive remedy for monetary damages under this
Agreement.
ARTICLE IX
Miscellaneous and General
9.1. Survival. This Article IX and the agreements of the Company, Parent
and Merger Sub contained in Article IV, Sections 6.10 (Expenses) and 6.11
(Indemnification; Directors' and Officers' Insurance) shall survive the
consummation of the Merger. This Article IX and the agreements of the Company,
Parent and Merger Sub contained in Section 6.10 (Expenses) and Section 8.5
(Effect of Termination and Abandonment) and the Confidentiality Agreement shall
-42-
survive the termination of this Agreement. All other representations,
warranties, covenants and agreements in this Agreement shall not survive the
consummation of the Merger or the termination of this Agreement.
9.2. Modification or Amendment. Subject to the provisions of the
applicable Laws, at any time prior to the Effective Time, the parties hereto may
modify or amend this Agreement, by written agreement executed and delivered by
duly authorized officers of the respective parties.
9.3. Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable Laws.
9.4. Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
9.5. Governing Law and Venue; Waiver of Jury Trial; Specific Performance.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS
SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW
OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES
THEREOF. The parties hereby irrevocably submit to the personal jurisdiction of
the courts of the State of Delaware and the Federal courts of the United States
of America located in the State of Delaware solely in respect of the
interpretation and enforcement of the provisions of this Agreement and of the
documents referred to in this Agreement, and in respect of the transactions
contemplated hereby, and hereby waive, and agree not to assert, as a defense in
any action, suit or proceeding for the interpretation or enforcement hereof or
of any such document, that it is not subject thereto or that such action, suit
or proceeding may not be brought or is not maintainable in said courts or that
the venue thereof may not be appropriate or that this Agreement or any such
document may not be enforced in or by such courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in such a Delaware State or Federal court. The
parties hereby consent to and grant any such court jurisdiction over the person
of such parties and, to the extent permitted by Law, over the subject matter of
such dispute and agree that mailing of process or other papers in connection
with any such action or proceeding in the manner provided in Section 9.6 or in
such other manner as may be permitted by Law shall be valid and sufficient
service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR
-43-
OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO
ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND
(iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.5.
(c) The parties agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in the Court of Chancery of the State
of Delaware, this being in addition to any other remedy to which such party is
entitled at law or in equity.
9.6. Notices. Any notice, request, instruction or other document to be
given hereunder by any party to the others shall be in writing and delivered
personally or sent by registered or certified mail, postage prepaid, by
facsimile or overnight courier:
If to Parent or Merger Sub:
Philips Electronics North America Corporation
Corporate Law Department
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxxxxx Xxxxxxxxxx
fax: (000) 000-0000
with a copy to:
Xxxxx Xxxxx
Senior Vice President, Corporate Mergers & Acquisitions
Koninklijkle Philips Electronics N.V.
Xxxxxxxx Center, HBT 17
Xxxxxxxxxxx 0, 0000 XX
X.X. Xxx 00000
0000 XX Xxxxxxxxx
Xxx Xxxxxxxxxxx
fax: (00) 00 00 00000
- and --
Xxxxxxxx & Xxxxxxxx LLP,
000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000
fax: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx
-44-
If to the Company:
For notices given prior to August 27, 2007:
Color Kinetics Incorporated
00 Xxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Chief Executive Officer
fax: (000) 000-0000
For notices given on or after August 27, 2007:
Color Kinetics Incorporated
0 Xxxxxxxxxx Xxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Chief Executive Officer
fax: (000) 000-0000
with a copy to:
Xxxxx Xxxx LLP
Seaport World Trade Center West
000 Xxxxxxx Xxxxxxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxx, Xx.
Xxxxxx X. Xxxxx, Xx.
fax: (000) 000-0000
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above. Any notice, request, instruction
or other document given as provided above shall be deemed given to the receiving
party upon actual receipt, if delivered personally; three (3) business days
after deposit in the mail, if sent by registered or certified mail; upon
confirmation of successful transmission if sent by facsimile (provided that if
given by facsimile such notice, request, instruction or other document shall be
followed up within one business day by dispatch pursuant to one of the other
methods described herein); or on the next business day after deposit with an
overnight courier, if sent by an overnight courier.
9.7. Entire Agreement. This Agreement (including any exhibits hereto), the
Company Disclosure Letter and the Confidentiality Agreement, dated May 24, 2007,
between a subsidiary of Parent and the Company (the "CONFIDENTIALITY AGREEMENT")
constitute the entire agreement, and supersede all other prior agreements,
understandings, representations and warranties both written and oral, among the
parties, with respect to the subject matter hereof.
9.8. No Third Party Beneficiaries. Except as provided in Section 6.11
(Indemnification; Directors' and Officers' Insurance) only, Parent and the
Company hereby agree that their respective representations, warranties and
covenants set forth herein are solely for the benefit of the other party hereto,
in accordance with and subject to the terms of this Agreement, and this
Agreement is not intended to, and does not, confer upon any Person other
-45-
than the parties hereto any rights or remedies hereunder, including, without
limitation, the right to rely upon the representations and warranties set forth
herein. The parties hereto further agree that the rights of third party
beneficiaries under Section 6.11 shall not arise unless and until the Effective
Time occurs. The representations and warranties in this Agreement are the
product of negotiations among the parties hereto and are for the sole benefit of
the parties hereto. Any inaccuracies in such representations and warranties are
subject to waiver by the parties hereto in accordance with Section 9.3 without
notice or liability to any other Person. In some instances, the representations
and warranties in this Agreement may represent an allocation among the parties
hereto of risks associated with particular matters regardless of the knowledge
of any of the parties hereto. Consequently, Persons other than the parties
hereto may not rely upon the representations and warranties in this Agreement as
characterizations of actual facts or circumstances as of the date of this
Agreement or as of any other date.
9.9. Obligations of Parent and of the Company. Whenever this Agreement
requires a Subsidiary of Parent to take any action, such requirement shall be
deemed to include an undertaking on the part of Parent to cause such Subsidiary
to take such action. Whenever this Agreement requires a Subsidiary of the
Company to take any action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary to take such
action and, after the Effective Time, on the part of the Surviving Corporation
to cause such Subsidiary to take such action.
9.10. Definitions. Each of the terms set forth in Annex A is defined in
the Section of this Agreement set forth opposite such term.
9.11. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application of such provision to any Person
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application of
such provision, in any other jurisdiction.
9.12. Interpretation; Construction. (a) The table of contents and headings
herein are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof. Where a reference in this Agreement is made to a Section or
Exhibit, such reference shall be to a Section of or Exhibit to this Agreement
unless otherwise indicated. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
(b) The parties have participated jointly in negotiating and
drafting this Agreement. In the event that an ambiguity or a question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties, and no presumption or burden
-46-
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provision of this Agreement.
(c) Each party to this Agreement has or may have set forth
information in its respective Disclosure Letter in a section of such Disclosure
Letter that corresponds to the section of this Agreement to which it relates.
The fact that any item of information is disclosed in a Disclosure Letter to
this Agreement shall not be construed to mean that such information is required
to be disclosed by this Agreement.
9.13. Assignment. This Agreement shall not be assignable by operation of
law or otherwise; provided, however, that Parent may designate, by written
notice to the Company, an Affiliate of Parent to be a Constituent Corporation,
in which event all references herein to such Constituent Corporation shall be
deemed references to such Affiliate, except that all representations and
warranties made herein with respect to such Constituent Corporation as of the
date of this Agreement shall be deemed representations and warranties made with
respect to such Affiliate as of the date of such designation; provided that any
such designation shall not materially impede or delay the consummation of the
transactions contemplated by this Agreement or otherwise materially impede the
rights of the stockholders of the Company under this Agreement. Any purported
assignment in violation of this Agreement is void.
-47-
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first written
above.
COLOR KINETICS INCORPORATED
By: /s/ Xxxxxxx X. Xxxx
----------------------------------
Name: Xxxxxxx X. Xxxx
Title: President and
Chief Executive Officer
PHILIPS HOLDING USA INC.
By: /s/ Xxxxxx X. Xxxxxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: Senior Vice President
BLACK & WHITE MERGER SUB, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: Senior Vice President
[Signature Page of Merger Agreement]
GUARANTEE BY KONINKLIJKE PHILIPS ELECTRONICS N.V.
Koninklijke Philips Electronics, N.V., a corporation organized under the
laws of the Kingdom of the Netherlands (the "GUARANTOR"), hereby irrevocably and
unconditionally guarantees to Color Kinetics Incorporated the full and timely
performance by Philips Holding USA Inc. and Black & White Merger Sub, Inc.
(collectively, the "PHILIPS COMPANIES") of their respective obligations under
the foregoing Agreement and Plan of Merger (the "MERGER AGREEMENT"), and agrees
to take all actions which the Philips Companies are obligated under the Merger
Agreement to cause the Guarantor to take. Sections 9.2, 9.4, 9.5, 9.8 and 9.11
of the Merger Agreement shall apply to this guarantee, mutatis mutandis, as if
they had been fully set forth herein.
Dated June 18, 2007
KONINKLIJKE PHILIPS ELECTRONICS N.V.
By /s/ Kleisterlee
-------------------------------
Name:
Title:
By /s/ Sivignon
-------------------------------
Name:
Title:
ANNEX A
DEFINED TERMS
TERMS SECTION
----- -------
Acquisition Proposal 6.2(b)
Affiliate 5.1(e)(ii)
Agreement Preamble
Alternative Acquisition Agreement 6.2(c)(ii)
Applicable Date 5.1(e)(i)
Bankruptcy and Equity Exception 5.1(c)(i)
Benefit Plans 5.1(h)(i)
business day 1.2
By-Laws 2.2
Certificate 4.1(a)
Change of Recommendation 6.2(c)(ii)
Charter 2.1
Closing 1.2
Closing Date 1.2
Code 5.1(h)(ii)
Company Preamble
Company Approvals 5.1(d)(i)
Company Awards 4.3(b)
Company Disclosure Letter 5.1
Company Labor Agreements 5.1(o)
Company Option 4.3(a)
Company Recommendation 5.1(c)(ii)
Company Reports 5.1(e)(i)
Confidentiality Agreement 9.7
Constituent Corporations Preamble
Contract 5.1(d)(ii)
Costs 6.11(a)
D&O Insurance 6.11(c)
Delaware Certificate of Merger 1.3
DGCL 1.1
Dissenting Stockholders 4.1(a)
Effective Time 1.3
Employees 5.1(h)(i)
Environmental Law 5.1(m)
ERISA 5.1(h)(i)
ERISA Affiliate 5.1(h)(iii)
ERISA Plan 5.1(h)(ii)
Exchange Act 5.1(a)
Exchange Fund 4.2(a)
Excluded Share 4.1(a)
A-1
TERMS SECTION
----- -------
Excluded Shares 4.1(a)
GAAP 5.1(e)(iv)
Governmental Consents 7.2(d)
Governmental Entity 5.1(d)(i)
Government Antitrust Entity 6.5(e)
Government Contract 5.1(j)(iv)
Hazardous Substance 5.1(m)
HSR Act 5.1(b)(ii)
Indemnified Parties 6.11(a)
Insurance Policies 5.1(q)
Intellectual Property 5.1(p)(v)
IRS 5.1(h)(ii)
IT Assets 5.1(p)(v)
Laws 5.1(i)
Leased Real Property 5.1(k)(ii)
Licenses 5.1(i)
Lien 5.1(b)(i)
Material Adverse Effect 5.1(a)
Material Contract 5.1(j)(i)(I)
Merger Recitals
Merger Sub Preamble
Multiemployer Plan 5.1(h)(ii)
Non-U.S. Benefit Plans 5.1(h)(i)
Order 7.1(c)
Parent Preamble
Parent Approvals 5.2(c)(i)
Paying Agent 4.2(a)
PBGC 5.1(h)(iii)
Pension Plan 5.1(h)(ii)
Person 4.2(d)
Per Share Merger Consideration 4.1(a)
Proxy Statement 6.3
Representatives 6.2(a)
Requisite Company Vote 5.1(c)(i)
Royal Philips 6.3
Xxxxxxxx-Xxxxx Act 5.1(e)(i)
SEC 5.1
Securities Act 5.1(e)(i)
Share 4.1(a)
Shares 4.1(a)
Significant Subsidiary 5.1(a)
Stock Plans 5.1(b)(i)
Stockholders Meeting 6.4
Subsidiary 5.1(a)
Superior Proposal 6.2(b)
A-2
TERMS SECTION
----- -------
Surviving Corporation 1.1
Takeover Statute 5.1(l)
Tax, Taxes 5.1(n)
Tax Return 5.1(n)
Termination Date 8.2
Termination Fee 8.5(b)
Trade Secrets 5.1(p)(v)
Treasury Regulations 5.1(n)
U.S. Benefit Plans 5.1(h)(ii)
A-3
