Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
INTUITIVE SURGICAL, INC.,
IRON ACQUISITION CORPORATION
AND
COMPUTER MOTION, INC.
DATED AS OF MARCH 7, 2003
TABLE OF CONTENTS
ARTICLE 1. THE MERGER........................................................................................ 2
Section 1.1 The Merger................................................................................. 2
Section 1.2 Effective Time............................................................................. 2
Section 1.3 Effect of the Merger....................................................................... 2
Section 1.4 Certificate of Incorporation; By-laws...................................................... 2
Section 1.5 Directors and Officers..................................................................... 2
ARTICLE 2. CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES................................................ 3
Section 2.1 Conversion of Securities................................................................... 3
Section 2.2 Exchange of Certificates................................................................... 5
Section 2.3 Stock Transfer Books....................................................................... 9
Section 2.4 Stock Options.............................................................................. 9
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................................... 10
Section 3.1 Organization and Qualification; Subsidiaries............................................... 10
Section 3.2 Certificate of Incorporation and By-laws; Corporate Books and Records...................... 11
Section 3.3 Capitalization............................................................................. 11
Section 3.4 Authority.................................................................................. 13
Section 3.5 No Conflict; Required Filings and Consents................................................. 14
Section 3.6 Permits; Compliance With Law............................................................... 15
Section 3.7 SEC Filings; Financial Statements.......................................................... 16
Section 3.8 Disclosure Documents....................................................................... 17
Section 3.9 Absence of Certain Changes or Events....................................................... 18
Section 3.10 Employee Benefit Plans..................................................................... 18
Section 3.11 Labor and Other Employment Matters......................................................... 22
Section 3.12 Tax Treatment.............................................................................. 24
Section 3.13 Contracts.................................................................................. 24
Section 3.14 Litigation................................................................................. 26
Section 3.15 Environmental Matters...................................................................... 27
Section 3.16 Intellectual Property...................................................................... 27
Section 3.17 Taxes...................................................................................... 29
Section 3.18 Insurance.................................................................................. 31
Section 3.19 Opinion of Financial Advisors.............................................................. 31
Section 3.20 Vote Required.............................................................................. 31
Section 3.21 Brokers and Other Advisors................................................................. 31
Section 3.22 Product Liability.......................................................................... 32
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Section 3.23 Transactions with Affiliates............................................................... 32
Section 3.24 Federal Healthcare Matters................................................................. 33
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........................................... 33
Section 4.1 Organization and Qualification; Subsidiaries............................................... 33
Section 4.2 Certificate of Incorporation and By-laws; Corporate Books and Records...................... 33
Section 4.3 Capitalization............................................................................. 34
Section 4.4 Authority.................................................................................. 35
Section 4.5 No Conflict; Required Filings and Consents................................................. 36
Section 4.6 Permits; Compliance With Law............................................................... 37
Section 4.7 SEC Filings; Financial Statements.......................................................... 38
Section 4.8 Disclosure Documents....................................................................... 39
Section 4.9 Absence of Certain Changes or Events....................................................... 40
Section 4.10 Employee Benefit Plans..................................................................... 40
Section 4.11 Labor and Other Employment Matters......................................................... 44
Section 4.12 Tax Treatment.............................................................................. 46
Section 4.13 Contracts.................................................................................. 46
Section 4.14 Litigation................................................................................. 48
Section 4.15 Environmental Matters...................................................................... 48
Section 4.16 Intellectual Property...................................................................... 49
Section 4.17 Taxes...................................................................................... 50
Section 4.18 Insurance.................................................................................. 52
Section 4.19 Opinion of Financial Advisors.............................................................. 53
Section 4.20 Vote Required.............................................................................. 53
Section 4.21 Brokers and Other Advisors................................................................. 53
Section 4.22 Product Liability.......................................................................... 53
Section 4.23 Transactions with Affiliates............................................................... 54
Section 4.24 Federal Healthcare Matters................................................................. 54
ARTICLE 5. COVENANTS......................................................................................... 54
Section 5.1 Conduct of Business by the Company Pending the Closing..................................... 54
Section 5.2 Conduct of Business by Parent Pending the Closing.......................................... 59
Section 5.3 Cooperation................................................................................ 60
Section 5.4 Registration Statement; Proxy Statement.................................................... 60
Section 5.5 Stockholders' Meetings..................................................................... 62
Section 5.6 Access to Information; Confidentiality..................................................... 62
Section 5.7 No Solicitation of Transactions............................................................ 63
Section 5.8 Appropriate Action; Consents; Filings...................................................... 65
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Section 5.9 Certain Notices............................................................................ 67
Section 5.10 Public Announcements....................................................................... 67
Section 5.11 Stock Exchange Listing..................................................................... 67
Section 5.12 Employee Benefit Matters................................................................... 67
Section 5.13 Indemnification of Directors and Officers.................................................. 68
Section 5.14 Plan of Reorganization..................................................................... 69
Section 5.15 Affiliate Agreements....................................................................... 69
Section 5.16 Company Rights Agreement................................................................... 70
Section 5.17 Patent Litigation and Administrative Proceedings........................................... 70
Section 5.18 Board of Directors......................................................................... 72
Section 5.19 Termination of 401(k) Plan................................................................. 72
Section 5.20 Employee Stock Purchase Plan............................................................... 72
ARTICLE 6. CLOSING CONDITIONS................................................................................ 73
Section 6.1 Conditions to Obligations of Each Party Under This Agreement............................... 73
Section 6.2 Additional Conditions to Obligations of Parent and Merger Sub.............................. 74
Section 6.3 Additional Conditions to Obligations of the Company........................................ 76
ARTICLE 7. TERMINATION, AMENDMENT AND WAIVER................................................................. 76
Section 7.1 Termination................................................................................ 76
Section 7.2 Effect of Termination...................................................................... 79
Section 7.3 Amendment.................................................................................. 80
Section 7.4 Waiver..................................................................................... 81
Section 7.5 Fees and Expenses.......................................................................... 81
ARTICLE 8. GENERAL PROVISIONS................................................................................ 81
Section 8.1 Non-Survival of Representations and Warranties............................................. 81
Section 8.2 Notices.................................................................................... 82
Section 8.3 Certain Definitions........................................................................ 82
Section 8.4 Terms Defined Elsewhere.................................................................... 89
Section 8.5 Headings................................................................................... 92
Section 8.6 Severability............................................................................... 92
Section 8.7 Entire Agreement........................................................................... 93
Section 8.8 Assignment................................................................................. 93
Section 8.9 Parties in Interest........................................................................ 93
Section 8.10 Mutual Drafting............................................................................ 93
Section 8.11 Governing Law; Consent to Jurisdiction; Waiver of Trial by Jury............................ 93
Section 8.12 Disclosure................................................................................. 94
Section 8.13 Counterparts............................................................................... 95
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Section 8.14 Specific Performance....................................................................... 95
EXHIBITS
EXHIBIT A Parent Stockholders Executing Parent Support Agreements
EXHIBIT B Form of Parent Support Agreement
EXHIBIT C Company Stockholders Executing Company Support Agreements
EXHIBIT D Form of Company Support Agreement
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AGREEMENT AND PLAN OF MERGER, dated as of March 7, 2003 (this
"Agreement"), by and among Intuitive Surgical, Inc., a Delaware corporation
("Parent"), Iron Acquisition Corporation, a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), and Computer Motion, Inc., a Delaware
corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have approved and declared advisable the merger of Merger Sub with and
into the Company (the "Merger") upon the terms and subject to the conditions of
this Agreement and in accordance with the General Corporation Law of the State
of Delaware (the "DGCL"); and
WHEREAS, the respective Boards of Directors of Parent and the Company have
determined that the Merger is in furtherance of and consistent with their
respective business strategies and is in the best interest of their respective
stockholders, and Parent has approved this Agreement and the Merger as the sole
stockholder of Merger Sub; and
WHEREAS, as a condition to and inducement to the Company's willingness to
enter into this Agreement, simultaneously with the execution of this Agreement,
each of the stockholders of Parent listed on Exhibit A have entered into support
agreements with the Company in the form attached hereto as Exhibit B (the
"Parent Support Agreements"); and
WHEREAS, as a condition to and inducement to Parent's and the Merger Sub's
willingness to enter into this Agreement, simultaneously with the execution of
this Agreement, each of the stockholders of the Company listed on Exhibit C have
entered into support agreements with Parent and Merger Sub in the form attached
hereto as Exhibit D (the "Company Support Agreements"); and
WHEREAS, simultaneously with the execution and delivery of this Agreement,
Parent and the Company have entered into a loan and security agreement dated the
date hereof; (the "Loan Agreement"); and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE 1.
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to satisfaction or
waiver of the conditions set forth in this Agreement, and in accordance with the
DGCL, Merger Sub, at the Effective Time, shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of Merger
Sub shall cease and the Company shall continue as the surviving corporation of
the Merger (the "Surviving Corporation").
Section 1.2 Effective Time. As soon as practicable after the satisfaction
or, if permissible, waiver of the conditions set forth in Article 6, the parties
hereto shall cause the Merger to be consummated by filing a certificate of
merger (the "Certificate of Merger") with the Secretary of State of the State of
Delaware, in such form as required by, and executed in accordance with the
relevant provisions of, the DGCL (the date and time of such filing, or if
another date and time is specified in such filing, such specified date and time,
being the "Effective Time").
Section 1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the DGCL. Without
limiting the generality of the foregoing, at the Effective Time, except as
otherwise provided herein, all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
Section 1.4 Certificate of Incorporation; By-laws. At the Effective Time,
the Certificate of Incorporation and the By-laws of the Surviving Corporation
shall be amended in their entirety to contain the provisions set forth in the
Certificate of Incorporation and the By-laws of Merger Sub, each as in effect
immediately prior to the Effective Time, as the same may be amended in
accordance with Section 5.13.1 hereof.
Section 1.5 Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to
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hold office in accordance with the Certificate of Incorporation and By-laws of
the Surviving Corporation. The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, each
to hold office in accordance with the Certificate of Incorporation and By-laws
of the Surviving Corporation.
ARTICLE 2.
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 2.1 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the following securities:
Section 2.1.1 Conversion Generally.
Section 2.1.1.1 Company Common Stock. Each share of common
stock, par value $0.001 per share, of the Company ("Company Common Stock")
issued and outstanding immediately prior to the Effective Time (other than any
shares of Company Common Stock to be canceled pursuant to Section 2.1.2),
including the associated rights of the Company (the "Company Rights") pursuant
to the Rights Agreement, dated as of June 14, 1999, between the Company and
American Stock Transfer and Trust Company, as Rights Agent (the "Company Rights
Agreement") shall be converted, subject to Section 2.2.5, into the right to
receive a number of shares of common stock, par value $0.001 per share, of
Parent ("Parent Common Stock"), equal to the Exchange Ratio. All such shares of
Company Common Stock shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each certificate previously
representing any such shares shall thereafter represent the right to receive a
certificate representing the shares of Parent Common Stock into which such
Company Common Stock was converted in the Merger. Certificates previously
representing shares of Company Common Stock shall be exchanged for certificates
representing whole shares of Parent Common Stock issued in consideration
therefor upon the surrender of such certificates in accordance with the
provisions of Section 2.2, without interest. No fractional share of Parent
Common Stock shall be issued, and in lieu thereof, a cash payment shall be made
pursuant to Section 2.2.5 hereof.
Section 2.1.1.2 Company Preferred Stock. Each share of
preferred stock, par value $0.001 per share, of the Company (the "Company
Preferred Stock" and, together
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with the Company Common Stock, the "Company Stock") issued and outstanding
immediately prior to the Effective Time (other than any shares of Company
Preferred Stock to be canceled pursuant to Section 2.1.2), shall be converted,
subject to Section 2.2.5, into the right to receive a number of shares of Parent
Common Stock equal to that number of shares of Company Common Stock into which
the Company Preferred Stock would have been convertible multiplied by the
Exchange Ratio. All such shares of Company Preferred Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate previously representing any such shares shall
thereafter represent the right to receive a certificate representing the shares
of Parent Common Stock into which such Company Preferred Stock was converted in
the Merger. Certificates previously representing shares of Company Preferred
Stock shall be exchanged for certificates representing whole shares of Parent
Common Stock issued in consideration therefor upon the surrender of such
certificates in accordance with the provisions of Section 2.2, without interest.
No fractional share of Parent Common Stock shall be issued, and in lieu thereof,
a cash payment shall be made pursuant to Section 2.2.5 hereof.
Section 2.1.1.3 Warrants. At the Effective Time, all
unexercised and unexpired warrants to purchase Company Common Stock ("Company
Warrants") then outstanding will be assumed by Parent. Each Company Warrant so
assumed by Parent under this Agreement will continue to have, and be subject to,
the same terms and conditions as set forth in such Company Warrant and any
agreements executed in connection therewith immediately prior to the Effective
Time, except that (i) each Company Warrant will be exercisable (or will become
exercisable in accordance with its terms) for that number of whole shares of
Parent Common Stock equal to the product of the number of shares of Company
Common Stock that were issuable upon exercise of such Company Warrant
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock and
(ii) the per share exercise price for the shares of Parent Common Stock issuable
upon exercise of such Company Warrant assumed, will be equal to the quotient
determined by dividing the exercise price per share of Company Common Stock at
which such Company Warrant was exercisable immediately prior to the Effective
Time by the Exchange Ratio, rounded up to the nearest whole cent.
Section 2.1.2 Cancellation of Certain Shares. Each share of Company
Stock held by Parent, Merger Sub, any wholly-owned subsidiary of Parent or
Merger Sub, in the
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treasury of the Company or by any wholly-owned subsidiary of the Company
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto.
Section 2.1.3 Merger Sub. Each share of common stock, par value
$0.001 per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and be exchanged for one newly and
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
Section 2.1.4 Change in Shares. If between the date of this
Agreement and the Effective Time the outstanding shares of Parent Common Stock
or Company Stock shall have been changed into a different number of shares or a
different class, by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the Exchange Ratio
shall be correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
Section 2.2 Exchange of Certificates.
Section 2.2.1 Exchange Agent. As of the Effective Time, Parent shall
deposit, or shall cause to be deposited, with Computer Share, Inc. or another
bank or trust company designated by Parent and reasonably satisfactory to the
Company (the "Exchange Agent"), for the benefit of the holders of shares of
Company Stock, for exchange in accordance with this Article 2, through the
Exchange Agent, certificates representing the shares of Parent Common Stock
(such certificates for shares of Parent Common Stock, together with cash in lieu
of fractional shares and any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 2.1 in exchange for outstanding shares of Company Stock. The Exchange
Agent shall, pursuant to irrevocable instructions, deliver the Parent Common
Stock contemplated to be issued pursuant to Section 2.1 out of the Exchange
Fund. Except as contemplated by Section 2.2.5 hereof, the Exchange Fund shall
not be used for any other purpose.
Section 2.2.2 Exchange Procedures. Promptly after the Effective
Time, Parent shall instruct the Exchange Agent to mail to each holder of record
of a certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Stock (the "Certificates") (A) a
letter of transmittal (which shall specify that delivery
5
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent and shall be
in customary form) and (B) instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing shares of Parent
Common Stock. Upon surrender of a Certificate for cancellation to the Exchange
Agent together with such letter of transmittal, properly completed and duly
executed, and such other documents as may be required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Parent Common Stock which such holder has the right to receive in respect of the
shares of Company Stock formerly represented by such Certificate (after taking
into account all shares of Company Stock then held by such holder), cash in lieu
of fractional shares of Parent Common Stock to which such holder is entitled
pursuant to Section 2.2.5 and any dividends or other distributions to which such
holder is entitled pursuant to Section 2.2.3, and the Certificate so surrendered
shall forthwith be canceled. No interest will be paid or accrued on any cash in
lieu of fractional shares or on any unpaid dividends and distributions payable
to holders of Certificates. In the event of a transfer of ownership of shares of
Company Stock which is not registered in the transfer records of the Company, a
certificate representing the proper number of shares of Parent Common Stock may
be issued to a transferee if the Certificate representing such shares of Company
Stock is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.2, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the certificate
representing shares of Parent Common Stock, cash in lieu of any fractional
shares of Parent Common Stock to which such holder is entitled pursuant to
Section 2.2.5 and any dividends or other distributions to which such holder is
entitled pursuant to Section 2.2.3.
Section 2.2.3 Distributions with Respect to Unexchanged Shares of
Parent Common Stock. No dividends or other distributions declared or made after
the Effective Time with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Parent Common Stock represented thereby, and no
cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.2.5, unless and until the holder of such Certificate shall
6
surrender such Certificate. Subject to the effect of escheat, tax or other
applicable Laws, following surrender of any such Certificate, there shall be
paid to the holder of the certificates representing whole shares of Parent
Common Stock issued in exchange therefor, without interest, (A) promptly, the
amount of any cash payable with respect to a fractional share of Parent Common
Stock to which such holder is entitled pursuant to Section 2.2.5 and the amount
of dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Parent Common Stock and
(B) at the appropriate payment date, the amount of dividends or other
distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such whole shares of Parent Common Stock.
Section 2.2.4 Further Rights in Company Stock. All shares of Parent
Common Stock issued upon conversion of the shares of Company Stock in accordance
with the terms hereof (including any cash paid pursuant to Section 2.2.3 or
Section 2.2.5) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Stock.
Section 2.2.5 Fractional Shares. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates, no dividend or distribution with respect
to Parent Common Stock shall be payable on or with respect to any fractional
share and such fractional share interests will not entitle the owner thereof to
any rights of a stockholder of Parent.
Section 2.2.5.1 As promptly as practicable following the
Effective Time, the Exchange Agent shall determine the difference between (A)
the number of full shares of Parent Common Stock delivered to the Exchange Agent
by Parent pursuant to Section 2.2.1 and (B) the aggregate number of full shares
of Parent Common Stock to be distributed to holders of Company Stock pursuant to
Section 2.2.2 (such difference being the "Excess Shares"). As soon after the
Effective Time as practicable, the Exchange Agent, as agent for such holders of
Parent Common Stock, shall sell the Excess Shares at then prevailing prices on
Nasdaq, all in the manner provided in this Section 2.2.5.
Section 2.2.5.2 The sale of the Excess Shares by the Exchange
Agent shall be executed on Nasdaq and shall be executed in round lots to the
extent practicable. Until the net proceeds of any such sale or sales have been
distributed to such holders of
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Company Stock, the Exchange Agent will hold such proceeds in trust for such
holders of Company Stock as part of the Exchange Fund. The Company shall pay all
commissions, transfer taxes and other out-of-pocket transaction costs of the
Exchange Agent incurred in connection with such sale or sales of Excess Shares.
In addition, the Company shall pay the Exchange Agent's compensation and
expenses in connection with such sale or sales. The Exchange Agent shall
determine the portion of such net proceeds to which each holder of Company Stock
shall be entitled, if any, by multiplying the amount of the aggregate net
proceeds by a fraction, the numerator of which is the amount of the fractional
share interest to which such holder of Company Stock is entitled (after taking
into account all shares of Parent Common Stock to be issued to such holder) and
the denominator of which is the aggregate amount of fractional share interests
to which all holders of Company Stock are entitled.
Section 2.2.5.3 As soon as practicable after the determination
of the amount of cash, if any, to be paid to holders of Company Stock with
respect to any fractional share interests, the Exchange Agent shall promptly pay
such amounts to such holders of Company Stock subject to and in accordance with
the terms of Section 2.2.3.
Section 2.2.6 Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of Company Stock for
six months after the Effective Time shall be delivered to Parent upon demand,
and any holders of Company Stock who have not theretofore complied with this
Article 2 shall thereafter look only to Parent for the shares of Parent Common
Stock, any cash in lieu of fractional shares of Parent Common Stock to which
they are entitled pursuant to Section 2.2.5 and any dividends or other
distributions with respect to Parent Common Stock to which they are entitled
pursuant to Section 2.2.3, in each case, without any interest thereon.
Section 2.2.7 No Liability. Neither Parent nor the Company shall be
liable to any holder of shares of Company Stock for any such shares of Parent
Common Stock (or dividends or distributions with respect thereto) or cash from
the Exchange Fund delivered to a public official pursuant to any abandoned
property, escheat or similar Law.
Section 2.2.8 Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent, the posting by such person of
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a bond, in such reasonable amount as Parent may direct, as indemnity against any
claim that may be made against it with respect to such Certificate, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Certificate the
shares of Parent Common Stock, any cash in lieu of fractional shares of Parent
Common Stock to which the holders thereof are entitled pursuant to Section 2.2.5
and any dividends or other distributions to which the holders thereof are
entitled pursuant to Section 2.2.3, in each case, without any interest thereon.
Section 2.2.9 Withholding. Parent or the Exchange Agent shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Company Stock such amounts as Parent
or the Exchange Agent are required to deduct and withhold under the Code, or any
provision of state, local or foreign tax Law, with respect to the making of such
payment. To the extent that amounts are so withheld by Parent or the Exchange
Agent, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of Company Stock in respect of whom such
deduction and withholding was made by Parent or the Exchange Agent.
Section 2.3 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and thereafter, there shall be no
further registration of transfers of shares of Company Stock theretofore
outstanding on the records of the Company. From and after the Effective Time,
the holders of certificates representing shares of Company Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Company Stock except as otherwise provided herein or
by Law. On or after the Effective Time, any Certificates presented to the
Exchange Agent or Parent for any reason shall be converted into the shares of
Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock to which the holders thereof are entitled pursuant to Section 2.2.5 and
any dividends or other distributions to which the holders thereof are entitled
pursuant to Section 2.2.3.
Section 2.4 Stock Options. At the Effective Time, all unexercised and
unexpired options to purchase Company Common Stock ("Company Options") then
outstanding, under any stock option plan of the Company, including the Company's
Tandem Stock Option Plan, the Company's 1997 Stock Incentive Plan or any other
plan, agreement or arrangement (the "Company Stock Option Plans"), whether or
not then exercisable, will be assumed by Parent.
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Each Company Option so assumed by Parent under this Agreement will continue to
have, and be subject to, the same terms and conditions as set forth in the
Company Stock Option Plan and any agreements thereunder immediately prior to the
Effective Time, except that (i) each Company Option will be exercisable (or will
become exercisable in accordance with its terms) for that number of whole shares
of Parent Common Stock equal to the product of the number of shares of Company
Common Stock that were issuable upon exercise of such Company Option immediately
prior to the Effective Time multiplied by the Exchange Ratio, rounded down to
the nearest whole number of shares of Parent Common Stock and (ii) the per share
exercise price for the shares of Parent Common Stock issuable upon exercise of
such Company Option assumed, will be equal to the quotient determined by
dividing the exercise price per share of Company Common Stock at which such
Company Option was exercisable immediately prior to the Effective Time by the
Exchange Ratio, rounded up to the nearest whole cent. The conversion of any
Company Options which are incentive stock options within the meaning of Section
422 of the Code, into options to purchase Parent Common Stock shall be made so
as not to constitute a "modification" of such Company Options within the meaning
of Section 424 of the Code. Continuous employment with the Company or its
subsidiaries shall be credited to the optionee for purposes of determining the
vesting of all assumed Company Options after the Effective Time.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule delivered by the Company to
Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule"), which identifies exceptions by specific Section references, the
Company hereby represents and warrants to Parent as follows:
Section 3.1 Organization and Qualification; Subsidiaries. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each subsidiary of the Company (each a "Company
Subsidiary" and, collectively, the "Company Subsidiaries") has been duly
organized, and is validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, as the case may be. Each of
the Company and each Company Subsidiary has the requisite power and authority
and all necessary governmental approvals to own, lease and operate its
properties and to carry on its
10
business as it is now being conducted. Each of the Company and each Company
Subsidiary is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification,
licensing or good standing necessary, except for such failures to be so
qualified, licensed or in good standing that would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
Section 3.1 of the Company Disclosure Schedule sets forth a true and complete
list of all of the Company Subsidiaries. Except as set forth in Section 3.1 of
the Company Disclosure Schedule, none of the Company or any Company Subsidiary
holds an Equity Interest in any other person.
Section 3.2 Certificate of Incorporation and By-laws; Corporate Books and
Records. The copies of the Company's Second Amended and Restated Certificate of
Incorporation (the "Company Certificate") and By-laws (the "Company By-laws")
that are listed as exhibits to the Company's Form 10-K for the year ended
December 31, 2001 are complete and correct copies thereof as in effect on the
date hereof (the "Company Form 10-K"). The Company is not in violation of any of
the provisions of the Company Certificate or the Company By-laws. True and
complete copies of all minute books of the Company have been made available by
the Company to Parent.
Section 3.3 Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of Company Common Stock and 5,000,000 shares of
Company Preferred Stock. As of the date hereof, (A)17,842,157 shares of Company
Common Stock (other than treasury shares) were issued and outstanding, all of
which were validly issued and fully paid, nonassessable and free of preemptive
rights, (B) no shares of Company Common Stock were held in the treasury of the
Company or by the Company Subsidiaries, and (C) 5,537,142 shares of Company
Common Stock were issuable (and such number was reserved for issuance) upon
exercise of Company Options outstanding as of such date. As of the date hereof,
of the 5,000,000 shares of authorized Company Preferred Stock, 12,000 shares
have been designated as Series A Junior Participating Preferred Stock; 12,000
shares have been designated as Series B Convertible Preferred Stock; 10,750
shares of Company Preferred Stock have been designated as Series C Convertible
Preferred Stock, 8,965 shares of which have been designated as Series C-1
Convertible Preferred Stock and 1,785 shares of which have been designated as
Series C-2 Convertible Preferred Stock; 10,750 shares of Company Preferred Stock
have been designated as
11
Series D Convertible Preferred Stock ("Series D Convertible Preferred Stock"),
8,965 shares of which have been designated as Series D-1 Convertible Preferred
Stock ("Series D-1 Convertible Preferred Stock") and 1,785 shares of which have
been designated as Series D-2 Convertible Preferred Stock ("Series D-2
Convertible Preferred Stock"). As of the date hereof, 7,726 shares of Series D-1
Convertible Preferred Stock and 1,071 shares of Series D-2 Convertible Preferred
Stock are issued and outstanding, and there are no other shares of Company
Preferred Stock outstanding. Except for Company Options to purchase not more
than 5,537,142 shares of Company Common Stock and Company Warrants to purchase
not more than 7,416,887 shares of Company Common Stock outstanding as of the
date hereof, Company Rights outstanding under the Company Rights Agreement and
arrangements and agreements set forth in Section 3.3 of the Company Disclosure
Schedule, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which the Company or any Company
Subsidiary is a party or by which the Company or any Company Subsidiary is bound
relating to the issued or unissued capital stock or other Equity Interests of
the Company or any Company Subsidiary, or securities convertible into or
exchangeable for such capital stock or other Equity Interests, or obligating the
Company or any Company Subsidiary to issue or sell any shares of its capital
stock or other Equity Interests, or securities convertible into or exchangeable
for such capital stock of, or other Equity Interests in, the Company or any
Company Subsidiary. Since December 31, 2001, the Company has not issued any
shares of its capital stock, or securities convertible into or exchangeable for
such capital stock or other Equity Interests, other than those shares of capital
stock reserved for issuance as set forth in this Section 3.3 or Section 3.3 of
the Company Disclosure Schedule. Section 3.3 of the Company Disclosure Schedule
sets forth a true and complete list, as of the date hereof, of the prices at
which outstanding Company Options may be exercised under the applicable Company
Stock Option Plan, the number of Company Options outstanding at each such price
and the vesting schedule of the Company Options for each officer of the Company
and the prices at which outstanding Company Warrants may be exercised, the
number of Company Warrants outstanding at each such price and the number of
shares of Company Common Stock into which each such Company Warrant is
convertible. All shares of Company Common Stock subject to issuance under the
Company Stock Option Plans, upon issuance prior to the Effective Time on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully
12
paid, nonassessable and free of preemptive rights. There are no outstanding
contractual obligations of the Company or any Company Subsidiary (A) restricting
the transfer of, (B) affecting the voting rights of, (C) requiring the
repurchase, redemption or disposition of, or containing any right of first
refusal with respect to, (D) requiring the registration for sale of, or (E)
granting any preemptive or antidilutive right with respect to, any shares of
Company Stock or any capital stock of, or other Equity Interests in, the Company
or any Company Subsidiary. Except as set forth in Section 3.3 of the Company
Disclosure Schedule, each outstanding share of capital stock of each Company
Subsidiary is duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights and is owned, beneficially and of record, by the
Company or another Company Subsidiary free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on the Company's or such other Company Subsidiary's voting rights,
charges and other encumbrances of any nature whatsoever. There are no
outstanding contractual obligations of the Company or any Company Subsidiary to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any Company Subsidiary or any other person, other
than guarantees by the Company of any indebtedness or other obligations of any
wholly-owned Company Subsidiary.
Section 3.4 Authority.
Section 3.4.1 The Company has all necessary corporate power and
authority to execute and deliver this Agreement and each Ancillary Agreement, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated by this Agreement and each Ancillary Agreement to be
consummated by the Company. The execution and delivery of this Agreement and
each Ancillary Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action and no other corporate proceedings
on the part of the Company and no stockholder votes are necessary to authorize
this Agreement or any Ancillary Agreement or to consummate the transactions
contemplated hereby and thereby other than, with respect to the Merger, as
provided in Section 3.20. The Board of Directors of the Company (the "Company
Board") has approved this Agreement and each Ancillary Agreement, declared
advisable the transactions contemplated hereby and thereby and has directed that
this Agreement and the transactions contemplated hereby be submitted to the
Company's stockholders for approval at a meeting of such stockholders. This
Agreement and
13
each Ancillary Agreement has been duly authorized and validly executed and
delivered by the Company and constitute a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with their respective
terms.
Section 3.4.2 The Company has taken all appropriate actions so that
the restrictions on business combinations contained in Section 203 of the DGCL
will not apply with respect to or as a result of this Agreement or any Ancillary
Agreement and the transactions contemplated hereby and thereby, including the
Merger, without any further action on the part of the stockholders or the
Company Board. True and complete copies of all Company Board resolutions
reflecting such actions have been previously provided to Parent. No other state
takeover statute or similar statute or regulation is applicable to or purports
to be applicable to the Merger or any other transaction contemplated by this
Agreement or any Ancillary Agreement.
Section 3.4.3 The Company Rights Agreement has been amended so that:
(A) Parent, Merger Sub and each Parent Subsidiary are each exempt from the
definition of "Acquiring Person" contained in the Company Rights Agreement, and
no "Stock Acquisition Date" or "Distribution Date" or "Triggering Event" (as
such terms are defined in the Company Rights Agreement) will occur as a result
of the execution of this Agreement or any Ancillary Agreement or the
consummation of the Merger and the other transactions contemplated by this
Agreement or any Ancillary Agreement and (B) the Company Rights Agreement will
terminate and the Company Rights will expire immediately prior to the Effective
Time. The Company Rights Agreement, as so amended, has not been further amended
or modified. True and complete copies of the Company Rights Agreement and of all
amendments thereto through the date hereof have been previously provided to
Parent.
Section 3.5 No Conflict; Required Filings and Consents.
Section 3.5.1 The execution and delivery of this Agreement and each
Ancillary Agreement by the Company does not, and the performance of this
Agreement and each Ancillary Agreement by the Company will not, (A) (assuming,
the stockholder approval set forth in Section 3.20 is obtained) conflict with or
violate any provision of the Company Certificate or Company By-laws or any
equivalent organizational documents of any Company Subsidiary, (B) assuming that
all consents, approvals, authorizations and permits described in Section 3.5.2
have been obtained and all filings and notifications described in Section 3.5.2
have been made and any
14
waiting periods thereunder have terminated or expired, conflict with or violate
any Law applicable to the Company or any Company Subsidiary or by which any
property or asset of the Company or any Company Subsidiary is bound or affected
or (C) require any consent or approval under, result in any breach of or any
loss of any benefit under, constitute a change of control or default (or an
event which with notice or lapse of time or both would become a default) under
or give to others any right of termination, vesting, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of the Company or any Company Subsidiary pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, Company
Permit or other instrument or obligation.
Section 3.5.2 The execution and delivery of this Agreement and each
Ancillary Agreement by the Company does not, and the performance of this
Agreement and each Ancillary Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity or any other person, except (A) under the Exchange
Act, the Securities Act, any applicable Blue Sky Laws and the rules and
regulations of Nasdaq and the filing and recordation of the Certificate of
Merger as required by the DGCL and (B) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications
to a person other than a Governmental Entity, would not, individually or in the
aggregate, reasonably be expected to (x) prevent or materially delay
consummation of the Merger, (y) otherwise prevent or materially delay
performance by the Company of any of its material obligations under this
Agreement or any Ancillary Agreement or (z) have a Company Material Adverse
Effect.
Section 3.6 Permits; Compliance With Law. Each of the Company and each
Company Subsidiary is in possession of all authorizations, licenses, permits,
certificates, approvals and clearances of any Governmental Entity necessary for
the Company and each Company Subsidiary to own, lease and operate its properties
or to carry on its respective businesses substantially in the manner described
in the Company SEC Filings filed prior to the date hereof and substantially as
it is being conducted as of the date hereof (the "Company Permits"), and all
such Company Permits are valid, and in full force and effect, except where the
failure to have, or the suspension or cancellation of, or failure to be valid or
in full force and effect of, any of the Company Permits would not, individually
or in the aggregate, reasonably be expected to (A) prevent or materially delay
consummation of the Merger, (B) otherwise prevent
15
or materially delay performance by the Company of any of its material
obligations under this Agreement or any Ancillary Agreement or (C) have a
Company Material Adverse Effect. None of the Company or any Company Subsidiary
is in conflict with, or in default or violation of, (x) any Law applicable to
the Company or any Company Subsidiary or by which any property or asset of the
Company or any Company Subsidiary is bound or affected or (y) any Company
Permits, except for any such conflicts, defaults or violations that would not,
individually or in the aggregate, reasonably be expected to (A) prevent or
materially delay consummation of the Merger, (B) otherwise prevent or materially
delay performance by the Company of any of its material obligations under this
Agreement or any Ancillary Agreement or (C) have a Company Material Adverse
Effect.
Section 3.7 SEC Filings; Financial Statements.
Section 3.7.1 The Company has timely filed all registration
statements, prospectuses, forms, reports, definitive proxy statements, schedules
and documents required to be filed by it under the Securities Act or the
Exchange Act, as the case may be, since January 1, 2000 (collectively, the
"Company SEC Filings"). Each Company SEC Filing (A) as of its date, complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (B) did not, at the time it was filed,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. As of the date of this Agreement, no Company Subsidiary is subject
to the periodic reporting requirements of the Exchange Act.
Section 3.7.2 Each of the consolidated financial statements
(including, in each case, any notes thereto) contained in the Company SEC
Filings was prepared in accordance with GAAP applied (except as may be indicated
in the notes thereto and, in the case of unaudited quarterly financial
statements, as permitted by Form 10-Q under the Exchange Act) on a consistent
basis throughout the periods indicated (except as may be indicated in the notes
thereto), and each presented fairly the consolidated financial position, results
of operations and cash flows of the Company and the consolidated Company
Subsidiaries as of the respective dates thereof and for the respective periods
indicated therein (subject, in the case of unaudited statements, to normal
year-end adjustments which did not and would not, individually or in the
16
aggregate, reasonably be expected to have a Company Material Adverse Effect).
The books and records of the Company and each Company Subsidiary have been, and
are being, maintained in accordance with applicable legal and accounting
requirements.
Section 3.7.3 Except as and to the extent set forth on the
consolidated balance sheet of the Company and the consolidated Company
Subsidiaries as of December 31, 2001 included in the Company Form 10-K for the
year ended December 31, 2001, including the notes thereto, none of the Company
or any consolidated Company Subsidiary has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on a balance sheet or in notes thereto prepared in
accordance with GAAP, except for liabilities or obligations incurred in the
ordinary course of business since December 31, 2001 that would not, individually
or in the aggregate, reasonably be expected to (A) prevent or materially delay
consummation of the Merger, (B) otherwise prevent or materially delay
performance by the Company of any of its material obligations under this
Agreement or any Ancillary Agreement or (C) have a Company Material Adverse
Effect.
Section 3.7.4 The Company has previously provided to Parent a
complete and correct copy of any amendment or modification which has not yet
been filed with the SEC to any agreement, document or other instrument which
previously had been filed by the Company with the SEC pursuant to the Securities
Act or the Exchange Act.
Section 3.8 Disclosure Documents.
Section 3.8.1 The Proxy Statement and any Other Filings, and any
amendments or supplements thereto, at (A) the time the Registration Statement is
declared effective, (B) the time the Proxy Statement (or any amendment thereof
or supplement thereto) is first mailed to the stockholders of the Company, (C)
if applicable, the time the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to stockholders of Parent, (D) the time of
the Company Stockholders' Meeting, (E) the time of the Parent Stockholders'
Meeting, and (F) the Effective Time, will comply as to form in all material
respects with the applicable requirements of the Securities Act, the Exchange
Act and other applicable Laws.
Section 3.8.2 The Proxy Statement and any Other Filings, and any
amendments or supplements thereto, do not, and will not, at (A) the time the
Registration Statement is declared effective, (B) the time the Proxy Statement
(or any amendment thereof or
17
supplement thereto) is first mailed to the stockholders of the Company, (C) the
time the Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to stockholders of Parent, (D) the time of the Company
Stockholders' Meeting, (E) the time of the Parent Stockholders' Meeting, and (F)
the Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading. The representations and warranties contained in this
Section 3.8.2 will not apply to statements or omissions included in the Proxy
Statement or any Other Filings based upon information furnished in writing to
the Company by Parent or Merger Sub specifically for use therein.
Section 3.9 Absence of Certain Changes or Events. Since September 30,
2002, except as specifically contemplated by, or as disclosed in, this Agreement
or Section 3.9 of the Company Disclosure Schedule, the Company and each Company
Subsidiary has conducted its businesses in the ordinary course consistent with
past practice. During the period from October 1, 2002 through the date of this
Agreement, there has not been any Company Material Adverse Effect or an event or
development that would, individually or in the aggregate, reasonably be expected
to have a Company Material Adverse Effect. Since September 30, 2002, there has
not been any event or development that would, individually or in the aggregate,
reasonably be expected to prevent or materially delay the performance of this
Agreement or any Ancillary Agreement by the Company. Neither the Company nor any
Company Subsidiary has taken any action during the period from October 1, 2002
through the date of this Agreement that, if taken during the period from the
date of this Agreement through the Effective Time, would constitute a breach of
Section 5.1.
Section 3.10 Employee Benefit Plans
Section 3.10.1 Section 3.10.1 of the Company Disclosure Schedule
sets forth a true and complete list of each "employee benefit plan" as defined
in Section 3(3) of ERISA and any other plan, policy, program, practice,
agreement, understanding or arrangement (whether written or oral) providing
compensation or other benefits to any current or former director, officer,
employee or consultant (or to any dependent or beneficiary thereof of the
Company or any ERISA Affiliate), which are now, or were within the past 6 years,
maintained,
18
sponsored or contributed to by the Company or any ERISA Affiliate, or under
which the Company or any ERISA Affiliate has any obligation or liability,
whether actual or contingent, including, without limitation, all incentive,
bonus, deferred compensation, vacation, holiday, cafeteria, medical, disability,
stock purchase, stock option, stock appreciation, phantom stock, restricted
stock or other stock-based compensation plans, policies, programs, practices or
arrangements (each a "Company Benefit Plan"). Neither the Company, nor to the
knowledge of the Company, or any other person or entity, has any express or
implied commitment, whether legally enforceable or not, to modify, change or
terminate any Company Benefit Plan, other than with respect to a modification,
change or termination required by ERISA or the Code.
With respect to each Company Benefit Plan, the Company has delivered to
Parent true, correct and complete copies of (A) each Company Benefit Plan (or,
if not written a written summary of its material terms), including without
limitation all plan documents, adoption agreements, trust agreements, insurance
contracts or other funding vehicles and all amendments thereto, (B) all
summaries and summary plan descriptions, including any summary of material
modifications, (C) the most recent annual reports (Form 5500 series) filed with
the IRS with respect to such Company Benefit Plan (and, if the most recent
annual report is a Form 5500R, the most recent Form 5500C filed with respect to
such Company Benefit Plan), (D) the most recent actuarial report or other
financial statement relating to such Company Benefit Plan, (E) the most recent
determination or opinion letter, if any, issued by the IRS with respect to any
Company Benefit Plan and any pending request for such a determination letter,
(F) the most recent nondiscrimination tests performed under the Code (including
401(k) and 401(m) tests) for each Company Benefit Plan, and (G) all filings made
with any Governmental Entity, including but not limited any filings under the
Voluntary Compliance Resolution or Closing Agreement Program or the Department
of Labor Delinquent Filer Program.
Section 3.10.2 Each Company Benefit Plan has been administered in
all material respects in accordance with its terms and all applicable Laws,
including ERISA and the Code, and contributions required to be made under the
terms of any of the Company Benefit Plans as of the date of this Agreement have
been timely made or, if not yet due, have been properly reflected on the most
recent consolidated balance sheet filed or incorporated by reference in the
Company SEC Filings prior to the date of this Agreement. With respect to the
Company Benefit Plans, no event has occurred and, to the knowledge of the
Company, there
19
exists no condition or set of circumstances in connection with which the Company
could be subject to any material liability (other than for routine benefit
liabilities) under the terms of, or with respect to, such Company Benefit Plans,
ERISA, the Code or any other applicable Law.
Section 3.10.3 Except as disclosed on Section 3.10.3 of the Company
Disclosure Schedule: (A) each Company Benefit Plan which is intended to qualify
under Section 401(a), Section 401(k), Section 401(m) or Section 4975(e)(6) of
the Code has either received a favorable determination letter from the IRS as to
its qualified status or the remedial amendment period for such Company Benefit
Plan has not yet expired, and each trust established in connection with any
Company Benefit Plan which is intended to be exempt from federal income taxation
under Section 501(a) of the Code is so exempt, and to the Company's knowledge no
fact or event has occurred that could adversely affect the qualified status of
any such Company Benefit Plan or the exempt status of any such trust, (B) to the
Company's knowledge there has been no prohibited transaction (within the meaning
of Section 406 of ERISA or Section 4975 of the Code and other than a transaction
that is exempt under a statutory or administrative exemption) with respect to
any Company Benefit Plan that could result in liability to the Company or an
ERISA Affiliate, (C) each Company Benefit Plan can be amended, terminated or
otherwise discontinued after the Effective Time in accordance with its terms,
without liability (other than (i) liability for ordinary administrative expenses
typically incurred in a termination event or (ii) if the Company Benefit Plan is
a pension benefit plan subject to Part 2 of Title I of ERISA, liability for the
accrued benefits as of the date of such termination (if and to the extent
required by ERISA) to the extent that either there are sufficient assets set
aside in a trust or insurance contract to satisfy such liability or such
liability is reflected on the most recent consolidated balance sheet filed or
incorporated by reference in the Company SEC Filings prior to the date of this
Agreement), (D) no suit, administrative proceeding, action or other litigation
has been brought, or to the knowledge of the Company is threatened, against or
with respect to any such Company Benefit Plan, including any audit or inquiry by
the IRS or United States Department of Labor (other than routine benefits
claims), (E) neither the Company nor any ERISA Affiliate has any liability under
XXXXX Xxxxxxx 000, (X) all tax, annual reporting and other governmental filings
required by ERISA and the Code have been timely filed with the appropriate
Governmental Entity and all notices and disclosures have been timely provided to
participants, (G) all contributions and payments to such Company Benefit Plan
are deductible
20
under Code sections 162 or 404, (H) no amount is subject to Tax as unrelated
business taxable income under Section 511 of the Code, and (I) no excise tax
could be imposed upon the Company under Chapter 43 of the Code.
Section 3.10.4 Neither the Company nor any of its ERISA Affiliates
sponsors, maintains, contributes to or has an obligation to contribute to, or
has sponsored, maintained, contributed to or had an obligation to contribute to,
any "employee pension benefit plan" (as defined in Section 3(2) of ERISA) that
is subject to Title IV of ERISA or Section 412 of the Code, or any
"multiemployer plan" as defined in Section 3(37) of ERISA ("Multiemployer
Plan").
Section 3.10.5 Neither the Company nor any of its ERISA Affiliates
sponsors, contributes to or has any liability with respect to any employee
benefit plan, program or arrangement that provides benefits to non-resident
aliens with no United States source income outside of the United States.
Section 3.10.6 Except as set forth on Section 3.10.6 of the Company
Disclosure Schedule, no amount that could be received (whether in cash or
property or the vesting of property), as a result of the consummation of the
transactions contemplated by this Agreement or any Ancillary Agreement, by any
employee, officer or director of the Company or any Company Subsidiary who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any Company Benefit Plan could be
characterized as an "excess parachute payment" (as defined in Section 280G(b)(1)
of the Code). Set forth in Section 3.10.6 of the Company Disclosure Schedule is
(A) the estimated maximum amount that could be paid to any disqualified
individual as a result of the transactions contemplated by this Agreement or any
Ancillary Agreement under all employment, severance and termination agreements,
other compensation arrangements and Company Benefit Plans currently in effect,
and (B) the "base amount" (as defined in Section 280G(b)(e) of the Code) for
each such individual as of the date of this Agreement.
Section 3.10.7 Except as required by Law, no Company Benefit Plan
provides any of the following retiree or post-employment benefits to any person:
medical, disability or life insurance benefits. No Company Benefit Plan is a
voluntary employee benefit association under Section 501(a)(9) of the Code. The
Company and each ERISA Affiliate are in
21
material compliance with (i) the requirements of the applicable health care
continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended, and the regulations (including proposed
regulations) thereunder and any similar state law and (ii) the applicable
requirements of the Health Insurance Portability and Accountability Act of 1996,
as amended, and the regulations (including the proposed regulations) thereunder.
Section 3.11 Labor and Other Employment Matters.
Section 3.11.1 Each of the Company and each Company Subsidiary is in
compliance with all applicable Laws respecting labor, employment, fair
employment practices, terms and conditions of employment, workers' compensation,
occupational safety, plant closings, and wages and hours. None of the Company or
any Company Subsidiary is liable for any payment to any trust or other fund or
to any Governmental Entity, with respect to unemployment compensation benefits,
social security or other benefits or obligations for employees (other than
routine payments to be made in the ordinary course of business and consistent
with past practice). Except as set forth in Section 3.11.1 of the Company
Disclosure Schedule, none of the Company or any Company Subsidiary is a party to
any collective bargaining or other labor union contract applicable to persons
employed by the Company or any Company Subsidiary, and no collective bargaining
agreement or other labor union contract is being negotiated by the Company or
any Company Subsidiary. There is no labor dispute, strike, slowdown or work
stoppage against the Company or any Company Subsidiary pending or, to the
knowledge of the Company, threatened which may interfere in any respect that
would have a Company Material Adverse Effect with the respective business
activities of the Company or any Company Subsidiary. No labor union or similar
organization has otherwise been certified to represent any persons employed by
the Company or any Company Subsidiary or has applied to represent such employees
or, to the knowledge of the Company, is attempting to organize so as to
represent such employees. None of the Company, any Company Subsidiary or their
respective representatives or employees has committed any unfair labor practices
in connection with the operation of the respective businesses of the Company or
any Company Subsidiary, and there is no charge or complaint against the Company
or any Company Subsidiary by the National Labor Relations Board or any
comparable state or foreign agency pending or, to the knowledge of the Company,
threatened, except where such unfair labor practice, charge or complaint would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse
22
Effect. None of the Company or any Company Subsidiary is delinquent in payments
to any of its employees for any wages, salaries, commissions, bonuses or other
direct compensation for any services performed for it or amounts required to be
reimbursed to such employees. Each of the Company and each Company Subsidiary
has withheld all amounts required by Law or by agreement to be withheld from the
wages, salaries, and other payments to employees, and is not liable for any
arrears of wages or any Taxes or any penalty for failure to comply with any of
the foregoing. There are no material pending claims against the Company or any
Company Subsidiary under any workers' compensation plan or policy or for long
term disability. There are no material controversies pending or, to the
knowledge of the Company, threatened, between the Company or any Company
Subsidiary and any of their current or former employees, which controversies
have or could reasonably be expected to result in an action, suit, proceeding,
claim, arbitration or investigation before any Governmental Entity. To the
Company's knowledge, no employee of the Company or any Company Subsidiary is in
any material respect in violation of any term of any employment contract,
non-disclosure agreement, non-competition agreement, or any restrictive covenant
to a former employer relating to the right of any such employee to be employed
by the Company or such Company Subsidiary because of the nature of the business
conducted or presently proposed to be conducted by it or to the use of trade
secrets or proprietary information of others. No employee of the Company or any
Company Subsidiary has given notice, nor is the Company otherwise aware, that
such employee intends to terminate his or her employment with the Company or
such Company Subsidiary.
Section 3.11.2 The Company has identified in Section 3.11.2 of the
Company Disclosure Schedule and has made available to Parent true and complete
copies of (A) all severance and employment agreements with directors, officers
or employees of or consultants to the Company or any Company Subsidiary, (B) all
severance programs and policies of the Company and each Company Subsidiary with
or relating to its employees, and (C) all plans, programs, agreements and other
arrangements of the Company and each Company Subsidiary with or relating to its
directors, officers, employees or consultants which contain change in control
provisions. Except as set forth in Section 3.11.2 of the Company Disclosure
Schedule, none of the execution and delivery of this Agreement or any Ancillary
Agreement or the consummation of the transactions contemplated hereby or thereby
will (either alone or in conjunction with any other event, such as termination
of employment) (A) result in any payment
23
(including, without limitation, severance, unemployment compensation, parachute
or otherwise) becoming due to any director or any employee of the Company or any
Company Subsidiary or affiliate from the Company or any Company Subsidiary or
affiliate under any Company Benefit Plan or otherwise, (B) significantly
increase any benefits otherwise payable under any Company Benefit Plan or (C)
result in any acceleration of the time of payment or vesting of any material
benefits. No individual who is a party to an employment agreement listed in
Section 3.11.2 of the Company Disclosure Schedule or any agreement incorporating
change in control provisions with the Company has terminated employment or been
terminated, nor has any event occurred that could give rise to a termination
event, in either case under circumstances that has given, or could give, rise to
a severance obligation on the part of the Company under such agreement. Section
3.11.2 of the Company Disclosure Schedule sets forth the Company's best
estimates of the amounts payable to the executives listed therein, as a result
of the transactions contemplated by this Agreement, any Ancillary Agreement,
and/or any subsequent employment termination (including any cash-out or
acceleration of options and restricted stock and any "gross-up" payments with
respect to any of the foregoing), based on compensation data applicable as of
the date of the Company Disclosure Schedule and the assumptions stated therein.
Section 3.11.3 There are no pending or threatened claims (other than
claims for benefits in the ordinary course), lawsuits or arbitrations which have
been asserted or instituted against any Company Benefit Plan, any fiduciaries
thereof with respect to their duties to the Company Benefit Plans or the assets
of any of the trusts under any of the Company Benefit Plans which could
reasonably be expected to result in any material liability of the Company or any
Company Subsidiary to the Pension Benefit Guaranty Corporation ("PBGC"), the
Department of Treasury, the Department of Labor or any Multiemployer Plan.
Section 3.12 Tax Treatment. None of the Company, any Company Subsidiary
or, to the knowledge of the Company, any of the Company's affiliates has taken
or agreed to take any action that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code. The Company is
not aware of any agreement, plan or other circumstance that would prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code.
Section 3.13 Contracts
24
Except as filed as exhibits to the Company SEC Filings filed prior to the
date of this Agreement, or as disclosed in Section 3.13 of the Company
Disclosure Schedule, none of the Company or any Company Subsidiary is a party to
or bound by any contract (A) any of the benefits to any party of which will be
increased, or the vesting of the benefits to any party of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or any Ancillary Agreement, or the value of any of the benefits to any
party of which will be calculated on the basis of any of the transactions
contemplated by this Agreement or any Ancillary Agreement, or (B) which, as of
the date hereof, (1) is a "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC), (2) involves aggregate expenditures in
excess of $250,000, other than contracts for the purchase of raw materials,
components or manufacturing goods and contracts for the sale of the Company's
products in the ordinary course of business, (3) involves annual expenditures in
excess of $250,000 and is not cancelable within one year, other than contracts
for the purchase of raw materials, components or manufacturing goods and
contracts for the sale of the Company's products in the ordinary course of
business, (4) contains any non-compete or exclusivity provisions with respect to
any line of business or geographic area with respect to the Company, any Company
Subsidiary or any of the Company's current or future affiliates, or which
restricts the conduct of any line of business by the Company, any Company
Subsidiary or any of the Company's current or future affiliates or any
geographic area in which the Company, any Company Subsidiary or any of the
Company's current or future affiliates may conduct business, in each case in any
material respect, (5) involves the sale of a Company Product to a customer or
distributor and provides for a right of refund or return for any reason,
including upon the occurrence of specified events or otherwise or (6) would
prohibit or materially delay the consummation of the Merger or any of the
transactions contemplated by this Agreement or any Ancillary Agreement. Each
Contract of the type described in this Section 3.13, whether or not set forth in
Section 3.13 of the Company Disclosure Schedule, is referred to herein as a
"Company Material Contract." Each Company Material Contract is valid and binding
on the Company and each Company Subsidiary party thereto and, to the Company's
knowledge, each other party thereto, and in full force and effect, and the
Company and each Company Subsidiary has in all material respects performed all
obligations required to be performed by it to the date hereof under each Company
Material Contract and, to the Company's knowledge, each other party to each
Company Material Contract
25
has in all material respects performed all obligations required to be performed
by it under such Company Material Contract, except as would not, individually or
in the aggregate, reasonably be expected to (1) prevent or materially delay
consummation of the Merger, (2) otherwise prevent or materially delay
performance by the Company of any of its material obligations under this
Agreement or any Ancillary Agreement, or (3) result in a Company Material
Adverse Effect. None of the Company or any Company Subsidiary knows of, or has
received notice of, any violation or default under (or any condition which with
the passage of time or the giving of notice would cause such a violation of or
default under) any Company Material Contract or any other contract to which it
is a party or by which it or any of its properties or assets is bound, except
for violations or defaults that would not, individually or in the aggregate,
reasonably be expected to (1) prevent or materially delay consummation of the
Merger, (2) otherwise prevent or materially delay performance by the Company of
any of its material obligations under this Agreement or any Ancillary Agreement
or (3) result in a Company Material Adverse Effect. Section 3.13 of the Company
Disclosure Schedule provides the Company's good faith estimate of the additional
costs which will accrue to the Company under the contracts described in clause
(A) of Section 3.13 as a result of the transactions contemplated by this
Agreement or any Ancillary Agreement.
Section 3.14 Litigation. Except as and to the extent set forth in
Company SEC Filings filed prior to the date of this Agreement or in Section 3.14
of the Company Disclosure Schedule, (A) there is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of the Company,
threatened in writing against the Company or any Company Subsidiary or
reasonably likely to be brought against the Company or any Company Subsidiary or
for which the Company or any Company Subsidiary is obligated to indemnify a
third party that (1) has had or would, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect or (2) as of
the date hereof, challenges the validity or propriety, or seeks to prevent or
materially delay consummation of the Merger or any other transaction
contemplated by this Agreement or any Ancillary Agreement and (B) none of the
Company or any Company Subsidiary is subject to any outstanding order, writ,
injunction, decree or arbitration ruling, award or other finding which has had
or would, individually or in the aggregate, reasonably be expected to (1)
prevent or materially delay consummation of the Merger, (2) otherwise prevent or
materially delay performance by the Company of any of its
26
material obligations under this Agreement or any Ancillary Agreement, or (3)
result in a Company Material Adverse Effect.
Section 3.15 Environmental Matters. Except as would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect:
Section 3.15.1 The Company and each Company Subsidiary (A) is in
compliance with all, and is not subject to any liability, with respect to any,
applicable Environmental Laws, (B) holds or has applied for all Environmental
Permits necessary to conduct their current operations, and (C) is in compliance
with their respective Environmental Permits.
Section 3.15.2 None of the Company or any Company Subsidiary
has received any written notice, demand, letter, claim or request for
information alleging that the Company or any Company Subsidiary may be in
violation of, or liable under, any Environmental Law.
Section 3.15.3 None of the Company or any Company Subsidiary
(A) has entered into or agreed to any consent decree or order or is subject to
any judgment, decree or judicial order relating to compliance with Environmental
Laws, Environmental Permits or the investigation, sampling, monitoring,
treatment, remediation, removal or cleanup of Hazardous Materials and, to the
knowledge of the Company, no investigation, litigation or other proceeding is
pending or threatened in writing with respect thereto, or (B) is an indemnitor
in connection with any claim threatened or asserted in writing by any
third-party indemnitee for any liability under any Environmental Law or relating
to any Hazardous Materials.
Section 3.15.4 None of the real property owned or leased by
the Company or any Company Subsidiary is listed or, to the knowledge of the
Company, proposed for listing on the "National Priorities List" under CERCLA, as
updated through the date hereof, or any similar state or foreign list of sites
requiring investigation or cleanup.
Section 3.16 Intellectual Property. Excepting the Intellectual
Property owned or controlled by Parent and/or Merger Sub, the Company owns or
has the defensible right to use, whether through ownership, licensing or
otherwise, all Intellectual Property significant to the businesses of the
Company and each Company Subsidiary in substantially the same manner as
27
such businesses are conducted on the date hereof ("Material Company Intellectual
Property"). Excepting the Intellectual Property owned or controlled by Parent
and/or Merger Sub, except as set forth in Section 3.16 of the Company Disclosure
Schedule and except as would not, individually or in the aggregate, reasonably
be expected to have a material adverse impact on the validity or value of any
Material Company Intellectual Property and excluding prior communications or
dealings with Parent: (A) no written claim of invalidity or conflicting
ownership rights with respect to any Material Company Intellectual Property has
been made by a third party and no such Material Company Intellectual Property is
the subject of any pending or, to the Company's knowledge, threatened action,
suit, claim, investigation, arbitration or other proceeding; (B) no person or
entity has given notice to the Company or any Company Subsidiary that the use of
any Material Company Intellectual Property by the Company, any Company
Subsidiary or any licensee is infringing or has infringed any domestic or
foreign patent, trademark, service xxxx, trade name, or copyright or design
right, or that the Company, any Company Subsidiary or any licensee has
misappropriated or improperly used or disclosed any trade secret, confidential
information or know-how; (C) the making, using, selling, manufacturing,
marketing, licensing, reproduction, distribution, or publishing of any process,
machine, manufacture or product related to any Material Company Intellectual
Property, is not presently believed to infringe any domestic or foreign patent,
trademark, service xxxx, trade name, copyright or other intellectual property
right of any third party, and does not and will not involve the misappropriation
or improper use or disclosure of any trade secrets, confidential information or
know-how of any third party; (D) there is not believed to exist any prior act or
current conduct or use by the Company, any Company Subsidiary or any third party
that would void or invalidate any Material Company Intellectual Property; and
(E) the execution, delivery and performance of this Agreement and each Ancillary
Agreement by the Company and the consummation of the transactions contemplated
hereby and thereby will not breach, violate or conflict with any instrument or
agreement concerning any Material Company Intellectual Property, will not cause
the forfeiture or termination or give rise to a right of forfeiture or
termination of any of the Material Company Intellectual Property or impair the
right of Parent or the Surviving Corporation to make, use, sell, license or
dispose of, or to bring any action for the infringement of any Material Company
Intellectual Property. In addition, the matters disclosed
28
on Section 3.16 of the Company Disclosure Schedule would not, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse Effect.
Section 3.17 Taxes.
Section 3.17.1 The Company and each Company Subsidiary has timely
filed all Tax Returns with the appropriate taxing authorities required to be
filed as of the date hereof, taking into account any extensions of time within
which to file such Tax Returns. The Tax Returns accurately reflected in all
material respects and will accurately reflect in all material respects all
liability for Taxes of the Company and such Company Subsidiaries for the periods
covered thereby. Except as provided in Schedule 3.17.1, all material Taxes owed
by the Company and each Company Subsidiary for all taxable years or other
taxable periods that end on or before the Effective Time, and, with respect to
any taxable year or other taxable period beginning before and ending after the
Effective Time, whether or not shown as being due on any Tax Return, have been
paid and the Company and each Company Subsidiary have provided adequate reserves
in accordance with GAAP in their financial statements for any Taxes that have
not been paid, whether or not shown as being due on any Tax Returns. No claim
has ever been made by an authority in a jurisdiction where the Company or any
Company Subsidiary does not file Tax Returns that the Company or any Company
Subsidiary is or may be subject to taxation by that jurisdiction.
Section 3.17.2 Except as provided in Schedule 3.17.2, no
deficiencies for Taxes with respect to the Company and any Company Subsidiary
have been claimed, proposed or assessed by any taxing authority or other
Governmental Entity. Except as provided in Schedule 3.17.2, there are no audits
or other administrative proceedings or court proceedings presently pending with
regard to any Taxes or Tax Returns of the Company or any Company Subsidiary and
none of the Company or any Company Subsidiary has received a written notice or
announcement of any audits or proceedings. To the Company's knowledge, no such
audits or proceedings are contemplated. No requests for waivers of time to
assess any Taxes are pending and none of the Company or any Company Subsidiary
has waived any statute of limitations with respect to Taxes or agreed to any
extension of time with respect to any Tax assessment or deficiency for any open
tax year.
29
Section 3.17.3 There are no Tax liens upon any property or assets of
the Company or any Company Subsidiary except liens for current Taxes not yet due
and payable and liens for Taxes that are being contested in good faith by
appropriate proceedings.
Section 3.17.4 The Company and each Company Subsidiary has withheld
and paid all material Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party.
Section 3.17.5 Neither the Company nor any Company Subsidiary has
been included in any "consolidated," "unitary" or combined Tax Return, other
than the consolidated, unified or combined Tax Returns of a Company Subsidiary
filed with other Company Subsidiaries and/or the Company, provided for under the
laws of the United States, any foreign jurisdiction or any state or locality
with respect to Taxes for any taxable period for which the statute of
limitations has not expired. None of the Company or any Company Subsidiary is
responsible for the Taxes of any other person under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee, by contract, or otherwise.
Section 3.17.6 None of the Company or any Company Subsidiary has (i)
filed a consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of any asset owned by it; (ii)
agreed, or is required, to make any adjustment under Section 481(a) of the Code
by reason of a change in accounting method or otherwise; (iii) made an election,
or is required to treat any of its assets as owned by another person or as
"tax-exempt use property" or "tax-exempt bond financed property" within the
meaning of Section 168 of the Code; (iv) made a consent dividend election under
Section 565 of the Code; or (v) made any of the foregoing elections or is
required to apply any of the foregoing rules under any comparable state, local
or foreign Tax provision.
Section 3.17.7 The Company has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period described in Section 897(c)(1)(A)(ii) of the Code.
30
Section 3.17.8 None of the interest payable by the Company or any
Company Subsidiary under outstanding indebtedness is nondeductible under Code
Section 163 or is treated as interest on corporate acquisition indebtedness
under Code Section 279.
Section 3.17.9 None of the Company or any Company Subsidiary is a
party to, is bound by or has any obligation under any Tax sharing or Tax
indemnity agreement or similar contract or arrangement.
Section 3.17.10 There are no other transactions or facts existing
with respect to the Company and/or its Subsidiaries which by reason of the
consummation of the transactions contemplated by this Agreement will result in
the Company and/or the Company Subsidiaries recognizing income.
Section 3.18 Insurance. The Company maintains insurance coverage with
reputable insurers, or maintains self-insurance practices, in such amounts and
covering such risks as are in accordance with normal industry practice for
companies engaged in businesses similar to that of the Company (taking into
account the cost and availability of such insurance).
Section 3.19 Opinion of Financial Advisors. X.X. Xxxxxxxxxx & Co. (the
"Company Financial Advisor") has delivered to the Company Board its written
opinion that the Exchange Ratio is fair from a financial point of view to the
holders of Company Stock.
Section 3.20 Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock and Series D
Convertible Preferred Stock, voting together as a single class on an
as-converted basis, are the only votes, if any, of the holders of any class or
series of capital stock or other Equity Interests of the Company necessary to
approve the Merger.
Section 3.21 Brokers and Other Advisors. No broker, finder, investment
banker or other person (other than the Company Financial Advisor, the fees and
expenses of which will be paid by the Company) is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger or any other
transaction contemplated by this Agreement or any Ancillary Agreement based upon
arrangements made by or on behalf of the Company or any Company Subsidiary. The
Company has heretofore made available to Parent a true and complete copy of all
agreements between the Company and the Company Financial Advisor
31
pursuant to which such firm would be entitled to any payment or indemnification
in connection with the Merger or any other transaction contemplated by this
Agreement or any Ancillary Agreement.
Section 3.22 Product Liability. As used in this Section 3.22, the term
"Company Product" shall mean any product designed, manufactured, shipped, sold,
marketed, distributed and/or otherwise introduced into the stream of commerce by
or on behalf of the Company or any Company Subsidiary, including, without
limitation, any product sold by the Company or any Company Subsidiary as a
distributor, agent, or pursuant to any other contractual relationship; and the
term "Company Defect" shall mean a defect or impurity of any kind, whether in
design, manufacture, processing or otherwise, including, without limitation, any
dangerous propensity associated with any reasonably foreseeable use of a Company
Product, or the failure to know of the existence of any defect, impurity or
dangerous propensity. Except as set forth in Section 3.22 of the Company
Disclosure Schedule, there is no pending or, to the knowledge of the Company,
threatened, claim, action, suit, inquiry, proceeding or investigation by any
individual or Governmental Entity in which a Company Product is alleged to have
a Company Defect, except any such claim, action, suit, inquiry proceeding or
investigation which would not be reasonably likely to have, individually or in
the aggregate, a Company Material Adverse Effect.
Section 3.23 Transactions with Affiliates. Other than as previously
disclosed by the Company in any filing with the SEC prior to the date of this
Agreement, since January 1, 2000, the Company has not entered into any agreement
or engaged in any transaction with any current or former director, officer or
holder of five percent or more of the outstanding voting securities of the
Company (calculated assuming conversion or exercise of all securities
convertible into or exercisable or exchangeable for voting securities of the
Company). Other than as previously disclosed by the Company in any filing with
the SEC prior to the date of this Agreement, since January 1, 2000, no executive
officer or director of the Company, either in such capacity or in his or her
individual capacity, has entered into any agreement or engaged in any
transaction with any current or former employee, customer, distributor, vendor
or any other person, except for any agreement or transaction pursuant to which
the Company receives no direct or indirect benefit and undertakes no direct or
indirect obligation.
32
Section 3.24 Federal Healthcare Matters. The Company (i) is not currently
excluded, debarred, or otherwise ineligible to participate in the federal health
care programs as defined in 42 U.S.C. Section 1320a-7b(f) (the "Federal
Healthcare Programs"); (ii) has not been charged with or convicted of a criminal
offense related to the provision of health care items or services and (iii) is
not under investigation or otherwise aware of any circumstances which may result
in the Company being excluded from participation in the Federal Healthcare
Programs.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the Disclosure Schedule delivered by Parent and
Merger Sub to the Company prior to the execution of this Agreement (the "Parent
Disclosure Schedule"), which identifies exceptions by specific Section
references, Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company as follows:
Section 4.1 Organization and Qualification; Subsidiaries. Each of Parent
and Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of Merger Sub and the
other subsidiaries of Parent (each a "Parent Subsidiary" and, collectively, the
"Parent Subsidiaries") has been duly organized, and is validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization, as the case may be. Each of Parent and each Parent Subsidiary has
the requisite power and authority and all necessary governmental approvals to
own, lease and operate its properties and to carry on its business as it is now
being conducted. Each of Each of Parent and each Parent Subsidiary is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification, licensing or good
standing necessary, except for such failures to be so qualified, licensed or in
good standing that would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect. Section 4.1 of the Parent
Disclosure Schedule sets forth a true and complete list of all of the Parent
Subsidiaries. Except as set forth in Section 4.1 of the Parent Disclosure
Schedule, none of Parent or any Parent Subsidiary holds an Equity Interest in
any other person.
Section 4.2 Certificate of Incorporation and By-laws; Corporate Books and
Records. The copies of Parent's Amended and Restated Certificate of
Incorporation (the "Parent
33
Certificate") and By-laws (the "Parent By-laws") that are listed as exhibits to
Parent's Form 10-K for the year ended December 31, 2001 are complete and correct
copies thereof as in effect on the date hereof (the "Parent Form 10-K"). Parent
is not in violation of any of the provisions of the Parent Certificate or the
Parent By-laws. True and complete copies of all minute books of Parent have been
made available by Parent to the Company.
Section 4.3 Capitalization. The authorized capital stock of Parent
consists of 200,000,000 shares of Parent Common Stock and 5,000,000 shares of
preferred stock, par value $0.001 per share (the "Parent Preferred Stock"). As
of the date hereof, (A) 36,974,978 shares of Parent Common Stock (other than
treasury shares) were issued and outstanding, all of which were validly issued
and fully paid, nonassessable and free of preemptive rights, (B) no shares of
Parent Common Stock were held in the treasury of Parent or by the Parent
Subsidiaries, and (C) 6,512,652 shares of Parent Common Stock were issuable (and
such number was reserved for issuance) upon exercise of options to purchase
Parent Common Stock ("Parent Options") outstanding as of such date. As of the
date hereof, no shares of Parent Preferred Stock are issued or outstanding.
Except for Parent Options to purchase not more than 6,512,652 shares of Parent
Common Stock, warrants to purchase not more than 5,081 shares of Company Common
Stock outstanding as of the date hereof and arrangements and agreements set
forth in Section 4.3 of the Parent Disclosure Schedule, there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character to which Parent or any Parent Subsidiary is a party or by which Parent
or any Parent Subsidiary is bound relating to the issued or unissued capital
stock or other Equity Interests of Parent or any Parent Subsidiary, or
securities convertible into or exchangeable for such capital stock or other
Equity Interests, or obligating Parent or any Parent Subsidiary to issue or sell
any shares of its capital stock or other Equity Interests, or securities
convertible into or exchangeable for such capital stock of, or other Equity
Interests in, Parent or any Parent Subsidiary. Since December 31, 2002, Parent
has not issued any shares of its capital stock, or securities convertible into
or exchangeable for such capital stock or other Equity Interests, other than
those shares of capital stock reserved for issuance as set forth in this Section
4.3 or Section 4.3 of the Parent Disclosure Schedule. Parent has previously
provided the Company with a true and complete list, as of the date hereof, of
the prices at which outstanding Parent Options may be exercised under the
applicable Parent Stock Option Plan, the number of Parent Options outstanding at
each such price and the vesting
34
schedule of the Parent Options for each officer of Parent. All shares of Parent
Common Stock subject to issuance under the Parent Stock Option Plans, upon
issuance prior to the Effective Time on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights. There
are no outstanding contractual obligations of Parent or any Parent Subsidiary
(A) restricting the transfer of, (B) affecting the voting rights of, (C)
requiring the repurchase, redemption or disposition of, or containing any right
of first refusal with respect to, (D) requiring the registration for sale of, or
(E) granting any preemptive or antidilutive right with respect to, any shares of
Parent Common Stock or any capital stock of, or other Equity Interests in,
Parent or any Parent Subsidiary. Except as set forth in Section 4.3 of the
Parent Disclosure Schedule, each outstanding share of capital stock of each
Parent Subsidiary is duly authorized, validly issued, fully paid, nonassessable
and free of preemptive rights and is owned, beneficially and of record, by
Parent or another Parent Subsidiary free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements,
limitations on Parent's or such other Parent Subsidiary's voting rights, charges
and other encumbrances of any nature whatsoever. There are no outstanding
contractual obligations of Parent or any Parent Subsidiary to provide funds to,
or make any investment (in the form of a loan, capital contribution or
otherwise) in, any Parent Subsidiary or any other person, other than guarantees
by Parent of any indebtedness or other obligations of any wholly-owned Parent
Subsidiary.
Section 4.4 Authority.
Section 4.4.1 Each of Parent and Merger Sub has all necessary
corporate power and authority to execute and deliver this Agreement and each
Ancillary Agreement to which it is a party, to perform its obligations hereunder
and thereunder and to consummate the transactions contemplated by this Agreement
and each Ancillary Agreement to be consummated by it. Each of (A) the execution
and delivery of this Agreement and each Ancillary Agreement to which it is a
party by each of Parent and Merger Sub, as applicable, and the consummation by
Parent and Merger Sub of the transactions contemplated hereby and thereby and
(B) the issuance of shares of Parent Common Stock in accordance with the Merger,
have been duly and validly authorized by all necessary corporate action
(including approval by Parent as sole stockholder of Merger Sub), and no other
corporate proceedings on the part of Parent and Merger Sub and no other
stockholder votes are necessary to authorize this Agreement or any such
Ancillary Agreement or to consummate the transactions contemplated hereby and
thereby other than, with respect to the Merger, as provided in Section 4.20.
Each of the Board of Directors of Parent (the "Parent Board") and the Board of
Directors of Merger Sub (the "Merger Sub Board") has approved this Agreement and
each Ancillary Agreement to which Parent or Merger Sub, as applicable, is a
party, declared advisable the transactions contemplated hereby or thereby and
has directed that this Agreement and each such Ancillary
35
Agreement and the transactions contemplated hereby and thereby be submitted to
Parent's stockholders for approval at a meeting of such stockholders and to
Parent, as the sole stockholder of Merger Sub, for approval. This Agreement and
each Ancillary Agreement to which Parent or Merger Sub is a party have been duly
authorized and validly executed and delivered by Parent and Merger Sub, as
applicable, and constitute a legal, valid and binding obligation of Parent and
Merger Sub, enforceable against Parent and Merger Sub in accordance with its
terms.
Section 4.4.2 Each of Parent and Merger Sub has taken all
appropriate actions so that the restrictions on business combinations contained
in Section 203 of the DGCL will not apply with respect to or as a result of this
Agreement or any Ancillary Agreement to which Parent or Merger Sub is a party
and the transactions contemplated hereby and thereby, including the Merger,
without any further action on the part of the stockholders of Parent or Merger
Sub or the Parent Board or the Merger Sub Board. True and complete copies of all
Parent Board resolutions and Merger Sub Board resolutions reflecting such
actions have been previously provided to the Company. No other state takeover
statute or similar statute or regulation is applicable to or purports to be
applicable to the Merger or any other transaction contemplated by this Agreement
or any Ancillary Agreement to which Parent or Merger Sub is a party.
Section 4.5 No Conflict; Required Filings and Consents.
Section 4.5.1 The execution and delivery of this Agreement and each
Ancillary Agreement to which Parent or Merger Sub is a party do not, and the
performance thereof by Parent and Merger Sub will not, (A) (assuming, the
stockholder approval set forth in Section 4.20 is obtained) conflict with or
violate any provision of the Certificate of Incorporation or By-laws of Parent
or Merger Sub, (B) assuming that all consents, approvals, authorizations and
permits described in Section 4.5.2 have been obtained and all filings and
notifications
36
described in Section 4.5.2 have been made, and that the stockholders of Parent
have approved the issuance of the shares of Parent Common Stock to be issued in
connection with the Merger, and any waiting periods thereunder have terminated
or expired, conflict with or violate any Law applicable to Parent or any Parent
Subsidiary or by which any property or asset of Parent or any Parent Subsidiary
is bound or affected or (C) require any consent or approval under, result in any
breach of or any loss of any benefit under, constitute a change of control or
default (or an event which with notice or lapse of time or both would become a
default) under or give to others any right of termination, vesting, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of Parent or any Parent Subsidiary pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
Parent Permit or other instrument or obligation.
Section 4.5.2 The execution and delivery of this Agreement and each
Ancillary Agreement to which Parent or Merger Sub is a party do not, and the
performance hereof and thereof by Parent and Merger Sub will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity or any other person, except (A) under the Exchange
Act, the Securities Act, any applicable Blue Sky Laws and the rules and
regulations of Nasdaq and the filing and recordation of the Certificate of
Merger as required by the DGCL and (B) where failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications
to a person other than a Governmental Entity, would not, individually or in the
aggregate, reasonably be expected to (x) prevent or materially delay
consummation of the Merger, (y) otherwise prevent or materially delay
performance by Parent or Merger Sub of any of their material obligations under
this Agreement or any Ancillary Agreement or (z) have a Parent Material Adverse
Effect.
Section 4.6 Permits; Compliance With Law. Each of Parent and each Parent
Subsidiary is in possession of all authorizations, licenses, permits,
certificates, approvals and clearances of any Governmental Entity necessary for
Parent and each Parent Subsidiary to own, lease and operate its properties or to
carry on its respective businesses substantially in the manner described in the
Parent SEC Filings filed prior to the date hereof and substantially as it is
being conducted as of the date hereof (the "Parent Permits"), and all such
Parent Permits are valid, and in full force and effect, except where the failure
to have, or the suspension or cancellation of, or failure to be valid or in full
force and effect of, any of the Parent Permits
37
would not, individually or in the aggregate, reasonably be expected to (A)
prevent or materially delay consummation of the Merger, (B) otherwise prevent or
materially delay performance by Parent or Merger Sub of any of their material
obligations under this Agreement or any Ancillary Agreement or (C) have a Parent
Material Adverse Effect. None of Parent or any Parent Subsidiary is in conflict
with, or in default or violation of, (x) any Law applicable to Parent or any
Parent Subsidiary or by which any property or asset of Parent or any Parent
Subsidiary is bound or affected or (y) any Parent Permits, except for any such
conflicts, defaults or violations that would not, individually or in the
aggregate, reasonably be expected to (A) prevent or materially delay
consummation of the Merger, (B) otherwise prevent or materially delay
performance by Parent or Merger Sub of any of their material obligations under
this Agreement or any Ancillary Agreement to which it is a party or (C) have a
Parent Material Adverse Effect.
Section 4.7 SEC Filings; Financial Statements.
Section 4.7.1 Parent has timely filed all registration statements,
prospectuses, forms, reports, definitive proxy statements, schedules and
documents required to be filed by it under the Securities Act or the Exchange
Act, as the case may be, since January 1, 2000 (collectively, the "Parent SEC
Filings"). Each Parent SEC Filing (A) as of its date, complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and (B) did not, at the time it was filed, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. As of the
date of this Agreement, no Parent Subsidiary is subject to the periodic
reporting requirements of the Exchange Act.
Section 4.7.2 Each of the consolidated financial statements
(including, in each case, any notes thereto) contained in the Parent SEC Filings
was prepared in accordance with GAAP applied (except as may be indicated in the
notes thereto and, in the case of unaudited quarterly financial statements, as
permitted by Form 10-Q under the Exchange Act) on a consistent basis throughout
the periods indicated (except as may be indicated in the notes thereto), and
each presented fairly the consolidated financial position, results of operations
and cash flows of Parent and the consolidated Parent Subsidiaries as of the
respective dates thereof and for the respective periods indicated therein
(subject, in the case of unaudited statements, to
38
normal year-end adjustments which did not and would not, individually or in the
aggregate, reasonably be expected to have a Parent Material Adverse Effect). The
books and records of Parent and each Parent Subsidiary have been, and are being,
maintained in accordance with applicable legal and accounting requirements.
Section 4.7.3 Except as and to the extent set forth on the
consolidated balance sheet of Parent and the consolidated Parent Subsidiaries as
of December 31, 2001 included in the Parent Form 10-K for the year ended
December 31, 2001, including the notes thereto, none of Parent or any
consolidated Parent Subsidiary has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on a balance sheet or in notes thereto prepared in accordance with
GAAP, except for liabilities or obligations incurred in the ordinary course of
business since December 31, 2001 that would not, individually or in the
aggregate, reasonably be expected to (A) prevent or materially delay
consummation of the Merger, (B) otherwise prevent or materially delay
performance by Parent or Merger Sub of any of their material obligations under
this Agreement or any Ancillary Agreement to which it is a party or (C) have a
Parent Material Adverse Effect.
Section 4.7.4 Parent has previously provided to the Company a
complete and correct copy of any amendment or modification which has not yet
been filed with the SEC to any agreement, document or other instrument which
previously had been filed by Parent with the SEC pursuant to the Securities Act
or the Exchange Act.
Section 4.8 Disclosure Documents.
Section 4.8.1 The Registration Statement, the Proxy Statement and
any Other Filings, and any amendments or supplements thereto, at (A) the time
the Registration Statement is declared effective, (B) the time the Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
the stockholders of the Company, (C) if applicable, the time the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to stockholders
of Parent, (D) the time of the Company Stockholders' Meeting, (E) the time of
the Parent Stockholders' Meeting, and (F) the Effective Time, will comply as to
form in all material respects with the applicable requirements of the Securities
Act, the Exchange Act and other applicable Laws.
39
Section 4.8.2 The Registration Statement, the Proxy Statement and
any Other Filings, and any amendments or supplements thereto, do not, and will
not, at (A) the time the Registration Statement is declared effective, (B) the
time the Proxy Statement (or any amendment thereof or supplement thereto) is
first mailed to the stockholders of the Company, (C) the time the Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
stockholders of Parent, (D) the time of the Company Stockholders' Meeting, (E)
the time of the Parent Stockholders' Meeting, and (F) the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading. The representations and warranties contained in this Section 4.8.2
will not apply to statements or omissions included in the Registration
Statement, the Proxy Statement or any Other Filings based upon information
furnished in writing to Parent or Merger Sub by the Company specifically for use
therein.
Section 4.9 Absence of Certain Changes or Events. Since September 30,
2002, except as specifically contemplated by, or as disclosed in, this Agreement
or Section 4.9 of the Parent Disclosure Schedule, Parent and each Parent
Subsidiary has conducted its businesses in the ordinary course consistent with
past practice. During the period from October 1, 2002 through the date of this
Agreement, there has not been any Parent Material Adverse Effect or an event or
development that would, individually or in the aggregate, reasonably be expected
to have a Parent Material Adverse Effect. Since September 30, 2002, there has
not been any event or development that would, individually or in the aggregate,
reasonably be expected to prevent or materially delay the performance of this
Agreement or any Ancillary Agreement by Parent or Merger Sub. Neither Parent nor
any Parent Subsidiary has taken any action during the period from October 1,
2002 through the date of this Agreement that, if taken during the period from
the date of this Agreement through the Effective Time, would constitute a breach
of Section 5.2.
Section 4.10 Employee Benefit Plans.
Section 4.10.1 Section 4.10.1 of the Parent Disclosure Schedule sets
forth a true and complete list of each "employee benefit plan" as defined in
Section 3(3) of ERISA and any other plan, policy, program, practice, agreement,
understanding or arrangement (whether written or oral) providing compensation or
other benefits to any current or former director,
40
officer, employee or consultant (or to any dependent or beneficiary thereof of
Parent or any ERISA Affiliate), which are now, or were within the past 6 years,
maintained, sponsored or contributed to by Parent or any ERISA Affiliate, or
under which Parent or any ERISA Affiliate has any obligation or liability,
whether actual or contingent, including, without limitation, all incentive,
bonus, deferred compensation, vacation, holiday, cafeteria, medical, disability,
stock purchase, stock option, stock appreciation, phantom stock, restricted
stock or other stock-based compensation plans, policies, programs, practices or
arrangements (each a "Parent Benefit Plan"). Neither Parent, nor to the
knowledge of Parent, or any other person or entity, has any express or implied
commitment, whether legally enforceable or not, to modify, change or terminate
any Parent Benefit Plan, other than with respect to a modification, change or
termination required by ERISA or the Code.
With respect to each Parent Benefit Plan, Parent has delivered to the
Company true, correct and complete copies of (A) each Parent Benefit Plan (or,
if not written a written summary of its material terms), including without
limitation all plan documents, adoption agreements, trust agreements, insurance
contracts or other funding vehicles and all amendments thereto, (B) all
summaries and summary plan descriptions, including any summary of material
modifications, (C) the most recent annual reports (Form 5500 series) filed with
the IRS with respect to such Parent Benefit Plan (and, if the most recent annual
report is a Form 5500R, the most recent Form 5500C filed with respect to such
Parent Benefit Plan), (D) the most recent actuarial report or other financial
statement relating to such Parent Benefit Plan, (E) the most recent
determination or opinion letter, if any, issued by the IRS with respect to any
Parent Benefit Plan and any pending request for such a determination letter, (F)
the most recent nondiscrimination tests performed under the Code (including
401(k) and 401(m) tests) for each Parent Benefit Plan, and (G) all filings made
with any Governmental Entity, including but not limited any filings under the
Voluntary Compliance Resolution or Closing Agreement Program or the Department
of Labor Delinquent Filer Program.
Section 4.10.2 Each Parent Benefit Plan has been administered in all
material respects in accordance with its terms and all applicable Laws,
including ERISA and the Code, and contributions required to be made under the
terms of any of the Parent Benefit Plans as of the date of this Agreement have
been timely made or, if not yet due, have been properly reflected on the most
recent consolidated balance sheet filed or incorporated by reference in the
41
Parent SEC Filings prior to the date of this Agreement. With respect to the
Parent Benefit Plans, no event has occurred and, to the knowledge of Parent,
there exists no condition or set of circumstances in connection with which
Parent could be subject to any material liability (other than for routine
benefit liabilities) under the terms of, or with respect to, such Parent Benefit
Plans, ERISA, the Code or any other applicable Law.
Section 4.10.3 Except as disclosed on Section 4.10.3 of the Parent
Disclosure Schedule: (A) each Parent Benefit Plan which is intended to qualify
under Section 401(a), Section 401(k), Section 401(m) or Section 4975(e)(6) of
the Code has either received a favorable determination letter from the IRS as to
its qualified status or the remedial amendment period for such Parent Benefit
Plan has not yet expired, and each trust established in connection with any
Parent Benefit Plan which is intended to be exempt from federal income taxation
under Section 501(a) of the Code is so exempt, and to Parent's knowledge no fact
or event has occurred that could adversely affect the qualified status of any
such Parent Benefit Plan or the exempt status of any such trust, (B) to Parent's
knowledge there has been no prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code and other than a transaction
that is exempt under a statutory or administrative exemption) with respect to
any Parent Benefit Plan that could result in liability to Parent or an ERISA
Affiliate, (C) each Parent Benefit Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
liability (other than (i) liability for ordinary administrative expenses
typically incurred in a termination event or (ii) if the Parent Benefit Plan is
a pension benefit plan subject to Part 2 of Title I of ERISA, liability for the
accrued benefits as of the date of such termination (if and to the extent
required by ERISA) to the extent that either there are sufficient assets set
aside in a trust or insurance contract to satisfy such liability or such
liability is reflected on the most recent consolidated balance sheet filed or
incorporated by reference in the Parent SEC Filings prior to the date of this
Agreement), (D) no suit, administrative proceeding, action or other litigation
has been brought, or to the knowledge of Parent is threatened, against or with
respect to any such Parent Benefit Plan, including any audit or inquiry by the
IRS or United States Department of Labor (other than routine benefits claims),
(E) neither Parent nor any ERISA Affiliate has any liability under XXXXX Xxxxxxx
000, (X) all tax, annual reporting and other governmental filings required by
ERISA and the Code have been timely filed with the appropriate Governmental
Entity and all notices and disclosures have been timely
42
provided to participants, (G) all contributions and payments to such Parent
Benefit Plan are deductible under Code sections 162 or 404, (H) no amount is
subject to Tax as unrelated business taxable income under Section 511 of the
Code, and (I) no excise tax could be imposed upon Parent under Chapter 43 of the
Code.
Section 4.10.4 Neither Parent nor any of its ERISA Affiliates
sponsors, maintains, contributes to or has an obligation to contribute to, or
has sponsored, maintained, contributed to or had an obligation to contribute to,
any "employee pension benefit plan" (as defined in Section 3(2) of ERISA) that
is subject to Title IV of ERISA or Section 412 of the Code, or any Multiemployer
Plan.
Section 4.10.5 Neither Parent nor any of its ERISA Affiliates
sponsors, contributes to or has any liability with respect to any employee
benefit plan, program or arrangement that provides benefits to non-resident
aliens with no United States source income outside of the United States.
Section 4.10.6 Except as set forth on Section 4.10.6 of the Parent
Disclosure Schedule, no amount that could be received (whether in cash or
property or the vesting of property), as a result of the consummation of the
transactions contemplated by this Agreement or any Ancillary Agreement, by any
employee, officer or director of Parent or any Parent Subsidiary who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any Parent Benefit Plan could be
characterized as an "excess parachute payment" (as defined in Section 280G(b)(1)
of the Code). Set forth in Section 4.10.6 of the Parent Disclosure Schedule is
(A) the estimated maximum amount that could be paid to any disqualified
individual as a result of the transactions contemplated by this Agreement or any
Ancillary Agreement under all employment, severance and termination agreements,
other compensation arrangements and Parent Benefit Plans currently in effect,
and (B) the "base amount" (as defined in Section 280G(b)(e) of the Code) for
each such individual as of the date of this Agreement.
Section 4.10.7 Except as required by Law, no Parent Benefit Plan
provides any of the following retiree or post-employment benefits to any person:
medical, disability or life insurance benefits. No Parent Benefit Plan is a
voluntary employee benefit association under Section 501(a)(9) of the Code.
Parent and each ERISA Affiliate are in material compliance with
43
(i) the requirements of the applicable health care continuation and notice
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, and the regulations (including proposed regulations) thereunder and any
similar state law and (ii) the applicable requirements of the Health Insurance
Portability and Accountability Act of 1996, as amended, and the regulations
(including the proposed regulations) thereunder.
Section 4.11 Labor and Other Employment Matters.
Section 4.11.1 Each of Parent and each Parent Subsidiary is in
compliance with all applicable Laws respecting labor, employment, fair
employment practices, terms and conditions of employment, workers' compensation,
occupational safety, plant closings, and wages and hours. None of Parent or any
Parent Subsidiary is liable for any payment to any trust or other fund or to any
Governmental Entity, with respect to unemployment compensation benefits, social
security or other benefits or obligations for employees (other than routine
payments to be made in the ordinary course of business and consistent with past
practice). Except as set forth in Section 4.11.1 of the Parent Disclosure
Schedule, none of Parent or any Parent Subsidiary is a party to any collective
bargaining or other labor union contract applicable to persons employed by
Parent or any Parent Subsidiary, and no collective bargaining agreement or other
labor union contract is being negotiated by Parent or any Parent Subsidiary.
There is no labor dispute, strike, slowdown or work stoppage against Parent or
any Parent Subsidiary pending or, to the knowledge of Parent, threatened which
may interfere in any respect that would have a Parent Material Adverse Effect
with the respective business activities of Parent or any Parent Subsidiary. No
labor union or similar organization has otherwise been certified to represent
any persons employed by Parent or any Parent Subsidiary or has applied to
represent such employees or, to the knowledge of Parent, is attempting to
organize so as to represent such employees. None of Parent, any Parent
Subsidiary or their respective representatives or employees has committed any
unfair labor practices in connection with the operation of the respective
businesses of Parent or any Parent Subsidiary, and there is no charge or
complaint against Parent or any Parent Subsidiary by the National Labor
Relations Board or any comparable state or foreign agency pending or, to the
knowledge of Parent, threatened, except where such unfair labor practice, charge
or complaint would not, individually or in the aggregate, reasonably be expected
to have a Parent Material Adverse Effect. None of Parent or any Parent
Subsidiary is delinquent in payments to any of its employees for any wages,
salaries,
44
commissions, bonuses or other direct compensation for any services performed for
it or amounts required to be reimbursed to such employees. Each of Parent and
each Parent Subsidiary has withheld all amounts required by Law or by agreement
to be withheld from the wages, salaries, and other payments to employees, and is
not liable for any arrears of wages or any Taxes or any penalty for failure to
comply with any of the foregoing. There are no material pending claims against
Parent or any Parent Subsidiary under any workers' compensation plan or policy
or for long term disability. There are no material controversies pending or, to
the knowledge of Parent, threatened, between Parent or any Parent Subsidiary and
any of their current or former employees, which controversies have or could
reasonably be expected to result in an action, suit, proceeding, claim,
arbitration or investigation before any Governmental Entity. To Parent's
knowledge, no employee of Parent or any Parent Subsidiary is in any material
respect in violation of any term of any employment contract, non-disclosure
agreement, non-competition agreement, or any restrictive covenant to a former
employer relating to the right of any such employee to be employed by Parent or
such Parent Subsidiary because of the nature of the business conducted or
presently proposed to be conducted by it or to the use of trade secrets or
proprietary information of others. No employee of Parent or any Parent
Subsidiary has given notice, nor is Parent otherwise aware, that such employee
intends to terminate his or her employment with Parent or such Parent
Subsidiary.
Section 4.11.2 Parent has identified in Section 4.11.2 of the Parent
Disclosure Schedule and has made available to the Company true and complete
copies of (A) all severance and employment agreements with directors, officers
or employees of or consultants to Parent or any Parent Subsidiary, (B) all
severance programs and policies of Parent and each Parent Subsidiary with or
relating to its employees, and (C) all plans, programs, agreements and other
arrangements of Parent and each Parent Subsidiary with or relating to its
directors, officers, employees or consultants which contain change in control
provisions. Except as set forth in Section 4.11.2 of the Parent Disclosure
Schedule, none of the execution and delivery of this Agreement or any Ancillary
Agreement or the consummation of the transactions contemplated hereby or thereby
will (either alone or in conjunction with any other event, such as termination
of employment) (A) result in any payment (including, without limitation,
severance, unemployment compensation, parachute or otherwise) becoming due to
any director or any employee of Parent or any Parent Subsidiary or
45
affiliate from Parent or any Parent Subsidiary or affiliate under any Parent
Benefit Plan or otherwise, (B) significantly increase any benefits otherwise
payable under any Parent Benefit Plan or (C) result in any acceleration of the
time of payment or vesting of any material benefits. No individual who is a
party to an employment agreement listed in Section 4.11.2 of the Parent
Disclosure Schedule or any agreement incorporating change in control provisions
with Parent has terminated employment or been terminated, nor has any event
occurred that could give rise to a termination event, in either case under
circumstances that has given, or could give, rise to a severance obligation on
the part of Parent under such agreement. Section 4.11.2 of the Parent Disclosure
Schedule sets forth Parent's best estimates of the amounts payable to the
executives listed therein, as a result of the transactions contemplated by this
Agreement, any Ancillary Agreement, and/or any subsequent employment termination
(including any cash-out or acceleration of options and restricted stock and any
"gross-up" payments with respect to any of the foregoing), based on compensation
data applicable as of the date of the Parent Disclosure Schedule and the
assumptions stated therein.
Section 4.11.3 There are no pending or threatened claims (other than
claims for benefits in the ordinary course), lawsuits or arbitrations which have
been asserted or instituted against any Parent Benefit Plan, any fiduciaries
thereof with respect to their duties to the Parent Benefit Plans or the assets
of any of the trusts under any of the Parent Benefit Plans which could
reasonably be expected to result in any material liability of Parent or any
Parent Subsidiary to the PBGC, the Department of Treasury, the Department of
Labor or any Multiemployer Plan.
Section 4.12 Tax Treatment. None of Parent, any Parent Subsidiary or, to
the knowledge of Parent, any of Parent's affiliates has taken or agreed to take
any action that would prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code. Parent is not aware of any
agreement, plan or other circumstance that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
Section 4.13 Contracts.
Except as filed as exhibits to the Parent SEC Filings filed prior to the
date of this Agreement, or as disclosed in Section 4.13 of the Parent Disclosure
Schedule, none of Parent or any Parent Subsidiary is a party to or bound by any
contract (A) any of the benefits to any party of which will be increased, or the
vesting of the benefits to any party
46
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or any Ancillary Agreement, or the value of any
of the benefits to any party of which will be calculated on the basis of any of
the transactions contemplated by this Agreement or any Ancillary Agreement, or
(B) which, as of the date hereof, (1) is a "material contract" (as such term is
defined in Item 601(b)(10) of Regulation S-K of the SEC), (2) involves aggregate
expenditures in excess of $250,000, other than contracts for the purchase of raw
materials, components or manufacturing goods and contracts for the sale of
Parent's products in the ordinary course of business, (3) involves annual
expenditures in excess of $250,000 and is not cancelable within one year, other
than contracts for the purchase of raw materials, components or manufacturing
goods and contracts for the sale of Parent's products in the ordinary course of
business, (4) contains any non-compete or exclusivity provisions with respect to
any line of business or geographic area with respect to Parent, any Parent
Subsidiary or any of Parent's current or future affiliates, or which restricts
the conduct of any line of business by Parent, any Parent Subsidiary or any of
Parent's current or future affiliates or any geographic area in which Parent,
any Parent Subsidiary or any of Parent's current or future affiliates may
conduct business, in each case in any material respect, (5) involves the sale of
a Parent Product to a customer or distributor and provides for a right of refund
or return for any reason, including upon the occurrence of specified events or
otherwise or (6) would prohibit or materially delay the consummation of the
Merger or any of the transactions contemplated by this Agreement or any
Ancillary Agreement. Each Contract of the type described in this Section 4.13,
whether or not set forth in Section 4.13 of the Parent Disclosure Schedule, is
referred to herein as a "Parent Material Contract." Each Parent Material
Contract is valid and binding on Parent and each Parent Subsidiary party thereto
and, to Parent's knowledge, each other party thereto, and in full force and
effect, and Parent and each Parent Subsidiary has in all material respects
performed all obligations required to be performed by it to the date hereof
under each Parent Material Contract and, to Parent's knowledge, each other party
to each Parent Material Contract has in all material respects performed all
obligations required to be performed by it under such Parent Material Contract,
except as would not, individually or in the aggregate, reasonably be expected to
(1) prevent or materially delay consummation of the Merger, (2) otherwise
prevent or materially delay performance by Parent or Merger Sub of any of their
material obligations under this Agreement or any Ancillary Agreement to which it
is a party, or (3) result in a Parent Material Adverse Effect. None of Parent or
any Parent Subsidiary knows of, or has received notice of, any violation or
default under (or any condition which with the passage of time or the giving of
notice would cause such a violation of or default under) any Parent Material
Contract or any other contract to which it is a party or by which it or any of
its properties or assets is bound, except for violations or defaults that would
not, individually or in the aggregate, reasonably be expected to (1) prevent or
materially delay consummation of the Merger, (2) otherwise prevent or materially
delay performance by Parent or Merger Sub of any of their material obligations
under this Agreement or any Ancillary
47
Agreement to which it is a party or (3) result in a Parent Material Adverse
Effect. Section 4.13 of the Parent Disclosure Schedule provides Parent's good
faith estimate of the additional costs which will accrue to Parent under the
contracts described in clause (A) of Section 4.13 as a result of the
transactions contemplated by this Agreement or any Ancillary Agreement.
Section 4.14 Litigation. Except as and to the extent set forth in Parent
SEC Filings filed prior to the date of this Agreement or in Section 4.14 of the
Parent Disclosure Schedule, (A) there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of Parent, threatened in writing
against Parent or any Parent Subsidiary or reasonably likely to be brought
against Parent or any Parent Subsidiary or for which Parent or any Parent
Subsidiary is obligated to indemnify a third party that (1) has had or would,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect or (2) as of the date hereof, challenges the validity or
propriety, or seeks to prevent or materially delay consummation of the Merger or
any other transaction contemplated by this Agreement or any Ancillary Agreement
and (B) none of Parent or any Parent Subsidiary is subject to any outstanding
order, writ, injunction, decree or arbitration ruling, award or other finding
which has had or would, individually or in the aggregate, reasonably be expected
to (1) prevent or materially delay consummation of the Merger, (2) otherwise
prevent or materially delay performance by Parent or Merger Sub of any of their
material obligations under this Agreement or any Ancillary Agreement, or (3)
result in a Parent Material Adverse Effect.
Section 4.15 Environmental Matters. Except as would not, individually or
in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect:
48
Section 4.15.1 Parent and each Parent Subsidiary (A) is in
compliance with all, and is not subject to any liability, with respect to any,
applicable Environmental Laws, (B) holds or has applied for all Environmental
Permits necessary to conduct their current operations, and (C) is in compliance
with their respective Environmental Permits.
Section 4.15.2 None of Parent or any Parent Subsidiary has received
any written notice, demand, letter, claim or request for information alleging
that Parent or any Parent Subsidiary may be in violation of, or liable under,
any Environmental Law.
Section 4.15.3 None of Parent or any Parent Subsidiary (A) has
entered into or agreed to any consent decree or order or is subject to any
judgment, decree or judicial order relating to compliance with Environmental
Laws, Environmental Permits or the investigation, sampling, monitoring,
treatment, remediation, removal or cleanup of Hazardous Materials and, to the
knowledge of Parent, no investigation, litigation or other proceeding is pending
or threatened in writing with respect thereto, or (B) is an indemnitor in
connection with any claim threatened or asserted in writing by any third-party
indemnitee for any liability under any Environmental Law or relating to any
Hazardous Materials.
Section 4.15.4 None of the real property owned or leased by Parent
or any Parent Subsidiary is listed or, to the knowledge of Parent, proposed for
listing on the "National Priorities List" under CERCLA, as updated through the
date hereof, or any similar state or foreign list of sites requiring
investigation or cleanup.
Section 4.16 Intellectual Property. Excepting the Intellectual Property
owned or controlled by the Company, Parent owns or has the defensible right to
use, whether through ownership, licensing or otherwise, all Intellectual
Property significant to the businesses of Parent and each Parent Subsidiary in
substantially the same manner as such businesses are conducted on the date
hereof ("Material Parent Intellectual Property"). Excepting the Intellectual
Property owned or controlled by the Company, except as set forth in Section 4.16
of the Parent Disclosure Schedule and except as would not, individually or in
the aggregate, reasonably be expected to have a material adverse impact on the
validity or value of any Material Parent Intellectual Property and excluding
prior communications or dealings with the Company: (A) no written claim of
invalidity or conflicting ownership rights with respect to any Material Parent
Intellectual Property has been made by a third party and no such Material Parent
Intellectual
49
Property is the subject of any pending or, to Parent's knowledge, threatened
action, suit, claim, investigation, arbitration or other proceeding; (B) no
person or entity has given notice to Parent or any Parent Subsidiary that the
use of any Material Parent Intellectual Property by Parent, any Parent
Subsidiary or any licensee is infringing or has infringed any domestic or
foreign patent, trademark, service xxxx, trade name, or copyright or design
right, or that Parent, any Parent Subsidiary or any licensee has misappropriated
or improperly used or disclosed any trade secret, confidential information or
know-how; (C) the making, using, selling, manufacturing, marketing, licensing,
reproduction, distribution, or publishing of any process, machine, manufacture
or product related to any Material Parent Intellectual Property, is not
presently believed to infringe any domestic or foreign patent, trademark,
service xxxx, trade name, copyright or other intellectual property right of any
third party, and does not and will not involve the misappropriation or improper
use or disclosure of any trade secrets, confidential information or know-how of
any third party; (D) there is not believed to exist any prior act or current
conduct or use by Parent, any Parent Subsidiary or any third party that would
void or invalidate any Material Parent Intellectual Property; and (E) the
execution, delivery and performance of this Agreement and each Ancillary
Agreement by Parent and Merger Sub and the consummation of the transactions
contemplated hereby and thereby will not breach, violate or conflict with any
instrument or agreement concerning any Material Parent Intellectual Property,
will not cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any of the Material Parent Intellectual Property or
impair the right of Parent or the Surviving Corporation to make, use, sell,
license or dispose of, or to bring any action for the infringement of any
Material Parent Intellectual Property. In addition, the matters disclosed on
Section 4.16 of the Parent Disclosure Schedule would not, individually or in the
aggregate, reasonably be expected to have a Parent Material Adverse Effect.
Section 4.17 Taxes.
Section 4.17.1 Parent and each Parent Subsidiary has timely filed
all Tax Returns with the appropriate taxing authorities required to be filed as
of the date hereof, taking into account any extensions of time within which to
file such Tax Returns. The Tax Returns have accurately reflected in all material
respects and will accurately reflect in all material respects all liability for
Taxes of Parent and such Parent Subsidiaries for the periods covered thereby.
Except as provided in Schedule 4.17.1, all material Taxes owed by Parent and
each
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Parent Subsidiary for all taxable years or other taxable periods that end on or
before the Effective Time, and, with respect to any taxable year or other
taxable period beginning before and ending after the Effective Time, whether or
not shown as being due on any Tax Return, have been paid and Parent and each
Parent Subsidiary have provided adequate reserves in accordance with GAAP in
their financial statements for any Taxes that have not been paid, whether or not
shown as being due on any Tax Returns. No claim has ever been made by an
authority in a jurisdiction where Parent or any Parent Subsidiary does not file
Tax Returns that Parent or any Parent Subsidiary is or may be subject to
taxation by that jurisdiction.
Section 4.17.2 Except as provided in Schedule 4.17.2, no
deficiencies for Taxes with respect to Parent and any Parent Subsidiary have
been claimed, proposed or assessed by any taxing authority or other Governmental
Entity. Except as provided in Schedule 4.17.2, there are no audits or other
administrative proceedings or court proceedings presently pending with regard to
any Taxes or Tax Returns of Parent or any Parent Subsidiary and none of Parent
or any Parent Subsidiary has received a written notice or announcement of any
audits or proceedings. To Parent's knowledge, no such audits or proceedings are
contemplated. No requests for waivers of time to assess any Taxes are pending
and none of Parent or any Parent Subsidiary has waived any statute of
limitations with respect to Taxes or agreed to any extension of time with
respect to any Tax assessment or deficiency for any open tax year.
Section 4.17.3 There are no Tax liens upon any property or assets of
Parent or any Parent Subsidiary except liens for current Taxes not yet due and
payable and liens for Taxes that are being contested in good faith by
appropriate proceedings.
Section 4.17.4 Parent and each Parent Subsidiary has withheld and
paid all material Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
Section 4.17.5 Neither Parent nor any Parent Subsidiary has been
included in any "consolidated," "unitary" or combined Tax Return, other than the
consolidated, unified or combined Tax Returns of a Parent Subsidiary filed with
other Parent Subsidiaries and/or the Company, provided for under the laws of the
United States, any foreign jurisdiction or any state or locality with respect to
Taxes for any taxable period for which the statute of limitations has not
expired. None of the Company or any Company Subsidiary is responsible for the
Taxes of
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any other person under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee, by contract, or
otherwise.
Section 4.17.6 None of Parent or any Parent Subsidiary has (i) filed
a consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of any asset owned by it; (ii)
agreed, or is required, to make any adjustment under Section 481(a) of the Code
by reason of a change in accounting method or otherwise; (iii) made an election,
or is required to treat any of its assets as owned by another person or as
"tax-exempt use property" or "tax-exempt bond financed property" within the
meaning of Section 168 of the Code; (iv) made a consent dividend election under
Section 565 of the Code; or (v) made any of the foregoing elections or is
required to apply any of the foregoing rules under any comparable state, local
or foreign Tax provision.
Section 4.17.7 Parent has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period described in Section 897(c)(1)(A)(ii) of the Code.
Section 4.17.8 None of the interest payable by Parent or any Parent
Subsidiary under outstanding indebtedness is nondeductible under Code Section
163 or is treated as interest on corporate acquisition indebtedness under Code
Section 279.
Section 4.17.9 None of Parent or any Parent Subsidiary is a party
to, is bound by or has any obligation under any Tax sharing or Tax indemnity
agreement or similar contract or arrangement.
Section 4.17.10 There are no other transactions or facts existing
with respect to Parent and/or its Subsidiaries which by reason of the
consummation of the transactions contemplated by this Agreement will result in
Parent and/or the Parent Subsidiaries recognizing income.
Section 4.18 Insurance. Parent maintains insurance coverage with reputable
insurers, or maintains self-insurance practices, in such amounts and covering
such risks as are in accordance with normal industry practice for companies
engaged in businesses similar to that of Parent (taking into account the cost
and availability of such insurance).
52
Section 4.19 Opinion of Financial Advisors. Bear, Xxxxxxx & Co. Inc. (the
"Parent Financial Advisor") has delivered to the Parent Board its written
opinion that the Exchange Ratio is fair from a financial point of view to
Parent.
Section 4.20 Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Parent Common Stock is the only vote, if
any, of the holders of any class or series of capital stock or other Equity
Interests of Parent necessary to approve the Share Issuance. The affirmative
vote of Parent, as the sole stockholder of Merger Sub, is the only vote, if any,
of the holders of any class or series of capital stock or other Equity Interests
of Merger Sub necessary to approve the Merger.
Section 4.21 Brokers and Other Advisors. No broker, finder, investment
banker or other person (other than the Parent Financial Advisor, the fees and
expenses of which will be paid by Parent) is entitled to any brokerage, finder's
or other fee or commission in connection with the Merger or any other
transaction contemplated by this Agreement or any Ancillary Agreement based upon
arrangements made by or on behalf of Parent or any Parent Subsidiary. Parent has
heretofore made available to the Company a true and complete copy of all
agreements between Parent and the Parent Financial Advisor pursuant to which
such firm would be entitled to any payment or indemnification in connection with
the Merger or any other transaction contemplated by this Agreement or any
Ancillary Agreement.
Section 4.22 Product Liability. As used in this Section 4.22, the term
"Parent Product" shall mean any product designed, manufactured, shipped, sold,
marketed, distributed and/or otherwise introduced into the stream of commerce by
or on behalf of Parent or any Parent Subsidiary, including, without limitation,
any product sold by Parent or any Parent Subsidiary as a distributor, agent, or
pursuant to any other contractual relationship; and the term "Parent Defect"
shall mean a defect or impurity of any kind, whether in design, manufacture,
processing or otherwise, including, without limitation, any dangerous propensity
associated with any reasonably foreseeable use of a Parent Product, or the
failure to know of the existence of any defect, impurity or dangerous
propensity. Except as set forth in Section 4.22 of the Parent Disclosure
Schedule, there is no pending or, to the knowledge of Parent, threatened, claim,
action, suit, inquiry, proceeding or investigation by any individual or
Governmental Entity in which a Parent Product is alleged to have a Parent
Defect, except any such claim, action, suit,
53
inquiry proceeding or investigation which would not be reasonably likely to
have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 4.23 Transactions with Affiliates. Other than as previously
disclosed by the Company in any filing with the SEC prior to the date of this
Agreement, since January 1, 2000, Parent has not entered into any agreement or
engaged in any transaction with any current or former director, officer or
holder of five percent or more of the outstanding voting securities of Parent
(calculated assuming conversion or exercise of all securities convertible into
or exercisable or exchangeable for voting securities of Parent). Other than as
previously disclosed by the Company in any filing with the SEC prior to the date
of this Agreement, since January 1, 2000, no executive officer or director of
Parent, either in such capacity or in his or her individual capacity, has
entered into any agreement or engaged in any transaction with any current or
former employee, customer, distributor, vendor or any other person, except for
any agreement or transaction pursuant to which Parent receives no direct or
indirect benefit and undertakes no direct or indirect obligation.
Section 4.24 Federal Healthcare Matters. The Company (i) is not currently
excluded, debarred, or otherwise ineligible to participate in the Federal
Healthcare Programs; (ii) has not been charged with or convicted of a criminal
offense related to the provision of health care items or services and (iii) is
not under investigation or otherwise aware of any circumstances which may result
in the Company being excluded from participation in the Federal Healthcare
Programs.
ARTICLE 5.
COVENANTS
Section 5.1 Conduct of Business by the Company Pending the Closing. The
Company agrees that, between the date of this Agreement and the Effective Time,
except as set forth in Section 5.1 of the Company Disclosure Schedule or as
specifically permitted by any other provision of this Agreement, unless Parent
shall otherwise agree in writing, the Company will, and will cause each Company
Subsidiary to, (A) conduct its operations only in the ordinary and usual course
of business consistent with past practice and (B) subject to the prohibitions
contained in Section 5.1.6, use its reasonable efforts to keep available the
services of the current executive officers, key employees and consultants of the
Company and each Company
54
Subsidiary and to preserve the current relationships of the Company and each
Company Subsidiary with such of the customers, suppliers and other persons with
which the Company or any Company Subsidiary has significant business relations
as is reasonably necessary to preserve substantially intact its business
organization. Without limiting the foregoing, and as an extension thereof,
except as set forth in Section 5.1 of the Company Disclosure Schedule or as
specifically permitted by any other provision of this Agreement, the Company
shall not (unless required by applicable Law or the regulations or requirements
of Nasdaq), and shall not permit any Company Subsidiary to, between the date of
this Agreement and the Effective Time, directly or indirectly, do, or agree to
do, any of the following without the prior written consent of Parent:
Section 5.1.1 amend or otherwise change its certificate of
incorporation or by-laws or equivalent organizational documents;
Section 5.1.2 (A) issue, sell, pledge, dispose of, grant, transfer
or encumber, or authorize the issuance, sale, pledge, disposition, grant,
transfer or encumbrance of any shares of capital stock of, or other Equity
Interests in, the Company or any Company Subsidiary of any class, or securities
convertible or exchangeable or exercisable for any shares of such capital stock
or other Equity Interests, or any options (other than options to purchase up to
an aggregate of 50,000 shares of Company Common Stock to be granted pursuant to
the Company's 1997 Stock Incentive Plan, in each case consistent with past
practice), warrants or other rights of any kind to acquire any shares of such
capital stock or other Equity Interests or such convertible or exchangeable
securities, or any other ownership interest (including, without limitation, any
such interest represented by contract right), of the Company or any Company
Subsidiary, other than the issuance of Company Common Stock (and the related
Company Rights) upon the exercise of Company Options or Company Warrants
outstanding as of the date hereof in accordance with their terms as of the date
hereof (or, if a Triggering Event (as defined in the Company Rights Agreement)
by a party other than Parent or Merger Sub shall occur, the Company Rights), (B)
amend, waive or modify any terms of any Company Options or Company Warrants,
including, without limitation, by directly or indirectly increasing or reducing
the exercise price of or the number of shares of Company Common Stock subject to
any Company Option or Company Warrant (provided, however, that, solely with
respect to this Section 5.1.2(B), Parent's prior written consent shall not be
unreasonably withheld) or (C), sell, pledge, dispose of, transfer, lease,
license, guarantee or encumber, or authorize the sale, pledge,
55
disposition, transfer, lease, license, guarantee or encumbrance of, any material
property or assets (including Intellectual Property) of the Company or any
Company Subsidiary, except pursuant to the Loan Agreement, existing contracts or
commitments or the sale or purchase of goods in the ordinary course of business
consistent with past practice, or enter into any commitment or transaction
outside the ordinary course of business consistent with past practice other than
transactions between a wholly-owned Company Subsidiary and the Company or
another wholly-owned Company Subsidiary;
Section 5.1.3 declare, set aside, make or pay any dividend or other
distribution (whether payable in cash, stock, property or a combination thereof)
with respect to any of its capital stock (other than dividends paid by a
wholly-owned Company Subsidiary to the Company or to any other wholly-owned
Company Subsidiary) or enter into any agreement with respect to the voting of
its capital stock; provided, however, that the Company shall be permitted to pay
dividends on the Series D Preferred Stock in accordance with the requirements of
Section 2 of the certificate of designations relating to the Series D Preferred
Stock; and provided further, that any such dividends paid on the Series D-1
Preferred Stock shall be paid in shares of Company Common Stock to the fullest
extent possible;
Section 5.1.4 reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of its capital stock,
other Equity Interests or other securities;
Section 5.1.5 (A) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any person or
any division thereof or any assets, other than acquisitions of assets in the
ordinary course of business consistent with past practice and any other
acquisitions for consideration that do not exceed $100,000 in the aggregate for
the Company and the Company Subsidiaries taken as a whole, (B) incur any
indebtedness for borrowed money or issue any debt securities (other than
pursuant to the Loan Agreement) or assume, guarantee or endorse, or otherwise as
an accommodation become responsible for, the obligations of any person (other
than a wholly-owned Company Subsidiary) for borrowed money, except for
indebtedness for borrowed money incurred in the ordinary course of business or
other indebtedness for borrowed money with a maturity of not more than one year
in a principal amount not, in the aggregate, in excess of $100,000 for the
Company and
56
the Company Subsidiaries taken as a whole, (C) (i) terminate, cancel or request
any material change in, or agree to any material change in, any Company Material
Contract other than in the ordinary course of business consistent with past
practice, (ii) enter into any Company Material Contract or (iii) grant any
product warranty for a period longer than one year from the date of purchase to
any customer of the Company, (D) make or authorize any capital expenditure,
other than capital expenditures that are not, in the aggregate, in excess of
$100,000 for the Company and the Company Subsidiaries taken as a whole or (E)
enter into or amend any contract, agreement, commitment or arrangement that, if
fully performed, would not be permitted under this Section 5.1.5;
Section 5.1.6 Except as may be required by contractual commitments
or corporate policies with respect to severance or termination pay in existence
on the date of this Agreement as disclosed in Section 3.11.2 of the Company
Disclosure Schedule: (A) increase the compensation or benefits payable or to
become payable to its directors, officers or employees (except for increases in
accordance with past practices in salaries or wages of employees of the Company
or any Company Subsidiary which are not across-the-board increases); (B) grant
any rights to severance or termination pay to, or enter into any employment or
severance agreement with, any director, officer or other employee of the Company
or any Company Subsidiary, or establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred 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 Law or the terms of a collective bargaining
agreement in existence on the date of this Agreement; or (C) take any
affirmative action to amend or waive any performance or vesting criteria or
accelerate vesting, exercisability or funding under any Company Benefit Plan.
Section 5.1.7 (A) pre-pay any long-term debt, except in the ordinary
course of business in an amount not to exceed $25,000 in the aggregate for the
Company and the Company Subsidiaries taken as a whole, or pay, discharge or
satisfy any claims, liabilities or obligations (absolute, accrued, contingent or
otherwise), except in the ordinary course of business consistent with past
practice and in accordance with their terms and except as contemplated by the
Loan Agreement, (B) accelerate or delay collection of notes or accounts
receivable in advance of or beyond their regular due dates or the dates when the
same would
57
have been collected in the ordinary course of business consistent with past
practice, (C) delay or accelerate payment of any account payable in advance of
its due date or the date such liability would have been paid in the ordinary
course of business consistent with past practice or (D) vary the Company's
inventory practices in any material respect from the Company's past practices;
Section 5.1.8 make any change in accounting policies or procedures,
other than in the ordinary course of business consistent with past practice or
except as required by GAAP or by a Governmental Entity;
Section 5.1.9 waive, release, assign, settle or compromise any
material claims, or any material litigation or arbitration, except as expressly
contemplated by Section 5.17;
Section 5.1.10 make any material tax election or settle or
compromise any material liability for Taxes;
Section 5.1.11 take, or agree to take, any action that would prevent
the Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code;
Section 5.1.12 amend or modify, or propose to amend or modify, or
otherwise take any action under, the Company Rights Agreement;
Section 5.1.13 modify, amend or terminate, or waive, release or
assign any material rights or claims with respect to any confidentiality or
standstill agreement to which the Company is a party;
Section 5.1.14 write up, write down or write off the book value of
any assets, individually or in the aggregate, for the Company and the Company
Subsidiaries taken as a whole, in excess of $200,000, except for depreciation
and amortization in accordance with GAAP consistently applied;
Section 5.1.15 take any action to exempt or make not subject to (A)
the provisions of Section 203 of the DGCL, (B) any other state takeover law or
state law that purports to limit or restrict business combinations or the
ability to acquire or vote shares or (C) the Company Rights Agreement, any
person or entity (other than Parent, Merger Sub or any Parent Subsidiary) or any
action taken thereby, which person, entity or action would have otherwise been
subject to the restrictive provisions thereof and not exempt therefrom;
58
Section 5.1.16 take any action that is intended or would reasonably
be expected to result in any of the conditions to the Merger set forth in
Article 6 not being satisfied; or
Section 5.1.17 authorize or enter into any agreement or otherwise
make any commitment to do any of the foregoing.
Section 5.2 Conduct of Business by Parent Pending the Closing. Except as
set forth in Section 5.2 of the Parent Disclosure Schedule or as specifically
permitted by any other provision of this Agreement, Parent shall not (unless
required by applicable Law or any stock exchange regulations applicable to
Parent), and shall not permit any Parent Subsidiary to, between the date of this
Agreement and the Effective Time, directly or indirectly, do, or agree to do,
any of the following, without the prior written consent of the Company:
Section 5.2.1 amend or otherwise change its certificate of
incorporation or by-laws or equivalent organizational documents;
Section 5.2.2 declare, set aside, make or pay any dividend or other
distribution (whether payable in cash, stock, property or a combination thereof)
with respect to any of its capital stock (other than dividends paid by a
wholly-owned Parent Subsidiary to Parent or to any other wholly-owned Parent
Subsidiary) or enter into any agreement with respect to the voting of its
capital stock;
Section 5.2.3 make any change in accounting policies or procedures,
other than in the ordinary course of business consistent with past practice or
except as required by GAAP or by a Governmental Entity;
Section 5.2.4 waive, release, assign, settle or compromise any
material claims, or any material litigation or arbitration, except as expressly
contemplated by Section 5.17;
Section 5.2.5 take, or agree to take, any action that would prevent
the Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code;
Section 5.2.6 take any action that is intended or would reasonably
be expected to result in any of the conditions to the Merger set forth in
Article 6 not being satisfied; or
59
Section 5.2.7 authorize or enter into any agreement or otherwise
make any commitment to do any of the foregoing.
Section 5.3 Cooperation. The Company and Parent shall coordinate and
cooperate in connection with (A) the preparation of the Registration Statement,
the Proxy Statement and any Other Filings, (B) determining whether any action by
or in respect of, or filing with, any Governmental Entity is required, or any
actions, consents, approvals or waivers are required to be obtained from parties
to any Company Material Contracts, in connection with the consummation of the
Merger, and (C) seeking any such actions, consents, approvals or waivers or
making any such filings, furnishing information required in connection therewith
or with the Registration Statement, the Proxy Statement or any Other Filings and
timely seeking to obtain any such actions, consents, approvals or waivers.
Section 5.4 Registration Statement; Proxy Statement.
Section 5.4.1 As promptly as practicable after the execution of this
Agreement, Parent and the Company shall prepare and the Company shall file with
the SEC a joint proxy statement relating to the meeting of the Company's
stockholders to be held in connection with the Merger and the meeting of
Parent's stockholders to be held in connection with the issuance of shares of
Parent Common Stock contemplated hereby (together with any amendments thereof or
supplements thereto, the "Proxy Statement") and Parent shall prepare and file
with the SEC a registration statement on Form S-4 (together with all amendments
thereto, the "Registration Statement") in which the Proxy Statement shall be
included as a prospectus, in connection with the registration under the
Securities Act of the shares of Parent Common Stock to be issued to the
stockholders of the Company pursuant to the Merger. Each of Parent and the
Company shall prepare and file with the SEC any Other Filings as and when
required or requested by the SEC. Each of Parent and the Company will use all
reasonable efforts to respond to any comments made by the SEC with respect to
the Proxy Statement and any Other Filings, and to cause the Registration
Statement to become effective as promptly as practicable. Prior to the effective
date of the Registration Statement, Parent shall take all or any action required
under any applicable federal or state securities laws in connection with the
issuance of shares of Parent Common Stock in the Merger. Each of Parent and the
Company shall furnish all information concerning it and the holders of its
capital stock as the other may reasonably request
60
in connection with such actions and the preparation of the Registration
Statement, the Proxy Statement and any Other Filings. As promptly as practicable
after the Registration Statement shall have become effective, each of the
Company and Parent shall mail the Proxy Statement to its stockholders. The Proxy
Statement shall (subject to the last sentence of Section 5.7.3 hereof) include
(i) the recommendation of the Company Board that adoption of the Agreement by
the Company's stockholders is advisable and that the Company Board has
determined that the Merger is fair and in the best interests of the Company's
stockholders and (ii) the recommendation of the Parent Board in favor of the
issuance of shares of Parent Common Stock contemplated hereby.
Subject to the last sentence of Section 5.7.3 hereof, no amendment or
supplement (other than pursuant to Rule 425 of the Securities Act with respect
to releases made in compliance with Section 5.10 of this Agreement) to the Proxy
Statement, the Registration Statement or any Other Filings will be made by
Parent or the Company without the approval of the other party (which approval
shall not be unreasonably withheld or delayed). Parent and the Company each will
advise the other, promptly after it receives notice thereof, of the time when
the Registration Statement has become effective or any supplement or amendment
has been filed, of the issuance of any stop order, the suspension of the
qualification of the Parent Common Stock issuable in connection with the Merger
for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Proxy Statement, the Registration Statement or any Other
Filings or comments thereon and responses thereto or requests by the SEC for
additional information.
If at any time prior to the Effective Time, any event or circumstance
relating to Parent or any Parent Subsidiary, or their respective officers or
directors, should be discovered by Parent which should be set forth in an
amendment or a supplement to the Registration Statement, the Proxy Statement or
any Other Filing, Parent shall promptly inform the Company. All documents that
Parent is responsible for filing with the SEC in connection with the
transactions contemplated herein will comply as to form and substance in all
material respects with the applicable requirements of the Securities Act and the
rules and regulations thereunder, the Exchange Act and the rules and regulations
thereunder, and other applicable Law.
61
If at any time prior to the Effective Time, any event or circumstance
relating to the Company or any Company Subsidiary, or their respective officers
or directors, should be discovered by the Company which should be set forth in
an amendment or a supplement to the Registration Statement, the Proxy Statement
or any Other Filing, the Company shall promptly inform Parent. All documents
that the Company is responsible for filing with the SEC in connection with the
transactions contemplated herein will comply as to form and substance in all
material respects with the applicable requirements of the Securities Act and the
rules and regulations thereunder, the Exchange Act and the rules and regulations
thereunder and other applicable Law.
Section 5.5 Stockholders' Meetings.
Section 5.5.1 The Company shall call and hold a meeting of its
stockholders (the "Company Stockholders' Meeting") as promptly as practicable
for the purpose of voting upon the approval of the Merger, and the Company shall
use its best efforts to hold the Company Stockholders' Meeting as soon as
practicable after the date on which the Registration Statement becomes
effective. The Company's obligation under this Section 5.5.1 shall not be
affected in any way as a result of any change in the Company Recommendation
permitted by Section 5.7.3.
Section 5.5.2 Parent shall call and hold a meeting of its
stockholders (the "Parent Stockholders' Meeting") as promptly as practicable for
the purpose of voting upon the approval of the Share Issuance, and Parent shall
use its best efforts to hold the Parent Stockholders' Meeting as soon as
practicable after the date on which the Registration Statement becomes
effective.
Section 5.6 Access to Information; Confidentiality.
Section 5.6.1 Except as required pursuant to any confidentiality
agreement or similar agreement or arrangement to which the Company or any
Company Subsidiary is a party (which such person shall use its reasonable best
efforts to cause the counterparty to waive), from the date of this Agreement to
the Effective Time, the Company shall, and shall cause each Company Subsidiary
and each of their respective directors, officers, employees, accountants,
consultants, legal counsel, advisors, and agents and other representatives
(collectively, the "Company Representatives") to (A) provide to Parent and
62
Merger Sub and their respective officers, directors, employees, accountants,
consultants, legal counsel, advisors, agents and other representatives
(collectively, the "Parent Representatives") access at reasonable times upon
prior notice to the officers, employees, agents, properties, offices and other
facilities of such party and its subsidiaries and to the books and records
thereof and (B) furnish promptly such information concerning the business,
properties, contracts, assets, liabilities, personnel and other aspects of such
party and its subsidiaries as the other party or its Representatives may
reasonably request, except in each case for information relating to the
Company's pending patent applications and trade secrets.
Except as required pursuant to any confidentiality agreement or similar
agreement or arrangement to which Parent or any Parent Subsidiary is a party
(which such person shall use its reasonable best efforts to cause the
counterparty to waive), from the date of this Agreement to the Effective Time,
Parent shall, and shall cause each Parent Subsidiary and each Parent
Representative to (A) provide to the Company and the Company Representatives
access at reasonable times upon prior notice to the officers, employees, agents,
properties, offices and other facilities of such party and its subsidiaries and
to the books and records thereof and (B) furnish promptly such information
concerning the business, properties, contracts, assets, liabilities, personnel
and other aspects of such party and its subsidiaries as the other party or its
Representatives may reasonably request, except in each case for information
relating to Parent's pending patent applications and trade secrets.
No investigation conducted pursuant to this Section 5.6.1 shall affect or
be deemed to modify or limit any representation or warranty made in this
Agreement.
Section 5.6.2 With respect to the information disclosed pursuant to
Section 5.6.1, the parties shall comply with, and shall cause their respective
Representatives to comply with, all of their respective obligations under the
Confidentiality Agreement previously executed by the Company and Parent (the
"Confidentiality Agreement").
Section 5.7 No Solicitation of Transactions.
Section 5.7.1 None of the Company or any Company Subsidiary shall,
directly or indirectly, take (and the Company shall not authorize or permit the
Company Representatives or, to the extent within the Company's control, other
affiliates to take) any action to (A) encourage (including by way of furnishing
non-public information), solicit, initiate
63
or facilitate any Acquisition Proposal, (B) enter into any agreement with
respect to any Acquisition Proposal or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transaction contemplated by this Agreement or (C)
participate in any way in discussions or negotiations with, or furnish any
information to, any person in connection with, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or
could reasonably be expected to lead to, any Acquisition Proposal; provided,
however, that if, at any time prior to the obtaining of the Company's
stockholders' approval of the Merger, the Company Board determines in good
faith, after consultation with outside counsel, that it would otherwise
constitute a breach of the directors' fiduciary duties to stockholders, the
Company may, in response to a Superior Proposal and subject to the Company's
compliance with Section 5.5.1 and Section 5.7.2, (x) furnish information with
respect to the Company and the Company Subsidiaries to the person making such
Superior Proposal pursuant to a customary confidentiality agreement the benefits
of the terms of which are no more favorable to the other party to such
confidentiality agreement than those in place with Parent and (y) participate in
discussions with respect to such Superior Proposal. Upon execution of this
Agreement, the Company shall cease immediately and cause to be terminated any
and all existing discussions or negotiations with any parties conducted
heretofore with respect to an Acquisition Proposal and promptly request that all
confidential information with respect thereto furnished on behalf of the Company
be returned.
Section 5.7.2 The Company shall, as promptly as practicable (and in
no event later than 24 hours after receipt thereof), advise Parent of any
inquiry received by it relating to any potential Acquisition Proposal and of the
material terms of any proposal or inquiry, including the identity of the person
and its affiliates making the same, that it may receive in respect of any such
potential Acquisition Proposal, or of any information requested from it or of
any negotiations or discussions being sought to be initiated with it, shall
furnish to Merger Sub a copy of any such proposal or inquiry, if it is in
writing, or a written summary of any such proposal or inquiry, if it is not in
writing and shall keep Parent fully informed on a prompt basis with respect to
any developments with respect to the foregoing.
Section 5.7.3 Neither the Company Board nor any committee thereof
shall (A) withdraw or modify, or propose publicly to withdraw or modify, in a
manner adverse to Parent, the approval or recommendation by the Company Board or
such committee of the
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adoption and approval of the Merger (the "Company Recommendation") and the
matters to be considered at the Company Stockholders' Meeting, (B) other than
the Merger, approve or recommend, or propose publicly to approve or recommend,
any Acquisition Proposal or (C) other than the Merger, cause the Company to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement related to any Acquisition Proposal. Nothing
contained in this Section 5.7 shall prohibit the Company (x) from taking and
disclosing to its stockholders a position contemplated by Rule 14d-9 or Rule
14e-2(a) promulgated under the Exchange Act or (y) in the event that a Superior
Proposal is made and the Company Board determines in good faith, after
consultation with outside counsel, that it would otherwise constitute a breach
of its fiduciary duty to stockholders, from withdrawing or modifying its
recommendation of the Merger no earlier than five business days following the
day of delivery of written notice to Parent of its intention to do so, so long
as the Company continues to comply with all other provisions of this Agreement
including, without limitation, Section 5.5.1 hereof.
Section 5.8 Appropriate Action; Consents; Filings.
Section 5.8.1 The Company and Parent shall use their reasonable best
efforts to (A) take, or cause to be taken, all appropriate action, and do, or
cause to be done, all things necessary, proper or advisable under applicable Law
or otherwise to consummate and make effective the transactions contemplated by
this Agreement and each Ancillary Agreement as promptly as practicable, (B)
obtain from any Governmental Entity any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained or made by Parent or
the Company or any of their respective Subsidiaries, or to avoid any action or
proceeding by any Governmental Entity, in connection with the authorization,
execution and delivery of this Agreement and each Ancillary Agreement and the
consummation of the transactions contemplated herein and therein, including,
without limitation, the Merger, and (C) make all necessary filings, and
thereafter make any other required submissions, with respect to this Agreement
and each Ancillary Agreement and the Merger required under (x) the Securities
Act and the Exchange Act, and any other applicable federal or state securities
Laws and (y) any other applicable Law; provided, that Parent and the Company
shall cooperate with each other in connection with the making of all such
filings, including providing copies of all such documents to the non-filing
party and its advisors prior to filing and, if requested, to accept all
reasonable additions, deletions or changes suggested in connection therewith
and, provided, however, that
65
nothing in this Section 5.8.1 shall require Parent to agree to (AA) the
imposition of conditions, (BB) the requirement of divestiture of assets or
property or (CC) the requirement of expenditure of money by Parent or the
Company to a third party in exchange for any such consent. The Company and
Parent shall furnish to each other all information required for any application
or other filing under the rules and regulations of any applicable Law (including
all information required to be included in the Proxy Statement and the
Registration Statement) in connection with the transactions contemplated by this
Agreement and each Ancillary Agreement. Nothing contained in this Agreement
shall give Parent or Merger Sub, directly or indirectly, the right to control or
direct the operations of the Company prior to the consummation of the Merger.
Prior to the consummation of the Merger, the Company shall exercise, consistent
with the terms and conditions of this Agreement, complete control and
supervision over its operations.
Section 5.8.2 The Company and Parent shall give (or shall cause
their respective Subsidiaries to give) any notices to third parties, and use,
and cause their respective Subsidiaries to use, all reasonable efforts to obtain
any third party consents, (A) necessary, proper or advisable to consummate the
transactions contemplated in this Agreement and each Ancillary Agreement, (B)
required to be disclosed in the Company Disclosure Schedule or the Parent
Disclosure Schedule, as applicable, (C) required to prevent a Company Material
Adverse Effect from occurring prior to or after the Effective Time or a Parent
Material Adverse Effect from occurring after the Effective Time or (D) otherwise
referenced in Section 6.1.4 or Section 6.2.3. In the event that either party
shall fail to obtain any third party consent described in the first sentence of
this Section 5.8.2, such party shall use all reasonable efforts, and shall take
any such actions reasonably requested by the other party hereto, to minimize any
adverse effect upon the Company and Parent, their respective Subsidiaries, and
their respective businesses resulting, or which could reasonably be expected to
result after the Effective Time, from the failure to obtain such consent.
Section 5.8.3 From the date of this Agreement until the Effective
Time, the Company shall promptly notify Parent in writing of any pending or, to
the knowledge of the Company, threatened action, suit, arbitration or other
proceeding or investigation by any Governmental Entity or any other person (A)
challenging or seeking material damages in connection with the Merger or the
conversion of Company Stock into Parent Common Stock pursuant to the Merger or
(B) seeking to restrain or prohibit the consummation of the Merger or
66
otherwise limit the right of Parent or any Parent Subsidiary to own or operate
all or any portion of the businesses or assets of the Company or any Company
Subsidiary, which in either case would reasonably be expected to have a Company
Material Adverse Effect prior to or after the Effective Time or a Parent
Material Adverse Effect after the Effective Time.
Section 5.9 Certain Notices. From and after the date of this Agreement
until the Effective Time, each party hereto shall promptly notify the other
party hereto of (A) the occurrence, or non-occurrence, of any event that would
be likely to cause any condition to the obligations of any party to effect the
Merger and the other transactions contemplated by this Agreement or any
Ancillary Agreement not to be satisfied or (B) the failure of the Company or
Parent, as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it pursuant to this Agreement or
any Ancillary Agreement which would reasonably be expected to result in any
condition to the obligations of any party to effect the Merger and the other
transactions contemplated by this Agreement or any Ancillary Agreement not to be
satisfied; provided, however, that the delivery of any notice pursuant to this
Section 5.9 shall not cure any breach of any representation or warranty
requiring disclosure of such matter prior to the date of this Agreement or
otherwise limit or affect the remedies available hereunder to the party
receiving such notice.
Section 5.10 Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Merger and shall not issue any such press release
or make any such public statement prior to such consultation, except as may be
required by applicable Law or any listing agreement with Nasdaq.
Section 5.11 Stock Exchange Listing. Parent shall promptly prepare and
submit to Nasdaq and any other applicable exchange a listing application
covering the shares of Parent Common Stock to be issued in the Merger and shall
use its reasonable best efforts to cause such shares to be approved for listing
on Nasdaq, subject to official notice of issuance, prior to the Effective Time.
Section 5.12 Employee Benefit Matters. With respect to any Parent Benefit
Plan in which any director, officer or employee of the Company or any Company
Subsidiary (the "Company Employees") will participate effective as of the
Effective Time, Parent shall, or shall
67
cause the Surviving Corporation to, recognize all service of the Company
Employees with the Company or a Company Subsidiary, as the case may be, for
purposes of eligibility for participation in, but not for purposes of benefit
accrual, in any such Parent Benefit Plan; provided, however, that with regard
to vacation, on and after the Effective Time, Parent shall provide, or shall
cause to be provided, each Company Employee with credit for service under the
Parent vacation policy pursuant to the terms of such policy as may be amended
from time to time. Prior to the Effective Time, the Company Board, or an
appropriate committee of non-employee directors thereof, shall adopt a
resolution consistent with the interpretive guidance of the SEC so that the
acquisition by any officer or director of the Company who may become a covered
person of Parent for purposes of Section 16 of the Exchange Act and the rules
and regulations thereunder ("Section 16") of shares of Parent Common Stock or
options to acquire Parent Common Stock pursuant to this Agreement and the Merger
shall be an exempt transaction for purposes of Section 16.
Section 5.13 Indemnification of Directors and Officers.
Section 5.13.1 Parent and the Surviving Corporation agree that the
indemnification obligations set forth in the Company Certificate and Company
By-laws shall survive the Merger (and, prior to the Effective Time, Parent shall
cause the Certificate of Incorporation and By-laws of Merger Sub to reflect such
provisions) and shall not be amended, repealed or otherwise modified for a
period of six years after the Effective Time in any manner that would adversely
affect the rights thereunder of any individual who on or prior to the Effective
Time was a director, officer, trustee, fiduciary, employee or agent of the
Company or any Company Subsidiary or who served at the request of the Company or
any Company Subsidiary as a director, officer, trustee, partner, fiduciary,
employee or agent of another corporation, partnership, joint venture, trust,
pension or other employee benefit plan or enterprise, unless such amendment or
modification is required by Law.
Section 5.13.2 For six years from the Effective Time, the Surviving
Corporation shall provide to the Company's current directors and officers an
insurance and indemnification policy that provides coverage for events occurring
prior to the Effective Time (the "D&O Insurance") that is no less favorable than
the Company's existing policy (true and complete copies which have been
previously provided to Parent) or, if substantially equivalent
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insurance coverage is unavailable, the best available coverage; provided,
however, that the Surviving Corporation shall not be required to pay an annual
premium for the D&O Insurance in excess of 150% of the last annual premium paid
prior to the date of this Agreement, which premium the Company represents and
warrants to be approximately $315,000. The provisions of the immediately
preceding sentence shall be deemed to have been satisfied if prepaid policies
have been obtained prior to the Effective Time for purposes of this Section
5.13, which policies provide such directors and officers with coverage for an
aggregate period of six years with respect to claims arising from facts or
events that occurred on or before the Effective Time, including, without
limitation, in respect of the transactions contemplated by this Agreement. If
such prepaid policies have been obtained prior to the Effective Time, Parent
shall, and shall cause the Surviving Corporation to, maintain such policies in
full force and effect, and continue to honor the obligations thereunder. The
obligations under this Section 5.13 shall not be terminated or modified in such
a manner as to adversely affect any indemnitee to whom this Section 5.13 applies
without the consent of such affected indemnitee (it being expressly agreed that
the indemnitees to whom this Section 5.13 applies shall be third party
beneficiaries of this Section 5.13).
Section 5.13.3 In the event Parent or the Surviving Corporation (A)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(B) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, proper provisions shall be made so that
such continuing or surviving corporation or entity or transferee of such assets,
as the case may be, shall assume the obligations set forth in this Section 5.13.
Section 5.14 Plan of Reorganization. This Agreement is intended to
constitute a "plan of reorganization" within the meaning of Treasury Regulation
Section 1.368-2(g). Each party hereto shall use its reasonable best efforts to
cause the Merger to qualify, and will not knowingly take any actions or cause
any actions to be taken which could reasonably be expected to prevent the Merger
from qualifying, as a reorganization within the meaning of Section 368(a) of the
Code.
Section 5.15 Affiliate Agreements. The Company shall, within five business
days of the date hereof, deliver to Parent a list (reasonably satisfactory to
counsel for Parent)
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setting forth the names of all persons who are expected to be, at the time of
the Company Stockholders' Meeting, "affiliates" of the Company for purposes of
Rule 145 under the Securities Act. The Company shall furnish such information
and documents as Parent may reasonably request for the purpose of reviewing the
list. The Company shall use its reasonable best efforts to cause each person who
is identified as an affiliate in the list furnished or supplemented pursuant to
this Section 5.15 to execute a written agreement, as soon as practicable after
the date hereof, as to such person's prospective compliance with the
restrictions imposed by Rule 145 under the Securities Act on transfer of the
shares of Parent Common Stock received by such person in the Merger.
Section 5.16 Company Rights Agreement. The Company covenants and agrees
that it will not (i) redeem the Company Rights, (ii) amend the Company Rights
Agreement or (iii) take any action which would allow any person (as defined in
the Company Rights Agreement) other than Parent, Merger Sub or any Parent
Subsidiary to acquire beneficial ownership (for purposes of this Section 5.16,
as defined in the Company Rights Agreement) of 20% or more of the outstanding
shares of Company Common Stock without causing a Distribution Date or a
Triggering Event (as each such term is defined in the Company Rights Agreement)
to occur.
Section 5.17 Patent Litigation and Administrative Proceedings.
Section 5.17.1 Patent litigation counsel for both parties shall,
within one day of execution of this Agreement or as soon thereafter as possible,
cooperate in good faith to jointly file papers in the U.S. District Courts for
the Central District of California and the District of Delaware, requesting that
an immediate stay of all proceedings be entered in the following civil actions:
C.D. Cal. Case Nos. CV 00-4988-CBM and CV 02-5888-CBM, and D. Del. Case No.
01-203-SLR. The duration of each requested stay shall be through and including
August 31, 2003. Before seeking the stay in Delaware, counsel for Parent shall
exercise all reasonable efforts to acquire IBM Corporation's consent to stay all
further proceedings in Delaware. As part of the requested stays, the parties
shall request that the courts cease all further activity in the cases during the
period of stay, including refraining from issuing any further opinions or orders
on issues already previously submitted for decision. In the event that the
Merger is not consummated within the duration of the first stay to be obtained,
and if both parties believe that
70
an extension of the stays would be justified or desirable, then patent
litigation counsel shall cooperate to request appropriate extensions of the
stays in each forum.
Section 5.17.2 Upon execution of this Agreement, patent prosecution
counsel for both parties shall immediately confer in good faith for the purpose
of seeking to stay opposition proceedings in the European Patent Office, and
will file papers as soon as practicable jointly requesting either that the
opposition proceeding No. IK/I-12053, be stayed through and including August 31,
2003 or until further notice (if possible) or that any impending filing
deadlines be extended by at least six months.
Section 5.17.3 Within three days after consummation of the Merger,
(i) patent litigation counsel for both parties shall cooperate in good faith to
jointly file papers in all of the stayed litigations requesting dismissal with
prejudice of all claims, counterclaims and cross-claims (if any), and before
seeking such dismissal in Delaware, counsel for Parent shall exercise all
reasonable efforts to acquire IBM Corporation's consent to such dismissal; (ii)
patent prosecution counsel for both parties shall seek dismissal with prejudice
(or similar terminating relief) of all opposition proceedings; and (iii) in
accordance with 35 U.S.C. Section 135(c) and 37 C.F.R. Sections 1.661 and
1.666, the parties shall promptly jointly submit a copy of this Agreement to the
United States Patent Office in Interference Nos. 104,643, 104,644, and 104,645.
Section 5.17.4 Subject to Section 5.17.5, if for any reason this
Agreement is terminated by either party prior to consummation of the Merger,
then, upon five days' written notice by the party seeking to lift the stays,
that party may unilaterally request that the stays in each of the litigations be
immediately lifted and may also immediately request a status conference.
Section 5.17.5 As part of the stay requested in C.D. Cal. Case Nos.
CV 00-4988-CBM pursuant to Section 5.17.1, the parties shall jointly request
that the court reserve the earliest available trial date no earlier than
November 30, 2003; provided, however, that if this Agreement is terminated
pursuant to Section 7.1.4, 7.1.5, 7.1.6 or 7.1.7, the Company agrees and hereby
stipulates that it will not thereafter request, suggest or justify a trial date
any earlier than February 29, 2004, and hereby agrees to take all necessary and
reasonable steps to seek from the court an additional three-month extension of
the trial date under these circumstances.
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Section 5.17.6 Within one day of the execution of this Agreement or
as soon thereafter as practicable, patent litigation counsel for both parties
shall jointly stipulate and request that the Company be immediately relieved
from the Delaware court's requirement that it post a bond as security for the
damage award due Parent, without prejudice to possible future reinstatement;
provided, however, that as part of that stipulation, the Company shall also
stipulate to an immediate reimposition of the previous bond requirement should
the stay in Delaware be lifted prior to consummation of the Merger upon
termination of this Agreement for any reason, without any further obligation or
requirement of Parent to act. Parent's counsel shall promptly exercise all
reasonable efforts to acquire IBM Corporation's consent to effectuate this
relief, if such consent is deemed necessary or desirable to do so.
Section 5.18 Board of Directors. Parent agrees to increase the size of the
Parent Board and shall have validly elected directors such that immediately
following the Effective Time, the Parent Board shall consist of nine directors,
including Xxxxxx Xxxxxx and one other individual to be proposed by the Company
as soon as practicable after the date of this Agreement and satisfactory to
Parent.
Section 5.19 Termination of 401(k) Plan. At the request of Parent, the
Company shall, effective not later than the day immediately prior to the day on
which the Effective Time occurs, terminate the Company's 401(k) Plan (the
"401(k) Plan") and no further contributions shall be made to the 401(k) Plan.
The Company shall provide to Parent and Merger Sub (i) executed resolutions by
the Company Board authorizing the termination and (ii) an executed amendment to
the 401(k) Plan sufficient to assure compliance with all applicable requirements
of the Internal Revenue Code and regulations thereunder so that the
tax-qualified status of the 401(k) Plan will be maintained at the time of
termination.
Section 5.20 Employee Stock Purchase Plan. Effective as of the date
hereof, the Company Board, or, if appropriate, any committee of the Company
Board administering the Company's Employee Stock Purchase Plan (the "ESPP")),
shall adopt such resolutions or take such other actions as may be required to
provide that (i) participants may not increase their payroll deductions or
purchase elections from those in effect on the date of this Agreement, (ii) no
offering period shall be commenced after the date of this Agreement, (iii) each
participant's outstanding right to purchase shares of Company Common Stock under
the ESPP shall terminate
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on the day immediately prior to the day on which the Effective Time occurs,
provided that all amounts allocated to each participant's account under the ESPP
as of such date shall thereupon be used to purchase from the Company whole
shares of Company Common Stock at the applicable price determined under the
terms of the ESPP for then-outstanding offering periods using such date as the
final purchase date for each such offering period, and (iv) the ESPP shall
terminate immediately following the purchases of Company Common Stock on the day
prior to the day on which the Effective Time occurs.
ARTICLE 6.
CLOSING CONDITIONS
Section 6.1 Conditions to Obligations of Each Party Under This Agreement.
The respective obligations of each party to effect the Merger and the other
transactions contemplated herein shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which may
be waived, in whole or in part, to the extent permitted by applicable Law:
Section 6.1.1 Effectiveness of the Registration Statement. The
Registration Statement shall have been declared effective by the SEC under the
Securities Act. No stop order suspending the effectiveness of the Registration
Statement shall have been issued by the SEC and no proceedings for that purpose
shall have been initiated or, to the knowledge of Parent or the Company,
threatened by the SEC.
Section 6.1.2 Stockholder Approval. This Agreement and the Merger
and the other transactions contemplated hereby shall have been approved and
adopted by the requisite vote of the stockholders of the Company and by the
requisite vote of the stockholders of Parent, to the extent, in each case, that
stockholder approval is required under the DGCL or by Nasdaq.
Section 6.1.3 No Order. No Governmental Entity, nor any federal or
state court of competent jurisdiction or arbitrator shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, judgment, injunction or arbitration award or finding or other order
(whether temporary, preliminary or permanent), in any case which is in effect
and which prevents or prohibits consummation of the Merger or any other
transactions contemplated in this Agreement or any Ancillary Agreement.
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Section 6.1.4 Consents and Approvals. All consents, approvals and
authorizations of any Governmental Entity set forth in Section 3.5.2, Section
4.5.2 or otherwise required to be set forth in the related sections of the
Company Disclosure Schedule or the Parent Disclosure Schedule shall have been
obtained, in each case, without (A) the imposition of conditions, (B) the
requirement of divestiture of assets or property or (C) the requirement of
expenditure of money by Parent or the Company to a third party in exchange for
any such consent, except as would not be reasonably likely to have a Company
Material Adverse Effect or Parent Material Adverse Effect, as applicable.
Section 6.1.5 Exchange Listing. The shares of Parent Common Stock
issuable to the Company's stockholders in the Merger shall have been approved
for listing on Nasdaq, subject to official notice of issuance.
Section 6.1.6 Litigation Stays. Each of the patent litigation stays
referred to in Section 5.17.1 shall have been obtained and remain in full force
and effect.
Section 6.2 Additional Conditions to Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to effect the Merger and the other
transactions contemplated herein are also subject to the following conditions:
Section 6.2.1 Representations and Warranties. Each of (i) the
representations and warranties of the Company contained in this Agreement and
each Ancillary Agreement (other than the Loan Agreement) that are qualified by
Company Material Adverse Effect shall be true and correct as of the date hereof
and as of the Effective Time as though made on and as of the Effective Time
(except that those representations and warranties which address matters only as
of a particular date need only be true and correct as of such date), and (ii)
the representations and warranties of the Company contained in this Agreement
and each Ancillary Agreement (other than the Loan Agreement) which are not so
qualified (including, without limitation, those which are qualified by the
phrase "material") shall be true and correct as of the date hereof and as of the
Effective Time as though made on and as of the Effective Time (except that those
representations and warranties which address matters only as of a particular
date need only remain true and correct as of such date), except to the extent
that the failure of any such representation or warranty to be true and correct
has not had and could not reasonably be likely
74
to have a Company Material Adverse Effect. Parent shall have received a
certificate of the Chief Executive Officer or Chief Financial Officer of the
Company to that effect.
Section 6.2.2 Agreements and Covenants. The Company shall have
performed or complied with all agreements and covenants required by this
Agreement and each Ancillary Agreement (other than the Loan Agreement) to be
performed or complied with by it on or prior to the Effective Time, except to
the extent that such nonperformance or noncompliance has not had and could not
reasonably be likely to have a Company Material Adverse Effect. Parent shall
have received a certificate of the Chief Executive Officer or Chief Financial
Officer of the Company to that effect.
Section 6.2.3 Consents and Approvals. All consents, approvals and
authorizations listed on Schedule 6.2.3 or of any person other than a
Governmental Entity required to be set forth in Section 3.5 or Section 4.5 or
the related sections of the Company Disclosure Schedule or the Parent Disclosure
Schedule shall have been obtained in each case, without (A) the imposition of
conditions, (B) the requirement of divestiture of assets or property or (C) the
requirement of expenditure of money by Parent or the Company to a third party in
exchange for any such consent, except as has not had and could not reasonably be
likely to have a Company Material Adverse Effect or Parent Material Adverse
Effect, as applicable.
Section 6.2.4 Material Adverse Change. Since the date of this
Agreement, there shall not have occurred any Company Material Adverse Change.
Section 6.2.5 Court Proceedings. No action or claim shall be pending
or threatened before any court or quasi-judicial or administrative agency of any
federal, state, local or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement
or any Ancillary Agreement, (B) cause any of the transactions contemplated by
this Agreement or any Ancillary Agreement to be rescinded following consummation
thereof or (C) materially adversely affect the right or powers of Parent to own,
operate or control the Company, and no such injunction, judgment, order, decree,
ruling or charge shall be in effect.
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Section 6.3 Additional Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger and the other transactions
contemplated herein are also subject to the following conditions:
Section 6.3.1 Representations and Warranties. Each of (i) the
representations and warranties of Parent contained in this Agreement and each
Ancillary Agreement (other than the Loan Agreement) that are qualified by Parent
Material Adverse Effect shall be true and correct as of the date hereof and as
of the Effective Time as though made on and as of the Effective Time (except
that those representations and warranties which address matters only as of a
particular date need only be true and correct as of such date), and (ii) the
representations and warranties of Parent contained in this Agreement and each
Ancillary Agreement (other than the Loan Agreement) which are not so qualified
(including, without limitation, those which are qualified by the phrase
"material") shall be true and correct as of the date hereof and as of the
Effective Time as though made on and as of the Effective Time (except that those
representations and warranties which address matters only as of a particular
date need only remain true and correct as of such date), except to the extent
that the failure of any such representation or warranty to be true and correct
has not had and could not reasonably be likely to have a Parent Material Adverse
Effect. The Company shall have received a certificate of the Chief Executive
Officer or Chief Financial Officer of Parent to that effect.
Section 6.3.2 Agreements and Covenants. Parent shall have performed
or complied with all agreements and covenants required by this Agreement and
each Ancillary Agreement (other than the Loan Agreement) to be performed or
complied with by it on or prior to the Effective Time, except to the extent that
such nonperformance or noncompliance has not had and could not reasonably be
likely to have a Parent Material Adverse Effect. The Company shall have received
a certificate of the Chief Executive Officer or Chief Financial Officer of
Parent to that effect.
ARTICLE 7.
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated, and the Merger
contemplated hereby may be abandoned, at any time prior to the Effective Time,
by action taken or authorized by the Board of Directors of the terminating party
or parties, whether before or
76
after approval of the matters presented in connection with the Merger by the
stockholders of the Company and Parent:
Section 7.1.1 By mutual written consent of Parent and the Company,
by action of their respective Boards of Directors;
Section 7.1.2 By either the Company or Parent if the Merger shall
not have been consummated prior to August 31, 2003 (the "Termination Date");
provided, however, that the right to terminate this Agreement under this Section
7.1.2 shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Merger to occur on or before such date;
Section 7.1.3 By either the Company or Parent if any Governmental
Entity shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement or any Ancillary Agreement, and such order,
decree, ruling or other action shall have become final and nonappealable (which
order, decree, ruling or other action the parties shall have used their
reasonable best efforts to resist, resolve or lift, as applicable, subject to
the provisions of Section 5.8);
Section 7.1.4 By either Parent or the Company if the approval by the
stockholders of the Company required for the consummation of the Merger or the
other transactions contemplated hereby shall not have been obtained by reason of
the failure to obtain the required vote at a duly held meeting of stockholders
of the Company or at any adjournment thereof; provided, however, that if this
Agreement is then terminable pursuant to Section 7.1.5 by Parent, the Company
shall not have a right to terminate under this Section 7.1.4;
Section 7.1.5 By Parent if (A) the Company Board shall have
withdrawn, or adversely modified, or failed upon Parent's request to reconfirm
its recommendation of the Merger or this Agreement (or determined to do so); (B)
the Company Board shall have determined to recommend to the stockholders of the
Company that they approve an Acquisition Proposal other than that contemplated
by this Agreement or shall have determined to accept a Superior Proposal; (C) a
tender offer or exchange offer that, if successful, would result in any person
or group becoming a beneficial owner of 35% or more of the outstanding shares of
Company Common Stock and/or securities convertible into or exercisable or
exchangeable for
77
35% or more of the outstanding shares of Company Common Stock is commenced
(other than by Parent or an affiliate of Parent) and the Company Board fails to
recommend that the stockholders of the Company not tender their shares in such
tender or exchange offer; (D) any person (other than Parent or an affiliate of
Parent) or group becomes the beneficial owner of 35% or more of the outstanding
shares of Company Common Stock; or (E) for any reason the Company fails to call
or hold the Company Stockholders' Meeting by the Termination Date;
Section 7.1.6 By the Company, if the Company Board determines to
accept a Superior Proposal, but only after the Company (A) holds the Company
Stockholders' Meeting and has failed to obtain the stockholder approval required
for consummation of the Merger and the other transactions contemplated hereby,
and (B) fulfills its obligations under Section 7.2 hereof upon such termination
(provided that the Company's right to terminate this Agreement under this
Section 7.1.6 shall not be available if the Company is then in breach of Section
5.7);
Section 7.1.7 By Parent, if since the date of this Agreement, there
shall have been any event, development or change of circumstance that
constitutes, has had or could reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Change and such Company Material
Adverse Change is not cured within 10 days after written notice thereof or if
(A)(1) there shall be breached any covenant or agreement on the part of a party
other than Parent or Merger Sub set forth in this Agreement or any Ancillary
Agreement (other than the Loan Agreement) or (2) any representation or warranty
of a party other than Parent or Merger Sub set forth in this Agreement or any
Ancillary Agreement (other than the Loan Agreement) shall have become untrue,
(B) such breach or misrepresentation is not cured within 10 days after written
notice thereof and (C) such breach or misrepresentation would cause the
conditions set forth in Section 6.2.1 or Section 6.2.2 not to be satisfied;
Section 7.1.8 By the Company, if (A)(1) Parent has breached any
covenant or agreement on the part of Parent or Merger Sub set forth in this
Agreement or any Ancillary Agreement or (2) any representation or warranty of
Parent or Merger Sub set forth in this Agreement or any Ancillary Agreement
shall have become untrue, (B) such breach or misrepresentation is not cured
within 10 days after written notice thereof and (C) such breach or
78
misrepresentation would cause the conditions set forth in Section 6.3.1 or
Section 6.3.2 not to be satisfied; or
Section 7.1.9 By either Parent or the Company if the approval by the
stockholders of Parent required for the Share Issuance or the other transactions
contemplated hereby shall not have been obtained by reason of the failure to
obtain the required vote at a duly held meeting of stockholders of Parent or at
any adjournment thereof.
Section 7.2 Effect of Termination.
Section 7.2.1 Limitation on Liability. In the event of termination
of this Agreement by either the Company or Parent as provided in Section 7.1,
this Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent or the Company or their respective
Subsidiaries, officers or directors except (x) with respect to Section 5.6.2,
Section 5.10, Section 5.17 this Section 7.2 and Article 8 and (y) with respect
to any liabilities or damages incurred or suffered by a party as a result of the
willful and material breach by the other party of any of its representations,
warranties, covenants or other agreements set forth in this Agreement or any
Ancillary Agreement.
Section 7.2.2 Parent Expenses. Parent and the Company agree that if
this Agreement is terminated pursuant to Section 7.1.4, 7.1.5, 7.1.6 or 7.1.7,
then the Company shall pay Parent an amount equal to the sum of Parent's
Expenses up to an amount equal to $1,250,000.
Section 7.2.3 Company Expenses. Parent and the Company agree that if
this Agreement is terminated pursuant to Section 7.1.8 or Section 7.1.9 then
Parent shall pay to the Company an amount equal to the sum of the Company's
Expenses up to an amount equal to $1,250,000.
Section 7.2.4 Payment of Expenses. Payment of Expenses pursuant to
Section 7.2.2 or Section 7.2.3 shall be made not later than two business days
after delivery to the other party of notice of demand for payment and a
documented itemization setting forth in reasonable detail all Expenses of the
party entitled to receive payment (which itemization may be supplemented and
updated from time to time by such party until the 90th day after such party
delivers such notice of demand for payment).
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Section 7.2.5 Termination Fee.
Section 7.2.5.1 In addition to any payment required by the
foregoing provisions of this Section 7.2, (A) in the event that this Agreement
is terminated pursuant to Section 7.1.5, Section 7.1.6 or Section 7.1.7, then
the Company shall pay to Parent immediately prior to such termination, in the
case of a termination by the Company, or within two business days thereafter, in
the case of a termination by Parent, a termination fee of $2,500,000 (provided,
however, that this amount shall be reduced by and to the extent of any payment
of Parent expenses pursuant to Section 7.2.2) and (B) in the event that this
Agreement is terminated pursuant to Section 7.1.4, and an Acquisition Proposal
has been publicly announced and not expressly and publicly withdrawn prior to
the Company Stockholders' Meeting, then the Company shall pay Parent, no later
than two days after the earlier to occur of (x) the date the Company or any
Company Subsidiary enter into an agreement concerning a transaction that
constitutes an Acquisition Proposal, provided that such agreement is entered
into within 12 months of the termination of this Agreement or (y) the date any
person or persons (other than Parent) purchases at least a majority of the
consolidated assets or Equity Interests of the Company and the Company
Subsidiaries, provided that any tender, exchange or other offer or arrangement
for the Company's voting securities is first publicly announced within 12 months
of the termination of this Agreement, a termination fee of $2,500,000 (provided,
however, that this amount shall be reduced by and to the extent of any payment
of Parent expenses pursuant to Section 7.2.2).
Section 7.2.5.2 In addition to any payment required by the
foregoing provisions of this Section, in the event that this Agreement is
terminated pursuant to Section 7.1.8, then Parent shall pay to the Company,
within two business days thereafter, a termination fee of $2,500,000 (provided,
however, that this amount shall be reduced by and to the extent of any payment
of Company expenses pursuant to Section 7.2.3).
Section 7.2.6 All Payments. All payments under Section 7.2 shall be
made by wire transfer of immediately available funds to an account designated by
the party entitled to receive payment.
Section 7.3 Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the
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Effective Time; provided, however, that, after approval of the Merger by the
stockholders of the Company, no amendment may be made without further
stockholder approval which, by Law or in accordance with the rules of any
relevant stock exchange, requires further approval by such stockholders. This
Agreement may not be amended except by an instrument in writing signed by the
parties hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, any party
hereto may (A) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (B) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto, and (C) waive compliance by the other party
with any of the agreements or conditions contained herein; provided, however,
that after any approval of the transactions contemplated by this Agreement by
the stockholders of the Company, there may not be, without further approval of
such stockholders, any extension or waiver of this Agreement or any portion
thereof which, by Law or in accordance with the rules of any relevant stock
exchange, requires further approval by such stockholders. Any such extension or
waiver shall be valid only if set forth in an instrument in writing signed by
the party or parties to be bound thereby, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
Section 7.5 Fees and Expenses. Subject to Section 7.2.1, Section 7.2.2 and
Section 7.2.3 hereof, all expenses incurred by the parties hereto shall be borne
solely and entirely by the party which has incurred the same; provided, however,
that each of Parent and the Company shall pay one-half of the expenses related
to printing, filing and mailing the Registration Statement and the Proxy
Statement and all SEC and other regulatory filing fees incurred in connection
with the Registration Statement and the Proxy Statement.
ARTICLE 8.
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
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Section 8.2 Notices. Any notices or other communications required or
permitted under, or otherwise in connection with this Agreement, shall be in
writing and shall be deemed to have been duly given when delivered in person or
upon confirmation of receipt when transmitted by facsimile transmission (but
only if followed by transmittal by national overnight courier or hand for
delivery on the next business day) or on receipt after dispatch by registered or
certified mail, postage prepaid, addressed, or on the next business day if
transmitted by national overnight courier, in each case as follows:
If to Parent or Merger Sub, addressed to it at:
Intuitive Surgical, Inc.
000 Xxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, President and Chief Executive Officer
with a mandated copy (which shall not constitute notice) to:
Xxxxxx & Xxxxxxx LLP
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
If to the Company, addressed to it at:
Computer Motion, Inc.
000-X Xxxxxxx Xxxxx
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Chairman of the Board and Chief Executive
Officer
with a mandated copy (which shall not constitute notice) to:
Xxxxxxxxx Xxxxx Xxxxxxx & Xxxxx
000 Xxxxx Xxxxxx
Xxxxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
Section 8.3 Certain Definitions. For purposes of this Agreement, the term:
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"AFFILIATE" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with, the first-mentioned person;
"ACQUISITION PROPOSAL" means any offer or proposal concerning any (A)
merger, consolidation, business combination, or similar transaction involving
the Company or any Company Subsidiary, (B) sale, lease or other disposition
directly or indirectly by merger, consolidation, business combination, share
exchange, joint venture, or otherwise of assets of the Company or any Company
Subsidiary representing 20% or more of the consolidated assets of the Company
and the Company Subsidiaries, (C) issuance, sale, or other disposition of
(including by way of merger, consolidation, business combination, share
exchange, joint venture, or any similar transaction) securities (or options,
rights or warrants to purchase, or securities convertible into or exchangeable
for such securities) representing 20% or more of the voting power of the Company
or (D) transaction in which any person shall acquire beneficial ownership, or
the right to acquire beneficial ownership or any group shall have been formed
which beneficially owns or has the right to acquire beneficial ownership of 20%
or more of the outstanding voting capital stock of the Company or (E) any
combination of the foregoing (other than the Merger); provided, however, that
for purposes of Section 7.2.5.1(B)(x), the 20% figures stated in this definition
of "Acquisition Proposal" shall instead be 50%.
"ANCILLARY AGREEMENTS" means the Company Support Agreements, the Parent
Support Agreements and the Loan Agreement.
"BENEFICIAL OWNERSHIP" (and related terms such as "beneficially owned" or
"beneficial owner") has the meaning set forth in Rule 13d-3 under the Exchange
Act.
"BLUE SKY LAWS" means state securities or "blue sky" laws.
"BUSINESS DAY" means any day other than a day on which the SEC shall be
closed.
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended as of the date hereof.
"COMPANY ALLOCABLE SHARES" means (x) the Parent Total Fully Diluted Shares
divided by 0.68, minus (y) the Parent Total Fully Diluted Shares.
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"COMPANY MATERIAL ADVERSE CHANGE" means any event, development or change
affecting, or condition having an effect on, the Company and the Company
Subsidiaries that is material to the assets, liabilities, business, financial
condition or results of operations of the Company and the Company Subsidiaries,
taken as a whole, which arises out of or relates to (i) any forfeiture,
impairment, invalidity or diminution in value of the Material Company
Intellectual Property which is unrelated to any litigation, dispute or
proceeding between Parent and the Company; (ii) any violation of Section
5.1.2(A) or (iii) the incurrence by the Company or any of the Company
Subsidiaries of any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise), other than pursuant to the Loan Agreement,
except in the case of any of the events listed in clauses (i), (ii) or (iii) of
this definition that would not, individually or in the aggregate, reasonably be
likely to result in a Company Material Adverse Effect.
"COMPANY MATERIAL ADVERSE EFFECT" means any change affecting, or condition
having an effect on, the Company and the Company Subsidiaries that is, or would
reasonably be likely to be, materially adverse to the assets, liabilities,
business, financial condition or results of operations of the Company and the
Company Subsidiaries, taken as a whole, other than any change or condition
relating to the economy or securities markets in general, or the industry in
which the Company operates in general, and not specifically relating to the
Company.
"COMPANY TOTAL FULLY DILUTED SHARES" means, as of immediately prior to the
consummation of the Merger, the sum of (x) the number of shares of Company
Common Stock outstanding, (y) the number of shares of Company Common Stock into
which any outstanding convertible or exchangeable securities (including any
outstanding Company Preferred Stock) may be converted or exchanged, and (z) the
number of shares of Company Common Stock issuable upon exercise of all
outstanding Company Options and Company Warrants (whether or not such
convertible or exchangeable securities or Company Options or Company Warrants
are then convertible, exchangeable or exercisable, and regardless of the
conversion, exchange or exercise price of any such securities), but excluding
for purposes of this calculation (if then outstanding) the shares of Company
Common Stock issuable upon exercise of the Company Warrants to acquire 396,578
shares of Company Common Stock at $4.57 per share, and excluding the shares of
Company Common Stock issuable upon exercise of the Company Warrants to acquire
252,836 shares of Company Common Stock at $7.71 per share.
84
"CONTRACTS" means any of the agreements, contracts, leases, powers of
attorney, notes, loans, evidence of indebtedness, purchase orders, letters of
credit, settlement agreements, franchise agreements, undertakings, covenants not
to compete, employment agreements, licenses, instruments, obligations,
commitments, understandings, policies, purchase and sales orders, quotations and
other executory commitments to which any company is a party or to which any of
the assets of the companies are subject, whether oral or written, express or
implied.
"CONTROL" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the management or policies of a
person, whether through the ownership of stock or as trustee or executor, by
contract or credit arrangement or otherwise.
"ENVIRONMENTAL LAWS" means any federal, state, local or foreign statute,
law, ordinance, regulation, rule, code, treaty, writ or order and any
enforceable judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree, judgment, stipulation,
injunction, permit, authorization, policy, opinion, or agency requirement, in
each case having the force and effect of law, relating to the pollution,
protection, investigation or restoration of the environment, health and safety
as affected by the environment or natural resources, including, without
limitation, those relating to the use, handling, presence, transportation,
treatment, storage, disposal, release, threatened release or discharge of
Hazardous Materials or noise, odor, wetlands, pollution or contamination.
"ENVIRONMENTAL PERMITS" means any permit, approval, identification number,
license and other authorization required under any applicable Environmental Law.
"EQUITY INTEREST" means any share, capital stock, partnership, member or
similar interest in any entity, and any option, warrant, right or security
(including debt securities) convertible, exchangeable or exercisable therefor.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder.
"ERISA AFFILIATE" shall mean any entity or trade or business (whether or
not incorporated) other than the Company that together with the Company is
considered under
85
common control and treated as a single employer under Section 4.14(b), (c), (m)
or (o) of the Code.
"EXCHANGE ACT" shall mean Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"EXCHANGE RATIO" means the number obtained by dividing (x) the Company
Allocable Shares by (y) the Company Total Fully Diluted Shares.
"EXPENSES" includes all reasonable out-of-pocket expenses (including,
without limitation, all fees and expenses of counsel, accountants, investment
bankers, experts and consultants to a party hereto and its affiliates) incurred
by a party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement and the
transactions contemplated hereby, including the preparation, printing, filing
and mailing of the Proxy Statement and the solicitation of shareholder approvals
and all other matters related to the transactions contemplated hereto.
"GAAP" means generally accepted accounting principles as applied in the
United States.
"GOVERNMENTAL ENTITY" means domestic or foreign governmental,
administrative, judicial or regulatory authority.
"GROUP" is defined as in the Exchange Act, except where the context
otherwise requires.
"HAZARDOUS MATERIALS" means (A) any petroleum, petroleum products,
byproducts or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated biphenyls or (B) any chemical, material or other
substance defined or regulated as toxic or hazardous or as a pollutant or
contaminant or waste under any applicable Environmental Law.
"INTELLECTUAL PROPERTY" means all intellectual property or other
proprietary rights of every kind, foreign or domestic, including all patents,
patent applications, inventions (whether or not patentable), processes,
products, technologies, discoveries, copyrightable and copyrighted works,
apparatus, trade secrets, trademarks, trademark registrations and applications,
domain names, service marks, service xxxx registrations and applications, trade
names, trade secrets,
86
know-how, trade dress, copyright registrations, customer lists, confidential
marketing and customer information, licenses, confidential technical
information, software, and all documentation thereof.
"IRS" means the United States Internal Revenue Service.
"KNOWLEDGE" will be deemed to be present when the matter in question was
brought to the attention of any officer of Parent or the Company, as the case
may be.
"LAW" means foreign or domestic law, statute, code, ordinance, rule,
regulation, order, judgment, writ, stipulation, award, injunction, decree or
arbitration award or finding.
"OTHER FILINGS" means all filings made by or required to be made by, the
Company or Parent, as the case may be, with the SEC other than the Registration
Statement and the Proxy Statement.
"PARENT MATERIAL ADVERSE EFFECT" means any change affecting, or condition
having an effect on, Parent, Merger Sub and the Parent Subsidiaries that is, or
would reasonably be likely to be, materially adverse to the assets, liabilities,
business, financial condition or results of operations of Parent and the Parent
Subsidiaries, taken as a whole, other than any change or condition relating to
the economy or securities markets in general, or the industry in which Parent
operates in general, and not specifically relating to Parent.
"PARENT TOTAL FULLY DILUTED SHARES" means, as of immediately prior to the
consummation of the Merger, the sum of (x) the number of shares of Parent Common
Stock outstanding, (y) the number of shares of Parent Common Stock into which
any outstanding convertible or exchangeable securities (including any
outstanding Parent Preferred Stock) may be converted or exchanged, and (z) the
number of shares of Parent Common Stock issuable upon exercise of all
outstanding Parent Options and warrants to purchase shares of Parent Common
Stock (whether or not such convertible or exchangeable securities or Parent
Options or warrants to purchase shares of Parent Common Stock are then
convertible, exchangeable or exercisable, and regardless of the conversion,
exchange or exercise price of any such securities).
"PERSON" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in Section 13(d) of the Exchange Act).
87
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SHARE ISSUANCE" means the issuance of Parent Common Stock pursuant to
Section 2.1.1.
"SUBSIDIARY" or "SUBSIDIARIES" of Parent, the Company, the Surviving
Corporation or any other person means any corporation, partnership, joint
venture or other legal entity of which Parent, the Company, the Surviving
Corporation or such other person, as the case may be (either alone or through or
together with any other subsidiary), owns, directly or indirectly, a majority of
the stock or other equity interests the holders of which are generally entitled
to vote for the election of the board of directors or other governing body of
such corporation or other legal entity.
"SUPERIOR PROPOSAL" means a bona fide Acquisition Proposal made by a third
party which was not solicited by the Company, any Company Subsidiary, any
Company Representatives or any other affiliates and which, in the good faith
judgment of the Company Board, taking into account, to the extent deemed
appropriate by the Company Board, the various legal, financial and regulatory
aspects of the proposal and the person making such proposal (A) if accepted, is
reasonably likely to be consummated, and (B) if consummated would, based upon
the written advice of the Company Financial Advisor, result in a transaction
that is more favorable to the Company's stockholders, from a financial point of
view, than the transactions contemplated by this Agreement.
"TAXES" means any and all taxes, fees, levies, duties, tariffs, imposts
and other charges of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any Governmental Entity or domestic or foreign taxing authority, including,
without limitation, income, franchise, windfall or other profits, gross
receipts, property, sales, use, net worth, capital stock, payroll, employment,
social security, workers' compensation, unemployment compensation, excise,
withholding, ad valorem, stamp, transfer, value-added, gains tax and license,
registration and documentation fees.
88
"TAX RETURNS" means any report, return (including information return),
claim for refund, election, estimated tax filing or declaration required to be
supplied to any Governmental Entity or domestic or foreign taxing authority with
respect to Taxes, including any schedule or attachment thereto, and including
any amendments thereof.
Section 8.4 Terms Defined Elsewhere. The following terms are defined
elsewhere in this Agreement, as indicated below:
"401(k) PLAN" Section 5.19
"AGREEMENT" Preamble
"CERTIFICATE OF MERGER" Section 1.2
"CERTIFICATES" Section 2.2.2
"CERTIFICATE OF AMENDMENT" Section 5.5.1
"CODE" Recitals
"COMPANY" Preamble
"COMPANY BENEFIT PLAN" Section 3.10.1
"COMPANY BOARD" Section 3.4.1
"COMPANY BY-LAWS" Section 3.2
"COMPANY CERTIFICATE" Section 3.2
"COMPANY COMMON STOCK" Section 2.1.1.1
"COMPANY DEFECT" Section 3.22
"COMPANY DISCLOSURE SCHEDULE" Article 3
"COMPANY EMPLOYEES" Section 5.12
"COMPANY FINANCIAL ADVISOR" Section 3.19
"COMPANY FORM 10-K" Section 3.2
"COMPANY MATERIAL CONTRACT" Section 3.13
"COMPANY OPTIONS" Section 2.4
89
"COMPANY PERMITS" Section 3.6
"COMPANY PREFERRED STOCK" Section 2.1.1.2
"COMPANY PRODUCT" Section 3.22
"COMPANY RECOMMENDATION" Section 5.7.3
"COMPANY REPRESENTATIVES" Section 5.6.1
"COMPANY RIGHTS" Section 2.1.1.1
"COMPANY RIGHTS AGREEMENT" Section 2.1.1.1
"COMPANY SEC FILINGS" Section 3.7.1
"COMPANY PREFERRED STOCK" Section 2.1.1.2
"COMPANY STOCK" Section 2.1.1.2
"COMPANY STOCKHOLDERS' MEETING" Section 5.5.1
"COMPANY SUBSIDIARY" Section 3.1
"COMPANY SUPPORT AGREEMENTS" Recitals
"COMPANY WARRANTS" Section 2.1.1.3
"CONFIDENTIALITY AGREEMENT" Section 5.6.2
"D&O INSURANCE" Section 5.13.2
"DGCL" Recitals
"EFFECTIVE TIME" Section 1.2
"ESPP" Section 5.20
"EXCESS SHARES" Section 2.2.5.1
"EXCHANGE AGENT" Section 2.2.1
"EXCHANGE FUND" Section 2.2.1
"FEDERAL HEALTHCARE PROGRAMS" Section 3.24
"LOAN AGREEMENT" Recitals
90
"MATERIAL COMPANY INTELLECTUAL PROPERTY" Section 3.16
"MATERIAL PARENT INTELLECTUAL PROPERTY" Section 4.16
"MERGER" Recitals
"MERGER SUB" Preamble
"MERGER SUB BOARD" Section 4.4.1
"MULTIEMPLOYER PLAN" Section 3.10.4
"PARENT" Preamble
"PARENT BENEFIT PLAN" Section 4.10.1
"PARENT BOARD" Section 4.4.1
"PARENT BY-LAWS" Section 4.2
"PARENT CERTIFICATE" Section 4.2
"PARENT COMMON STOCK" Section 2.1.1.1
"PARENT DEFECT" Section 4.22
"PARENT DISCLOSURE SCHEDULE" Article 4
"PARENT FINANCIAL ADVISOR" Section 4.19
"PARENT FORM 10-K" Section 4.2
"PARENT MATERIAL CONTRACT" Section 4.13
"PARENT OPTIONS" Section 4.3
"PARENT PERMITS" Section 4.6
"PARENT PREFERRED STOCK" Section 4.3
"PARENT PRODUCT" Section 4.22
"PARENT REPRESENTATIVES" Section 5.6.1
"PARENT SEC FILINGS" Section 4.7.1
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"PARENT STOCKHOLDERS' MEETING" Section 5.5.2
"PARENT SUBSIDIARY" Section 4.1
"PARENT SUPPORT AGREEMENTS" Recitals
"PBGC" Section 3.11.3
"PROXY STATEMENT" Section 5.4.1
"REGISTRATION STATEMENT" Section 5.4.1
"SECTION 16" Section 5.12
"SERIES D CONVERTIBLE PREFERRED STOCK" Section 3.3
"SERIES D-1 CONVERTIBLE PREFERRED STOCK" Section 3.3
"SERIES D-2 CONVERTIBLE PREFERRED STOCK" Section 3.3
"SURVIVING CORPORATION" Section 1.1
"TERMINATION DATE" Section 7.1.2
Section 8.5 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 8.6 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
92
Section 8.7 Entire Agreement. This Agreement (together with the Exhibits,
Parent and Company Disclosure Schedules and the other documents delivered
pursuant hereto), each Ancillary Agreement and the Confidentiality Agreement
constitute the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the parties, or any
of them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein, are not intended to confer upon any other person any
rights or remedies hereunder.
Section 8.8 Assignment. This Agreement shall not be assigned by operation
of law or otherwise.
Section 8.9 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and their respective successors
and assigns, and nothing in this Agreement, express or implied, other than
pursuant to Section 5.13, is intended to or shall confer upon any other person
any right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
Section 8.10 Mutual Drafting. Each party hereto has participated in the
drafting of this Agreement, which each party acknowledges is the result of
extensive negotiations between the parties.
Section 8.11 Governing Law; Consent to Jurisdiction; Waiver of Trial by
Jury.
Section 8.11.1 This Agreement shall be governed by, and construed in
accordance with, the Laws of the State of Delaware, without regard to laws that
may be applicable under conflicts of laws principles.
Section 8.11.2 Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of any Delaware State court, or Federal court of the United States
of America, sitting in Delaware, and any appellate court from any thereof, in
any action or proceeding arising out of or relating to this Agreement or the
agreements delivered in connection herewith or the transactions contemplated
hereby or thereby or for recognition or enforcement of any judgment relating
thereto, and each of the parties hereby irrevocably and unconditionally (A)
agrees not to commence any such action or proceeding except in such courts, (B)
agrees that any claim in respect of any such action or
93
proceeding may be heard and determined in such Delaware State court or, to the
extent permitted by law, in such Federal court, (C) waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any such action or proceeding in any
such Delaware State or Federal court, and (D) waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such Delaware State or Federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Each party to this Agreement
irrevocably consents to service of process in the manner provided for notices in
Section 8.2. Nothing in this Agreement will affect the right of any party to
this Agreement to serve process in any other manner permitted by law.
Section 8.11.3 EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH WAIVERS, (B) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (C) IT MAKES SUCH WAIVERS
VOLUNTARILY, AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.11.3.
Section 8.12 Disclosure. Any matter disclosed in any section of a party's
Disclosure Schedule shall be considered disclosed for other sections of such
Disclosure Schedule, but only to the extent such matter on its face would
reasonably be expected to be pertinent to a particular section of a party's
Disclosure Schedule in light of the disclosure made
94
in such section. The provision of monetary or other quantitative thresholds for
disclosure does not and shall not be deemed to create or imply a standard of
materiality hereunder.
Section 8.13 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
Section 8.14 Specific Performance. The parties hereto 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 hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
INTUITIVE SURGICAL, INC.
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxx
Title: President and Chief Executive
Officer
IRON ACQUISITION CORPORATION
By: /s/ Xxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxx X. Xxxxx
Title: President, Chief Executive Officer
and Secretary
COMPUTER MOTION, INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chairman of the Board and Chief
Executive Officer
96
