EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BRIGHT HORIZONS FAMILY SOLUTIONS, INC.,
BFAM MERGERSUB, INC.
AND
CHILDRENFIRST INC.
DATED AS OF JUNE 27, 2005
TABLE OF CONTENTS
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ARTICLE I THE MERGER................................................................1
1.1 The Merger...................................................................1
1.2 Effective Time of the Merger.................................................1
1.3 Closing......................................................................2
1.4 Effects of the Merger........................................................2
1.5 Directors and Officers of the Surviving Corporation..........................2
ARTICLE II CONVERSION OF SECURITIES..................................................2
2.1 Conversion of Capital Stock..................................................2
2.2 Exchange Fund................................................................6
2.3 Company Stock Plans..........................................................8
2.4 Dissenting Shares............................................................8
2.5 Escrow.......................................................................9
2.6 Stockholder Representative..................................................10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................11
3.1 Organization, Standing and Power............................................11
3.2 Capitalization..............................................................11
3.3 Subsidiaries................................................................13
3.4 Authority; No Conflict; Required Filings and Consents.......................14
3.5 Financial Statements........................................................15
3.6 Absence of Certain Changes..................................................15
3.7 No Undisclosed Liabilities..................................................16
3.8 Taxes.......................................................................16
3.9 Owned and Leased Real Properties............................................18
3.10 Intellectual Property.......................................................19
3.11 Contracts...................................................................21
3.12 Litigation..................................................................22
3.13 Environmental Matters.......................................................22
3.14 Employee Benefit Plans......................................................23
3.15 Compliance With Laws........................................................27
3.16 Permits.....................................................................27
3.17 Labor and Employee Matters..................................................27
3.18 Insurance...................................................................29
3.19 Brokers.....................................................................29
3.20 Assets......................................................................30
3.21 Certain Business Relationships with the Company and its Subsidiaries........30
3.22 Takeover Statutes...........................................................30
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE TRANSITORY
SUBSIDIARY...............................................................30
4.1 Organization, Standing and Power............................................30
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4.2 Authority; No Conflict; Required Filings and Consents.......................30
4.3 Litigation..................................................................32
4.4 [Intentionally Omitted].....................................................32
4.5 [Intentionally Omitted].....................................................32
4.6 Operations of the Transitory Subsidiary.....................................32
4.7 Financing...................................................................32
4.8 Solvency....................................................................32
ARTICLE V CONDUCT OF BUSINESS......................................................32
5.1 Covenants of the Company....................................................32
5.2 Confidentiality.............................................................35
ARTICLE VI ADDITIONAL AGREEMENTS....................................................36
6.1 No Solicitation.............................................................36
6.2 Stockholder Approval........................................................37
6.3 Access to Information.......................................................37
6.4 Legal Conditions to the Merger..............................................37
6.5 Public Disclosure...........................................................39
6.6 Indemnification of Directors and Officers...................................39
6.7 Notification of Certain Matters.............................................41
6.8 Service Credit..............................................................42
ARTICLE VII CONDITIONS TO MERGER.....................................................42
7.1 Conditions to Each Party's Obligation To Effect the Merger..................42
7.2 Additional Conditions to Obligations of the Buyer and the
Transitory Subsidiary.....................................................43
7.3 Additional Conditions to Obligations of the Company.........................44
ARTICLE VIII INDEMNIFICATION..........................................................45
8.1 Indemnification by Company..................................................45
8.2 Indemnification by Buyer....................................................45
8.3 Claims for Indemnification..................................................45
8.4 Survival....................................................................47
8.5 Limitations.................................................................47
8.6 Treatment of Indemnity Payments.............................................49
ARTICLE IX TERMINATION AND AMENDMENT................................................49
9.1 Termination.................................................................49
9.2 [Intentionally Omitted].....................................................50
9.3 Effect of Termination.......................................................50
9.4 Fees and Expenses...........................................................50
9.5 Amendment...................................................................50
9.6 Extension; Waiver...........................................................50
ARTICLE X MISCELLANEOUS............................................................51
10.1 [Intentionally Omitted].....................................................51
10.2 Notices.....................................................................51
10.3 Entire Agreement............................................................52
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10.4 No Third Party Beneficiaries................................................52
10.5 Assignment..................................................................52
10.6 Severability................................................................53
10.7 Counterparts and Signature..................................................53
10.8 Interpretation..............................................................53
10.9 Governing Law...............................................................53
10.10 Remedies....................................................................53
10.11 Submission to Jurisdiction..................................................54
10.12 Disclosure Schedules........................................................54
10.13 Company's Knowledge.........................................................54
Schedule I
Exhibit A Form of Escrow Agreement
Exhibit B Form of Legal Opinion
Exhibit C Form of Stock Voting Agreement and Irrevocable Proxy
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TABLE OF DEFINED TERMS
Reference in
Terms Agreement
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Acquisition Proposal Section 6.1(e)
Action Section 6.6(a)
Actual Net Working Capital Section 2.1(c)
Additional Due Diligence Section 6.10
Adjustment Escrow Amount Section 2.5
Adjustment Escrow Fund Section 2.5
Affiliate Section 3.2(c)
Affiliated Group Section 3.8(c)
Agreement Preamble
Alternative Acquisition Agreement Section 6.1(b)
Antitrust Laws Section 6.4(b)
Antitrust Order Section 6.4(b)
Articles of Merger Section 1.2
Bankruptcy and Equity Exception Section 3.4(a)
Base Merger Consideration Section 2.1(c)
Business Day Section 1.3
Buyer Preamble
Buyer Disclosure Schedule Article IV
Buyer Employee Plan Section 6.8
Buyer Indemnity Claim Section 2.6
Buyer Material Adverse Effect Section 4.2(b)
CERCLA Section 3.13
Certificate Section 2.2(b)
Claim Amount Section 8.3(b)
Claim Notice Section 8.3(b)
Closing Section 1.3
Closing Date Section 1.3
Closing Date Payment Section 2.2(a)
Code Section 2.2(f)
Company Preamble
Company Balance Sheet Section 3.5
Company Balance Sheet Date Section 3.5
Company Board Section 3.4(a)
Company Common Stock Section 2.1(b)
Company Disclosure Schedule Article III
Company Employee Plans Section 3.14(a)
Company Financial Statements Section 3.5
Company Indemnified Party Section 6.6(a)
Company Intellectual Property Section 3.10(b)
Company Leases Section 3.9(b)
Company Material Adverse Effect Section 3.6
Company Material Contracts Section 3.11(a)
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Reference in
Terms Agreement
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Company Permits Section 3.16
Company Preferred Stock Section 2.1(b)
Company Stock Section 2.1(b)
Company Stock Options Section 2.3(a)
Company Stock Plans Section 2.3(a)
Company Stockholder Approval Section 3.4(a)
Company Stockholders' Meeting Section 6.2
Company Transaction Expenses Section 2.1(c)
Company Voting Proposal Section 3.4(a)
Company's Knowledge Section 10.12
Confidentiality Agreement Section 5.2
Continuing Employees Section 6.8
Current Assets Section 2.1(c)
Current Liabilities Section 2.1(c)
Damages Section 8.1
Debt Section 2.1(c)
Dissenting Shares Section 2.4(a)
DOL Section 3.14(i)
Effective Time Section 1.2
Employee Benefit Plan Section 3.14(a)
Environmental Law Section 3.13(e)
Environmental Claim Section 3.13(e)
Environmental Permits Section 3.13(a)
ERISA Section 3.14(a)
ERISA Affiliate Section 3.14(a)
Escrow Agent Section 2.5
Escrow Agreement Section 2.5
Escrow Amount Section 2.1(d)
Escrow Fund Section 2.5
Estimated Net Working Capital Section 2.1(c)
Exchange Agent Section 2.2(a)
Exchange Fund Section 2.2(a)
GAAP Section 3.5
Governmental Entity Section 3.4(c)
Hazardous Substance Section 3.13(f)
HSR Act Section 3.4(c)
Incentive Payment Amount Section 2.1(c)
Indemnified Party Section 8.3(a)
Indemnifying Party Section 8.3(a)
Indemnifying Securityholders Section 8.1
Independent Accounting Firm Section 2.1(e)
Intellectual Property Section 3.10(a)
IRS Section 3.14(b)
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Reference in
Terms Agreement
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Liability Section 3.7
Liens Section 3.4(b)
Maximum Premium Section 6.6(c)
MBCA Preamble
Merger Preamble
Merger Consideration Section 2.1(c)
Net Working Capital Section 2.1(c)
Non-Preference Consideration Schedule I
Option Consideration Section 2.3(b)
Ordinary Course of Business Section 3.7
Outside Date Section 9.11(b)
Permitted Investments Section 2.5
Person Section 2.1(c)
Pre-Closing Period Section 5.1
Preliminary Closing Balance Sheet Section 2.1(c)
Release Section 3.1(f)
Representatives Section 6.1(a)
Retained Employee Section 6.8
Revised Disclosure Schedule Section 6.10
Securities Act Section 3.2(c)
Series B Preference Amount Schedule I
Series C Preference Amount Schedule I
Series D Preference Amount Schedule I
Series E Preference Amount Schedule I
Series F Preference Amount Schedule I
Series G Preference Amount Schedule I
Series H Preference Amount Schedule I
Special Damages Section 8.5(b)
Specified Termination Section 9.2(b)
Specified Time Section 6.1(a)
Stockholder Representative Section 2.6
Stockholders' Accountant Section 2.1(e)
Subsidiary Section 3.3(a)
Surviving Corporation Section 1.1
Tax Returns Section 3.8(a)
Target Net Working Capital Section 2.1(c)
Taxes Section 3.8(a)
Third Party Intellectual Property Section 3.10(b)
Transitory Subsidiary Preamble
WARN Act Section 3.17(n)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as
of June 27, 2005, by and among Bright Horizons Family Solutions, Inc., a
Delaware corporation (the "Buyer"), BFAM Mergersub, Inc., a Massachusetts
corporation and a wholly owned subsidiary of the Buyer (the "Transitory
Subsidiary"), and ChildrenFirst Inc., a Massachusetts corporation (the
"Company"). The Buyer, the Transitory Subsidiary and the Company are sometimes
referred to herein collectively as the "Parties" or individually as a "Party."
WHEREAS, the Boards of Directors of the Buyer and the Company deem it
advisable and in the best interests of each corporation and their respective
stockholders that the Buyer acquire the Company in order to advance the
long-term business interests of the Buyer and the Company;
WHEREAS, the acquisition of the Company shall be effected through a
merger (the "Merger") of the Transitory Subsidiary with and into the Company in
accordance with the terms of this Agreement and the Massachusetts Business
Corporation Act (the "MBCA"), as a result of which the Company shall become a
wholly owned subsidiary of the Buyer; and
WHEREAS, the Board of Directors of the Company has unanimously
determined to approve the Merger and adopt this Agreement, that the Merger and
the other transactions contemplated hereby are in the best interests of the
Company, and to submit this Agreement to the stockholders of the Company for
their approval;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Buyer, the Transitory Subsidiary and the Company agree
as follows:
ARTICLE I
THE MERGER
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 MBCA,
Transitory Subsidiary shall be merged with and into the Company at the Effective
Time. At the Effective Time, the separate existence of the Transitory Subsidiary
shall cease and the Transitory Subsidiary shall be merged with and into the
Company, and the Company shall continue as the surviving corporation (the
Company following the Merger is sometimes referred to herein as the "Surviving
Corporation").
1.2 Effective Time of the Merger. Subject to the provisions of this
Agreement, prior to the Closing, the Buyer and the Company shall jointly
prepare, and immediately following the Closing the Surviving Corporation shall
cause to be filed with the Secretary of the Commonwealth of the Commonwealth of
Massachusetts, articles of merger (the "Articles of Merger") in such form as is
required by, and executed by the Transitory Subsidiary and the Company in
accordance with, the relevant provisions of the MBCA and shall make all other
filings or recordings required under the MBCA. The Merger shall become effective
upon the
filing of the Articles of Merger with the Secretary of the Commonwealth of the
Commonwealth of Massachusetts or at such later time as is established by the
Buyer and the Company and set forth in the Articles of Merger (the "Effective
Time").
1.3 Closing. The closing of the Merger (the "Closing") shall take place
at 10:00 a.m., Eastern time, on a date to be specified by the Buyer and the
Company (the "Closing Date"), which shall be no later than the second Business
Day after satisfaction or waiver of the conditions set forth in Article VII
(other than delivery of items to be delivered at the Closing and other than
satisfaction of those conditions that by their nature are to be satisfied at the
Closing, it being understood that the occurrence of the Closing shall remain
subject to the delivery of such items and the satisfaction or waiver of such
conditions at the Closing), at the offices of Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and
Xxxx LLP, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx, unless another date, place or
time is agreed to in writing by the Buyer and the Company. For purposes of this
Agreement, a "Business Day" shall be any day other than (a) a Saturday or Sunday
or (b) a day on which banking institutions located in Boston, Massachusetts are
permitted or required by law, executive order or governmental decree to remain
closed.
1.4 Effects of the Merger. The Articles of Organization and By-laws of
the Company, each as amended and in effect on the date of this Agreement, shall
be the Articles of Organization and By-laws of the Surviving Corporation. The
Merger shall have the effects set forth in the applicable provisions of the
MBCA. Without limiting the generality of the foregoing, at the Effective Time,
except as otherwise provided herein, all the property, rights, privileges and
powers of the Company and Transitory Subsidiary shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Transitory
Subsidiary shall become the debts, liabilities and duties of the Surviving
Corporation.
1.5 Directors and Officers of the Surviving Corporation.
(a) The directors of the Transitory Subsidiary immediately prior to
the Effective Time shall be the initial directors of the Surviving Corporation,
each to hold office in accordance with the Articles of Organization and By-laws
of the Surviving Corporation.
(b) The officers of the Transitory Subsidiary immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation,
each to hold office in accordance with the Articles of Organization and By-laws
of the Surviving Corporation.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of the
capital stock of the Company or capital stock of the Transitory Subsidiary:
(a) Capital Stock of the Transitory Subsidiary. Each share of the
common stock of the Transitory Subsidiary issued and outstanding immediately
prior to the Effective Time shall be converted into and become one fully paid
and nonassessable share of common stock, no par value per share, of the
Surviving Corporation.
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(b) Cancellation of Treasury Stock and Buyer-Owned Stock. All
shares of common stock, no par value per share, of the Company ("Company Common
Stock") and preferred stock, no par value per share, of the Company ("Company
Preferred Stock", and together with Company Common Stock, "Company Stock"), that
are owned by the Company as treasury stock or by any wholly owned Subsidiary of
the Company and any shares of Company Stock owned by the Buyer, the Transitory
Subsidiary or any other wholly owned Subsidiary of the Buyer immediately prior
to the Effective Time shall be cancelled and shall cease to exist and no stock
of the Buyer or other consideration shall be delivered in exchange therefor.
(c) Merger Consideration.
(i) The aggregate consideration to be paid by the Buyer to the
holders of Company Stock and Company Stock Options (the "Merger Consideration")
is $61,000,000 in cash (the "Base Merger Consideration") plus (to the extent the
Actual Net Working Capital is greater than the Target Net Working Capital) or
minus (to the extent the Actual Net Working Capital is less than the Target Net
Working Capital) the amount if any that the Actual Net Working Capital of the
Company as of the Closing is greater than or less than the Target Net Working
Capital of the Company. For purposes of this Agreement, the Target Net Working
Capital of the Company at Closing is negative $528,000. The Merger Consideration
shall be paid in accordance with Schedule I. As of the Effective Time, all such
shares of Company Stock shall no longer be outstanding and shall automatically
be cancelled and shall cease to exist, and each holder of a certificate
representing any such shares of Company Stock shall cease to have any rights
with respect thereto, except the right to receive the applicable Merger
Consideration pursuant to Section 2.1(c), Section 2.1(d) and Schedule I of the
Agreement upon the surrender of such certificate in accordance with Section 2.2
of the Agreement, without interest.
(ii) The Company shall, at least three (3) Business Days prior
to the Closing Date, deliver to the Buyer a certificate setting forth a good
faith determination of the estimated Net Working Capital of the Company at the
Closing, determined in accordance with GAAP on a consistent basis with the
Company Financial Statements and past practice (the "Estimated Net Working
Capital"). At the Closing, the Merger Consideration to be paid pursuant to
Sections 2.1, 2.2 and 2.3, shall be based upon the Estimated Net Working
Capital, and the Merger Consideration shall be subject to adjustment pursuant to
Section 2.1(e).
(iii) For purposes of this Agreement:
"Actual Net Working Capital" means the Net Working Capital as
determined pursuant to the Final Closing Date Balance Sheet.
"Company Transaction Expenses" means (i) any unpaid (as of the Closing
Date) fees and expenses payable to Xxxxx Xxxxxxx & Co. referenced in Section
3.19 and (ii) any unpaid (as of the Closing Date) fees and expenses payable to
Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP and Deloitte & Touche LLP (excluding
audit related fees and expenses) for services rendered in connection with the
negotiation and execution of this Agreement and the transactions contemplated
hereby, (iii) fifty percent (50%) of all fees and expenses relating to the
Exchange Agent and filings made pursuant to the HSR Act, (iv) any consideration
payable pursuant to the existing terms of a real property lease of the Company
as a result of the consummation of the
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transactions contemplated by this Agreement, and (v) all other fees and expenses
incurred by the Company in connection with this Agreement and the transactions
contemplated hereby.
"Current Assets" shall mean the current assets of the Company
(excluding any deferred tax assets) as reflected on the Final Closing Balance
Sheet.
"Current Liabilities" shall mean the current liabilities of the Company
as reflected on the Final Closing Balance Sheet, provided that they shall
include, to the extent not otherwise paid or accrued, the Company Transaction
Expenses and the Incentive Payment Amount.
"Incentive Payment Amount" means the aggregate "Incentive Payment", as
such term is defined the Company's 2004 Key Employee Incentive Plan, amount as
determined on the Closing Date.
"Net Working Capital" shall mean an amount (positive or negative) equal
to the Current Assets minus the Current Liabilities.
"Person" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
(d) Notwithstanding the foregoing, at the Effective Time, and
subject to and in accordance with the provisions of Sections 2.5 and 2.6, Buyer
shall pay to the Escrow Agent, for deposit into the Escrow Fund, on behalf of
the holders of Company Stock, a portion of the Merger Consideration otherwise
payable in respect of Company Stock equal to $4,500,000 (the "Escrow Amount"),
which in each case shall be held by the Escrow Agent as nominee for the holders
of Company Stock. The Escrow Amount will be paid out to the holders of Company
Stock as set forth in the Escrow Agreement and the Schedules thereto.
(e) Adjustments to Merger Consideration.
(i) Stock Split, Stock Dividend, etc. The Merger Consideration
shall be adjusted to reflect fully the effect of any reclassification, stock
split, reverse split, stock dividend (including any dividend or distribution of
securities convertible into Company Stock), reorganization, recapitalization or
other like change with respect to Company Stock occurring (or for which a record
date is established) after the date hereof and prior to the Effective Time.
(ii) Working Capital Adjustment. The Merger Consideration
shall be adjusted to reflect the difference, if any, between the Estimated Net
Working Capital and the Actual Net Working Capital.
(A) As soon as practicable, but in any event within
sixty (60) days following the Closing Date, the Buyer shall deliver to the
Stockholder Representative an unaudited balance sheet of the Company (the
"Preliminary Closing Balance Sheet") as of the close of business on the date
immediately preceding the Closing Date prepared in accordance with GAAP on a
consistent basis with the Company Financial Statements and past practice.
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(B) Subject to the resolution of any disputes
pursuant to Section 2.1(e)(ii)(C), within thirty (30) days after the date of
receipt by the Stockholder Representative of the Preliminary Closing Balance
Sheet:
(1) if the Estimated Net Working Capital
exceeds the Actual Net Working Capital, the Buyer shall be entitled to a payment
from the Adjustment Escrow Fund, which will be its initial recourse for amounts
due under this Section 2.1(e)(ii)(B), in an amount equal to such excess, as a
downward adjustment to the Merger Consideration for tax purposes, provided that,
if the Adjustment Fund Amount is insufficient to pay such amounts due under this
Section, the remainder shall be disbursed from the Escrow Fund; and
(2) if the Actual Net Working Capital
exceeds the Estimated Net Working Capital, (i) the Buyer shall deliver to, as an
upward adjustment to the Merger Consideration for tax purposes, the Exchange
Agent by wire transfer or other delivery of immediately available funds an
aggregate amount equal to such excess and (ii) the Escrow Agent shall distribute
the Adjustment Escrow Amount, which amounts shall be distributed by the Exchange
Agent to the holders of Company Stock and Company Stock Options allocated as set
forth on Schedule I.
(C) (1) The Stockholder Representative may dispute
any amounts reflected on the Preliminary Closing Balance Sheet; provided,
however, that the Stockholder Representative shall have notified the Buyer in
writing of each disputed item, specifying the amount thereof in dispute and
setting forth, in reasonable detail, the basis for such dispute, within thirty
(30) days of the Stockholder Representative's receipt of the Preliminary Closing
Balance Sheet. In the event of such a dispute, the Buyer and the Stockholder
Representative shall attempt to reconcile their differences. If the Buyer and
the Stockholder Representative are unable to reach a resolution within twenty
(20) days after receipt by the Buyer of the Stockholder Representative's written
notice of dispute, the Buyer and the Stockholder Representative shall submit the
items remaining in dispute for resolution to an accounting firm to be mutually
agreed upon by the parties (the "Independent Accounting Firm"), which shall,
within thirty (30) days of such submission, determine and report to the
Stockholder Representative and the Buyer upon such remaining disputed items, and
such report shall be final, binding and conclusive on the stockholders of the
Company and the Buyer. The Closing Date Balance Sheet that has not been
challenged, has been reconciled, or has been determined by the Independent
Accounting Firm pursuant to this subsection 2.1(e)(ii)(C)(1) is referred to
herein as the "Final Closing Date Balance Sheet." The fees and disbursements of
the Independent Accounting Firm shall be allocated equally between the Buyer and
the stockholders of the Company.
(2) During the period of the Stockholder
Representative's review of the Preliminary Closing Balance Sheet and of any
dispute referred to in this Section 2.1(e)(ii)(C), the Buyer shall provide the
Stockholder Representative, Deloitte & Touche LLP (the "Stockholders'
Accountant") and any Independent Accounting Firm full access to the books,
records and facilities of the Surviving Corporation and shall cooperate fully
with the Stockholder Representative and Stockholders' Accountant and any
Independent Accounting Firm, in each case to the extent reasonably required by
the Stockholder Representative, the Stockholders' Accountant and any Independent
Accounting Firm in order to review the amounts reflected in the Preliminary
Closing Balance Sheet or to investigate the basis for any such
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dispute; provided, however, that any such review and investigation shall be
conducted in such a manner as not to interfere unreasonably with the operation
of the Surviving Corporation's business. The Buyer shall cause its accountant to
make all of its work papers underlying the review of the Preliminary Closing
Balance Sheet available to the Stockholder Representative and Stockholders'
Accountant on customary conditions and to consult in good faith with the
Stockholder Representative, Stockholders' Accountant and any Independent
Accounting Firm during such period.
2.2 Exchange Fund. The procedures for exchanging outstanding shares of
Company Stock for the Merger Consideration pursuant to the Merger are as
follows:
(a) Exchange Agent. At or prior to the Effective Time, the Buyer
shall deposit with U.S. Bank National Association or another bank or trust
company mutually acceptable to the Buyer and the Company (the "Exchange Agent"),
for the benefit of the holders of shares of Company Stock and Company Stock
Options outstanding immediately prior to the Effective Time, for payment through
the Exchange Agent in accordance with this Section 2.2, cash in an amount
sufficient to make payment of the Merger Consideration less the Escrow Amount
(the "Closing Date Payment") pursuant to Section 2.1(c) and Section 2.3, in
exchange for all of the outstanding shares of Company Stock and cancellation of
all Company Stock Options pursuant to Section 2.3 (the "Exchange Fund"). No
interest will be paid or will accrue on the amount payable upon the surrender of
any Certificate or cancellation of any Company Stock Option.
(b) Exchange Procedures. Promptly (and in any event within two
Business Days) after the Effective Time, the Buyer shall cause the Exchange
Agent to mail to each holder of record of a certificate which immediately prior
to the Effective Time represented outstanding shares of Company Stock (each, a
"Certificate") (i) a letter of transmittal in customary form and (ii)
instructions for effecting the surrender of the Certificates in exchange for the
applicable Closing Date Payment payable with respect thereto, provided that the
Buyer shall assist the Company in developing arrangements for the delivery of
such materials at Closing to significant stockholders of the Company to
facilitate the payment of the Closing Date Payment to such stockholders
immediately following the Effective Time. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be paid promptly in exchange
therefor cash in an amount equal to the Closing Date Payment that such holder
has the right to receive pursuant to the provisions of this Article II in
respect of all Company Stock held by such holder and the Certificate so
surrendered shall immediately be cancelled. In the event of a transfer of
ownership of Company Stock which is not registered in the transfer records of
the Company, the applicable Closing Date Payment may be paid to a Person other
than the Person in whose name the Certificate so surrendered is registered, if
such Certificate is presented to the Exchange Agent, properly endorsed with
signature guarantees or otherwise be in proper form for transfer, accompanied by
all documents required to evidence and effect such transfer and by evidence that
any applicable stock transfer taxes have been paid or are not applicable. 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 applicable Merger Consideration.
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(c) No Further Ownership Rights in Company Stock. All Merger
Consideration paid upon the surrender for exchange of Certificates evidencing
shares of Company Stock in accordance with the terms hereof shall be deemed to
have been paid in satisfaction of all rights pertaining to such shares of
Company Stock, and from and after the Effective Time there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation or the Exchange Agent for any reason,
they shall be cancelled and exchanged as provided in this Article II.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Company Stock or Company Stock
Options for one year after the Effective Time shall be only delivered to the
Buyer, upon demand, and any holder of Company Stock who has not previously
complied with this Section 2.2 and any holder of Company Stock Options shall be
entitled to receive only from the Buyer payment of its claim for the applicable
Merger Consideration without interest.
(e) No Liability. To the extent permitted by applicable law, none
of the Buyer, the Transitory Subsidiary, the Company, the Surviving Corporation
or the Exchange Agent shall be liable to any holder of shares of Company Stock
or Company Stock Options delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(f) Withholding Rights. Each of the Buyer and the Surviving
Corporation shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Company
Stock or Company Stock Options such amounts as it is required to deduct and
withhold with respect to the making of such payment under the Internal Revenue
Code of 1986, as amended (the "Code"), or any other applicable state, local or
foreign tax law. To the extent that amounts are so withheld by the Surviving
Corporation or the Buyer, as the case may be, such withheld amounts (i) shall be
remitted by the Buyer or the Surviving Corporation, as the case may be, to the
applicable Governmental Entity, and (ii) shall be treated for all purposes of
this Agreement as having been paid to the holder of the shares of Company Stock
or Company Stock Options in respect of which such deduction and withholding was
made by the Surviving Corporation or the Buyer, as the case may be.
(g) 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 a lost certificate
indemnity, or if required by the Buyer, the posting by such person of a bond in
such reasonable amount as the Buyer may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificate the
Closing Date Payment deliverable in respect thereof pursuant to this Agreement.
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2.3 Company Stock Plans.
(a) The Company shall take such action as shall be required:
(i) to cause the vesting of any unvested options to purchase
Company Common Stock ("Company Stock Options") granted under any stock option
plans or other equity-related plans of the Company (the "Company Stock Plans")
to be accelerated in full effective immediately prior to the Effective Time;
(ii) to effectuate the cancellation, as of the Effective Time,
of all Company Stock Options outstanding immediately prior to the Effective Time
(without regard to the exercise price of such Company Stock Options);
(iii) to cause, pursuant to the Company Stock Plans, each
outstanding Company Stock Option to represent as of the Effective Time solely
the right to receive, in accordance with this Section 2.3, a lump sum cash
payment in the amount of the Option Consideration, if any, with respect to such
Company Stock Option and to no longer represent the right to purchase Company
Common Stock or any other equity security of the Company, the Buyer, the
Surviving Corporation or any other Person or any other consideration; and
(iv) to cause all Company Stock Options held by holders of
options to purchase 10,000 or more shares of Company Common Stock to be
exercised immediately prior to the Effective Time.
(b) Each holder of a Company Stock Option outstanding as of the
Effective Time shall be entitled to receive from the Exchange Fund, in respect
and in consideration of each Company Stock Option so cancelled, as soon as
practicable following the Effective Time (but in any event not later than five
Business Days), an amount equal to the product of (i) the excess, if any, of (A)
the Non-Preference Consideration over (B) the exercise price per share of
Company Common Stock subject to such Company Stock Option, multiplied by (ii)
the total number of shares of Company Common Stock subject to such Company Stock
Option (whether or not then vested or exercisable) (the "Option Consideration"),
net of any applicable withholding taxes and without any interest thereon. In the
event that the exercise price of any Company Stock Option is equal to or greater
than the Non-Preference Consideration, such Company Stock Option shall be
cancelled and have no further force or effect and the holder of such Company
Stock Option shall not be entitled to receive any Option Consideration.
(c) As soon as practicable following the execution of this
Agreement, the Company shall mail to each Person who is a holder of Company
Stock Options a letter describing the treatment of and payment for such Company
Stock Options pursuant to this Section 2.3, and providing instructions for
obtaining payment for such Company Stock Options following the Effective Time.
2.4 Dissenting Shares.
(a) Notwithstanding anything to the contrary contained in this
Agreement, shares of Company Stock held by a holder who has made a demand for
appraisal of such shares of Company Stock in accordance with the MBCA (any such
shares being referred to as
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"Dissenting Shares" until such time as such holder fails to perfect or otherwise
loses such holder's appraisal rights under the MBCA with respect to such shares)
shall not be converted into or represent the right to receive Merger
Consideration in accordance with Section 2.1, but shall be entitled only to such
rights as may be granted by the MBCA to a holder of Dissenting Shares.
(b) If any Dissenting Shares shall lose their status as such
(through failure to perfect or otherwise), then, as of the later of the
Effective Time or the date of loss of such status, such shares shall
automatically be converted into and shall represent only the right to receive
Merger Consideration in accordance with Section 2.1 without interest thereon,
upon surrender of the Certificate formerly representing such shares.
(c) The Company shall give the Buyer: (i) prompt notice of any
written demand for appraisal received by the Company prior to the Effective Time
pursuant to the MBCA, any withdrawal of any such demand and any other demand,
notice or instrument delivered to the Company prior to the Effective Time
pursuant to the MBCA that relate to such demand; and (ii) the opportunity to
participate in all negotiations and proceedings with respect to any such demand,
notice or instrument. The Company shall not make any payment or settlement offer
prior to the Effective Time with respect to any such demand, notice or
instrument unless the Buyer shall have given its written consent to such payment
or settlement offer.
2.5 Escrow. To secure the obligations of the holders of Company Stock
contained in Article VIII and making any payments due pursuant to Section
2.1(e)(ii)(B)(1), prior to the Closing, the Buyer and the Stockholder
Representative shall enter into an escrow agreement with an escrow agent (the
"Escrow Agent") mutually acceptable to the Buyer and the Stockholder
Representative substantially in the form of Exhibit A hereto (the "Escrow
Agreement"). At the Closing, the Buyer shall deposit (i) into an escrow fund
(the "Escrow Fund") the Escrow Amount for the purpose of securing the
obligations of the holders of Company Stock contained in Article VIII and (ii)
$300,000 (the "Adjustment Escrow Amount") into a separate escrow fund held by
the Escrow Agent under this Escrow Agreement (the "Adjustment Escrow Fund")
which shall be available solely for the purpose of making any payment due
pursuant to Section 2.1(e)(ii)(B)(1). The Escrow Agent shall invest the Escrow
Amount and Adjustment Escrow Amount as the Buyer directs; provided, however,
that such investments shall be in (i) obligations of or guaranteed by the United
States of America or any agency thereof with maturity dates of 90 days or less,
(ii) commercial paper obligations receiving the highest rating from either
Xxxxx'x Investors Service, Inc. or Standard & Poor's Ratings Group or (iii)
certificates of deposit with maturity dates of 90 days or less issued by
commercial banks incorporated under the laws of the United States of America or
any states in the United States of America or any domestic branch of a foreign
commercial bank, subject to supervision and examination by federal or state
banking or depository institution authorities with combined capital, surplus and
undivided profits exceeding $1,000,000,000 (collectively, "Permitted
Investments") or in money market funds which are invested solely in Permitted
Investments; provided further, however, that the maturities of Permitted
Investments shall be such as to permit the Escrow Agent to make withdrawals from
the Escrow Fund and the Adjustment Escrow Fund on no more than two (2) Business
Days' notice. Any net profit from, or interest or income produced by, Permitted
Investments in the Escrow Fund and the Adjustment Escrow Fund shall remain in
and be a part of such escrow fund. The Escrow Fund and the Adjustment Escrow
Fund shall be administered in accordance
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with the terms and provisions of the Escrow Agreement for a term ending on (i)
the one year anniversary of the Closing Date with respect to the Escrow Fund,
subject to the resolution of any claims for breach of representations,
warranties or covenants properly made before such time and (ii) upon the
resolution of the Actual Net Working Capital pursuant to Section 2.1(e) with
respect to the Adjustment Escrow Fund, subject to the resolution of any claims
for adjustments to the Merger Consideration made pursuant to Section 2.1(e).
2.6 Stockholder Representative.
(a) The Company and the holders of Company Stock and Company Stock
Options hereby appoint Xxxxx Xxxxx (the "Stockholder Representative") for and on
behalf of the holders of Company Stock and Company Stock Options. The
Stockholder Representative shall have full power and authority to represent all
of the holders of Company Stock and Company Stock Options and their successors,
assigns, heirs and representatives with respect to all matters arising under
this Agreement and the Escrow Agreement and all actions taken by the Stockholder
Representative hereunder and thereunder shall be final, conclusive and binding
upon all such holders of Company Stock and Company Stock Options and their
successors, assigns, heirs and representatives as if expressly confirmed and
ratified in writing by each of them, and no holder of Company Stock or Company
Stock Options shall have the right to object, dissent, protest or otherwise
contest the same. The Stockholder Representative shall take any and all actions
which it believes are necessary or appropriate under this Agreement and the
Escrow Agreement for and on behalf of the holders of Company Stock and Company
Stock Options, as fully as if the holders of Company Stock and Company Stock
Options were acting on their own behalf, including executing the Escrow
Agreement as Stockholder Representative, giving and receiving any notice or
instruction permitted or required under this Agreement or the Escrow Agreement
by the Stockholder Representative or any holder of Company Stock or Company
Stock Options, interpreting all of the terms and provisions of this Agreement
and the Escrow Agreement, authorizing payments to be made with respect hereto or
thereto, obtaining reimbursement for all out-of-pocket fees and expenses and
other obligations of or incurred by the Stockholder Representative in connection
with this Agreement and the Escrow Agreement, which fees and expenses shall be
disbursed from the Escrow Funds (in an amount not to exceed $150,000 in the
aggregate), in accordance with the Escrow Agreement, including the provisions
set forth in Article VIII, bringing all indemnity claims against the Buyer
pursuant to Article VIII, defending all indemnity claims against the holders of
Company Stock and Company Stock Options pursuant to Article VIII (a "Buyer
Indemnity Claim"), consenting to, compromising or settling all Buyer Indemnity
Claims, conducting negotiations with the Buyer and its agents regarding such
claims, dealing with the Buyer and the Escrow Agent under this Agreement and the
Escrow Agreement with respect to all matters arising under this Agreement and
the Escrow Agreement, taking any and all other actions specified in or
contemplated by this Agreement and the Escrow Agreement, and engaging counsel,
accountants or other Stockholder Representatives in connection with the
foregoing matters. Without limiting the generality of the foregoing, the
Stockholder Representative shall have full power and authority to interpret all
the terms and provisions of this Agreement and the Escrow Agreement and to
consent to any amendment hereof or thereof on behalf of all such holders of
Company Stock or Company Stock Options and their successors, assigns, heirs and
representatives.
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(b) The provisions of this Section 2.6 shall in no way impose any
obligations on the Buyer. In particular, notwithstanding any notice received by
the Buyer to the contrary and absent bad faith or willful misconduct, the Buyer
(i) shall be fully protected in relying upon and shall be entitled to rely upon,
(ii) shall have no Liability to the holders of Company Stock or Company Stock
Options with respect to, actions, decisions and determinations of the
Stockholder Representative and (iii) shall be entitled to assume that all
actions, decisions and determinations of the Stockholder Representative are
fully authorized by all of the holders of Company Stock and Company Stock
Options.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer and the Transitory
Subsidiary that the statements contained in this Article III are true and
correct, except as set forth herein or in the disclosure schedule delivered by
the Company to the Buyer and the Transitory Subsidiary and dated as of the date
of this Agreement (the "Company Disclosure Schedule").
3.1 Organization, Standing and Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts, has all requisite corporate power and authority
to own, lease and operate its properties and assets and to carry on its business
as now being conducted and is duly qualified to do business and, where
applicable as a legal concept, is in good standing as a foreign corporation in
each jurisdiction in which the character of the properties it owns, operates or
leases or the nature of its activities makes such qualification necessary,
except for such failures to be so organized, qualified or in good standing,
individually or in the aggregate, that are not reasonably likely to have a
material and adverse effect on the Company and its Subsidiaries taken as a
whole. The Company has delivered or made available to the Buyer correct and
complete copies of its Articles of Organization and by-laws (each as amended to
date). The Company is not in default under or in violation of any provision of
its Articles of Organization or by-laws.
3.2 Capitalization.
(a) The authorized capital stock of the Company as of the date of
this Agreement consists of 7,000,000 shares of Company Common Stock and
4,727,786 shares of Company Preferred Stock of which there are 11,902 shares of
Series B Preferred Stock, 32,057 shares of Series C Preferred Stock, 28,457
shares of Series D Preferred Stock, 3,000,000 shares of Series E Preferred
Stock, 541,620 shares of Series F Preferred Stock, 213,750 shares of Series G
Preferred Stock, and 900,000 shares of Series H Preferred Stock. The rights and
privileges of each class of the Company's capital stock are as set forth in the
Company's Articles of Organization. As of the date of this Agreement, (i)
323,924 shares of Company Common Stock were issued and outstanding, and 11,902
shares of Series B Preferred Stock, 32,057 shares of Series C Preferred Stock,
28,457 shares of Series D Preferred Stock, 2,329,789 shares of Series E
Preferred Stock, 541,620 shares of Series F Preferred Stock, 187,250 shares of
Series G Preferred Stock and 450,000 shares of Series H Preferred Stock were
issued and outstanding. Section 3.2(a) of the Company Disclosure Schedule sets
forth a complete and accurate list, as of
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the date of this Agreement, of the names and addresses of all holders of the
Company Common Stock and Company Preferred Stock and the number of such shares
held.
(b) Section 3.2(b) of the Company Disclosure Schedule sets forth a
complete and accurate list, as of the date of this Agreement, of: (i) all
Company Stock Plans, indicating for each Company Stock Plan, as of such date,
the number of shares of Company Common Stock issued under such Plan, the number
of shares of Company Common Stock subject to outstanding options under such Plan
and the number of shares of Company Common Stock reserved for future issuance
under such Plan; and (ii) all outstanding Company Stock Options, indicating with
respect to each such Company Stock Option the name of the holder thereof, the
Company Stock Plan under which it was granted, the number of shares of Company
Common Stock subject to such Company Stock Option, the exercise price, the date
of grant, and the vesting schedule. The Company has made available to the Buyer
complete and accurate copies of all Company Stock Plans and the forms of all
stock option agreements evidencing Company Stock Options. None of the Company
Stock Options are "incentive stock options" within Section 422 of the Code.
(c) Except (i) as set forth in this Section 3.2 and (ii) as
reserved for future grants under Company Stock Plans, as of the date of this
Agreement, (A) there are no equity securities of any class of the Company, or
any security exchangeable into or exercisable for such equity securities,
issued, reserved for issuance or outstanding and (B) there are no options,
warrants, equity securities, calls, rights, commitments, arrangements or
agreements of any character to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound obligating the
Company or any of its Subsidiaries to issue, exchange, transfer, deliver or
sell, or cause to be issued, exchanged, transferred, delivered or sold,
additional shares of capital stock or other equity interests of the Company or
any security or rights convertible into or exchangeable or exercisable for any
such shares or other equity interests, or obligating the Company or any of its
Subsidiaries to grant, extend, accelerate the vesting of, otherwise modify or
amend or enter into any such option, warrant, equity security, call, right,
commitment, arrangement or agreement. The Company does not have any outstanding
stock appreciation rights, phantom stock, performance based equity rights or
similar equity rights or obligations. Neither the Company nor any of its
Affiliates is a party to or is bound by any agreements or understandings with
respect to the voting (including voting trusts and proxies) or sale or transfer
(including agreements imposing transfer restrictions) of any shares of capital
stock or other equity interests of the Company. For purposes of this Agreement,
the term "Affiliate" when used with respect to any party shall mean any Person
who is an "affiliate" of that party within the meaning of Rule 405 promulgated
under the Securities Act of 1933, as amended (the "Securities Act").
(d) All outstanding shares of Company Stock are, and all shares of
Company Common Stock subject to issuance as specified in Section 3.2(b) above,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be, duly authorized, validly issued, fully paid
and nonassessable and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right subscription right
or any similar right under any provision of the MBCA, the Company's Articles of
Organization or By-laws or any agreement to which the Company is a party or is
otherwise bound. All of the issued and outstanding shares of capital stock of
the Company have been
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offered, issued and sold by the Company in compliance with applicable federal
and state securities laws.
(e) There are no obligations, contingent or otherwise, of the
Company or any of its Subsidiaries (i) restricting the transfer of, (ii)
affecting the voting rights of, (iii) requiring the repurchase, redemption,
disposition or other acquisition of, or containing any right of first refusal
with respect to, (iv) requiring the registration for sale of, or (v) granting
any preemptive or antidilutive right with respect to, any shares of Company
Stock or the capital stock or other equity interest of the Company or any of its
Subsidiaries.
(f) The payment of the Merger Consideration, including any amounts
distributed pursuant to the terms of the Escrow Agreement, to the holders of
shares of Company Stock will be made in accordance with the Company's Articles
of Organization.
3.3 Subsidiaries.
(a) Section 3.3 of the Company Disclosure Schedule sets forth, as
of the date of this Agreement, for each Subsidiary of the Company: (i) its name;
(ii) the number and type of outstanding equity securities and a list of the
holders thereof; and (iii) the jurisdiction of organization. For purposes of
this Agreement, the term "Subsidiary" means, with respect to any party, any
corporation, partnership, trust, limited liability company or other
non-corporate business enterprise in which such party (or another Subsidiary of
such party) holds stock or other ownership interests representing (A) more that
50% of the voting power of all outstanding stock or ownership interests of such
entity or (B) the right to receive more than 50% of the net assets of such
entity available for distribution to the holders of outstanding stock or
ownership interests upon a liquidation or dissolution of such entity. All of the
issued and outstanding shares of capital stock of each Subsidiary are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. All shares of each Subsidiary that are held of record or owned
beneficially by either the Company or any Subsidiary are held or owned free and
clear of any restrictions on transfer (other than restrictions under the
Securities Act and state securities laws), claims, security interests, pledges,
options, rights of first refusal, agreements and other encumbrances of any
nature whatsoever. There are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that require any of the Company and its
Subsidiaries to sell, transfer, or otherwise dispose of any capital stock of any
of its Subsidiaries or that require any Subsidiary of the Company to issue,
sell, or otherwise cause to become outstanding any of its own capital stock.
There are no outstanding contractual obligations of the Company or any of its
Subsidiaries to provide funds to, or make any investment (in the form of a loan,
capital contribution or otherwise) in any Subsidiary of the Company. There are
no voting trusts, proxies or other agreements or understandings with respect to
the voting of any capital stock of any Subsidiary.
(b) Each Subsidiary of the Company is a corporation duly organized,
validly existing and in good standing (to the extent such concepts are
applicable) under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority to own, lease and operate its properties
and assets and to carry on its business as now being conducted and as proposed
to be conducted, and is duly qualified to do business and is in good standing as
a
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foreign corporation (to the extent such concepts are applicable) in each
jurisdiction where the character of its properties owned, operated or leased or
the nature of its activities makes such qualification necessary, except for such
failures to be so organized, qualified or in good standing, individually or in
the aggregate, that are not reasonably likely to have a material and adverse
effect on the Company and its Subsidiaries taken as a whole.
(c) The Company has made available to the Buyer complete and
accurate copies of the charter, by-laws or other organizational documents of
each Subsidiary of the Company. None of the Subsidiaries of the Company is in
default under or in violation of any provision of its charter or by-laws.
3.4 Authority; No Conflict; Required Filings and Consents.
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and, subject to the approval of this Agreement (the
"Company Voting Proposal") by the Company's stockholders under the MBCA (the
"Company Stockholder Approval"), to consummate the transactions contemplated by
this Agreement. Without limiting the generality of the foregoing, the Board of
Directors of the Company (the "Company Board"), at a meeting duly called and
held, by vote of its directors (i) determined that the Merger is in the best
interests of the Company, (ii) adopted this Agreement in accordance with the
provisions of the MBCA, (iii) directed that this Agreement be submitted to the
stockholders of the Company for their approval, and (iv) to the extent
necessary, adopted a vote having the effect of causing the Company not to be
subject to any state takeover law or similar law that might otherwise apply to
the Merger and any other transactions contemplated by this Agreement. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement by the Company have been duly
authorized by all necessary corporate action on the part of the Company, subject
only to the required receipt of the Company Stockholder Approval. This Agreement
has been duly executed and delivered by the Company and constitutes the valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles (the
"Bankruptcy and Equity Exception").
(b) The execution and delivery of this Agreement by the Company do
not, and the consummation by the Company of the transactions contemplated by
this Agreement shall not, (i) conflict with, or result in any violation or
breach of, any provision of the Articles of Organization or by-laws of the
Company or of the charter, by-laws, or other organizational document of any
Subsidiary of the Company, (ii) conflict with, or result in any violation or
breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation, modification or
acceleration of any obligation or loss of any material benefit) under, require a
consent or waiver under, constitute a change in control under, require the
payment of a penalty under or result in the imposition of any mortgage, security
interest, pledge, lien, charge or encumbrance of any kind, other than any of
such arising from (A) mechanic's, materialmen's, workmen's, repairmen's,
warehousemen's, landlord's, carrier's and similar liens, (B) liens for Taxes and
installments of special assessments arising in the Ordinary Course of Business
for amounts not yet due and payable or delinquent or the validity of which are
being contested in good faith subject to appropriate reserves for contested
Taxes or
-14-
assessments in accordance with GAAP, (C) other liens which do not interfere in
any material respect with the use or value of an asset, or (D) liens set forth
in Section 3.4(b) of the Company Disclosure Schedule (collectively "Liens") on
the Company's or any of its Subsidiary's assets under, any of the terms,
conditions or provisions of any Company Material Contracts, Company Leases,
material lease, license, contract or other agreement, instrument or obligation
with respect to Company Intellectual Property to which the Company or any of its
Subsidiaries is a party, or (iii) subject to obtaining the Company Stockholder
Approval and compliance with the requirements specified in clauses (i) and (ii)
of Section 3.4(c), conflict with or violate any material permit, concession,
franchise, license, judgment, injunction, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or any of its or their respective properties or assets.
(c) No consent, approval, license, permit, order or authorization
of, or registration, declaration, notice or filing with, any court, tribunal,
arbitrator or arbitral body, administrative agency, commission, department,
board, bureau or other governmental or regulatory authority, agency or
instrumentality (a "Governmental Entity") is required by or with respect to the
Company or any of its Subsidiaries in connection with the execution and delivery
of this Agreement by the Company or the consummation by the Company of the
transactions contemplated by this Agreement, except for (i) the pre merger
notification requirements under the Xxxx Xxxxx Xxxxxx Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), (ii) the filing of the Articles of Merger
with the Massachusetts Secretary of the Commonwealth and appropriate
corresponding documents with the appropriate authorities of other states in
which the Company is qualified as a foreign corporation to transact business and
(iii) such other consents, approvals, licenses, permits, orders, authorizations,
registrations, declarations, notices and filings which, if not obtained or made,
would not be reasonably likely to have a Company Material Adverse Effect.
3.5 Financial Statements. The Company has delivered or otherwise made
available to Buyer or its counsel (a) the Company's audited consolidated balance
sheet as of December 31, 2004, December 31, 2003 and December 31, 2002, and the
related audited consolidated statements of operations for the three years ended
December 31, 2004, and (b) the unaudited consolidated balance sheet of the
Company as of March 31, 2005 (the "Company Balance Sheet") and the related
consolidated unaudited statement of operations of the Company for the three
months ended March 31, 2005 (the "Company Balance Sheet Date") (all of the
foregoing financial statements of the Company and any notes thereto are
hereinafter collectively referred to as the "Company Financial Statements"). The
Company Financial Statements are consistent with the books and records of the
Company and its Subsidiaries and fairly present, in all material respects, the
financial condition of the Company and its Subsidiaries at the dates therein
indicated and the results of operations of the Company and its Subsidiaries for
the periods therein specified in accordance with United States generally
accepted accounting principles ("GAAP") consistently applied during the period
involved, except (i) as may be indicated in the footnotes to such financial
statements and (ii) that the unaudited financial statements do not contain
footnotes and are subject to normal year end adjustments.
3.6 Absence of Certain Changes. Except as expressly contemplated by
this Agreement, between the date of the Company Balance Sheet and the date of
this Agreement, there has not occurred: (a) any Company Material Adverse Effect;
(b) any acquisition, sale or
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transfer of any material asset of the Company other than in the ordinary course
of business, (c) any amendment to the Articles of Organization or By-laws of the
Company or (d) any other action or event that would have required the consent of
the Buyer pursuant to Sections 5.1(a) through (t) of this Agreement had such
action or event occurred after the date of this Agreement. For purposes of this
Agreement, the term "Company Material Adverse Effect" means any change, event,
circumstance, development, condition or effect that (i) prevents the
consummation of the Merger or the transactions contemplated hereby or (ii) is
materially adverse with respect to, or has a material adverse effect on, the
business, assets, liabilities, properties, financial condition or results of
operations of the Company and its Subsidiaries, taken as a whole; provided,
however, that none of the following shall constitute, or shall be considered in
determining whether there has occurred, a Company Material Adverse Effect:
(a) changes that are the result of economic factors affecting the
national, regional or world economy or acts of war or terrorism which do not
materially disproportionately adversely affect the Company and its Subsidiaries
relative to other participants in the child care and child education industries;
(b) changes that are the result of factors generally affecting the
industries or markets in which the Company operates or competes, which do not
materially disproportionately adversely affect the Company and its Subsidiaries
relative to other participants in the child care and child education industries;
(c) any adverse change arising from (i) compliance with or the
taking of actions required by this Agreement, (ii) actions taken by the Buyer or
its Affiliates or (iii) the announcement or consummation of the transactions
contemplated by this Agreement; and
(d) changes in law, rules or regulations or generally accepted
accounting principles or the interpretation thereof.
3.7 No Undisclosed Liabilities. Except as may be disclosed in the
Company Balance Sheet and except for (a) any Liability incurred in the ordinary
course of business consistent with past practice (the "Ordinary Course of
Business") since the Company Balance Sheet Date and (b) any Liability reflected
or reserved against in the Company Balance Sheet or the notes thereto, the
Company and its Subsidiaries do not have any liabilities of any nature required
by GAAP to be reflected on a consolidated balance sheet of the Company.
"Liability" means any liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due).
3.8 Taxes.
(a) The Company and each of its Subsidiaries have filed all Tax
Returns that they were required to file, and all such Tax Returns were correct
and complete in all material respects. Neither the Company nor any of its
Subsidiaries is the beneficiary of any extension of time within which to file
any Tax Return. The Company and each of its Subsidiaries have paid on a timely
basis all Taxes required to be paid (whether or not shown to be due on any such
Tax Returns). There are no liens on any of the assets of any of the Company and
its Subsidiaries that
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arose in connection with any failure (or alleged failure) to pay any material
Tax other than liens for Taxes not yet due or payable or for Taxes that the
Company or its Subsidiaries are contesting in good faith through appropriate
proceedings and for which appropriate reserves have been established. Each of
the Company and its Subsidiaries 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. For purposes of this Agreement: (i) "Taxes" means any and all taxes,
charges, fees, levies or other similar assessments or liabilities, including
income, gross receipts, ad valorem, premium, value-added, excise, stamp, real
property, personal property, sales, use, services, transfer, withholding,
employment, payroll, social security (or similar), unemployment, disability,
severance, occupation, registration, value added, premium, windfall profits,
environmental, customs duties, profits, capital stock, and franchise alternative
or add-on minimum, estimated, business, occupancy or other tax of any kind
whatsoever imposed by the United States of America or any state, local or
foreign government, or any agency thereof, together with any interest, fines,
penalties, assessments or additions to tax resulting from, attributable to or
incurred in connection with any tax or any contest or dispute thereof; and (ii)
"Tax Returns" means all reports, returns, declarations, statements or other
information required to be supplied to a taxing authority in connection with
Taxes, including any schedule or attachment thereto, and including any amendment
thereof.
(b) The Company has made available to the Buyer correct and
complete copies of all federal and state income, and all material non-income or
franchise, Tax Returns, examination reports and statements of deficiencies
assessed against or agreed to by the Company or any of its Subsidiaries since
January 1, 2002. No examination or audit of any Tax Return of the Company or any
of its Subsidiaries by any Governmental Entity is currently in progress or, to
the Company's Knowledge, threatened or contemplated, nor is there any dispute or
claim concerning any material Tax Liability of any of the Company and its
Subsidiaries claimed or raised by any authority in writing. None of the Company
and its Subsidiaries has waived any statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax assessment or
deficiency which extension or waiver is still in effect.
(c) Neither the Company nor any of its Subsidiaries is a party to
or bound by any Tax allocation or sharing agreement. Neither the Company nor any
of its Subsidiaries (i) is or has ever been a member of an Affiliated Group or
other group of corporations with which it has filed (or been required to file)
consolidated, combined or unitary Tax Returns, other than a group of which the
Company is or was the common parent, (ii) has any Liability for the Taxes of any
Person (other than its own and the Affiliated Group the common parent of which
is the Company) under Treasury Regulations Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise, or (iii) is a party to or bound by any Tax indemnity,
Tax sharing or Tax allocation agreement. For purposes of this Agreement,
"Affiliated Group" means any affiliated group within the meaning of Code Section
1504(a) or any similar group defined under a similar provision of state, local
or foreign law.
(d) None of the Company and its Subsidiaries (i) has been a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code (or any similar state, local or foreign laws); (ii) has made any
payments, is obligated to make any payments, or is a party to (or participating
employer in) any agreement that will obligate it to make any
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payments that will not be deductible under Code Section 280G as a result of the
transactions contemplated by this Agreement; or (iii) has been either a
"distributing corporation" or a "controlled corporation" in a distribution of
stock intended to qualify for tax-free treatment under Section 355 of the Code,
or any similar state, local or foreign laws).
(e) The unpaid Taxes of the Company and its Subsidiaries (A) did
not, as of the Company Balance Sheet Date, exceed the accruals and reserves for
Taxes (other than any accrual or reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on the face of
the Company Balance Sheet Date (or in any notes thereto) and (B) do not exceed
that reserve as adjusted for the passage of time through the Effective Time in
accordance with the past practice of the Company and its Subsidiaries in filing
their Tax Returns. Since the date of the Company Balance Sheet, neither the
Company nor any of its Subsidiaries has incurred any Liability for Taxes arising
from extraordinary gains or losses, as that term is used in GAAP, outside the
Ordinary Course of Business.
(f) No claim is currently being asserted or, to the Company's
Knowledge, threatened with respect to the Company or its Subsidiaries by a
taxing authority in a jurisdiction where the Company or its Subsidiaries do not
pay Taxes or file Tax Returns that the Company or its Subsidiaries are or may be
subject to Taxes assessed by such jurisdiction.
(g) None of the Company and its Subsidiaries will be required to
take into account any income or gain in, or exclude any item of deduction from,
taxable income for any taxable period (or portion thereof) ending after the
Closing Date that is attributable to (i) a change in method of accounting under
Section 481 of the Code (or any corresponding or similar provision of federal,
state, local or foreign Tax law) made on or prior to the Closing Date; (ii) a
"closing agreement" as described in Section 7121 of the Code (or any
corresponding or similar provision of state, local or foreign Tax law) executed
on or prior to the Closing Date; (iii) an installment sale or open transaction
disposition made on or prior to the Closing Date; (iv) a prepaid amount received
on or prior to the Closing Date; or (v) intercompany transactions or any excess
loss account described in Treasury Regulations under Section 1502 of the Code
(or any corresponding or similar provision of state, local or foreign Tax law).
3.9 Owned and Leased Real Properties.
(a) Neither the Company nor any of its Subsidiaries owns any real
property.
(b) Section 3.9(b) of the Company Disclosure Schedule sets forth a
complete and accurate list as of the date of this Agreement of all real property
leased, subleased or licensed by the Company or any of its Subsidiaries
(collectively "Company Leases") and the location of the premises. Neither the
Company nor any of its Subsidiaries nor, to the Company's Knowledge, any other
party to any Company Lease is in material default under any of the Company
Leases. Neither the Company nor any of its Subsidiaries leases, subleases or
licenses any real property to any Person. The Company has made available to the
Buyer complete and accurate copies of all Company Leases. With respect to each
lease and sublease listed in Section 3.9(b) of the Company Disclosure Schedule:
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(i) the lease or sublease constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms subject to the Bankruptcy and Equity Exception, and to the Company's
Knowledge, against each other party thereto;
(ii) none of the Company and its Subsidiaries is in breach or
default in any material respect under any such lease or sublease, and to the
Company's Knowledge, no other party (including the lessor or landlord under a
master lease) is in breach or default in any material respect under any such
lease or sublease and, to the Company's Knowledge, no event has occurred under
any such lease or sublease which, with notice or lapse of time, would constitute
a breach or default in any material respect thereunder, or permit termination,
modification, or acceleration thereof;
(iii) the Company has not, and has not received any written
notice that any other party to the lease or sublease has, repudiated any
provision thereof;
(iv) none of the Company and its Subsidiaries has assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in
the leasehold or subleasehold estate created by any such lease or sublease; and
(v) to the Company's Knowledge, all facilities leased or
subleased are supplied with utilities sufficient for the operation of said
facilities in the Ordinary Course of Business.
3.10 Intellectual Property.
(a) The Company and its Subsidiaries own, license, sublicense or
otherwise possess legally enforceable rights to use (free and clear of all
Liens) all Intellectual Property necessary to conduct the business of the
Company and its Subsidiaries as currently conducted in all material respects.
For purposes of this Agreement, the term "Intellectual Property" means (i) all
inventions (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications, and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (ii)
all registered and common law trademarks, service marks, trade dress, logos,
trade names, corporate names, and domain names and all goodwill associated
therewith, (iii) all copyrightable works, including without limitation, all
curriculum and all copyrights, (iv) all mask works, designs and trade secrets,
(v) applications for, and registrations and renewals, of such patents,
trademarks, service marks, trade dress, logos, trade names, domain names,
copyrights and designs, (vi) all trade secrets and proprietary or confidential
business information (including, without limitation, ideas, research and
development, processes, formulae, methods, schematics, technology, know-how,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information, business and marketing plans and proposals and employee
handbooks and manuals), (vii) all computer software programs and applications
(including data and related documentation), (viii) all other tangible or
intangible proprietary or confidential information and materials and (ix) all
copies and tangible embodiments of any of the foregoing (in whatever form or
medium).
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(b) The execution and delivery of this Agreement by the Company
and the consummation by the Company of the Merger will not result in the breach
of, or create on behalf of any third party the right to terminate or modify, (i)
any license, sublicense or other agreement relating to any Intellectual Property
owned by the Company that is material to the business of the Company and its
Subsidiaries, taken as a whole (the "Company Intellectual Property"), or (ii)
any license, sublicense and other agreement as to which the Company or any of
its Subsidiaries is a party and pursuant to which the Company or any of its
Subsidiaries is authorized to use any third party Intellectual Property that is
material to the business of the Company and its Subsidiaries, taken as a whole,
excluding generally commercially available, off-the-shelf software programs (the
"Third Party Intellectual Property"). Section 3.10(b)(i) of the Company
Disclosure Schedule sets forth a complete and accurate list of all patents and
patent applications owned by the Company or its Subsidiaries and Section
3.10(b)(ii) of the Company Disclosure Schedule sets forth a complete and
accurate list of all Third Party Intellectual Property.
(c) To the Company's Knowledge, no third party is infringing,
violating or misappropriating any of the Company Intellectual Property or any of
the Company's or Subsidiaries' rights thereto.
(d) To the Company's Knowledge, the conduct of the business of the
Company and its Subsidiaries as currently conducted does not infringe, violate
or constitute a misappropriation of any Intellectual Property of any third
party. Since January 1, 2003, neither the Company nor any of its Subsidiaries
has received any written claim or notice alleging any such material
infringement, violation or misappropriation or challenging or questioning the
legality, validity or enforceability of any such Intellectual Property.
(e) Section 3.10(e) of the Company Disclosure Schedule identifies
each registration and application to register any trade name, copyright, domain
name, service xxxx and trademark of the Company and its Subsidiaries and any
other trade name, copyright, domain name, service xxxx and trademark of the
Company and its Subsidiaries material to the business of the Company and its
Subsidiaries. Each of the Company and its Subsidiaries has taken reasonably
appropriate measures to maintain and protect its Intellectual Property. Without
limiting the foregoing, all maintenance and related fees have been paid, and all
documents and instruments necessary to maintain the rights of the Company and
the Subsidiaries in any registrations or applications for such Intellectual
Property owned by any of them have been validly executed, delivered and filed.
(f) Section 3.10(f) of the Company Disclosure Schedule identifies
each material license, agreement, or other material permission to which any of
the Company and its Subsidiaries is party involving any Intellectual Property
necessary for the continued operation of the businesses of the Company and its
Subsidiaries as presently conducted in all material respects. Each such license,
agreement or permission is in full force and effect. None of the Company and its
Subsidiaries and, to the Knowledge of the Company, no other party thereto is in
breach or default in any material respect under any such license, agreement or
permission.
-20-
3.11 Contracts.
(a) Section 3.11(a) of the Company Disclosure Schedule sets forth
a complete and accurate list of the following contracts and agreements to which
the Company or any of its Subsidiaries is a party or is otherwise bound as of
the date of this Agreement: (i) any agreement, contract or commitment in
connection with which or pursuant to which the Company and its Subsidiaries will
spend or receive (or are expected to spend or receive), in the aggregate, more
than $25,000 during the current fiscal year or during the next fiscal year
(provided, that with respect to contracts between the Company and its customers
such amount shall be $50,000 and not $25,000), (ii) any non-competition or other
agreement that prohibits or otherwise restricts, the Company or any of its
Subsidiaries from freely engaging in business anywhere in the world, (iii) any
employment or consulting agreement with any executive officer or other employee
of the Company or any Subsidiary other than those that are terminable by the
Company or any of its Subsidiaries on no more than 30 days' notice without
material liability or financial obligation to the Company or any of its
Subsidiaries, (iv) any agreement establishing a partnership or joint venture
between the Company or any of its Subsidiaries on the one hand, and a third
party on the other hand, (v) any agreement (or group of related agreements) for
the lease of personal property to or from any Person providing for lease
payments in excess of $25,000 per annum; (vi) any agreement (or group of related
agreements) for the purchase or sale of raw materials, commodities, supplies,
products, or other personal property, or for the furnishing or receipt of
services, the performance of which will extend over a period of more than one
year or involves consideration in excess of $25,000 in any year and which is not
terminable by the Company or any of its Subsidiaries without penalty upon ninety
(90) or fewer days' notice (provided, that with respect to contracts between the
Company and its customers such amount shall be $50,000 and not $25,000); (vii)
any royalty sharing arrangements involving payments by the Company or any of its
Subsidiaries in excess of $25,000 in any calendar year; (viii) any agreement (or
group of related agreements) under which it has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money, any capitalized lease
obligation, or any agreement under which it has imposed a Lien on any of its
assets, (ix) any agreements concerning confidentiality; (x) any agreement with
any of the stockholders of the Company and their Affiliates and (xi) any
agreement under which it has advanced or loaned any amount to any of its
directors, officers, and employees outside the Ordinary Course of Business
(collectively, the "Company Material Contracts"). The Company has made available
to the Buyer a complete and accurate copy of each Company Material Contract and
has delivered to Buyer a written summary setting forth the terms and conditions
of any oral agreement referred to in Section 3.11(a) of the Disclosure Schedule.
(b) Each Company Material Contract constitutes the valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms subject to the Bankruptcy and Equity Exception, and to the
Company's Knowledge, against each other party thereto, except to the extent it
has previously expired in accordance with its terms, and will continue to be in
full force and effect immediately following the Closing in accordance with the
terms thereof as in effect immediately prior to the Closing. Neither the Company
nor any of its Subsidiaries nor, to the Company's Knowledge, any other party to
any Company Material Contract is in material violation of or in material default
under (nor does there exist any condition which, upon the passage of time or the
giving of notice or both, would cause such a material violation of or material
default under) any Company Material Contract. As of the date
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of this Agreement, no party has given written notice that it intends to
terminate or has repudiated in writing any provision of any Company Material
Contract.
3.12 Litigation. As of the date hereof there is no action, suit,
proceeding, claim, arbitration or investigation pending or, to the Company's
Knowledge, threatened against the Company or any of its Subsidiaries. There are
no judgments, injunctions, orders, decrees or rulings outstanding against the
Company or any of its Subsidiaries. Section 3.12 of the Company Disclosure
Schedule sets forth each instance in which the Company or any of its
Subsidiaries, as of the date hereof, has been a party to or, to the Company's
Knowledge, has been threatened to be made a party to any suit, action,
proceeding, hearing, or investigation of, in, or before any court or
quasi-judicial or administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator.
3.13 Environmental Matters.
(a) The Company and each of its Subsidiaries are in compliance in
all material respects with all applicable Environmental Laws (which compliance
includes, but is not limited to, the possession of all material permits and
other governmental authorizations required under applicable Environmental Laws
(collectively, "Environmental Permits"), and is in compliance in all material
respects with the terms and conditions thereof).
(b) Neither the Company nor any of its Subsidiaries has received
any written notice alleging any of them has not complied with or is in violation
of applicable Environmental Laws. To the Company's Knowledge, the properties
operated by the Company and its Subsidiaries (including soils, groundwater,
surface water, buildings or other structures) are not contaminated with any
Hazardous Substances. To the Company's Knowledge, none of the facilities located
in real property leased by the Company or its Subsidiaries and used in the
operation of its business contain any lead based paint or dust, asbestos or
mold.
(c) Neither the Company nor any of its Subsidiaries has received a
written Environmental Claim that has not been resolved in all material respects,
and, to the Knowledge of the Company, (i) no Environmental Claim has been
threatened in writing against the Company or its Subsidiaries that has not been
resolved in all material respects, and (ii) there is no material Environmental
Claim pending against any Person whose Liability for any Environmental Claim the
Company or any of its Subsidiaries has retained or assumed either contractually
or by operation of law. Neither the Company, nor any of its Subsidiaries has
Released Hazardous Substances into the environment except (A) in compliance with
law or (B) in an amount or concentration that would not be expected to give rise
to any material Liability or obligation under any Environmental Law. Neither the
Company nor any of its Subsidiaries is subject to any material orders, decrees
or injunctions by any Governmental Entity addressing Liability under any
Environmental Law.
(d) Neither the Company nor any of its Subsidiaries store,
generate or handle, or allow any Person to store, generate or handle, any
Hazardous Substances at or on any properties operated by the Company and its
Subsidiaries, except in material compliance with Environmental Laws.
-22-
(e) The Company has delivered or otherwise made available for
inspection to Buyer true, complete and correct copies of any written reports or
written results of, studies, analyses, tests or monitoring, to the extent same
are possessed by the Company, in any case pertaining to Hazardous Substances in,
on, beneath or adjacent to any property currently or formerly owned, operated or
leased by the Company, or regarding the Company's compliance with applicable
Environmental Law.
(f) For purposes of this Agreement, the term "Environmental Law"
means any law, regulation, order, decree or permit requirement of any
governmental jurisdiction relating to: (i) the pollution, protection,
investigation or restoration of the environment, human health and safety, or
natural resources (including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), the
Resource Conservation and Recovery Act of 1976, and the Occupational Safety and
Health Act of 1970), each as amended, and all laws relating to protection of
endangered or threatened species of fish, wildlife and plants and the
conservation of natural resources, (ii) the handling, use, storage, treatment,
transport, disposal, release or threatened release of any Hazardous Substance or
(iii) noise, odor or wetlands protection; and "Environmental Claim" means any
written claim, action, cause of action or notice by any Person alleging
potential Liability under Environmental Law.
(g) For purposes of this Agreement, the term "Hazardous Substance"
means: (i) any pollutant, contaminant, toxic substance, or other compound,
element, material or other substance that is regulated or which falls within the
definition of a "hazardous substance," "hazardous waste" or "hazardous material"
pursuant to any Environmental Law; or (ii) any petroleum product or by-product,
asbestos-containing material, polychlorinated biphenyls, radioactive materials
or radon; and the term "Release" shall have the meaning given to it in CERCLA.
(h) The parties agree that the only representations and warranties
of the Company in this Agreement as to any environmental matters or any other
obligation or Liability with respect to Hazardous Substances are those contained
in this Section 3.13. Without limiting the generality of the foregoing, the
Buyer specifically acknowledges that the representations and warranties
contained in Sections 3.12, 3.15 and 3.16 do not relate to environmental
matters.
3.14 Employee Benefit Plans.
(a) Section 3.14(a) of the Company Disclosure Schedule sets forth
a complete and accurate list of all Employee Benefit Plans sponsored,
maintained, or contributed to, by the Company, or any of the Company's
Subsidiaries or any of their ERISA Affiliates or to which the Company, any of
the Company's Subsidiaries or any of their ERISA Affiliates is a party, (i)
covering or benefiting any current or former officer, employee, agent, director
or independent contractor of the Company or any of the Company's Subsidiaries
(or any dependent or beneficiary of any such individual), or (ii) with respect
to which the Company or any of the Company's Subsidiaries or any of their ERISA
Affiliates has (or could have) any obligation or Liability (together, the
"Company Employee Plans"). None of the Company, any of the Company's
Subsidiaries or any of their ERISA Affiliates has any written agreement,
arrangement, commitment or obligation, to create, enter into or contribute to
any additional Company Employee Plan, or to modify or amend any existing Company
Employee Plan. The
-23-
terms of each Company Employee Plan permit the Company, one of the Company's
Subsidiaries or any of their ERISA Affiliates (as applicable) to amend and
terminate such Company Employee Plan (or its participation therein, as
applicable) at any time and for any reason without material penalty and without
material Liability or expense. None of the rights of the Company or any of the
Company's Subsidiaries or any of their ERISA Affiliates under any Company
Employee Plan will be impaired in any way by this Agreement or the consummation
of the transactions contemplated by this Agreement. For purposes of this
Agreement, the following terms shall have the following meanings: (i) "Employee
Benefit Plan" means (A) any "employee pension benefit plan" (as defined in
Section 3(2) of ERISA), (B) any "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA), and (C) any other written or oral plan, agreement or
arrangement involving direct or indirect compensation to one or more Persons and
monetary benefits in excess of $10,000, including, without limitation, insurance
coverage, severance benefits, disability benefits, fringe benefits, deferred
compensation, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
compensation and all unexpired severance agreements; (ii) "ERISA" means the
Employee Retirement Income Security Act of 1974, as amended, and all regulations
and rulings promulgated thereunder; and (iii) "ERISA Affiliate" means any entity
which is a member of (A) a controlled group of corporations (as defined in
Section 414(b) of the Code), (B) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (C) an affiliated service
group (as defined under Section 414(m) of the Code or the regulations under
Section 414(o) of the Code), any of which includes the Company or a Subsidiary
of the Company.
(b) With respect to each Company Employee Plan, the Company has
made available to the Buyer (to the extent applicable to the Company Employee
Plan) a complete and accurate copy of (i) such Company Employee Plan, (ii) the
three most recent annual reports (Form 5500) filed with the Internal Revenue
Service (the "IRS") with respect to such Company Employee Plan, (iii) the most
recent summary plan description, and all summaries of material modification
related thereto, distributed with respect, to such Company Employee Plan, (iv)
all contracts and agreements relating to such Company Employee Plan, including,
without limitation, all trust agreements, investment management agreements,
annuity contracts, insurance contracts, bonds, indemnification agreements and
service provider agreements; (v) the most recent determination letter issued by
the IRS with respect to such Company Employee Plan; (vi) the most recent annual
actuarial valuation prepared for such Company Employee Plan; (vii) all material
written communications during the last three years relating to the amendment,
creation or termination of such Company Employee Plan, or any increase or
decrease in benefits, acceleration of payments or vesting under such Company
Employee Plan, or any other event(s) that could result in any material Liability
to the Company or any of the Company's Subsidiaries or any of their ERISA
Affiliates with respect to such Company Employee Plan; (viii) all material
correspondence to or from any governmental entity or agency relating to such
Company Employee Plan; and (ix) all coverage, nondiscrimination, top heavy and
Code Section 415 tests performed with respect to such Company Employee Plan for
the last three years.
(c) With respect to each Company Employee Plan: (i) such Company
Employee Plan was properly and legally established; (ii) such Company Employee
Plan is maintained, administered, operated and funded in all material respects
in accordance with its terms and in compliance with all applicable requirements
of all applicable laws, statutes, orders,
-24-
rules and regulations, including, without limitation, ERISA and the Code; (iii)
the Company, each of the Company's Subsidiaries, each of their ERISA Affiliates
and each other Person (including, without limitation, each fiduciary) has in all
material respects, properly performed all of its, his or her duties and
obligations (whether arising by operation of law or by contract) under or with
respect to such Company Employee Plan, including, without limitation, all
reporting, disclosure and notification obligations; (iv) all returns, reports
(including, without limitation, all Form 5500 series annual reports, together
with all schedules and audit reports required with respect thereto), notices,
statements and other disclosures relating to such Company Employee Plan required
to be filed with any governmental authority or distributed to any Company
Employee Plan participant have been properly prepared and filed or distributed;
(v) none of the Company, any of the Company's Subsidiaries, any of their ERISA
Affiliates or any fiduciary of such Company Employee Plan has engaged in any
transaction or acted or failed to act in a manner that violates the fiduciary
requirements of ERISA or any other applicable law in a manner that would result
in material Liability to the Company; (vi) no transaction or event has occurred
or to the knowledge of the Company, any of the Company's Subsidiaries or any of
their ERISA Affiliates is threatened or about to occur (including any of the
transactions contemplated in or by this Agreement) that constitutes or could
constitute a prohibited transaction under Section 406 or 407 of ERISA or under
Section 4975 of the Code for which an exemption is not available that would
result in material Liability to the Company; and (vii) none of the Company, any
of the Company's Subsidiaries or any of their ERISA Affiliates has incurred, and
there exists no condition or set of circumstances in connection with which the
Company, any of the Company's Subsidiaries, any of their ERISA Affiliates or the
Buyer could reasonably be expected to incur, directly or indirectly, any
material Liability or expense (except for routine contributions and benefit
payments) under ERISA, the Code or any other applicable law, statute, order,
rule or regulation, or pursuant to any indemnification or similar agreement,
with respect to such Benefit Plan.
(d) With respect to the Company Employee Plans, there are no
benefit obligations for which contributions have not been made or properly
accrued to the extent required by GAAP. The assets of each Company Employee Plan
which is funded are reported at their fair market value on the books and records
of such Employee Benefit Plan. All contributions which have become due to the
Company Employee Plans have been paid thereto.
(e) All the Company Employee Plans that are intended to be
qualified under Section 401(a) of the Code have received favorable determination
letters from the IRS to the effect that such Company Employee Plans are
qualified and the plans and trusts (and group annuity contracts) related thereto
are exempt from federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code, as amended by the Tax Reform Act of 1986 and all
subsequent legislation, including, without limitation, that legislation commonly
referred to as "GUST" and "EGTRRA," no such determination letter has been
revoked and revocation has not been threatened, and nothing has occurred, or is
reasonably expected by the Company, any of the Company's Subsidiaries or any of
their ERISA Affiliates to occur, that could reasonably be expected to adversely
affect the qualification or exemption of any such Company Employee Plan or its
related trust (or group annuity contract) or materially increase its cost. No
such Company Employee Plan is a "top-heavy plan," as defined in Section 416 of
the Code.
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(f) None of the Company, any of the Company's Subsidiaries or any
of their ERISA Affiliates has incurred, or reasonably expects to incur, any
material Liability under Title IV of ERISA. None of the Company, any of the
Company's Subsidiaries or any of their ERISA Affiliates has within the past 65
years (i) sponsored, maintained or contributed to (or been obligated to sponsor,
maintain or contribute to) an Employee Benefit Plan which was ever subject to
Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA, (ii)
sponsored, maintained or contributed to (or been obligated to sponsor, maintain
or contribute to) a multiple employer plan within the meaning of Section 4063 or
4064 of ERISA or Section 413 of the Code, or (iii) contributed to, or been
obligated to contribute to, a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA).
(g) Neither the Company nor any of its Subsidiaries is a party to
any oral or written (i) agreement with any stockholders, director, executive
officer or other key employee of the Company or any of its Subsidiaries (A) the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving the Company or any of its
Subsidiaries of the nature of any of the transactions contemplated by this
Agreement, (B) providing any term of employment or compensation guarantee or (C)
providing severance benefits or other benefits after the termination of
employment of such director, executive officer or key employee; or (ii)
agreement or plan binding the Company or any of its Subsidiaries, including,
without limitation, any stock option plan, stock appreciation right plan,
restricted stock plan, stock purchase plan or severance benefit plan, any of the
benefits of which shall be increased, or the vesting of the benefits of which
shall be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which shall be
calculated on the basis of any of the transactions contemplated by this
Agreement.
(h) None of the Company Employee Plans promises or provides
post-employment medical or other post-employment welfare benefits to any person,
except as required by Parts 6 and 7 of Subtitle B of Title I of ERISA, Sections
4980B(f), 9801, 9802 and 9803 of the Code or similar state laws.
(i) There are no actions, suits or claims (other than routine
claims for benefits) pending or, to the Company's Knowledge, any of the
Company's Subsidiaries or any of their ERISA Affiliates, threatened with respect
to (or against the assets of) any Company Employee Plan. No Company Employee
Plan is currently under investigation, audit or review, directly or indirectly,
by the IRS, the United States Department of Labor (the "DOL") or any other
governmental entity or agency, and, to the Company's Knowledge, each of the
Company's Subsidiaries and each of their ERISA Affiliates, no such action is
contemplated or under consideration by the IRS, DOL or any other governmental
entity or agency.
(j) Each "group health plan," as defined in Section 607(1) or
733(a)(1) of ERISA or Section 5000(b)(1) of the Code, sponsored, maintained or
contributed to by the Company, any of the Company's Subsidiaries or any of their
ERISA Affiliates has been maintained, administered and operated at all times
since its inception in material compliance with the requirements of Parts 6 and
7 of Subtitle B of Title I of ERISA, Sections 4980B(f), 9801, 9802 and 9803 of
the Code and any other applicable laws, statutes, orders, rules and regulations
relating to the provision or continuation of health insurance coverage or other
welfare benefits (within the meaning of Section 3(1) of ERISA). Section 3.14(j)
of the Company
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Disclosure Schedule lists all former employees of the Company, any of the
Company's Subsidiaries or any of their ERISA Affiliates and their beneficiaries
who have elected or are eligible to elect continuation of health insurance
coverage under any Company Employee Plan offering health insurance or medical
benefits pursuant to Part 6 of Subtitle B of Title I of ERISA and Section 4890B
of the Code.
3.15 Compliance With Laws. The Company and each of its Subsidiaries has
since January 1, 2000 materially complied with, is in material compliance with,
is not in material violation of, and, since January 1, 2000, has not received
any written notice alleging any material violation with respect to, any
applicable statute, law or regulation (including without limitation, any rules,
ordinances, executive orders, codes, plans, injunctions, judgments, orders,
decrees and rulings) with respect to the conduct of its business, or the
ownership or operation of its properties or assets.
3.16 Permits. The Company and each of its Subsidiaries have all
material permits, licenses, franchises, approvals, authorizations, exemptions,
certificates and registrations from Governmental Entities required to conduct
their businesses as now being conducted (the "Company Permits") or has applied
for renewal of such Company Permits in the ordinary course of business. The
Company and each of its Subsidiaries are in material compliance with the terms
and requirements of the Company Permits. Such Company Permits are valid and in
full force and effect and there are no proceedings pending or, to the Company's
Knowledge, threatened in writing that seek the revocation, cancellation,
suspension or adverse modification thereof. To the Company's Knowledge, no event
has occurred or circumstance exists that may (with or without notice or lapse of
time) (A) constitute or result directly or indirectly in a failure to comply in
all material respects with any term or requirement of any Company Permit, or (B)
result directly or indirectly in the revocation, withdrawal, suspension,
cancellation or termination of any Company Permit. All material applications
required for the continued operation of the businesses of the Company and its
Subsidiaries as presently conducted in all material respects have been filed for
the renewal of the Company Permits, have been duly filed on a timely basis with
the appropriate Governmental Entity, and all other material filings required for
the continued operation of the businesses of the Company and its Subsidiaries as
presently conducted in all material respects have been made on a timely basis
with the appropriate Governmental Entity. Neither the Company nor any of its
Subsidiaries has received, at any time during the past three years, any written
notice or other written communication from any Governmental Entity regarding (A)
any actual or alleged specific failure to comply in all material respects with
any term or requirement of any Company Permit, or (B) any actual or proposed
revocation, withdrawal, suspension, cancellation or termination of any Company
Permit.
3.17 Labor and Employee Matters.
(a) Neither the Company nor any of its Subsidiaries is the subject
of any proceeding (1) asserting that the Company or any of its Subsidiaries has
committed an unfair labor practice nor, to the Company's Knowledge have any
unfair labor practice charges or complaints against the Company or any of its
Subsidiaries been threatened, or (2) seeking to compel it to bargain with any
labor union or labor organization.
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(b) There are no pending or, to the Company's Knowledge,
threatened labor strikes, disputes, walkouts, slowdowns, work stoppages or
lockouts involving the Company or any of its Subsidiaries, and during the past
three years there has not been any such action;
(c) No labor organization, as that term is defined in the National
Labor Relations Act, is certified or recognized as the bargaining agent on
behalf of any employees of the Company or its Subsidiaries, and to the Company's
Knowledge, as of the date hereof, there are no current union organizing
activities among the employees of the Company or its Subsidiaries;
(d) Section 3.17 of the Company Disclosure Schedule contains a
complete and accurate list as of the date of this Agreement of the following
information for each independent contractor or consultant with a base
compensation in excess of $50,000, and for each employee of the Company,
including each employee on leave of absence or layoff status, with a base salary
in excess of $100,000; employer; name; job title; current compensation paid or
payable and any change in compensation since January 1, 2004; vacation accrued;
and date of hire;
(e) As of the date hereof, no executive officer has notified the
Company in writing, since January 1, 2004, that he or she has any plans to
terminate employment with the Company or its Subsidiaries;
(f) The Company and its Subsidiaries have paid in full to, or in
accordance with GAAP accrued on behalf of, all Persons performing services for
the Company and its Subsidiaries, all payments, wages, salaries, commissions,
bonuses and other compensation that is due to such Persons, vacation,
profit-sharing and other benefits which have accrued through the date hereof for
such Persons, and amounts required to be reimbursed to such Persons for which
appropriate reimbursement requests have been submitted, except for such failures
to pay or accrue, individually or in the aggregate, that are not reasonably
likely to have a material and adverse effect on the Company and its Subsidiaries
taken as a whole, and (ii) are in compliance with all wage and hour laws;
(g) There are no written personnel policies, rules or procedures
generally applicable to substantially all employees of the Company and its
Subsidiaries, true, correct and complete copies of which have heretofore been
delivered or made available to Buyer;
(h) No charges of discrimination or other violation of equal
employment laws are pending, or to the Company's Knowledge, threatened against
the Company or its Subsidiaries before the Equal Employment Opportunity
Commission or any other Governmental Entity responsible for the enforcement of
similar laws;
(i) There are no pending or, to the Company's Knowledge,
threatened wage and hour claims filed against the Company or its Subsidiaries
with the United States Department of Labor or any other Governmental Entity
responsible for the enforcement of similar laws;
(j) There are no pending or, to the Company's Knowledge,
threatened citations relating to the Company and its Subsidiaries filed by the
Occupational Safety and
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Health Administration nor any other Governmental Entity responsible for the
enforcement of similar laws nor any such citations threatened in writing;
(k) There are no pending or, to the Company's Knowledge,
threatened investigations of, or complaints pending or, to the Company's
Knowledge, threatened against the Company or its Subsidiaries by the Office of
Federal Contract Compliance Programs or any other Governmental Entity
responsible for the enforcement of similar laws nor any such investigation or
complaint threatened in writing;
(l) To the Company's Knowledge and other than the matters covered
in Section 3.17(h) to Section 3.17(k) above, there are no complaints, lawsuits
or other proceedings pending or threatened in writing against the Company or its
Subsidiaries that allege breach or violation of any express or implied contract
of employment, any law governing employment or the termination thereof, or
alleging any other discriminatory, wrongful, unlawful or tortious conduct in
connection with the employment relationship asserted by or on behalf of any
employees of the Company or its Subsidiaries;
(m) There are no express agreements with any employees of the
Company or its Subsidiaries establishing an employment relationship for a
definite term, a just cause requirement for termination of employment or any
severance obligation of the Company or its Subsidiaries;
(n) The Company and its Subsidiaries have not since January 1,
2000, effectuated (i) a "plant closing" (as defined in the Worker Adjustment and
Retraining Notification Act of 1988 ("WARN Act")) affecting any site of
employment or one or more facilities or operating units within any site of
employment or facility of the Company or (ii) a "mass layoff" (as defined by the
WARN Act) affecting any site of employment or facility of the Company except in
compliance with the WARN Act.
(o) To the Company's Knowledge, no Employee is subject to any
non-compete, non-disclosure, confidentiality, employment, consulting or similar
agreement relating to, affecting or in conflict with the present or proposed
business activities of the Company or its Subsidiaries.
3.18 Insurance. Section 3.18 of the Company Disclosure Schedule lists,
as of the date hereof, all policies of fire and extended coverage and casualty,
liability and other forms of insurance applicable to the Company and its
Subsidiaries, and the expiration dates of such insurance policies, copies of
which have been made available to Buyer. Each of the Company and its
Subsidiaries maintains insurance policies with reputable insurance carriers
against risks and losses of a character and in such amounts as are usually
insured against by similarly situated companies in the same or similar
businesses.
3.19 Brokers. No agent, broker, investment banker, financial advisor or
other firm or Person is or shall be entitled, as a result of any action,
agreement or commitment of the Company or any of its Affiliates, to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with any of the transactions contemplated by this Agreement, except
Xxxxx Xxxxxxx & Co., whose fees and expenses shall be paid by the Company.
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3.20 Assets. The material tangible assets owned, leased, licensed or
used by the Company and its Subsidiaries have been maintained in accordance with
normal industry practice and are in good operating condition and repair (subject
to normal wear and tear given the use and age of such asset) and are suitable
for the purposes for which they are presently used. The Company and its
Subsidiaries have good title to all property and assets purported to be owned by
the Company and its Subsidiaries, free and clear of all Liens.
3.21 Certain Business Relationships with the Company and its
Subsidiaries. Except for (i) amounts due as compensation in the Ordinary Course
of Business or (ii) reimbursement of expenses in the Ordinary Course of
Business, the stockholders of the Company and their respective Affiliates (other
than the Company and its Subsidiaries) have not been involved in any business
arrangement or business relationship with any of the Company and its
Subsidiaries within the past 12 months.
3.22 Takeover Statutes. No "fair price," "moratorium," "control share
acquisition" or other similar anti-takeover statute or regulation (including Ch.
110F of the Massachusetts General Laws assuming that Buyer is not an "interested
stockholder" for purposes of such statute) (each a "Takeover Statute") or an
anti-takeover provision in the Company's Articles of Organization and by-laws
is, or at the Effective Time will be, applicable to any shares of Company Common
Stock, the Merger or the other transactions contemplated by this Agreement. The
Company Board has taken all action so that neither Buyer nor the Transitory
Subsidiary will be prohibited from entering into a "business combination" with
the Company as an "interested stockholder" (in each case as such terms is used
in Ch. 110F of the Massachusetts General Law) as a result of this Agreement or
the consummation of the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE
TRANSITORY SUBSIDIARY
The Buyer and the Transitory Subsidiary represent and warrant to the
Company that the statements contained in this Article IV are true and correct,
except as set forth herein or in the disclosure schedule delivered by the Buyer
and the Transitory Subsidiary to the Company and dated as of the date of this
Agreement (the "Buyer Disclosure Schedule").
4.1 Organization, Standing and Power. Each of the Buyer and the
Transitory Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority to own, lease and operate its properties
and assets and to carry on its business as now being conducted.
4.2 Authority; No Conflict; Required Filings and Consents.
(a) Each of the Buyer and the Transitory Subsidiary has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement by the Buyer and the Transitory Subsidiary have been duly
authorized by all necessary corporate action on the part of
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each of the Buyer and the Transitory Subsidiary. This Agreement has been duly
executed and delivered by each of the Buyer and the Transitory Subsidiary and
constitutes the valid and binding obligation of each of the Buyer and the
Transitory Subsidiary, enforceable against each of them in accordance with its
terms, subject to the Bankruptcy and Equity Exception.
(b) The execution and delivery of this Agreement by each of the
Buyer and the Transitory Subsidiary do not, and the consummation by the Buyer
and the Transitory Subsidiary of the transactions contemplated by this Agreement
shall not, (i) conflict with, or result in any violation or breach of, any
provision of the Certificate of Incorporation or By-laws of the Buyer or the
Articles of Organization or By-laws of the Transitory Subsidiary, (ii) conflict
with, or result in any violation or breach of, or constitute (with or without
notice or lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
material benefit) under, require a consent or waiver under, constitute a change
in control under, require the payment of a penalty under or result in the
imposition of any Lien on the Buyer's or the Transitory Subsidiary's assets
under, any of the terms, conditions or provisions of any lease, license,
contract or other agreement, instrument or obligation to which the Buyer or the
Transitory Subsidiary is a party or by which any of them or any of their
properties or assets may be bound, or (iii) subject to compliance with the
requirements specified in clauses (i) and (ii) of Section 4.2(c), conflict with
or violate any permit, concession, franchise, license, judgment, injunction,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Buyer or the Transitory Subsidiary or any of its or their respective properties
or assets, except in the case of clauses (ii) and (iii) of this Section 4.2(b)
for any such conflicts, violations, breaches, defaults, terminations,
cancellations, accelerations, losses, penalties or Liens, and for any consents
or waivers not obtained, that, individually or in the aggregate, are not
reasonably likely to have a Buyer Material Adverse Effect. For purposes of this
Agreement, the term "Buyer Material Adverse Effect" means any material adverse
change, event, circumstance or development with respect to, or any material
adverse effect on, (a) the business, financial condition or results of
operations of the Buyer and its Subsidiaries, taken as a whole, or (b) the
ability of the Buyer or the Transitory Subsidiary to consummate the transactions
contemplated by this Agreement.
(c) No consent, approval, license, permit, order or authorization
of, or registration, declaration, notice or filing with, any Governmental Entity
or any stock market or stock exchange on which shares of Buyer Common Stock are
listed for trading is required by or with respect to the Buyer or the Transitory
Subsidiary in connection with the execution and delivery of this Agreement by
the Buyer or the Transitory Subsidiary or the consummation by the Buyer or the
Transitory Subsidiary of the transactions contemplated by this Agreement, except
for (i) the pre-merger notification requirements under the HSR Act, and (ii) the
filing of the Articles of Merger with the Massachusetts Secretary of the
Commonwealth and appropriate corresponding documents with the appropriate
authorities of other states in which the Company is qualified as a foreign
corporation to transact business.
(d) No vote of the holders of any class or series of the Buyer's
capital stock or other securities is necessary for the consummation by the Buyer
of the transactions contemplated by this Agreement.
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4.3 Litigation. As of the date of this Agreement, there is no lawsuit
or other legal proceeding pending or, to the knowledge of the Buyer or
Transitory Subsidiary, threatened, against the Buyer or the Transitory
Subsidiary challenging the Merger or the transactions contemplated by this
Agreement.
4.4 [INTENTIONALLY OMITTED]
4.5 [INTENTIONALLY OMITTED]
4.6 Operations of the Transitory Subsidiary. The Transitory Subsidiary
was formed solely for the purpose of engaging in the transactions contemplated
by this Agreement, has engaged in no other business activities and has conducted
its operations only as contemplated by this Agreement.
4.7 Financing. The Buyer and the Transitory Subsidiary have sufficient
funds to perform all of their respective obligations under this Agreement and to
consummate the Merger.
4.8 Solvency. Immediately after giving effect to the transactions
contemplated by this Agreement and the closing of any financing to be obtained
by the Buyer or any of its Affiliates in order to effect the transactions
contemplated by this Agreement, the Buyer and the Surviving Corporation shall be
able to pay their respective debts as they become due. Immediately after giving
effect to the transactions contemplated by this Agreement and the closing of any
financing to be obtained by the Buyer or any of its Affiliates in order to
effect the transactions contemplated by this Agreement, the Buyer and the
Surviving Corporation shall have adequate capital to carry on their respective
businesses. No transfer of property is being made and no obligation is being
incurred in connection with the transactions contemplated by this Agreement and
the closing of any financing to be obtained by the Buyer or any of its
Affiliates in order to effect the transactions contemplated by this Agreement
with the intent to hinder, delay or defraud either present or future creditors
of the Buyer or the Surviving Corporation.
ARTICLE V
CONDUCT OF BUSINESS
5.1 Covenants of the Company. Except as expressly provided or permitted
herein, set forth in Section 5.1 of the Company Disclosure Schedule, or as
consented to in writing by the Buyer (which consent shall not be unreasonably
withheld, conditioned or delayed), during the period commencing on the date of
this Agreement and ending at the Effective Time or such earlier date as this
Agreement may be terminated in accordance with its terms (the "Pre-Closing
Period"), the Company shall, and shall cause each of its Subsidiaries to, use
reasonable best efforts to act and carry on its business in the Ordinary Course
of Business, maintain and preserve its and each of its Subsidiary's business
organization, assets and properties and preserve its business relationships with
customers, strategic partners, suppliers, distributors, lessors, licensors,
employees and others having business dealings with it. Without limiting the
generality of the foregoing, except as expressly provided or permitted herein or
as set forth in Section 5.1 of the Company Disclosure Schedule, during the
Pre-Closing Period the Company shall not, and
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shall not permit any of its Subsidiaries to, directly or indirectly, do any of
the following without the prior written consent of the Buyer (which consent
shall not be unreasonably withheld, conditioned or delayed):
(a) (i) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, securities or other property) in respect
of, any of its capital stock (other than dividends and distributions by a direct
or indirect wholly owned Subsidiary of the Company to its parent); (ii) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or any of its other securities; or (iii)
purchase, redeem or otherwise acquire any shares of its capital stock or any
other of its securities or any rights, warrants or options to acquire any such
shares or other securities (including upon conversion, exchange, or exercise),
except, in the case of this clause (iii), for the acquisition of shares of
Company Common Stock (A) from holders of Company Stock Options in full or
partial payment of the exercise price payable by such holder upon exercise of
Company Stock Options to the extent required or permitted under the terms of
such Company Stock Options or (B) from former employees, directors and
consultants in accordance with written agreements providing for the repurchase
of shares in connection with any termination of services to the Company or any
of its Subsidiaries;
(b) except as permitted by Section 5.1(j), issue, deliver, sell,
grant, pledge or otherwise dispose of or encumber any shares of its capital
stock, any other voting securities or any securities convertible into or
exchangeable for, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible or exchangeable securities (other than
the issuance of shares of Company Common Stock upon the exercise of Company
Stock Options outstanding on the date of this Agreement);
(c) amend its Articles of Organization, By-laws or other comparable
charter or organizational documents;
(d) acquire (i) by merging or consolidating with, or by purchasing
all or a substantial portion of the assets or any stock of, or by any other
manner, any business or any corporation, partnership, joint venture, limited
liability company, association or other business organization or division
thereof or (ii) any assets in excess of $25,000 in the aggregate for the Company
and its Subsidiaries, taken as a whole;
(e) sell, lease, license, pledge, or otherwise dispose of any
properties or assets of the Company or of any of its Subsidiaries with value
greater than $50,000 in the aggregate for the Company and its Subsidiaries taken
as whole;
(f) cancel, compromise, waive or release any right or claim (or
series of related rights or claims) involving more than $25,000;
(g) (i) incur any indebtedness for borrowed money or capitalized
lease obligation or create, incur, assume or guarantee any such indebtedness or
capitalized lease obligation of another Person or guarantee any other
contractual obligation of another Person, (ii) issue, sell or amend any note,
bond or other debt securities or warrants or other rights to acquire any debt
securities of the Company or any of its Subsidiaries, guarantee any debt
securities of
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another Person, enter into any "keep well" or other agreement to maintain any
financial statement condition of another Person or enter into any arrangement
having the economic effect of any of the foregoing, (iii) make any loans,
advances (other than routine advances to employees of the Company and its
Subsidiaries in the Ordinary Course of Business) or capital contributions to, or
investment in, any other Person, other than the Company or any of its direct or
indirect wholly owned Subsidiaries, provided, however, that the Company may, in
the Ordinary Course of Business, invest in debt securities maturing not more
than 90 days after the date of investment, or (iv) enter into any hedging
agreement or other financial agreement or arrangement designed to protect the
Company or its Subsidiaries against fluctuations in commodities prices or
exchange rates;
(h) make any capital expenditures or other expenditures with
respect to property, plant or equipment in excess of $50,000 in the aggregate
for the Company and its Subsidiaries, taken as a whole, other than as set forth
in the Company's budget for capital expenditures previously made available to
the Buyer or the specific capital expenditures disclosed in Section 5.1(h) of
the Company Disclosure Schedule;
(i) make any changes in accounting methods, principles or
practices, except insofar as may have been required by a change in GAAP;
(j) except as required to comply with applicable law or agreements,
plans or arrangements existing on the date hereof, (i) adopt, enter into,
terminate or materially amend any bonus, profit-sharing, incentive, employment,
severance or other plan, contract, commitment, or agreement with, or material
benefit plan for the benefit or welfare of any current or former director,
officer or employee or any collective bargaining agreement (except in the
Ordinary Course of Business and only if such arrangement is terminable on 60
days' or less notice without either a penalty or a termination payment), (ii)
increase the compensation or fringe benefits of, or pay any bonus to, any
director, officer or employee (except for increases of salaries in the Ordinary
Course of Business and any bonuses due but not yet paid for the Company's 2004
fiscal year that are accrued on the Company Balance Sheet, (iii) accelerate the
payment, right to payment or vesting of any material compensation or benefits,
including any outstanding options or restricted stock awards, other than as
contemplated by this Agreement, (iv) grant any stock options, stock appreciation
rights, stock based or stock related awards, performance units or restricted
stock, or (v) take any action other than in the Ordinary Course of Business to
fund or in any other way secure the payment of compensation or benefits under
any Company Employee Plan;
(k) make or change any material election in respect of Taxes,
change any material accounting method in respect of Taxes, file any amendment to
a material Tax Return, settle any Liability in respect of Taxes, or consent to
any extension or waiver of the limitation period applicable to any material
claim or assessment in respect of Taxes; or
(l) (A) terminate or cancel any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and licenses)
involving more than $50,000, to which any of the Company and its Subsidiaries is
a party or by which any of them is bound or (B) materially modify any agreement,
contract, lease, or license (or series of related agreements, contracts, leases,
and licenses) involving more than $50,000 and outside the Ordinary Course of
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Business, to which any of the Company and its Subsidiaries is a party or by
which any of them is bound;
(m) impose any Lien upon any asset valued at greater than $50,000
in the aggregate of the Company and its Subsidiaries, taken as a whole;
(n) prepay, repurchase or redeem any notes, bonds, debt securities
or any other indebtedness for borrowed money, except for (A) scheduled payments
on indebtedness referenced in the Financial Statements or (B) current
liabilities within the meaning of GAAP incurred in the Ordinary Course of
Business;
(o) make any acquisition of the securities or assets of any other
Person (or series of related acquisitions) involving more than $50,000 in the
aggregate for the Company and its Subsidiaries, taken as a whole;
(p) delay or postpone the payment of accounts payable and other
liabilities involving more than $50,000 in the aggregate for the Company and its
Subsidiaries, taken as a whole;
(q) grant any material license or sublicense of any rights under or
with respect to any Intellectual Property outside the Ordinary Course of
Business;
(r) make any change in employment terms for any of the members of
its board of directors or its officers and employees that would make any such
person eligible for an increase in severance benefits, other than compensation
increases or promotions in the Ordinary Course of Business with respect to
employees who are not officers or director-level employees;
(s) fail to use reasonable best efforts to keep such insurance as
listed on 3.18 of the Company Disclosure Schedule or comparable insurance in
full force and effect through the Effective Time;
(t) enter into any transaction with the members of the Company
Board, the Company's officers or the Company's employees outside the Ordinary
Course of Business (except for the exercise of Company Stock Options as set
forth in Section 2.3(a)(iv));
(u) materially reduce the quality or quantity of supplies generally
maintained by the Company at its facilities in the Ordinary Course of Business;
and
(v) authorize any of, or commit or agree, in writing or otherwise,
to take any of, the foregoing actions.
5.2 Confidentiality. The parties acknowledge that the Buyer and the
Company have previously executed a confidentiality agreement, dated as of March
8, 2005 (the "Confidentiality Agreement"), which Confidentiality Agreement shall
continue in full force and effect in accordance with its terms, except as
expressly modified herein.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 No Solicitation.
(a) No Solicitation or Negotiation. Except as set forth in this
Section 6.1, until the termination of this Agreement in accordance with the
terms hereof (the "Specified Time"), neither the Company nor any of its
Subsidiaries shall, and the Company shall use reasonable efforts to cause its
directors, officers, employees, investment bankers, attorneys, accountants and
other advisors or representatives (such directors, officers, employees,
investment bankers, attorneys, accountants, other advisors and representatives,
collectively, "Representatives") not to, directly or indirectly:
(i) solicit, initiate, knowingly facilitate, or knowingly
encourage any inquiries or the making of any proposal or offer that constitutes,
or could reasonably be expected to lead to, any Acquisition Proposal; or
(ii) enter into, continue or otherwise participate in any
discussions or negotiations regarding, or furnish to any Person any non-public
information for the purpose of encouraging or facilitating, any Acquisition
Proposal.
(b) No Change in Recommendation or Alternative Acquisition
Agreement. Prior to the Specified Time, the Company Board shall not:
(i) withhold, withdraw or modify, in a manner adverse to the
Buyer, the approval or recommendation by the Company Board with respect to the
Company Voting Proposal;
(ii) cause or permit the Company to enter into any letter of
intent, memorandum of understanding, agreement in principle, acquisition
agreement, merger agreement or similar agreement (an "Alternative Acquisition
Agreement") providing for the consummation of a transaction contemplated by any
Acquisition Proposal; or
(iii) adopt, approve or recommend any Acquisition Proposal.
(c) Company Board Disclosures. Notwithstanding anything to the
contrary set forth in this Agreement, the Company Board may make any disclosure
to the stockholders of the Company if the Company Board determines in good
faith, after consultation with outside counsel, that failure to do so would be
inconsistent with its fiduciary obligations under applicable law.
(d) Notices to the Buyer. The Company shall promptly advise the
Buyer orally, with written confirmation to follow, of the Company's receipt of
any written Acquisition Proposal, the material terms and conditions of any such
Acquisition Proposal and the identity of the Person making any such Acquisition
Proposal.
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(e) Cessation of Ongoing Discussions. The Company shall, and shall
direct its Representatives to, cease immediately all discussions and
negotiations that commenced prior to the date of this Agreement regarding any
proposal that constitutes, or could reasonably be expected to lead to, an
Acquisition Proposal.
(f) Definition. For purposes of this Agreement, "Acquisition
Proposal" means (i) any proposal or offer for a merger, consolidation,
dissolution, sale of substantial assets outside the Ordinary Course of Business,
stock purchase, recapitalization, share exchange or other business combination
involving the Company and its Subsidiaries, taken as a whole, (ii) any proposal
for the issuance by the Company of over 10% of its equity securities or (iii)
any proposal or offer to acquire in any manner, directly or indirectly, over 10%
of the equity securities or consolidated total assets of the Company and its
Subsidiaries, in each case other than the transactions contemplated by this
Agreement.
6.2 Stockholder Approval. Within ten (10) Business Days after the date
of this Agreement, the Company shall, in accordance with its Articles of
Organization and By-laws and the applicable requirements of the MBCA, at its
election convene a special meeting of the stockholders of the Company (the
"Company Stockholders' Meeting") for the purpose of permitting them to consider
and to vote upon the approval of this Agreement. Subject to the terms hereof,
including Section 6.1, the Company shall use reasonable best efforts to cause
each stockholder of the Company to vote all shares of Company capital stock that
are owned, beneficially or of record, by such stockholder on the record date for
the Company Stockholders' Meeting, to be voted in favor of the approval of this
Agreement; provided, however, that nothing in Section 6.1 or this Section 6.2
shall limit the right or authority of the Company's board of directors to make
any disclosures to the Company's stockholders that are required in order to
fulfill its fiduciary obligations under applicable law.
6.3 Access to Information. During the Pre-Closing Period, the Company
shall (and shall cause each of its Subsidiaries to) afford to the Buyer's
officers, employees, accountants, counsel and other representatives, reasonable
access, upon reasonable notice, during normal business hours and in a manner
that does not unreasonably disrupt or interfere with business operations in any
material respects, to all of its properties, books, contracts, commitments,
personnel, documents and records as the Buyer shall reasonably request, and,
during such period, the Company shall (and shall cause each of its Subsidiaries
to) furnish promptly to the Buyer (a) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of federal or state securities laws and (b)
all other information concerning its business, properties, assets and personnel
as the Buyer may reasonably request. The Buyer will hold any such information
which is nonpublic in confidence in accordance with the Confidentiality
Agreement.
6.4 Legal Conditions to the Merger.
(a) Subject to the terms hereof, including Section 6.4(b), the
Company and the Buyer shall each use its reasonable best efforts to:
(i) take, or cause to be taken, all actions, and do, or cause
to be done, and to assist and cooperate with the other parties in doing, all
things necessary, proper or
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advisable to consummate and make effective the transactions contemplated hereby
as promptly as practicable;
(ii) as promptly as practicable, obtain from any Governmental
Entity or any other third party any consents, licenses, permits, waivers,
approvals, authorizations, or orders required to be obtained or made by the
Company or the Buyer or any of their Subsidiaries in connection with the
authorization, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby including, without
limitation, in connection with all real property leases and subleases,
management agreements and participation agreements;
(iii) as promptly as practicable and in any event not more
than ten (10) Business Days after the date of this Agreement, make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement and the Merger required under (A) any applicable federal or state
securities laws, (B) the HSR Act and any related governmental request
thereunder, and (C) any other applicable law;
(iv) as promptly as practicable, and in any event not more
than ten (10) Business Days after the date hereof, the Company shall notify all
child care licensing agencies having jurisdiction over the business of the
Company or its Subsidiaries of this Agreement and the transactions contemplated
hereby and shall thereafter use reasonable best efforts to obtain all consents,
authorizations, approvals, qualifications and orders necessary to allow the
business of the Company and its Subsidiaries to continue uninterrupted, in good
standing with all applicable licenses and without restriction following the
Effective Time consistent with its current status; and
(v) execute or deliver any additional instruments necessary to
consummate the transactions contemplated by, and to fully carry out the purposes
of, this Agreement.
The Company and the Buyer 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,
accepting reasonable additions, deletions or changes suggested in connection
therewith. The Company and the Buyer shall use their respective reasonable best
efforts to furnish to each other all information required for any application or
other filing to be made pursuant to the rules and regulations of any applicable
law in connection with the transactions contemplated by this Agreement.
(b) Subject to the terms hereof, the Buyer and the Company agree,
and shall cause each of their respective Subsidiaries, to cooperate and to use
their respective reasonable best efforts to obtain any government clearances or
approvals required for Closing under the HSR Act, the Xxxxxxx Act, as amended,
the Xxxxxxx Act, as amended, the Federal Trade Commission Act, as amended, and
any other federal, state or foreign law, regulation or decree designed to
prohibit, restrict or regulate actions for the purpose or effect of
monopolization or restraint of trade (collectively "Antitrust Laws"), to respond
to any government requests for information under any Antitrust Law, and to
contest and resist any action, including any legislative, administrative or
judicial action, and to have vacated, lifted, reversed or overturned
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any decree, judgment, injunction or other order (whether temporary, preliminary
or permanent) (an "Antitrust Order") that restricts, prevents or prohibits the
consummation of the Merger or any other transactions contemplated by this
Agreement under any Antitrust Law. The parties hereto will consult and cooperate
with one another, and consider in good faith the views of one another, in
connection with, and provide to the other parties in advance, any analyses,
appearances, presentations, memoranda, briefs, arguments, opinions and proposals
made or submitted by or on behalf of any party hereto in connection with
proceedings under or relating to any Antitrust Law.
(c) Each of the Company and the Buyer shall give (or shall cause
their respective Subsidiaries to give) any notices to third parties, and use,
and cause their respective Subsidiaries to use, their reasonable best efforts to
obtain any third party consents required in connection with the Merger that are
(i) necessary to consummate the transactions contemplated hereby, (ii) disclosed
or required to be disclosed in the Company Disclosure Schedule or the Buyer
Disclosure Schedule, as the case may be, or (iii) required to prevent the
occurrence of an event that is reasonably likely to have a material and adverse
effect upon the Company and its Subsidiaries taken as a whole or upon the Buyer
prior to or after the Effective Time, it being understood that neither the
Company nor the Buyer shall be required to make any payments in connection with
the fulfillment of its obligations under this Section 6.4.
(d) If any claim, action, suit, investigation or other proceeding
by any Governmental Entity or other Person is commenced which questions the
validity or legality of any of the other transactions contemplated by this
Agreement or seeks damages in connection therewith, the Parties agree to
cooperate and use reasonable best efforts to defend against such claim, action,
suit, investigation or other proceeding and, if an injunction or other order is
issued in any such action, suit or other proceeding, to use reasonable best
efforts to have such injunction or other order lifted, and to cooperate
reasonably regarding any other impediment to the consummation of the
transactions contemplated by this Agreement.
6.5 Public Disclosure. Except as may be required by law or stock market
regulations, (a) no press release announcing the execution of this Agreement
shall be issued and if so required to be issued shall only be issued in such
form as shall be mutually agreed upon by the Company and the Buyer and (b) the
Buyer and the Company shall consult with the other party before issuing any
other press release or otherwise making any public statement with respect to the
Merger or this Agreement.
6.6 Indemnification of Directors and Officers
(a) From the Effective Time through the sixth anniversary of the
date on which the Effective Time occurs, each of Buyer and the Surviving
Corporation shall, jointly and severally, indemnify and hold harmless each
person who is now, or has been at any time prior to the date hereof, or who
becomes prior to the Effective Time, a director or officer of the Company or any
of its Subsidiaries (the "Company Indemnified Parties"), against all claims,
losses, liabilities, damages, judgments, fines and reasonable fees, costs and
expenses, including attorneys' fees and disbursements, incurred in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative (an "Action"), arising out of or
pertaining to the fact that the Company Indemnified Party is or was an officer
or director of the Company or any of its Subsidiaries including without
limitation
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relating to the negotiation, execution and performance of this Agreement and any
related agreements (other than Actions brought by Buyer or its Affiliates in
respect of the breach of any representation, warranty or covenant by such
officer or director under this Agreement), whether asserted or claimed prior to,
at or after the Effective Time, to the fullest extent permitted under the MBCA
for officers and directors of Massachusetts corporations or such other law that
the Surviving Corporation is subject to. Each Company Indemnified Party will be
entitled to advancement of expenses incurred in the defense of any such claim,
action, suit, proceeding or investigation from each of the Buyer and the
Surviving Corporation within ten (10) business days of receipt by the Buyer or
the Surviving Corporation from the Company Indemnified Party of a request
therefor (provided that, the Person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
Person is not entitled to indemnification). In the event of any Action, the
Surviving Corporation shall control the defense of such Action with counsel
selected by the Surviving Corporation, which counsel shall be reasonably
acceptable to the Company Indemnified Party; provided however, that the Company
Indemnified Party shall be permitted to participate in the defense of such
Action through counsel selected by the Company Indemnified Party at the Company
Indemnified Party's expense, which counsel shall be reasonably acceptable to the
Surviving Corporation. Notwithstanding the foregoing, if there are conflicting
interests between the Surviving Corporation and any Company Indemnified Parties
with respect to the Action or there are additional defenses available to any
Company Indemnified Parties which are not available to the other defendants, the
Company Indemnified Parties shall be permitted to participate in the defense of
such Action with counsel selected by the Company Indemnified Parties, which
counsel shall be reasonably acceptable to the Surviving Corporation, and Buyer
shall cause the Surviving Corporation to pay the reasonable fees and expenses of
such counsel; provided however, that the Surviving Corporation shall not be
obligated to pay the reasonable fees and expenses of more than one counsel for
all Company Indemnified Parties in any single Action except to the extent that,
in the opinion of counsel for the Company Indemnified Parties, two or more of
such Company Indemnified Parties have conflicting interests in the outcome of
such Action, in which case the Surviving Corporation shall be obligated to pay
the reasonable fees and expenses for such additional counsel, which counsel
shall be reasonably acceptable to the Surviving Corporation. A Company
Indemnified Party shall not agree to any settlement of any Action without the
prior written consent of the Surviving Corporation (which consent shall not be
unreasonably withheld, conditioned or delayed), and neither the Buyer nor the
Surviving Corporation shall be liable for any settlement of any Action by a
Company Indemnified Party effected without the prior written consent of the
Surviving Corporation (which consent shall not be unreasonably withheld,
conditioned or delayed). The Buyer and Surviving Corporation shall not agree to
any settlement of any Action that does not include a complete release of the
Company Indemnified Parties from all liability with respect thereto or that
imposes any liability or obligation on the Company Indemnified Party without the
prior written consent of the Company Indemnified Parties. Neither Buyer nor the
Surviving Corporation shall have any obligation hereunder to a Company
Indemnified Party when and if a court of competent jurisdiction shall ultimately
determine, and such determination shall have become final and non-appealable,
that indemnification of such defendant in the manner contemplated hereby is
prohibited by applicable law.
(b) From the Effective Time through the sixth anniversary date on
which the Effective Time occurs, the Articles of Organization and By-laws of the
Surviving Corporation
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shall contain, and Buyer shall cause the Articles of Organization and By-laws of
the Surviving Corporation to so contain, provisions no less favorable with
respect to indemnification, advancement of expenses and exculpation of present
and former directors and officers of the Company and its Subsidiaries than are
presently set forth in the Articles of Organization and By-laws of the Company.
(c) Subject to the next sentence, the Surviving Corporation shall
maintain, and the Buyer shall cause the Surviving Corporation to maintain, at no
expense to the beneficiaries, in effect for six (6) years from the Effective
Time directors' and officers' liability insurance, containing terms and
conditions which are not less advantageous than those policies maintained by the
Company at the date hereof, with respect to matters existing or occurring at or
prior to the Effective Time (including the transactions contemplated by this
Agreement) to the extent available and having the maximum available coverage
under the current policies of directors' and officers' liability insurance;
provided that the Surviving Corporation shall not be required to spend in excess
of 200% of the current annual premium therefor (such 200% amount, the "Maximum
Premium"); and provided, further, that if the Surviving Corporation would be
required to spend in excess of the Maximum Premium per annum to obtain insurance
having the maximum available coverage under the current policies, the Surviving
Corporation will be required to or procure as much insurance coverage as it is
able to obtain for a premium equal to the Maximum Premium.
(d) To the extent permitted by applicable law, the Buyer and the
Surviving Corporation shall pay all expenses, including reasonable attorneys'
fees, that may be incurred by the Company Indemnified Parties in connection with
their enforcement of their rights provided in this Section 6.6.
(e) The provisions of this Section 6.6 are intended to be in
addition to the rights otherwise available to the current officers and directors
of the Company by law, charter, statute, by-law or agreement, and shall operate
for the benefit of, and shall be enforceable by, each of the Company Indemnified
Parties, their heirs and their representatives.
6.7 Notification of Certain Matters. During the Pre-Closing Period, the
Buyer shall give prompt notice to the Company, and the Company shall give prompt
notice to the Buyer, of (a) the occurrence, or failure to occur, of any event,
which occurrence or failure to occur is reasonably likely to cause any
representation or warranty of such Party contained in this Agreement to be
untrue or inaccurate in any material respect, in each case at any time from and
after the date of this Agreement until the Effective Time, or (b) any material
failure of the Buyer and the Transitory Subsidiary or the Company, as the case
may be, or of any officer, director, employee or agent thereof, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement. Notwithstanding the above, the delivery of any
notice pursuant to this Section 6.7 will not limit or otherwise affect the
remedies available hereunder to the Party receiving such notice or the
conditions to such Party's obligation to consummate the Merger, provided that
any representation or warranty set forth in Article III that speaks as of a
specific date shall be deemed solely for purposes of the notice requirements in
this Section 6.7 to speak as of the date of this Agreement and as of the Closing
Date.
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6.8 Service Credit. Following the Effective Time, the Buyer will give
each employee of the Buyer or the Surviving Corporation or their respective
Subsidiaries who shall have been an employee of the Company or any of its
Subsidiaries immediately prior to the Effective Time ("Continuing Employees")
full credit for prior service with the Company or its Subsidiaries for purposes
of (a) eligibility and vesting under any Buyer Employee Plans (as defined
below), (b) determination of benefit levels under any Buyer Employee Plan or
policy relating to vacation or severance and (c) determination of "retiree"
status under any Buyer Employee Plan, in each case for which the Continuing
Employee is otherwise eligible and in which the Continuing Employee is offered
participation, but except where such credit would result in a duplication of
benefits, in any case to the same extent recognized by the Company under
comparable Company plans; provided, however, that Buyer shall not be treated as
failing to satisfy its obligations under this Section 6.8 to the extent Buyer
provides continuity of benefits for the Retained Employees by continuing one or
more Employee Benefit Plans maintained by the Company or its Subsidiaries in
lieu of providing employee benefits under any corresponding Buyer Employee Plan.
In addition, the Buyer shall waive, or cause to be waived, any limitations on
benefits relating to pre-existing conditions to the same extent such limitations
are waived under any comparable plan of the Buyer and, to the extent
administratively feasible, recognize for purposes of annual deductible and
out-of-pocket limits under its medical and dental plans, deductible and
out-of-pocket expenses paid by Continuing Employees in the calendar year in
which the Effective Time occurs. For purposes of this Agreement, the term "Buyer
Employee Plan" means any "employee pension benefit plan" (as defined in Section
3(2) of ERISA), any "employee welfare benefit plan" (as defined in Section 3(1)
of ERISA), and any other written or oral plan, agreement or arrangement,
including insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
compensation and all unexpired severance agreements, for the benefit of, or
relating to, any current or former employee of the Buyer or any of its
Subsidiaries or any entity which is a member of (A) a controlled group of
corporations (as defined in Section 414(b) of the Code), (B) a group of trades
or businesses under common control (as defined in Section 414(c) of the Code) or
(C) an affiliated service group (as defined in Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes or included
the Buyer or a Subsidiary of the Buyer. Nothing in this Section 6.8 shall be
deemed to limit or otherwise affect the right of the Buyer and its Subsidiaries
and Affiliates to terminate the employment or change the place of work,
responsibilities, status or description of any employee or group of employees of
the Company or any of its Subsidiaries, or to continue, maintain or terminate
any existing Employee Benefit Plan of the Company or its Subsidiaries. For
purposes of this Section 6.8, "Retained Employees" means individuals who were
employees of the Company or its Subsidiaries immediately prior to the Closing
and who remain employed by the Company or its Subsidiaries, or become employed
by Buyer or any of its Subsidiaries or Affiliates, immediately after the
Closing.
ARTICLE VII
CONDITIONS TO MERGER
7.1 Conditions to Each Party's Obligation To Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction on or prior to the Closing Date of the
following conditions:
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(a) Stockholder Approval. The Company Voting Proposal shall have
been duly adopted by the Company's stockholders.
(b) HSR Act. The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated.
(c) Filing of the Articles of Merger. The Articles of Merger shall
have been filed with the Secretary of the Commonwealth of Massachusetts.
(d) No Injunctions. No Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
order, executive order, stay, decree, judgment or injunction (preliminary or
permanent) or statute, rule or regulation which is in effect and which has the
effect of making the Merger illegal or otherwise prohibiting consummation of the
Merger or the other transactions contemplated by this Agreement.
7.2 Additional Conditions to Obligations of the Buyer and the
Transitory Subsidiary. The obligations of the Buyer and the Transitory
Subsidiary to effect the Merger shall be subject to the satisfaction on or prior
to the Closing Date of each of the following additional conditions, any of which
may be waived, in writing, exclusively by the Buyer and the Transitory
Subsidiary:
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement shall be true and correct
in all material respects as of the Closing Date as though made on and as of the
Closing Date (except (A) to the extent such representations and warranties are
specifically made as of a particular date, in which case such representations
and warranties shall be true and correct as of such date, and (B) for changes
contemplated by this Agreement); and the Buyer shall have received a certificate
signed on behalf of the Company by the chief executive officer or the chief
financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement on or prior to the Closing Date; and the Buyer shall
have received a certificate signed on behalf of the Company by the chief
executive officer or the chief financial officer of the Company to such effect.
(c) No Restraints. There shall not be instituted or pending any
action or proceeding in which a Governmental Entity is (i) challenging or
seeking to restrain or prohibit the consummation of the Merger or any of the
other transactions contemplated by this Agreement or (ii) seeking to prohibit or
limit in any material respect the Buyer's ability to vote, transfer, receive
dividends with respect to or otherwise exercise ownership rights with respect to
the stock of the Surviving Corporation.
(d) Third Party Consents and Approvals. The Company shall have
obtained consents and approvals set forth in Section 7.2(d) of the Company
Disclosure Schedule.
(e) Dissenters' Rights. Holders of not more than 2% of the
outstanding capital stock of the Company shall have exercised dissenters' rights
with respect to the Merger.
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(f) No Material Adverse Effect. Between the date hereof and the
Effective Time, there shall not have been any Company Material Adverse Effect.
(g) Estimated Net Working Capital. The Company shall have delivered
to Buyer a certificate containing the Company's Estimated Net Working Capital
pursuant to Section 2.1(c)(i).
(h) FIRPTA Certificate. Buyer shall have received from the Company
a certificate in a form reasonably acceptable to the Buyer dated as of the
Closing Date to the effect that the Company is not and has not been a United
States real property holding company, as defined in Section 897(c)(2) of the
Code, during the applicable period described in Section 897(c)(1)(A)(ii) of the
Code.
(i) Legal Opinion. The Buyer shall have received an opinion of the
counsel of the Company, dated as of the Closing Date, in substantially the Form
of Exhibit B attached hereto.
(j) Termination of 401(k) Plan. Prior to Closing, the Company shall
have terminated its 401(k) Plan.
(k) Stock Voting Agreement. Each of the holders of Company Stock
set forth in Section 7.2(k) of the Company Disclosure Schedule shall have
entered into the Stock Voting Agreement and Irrevocable Proxy, in substantially
the Form of Exhibit C attached hereto.
7.3 Additional Conditions to Obligations of the Company. The obligation
of the Company to effect the Merger shall be subject to the satisfaction on or
prior to the Closing Date of each of the following additional conditions, either
of which may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of the Buyer and the Transitory Subsidiary set forth in this
Agreement shall be true and correct in all material respects as of the Closing
Date as though made on and as of the Closing Date (except (i) to the extent such
representations and warranties are specifically made as of a particular date, in
which case such representations and warranties shall be true and correct as of
such date, and (ii) for changes contemplated by this Agreement), and the Company
shall have received a certificate signed on behalf of the Buyer by the chief
executive officer or the chief financial officer of the Buyer to such effect.
(b) Performance of Obligations of the Buyer and the Transitory
Subsidiary. The Buyer and the Transitory Subsidiary shall have performed in all
material respects all obligations required to be performed by them under this
Agreement on or prior to the Closing Date; and the Company shall have received a
certificate signed on behalf of the Buyer by the chief executive officer or the
chief financial officer of the Buyer to such effect.
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ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Company. Subject to the terms and conditions of
this Article VIII, from and after the Closing, the holders of Company Stock (the
"Indemnifying Securityholders"), shall indemnify the Buyer in respect of, and
hold the Buyer harmless against, any and all liabilities, monetary damages,
fines, fees, penalties, interest, costs and expenses (including without
limitation reasonable attorneys' fees and expenses) (collectively, "Damages")
incurred or suffered by the Buyer or any Affiliate thereof resulting from or
constituting:
(a) any breach of a representation or warranty of the Company
contained in this Agreement after taking into account the last sentence of
Section 8.5(a);
(b) any failure by the Company to perform any covenant or agreement
contained in this Agreement; or
(c) the exercise by holders of Dissenting Shares of rights under
the MBCA (it being understood and agreed by the parties that Damages under this
clause (c) shall include the excess (if any) of the amounts received by a holder
of such Dissenting Shares pursuant to the exercise of such rights over the
amount the holder of such Dissenting Shares would have received pursuant to this
Agreement had the holder of such Dissenting Shares not exercised such rights
under the MBCA).
8.2 Indemnification by Buyer. Subject to the terms and conditions of
this Article VIII, from and after the Closing, the Buyer shall indemnify the
holders of Company Stock and holders of Company Stock Options in respect of, and
hold each holder of Company Stock and holder of Company Stock Options harmless
against, any and all Damages incurred or suffered by the holders of Company
Stock and holders of Company Stock Options resulting from or constituting:
(a) any breach of a representation or warranty of the Buyer
contained in this Agreement after taking into account the last sentence of
Section 8.5(a); or
(b) any failure by the Buyer to perform any covenant or agreement
contained in this Agreement.
8.3 Claims for Indemnification.
(a) Third-Party Claims. All claims for indemnification made under
this Agreement resulting from, related to or arising out of a third-party claim
against an Indemnified Party shall be made in accordance with the following
procedures. A Person entitled to indemnification under this Article VIII (an
"Indemnified Party") shall give prompt written notification to the Person from
whom indemnification is sought (the "Indemnifying Party") (with a copy to the
Escrow Agent) of the commencement of any action, suit or proceeding relating to
a third-party claim for which indemnification may be sought or, if earlier, upon
the written assertion of any such claim by a third party (it being understood
and agreed, however, that the failure by an Indemnified Party to give notice as
provided herein shall not relieve the
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Indemnifying Party of its indemnification obligation under this Agreement except
and only to the extent that such Indemnifying Party is actually damaged as a
result of such failure to give notice). Such notification shall include a
description in reasonable detail (to the extent known by the Indemnified Party)
of the facts constituting the basis for such third-party claim and the amount of
the Damages claimed. Within 30 days after delivery of such notification, the
Indemnifying Party may, upon written notice thereof to the Indemnified Party,
assume control of the defense of such action, suit, proceeding or claim with
counsel reasonably satisfactory to the Indemnified Party, unless (i) the action,
suit, proceeding or claim involves Taxes, (ii) the Indemnifying Party fails to
provide reasonable assurance of its financial capacity to defend such action,
suit, proceeding or claim or (iii) in the event the Indemnifying Party is an
Indemnifying Securityholder, the amount of the action, suit, proceeding or claim
exceeds, or would reasonably be expected to exceed, the Escrow Amount as then in
effect. An election by the Indemnifying Party to so assume the defense of any
such third-party claim shall constitute an admission by the Indemnifying Party
and shall conclusively establish for purposes of this Agreement that the
Indemnifying Party is obligated to indemnify the Indemnified Party with respect
to such third-party claim under the provisions of this Article VIII. If the
Indemnifying Party does not assume control of such defense, the Indemnified
Party shall control such defense. The Party not controlling such defense may
participate therein at its own expense; provided that if the Indemnifying Party
assumes control of such defense and the Indemnified Party reasonably concludes,
based on advice from counsel, that the Indemnifying Party and the Indemnified
Party have conflicting interests with respect to such action, suit, proceeding
or claim, the reasonable fees and expenses of counsel to the Indemnified Party
solely in connection therewith shall be considered Damages for purposes of this
Agreement; provided, however, that in no event shall the Indemnifying Party be
responsible for the fees and expenses of more than one counsel for all
Indemnified Parties. The Party controlling such defense shall keep the other
Party advised of the status of such action, suit, proceeding or claim and the
defense thereof and shall consider recommendations made by the other Party with
respect thereto. The Indemnified Party shall not agree to any settlement of such
action, suit, proceeding or claim without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld,
conditioned or delayed. The Indemnifying Party shall not agree to any settlement
of such action, suit, proceeding or claim that does not include a complete
release of the Indemnified Party from all liability with respect thereto or that
imposes any liability or obligation on the Indemnified Party without the prior
written consent of the Indemnified Party.
(b) Procedure for Claims. An Indemnified Party wishing to assert a
claim for indemnification under this Article VIII other than a third-party claim
made under Section 8.3(a) shall deliver to the Indemnifying Party (with a copy
to the Escrow Agent) a written notice (a "Claim Notice") which contains (i) a
description and the amount (the "Claim Amount") of any Damages incurred by the
Indemnified Party, (ii) a statement that the Indemnified Party is entitled to
indemnification under this Article VIII and a reasonable explanation of the
basis therefor, and (iii) a demand for payment in the amount of such Damages.
Within thirty (30) days after delivery of a Claim Notice, the Indemnifying Party
shall deliver to the Indemnified Party (with a copy to the Escrow Agent) a
written response in which the Indemnifying Party shall: (I) agree that the
Indemnified Party is entitled to receive all of the Claim Amount, (II) agree
that the Indemnified Party is entitled to receive part, but not all, of the
Claim Amount, or (III) contest, with a reasonable explanation of the basis
therefor, that the Indemnified Party is entitled to receive any of the Claim
Amount. If the Indemnifying Party in such response contests the
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payment of all or part of the Claim Amount, the Indemnifying Party and the
Indemnified Party shall use good faith efforts to resolve such dispute. If such
dispute is not resolved within sixty (60) days following the delivery by the
Indemnifying Party of such response, the Indemnifying Party and the Indemnified
Party shall each have the right to submit such dispute to a court of competent
jurisdiction in accordance with the provisions of Section 10.11. The
Indemnifying Party and the Indemnified Party may resolve any dispute at any time
by mutual written consent.
8.4 Survival.
(a) The representations and warranties of the Company and the Buyer
set forth in this Agreement and the indemnification obligations under Sections
8.1 and 8.2 of this Agreement shall survive the Closing and the consummation of
the transactions contemplated hereby and continue until the date ending on the
one year anniversary of the Closing Date, at which time they shall expire.
(b) If an indemnification claim is properly asserted in writing
pursuant to Section 8.3 prior to the expiration as provided in Section 8.4(a) of
the representation, warranty or obligation (including the indemnification
obligations under Sections 8.1 and 8.2 of this Agreement) that is the basis for
such claim, then such representation, warranty or obligation (including the
indemnification obligations under Sections 8.1 and 8.2 of this Agreement) shall
survive until, but only for the purpose of, the resolution of such claim.
8.5 Limitations.
(a) Notwithstanding anything to the contrary herein (other than
Section 8.5(e)), (i) the aggregate liability of the Indemnifying Securityholders
for Damages under this Article VIII shall not exceed the Escrow Amount and shall
be solely payable out of the Escrow Fund (as increased by any net profit from,
or interest or income produced by, Permitted Investments in the Escrow Fund)
pursuant to the terms of the Escrow Agreement, (ii) except for Damages arising
out of Sections 3.2, 3.4(a), 3.14, 3.19, 8.1(b) or 8.1(c) which shall be
recoverable without regard to the Deductible and shall be taken into account for
purposes of calculating the Deductible, the Indemnifying Securityholders shall
be liable for only that portion of the aggregate Damages under this Article VIII
for which they or it would otherwise be liable which exceeds $400,000 (the
"Deductible") and (iii) the liability of each Indemnifying Securityholder for
Damages under this Article VIII shall be limited to his, her or its interest in
the Escrow Fund as determined pursuant to Section 2.1(d), provided that nothing
herein shall limit the right of the Buyer to recover from the Escrow Fund the
full amount of any Damages (to the extent of the Escrow Fund) that are covered
by the indemnification under Section 8.1. For purposes of this Article VIII, all
representations and warranties of the Company in Article III (other than Section
3.6) and the Buyer and Transitory Subsidiary in Article IV shall be construed as
if the term "material" and any reference to "Company Material Adverse Effect" or
"Buyer Material Adverse Effect" and variations thereof were omitted from such
representations and warranties.
(b) In no event shall any Indemnifying Party be responsible or
liable for any Damages or other amounts under this Article VIII (i) that
constitute direct claims by any Indemnified Parties for punitive damages (for
the sake of clarity, Indemnified Parties may
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recover damages actually payable by such Indemnified Party under a third party
claim); (ii) that constitute consequential, incidental or special damages
(collectively, "Special Damages") (A) unless (x) such Special Damages were
reasonably foreseeable and proximately caused by the events and circumstances
giving rise to the Special Damages and (y) the Indemnified Parties used their
reasonable best efforts to mitigate any such Special Damages, or (B) to the
extent the Special Damages are based on any loss of value of the Company and its
Subsidiaries (including through the use of a multiple of any financial measure)
other than lost profits; or (iii) for Taxes payable by an Indemnified Party as a
result of any indemnification payment under this Agreement being treated by the
relevant Tax authority as income. Each Party shall (and shall cause its
Affiliates to) use commercially reasonable efforts to pursue all legal rights
and remedies available in order to minimize the Damages for which
indemnification is provided to it under this Article VIII.
(c) The amount of Damages recoverable by an Indemnified Party under
this Article VIII with respect to an indemnity claim shall be reduced by (i) the
amount of any payment received by such Indemnified Party (or an Affiliate
thereof), with respect to the Damages to which such indemnity claim relates,
from any insurance policy of the Company and (ii) the amount of any Tax savings
that the Indemnified Party actually realizes with respect to such Damages or
Taxes; provided, however, that any Tax savings resulting from such a claim shall
be determined only after applying all other deductions and losses, including any
net operating loss carryforwards, available to the Indemnified Party, as if the
Tax savings arising from such claim did not exist (for example, all existing net
operating loss carryforwards available for use during the applicable fiscal year
would have to be exhausted before a "Tax savings" would be actually realized
from such a claim) and provided further that creating or increasing a net
operating loss carryforward shall be deemed not to create a Tax savings. The
amount of any indemnity payment hereunder shall initially be made without
respect to any such Tax savings or insurance proceeds and shall be subject to
adjustment if and when any such Tax savings are actually realized or insurance
proceeds are received. An Indemnified Party shall use reasonable commercial
efforts to pursue, and to cause its Affiliates to pursue, all insurance claims
and Tax benefits to which it may be entitled in connection with any Damages it
incurs, and the Parties shall cooperate with each other in pursuing insurance
claims with respect to any Damages or any indemnification obligations with
respect to Damages; provided, however, the parties hereby agree that the
Indemnified Party shall not be required to file a lawsuit to pursue such
insurance claim or Tax benefit. If an Indemnified Party (or an Affiliate)
receives any insurance payment from any insurance policy of the Company in
connection with any claim for Damages for which it has already received an
indemnification payment from the Indemnifying Party, it shall pay to the
Indemnifying Party, within thirty (30) days of receiving such insurance payment,
an amount equal to the excess of (A) the amount previously received by the
Indemnified Party under this Article VIII from the Indemnifying Party with
respect to such claim plus the amount of the insurance payments received, over
(B) the amount of Damages with respect to such claim which the Indemnified Party
has become entitled to receive under this Article VIII from the Indemnifying
Party.
(d) Except with respect to claims for equitable relief, including
specific performance, made with respect to breaches of any covenant or agreement
contained in this Agreement, and except as specified in Section 8.5(e), the
rights of the Indemnified Parties under this Article VIII shall be the sole and
exclusive remedies of the Indemnified Parties and their
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respective Affiliates with respect to claims under, or otherwise relating to the
transactions that are the subject of, this Agreement. Without limiting the
generality of the foregoing, in no event shall any Party, its successors or
permitted assigns be entitled to claim or seek rescission of the transactions
consummated by this Agreement.
(e) Notwithstanding anything to the contrary in this Article VIII
with respect to any Indemnifying Securityholder, any Damages arising from fraud
of such Indemnifying Securityholder shall survive the periods set forth in
Section 8.4 and shall not be subject to the limitations on liability set forth
in this Section 8.5.
(f) For purposes of this Article VIII, (i) if the Indemnifying
Securityholders comprise the Indemnifying Party, any references to the
Indemnifying Party (except provisions relating to an obligation to make any
payments) shall be deemed to refer to the Stockholder Representative, and (ii)
if the Indemnifying Securityholders comprise the Indemnified Party, any
references to the Indemnified Party (except provisions relating to an obligation
to make or a right to receive any payments) shall be deemed to refer to the
Stockholder Representative.
8.6 Treatment of Indemnity Payments. Any payments made to an
Indemnified Party pursuant to this Article VIII or pursuant to the Escrow
Agreement shall be treated as an adjustment to the Merger Consideration for Tax
purposes.
ARTICLE IX
TERMINATION AND AMENDMENT
9.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time (with respect to Sections 9.1(b) through 9.1(g), by written
notice by the terminating Party to the other Party), whether before or, subject
to the terms hereof, after approval of this Agreement by the stockholders of the
Company:
(a) by mutual written consent of the Buyer, the Transitory
Subsidiary and the Company; or
(b) by either the Buyer or the Company if the Merger shall not have
been consummated by October 25, 2005 (the "Outside Date") (provided that the
right to terminate this Agreement under this Section 9.1(b) shall not be
available to any Party whose failure to fulfill any obligation under this
Agreement has been a principal cause of or resulted in the failure of the Merger
to occur on or before the Outside Date); or
(c) by either the Buyer or the Company if a Governmental Entity of
competent jurisdiction shall have issued a nonappealable final order, decree or
ruling or taken any other nonappealable final action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger; or
(d) by the Buyer if at the Company Meeting at which a vote on the
Company Voting Proposal is taken, the required Company stockholder vote in favor
of the Company Voting Proposal shall not have been obtained; or
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(e) by the Buyer, if there has been a breach of or failure to
perform any representation, warranty, covenant or agreement on the part of the
Company set forth in this Agreement, which breach or failure to perform (i)
would cause the conditions set forth in Section 7.2(a) or 7.2(b) not to be
satisfied, and (ii) shall not have been cured within 30 days following receipt
by the Company of written notice of such breach or failure to perform from the
Buyer; or
(f) by the Company, if there has been a breach of or failure to
perform any representation, warranty, covenant or agreement on the part of the
Buyer or the Transitory Subsidiary set forth in this Agreement, which breach or
failure to perform (i) would cause the conditions set forth in Section 7.3(a) or
7.3(b) not to be satisfied, and (ii) shall not have been cured within 30 days
following receipt by the Buyer of written notice of such breach or failure to
perform from the Company; or (g) by the Buyer, if the Company Stockholder
Approval shall not have been obtained within ten (10) Business Days after the
execution of this Agreement.
9.2 [INTENTIONALLY OMITTED]
9.3 Effect of Termination. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall immediately become
void and there shall be no Liability or obligation on the part of the Buyer, the
Company, the Transitory Subsidiary or their respective officers, directors,
stockholders or Affiliates; provided that (a) any such termination shall not
relieve any Party from Liability for any willful breach of this Agreement, (b)
the provisions of Sections 5.2 (Confidentiality), 9.4 (Fees and Expenses), this
Section 9.3 (Effect of Termination) and Article X (Miscellaneous) of this
Agreement and (c) the Confidentiality Agreement shall remain in full force and
effect and survive any termination of this Agreement.
9.4 Fees and Expenses. All fees and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the Party incurring such fees and expenses, whether or not the Merger is
consummated; provided however, that (i) the Buyer and the Company shall each be
responsible for fifty percent (50%) of all fees and expenses relating to the
Exchange Agent and filings made pursuant to the HSR Act and (ii) the Buyer shall
be responsible for customary licensing fees to be paid to any Governmental
Entity with respect to obtaining permits and consents pursuant to Section
6.4(a)(iv).
9.5 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of any Party, but, after any such approval, no amendment
shall be made which by law requires further approval by such stockholders
without such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
9.6 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
-50-
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a Party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such Party. Such extension
or waiver shall not be deemed to apply to any time for performance, inaccuracy
in any representation or warranty, or noncompliance with any agreement or
condition, as the case may be, other than that which is specified in the
extension or waiver. The failure of any Party to this Agreement to assert any of
its rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
ARTICLE X
MISCELLANEOUS
10.1 [INTENTIONALLY OMITTED]
10.2 Notices. All notices, requests, demands, claims and other
communications hereunder shall be in writing and shall be deemed duly delivered
(i) four Business Days after being sent by registered or certified mail, return
receipt requested, postage prepaid, (ii) one Business Day after being sent for
next Business Day delivery, fees prepaid, via a reputable nationwide overnight
courier service, or (iii) on the date of confirmation of receipt (or, the first
Business Day following such receipt if the date of such receipt is not a
Business Day) of transmission by facsimile, in each case to the intended
recipient as set forth below:
(a) if to the Buyer or the Transitory Subsidiary, to
Bright Horizons Family Solutions, Inc.
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxx, Chief Executive Officer
Telecopy: 000 000-0000
with a copy to:
Bass, Xxxxx & Xxxx PLC
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
Telecopy: 000 000-0000
(b) if to the Company, to
ChildrenFirst Inc.
000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Xxxx Xxxxxx, Chief Executive Officer
Telecopy: 000 000-0000
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with a copy to:
Xxxxxx Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxx Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
(c) if to the Stockholder Representative, to
Xxxxx X. Xxxxx
XX CF Holding LLC
00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Any party to this Agreement may give any notice or other communication
hereunder using any other means (including personal delivery, messenger service,
telex, ordinary mail or electronic mail), but no such notice or other
communication shall be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended. Any party to this
Agreement may change the address to which notices and other communications
hereunder are to be delivered by giving the other parties to this Agreement
notice in the manner herein set forth.
10.3 Entire Agreement. This Agreement (including the Schedules hereto
and the documents and instruments referred to herein that are to be delivered at
the Closing) constitutes the entire agreement among the parties to this
Agreement and supersedes any prior understandings, agreements or representations
by or among the parties hereto, or any of them, written or oral, with respect to
the subject matter hereof; provided that the Confidentiality Agreement shall
remain in effect in accordance with its terms.
10.4 No Third Party Beneficiaries. Except as provided in Sections 2.1
and 2.2 (with respect to which holders of Company Stock shall be third party
beneficiaries), Section 2.3 (with respect to which holders of Company Stock
Options shall be third party beneficiaries), Section 2.6 (with respect to which
the Stockholder Representative shall be a third party beneficiary), Section 6.6
(with respect to which the Company Indemnified Parties shall be third party
beneficiaries) and Section 6.8 (with respect to which the Continuing Employees
shall be third party beneficiaries), this Agreement is not intended, and shall
not be deemed, to confer any rights or remedies upon any Person other than the
parties hereto and their respective successors and permitted assigns, to create
any agreement of employment with any person or to otherwise create any
third-party beneficiary hereto.
10.5 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement may be assigned or delegated, in
whole or in part, by operation of law or otherwise by any of the parties hereto
without the prior written consent of the other parties, and any such assignment
without such prior written consent shall be null and void. Subject to the
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preceding sentence, this Agreement shall be binding upon, inure to the benefit
of, and be enforceable by, the parties hereto and their respective successors
and permitted assigns.
10.6 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties hereto agree that the court making such determination
shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified. In the event such court does
not exercise the power granted to it in the prior sentence, the parties hereto
agree to replace such invalid or unenforceable term or provision with a valid
and enforceable term or provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid or unenforceable term.
10.7 Counterparts and Signature. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original but all of which
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties hereto and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart. This Agreement may be executed and delivered by
facsimile transmission.
10.8 Interpretation. When reference is made in this Agreement to an
Article or a Section, such reference shall be to an Article or Section of this
Agreement, unless otherwise indicated. The table of contents, table of defined
terms and headings contained in this Agreement are for convenience of reference
only and shall not affect in any way the meaning or interpretation of this
Agreement. The language used in this Agreement shall be deemed to be the
language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction shall be applied against any party. Whenever the
context may require, any pronouns used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural, and vice versa. Any reference to
any federal, state, local or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." No summary of this Agreement prepared by any party shall
affect the meaning or interpretation of this Agreement.
10.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdiction) that would cause the application of laws
of any jurisdictions other than those of the State of Delaware.
10.10 Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other
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remedy conferred hereby, or by law or equity upon such party, and the exercise
by a party of any one remedy will not preclude the exercise of any other remedy.
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
of this Agreement, this being in addition to any other remedy to which they are
entitled at law or in equity.
10.11 Submission to Jurisdiction. Each of the parties to this Agreement
(a) consents to submit itself to the personal jurisdiction of any state or
federal court sitting in Boston, Massachusetts in any action or proceeding
arising out of or relating to this Agreement or any of the transactions
contemplated by this Agreement, (b) agrees that all claims in respect of such
action or proceeding may be heard and determined in any such court, (c) agrees
that it shall not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, and (d) agrees not to bring any
action or proceeding arising out of or relating to this Agreement or any of the
transactions contemplated by this Agreement in any other court. Each of the
parties hereto waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety or other
security that might be required of any other party with respect thereto. Any
party hereto may make service on another party by sending or delivering a copy
of the process to the party to be served at the address and in the manner
provided for the giving of notices in Section 10.2. Nothing in this Section
10.11, however, shall affect the right of any party to serve legal process in
any other manner permitted by law.
10.12 Disclosure Schedules. The Company Disclosure Schedule and the
Buyer Disclosure Schedule shall each be arranged in Sections corresponding to
the numbered Sections contained in Article III, in the case of the Company
Disclosure Schedule, or Article IV, in the case of the Buyer Disclosure
Schedule, and the disclosure in any Section shall qualify (a) the corresponding
Section in Article III or Article IV, as the case may be, and (b) the other
Sections in Article III or Article IV, as the case may be, to the extent that it
is reasonably apparent from a reading of such disclosure that it also qualifies
or applies to such other Sections. The inclusion of any information in the
Company Disclosure Schedule or the Buyer Disclosure Schedule, or in any update
thereto, shall not be deemed to be an admission or acknowledgment, in and of
itself, that such information is required by the terms hereof to be disclosed,
is material, has resulted in or would result in a Company Material Adverse
Effect or a Buyer Material Adverse Effect, or is outside the Ordinary Course of
Business.
10.13 Company's Knowledge. For purposes of this Agreement, the term
"Company's Knowledge" means the actual knowledge as of the date hereof and as of
the Closing Date of the individuals identified in Section 10.13 of the Company
Disclosure Schedule.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the Buyer, the Transitory Subsidiary and the
Company have caused this Agreement to be signed by their respective officers
thereunto duly authorized as of the date first written above.
BRIGHT HORIZONS FAMILY SOLUTIONS, INC.
By: /s/ Xxxxx X. Xxxxx
--------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
BFAM MERGERSUB, INC.
By: /s/ Xxxxx X. Xxxxx
--------------------------------
Name: Xxxxx X. Xxxxx
Title: President
CHILDRENFIRST INC.
By: /s/ Xxxx Xxxxxx
------------------------------
Name: Xxxx Xxxxxx
Title: Chief Executive Officer
[Signature Page to Agreement and Plan of Merger]
