Exhibit 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
AMONG
STRATOS LIGHTWAVE, INC.,
SLEEPING BEAR MERGER CORP.
AND
STERLING HOLDING COMPANY
Dated as of July 2, 2003
TABLE OF CONTENTS
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ARTICLE I THE MERGER ................................................................... 2
Section 1.1 The Merger ................................................................... 2
Section 1.2 Effective Time ............................................................... 2
Section 1.3 Effects of the Merger ........................................................ 2
Section 1.4 Plan of Reorganization ....................................................... 2
Section 1.5 Charter and Bylaws; Directors and Officers ................................... 2
Section 1.6 Conversion of Securities ..................................................... 3
Section 1.7 Delivery of Certificates and Payment of Cash ................................. 5
Section 1.8 Dividends; Transfer Taxes; Withholding ....................................... 6
Section 1.9 No Fractional Securities ..................................................... 7
Section 1.10 Return of Exchange Fund ...................................................... 7
Section 1.11 Adjustment of Per Share Merger Consideration ................................. 7
Section 1.12 No Further Ownership Rights in Company Common Stock
or Company Preferred Stock .................................................. 7
Section 1.13 Closing of Company Transfer Books ............................................ 8
Section 1.14 Lost Certificates ............................................................ 8
Section 1.15 Further Assurances ........................................................... 8
Section 1.16 Affiliates ................................................................... 8
Section 1.17 Excess Working Capital Adjustment ............................................ 9
Section 1.18 Associated Rights ............................................................ 12
Section 1.19 Closing; Closing Deliveries .................................................. 12
ARTICLE II REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB ............................. 13
Section 2.1 Organization, Standing and Power ............................................. 13
Section 2.2 Capital Structure ............................................................ 14
Section 2.3 Authority .................................................................... 15
Section 2.4 Consents and Approvals; No Violation ......................................... 16
Section 2.5 SEC Documents and Other Reports .............................................. 17
Section 2.6 Absence of Certain Changes or Events ......................................... 17
Section 2.7 Permits and Compliance ....................................................... 19
Section 2.8 Registration Statement and Proxy Statement ................................... 19
Section 2.9 Tax Matters .................................................................. 20
Section 2.10 Actions and Proceedings ...................................................... 21
Section 2.11 Certain Agreements ........................................................... 22
Section 2.12 ERISA ........................................................................ 22
Section 2.13 Compliance with Worker Safety and Environmental Laws ......................... 23
Section 2.14 Labor Matters ................................................................ 23
Section 2.15 Intellectual Property ........................................................ 24
Section 2.16 Contracts .................................................................... 24
Section 2.17 Takeover Statutes and Charter Provisions ..................................... 24
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TABLE OF CONTENTS
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Section 2.18 Required Vote of Parent Stockholders ......................................... 25
Section 2.19 Brokers ...................................................................... 25
Section 2.20 Operations of Sub ............................................................ 25
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY ................................ 25
Section 3.1 Organization, Standing and Power ............................................. 25
Section 3.2 Capital Structure ............................................................ 25
Section 3.3 Authority .................................................................... 27
Section 3.4 Consents and Approvals; No Violation ......................................... 28
Section 3.5 Financial Statements ......................................................... 29
Section 3.6 No Dividends; Absence of Certain Changes or Events ........................... 29
Section 3.7 Permits and Compliance ....................................................... 31
Section 3.8 Registration Statement and Proxy Statement ................................... 32
Section 3.9 Tax Matters .................................................................. 32
Section 3.10 Actions and Proceedings ...................................................... 34
Section 3.11 Certain Agreements ........................................................... 34
Section 3.12 Employee Benefits ............................................................ 35
Section 3.13 Compliance with Worker Safety and Environmental Laws ......................... 36
Section 3.14 Labor Matters ................................................................ 36
Section 3.15 Intellectual Property ........................................................ 36
Section 3.16 Availability of Assets ....................................................... 37
Section 3.17 Real Property ................................................................ 37
Section 3.18 Personal Property Leases ..................................................... 38
Section 3.19 Title to Assets .............................................................. 38
Section 3.20 Contracts .................................................................... 38
Section 3.21 Status of Contracts .......................................................... 40
Section 3.22 Insurance .................................................................... 40
Section 3.23 Takeover Statutes and Charter Provisions ..................................... 40
Section 3.24 Required Vote of Company Stockholders ........................................ 40
Section 3.25 Brokers ...................................................................... 41
Section 3.26 Ownership of Company Stock ................................................... 41
ARTICLE IV COVENANTS .................................................................... 41
Section 4.1 Conduct of Business of the Company Pending the Merger ........................ 41
Section 4.2 Conduct of Business of Parent Pending the Merger ............................. 44
Section 4.3 No Solicitation by the Company ............................................... 47
Section 4.4 No Solicitation by Parent .................................................... 48
Section 4.5 Third Party Standstill Agreements ............................................ 48
Section 4.6 Reorganization ............................................................... 49
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TABLE OF CONTENTS
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Continued
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ARTICLE V ADDITIONAL AGREEMENTS ........................................................ 49
Section 5.1 Stockholder Meetings ......................................................... 49
Section 5.2 Preparation of the Registration Statement and the Proxy Statement ............ 49
Section 5.3 Access to Information ........................................................ 50
Section 5.4 Compliance with the Securities Act ........................................... 50
Section 5.5 Fees and Expenses ............................................................ 50
Section 5.6 Company Stock Options ........................................................ 51
Section 5.7 Commercially Reasonable Efforts .............................................. 52
Section 5.8 Public Announcements ......................................................... 52
Section 5.9 Real Estate Transfer and Gains Tax ........................................... 52
Section 5.10 State Takeover Laws .......................................................... 53
Section 5.11 Indemnification of Directors and Officers .................................... 53
Section 5.12 Notification of Certain Matters .............................................. 53
Section 5.13 Stock Exchange Listing ....................................................... 54
Section 5.14 Indemnity Agreement .......................................................... 54
Section 5.15 Pre-Closing Transfers ........................................................ 54
Section 5.16 Working Capital Dividend ..................................................... 55
Section 5.17 Discharge of Indebtedness .................................................... 56
Section 5.18 Continuity of Business Enterprise ............................................ 56
Section 5.19 Post Closing Tax Returns ..................................................... 56
ARTICLE VI CONDITIONS PRECEDENT TO THE MERGER ........................................... 56
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger ................... 56
Section 6.2 Conditions to Obligation of the Company to Effect the Merger ................. 57
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the Merger ............. 58
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER ............................................ 60
Section 7.1 Termination .................................................................. 60
Section 7.2 Effect of Termination ........................................................ 62
Section 7.3 Amendment .................................................................... 62
Section 7.4 Extension; Waiver ............................................................ 62
ARTICLE VIII INDEMNIFICATION .............................................................. 62
Section 8.1 Indemnity Fund ............................................................... 62
Section 8.2 Indemnification from Indemnity Fund .......................................... 63
Section 8.3 Termination of Indemnity Fund ................................................ 64
Section 8.4 Notice and Determination of Claims ........................................... 64
Section 8.5 Resolution of Conflicts; Arbitration ......................................... 65
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TABLE OF CONTENTS
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Section 8.6 Stockholder Representatives .................................................. 66
Section 8.7 Actions of the Stockholder Representatives ................................... 67
Section 8.8 Third-Party Claims ........................................................... 67
ARTICLE IX GENERAL PROVISIONS ........................................................... 68
Section 9.1 Survival of Representations and Warranties ................................... 68
Section 9.2 Notices ...................................................................... 68
Section 9.3 Interpretation ............................................................... 69
Section 9.4 Counterparts ................................................................. 69
Section 9.5 Entire Agreement; No Third-Party Beneficiaries ............................... 69
Section 9.6 Governing Law ................................................................ 69
Section 9.7 Assignment ................................................................... 70
Section 9.8 Severability ................................................................. 70
Section 9.9 Enforcement of this Agreement ................................................ 70
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EXHIBITS
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Exhibit A Form of Voting Agreement
Exhibit B Form of Indemnity Escrow Agreement
Exhibit C Directors of Parent
Exhibit D Form of Certificate of Designation
Exhibit E Form of Amendment to Rights Agreement
Exhibit F Form of Company Affiliate Letter
Exhibits G-1 and G-2 Form of Leases
Exhibit H Form of FIRPTA Statement
Exhibit I Form of FIRPTA Notification
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TABLE OF DEFINED TERMS
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Defined Term Section
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Adjustment Resolution Period Section 1.17(b)(iii)
Affiliate Section 3.16
Agreed Accounting Principles Section 1.17(a)
Agreed Rate Section 1.6(g)
Agreed Value Section 5.15(d)
Agreement Introduction
Audited Financial Statements Section 3.5
Balance Sheet Section 3.5
Balance Sheet Date Section 3.5
Blue Sky Laws Section 2.4
Certificate of Designation Section 1.6(d)
Certificate of Merger Section 1.2
Certificates Section 1.7
Claim Notice Section 8.4(a)
Claiming Party Section 8.4(a)
Closing Section 1.19(a)
Closing Date Section 1.19(a)
Code Recitals
Company Introduction
Company Affiliate Letter Section 5.4
Company Agreements Section 3.21
Company Ancillary Agreements Section 3.3(a)
Company Business Personnel Section 3.14
Company Bylaws Section 3.2(a)
Company Charter Section 1.5(a)
Company Common Stock Recitals
Company Employment Agreements Section 3.12(d)
Company Group Section 3.9(f)
Company Letter Section 3.2(c)
Company Permits Section 3.7
Company Plan Section 3.12(c)
Company Preferred Stock Recitals
Company Stock Option Agreements Section 3.2(a)
Company Stock Options Section 3.2(a)
Company Stockholder Meeting Section 5.1(a)
Company Stockholders Section 1.7
Company Superior Proposal Section 4.3(a)
Company Takeover Proposal Section 4.3(a)
Constituent Corporations Introduction
Corona Section 3.2(d)
Corona Stock Purchase Agreement Section 3.2(d)
DGCL Section 1.1
Director Indemnification Agreements Section 5.11
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Defined Term Section
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Dissenting Shares Section 1.6(e)
Effective Time Section 1.2
Encumbrance Section 2.6(b)(iii)
Environmental Laws Section 2.13
ERISA Section 2.12(a)
ERISA Affiliate Section 2.12(c)
Excess Working Capital Section 1.17(a)
Exchange Act Section 2.4
Exchange Agent Section 1.7
Expense Section 8.1(c)
Financial Statements Section 3.5
Fully Diluted Equity Section 1.6(c)
GAAP Section 2.5
Gains Taxes Section 5.9
Governmental Entity Section 2.4
HSR Act Section 2.4
Indemnity Agent Section 8.1(a)
Indemnity Agreement Recitals
Indemnity Shares Section 1.7
Independent Accounting Firm Section 1.17(b)(iv)
Intellectual Property Rights Section 2.15(a)
Interim Excess Working Capital Section 1.17(b)(vi)
Interim Per Share Excess Working Capital Section 1.17(b)(vi)
IRS Section 2.12(b)
Joint Venture Section 3.2(d)
Knowledge of Parent Section 2.7
Knowledge of the Company Section 3.2(a)
Leases Section 5.15(a)
LLC Section 5.15(a)
LLC Assets Section 5.15(a)
LLC Units Section 5.15(b)
Loss Section 8.1(c)
Material Adverse Change Section 2.1
Material Adverse Effect Section 2.1
Merger Recitals
Nasdaq Section 1.9
Nondisclosure Agreement Section 5.3
Objection Section 8.4(c)
Objection Notice Section 1.17(b)(iii)
Owned Real Property Section 3.17(a)
Parent Introduction
Parent Ancillary Agreements Section 2.3
Parent Business Personnel Section 2.14
Parent Bylaws Section 2.4
Parent Calculation Section 1.17(b)(i)
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Defined Term Section
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Parent Charter Section 1.19(b)(i)
Parent Common Stock Recitals
Parent Group Members Section 8.1(c)
Parent Letter Section 2.4
Parent Permits Section 2.7
Parent Plan Section 2.12(c)
Parent Preferred Stock Recitals
Parent Rights Section 2.2
Parent SEC Documents Section 2.5
Parent Stock Plans Section 2.2
Parent Stockholder Meeting Section 5.1(b)
Parent Superior Proposal Section 4.4(a)
Parent Takeover Proposal Section 4.4(a)
Parent Third Party Section 5.5(e)
Per Share Excess Working Capital Section 1.17(a)
Per Share Merger Consideration Section 1.6(c)
Permitted Encumbrance Section 2.6(b)(iii)
Person Section 3.16
Post Closing Sale Section 5.15(d)
Proxy Statement Section 2.8
Registration Statement Section 2.3
Representatives' Accountant Section 1.17(b)(ii)
Restricted Stock Agreements Section 3.2(a)
Rights Agreement Section 2.2
Rule 145 Affiliates Section 5.4
SEC Section 2.3
Securities Act Section 2.3
Series S Preferred Stock Section 3.2(a)
Share Issuance Section 2.3
Shares Section 1.6(c)
State Takeover Approvals Section 2.4
Stockholder Meetings Section 5.1(b)
Stockholder Representatives Section 8.6(a)
Sub Introduction
Subsidiary Section 2.1
Surviving Corporation Section 1.1
Target Working Capital Section 1.17(a)
Tax Section 2.9(c)
Tax Return Section 2.9(c)
Tax Sharing Arrangement Section 2.9(c)
Third Party Acquisition Event involving Parent Section 5.5(e)
Transmittal Letter Section 1.7
Xxxxxxxxx Section 1.19(d)(vi)
Unaudited Financial Statements Section 3.5
Voting Agreements Recitals
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Defined Term Section
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Westlake Properties Section 3.17(b)
Worker Safety Laws Section 2.13
Working Capital Section 1.17(a)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 2, 2003 (this
"Agreement"), among Stratos Lightwave, Inc., a Delaware corporation ("Parent"),
Sleeping Bear Merger Corp., a Delaware corporation and a direct wholly owned
subsidiary of Parent ("Sub"), and Sterling Holding Company, a Delaware
corporation (the "Company") (Sub and the Company being hereinafter collectively
referred to as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved and declared advisable the merger of Sub and the Company
(the "Merger"), upon the terms and subject to the conditions set forth herein,
whereby each issued and outstanding share of common stock, $0.01 par value, of
the Company ("Company Common Stock"), and each issued and outstanding share of
preferred stock, $0.01 par value, of the Company ("Company Preferred Stock"), in
each case not owned directly or indirectly by Parent or the Company, will be
converted into the right to receive (i) shares of Common Stock, $0.01 par value,
of Parent ("Parent Common Stock") together with the associated Parent Rights (as
hereinafter defined), and (ii) shares of a new series of Preferred Stock, $0.01
per share, of Parent to be designated as the Series B Preferred Stock (the
"Parent Preferred Stock");
WHEREAS, the respective Boards of Directors of Parent and the Company
have determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is in the best interest of their
respective stockholders;
WHEREAS, in order to induce Parent and Sub to enter into this
Agreement, concurrently herewith Citicorp Venture Capital Ltd., the Xxxxxxx X.
and Xxxxx X. Xxxxx Trust dated 11/24/98, the Xxxxxxx X. and Xxxxx X. Xxxxx
Charitable Remainder Unit Trust, and the directors of the Company are entering
into agreements with Parent dated as of the date hereof (the "Voting
Agreements"), in the form of the attached Exhibit A, pursuant to which, among
other things, each such Person has agreed to vote in favor of this Agreement and
the Merger;
WHEREAS, in order to induce Parent and Sub to enter into this
Agreement, before the Closing Parent, the Indemnity Agent (as hereinafter
defined), and the Stockholder Representatives (as hereinafter defined) shall
enter into the Indemnity Escrow Agreement (the "Indemnity Agreement")
substantially in the form of the attached Exhibit B; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
regulations promulgated thereunder.
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL"), Sub shall be merged with and into the Company at
the Effective Time (as hereinafter defined). Following the Merger, the separate
corporate existence of Sub shall cease and the Company shall continue as the
surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights and obligations of Sub in accordance with the DGCL.
Notwithstanding anything to the contrary herein, at the election of Parent, any
direct wholly owned Subsidiary (as hereinafter defined) of Parent may be
substituted for Sub as a Constituent Corporation in the Merger; provided that
such substituted corporation is a Delaware corporation which is formed solely
for the purpose of engaging in the transactions contemplated by this Agreement
and has engaged in no other business activities. In such event, the parties
agree to execute an appropriate amendment to this Agreement, in form and
substance reasonably satisfactory to Parent and the Company, in order to reflect
such substitution.
Section 1.2 Effective Time. The Merger shall become effective when a
Certificate of Merger (the "Certificate of Merger"), executed in accordance with
the relevant provisions of the DGCL, is duly filed with the Secretary of State
of the State of Delaware; provided, however, that, upon mutual consent of the
Constituent Corporations, the Certificate of Merger may provide for a later date
of effectiveness of the Merger not more than 30 days after the date the
Certificate of Merger is duly filed. When used in this Agreement, the term
"Effective Time" shall mean the date and time at which the Certificate of Merger
is accepted for recording or such later time established by the Certificate of
Merger. The filing of the Certificate of Merger shall be made on the date of the
Closing (as hereinafter defined).
Section 1.3 Effects of the Merger. The Merger shall have the effects
set forth in Section 259 of the DGCL.
Section 1.4 Plan of Reorganization. The parties hereto intend that
this Agreement shall constitute a "plan of reorganization" for United States
federal income tax purposes pursuant to which, for such purposes, the merger of
Sub directly with and into the Company (in which each Company Stockholder (as
hereinafter defined) is to receive solely the Per Share Merger Consideration (as
hereinafter defined) provided for hereunder) is to be treated as a
"reorganization" under Section 368(a) of the Code (to which each of Parent and
the Company are to be parties under Section 368(b) of the Code).
Section 1.5 Charter and Bylaws; Directors and Officers.
(a) At the Effective Time, the Amended and Restated Certificate of
Incorporation, as amended, of the Company (the "Company Charter"), as in effect
immediately prior to the Effective Time, shall be amended so that Article IV
reads in its entirety as follows: "The total number of shares of all classes of
capital stock which the Corporation shall have authority to issue is 1,000
shares of Common Stock, $0.01 par value." As so amended, the Company Charter
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law. At the
Effective Time,
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the Bylaws of Sub, as in effect immediately prior to the Effective Time, shall
be the Bylaws of the Surviving Corporation until thereafter changed or amended
as provided therein or in the Certificate of Incorporation of the Surviving
Corporation.
(b) The directors of Sub at the Effective Time shall be the directors
of the Surviving Corporation and the officers of the Company at the Effective
Time shall be the officers of the Surviving Corporation, in each case until the
earlier of their resignation or removal or until their respective successors are
duly elected or appointed and qualified, as the case may be.
(c) Effective at the Effective Time, Parent's Board of Directors shall
consist of the eight individuals listed on Exhibit C and a ninth director to the
extent designated by the Company prior to the filing of the Registration
Statement (as hereinafter defined), and Xxxxx X. XxXxxxxx shall continue as
Parent's Chief Executive Officer, in each case, until the earlier of their
resignation or removal or until their respective successors are duly elected or
appointed and qualified, as the case may be. Parent shall use its best
reasonable efforts to effect the provision of this Section 1.5(c). Parent's
obligations with respect to the election of the Company's designees to Parent's
Board of Directors shall be subject to Section 14(f) of the Exchange Act (as
hereinafter defined) and Rule 14f-1 promulgated thereunder. The Company shall
supply to Parent in writing and be solely responsible for any information
specifically provided by it with respect to its director nominees required by
Section 14(f) and Rule 14f-1 for use in the Proxy Statement (as hereinafter
defined), and Parent agrees to include such information in the Proxy Statement.
(d) The parties currently intend that following the Merger, Parent
shall continue to maintain its headquarters and principal operations in the
Chicago, Illinois metropolitan area.
Section 1.6 Conversion of Securities. As of the Effective Time, by
virtue of the Merger and without any action on the part of Sub, the Company or
the holders of any securities of the Constituent Corporations:
(a) Each issued and outstanding share of common stock, $0.01 par
value, of Sub shall be converted into one validly issued, fully paid and
nonassessable share of common stock, $0.01 par value, of the Surviving
Corporation.
(b) All shares of Company Common Stock or Company Preferred Stock that
are held in the treasury of the Company or by any wholly owned Subsidiary of the
Company and any shares of Company Common Stock or Company Preferred Stock owned
by Parent shall be cancelled, and no capital stock of Parent or other
consideration shall be delivered in exchange therefor.
(c) Subject to the provisions of Sections 1.6(g), 1.9 and 1.11 hereof,
each share of Company Common Stock and each share of Company Preferred Stock
issued and outstanding immediately prior to the Effective Time (other than
Dissenting Shares (as hereinafter defined) and shares to be cancelled in
accordance with Section 1.6(b)) (collectively, the "Shares") shall be converted
into the right to receive the following: (i) the number of validly
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issued, fully paid and nonassessable shares of Parent Common Stock equal to
6,082,000 divided by the Fully Diluted Equity (as hereinafter defined), rounded
down to the nearest whole share, and (ii) the number of validly issued, fully
paid and nonassessable shares of Parent Preferred Stock equal to 50,000 divided
by the Fully Diluted Equity, rounded down to the nearest whole share (together
with any cash in lieu of fractional shares of Parent Common Stock or Parent
Preferred Stock to be paid pursuant to Section 1.9), (clauses (i) and (ii)
collectively, the "Per Share Merger Consideration"). All such Shares, when so
converted, shall no longer be outstanding and shall automatically be cancelled
and retired, and each holder of a certificate formerly representing any such
Shares shall cease to have any rights with respect thereto, except the right to
receive such amount and any dividends and other distributions in accordance with
Section 1.8. For purposes of this Agreement, "Fully Diluted Equity" means the
aggregate of all issued and outstanding shares of Company Common Stock (assuming
the conversion of all of the issued and outstanding shares of Company Preferred
Stock) as of the Effective Time.
(d) The shares of Parent Preferred Stock issued in connection with the
Merger shall be issued pursuant to a Certificate of Designation substantially in
the form of the attached Exhibit D (the "Certificate of Designation").
(e) Notwithstanding anything in this Agreement to the contrary, shares
of Company Common Stock or Company Preferred Stock issued and outstanding
immediately prior to the Effective Time which are held of record by stockholders
who shall not have voted such shares in favor of the Merger and who shall have
demanded properly in writing appraisal of such shares in accordance with Section
262 of the DGCL ("Dissenting Shares") shall not be converted into the right to
receive the Per Share Merger Consideration, as set forth in Section 1.6(c), and
cash in lieu of fractional shares as set forth in Section 1.9, but the holders
thereof instead shall be entitled to, and the Dissenting Shares shall only
represent the right to receive, payment of the fair value of such shares in
accordance with the provisions of Section 262 of the DGCL; provided, however,
that (i) if such a holder fails to demand properly in writing from the Surviving
Corporation the appraisal of his or its shares in accordance with Section 262(d)
of the DGCL or, after making such demand, subsequently delivers an effective
written withdrawal of such demand, or fails to establish his or its entitlement
to appraisal rights as provided in Section 262 of the DGCL, if so required, or
(ii) if a court shall determine that such holder is not entitled to receive
payment for his or its shares or such holder shall otherwise lose his or its
appraisal rights, then, in any such case, each share of Company Common Stock or
Company Preferred Stock, as the case may be, held of record by such holder or
holders shall automatically be converted into and represent only the right to
receive the Per Share Merger Consideration as set forth in Section 1.6(c), and
cash in lieu of fractional shares as set forth in Section 1.9, upon surrender of
the certificate or certificates representing such Dissenting Shares. Any cash
paid in respect of Dissenting Shares shall be paid by the Company solely with
its own funds, and the Company shall not be reimbursed therefor by Parent or any
of its Subsidiaries, either directly or indirectly. The Company shall give
Parent (x) prompt notice of any demands for appraisal received by the Company,
withdrawals of such demands, and any other instruments served pursuant to the
DGCL and received by the Company relating to Dissenting Shares or demands for
appraisal and (y) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under the DGCL. The Company shall not,
except with the prior written consent of
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Parent, make any payment with respect to any demands for appraisal or offer to
settle or settle any such demands.
(f) In calculating the Per Share Merger Consideration payable under
this Section 1.6, Parent shall be entitled to rely on the representations and
warranties contained in Section 3.2(a) and the certificate delivered pursuant to
Section 6.3(f). If such representations, warranties and certificate are not
correct, Parent shall have the right to adjust the Per Share Merger
Consideration accordingly, and notwithstanding anything else to the contrary
contained in this Agreement, in no event shall the aggregate merger
consideration payable by Parent, Sub or the Surviving Corporation to the holders
of equity interests in the Company in connection with the Merger or the
transactions contemplated hereby be other than 6,082,000 shares of Parent Common
Stock and 50,000 shares of Parent Preferred Stock.
(g) If the Target Working Capital (as hereinafter defined) exceeds the
Working Capital (as hereinafter defined) as finally determined pursuant to
Section 1.17(b), Parent shall be entitled, within 10 business days after such
final determination, to receive from the Indemnity Fund an amount equal to such
excess plus interest on such excess from the Closing Date to the date of payment
thereof at the Agreed Rate. For purposes of this Agreement, "Agreed Rate" means
the London Inter-Bank Offer Rate for six month deposits in United States dollars
as quoted on Telerate Page 3750 on the Closing Date plus 25 basis points.
Section 1.7 Delivery of Certificates and Payment of Cash. At or after
the Effective Time, each holder of record of a certificate or certificates
(collectively, the "Certificates") representing shares of Company Common Stock
or Company Preferred Stock issued and outstanding immediately prior to the
Effective Time (collectively, the "Company Stockholders") may surrender such
Certificate or Certificates to Parent's designee as the exchange agent (the
"Exchange Agent"), together with a letter of transmittal in customary form
prepared by Parent (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon actual delivery
thereof to the Exchange Agent and shall contain instructions for use in
effecting the surrender of such Certificates in exchange for the property
described in the next sentence and which, if Parent elects, may include a stock
power to be executed in blank with respect to any shares of Parent Common Stock
to be deposited with the Indemnity Agent) (the "Transmittal Letter"). Parent
shall promptly deliver or cause to be delivered upon surrender for cancellation
to the Exchange Agent of all Certificates held by any Company Stockholder,
together with the Transmittal Letter, duly executed, in exchange therefor (i) to
such Company Stockholder, (x) one or more certificates representing ninety
percent (90%) of the aggregate number of whole shares of Parent Common Stock
(rounded up to the nearest whole share) and one hundred percent (100%) of the
aggregate number of whole shares of Parent Preferred Stock into which the
Company Common Stock or the Company Preferred Stock represented by the
Certificate or Certificates so surrendered shall have been converted pursuant to
Section 1.6(c), (y) one hundred percent (100%) of the cash in lieu of any
fractional share of Parent Common Stock and one hundred percent (100%) of the
cash in lieu of any fractional share of Parent Preferred Stock in accordance
with Section 1.9, and (z) one hundred percent (100%) of certain dividends and
other distributions in accordance with Section 1.8; and (ii) in accordance with
Section 8.1, to the Indemnity Agent (as hereinafter defined), for deposit in the
Indemnity Fund (as defined in the Indemnity Agreement), (x) one or more
certificates representing the remaining ten percent (10%) of such number of
whole shares of Parent Common Stock (rounded
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down to the nearest whole share) (all such shares held by the Indemnity Agent
being collectively referred to as the "Indemnity Shares") and (y) one hundred
percent (100%) of certain dividends and other distributions in accordance with
Section 1.8, and any Certificate so surrendered shall forthwith be cancelled.
Section 1.8 Dividends; Transfer Taxes; Withholding. No dividends or
other distributions that are declared on or after the Effective Time on Parent
Common Stock or Parent Preferred Stock, or are payable to the holders of record
thereof on or after the Effective Time, will be paid to any Person (as
hereinafter defined) entitled by reason of the Merger to receive a certificate
representing Parent Common Stock or Parent Preferred Stock until such Person
surrenders the related Certificate or Certificates, as provided in Section 1.7,
and no cash payment in lieu of fractional shares will be paid to any such Person
pursuant to Section 1.9 until such Person shall so surrender the related
Certificate or Certificates. Subject to the effect of applicable law, there
shall be paid to each record holder of a new certificate representing such
Parent Common Stock or Parent Preferred Stock: (i) at the time of such surrender
or as promptly as practicable thereafter, one hundred percent (100%) of the
amount of any dividends or other distributions theretofore paid with respect to
the shares of Parent Common Stock or Parent Preferred Stock represented by such
new certificate and having a record date on or after the Effective Time and a
payment date prior to such surrender; (ii) at the appropriate payment date or as
promptly as practicable thereafter, one hundred percent (100%) of the amount of
any dividends or other distributions payable with respect to such shares of
Parent Common Stock or Parent Preferred Stock and having a record date on or
after the Effective Time but prior to such surrender and a payment date on or
subsequent to such surrender; and (iii) at the time of such surrender or as
promptly as practicable thereafter, the amount of any cash payable with respect
to a fractional share of Parent Common Stock or Parent Preferred Stock to which
such holder is entitled pursuant to Section 1.9; provided, that to the extent
such dividends or other distributions relate to stock splits or other similar
events, one hundred percent (100%) of such dividends or distributions with
respect to the Indemnity Shares shall be deposited by Parent with the Indemnity
Agent and shall be included in the Indemnity Fund in accordance with the
Indemnity Agreement. In no event shall the Person entitled to receive such
dividends or other distributions or cash in lieu of fractional shares be
entitled to receive interest on such dividends or other distributions or cash in
lieu of fractional shares. If any cash or certificate representing shares of
Parent Common Stock or Parent Preferred Stock is to be paid to or issued in a
name other than that in which the Certificate surrendered in exchange therefor
is registered, it shall be a condition of such exchange that the Certificate so
surrendered shall be properly endorsed and otherwise in proper form for transfer
and that the Person requesting such exchange shall pay to Parent any transfer or
other taxes required by reason of the issuance of certificates for such shares
of Parent Common Stock or Parent Preferred Stock in a name other than that of
the registered holder of the Certificate surrendered or shall establish to the
satisfaction of Parent that such tax has been paid or is not applicable. Parent
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any Person such amounts as Parent is
required to deduct and withhold with respect to the making of such payment under
the Code or under any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by Parent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the Person who
otherwise would have received the payment in respect of which such deduction and
withholding was made by Parent.
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Section 1.9 No Fractional Securities. No certificates or scrip
representing fractional shares of Parent Common Stock or Parent Preferred Stock,
as the case may be, shall be issued upon the surrender for exchange of
Certificates pursuant to this Article I, and no Parent dividend or other
distribution or stock split shall relate to any fractional share, and no
fractional share shall entitle the owner thereof to vote or to any other rights
of a securityholder of Parent. In lieu of any such fractional share of Parent
Common Stock, each holder of Company Common Stock or Company Preferred Stock who
would otherwise have been entitled to a fraction of a share of Parent Common
Stock upon surrender of Certificates for exchange pursuant to this Article I
will be paid one hundred percent (100%) of an amount in cash (without interest),
rounded down to the nearest cent, determined by multiplying (i) the last
reported sale price per share of Parent Common Stock on The Nasdaq National
Market ("Nasdaq") on the date immediately before the date of the Effective Time
(or, if the shares of Parent Common Stock do not trade on Nasdaq on such date,
the first date of trading of shares of Parent Common Stock on Nasdaq immediately
before such date) by (ii) the fractional interest of a share of Parent Common
Stock to which such holder would otherwise be entitled. In lieu of any such
fractional share of Parent Preferred Stock, each holder of Company Common Stock
or Company Preferred Stock who would otherwise have been entitled to a fraction
of Parent Preferred Stock upon surrender of Certificates for exchange pursuant
to this Article I will be paid an amount of cash (without interest), rounded
down to the nearest cent, determined by multiplying (i) $100 by (ii) the
fractional interest of a share of Parent Preferred Stock to which such holder
would otherwise be entitled.
Section 1.10 Return of Exchange Fund. Any portion of the Parent Common
Stock, Parent Preferred Stock or cash in lieu of fractional shares which remains
undistributed by the Exchange Agent to the Company Stockholders for 60 days
after the Effective Time shall be delivered to Parent, upon demand of Parent,
and any such Company Stockholders who have not theretofore complied with this
Article I shall thereafter look only to Parent for payment of their claim for
Parent Common Stock, Parent Preferred Stock, any cash in lieu of fractional
shares of Parent Common Stock or Parent Preferred Stock and any dividends or
distributions with respect to Parent Common Stock or Parent Preferred Stock.
Neither Parent nor the Surviving Corporation shall be liable to any former
holder of Company Common Stock or Company Preferred Stock for any consideration
payable in accordance with this Article I which is delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
Section 1.11 Adjustment of Per Share Merger Consideration. In the
event of any reclassification, stock split or stock dividend with respect to
Parent Common Stock, Company Common Stock or Company Preferred Stock, or any
change or conversion of Parent Common Stock, Company Common Stock or Company
Preferred Stock into other securities (or if a record date with respect to any
of the foregoing should occur), or any issuance of securities by Parent pursuant
to the Rights Agreement, in each case prior to the Effective Time, appropriate
and proportionate adjustments, if any, shall be made to the Per Share Merger
Consideration, and all references to the Per Share Merger Consideration in this
Agreement shall be deemed to be to the Per Share Merger Consideration, as so
adjusted.
Section 1.12 No Further Ownership Rights in Company Common Stock or
Company Preferred Stock. All shares of Parent Common Stock and Parent Preferred
Stock
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issued, and all cash paid upon the surrender for exchange of Certificates in
accordance with the terms hereof (including any cash paid pursuant to Section
1.9), shall be deemed to have been issued and paid in full satisfaction of all
rights pertaining to the shares of Company Common Stock or Company Preferred
Stock represented by such Certificates.
Section 1.13 Closing of Company Transfer Books. At the Effective Time,
the stock transfer books of the Company shall be closed, and no transfer of
shares of Company Common Stock or Company Preferred Stock shall thereafter be
made on the records of the Company. If, after the Effective Time, Certificates
are presented to the Surviving Corporation or Parent, such Certificates shall be
cancelled and exchanged as provided in this Article I.
Section 1.14 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) if
such Person is the holder of record of such Certificate as set forth in Section
3.2(c)(i) of the Company Letter (as hereinafter defined) and if required by
Parent or the Exchange Agent, upon the execution by such Person of an
indemnification agreement covering any claim that may be made against Parent,
the Surviving Corporation or the Exchange Agent with respect to such
Certificate, or (b) if such Person is not the holder of record of such
Certificate as set forth in Section 3.2(c)(i) of the Company Letter and if
required by Parent or the Exchange Agent, upon the posting by such Person of a
bond, in such amount as Parent or the Exchange Agent may direct as indemnity
against any claim that may be made against Parent, the Surviving Corporation or
the Exchange Agent with respect to such Certificate, Parent or the Exchange
Agent will issue or cause to be issued in exchange for such lost, stolen or
destroyed Certificate the shares of Parent Common Stock, the shares of Parent
Preferred Stock, any cash in lieu of fractional shares of Parent Common Stock or
Parent Preferred Stock to which the holders thereof are entitled pursuant to
Section 1.9 and any dividends or other distributions to which the holders
thereof are entitled pursuant to Section 1.8.
Section 1.15 Further Assurances. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (b) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and to do, in the name and on
behalf of either Constituent Corporation, all such other acts and things as may
be necessary, desirable or proper to vest, perfect or confirm the Surviving
Corporation's right, title or interest in, to or under any of the rights,
privileges, powers, franchises, properties or assets of such Constituent
Corporation and otherwise to carry out the purposes of this Agreement.
Section 1.16 Affiliates. Notwithstanding anything herein to the
contrary, to the fullest extent permitted by law, Certificates surrendered for
exchange by any Person who may be deemed a Rule 145 Affiliate of the Company (as
determined pursuant to Section 5.4) for purposes of Rule 145 under the
Securities Act (as hereinafter defined) shall not be exchanged
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until Parent has received an executed Company Affiliate Letter (as hereinafter
defined) from such Person.
Section 1.17 Excess Working Capital Adjustment.
(a) Certain Definitions. For purposes of this Agreement:
(i) "Working Capital" means the current assets of the Company and its
Subsidiaries consisting of cash, accounts receivable less allowance for
doubtful accounts, inventories, income tax receivables and prepaid expenses
minus all current liabilities of the Company and its Subsidiaries, in each
case determined as of the Effective Time in accordance with the Agreed
Accounting Principles; provided, that such assets and liabilities shall be
adjusted as follows without duplication:
(A) the legal fees and costs accrued and unpaid to the Company's
outside corporate counsel relating to the Merger and the other
transactions contemplated by this Agreement of $1 million or less
shall not be deemed to be current liabilities of the Company and
its Subsidiaries;
(B) the following shall be deemed to be current liabilities of the
Company and its Subsidiaries as of Effective Time (to the extent
not paid prior to the Effective Time): (1) any expenses relating
to the Merger and the other transactions contemplated by this
Agreement not included in clause (A) immediately above, (2) an
amount equal to $552,000 minus the amount of current liabilities
incurred by the Company between the date of this Agreement and
immediately before the Effective Time for capital expenditures,
(3) any expenses to be incurred by the Company or any of its
Subsidiaries following the date of this Agreement in connection
with relocating the Company's manufacturing operations from its
Xxxxxxxx Xxxxxxx, Xxxxxxxxxx facility to its Mesa, Arizona
facility (provided that any such expenses which have not been
incurred or paid prior to the Effective Time shall be based upon
actual expenditures reasonably incurred after the Effective Time
or, if actual expenditures have not been incurred prior to the
Parent Calculation (as hereinafter defined), shall be estimated by
Parent in good faith, subject to the reasonable review of the
Stockholder Representatives), (4) the aggregate Tax liability
payable by the Company and its Subsidiaries in connection with the
actions contemplated by Section 5.15 (including, without
limitation, the transfers and distribution described therein), as
determined by Parent in good faith based on the Agreed Values (as
hereinafter defined), (5) any withholding amounts owed under
federal, state and local income Tax laws in connection with (x)
cancellation of the indebtedness owed to the Company with respect
to the purchase of Company Common Stock (as set forth in Section
1.17(a) of the Company Letter) which the Company does not collect
from the borrowers under such indebtedness or (y) the waiver of
the exercise price of any Company Stock Option, in each case as
determined by Parent in good faith, (6) any bonuses payable to
officers, directors or employees of
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the Company and its Subsidiaries, and (7) all Tax liabilities
payable by the Company and its Subsidiaries with respect to the
period to and including the Effective Time (determined on a
"closing of the books" basis); and
(C) the following shall be deemed to be current assets of the
Company and its Subsidiaries as of the Effective Time: any
actual Tax benefit or actual reduction in Tax liability, to the
extent not otherwise taken into account as a reduction in
liability pursuant to clause (B) immediately above, attributable
to (1) cancellation of the indebtedness owed to the Company with
respect to the purchase of Company Common Stock (as set forth in
Section 1.17(a) of the Company Letter), (2) the expenses of the
Company and its Subsidiaries deemed to be current liabilities
pursuant to this Section 1.17(a), and (3) the disposition by the
Company of obsolete inventory, in each case not resulting from
any expenses described in clause (A) immediately above;
(ii) "Excess Working Capital" means the amount by which the Working
Capital exceeds the Target Working Capital;
(iii) "Target Working Capital" means $10,500,000;
(iv) "Agreed Accounting Principles" means the generally accepted
accounting principles used in the preparation of the Balance Sheet applied
in a manner consistent with the preparation of the Balance Sheet, provided
that no adjustments shall be made as a result of changes caused solely by
the Merger; and
(v) "Per Share Excess Working Capital" means the Excess Working
Capital divided by the Fully Diluted Equity.
(b) Post-Closing Determination of Excess Working Capital. If the
Company declares the dividend contemplated by Section 5.16(a), then:
(i) As promptly as practicable (but no later than 90 days) following
the Closing Date, Parent shall cause to be prepared and delivered to the
Stockholder Representatives Parent's calculation of the Working Capital of
the Company and its Subsidiaries as of the Closing Date, prepared in
accordance with the Agreed Accounting Principles and setting forth in
reasonable detail the basis therefor (the "Parent Calculation").
(ii) During the preparation of the Parent Calculation and the period
of any dispute within the contemplation of this Section 1.17, Parent shall
provide the Stockholder Representatives and their independent certified
public accountant (the "Representatives' Accountant") with reasonable
access to Parent's work papers prepared in connection with the Parent
Calculation (such access to be afforded upon receipt of reasonable advance
notice and during normal business hours), and the Stockholder
Representatives and the Representatives' Accountant shall be entitled to
review and discuss such work papers with Parent.
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(iii) The Stockholder Representatives shall have 30 days following
receipt of the Parent Calculation to review such calculation. Unless the
Stockholder Representatives deliver written notice (an "Objection Notice")
to Parent on or prior to the 30th day after receipt of the Parent
Calculation specifying in reasonable detail their objections to the Parent
Calculation, the Excess Working Capital as shown on the Parent Calculation
shall be final, binding and conclusive on the parties. If the Stockholder
Representatives deliver an Objection Notice to Parent within such 30-day
period, Parent and the Stockholder Representatives shall, within 30 days
after Parent has received the Objection Notice (the "Adjustment Resolution
Period"), negotiate in good faith and use commercially reasonable efforts
to resolve by written agreement their differences as to the Parent
Calculation. Any resolution by them as to any disputed item shall be final,
binding, conclusive and nonappealable.
(iv) If, at the conclusion of the Adjustment Resolution Period,
Parent and the Stockholder Representatives have not resolved all disputes
set forth in the Objection Notice, then all such disputes that have not
been resolved shall be submitted for resolution to the Chicago office of
Deloitte & Touche or such other accounting firm of national recognition
mutually acceptable to Parent and the Stockholder Representatives (the
"Independent Accounting Firm"). If requested by the Independent Accounting
Firm, Parent and the Stockholder Representatives agree to execute a
reasonable engagement letter. All fees and expenses of the Independent
Accounting Firm hereunder shall be borne 75% by the Company and 25% by the
Stockholder Representatives, who shall be entitled to be reimbursed
therefor from the Indemnity Fund pursuant to Section 7(b) of the Indemnity
Agreement. Parent and the Stockholder Representatives shall direct the
Independent Accounting Firm to render a determination as promptly as
reasonably practicable (and in any event not later than 30 days) after its
engagement, and Parent, the Stockholder Representatives and their
respective agents will cooperate with the Independent Accounting Firm
during its engagement. The Independent Accounting Firm's determination with
respect to such remaining disputed items shall be set forth in a written
statement delivered to Parent and the Stockholder Representatives, and
shall be final and binding on all parties including the Company
Stockholders.
(v) For the avoidance of doubt, no determination or agreement with
respect to the Parent Calculation or Excess Working Capital contemplated by
this Section 1.17 shall limit the representations, warranties, covenants
and agreements of the Company set forth elsewhere in this Agreement.
(vi) If Excess Working Capital has not been finally determined
pursuant to Section 1.17(b) by January 5, 2004, then no later than January
9, 2004, Parent shall cause to be prepared and delivered to the Stockholder
Representatives its estimate of Excess Working Capital as of the Closing
Date, based on the Parent Calculation if completed by then, with any
disputes set forth in the Objection Notice that have not been resolved
being treated as a reduction therein (such estimate, the "Interim Excess
Working Capital"). For purposes of this Agreement, "Interim Per Share
Excess Working Capital" means the Interim Excess Working Capital divided by
the Fully Diluted Equity.
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Section 1.18 Associated Rights. References in Article I of this
Agreement to Parent Common Stock shall include, unless the context otherwise
requires, the associated Parent Rights.
Section 1.19 Closing; Closing Deliveries.
(a) The closing of the transactions contemplated by this Agreement
(the "Closing") and all actions specified in this Agreement to occur at the
Closing shall take place at the offices of Sidley Xxxxxx Xxxxx & Xxxx, Bank One
Plaza, 00 Xxxxx Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx, at 10:00 a.m., local time,
no later than the second business day following the day on which the last of the
conditions set forth in Article VI shall have been fulfilled or waived (if
permissible) or at such other time and place as Parent and the Company shall
agree (the date and time on which the Closing actually occurs is referred to
herein as the "Closing Date").
(b) Subject to fulfillment or waiver of the conditions set forth in
Article VI, at the Closing Parent shall deliver to the Company all of the
following:
(i) a copy of the Restated Certificate of Incorporation, as amended,
of Parent including, without limitation, the Certificate of Designation for
the Series B Preferred Stock (the "Parent Charter"), certified as of a
recent date by the Secretary of State of the State of Delaware;
(ii) a certificate of good standing of Parent, issued as of a recent
date by the Secretary of State of the State of Delaware;
(iii) a certificate of the Secretary or an Assistant Secretary of
Parent, dated the Closing Date, in form and substance reasonably
satisfactory to the Company, as to (A) no amendments to the Parent Charter
since the certification date specified in Section 1.19(b)(i), (B) the
Bylaws of Parent, (C) the resolutions of the Board of Directors of Parent
authorizing the execution and performance of this Agreement and the
transactions contemplated herein, (D) the resolutions of the stockholders
of Parent approving the Share Issuance (as hereinafter defined) and (E) the
incumbency and signatures of the officers of Parent executing this
Agreement and any Parent Ancillary Agreement;
(iv) all consents, waivers or approvals obtained by Parent with
respect to the consummation of the transactions contemplated by this
Agreement; and
(v) the certificates contemplated by Sections 6.2(a), 6.2(b) and
6.2(e).
(c) Subject to fulfillment or waiver of the conditions set forth in
Article VI, at the Closing Sub shall deliver to the Company all of the
following:
(i) a copy of the Certificate of Incorporation of Sub certified as
of a recent date by the Secretary of State of the State of Delaware;
(ii) a certificate of good standing of Sub, issued as of a recent
date by the Secretary of State of the State of Delaware; and
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(iii) a certificate of the Secretary or an Assistant Secretary of
Sub, dated the Closing Date, in form and substance reasonably satisfactory
to the Company, as to (A) no amendments to the Certificate of Incorporation
of Sub since the certification date specified in Section 1.19(c)(i), (B)
the Bylaws of Sub, (C) the resolutions of the Board of Directors of Sub
authorizing the execution and performance of this Agreement and the
transactions contemplated herein, (D) the written consent of Parent in its
capacity as sole stockholder of Sub adopting this Agreement in accordance
with Section 251 of the DGCL and (E) the incumbency and signatures of the
officers of Sub executing this Agreement and any other agreement or
certificate executed by Sub in connection with the Closing.
(d) Subject to fulfillment or waiver of the conditions set forth in
Article VI, at the Closing the Company shall deliver to Parent all of the
following:
(i) a copy of the Company Charter, certified as of a recent date by
the Secretary of State of the State of Delaware;
(ii) a certificate of good standing of the Company, issued as of a
recent date by the Secretary of State of the State of Delaware;
(iii) a certificate of the Secretary or an Assistant Secretary of the
Company, dated the Closing Date, in form and substance reasonably
satisfactory to Parent, as to (A) no amendments to the Company Charter
since the certification date specified in Section 1.19(d)(i), (B) the
Bylaws of the Company, (C) the resolutions of the Board of Directors of the
Company authorizing the execution and performance of this Agreement and the
transactions contemplated herein, (D) the resolutions of the stockholders
of the Company approving and adopting this Agreement in accordance with
Section 251 of the DGCL and (E) the incumbency and signatures of the
officers of the Company executing this Agreement and any Company Ancillary
Agreement;
(iv) all consents, waivers or approvals obtained by the Company with
respect to the consummation of the transactions contemplated by this
Agreement;
(v) the certificates contemplated by Sections 6.3(a), 6.3(b),
6.3(f), 6.3(g), 6.3(h), 6.3(i), 6.3(j) and 6.3(k); and
(vi) the Leases (as hereinafter defined), duly executed by the LLC
(as hereinafter defined) and Xxxxxxxxx Electronics, Inc. ("Xxxxxxxxx").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 2.1 Organization, Standing and Power. Each of Parent and Sub
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the requisite corporate power and
authority to carry on its business as now
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being conducted. Each Subsidiary (as hereinafter defined) of Parent is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate (in the
case of a Subsidiary that is a corporation) or other power and authority to
carry on its business as now being conducted, except where the failure to be so
organized, existing or in good standing or to have such power or authority would
not, individually or in the aggregate, have a Material Adverse Effect (as
hereinafter defined) on Parent. Parent and each of its Subsidiaries are duly
qualified to do business, and are in good standing, in each jurisdiction where
the character of their properties owned or held under lease or the nature of
their activities makes such qualification necessary, except where the failure to
be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on Parent. For purposes of this Agreement, "Material Adverse
Change" or "Material Adverse Effect" means, when used with respect to Parent or
the Company, as the case may be, any event, change or effect that individually
or when taken together with all other such events, changes or effects is or
could reasonably be expected (as far as can be foreseen at the time) to be
materially adverse to the business, assets, liabilities, financial condition or
results of operations of Parent and its Subsidiaries, taken as a whole, or the
Company and its Subsidiaries, taken as a whole, as the case may be. None of the
following shall be deemed, by itself or by themselves, to constitute a Material
Adverse Change or Material Adverse Effect: (i) conditions affecting the industry
in which the Company and its Subsidiaries or Parent and its Subsidiaries, as the
case may be, operate, (ii) conditions affecting the U.S. economy as a whole, or
(iii) in the case of Parent, any change in the market price of Parent Common
Stock.
For purposes of this Agreement, "Subsidiary" means any corporation,
partnership, limited liability company, joint venture, trust, association or
other entity of which Parent or the Company, as the case may be (either alone or
through or together with any other Subsidiary), owns, directly or indirectly,
50% or more of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the Board of Directors or other
governing body of such corporation, partnership, limited liability company,
joint venture, trust, association or other entity.
Section 2.2 Capital Structure. As of the date hereof, the authorized
capital stock of Parent consists of 100,000,000 shares of Parent Common Stock
and 5,000,000 shares of preferred stock, of which 100,000 shares have been
designated as Series A Junior Participating Preferred Stock and have been
reserved for issuance upon exercise of the rights (the "Parent Rights")
distributed to the holders of Parent Common Stock pursuant to the Rights
Agreement, dated as of March 23, 2001, between Parent and Mellon Investor
Services LLC (the "Rights Agreement"). At the close of business on June 30,
2003, (i) 7,357,075 shares of Parent Common Stock were issued and outstanding,
(ii) 27,846 shares of Parent Common Stock were held in the treasury of Parent or
by Subsidiaries of Parent, (iii) no shares of Parent preferred stock were issued
or outstanding and (iv) 760,878 shares of Parent Common Stock were reserved for
issuance pursuant to outstanding options, warrants or other rights to purchase
or otherwise acquire shares of Parent Common Stock under Parent's plans or other
arrangements or pursuant to any plans or arrangements assumed by Parent in
connection with any acquisition, business combination or similar transaction
(collectively, the "Parent Stock Plans"). Section 2.2 of the Parent Letter (as
hereinafter defined) sets forth a true and correct schedule as of June 30, 2003
of the aggregate number of outstanding restricted stock, options and similar
securities, showing the
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exercise prices and vesting schedules of such securities. As of the date of this
Agreement, and except as set forth above, except for the issuance of shares of
Parent Common Stock pursuant to the Parent Stock Plans, no shares of capital
stock or other voting securities of Parent were issued, reserved for issuance or
outstanding. All of the shares of Parent Common Stock and Parent Preferred Stock
issuable upon conversion of Company Common Stock and Company Preferred Stock at
the Effective Time in accordance with Section 1.6(c) of this Agreement will be,
when so issued, duly authorized, validly issued, fully paid and nonassessable
and free of preemptive rights. All issued and outstanding shares of Parent
Common Stock have been issued in compliance with all appropriate securities
laws. Parent has no obligation to make any capital contributions, or otherwise
provide assets or cash, to any Joint Venture (as hereinafter defined).
Section 2.3 Authority. The Boards of Directors of Parent and Sub have
declared the Merger advisable and fair to and in the best interest of Parent and
Sub, respectively, and Parent, as sole stockholder of Sub, has approved and
adopted this Agreement in accordance with the DGCL. The Board of Directors of
Parent has approved the issuance of Parent Common Stock and Parent Preferred
Stock in connection with the Merger (the "Share Issuance") and has approved the
amendment to the Rights Agreement in the form attached hereto as Exhibit E and
the other agreements to be entered into by it as contemplated hereby (such
amendment and other agreements, the "Parent Ancillary Agreements") and has
resolved to recommend approval of the Share Issuance by Parent's stockholders
and directed that the Share Issuance be submitted to Parent's stockholders for
approval. Parent has the requisite corporate power and authority to enter into
this Agreement and the Parent Ancillary Agreements, and, subject to approval by
the stockholders of Parent of the Share Issuance, to consummate the transactions
contemplated hereby and thereby and to effect the Share Issuance. Sub has all
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Sub and the Parent Ancillary Agreements by Parent, and the
consummation by Parent and Sub of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary corporate action on the part
of Parent and Sub. This Agreement and the consummation of the transactions
contemplated hereby have been approved by the sole stockholder of Sub. This
Agreement has been duly executed and delivered by Parent and Sub. The Parent
Ancillary Agreements executed as of the date hereof have been duly executed and
delivered by Parent. Assuming the valid authorization, execution and delivery by
the other parties thereto and the validity and binding effect hereof and thereof
on the other parties thereto, this Agreement constitutes the valid and binding
obligation of Parent and Sub enforceable against each of them in accordance with
its respective terms, and each of the Parent Ancillary Agreements, upon
execution and delivery thereof by Parent, will constitute the valid and binding
obligation of Parent enforceable against it in accordance with its respective
terms, except to the extent its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by the effect of general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law). The filing of a registration statement on Form
S-4 with the Securities Exchange Commission ("SEC") by Parent under the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act"), for the purpose of registering
shares of Parent Common Stock to be issued in the Merger (together with any
amendments or supplements
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thereto, whether prior to or after the effective date thereof, the "Registration
Statement"), has been duly authorized by Parent's Board of Directors.
Section 2.4 Consents and Approvals; No Violation. Assuming that all
consents, approvals, authorizations and other actions described in this Section
2.4 have been obtained and all filings and obligations described in this Section
2.4 have been made, except as set forth in Section 2.4 of the letter dated the
date hereof and delivered on the date hereof by Parent to the Company, which
letter relates to this Agreement and is designated therein as the Parent Letter
(the "Parent Letter"), the execution and delivery of this Agreement by Parent
and Sub, and the Parent Ancillary Agreements by Parent, do not, and the
consummation of the transactions contemplated hereby and thereby and compliance
with the provisions hereof and thereof will not, result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give to
others a right of termination, cancellation or acceleration of any obligation or
the loss of benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Parent
or any of its Subsidiaries under, any provision of (a) the Parent Charter or the
Bylaws of Parent (the "Parent Bylaws") or the Certificate of Incorporation or
Bylaws of Sub, (b) the comparable charter or organizational documents of any of
Parent's Subsidiaries, (c) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to Parent or any of its Subsidiaries or any of their
respective properties or assets or (d) any judgment, order, decree, injunction,
statute, law, ordinance, rule or regulation applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets, other than, in the
case of clause (c) or (d), any such violations, defaults, rights, liens,
security interests, charges or encumbrances that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent, materially impair
the ability of Parent or Sub to perform their respective obligations hereunder
or, in the case of Parent, under the Parent Ancillary Agreements, or prevent the
consummation of any of the transactions contemplated hereby or thereby by Parent
or Sub. No filing or registration with, or authorization, consent or approval
of, any domestic (federal and state), foreign or supranational court,
commission, governmental body, regulatory agency, authority or tribunal (a
"Governmental Entity") is required by or with respect to Parent or any of its
Subsidiaries in connection with the execution and delivery of this Agreement by
Parent or Sub or the Parent Ancillary Agreements by Parent or is necessary for
the consummation by Parent or Sub of the Merger and the other transactions
contemplated by this Agreement or the Parent Ancillary Agreements, except for
(i) compliance with the provisions of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (together with the rules and regulations
promulgated thereunder, the "HSR Act"), the Securities Act and the Securities
Exchange Act of 1934, as amended (together with the rules and regulations
promulgated thereunder, the "Exchange Act"), (ii) the filing of the Certificate
of Merger and Certificate of Designation with the Secretary of State of the
State of Delaware and appropriate documents with the relevant authorities of
other states in which the Company or any of its Subsidiaries is qualified to do
business, (iii) such filings, authorizations, orders and approvals as may be
required by state takeover laws (the "State Takeover Approvals"), (iv) such
filings as may be required in connection with the taxes described in Section
5.9; (v) applicable requirements, if any, of state securities or "blue sky" laws
("Blue Sky Laws") and Nasdaq, (vi) applicable requirements, if any, under
foreign laws and (vii) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not,
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individually or in the aggregate, have a Material Adverse Effect on Parent,
materially impair the ability of Parent or Sub to perform its obligations
hereunder or, in the case of Parent, under the Parent Ancillary Agreements, or
prevent the consummation of any of the transactions contemplated hereby or
thereby by Parent or Sub.
Section 2.5 SEC Documents and Other Reports. Parent has filed all
required documents with the SEC between May 1, 2002 and the date hereof (the
"Parent SEC Documents"). As of their respective dates or, if amended, as of the
date of the last amendment, the Parent SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and, at the respective times they were filed, none of the Parent
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The consolidated financial statements (including, in each case,
any notes thereto) of Parent included in the Parent SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with United States generally accepted accounting principles
("GAAP") (except, in the case of the unaudited statements, as permitted by Form
10-Q of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) and fairly
presented in all material respects the consolidated financial position of Parent
and its consolidated subsidiaries at the respective dates thereof and the
consolidated results of their operations and their consolidated cash flows for
the periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments and to any other adjustments described therein).
Section 2.6 Absence of Certain Changes or Events. (a) Except as
disclosed in the Parent SEC Documents filed with the SEC prior to the date of
this Agreement or as disclosed in Section 2.6(a) of the Parent Letter, since
February 1, 2003 there has been:
(i) no Material Adverse Change with respect to Parent; and
(ii) no damage, destruction, loss or claim, whether or not covered by
insurance, or condemnation or other taking adversely affecting any material
assets or business of Parent or any of its Subsidiaries, other than any
such damages, destructions, losses, claims, condemnations or takings that,
individually or in the aggregate, would not have a Material Adverse Effect
on Parent.
(b) Except as set forth in Section 2.6(b) of the Parent Letter or as
disclosed in the Parent SEC Documents, since February 1, 2003 through the date
hereof, Parent and its Subsidiaries have conducted their respective businesses
in all material respects only in the ordinary course and in conformity with past
practice. Without limiting the generality of the foregoing, since February 1,
2003 through the date hereof, except as set forth in Section 2.6(b) of the
Parent Letter or as disclosed in the Parent SEC Documents, neither Parent nor
any of its Subsidiaries has:
(i) issued, delivered or agreed (conditionally or unconditionally)
to issue or deliver any of its bonds, notes or other debt securities;
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(ii) undertaken or committed to undertake capital expenditures,
other than capital expenditures that do not exceed $1,000,000 for any
single project or related series of projects or $2,500,000 in the
aggregate;
(iii) mortgaged or pledged, or imposed or suffered to be imposed any
lien, claim, charge, security interest, mortgage, pledge, easement,
conditional sale or other title retention agreement, defect in title,
covenant or other restriction of any kind (an "Encumbrance"), on, any of
the assets reflected on Parent's financial statements as of February 1,
2003 or any assets acquired by Parent or any of its Subsidiaries after such
date, except for inventory and minor amounts of personal property sold or
otherwise disposed of for fair value in the ordinary course of its business
consistent with past practice and except for (A) liens for taxes and other
governmental charges and assessments which are not yet due and payable, (B)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business
for sums not yet due and payable and (C) other liens or imperfections on
property which are not material in amount, do not interfere with, and are
not violated by the consummation of the transactions contemplated by, this
Agreement, and do not materially detract from the value or marketability
of, or materially impair the existing use of, the property affected by such
lien or imperfection (each, a "Permitted Encumbrance");
(iv) created, incurred or assumed, or agreed to create, incur or
assume, any indebtedness for borrowed money or entered into, as lessee, any
capitalized lease obligations (as defined in Statement of Financial
Accounting Standards No. 13), other than indebtedness or lease obligations
that do not exceed $100,000 in the aggregate;
(v) accelerated or delayed collection of notes or accounts
receivable in advance of or beyond their regular due dates or the dates
when the same would have been collected in the ordinary course of its
business consistent with past practice;
(vi) delayed or accelerated payment of any account payable or other
liability beyond or in advance of its due date or the date when such
liability would have been paid in the ordinary course of its business
consistent with past practice;
(vii) instituted any increase in any compensation payable to any
employee or director Parent or any of its Subsidiaries or in any
profit-sharing, bonus, incentive, deferred compensation, insurance,
pension, retirement, medical, hospital, disability, welfare or other
benefits made available to employees of Parent or any of its Subsidiaries
except, in case of employees other than directors or executive officers,
salary, bonus or equity compensation increases in connection with annual,
quarterly or periodic compensation reviews in the ordinary course of
business consistent with Parent's past practice;
(viii) settled or compromised any material federal, state, local or
foreign income tax liability;
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(ix) prepared or filed any Tax Return inconsistent with past practice
or, on any such Tax Return, taken any position, made any election or
adopted any method that is inconsistent with positions taken, elections
made or methods used in preparing or filing similar Tax Returns in prior
periods;
(x) made any change in the accounting principles and practices used
by Parent from those applied in the preparation of the financial statements
contained in the Parent SEC Documents; or
(xi) entered into or become committed to enter into any other
material transaction except in the ordinary course of business consistent
with past practice.
(c) Except as set forth in Section 2.6(c) of the Parent Letter or as
disclosed in the Parent SEC Documents, neither Parent nor any of its
Subsidiaries is subject to any liability (including unasserted claims, whether
known or unknown), whether absolute, contingent, accrued or otherwise, which is
not shown or which is in excess of amounts shown or reserved for in the most
recent audited balance sheet set forth in the Parent SEC Documents, other than
liabilities of the same nature as those set forth in such balance sheet and the
notes thereto and reasonably incurred in the ordinary course of its business
consistent with past practice after the date of such balance sheet and other
than liabilities as would not have a Material Adverse Effect on Parent.
Section 2.7 Permits and Compliance. Each of Parent and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, charters, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Entity necessary for
Parent or any of its Subsidiaries to own, lease and operate its properties or to
carry on its business as it is now being conducted (the "Parent Permits"),
except where the failure to have any of the Parent Permits would not,
individually or in the aggregate, have a Material Adverse Effect on Parent, and,
as of the date of this Agreement, no suspension or cancellation of any of the
Parent Permits is pending or, to the Knowledge of Parent (as hereinafter
defined), threatened, except where the suspension or cancellation of any of the
Parent Permits would not, individually or in the aggregate, have a Material
Adverse Effect on Parent. Neither Parent nor any of its Subsidiaries is in
violation of (a) charter, bylaws or other organizational documents, (b) any
applicable law, ordinance, administrative or governmental rule or regulation or
(c) any order, decree or judgment of any Governmental Entity having jurisdiction
over Parent or any of its Subsidiaries, except, in the case of clauses (a), (b)
and (c), for any violations that, individually or in the aggregate, would not
have a Material Adverse Effect on Parent. For purposes of this Agreement,
"Knowledge of Parent" means the actual knowledge of the individuals identified
in Section 2.7 of the Parent Letter.
Section 2.8 Registration Statement and Proxy Statement. None of the
information to be supplied by Parent or Sub for inclusion or incorporation by
reference in the Registration Statement or the joint proxy statement/prospectus
included therein relating to the Stockholder Meetings (as hereinafter defined)
(together with any amendments or supplements thereto, the "Proxy Statement")
will (i) in the case of the Registration Statement, at the time it becomes
effective, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not
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misleading or (ii) in the case of the Proxy Statement, at the time of the
mailing of the Proxy Statement and at the time of the Stockholder Meetings,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Stockholder Meetings any event with
respect to Parent, its officers and directors or any of its Subsidiaries shall
occur which is required to be described in the Proxy Statement or the
Registration Statement, such event shall be so described, and an appropriate
amendment or supplement shall be promptly filed with the SEC and, as required by
law, disseminated to the stockholders of the Company. The Registration Statement
will comply (with respect to Parent) as to form in all material respects with
the provisions of the Securities Act.
Section 2.9 Tax Matters. (a) Except as otherwise set forth in Section
2.9(a) of the Parent Letter, (i) each of Parent and each Subsidiary of Parent
has filed all Tax Returns (as hereinafter defined) required to be filed, except
to the extent that any failure to file would not, individually or in the
aggregate, have a Material Adverse Effect on Parent; (ii) all such Tax Returns
are complete and accurate and disclose all Taxes (as hereinafter defined)
required to be paid by Parent and each Subsidiary of Parent for the periods
covered thereby, except to the extent that any failure to be complete and
accurate would not, individually or in the aggregate, have a Material Adverse
Effect on Parent, and all Taxes shown to be due on such Tax Returns have been
timely paid or extensions for payment have been properly obtained, except to the
extent that any failure to so pay or so obtain such an extension would not,
individually or in the aggregate, have a Material Adverse Effect on Parent;
(iii) all Taxes (whether or not shown on any Tax Return) owed by Parent or any
Subsidiary of Parent have been timely paid, except to the extent that any
failure to timely pay such Taxes would not, individually or in the aggregate,
have a Material Adverse Effect on Parent; (iv) the Tax Returns referred to in
clause (i), to the extent related to federal income Taxes, have been examined by
the appropriate taxing authority or the period for assessment of the Taxes in
respect of which each such Tax Return was required to be filed (taking into
account all applicable extensions and waivers) has expired; (v) to the Knowledge
of Parent, there is no claim or assessment pending or proposed with respect to
Taxes of Parent or any Subsidiary of Parent, which, if determined in a manner
adverse to Parent or such Subsidiary, would have a Material Adverse Effect on
Parent; (vi) all deficiencies asserted in writing or assessments made in writing
as a result of any examination of the Tax Returns referred to in clause (i) have
been paid in full or are being timely and properly contested; (vii) there are no
material liens for Taxes upon the assets of Parent or any Subsidiary of Parent
except liens relating to current Taxes not yet due; (viii) all Taxes which
Parent or any Subsidiary of Parent are required by law to withhold or to collect
for payment have been duly withheld and collected and have been paid to the
appropriate Governmental Entity, except to the extent that any failure to
withhold, collect or pay would not, individually or in the aggregate, have a
Material Adverse Effect on Parent; and (ix) neither Parent nor any Subsidiary of
Parent has been a party to any distribution occurring during the last 3 years in
which the parties to such distribution treated the distributions as one to which
Section 355 of the Code (or any similar provision of state, local or foreign
law) applied.
(b) Except as set forth in Section 2.9(b) of the Parent Letter, as a
direct or indirect result of the transactions contemplated by this Agreement, no
payment or other benefit,
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and no acceleration of the vesting of any options, payments or other benefits,
will be, an "excess parachute payment" to a "disqualified individual" as those
terms are defined in Section 280G of the Code and the Treasury Regulations
thereunder. Except as set forth in Section 2.9(b) of the Parent Letter, as a
direct or indirect result of the transactions contemplated by this Agreement, no
payment or other benefit, and no acceleration of the vesting of any options,
payments or other benefits will be (or under Section 280G of the Code and the
Treasury Regulations thereunder be presumed to be) a "parachute payment" to a
"disqualified individual" as those terms are defined in Section 280G of the Code
and the Treasury Regulations thereunder, without regard to whether such payment
or acceleration is reasonable compensation for personal services performed or to
be performed in the future.
(c) For purposes of this Agreement: (i) "Tax" (and, with the
correlative meaning "Taxes") means (A) any federal, state, local, foreign or
provincial income, gross income, gross receipts, windfall profit, severance,
property, production, sales, use, license, excise, franchise, employment,
payroll, withholding, alternative or add-on minimum, ad valorem, value-added,
transfer, stamp, occupation, premium, capital stock, profits, social security
(or similar), unemployment, disability, estimated reclamation fees or
environmental (including Taxes under Section 59A of the Code) or other tax,
custom, duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty addition to Tax or additional
amount imposed by any Governmental Entity; and (B) any liability for the payment
of amounts with respect to payments of a type described in clause (A) as a
result of being a member of an affiliated, consolidated, combined or unitary
group, or as a result of any obligation under any Tax Sharing Arrangement (as
hereinafter defined) or Tax indemnity arrangement, (ii) "Tax Return" means any
return, report or similar statement (including the attached schedules) required
to be filed with respect to any Tax, including any information return, claim for
refund, amended return or declaration of estimated Tax, and (iii) "Tax Sharing
Arrangement" means any written or unwritten agreement or arrangement for the
allocation or payment of Tax liabilities or payment for Tax benefits with
respect to a consolidated, combined or unitary Tax Return.
Section 2.10 Actions and Proceedings. Except as set forth in the
Parent SEC Documents filed prior to the date of this Agreement and except as set
forth in Section 2.10 of the Parent Letter, there are no outstanding orders,
judgments, injunctions, awards or decrees of any Governmental Entity against or
involving Parent or any of its Subsidiaries or against or involving any of the
present or former directors, officers, employees or, to the Knowledge of Parent,
consultants, agents or stockholders of Parent or any of its Subsidiaries, as
such, or any of its or their properties, assets or business that, individually
or in the aggregate, would have a Material Adverse Effect on Parent or
materially impair the ability of Parent to perform its obligations hereunder.
Except as set forth in the Parent SEC Documents and except as set forth in
Section 2.10 of the Parent Letter, there are no actions, suits or claims or
legal, administrative or arbitration proceedings or investigations pending or,
to the Knowledge of Parent, threatened against or involving Parent or any of its
Subsidiaries or any of its or their present or former directors, officers,
employees or, to the Knowledge of Parent, consultants, agents or stockholders,
as such, or any of its or their properties, assets or business that,
individually or in the aggregate, would have a Material Adverse Effect on Parent
or materially impair the ability of Parent to perform its obligations hereunder.
As of the date hereof, there are no actions, suits,
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labor disputes or other litigation, legal or administrative proceedings or
governmental investigations pending or, to the Knowledge of Parent, threatened
against or affecting Parent or any of its Subsidiaries or any of its or their
present or former officers, directors, employees or, to the Knowledge of Parent,
consultants, agents or stockholders, as such, or any of its or their properties,
assets or business relating to the transactions contemplated by this Agreement.
Section 2.11 Certain Agreements. Except as set forth in Section 2.11
of the Parent Letter or as disclosed in the Parent SEC Documents, neither Parent
nor any of its Subsidiaries is a party to any oral or written agreement or plan,
including any employment agreement, severance agreement, stock option plan,
stock appreciation rights plan, restricted stock plan or stock purchase plan,
any of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which will
be calculated on the basis of any of the transactions contemplated by this
Agreement. Except as set forth in Section 2.11 of the Parent Letter or as
disclosed in the Parent SEC Documents, no holder of any option or other right to
purchase shares of Parent Common Stock, or shares of Parent Common Stock granted
in connection with the performance of services for Parent or its Subsidiaries,
is or will be entitled to receive cash from Parent or any Subsidiary in lieu of
or in exchange for such option, other right or shares.
Section 2.12 ERISA. (a) Except as would not have a Material Adverse
Effect on Parent, each Parent Plan (as hereinafter defined) complies in all
respects with Title IV of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), the Code and all other applicable statutes and
governmental rules and regulations. Neither Parent nor any of its ERISA
Affiliates (as hereinafter defined) currently maintains, contributes to or has
any liability under or, at any time during the past six (6) years has
maintained, contributed to or had any liability under, (i) any pension plan that
is subject to Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA
or (ii) any multiemployer plan (as defined in Section 4001(a)(3) of ERISA).
(b) With respect to the Parent Plans, no event has occurred and
there exists no condition or set of circumstances in connection with which
Parent or any ERISA Affiliate or Parent Plan fiduciary could be subject to any
liability (other than any liability for benefits payable in the normal course)
under the terms of such Parent Plans, ERISA, the Code or any other applicable
law, which would have a Material Adverse Effect on Parent. All Parent Plans that
are intended by their terms to be, or are otherwise treated by Parent as,
qualified under Section 401(a) of the Code have been determined by the Internal
Revenue Service ("IRS") to be so qualified, or a timely application for such
determination is now pending and Parent is not aware of any reason why any such
Parent Plan is not so qualified in operation. Except as set forth in Section
2.12(b) of the Parent Letter, neither Parent nor any of its ERISA Affiliates has
any liability or obligation under any welfare plan or agreement to provide
benefits after termination of employment to any employee or dependent other than
as required by Section 4980B of the Code.
(c) As used herein, (i) "Parent Plan" means (w) a "pension plan" (as
defined in Section 3(2) of ERISA), (x) a "welfare plan" (as defined in Section
3(1) of ERISA), (y) any other profit sharing, deferred compensation, incentive
compensation, stock ownership, stock
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purchase, stock option, phantom stock, restricted stock, stock appreciation
right, vacation, retention, severance, medical, dental, vision, disability,
death benefit, sick leave or insurance plan, arrangement or understanding, or
(z) any material bonus, holiday pay or fringe benefit plan, arrangement or
understanding, in each case established or maintained by Parent or any of its
ERISA Affiliates or as to which Parent or any of its ERISA Affiliates has
contributed or otherwise may have any liability, and (ii) with respect to any
person, "ERISA Affiliate" means any trade or business (whether or not
incorporated) which is under common control or would be considered a single
employer with such person pursuant to Section 414(b), (c), (m) or (o) of the
Code and the regulations promulgated under those sections or pursuant to Section
4001(b) of ERISA and the regulations promulgated thereunder.
Section 2.13 Compliance with Worker Safety and Environmental Laws.
Except as set forth in Section 2.13 of the Parent Letter or as disclosed in the
Parent SEC Documents, the properties, assets and operations of Parent and its
Subsidiaries are in compliance with all applicable federal, state, local and
foreign laws, rules and regulations, orders, decrees, judgments, permits and
licenses relating to public and worker health and safety (collectively, "Worker
Safety Laws") and the protection and clean-up of the environment and activities
or conditions related thereto, including, without limitation, those relating to
the generation, handling, disposal, transportation or release of hazardous
materials (collectively, "Environmental Laws"), except for any violations that,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent. With respect to such properties, assets and operations, including any
previously owned, leased or operated properties, assets or operations, there are
no events, conditions, circumstances, activities, practices, incidents, actions
or plans of Parent or any of its Subsidiaries that may interfere with or prevent
compliance or continued compliance with applicable Worker Safety Laws and
Environmental Laws, other than any such interference or prevention as would not,
individually or in the aggregate with any such other interference or prevention,
have a Material Adverse Effect on Parent.
Section 2.14 Labor Matters. Except as set forth in Section 2.14 of
the Parent Letter, Parent and each of its Subsidiaries have complied with all
applicable laws, rules and regulations which relate to prices, wages, hours,
discrimination in employment and collective bargaining and to the operation of
its business and are not liable for any arrears of wages or any withholding
taxes or penalties for failure to comply with any of the foregoing, except for
any possible noncompliance or liability that would not have a Material Adverse
Effect on Parent. Neither Parent nor any of its Subsidiaries is a party to any
collective bargaining agreement. Neither Parent nor any of its Subsidiaries has
engaged in any unfair labor practice with respect to any Persons employed by or
otherwise performing services primarily for Parent or any of its Subsidiaries
(the "Parent Business Personnel"), and there is no unfair labor practice
complaint or grievance against Parent or any of its Subsidiaries by the National
Labor Relations Board or any comparable state agency pending or threatened in
writing with respect to the Parent Business Personnel, except where such unfair
labor practice, complaint or grievance would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. There is no labor strike,
dispute, slowdown or stoppage pending or, to the Knowledge of Parent, threatened
against or affecting Parent or any of its Subsidiaries which may interfere with
the respective business activities of Parent or any of its Subsidiaries, except
where such dispute, strike or work stoppage would not, individually or in the
aggregate, have a Material Adverse Effect on Parent.
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Section 2.15 Intellectual Property. (a) Except as set forth in
Section 2.15 of the Parent Letter, Parent and its Subsidiaries have through
ownership or licensing all patents, trademarks, trade names, service marks,
trade secrets, copyrights and other proprietary intellectual property rights
(collectively, "Intellectual Property Rights") as are necessary to conduct the
business of Parent and its Subsidiaries as currently conducted or planned to be
conducted by Parent and its Subsidiaries, taken as a whole, except where the
failure to have such Intellectual Property Rights would not have a Material
Adverse Effect on Parent. Except as set forth in Section 2.15 of the Parent
Letter, neither Parent nor any of its Subsidiaries has infringed any
Intellectual Property Rights of any third party other than any infringements
that, individually or in the aggregate, would not have a Material Adverse Effect
on Parent.
(b) Except as set forth in the Parent SEC Documents filed prior to
the date of this Agreement or in Section 2.15 of the Parent Letter, there are no
actions, suits or claims or administrative proceedings or investigations pending
or, to the Knowledge of Parent, threatened that challenge or question Parent's
Intellectual Property Rights and that, individually or in the aggregate, would
have a Material Adverse Effect on Parent.
(c) Except as set forth in Section 2.15 of the Parent Letter, all
patents, registered trademarks, service marks and copyrights which are held by
Parent or any of its Subsidiaries and which are material to the business of
Parent and its Subsidiaries, taken as a whole, are to the Knowledge of Parent
valid and subsisting.
Section 2.16 Contracts. Except as disclosed in the Parent SEC
Documents filed prior to the date of this Agreement or as disclosed in Section
2.16 of the Parent Letter, all contracts and agreements required to be filed by
Parent between May 1, 2002 and the date hereof as material contracts pursuant to
Item 601 of Regulation S-K under the Securities Act have been filed. Except as
disclosed in the Parent SEC Documents filed prior to the date of this Agreement
or as disclosed in Section 2.16 of the Parent Letter, no event of default or
event that, but for the giving of notice or the lapse of time or both, would
constitute an event of default exists or, upon the consummation by Parent or Sub
of the transactions contemplated by this Agreement, will exist under any
indenture, mortgage, loan agreement, note or other agreement or instrument for
borrowed money, any guarantee of any agreement or instrument for borrowed money
or any lease, contractual license or other agreement or instrument to which
Parent or any of its Subsidiaries is a party or by which Parent or any such
Subsidiary is bound or to which any of the properties, assets or operations of
Parent or any such Subsidiary is subject, other than any defaults that,
individually or in the aggregate, would not have a Material Adverse Effect on
Parent.
Section 2.17 Takeover Statutes and Charter Provisions. The action
of the Board of Directors of Parent in approving this Agreement and the
transactions contemplated hereby is sufficient to render inapplicable to Parent,
Sub, the Merger and this Agreement the provisions of Section 203 of the DGCL. To
the Knowledge of Parent, no other state takeover statutes or charter or bylaw
provisions are applicable to the Merger, this Agreement, the Voting Agreements,
the Parent Ancillary Agreements and the Company Ancillary Agreements, and the
transactions contemplated hereby and thereby.
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Section 2.18 Required Vote of Parent Stockholders. The affirmative
vote of the holders of a majority of the outstanding shares of Parent Common
Stock is required to approve the Share Issuance. No other vote of the
securityholders of Parent is required by law, the Parent Charter, the Parent
Bylaws or otherwise in order for Parent to consummate the Merger and the
transactions contemplated hereby.
Section 2.19 Brokers. Other than CIBC World Markets Corp., with
respect to which the fees due by Parent shall be paid by Parent, no broker,
investment banker or other Person is entitled to any broker's, finder's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent.
Section 2.20 Operations of Sub. Sub is a direct, wholly owned
subsidiary of Parent, was formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business activities
and has conducted its operations only as contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as
follows:
Section 3.1 Organization, Standing and Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
carry on its business as now being conducted. Except as set forth in Section 3.1
of the Company Letter, each Subsidiary of the Company is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized and has the requisite corporate (in the case of a Subsidiary that is a
corporation) or other power and authority to carry on its business as now being
conducted. The Company and each of its Subsidiaries are duly qualified to do
business, and are in good standing, in each jurisdiction where the character of
their properties owned or held under lease or the nature of their activities
makes such qualification or good standing necessary, except where the failure to
be so qualified or licensed and in good standing would not have a Material
Adverse Effect on the Company.
Section 3.2 Capital Structure.
(a) The authorized capital stock of the Company consists of
12,600,000 shares of Company Common Stock and 5,100,000 shares of Company
Preferred Stock, of which 5,083,980 shares have been designated as Series S
Convertible Preferred Stock (the "Series S Preferred Stock"). At the close of
business on July 1, 2003, (i) 2,230,522 shares of Company Common Stock and
5,083,980 shares of Series S Preferred Stock were issued and outstanding, all of
which were validly issued, fully paid and nonassessable and free of preemptive
rights, (ii) no shares of Company Common Stock and no shares of Series S
Preferred Stock were held by Subsidiaries of the Company and (iii) 30,000 shares
of Company Common Stock were reserved for issuance pursuant to outstanding
options (the "Company Stock Options") to purchase shares of Company Common Stock
pursuant to the Company Stock Option Agreements
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(as hereinafter defined). All Company Stock Options and all shares of Company
Common Stock issuable upon the exercise of such options are free and clear of
any preemptive rights. Since July 1, 2003 except as set forth above and except
for the issuance of shares of Company Common Stock upon the exercise of the
Company Stock Options or upon the conversion of shares of Company Preferred
Stock, in each case, in accordance with the terms thereof, no shares of capital
stock or other voting securities of the Company are issued, reserved for
issuance or outstanding. All of the Company Stock Options not exercised prior to
the Effective Time will be cancelled as a result of the execution of this
Agreement or consummation of the transactions contemplated hereby. Except as set
forth above and except upon conversion of the outstanding shares of Company
Preferred Stock, there are no options, warrants, calls, rights, puts or
agreements to which the Company or any of its Subsidiaries is a party or by
which any of them is bound obligating the Company or any of its Subsidiaries to
issue, deliver, sell or redeem, or cause to be issued, delivered, sold or
redeemed, any additional shares of capital stock (or other voting securities or
equity equivalents) of the Company or any of its Subsidiaries or obligating the
Company or any of its Subsidiaries to grant, extend or enter into any such
option, warrant, call, right, put or agreement. True and complete copies of (w)
the Company Charter, (x) the Bylaws of the Company, as amended (the "Company
Bylaws"), (y) the Stock Option Agreement dated April 20, 1998 between the
Company and Xxxxxx Xxxxxx and the Stock Option Agreement dated October 18, 2000
between the Company and Xxxxxxx Xxxxxx (collectively, the "Company Stock Option
Agreements") and (z) each of the Restricted Stock Agreements and other
agreements pursuant to which currently outstanding shares of capital stock of
the Company were originally issued by the Company set forth in Section 3.2(a) of
the Company Letter (collectively, the "Restricted Stock Agreements") have been
delivered to Parent. For purposes of this Agreement, "Knowledge of the Company"
means the actual knowledge of the individuals identified on Section 3.2(a) of
the Company Letter
(b) Each outstanding share of capital stock (or other voting
security or equity equivalent, as the case may be) of each Subsidiary of the
Company is duly authorized, validly issued, fully paid and nonassessable, and
each such share (or other voting security or equity equivalent, as the case may
be) is owned by the Company or another Subsidiary of the Company, free and clear
of all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on voting rights, charges and other
encumbrances of any nature whatsoever. The Company does not have any outstanding
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or convertible into or exercisable for securities having the
right to vote) with the stockholders of the Company on any matter.
(c) Section 3.2(c)(i) of the letter dated the date hereof and
delivered on the date hereof by the Company to Parent, which letter relates to
this Agreement and is designated the Company Letter (the "Company Letter"), sets
forth the name and address of each holder of record of shares of capital stock
of the Company outstanding on the date hereof, together, in each case, with the
number of shares of Company Common Stock and the number of shares of Series S
Preferred Stock held by such holder. Section 3.2(c)(ii) of the Company Letter
also sets forth each option to purchase Company Common Stock issued by the
Company, together, in each case, with the number of shares issuable upon
exercise thereof, the grant date and the name and address of the record owner
thereof. One share of Company Common Stock is issuable upon conversion of a
share of Series S Preferred Stock.
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(d) Section 3.2(d) of the Company Letter sets forth a list of all
Subsidiaries of the Company and the jurisdiction in which each such Subsidiary
is organized. True and complete copies of the certificate of incorporation,
bylaws or similar organizational documents of each such Subsidiary have been
delivered to Parent. Neither the Company nor any of its Subsidiaries
participates in or has any interest in any Joint Venture, other than the
Company's ownership of 1,307,190 shares of Series B Convertible Redeemable
Preferred Stock of Corona Optical Systems, Inc., a Delaware corporation
("Corona"), acquired pursuant to that certain Series B Convertible Preferred
Stock Purchase Agreement, dated as of February 19, 2003, by and among Corona,
the Company and the other investors party thereto (the "Corona Stock Purchase
Agreement). Except as set forth in Article II of the Corona Stock Purchase
Agreement with respect to the Third Closing (as defined therein), neither the
Company nor any of its Subsidiaries has any obligation to make any capital
contributions, or otherwise provide assets or cash, to any Joint Venture.
Section 3.2(d) of the Company Letter sets forth a list of all agreements
relating to the Company's investment in Corona to which the Company is a party,
true and complete copies of which have been delivered by the Company to Parent.
For purposes of this Agreement, "Joint Venture" means any corporation, limited
liability company, partnership, joint venture, trust, association or other
entity which is not a Subsidiary of Parent or the Company, as the case may be,
and in which (i) Parent or the Company, as the case may be, directly or
indirectly owns or controls any shares of any class of the outstanding voting
securities or other equity interests or (ii) Parent or the Company, as the case
may be, or one of its Subsidiaries is a general partner.
(e) At the Effective Time, the LLC will not have any assets other
than the LLC Assets (as hereinafter defined).
(f) All issued and outstanding shares of Company Common Stock and
Series S Preferred Stock have been issued in compliance with all appropriate
securities laws and are subject to all appropriate restrictions on transfer in
connection with such laws.
Section 3.3 Authority. (a) The Board of Directors of the Company
has declared the Merger advisable and fair to and in the best interest of the
Company and its stockholders, approved and adopted this Agreement in accordance
with the DGCL, approved of the Voting Agreements, and approved the other
agreements to be entered into by the Company as contemplated hereby (such other
agreements (other than the Voting Agreements), the "Company Ancillary
Agreements"), resolved to recommend the approval and adoption of this Agreement
by the Company's stockholders and directed that this Agreement be submitted to
the Company's stockholders for approval and adoption. The Company has the
requisite corporate power and authority to enter into this Agreement and the
Company Ancillary Agreements and, subject to approval by the stockholders of the
Company of this Agreement, to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Company
Ancillary Agreements by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company, subject, in the case of
this Agreement, to approval of this Agreement by the stockholders of the
Company. This Agreement has been duly executed and delivered by the Company. The
Company Ancillary Agreements executed as of the date hereof have each been duly
executed and delivered by the Company, and no other corporate action on the part
of the Company is necessary in connection therewith. Assuming the valid
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authorization, execution and delivery by the other parties thereto and the
validity and binding effect hereof and thereof on the other parties thereto,
this Agreement constitutes the valid and binding obligation of the Company
enforceable against it in accordance with its terms, and each of the Company
Ancillary Agreements upon execution and delivery thereof by the Company will
constitute the valid and binding obligation of the Company enforceable against
it in accordance with its terms, except to the extent as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by the
effect of general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law).
(b) Upon the execution and delivery by the Stockholder
Representatives of the Indemnity Agreement, the Indemnity Agreement will
constitute the valid and binding obligation of the Stockholder Representatives,
enforceable against the Stockholder Representatives in accordance with its
terms. The Stockholder Representatives have the requisite power and authority to
enter into the Indemnity Agreement and to fulfill the terms thereof contemplated
thereby.
Section 3.4 Consents and Approvals; No Violation. Assuming that
all consents, approvals, authorizations and other actions described in this
Section 3.4 have been obtained and all filings and obligations described in this
Section 3.4 have been made, except as set forth in Section 3.4 of the Company
Letter, the execution and delivery of this Agreement and the Company Ancillary
Agreements by the Company do not, and the consummation of the transactions
contemplated hereby and thereby (including, without limitation, the transactions
contemplated by Section 5.15) and compliance with the provisions hereof and
thereof will not, result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation or the loss of a material benefit
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any of its
Subsidiaries under, any provision of (a) the Company Charter or the Company
Bylaws, (b) the comparable charter or organizational documents of any of the
Company's Subsidiaries, (c) any loan or credit agreement, note, bond, mortgage,
indenture, guaranty, lease or other agreement, instrument, permit, concession,
franchise or license material to the Company or any of its Subsidiaries or any
of their respective properties or assets, other than, in the case of clause (c),
any such violations, defaults, rights, liens, security interests, charges or
encumbrances that are immaterial, or (d) any judgment, order, decree,
injunction, statute, law, ordinance, rule or regulation applicable to the
Company or any of its Subsidiaries or any of their respective properties or
assets, other than, in the case of clause (d), any such violations, defaults,
rights, liens, security interests, charges or encumbrances that, individually or
in the aggregate, would not have a Material Adverse Effect on the Company,
materially impair the ability of the Company to perform its obligations
hereunder or under the Company Ancillary Agreements, or prevent the consummation
of any of the transactions contemplated hereby or thereby by the Company. No
filing or registration with, or authorization, consent or approval of, any
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 or
the Company Ancillary Agreements by the Company or is necessary for the
consummation of the Merger and the other transactions contemplated by this
Agreement or the Company Ancillary Agreements, except for (i) compliance with
the HSR Act, (ii) the filing of
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the Certificate of Merger with the Secretary of State of the State of Delaware
and appropriate documents with the relevant authorities of other states in which
the Company or any of its Subsidiaries is qualified to do business, (iii) State
Takeover Approvals, (iv) such filings as may be required in connection with the
taxes described in Section 5.9, (v) applicable requirements, if any, of Blue Sky
Laws, (vi) applicable requirements, if any, under foreign laws and (vii) such
other consents, orders, authorizations, registrations, declarations and filings
the failure of which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, materially impair the
ability of the Company to perform its obligations hereunder or under the Company
Ancillary Agreements, or prevent the consummation of any of the transactions
contemplated hereby or thereby by the Company.
Section 3.5 Financial Statements. The Company has delivered to
Parent (a) the balance sheet (the "Balance Sheet") of the Company and its
subsidiaries as of December 31, 2002 (the "Balance Sheet Date") and the related
statements of income, stockholders' equity and cash flows for the year then
ended, together with the appropriate notes to such financial statements,
accompanied by the report thereon of KPMG LLP, independent public accountants
(the "Audited Financial Statements") and (b) the unaudited balance sheet of the
Company and its subsidiaries as of May 31, 2003 and the related unaudited
statements of income, stockholders' equity and cash flows for the five-month
period ended May 31, 2003 (the "Unaudited Financial Statements" and together
with the Audited Financial Statements, the "Financial Statements"). Except as
disclosed in the notes thereto, the Financial Statements have been prepared in
conformity with GAAP consistently applied and fairly present in all material
respects the financial position of the Company and its subsidiaries at the dates
of such balance sheets and the results of its operations and cash flows for the
respective periods indicated (subject, in the case of the Unaudited Financial
Statements, to normal year end adjustments and any other adjustments described
therein, to the absence of footnotes, and to the fact that the Company's
investment in Corona is not reflected in the Unaudited Financial Statements,
which investment should have been accounted for under the equity method).
Section 3.6 No Dividends; Absence of Certain Changes or Events.
(a) Except as set forth in Section 3.6(a) of the Company Letter,
since January 1, 2000, neither the Company nor any of its partially-owned
Subsidiaries has ever declared or made, or agreed to declare or make, any
payment of dividends or distributions to its stockholders (and no record date
with respect to any of the foregoing has occurred) or purchased or redeemed, or
agreed to purchase or redeem, any of its capital stock or other equity interest.
(b) Except as set forth in Section 3.6(b) of the Company Letter,
since the Balance Sheet Date there has been:
(i) no Material Adverse Change with respect to the Company; and
(ii) no damage, destruction, loss or claim, whether or not covered
by insurance, or condemnation or other taking adversely affecting any
material assets or business of the Company or any of its Subsidiaries,
other than any such damages, destructions, losses, claims, condemnations
or takings that, individually or in the
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aggregate, would not have a Material Adverse Effect on the Company or any
of its Subsidiaries.
(c) Except as set forth in Section 3.6(c) of the Company Letter,
since the Balance Sheet Date through the date hereof, the Company and its
Subsidiaries have conducted their respective businesses in all material respects
only in the ordinary course and in conformity with past practice. Without
limiting the generality of the foregoing, since the Balance Sheet Date through
the date hereof, except as set forth in Section 3.6(c) of the Company Letter,
neither the Company nor any of its Subsidiaries has:
(i) issued, delivered or agreed (conditionally or
unconditionally) to issue or deliver, or granted any option, warrant or
other right to purchase, any of its capital stock or other equity
interest or any security convertible into its capital stock or other
equity interest;
(ii) issued, delivered or agreed (conditionally or
unconditionally) to issue or deliver any of its bonds, notes or other
debt securities;
(iii) except in the ordinary course of business consistent with
past practice, made or permitted any material amendment or termination of
any Company Agreement (as hereinafter defined);
(iv) undertaken or committed to undertake capital expenditures,
other than (A) capital expenditures relating to the Company's new plating
facility in Mesa, Arizona that do not exceed $500,000 in the aggregate
(and the Company's good faith estimate of the total capital expenditures
relating to such facility is $460,049)and (B) capital expenditures that
do not exceed $100,000 for any single project or related series of
projects or $250,000 in the aggregate;
(v) sold, leased (as lessor), transferred or otherwise disposed
of (including any transfers from the Company or any of its Subsidiaries
to any of the stockholders of the Company or any of their respective
Affiliates (as hereinafter defined)), or mortgaged or pledged, or imposed
or suffered to be imposed any Encumbrance on, any of the assets reflected
on the Balance Sheet or any assets acquired by the Company or any of its
Subsidiaries after the Balance Sheet Date, except for inventory and minor
amounts of personal property sold or otherwise disposed of for fair value
in the ordinary course of its business consistent with past practice,
except for the sale of the real estate located in Westlake Village,
California disclosed in Section 3.6(c)(v) of the Company Letter and
except for (A) liens for taxes and other governmental charges and
assessments which are not yet due and payable, (B) liens of landlords and
liens of carriers, warehousemen, mechanics and materialmen and other like
liens arising in the ordinary course of business for sums not yet due and
payable and (C) Permitted Encumbrances;
(vi) created, incurred or assumed, or agreed to create, incur or
assume, any indebtedness for borrowed money or entered into, as lessee,
any capitalized lease obligations (as defined in Statement of Financial
Accounting Standards No. 13);
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(vii) accelerated or delayed collection of notes or accounts
receivable in advance of or beyond their regular due dates or the dates
when the same would have been collected in the ordinary course of its
business consistent with past practice;
(viii) delayed or accelerated payment of any account payable or
other liability beyond or in advance of its due date or the date when
such liability would have been paid in the ordinary course of its
business consistent with past practice;
(ix) instituted any increase in any compensation payable to any
employee, director or consultant (other than consultants engaged
specifically in connection with the transactions contemplated by this
Agreement) of the Company or any of its Subsidiaries or in any
profit-sharing, bonus, incentive, deferred compensation, insurance,
pension, retirement, medical, hospital, disability, welfare or other
benefits made available to employees of the Company or any of its
Subsidiaries except, in case of employees other than directors or
executive officers, salary increases in connection with annual or
periodic compensation reviews in the ordinary course of business
consistent with the Company's past practice;
(x) settled or compromised any material federal, state, local or
foreign income tax liability;
(xi) prepared or filed any Tax Return inconsistent with past
practice or, on any such Tax Return, taken any position, made any
election or adopted any method that is inconsistent with positions taken,
elections made or methods used in preparing or filing similar Tax Returns
in prior periods;
(xii) made any change in the accounting principles and practices
used by the Company from those applied in the preparation of the
Financial Statements; or
(xiii) entered into or become committed to enter into any other
material transaction except in the ordinary course of business consistent
with past practice.
(d) Except as set forth in Section 3.6(d) of the Company Letter,
neither the Company nor any of its Subsidiaries is subject to any liability
(including unasserted claims, whether known or unknown), whether absolute,
contingent, accrued or otherwise, which is not shown or which is in excess of
amounts shown or reserved for in the Balance Sheet, other than liabilities of
the same nature as those set forth in the Balance Sheet and the notes thereto
and reasonably incurred in the ordinary course of its business consistent with
past practice after the Balance Sheet Date and liabilities as would not have a
Material Adverse Effect on the Company.
Section 3.7 Permits and Compliance. Each of the Company and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, charters, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Entity necessary for the
Company or any of its Subsidiaries to own, lease and operate its properties or
to carry on its business as it is now being conducted (the "Company Permits"),
except where the failure to have any of the Company Permits would not,
individually or in the aggregate, have a Material Adverse Effect on the Company,
and, as of the date of this
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Agreement, no suspension or cancellation of any of the Company Permits is
pending or, to the Knowledge of the Company, threatened, except where the
suspension or cancellation of any of the Company Permits would not, individually
or in the aggregate, have a Material Adverse Effect on the Company. Neither the
Company nor any of its Subsidiaries is in violation of (a) its charter, bylaws
or other organizational documents, (b) any applicable law, ordinance,
administrative or governmental rule or regulation or (c) any order, decree or
judgment of any Governmental Entity having jurisdiction over the Company or any
of its Subsidiaries, except, in the case of clauses (a), (b) and (c), for any
violations that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company.
Section 3.8 Registration Statement and Proxy Statement. None of
the information to be supplied by the Company for inclusion in the Registration
Statement or the Proxy Statement will (i) in the case of the Registration
Statement, at the time it becomes effective, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading or (ii) in
the case of the Proxy Statement, at the time of the mailing of the Proxy
Statement or at the time of the Stockholder Meetings, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If, at any time
prior to the Stockholder Meetings, any event with respect to the Company, its
officers and directors or any of its Subsidiaries shall occur which is required
at that time to be described in the Proxy Statement or the Registration
Statement, the Company shall deliver to Parent a description of such event in
order to permit Parent promptly to file an appropriate amendment or supplement
with the SEC and, as required by law, disseminate an appropriate amendment or
supplement to the Company Stockholders. The Proxy Statement will comply (with
respect to the Company) as to form in all material respects with the provisions
of the DGCL.
Section 3.9 Tax Matters.
(a) Except as set forth in Section 3.9(a) of the Company Letter,
(i) each of the Company, each Subsidiary of the Company and each Company Group
(as hereinafter defined) has filed all material Tax Returns required to be
filed; (ii) all such Tax Returns are complete and accurate in all material
respects and disclose all material Taxes required to be paid by the Company,
each Subsidiary of the Company and each Company Group for the periods covered
thereby; (iii) to the Knowledge of Company, neither the Company, any Subsidiary
of the Company nor any Company Group is currently the beneficiary of any
extension of time within which to file any Tax Return; (iv) all material Taxes
(whether or not shown on any Tax Return) owed by the Company, any Subsidiary of
the Company or any Company Group have been timely paid or extensions for payment
have been properly obtained; (v) to the Knowledge of the Company, none of the
Company, any Subsidiary of the Company or any member of any Company Group has
waived or been requested to waive any statute of limitations in respect of Taxes
which waiver is currently in effect; (vi) to the Knowledge of the Company, the
Tax Returns referred to in clause (i), to the extent related to income Taxes,
have not been examined by the appropriate taxing authority; (vii) to the
Knowledge of the Company, there is no action, suit, investigation, audit, claim
or assessment pending or proposed or threatened with respect to Taxes of the
Company, any Subsidiary of the Company or any Company Group which, if determined
in a manner adverse to the Company, would be material; (viii) all deficiencies
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asserted in writing or assessments made in writing as a result of any
examination of the Tax Returns referred to in clause (i) have been paid in full
or are being timely and properly contested; (ix) to the Knowledge of the
Company, there are no Tax rulings, requests for rulings, or closing agreements
relating to the Company, any Subsidiary of the Company or any Company Group
which could affect the liability for Taxes of the Company or any Subsidiary of
the Company for any period after the Closing Date; (x) there are no material
liens for Taxes upon the assets of the Company or any Subsidiary of the Company
except liens relating to current Taxes not yet due; (xi) all material Taxes
which the Company, any Subsidiary of the Company or any Company Group are
required by law to withhold or to collect for payment have been duly withheld
and collected and either have been paid to the appropriate Governmental Entity
or accrued, reserved against and entered upon the books of the Company; (xii)
neither the Company nor any Subsidiary of the Company has been a party to any
distribution occurring during the last 3 years in which the parties to such
distribution treated the distributions as one to which Section 355 of the Code
(or any similar provision of state, local or foreign law) applied; (xiii)
neither the Company nor any Subsidiary of the Company is, or has ever been, a
party to or liable under a Tax Sharing Arrangement or Tax indemnity arrangement;
and (xiv) the charges, accruals and reserves in respect of Taxes on the Balance
Sheet are adequate in all material respects to provide for all unpaid Taxes
(including any deferred Taxes) as of the Balance Sheet Date.
(b) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code, and no stock transfer Taxes, sales
Taxes, use Taxes, real estate transfer Taxes or other similar Taxes will be
imposed on the transactions contemplated by this Agreement.
(c) As a direct or indirect result of the transactions
contemplated by this Agreement, no payment or other benefit, and no acceleration
of the vesting of any options, payments or other benefits, will be, an "excess
parachute payment" to a "disqualified individual" as those terms are defined in
Section 280G of the Code and the Treasury Regulations thereunder. Except as set
forth in Section 3.9(c) of the Company Letter, as a direct or indirect result of
the transactions contemplated by this Agreement, no payment or other benefit,
and no acceleration of the vesting of any options, payments or other benefits
will be (or under Section 280G of the Code and the Treasury Regulations
thereunder be presumed to be) a "parachute payment" to a "disqualified
individual" as those terms are defined in Section 280G of the Code and the
Treasury Regulations thereunder, without regard to whether such payment or
acceleration is reasonable compensation for personal services performed or to be
performed in the future.
(d) None of the Company, any predecessor of the Company or any
Subsidiary of the Company is (and none thereof has ever been) a member of (i)
any "affiliated group" (as defined in Section 1504(a) of the Code without regard
to the limitations contained in Section 1504(b) of the Code) other than the
Company Group or (ii) any other group of corporations or entities which files or
has filed Tax Returns on a combined, consolidated or unitary basis. No income or
gain of the Company or any Subsidiary of the Company has been deferred pursuant
to current or former Treasury Regulation (S)(S) 1.1502-13 or 14, or current or
former Temporary Treasury Regulation (S)(S) 1.1502-13T or -14T, or Proposed
Treasury Regulations (S) 1.1502-13. No excess loss account (as described in
Treasury Regulation (S)(S) 1.1502-19 and -32) exists with respect to any
Subsidiary of the Company.
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(e) The tax basis in each LLC Asset is set forth in Section 3.9(e)
of the Company Letter.
(f) For purposes of this Agreement, "Company Group" means any
"affiliated group" (as defined in Section 1504(a) of the Code without regard to
the limitations contained in Section 1504(b) of the Code) that, at any time on
or before the Effective Time, includes or has included the Company or any
Subsidiary of the Company, or any predecessor of the Company or any Subsidiary
of the Company (or another such predecessor), or any other group of corporations
which, at any time on or before the Effective Time, files or has filed Tax
Returns on a combined, consolidated or unitary basis with the Company or any
Subsidiary of the Company, or any predecessor of the Company or any Subsidiary
of the Company (or another such predecessor).
Section 3.10 Actions and Proceedings. Except as set forth in
Section 3.10 of the Company Letter, there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against or involving
the Company or any of its Subsidiaries or against or involving any of the
present or former directors, officers, employees or, to the Knowledge of the
Company, consultants, agents or stockholders of the Company or any of its
Subsidiaries, as such, or any of its or their properties, assets or business or
any Company Plan (as hereinafter defined) that, individually or in the
aggregate, would have a Material Adverse Effect on the Company or materially
impair the ability of the Company to perform its obligations hereunder. Except
as set forth Section 3.10 of the Company Letter, there are no actions, suits or
claims or legal, administrative or arbitration proceedings or investigations
pending or, to the Knowledge of the Company, threatened against or involving the
Company or any of its Subsidiaries or any of its or their present or former
directors, officers, employees or, to the Knowledge of the Company, consultants,
agents or stockholders, as such, or any of its or their properties, assets or
business or any Company Plan that, individually or in the aggregate, would have
a Material Adverse Effect on the Company or materially impair the ability of the
Company to perform its obligations hereunder. There are no actions, suits, labor
disputes or other litigation, legal or administrative proceedings or
governmental investigations pending or, to the Knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries or any of
its or their present or former officers, directors, employees or, to the
Knowledge of the Company, consultants, agents or stockholders, as such, or any
of its or their properties, assets or business relating to the transactions
contemplated by this Agreement and the Company Ancillary Agreements.
Section 3.11 Certain Agreements. Except as set forth in Section
3.11 of the Company Letter, neither the Company nor any of its Subsidiaries is a
party to any oral or written agreement or plan, including any employment
agreement, severance agreement, stock option plan, stock appreciation rights
plan, restricted stock plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of the benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated by this Agreement or
the value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement. No holder of any option or
other right to purchase shares of Company Common Stock, or shares of Company
Common Stock granted in connection with the performance of services for the
Company or its Subsidiaries, is or will be entitled to receive cash from the
Company or any Subsidiary in lieu of or in exchange for such option, other right
or shares.
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Section 3.12 Employee Benefits.
(a) Each Company Plan is listed in Section 3.12(a) of the Company
Letter. With respect to each Company Plan, the Company has delivered to Parent a
true and correct copy of (i) the three (3) most recent annual reports (Form
5500) filed with the IRS, (ii) each such Company Plan that has been reduced to
writing and all amendments thereto, (iii) each trust agreement, insurance
contract or administration agreement relating to each such Company Plan, (iv) a
written summary of each unwritten material Company Plan, (v) the most recent
summary plan description or other written explanation of each Company Plan, if
any, provided to participants, (vi) the most recent determination letter and
request therefor, if any, issued by the IRS with respect to any Company Plan
intended to be qualified under Section 401(a) of the Code, (vii) any request for
a determination currently pending before the IRS and (viii) all correspondence
with the IRS or the Department of Labor relating to any outstanding controversy
or audit. Each Company Plan complies in all respects with ERISA, the Code and
all other applicable statutes and governmental rules and regulations, except
where noncompliance would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. Neither the Company nor any of its ERISA
Affiliates currently maintains, contributes to or has any liability under or, at
any time during the past six (6) years has maintained, contributed to or had any
liability under, (x) any pension plan which is subject to Section 412 of the
Code, Section 302 of ERISA or Title IV of ERISA or (y) any multiemployer plan
(as defined in Section 4001(a)(3) of ERISA).
(b) Except as listed in Section 3.12(b) of the Company Letter,
with respect to the Company Plans, no event has occurred and there exists no
condition or set of circumstances in connection with which the Company, its
ERISA Affiliates or any Company Plan fiduciary could be subject to any
liability, other than any liability for benefits payable in the normal course,
under the terms of such Company Plans, ERISA, the Code or any other applicable
law, which would have a Material Adverse Effect on the Company. All Company
Plans that are intended by their terms to be, or are otherwise treated by the
Company as, qualified under Section 401(a) of the Code have been determined by
the IRS to be so qualified, or a timely application for such determination is
now pending and the Company is not aware of any reason why any such Company Plan
is not so qualified in operation. Except as set forth in Section 3.12(b) of the
Company Letter, neither the Company nor any of its ERISA Affiliates has any
liability or obligation under any welfare plan or agreement to provide benefits
after termination of employment to any employee or dependent other than as
required by Section 4980B of the Code.
(c) As used herein, "Company Plan" means (i) a "pension plan" (as
defined in Section 3(2) of ERISA), (ii) a "welfare plan" (as defined in Section
3(1) of ERISA), (iii) any other written or oral profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, restricted stock, stock appreciation right, vacation,
retention, severance, medical, dental, vision, disability, death benefit, sick
leave or insurance plan, arrangement or understanding, or (iv) any written or
oral material bonus, holiday pay or fringe benefit plan, arrangement or
understanding, in each case established or maintained by the Company or any of
its ERISA Affiliates or as to which the Company or any of its ERISA Affiliates
has contributed or otherwise may have any liability.
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(d) Section 3.12(d) of the Company Letter contains a list of all
(i) employment, compensation and other material agreements with current and
former employees, consultants and independent contractors providing services to
the Company or any ERISA Affiliate, and (ii) plans, programs, agreements and
other arrangements of the Company and each ERISA Affiliate with or relating to
its current and former employees, consultants and independent contractors
containing change of control or similar provisions (collectively, "Company
Employment Agreements"). Except as set forth in Section 3.12(d) of the Company
Letter, the Company has delivered to Parent a true and correct copy of each
Company Employment Agreement and any amendments thereto.
Section 3.13 Compliance with Worker Safety and Environmental Laws.
The properties, assets and operations of the Company and its Subsidiaries are in
compliance with all applicable Worker Safety Laws and Environmental Laws, except
for any violations that, individually or in the aggregate, would not have a
Material Adverse Effect on the Company. With respect to such properties, assets
and operations, including any previously owned, leased or operated properties,
assets or operations, there are no events, conditions, circumstances,
activities, practices, incidents, actions or plans of the Company or any of its
Subsidiaries that may interfere with or prevent compliance or continued
compliance with applicable Worker Safety Laws and Environmental Laws, other than
any such interference or prevention as would not, individually or in the
aggregate with any such other interference or prevention, have a Material
Adverse Effect on the Company.
Section 3.14 Labor Matters. The Company and each of its
Subsidiaries have complied with all applicable laws, rules and regulations which
relate to prices, wages, hours, discrimination in employment and collective
bargaining and to the operation of its business and are not liable for any
arrears of wages or any withholding taxes or penalties for failure to comply
with any of the foregoing, except for any possible noncompliance or liability
that would not, individually or in the aggregate, have a Material Adverse Effect
on the Company. Neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement or labor contract. Neither the Company nor
any of its Subsidiaries has engaged in any unfair labor practice with respect to
any Persons employed by or otherwise performing services primarily for the
Company or any of its Subsidiaries (the "Company Business Personnel"), and
except as set forth in Section 3.14 of the Company Letter there is no unfair
labor practice complaint or grievance pending or threatened in writing against
the Company or any of its Subsidiaries by the National Labor Relations Board or
any comparable state agency with respect to the Company Business Personnel,
except any complaint or grievance that would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. There is no labor
strike, dispute, slowdown or stoppage pending or, to the Knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
which may interfere with the respective business activities of the Company or
any of its Subsidiaries, except any strike, dispute, slowdown or stoppage that
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
Section 3.15 Intellectual Property.
(a) Except as set forth in Section 3.15(a) of the Company Letter,
the Company and its Subsidiaries have through ownership or licensing all
Intellectual Property Rights as are
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necessary to conduct the business of the Company and its Subsidiaries as
currently conducted or planned to be conducted by the Company and its
Subsidiaries, taken as a whole, except where the failure to have such
Intellectual Property Rights would not have a Material Adverse Effect on the
Company. Except as set forth in Section 3.15(a) of the Company Letter, neither
the Company nor any of its Subsidiaries has infringed any Intellectual Property
Rights of any third party other than any infringements that, individually or in
the aggregate, would not have a Material Adverse Effect on the Company.
(b) Except as set forth in Section 3.15(b) of the Company Letter,
there are no actions, suits or claims or administrative proceedings or
investigations pending or, to the Knowledge of the Company, threatened that
challenge or question the Company's Intellectual Property Rights and that,
individually or in the aggregate, would have a Material Adverse Effect on the
Company.
(c) All patents, registered trademarks, service marks and
copyrights which are held by the Company or any of its Subsidiaries and which
are material to the business of the Company and its Subsidiaries, taken as a
whole, are to the Knowledge of the Company valid and subsisting.
Section 3.16 Availability of Assets. Except as set forth in
Section 3.16 of the Company Letter, the assets owned or leased by the Company
and its Subsidiaries constitute all the material assets used in its business
(including all books, records, computers and computer programs and data
processing systems) and are in good condition (subject to normal wear and tear
and immaterial impairments of value and damage) and serviceable condition and
are generally suitable for the uses for which intended. There are no material
services provided by any of the stockholders of the Company or any of their
Affiliates to the Company or any Subsidiary of the Company utilizing either (i)
assets not owned by the Company or its Subsidiaries as of the Effective Time or
(ii) Persons not employed by the Company or its Subsidiaries. For purposes of
this Agreement, "Affiliate" means, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by or is under common
control with such Person. For purposes of this Agreement, "Person" means any
individual, corporation, partnership, limited liability company, joint venture,
association, joint-stock company, trust or unincorporated organization.
Section 3.17 Real Property. (a) Section 3.17(a) of the Company
Letter sets forth a list and brief description of (i) each parcel of real
property owned by the Company and any of its Subsidiaries (the "Owned Real
Property") (showing the record title holder, location and any indebtedness
secured by a mortgage or other Encumbrance thereon) and (ii) each contract,
option or other right to which the Company or any of its Subsidiaries is a party
to or bound by for the purchase or sale of real property. Except as set forth in
Section 3.17(a) of the Company Letter, the Company or the applicable Subsidiary,
as the case may be, has good, marketable and insurable (at ordinary rates) title
in fee simple to all Owned Real Property and to all buildings, structures and
other improvements thereon, in each case free and clear of all Encumbrances,
except for Permitted Encumbrances. All public utilities give adequate service to
the Owned Real Property, and the Owned Real Property has all needed access to
and from publicly dedicated streets. Except as set forth in Section 3.17(a) of
the Company Letter, none of the buildings, structures or other improvements
(including parking lots and roadways)
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comprising the Owned Real Property encroach in any material respect on any
public or private lands or easements and rights-of-way or violate any building
lines or setback requirements. True and complete copies of any (w) title
opinions, (x) surveys and (y) appraisals conducted within the past five years in
the possession of the Company or any of its Subsidiaries and (z) any policies of
title insurance currently in force and in the possession of the Company and any
of its Subsidiaries with respect to each parcel of Owned Real Property
heretofore have been delivered by the Company to Parent.
(b) Neither the Company nor any Subsidiary of the Company is
lessee of, or holds or operates, any real property owned by any third Person.
Immediately following the Effective Time, Xxxxxxxxx shall have the right to
quiet enjoyment of the Westlake Properties for the full term of the Leases
(including any renewal option relating thereto), and the leasehold interests of
Xxxxxxxxx in the Westlake Properties shall not be subject or subordinate to any
Encumbrance except for Permitted Encumbrances. For purposes of this Agreement,
"Westlake Properties" means the premises located at (i) Suites 100, 104, 201,
202, 203, 205, 206 and 207 and, if requested by Xxxxxxxxx, Suites 102 and 200 at
00000 Xx Xxxx Xxxxx, Xxxxxxxx Xxxxxxx, Xxxxxxxxxx and (ii) if Xxxxxxxxx has not
vacated the premises before the Effective Time, 00000 Xx Xxxx Xxxxx, Xxxxxxxx
Xxxxxxx, Xxxxxxxxxx.
(c) Neither the whole nor any part of the Owned Real Property is
or was subject to any suit for condemnation, eminent domain or other taking by
any public authority or other Person, and, to the Knowledge of the Company, no
such condemnation, eminent domain or other taking is threatened or contemplated.
Section 3.18 Personal Property Leases. Section 3.18 of the Company
Letter contains a brief description of each lease or other agreement or right,
whether written or oral, under which the Company or any Subsidiary of the
Company is lessee of, or holds or operates, any machinery, equipment, vehicle or
other tangible personal property owned by a third party, except for any such
lease, agreement or right that is terminable by the Company or any Subsidiary of
the Company without penalty or payment on notice of 30 days or less or which
involves the payment by the Company or any Subsidiary of the Company of rentals
of less than $100,000 per year.
Section 3.19 Title to Assets. Each of the Company and its
Subsidiaries has good title to all of its assets reflected on the Balance Sheet
as being owned by it and all of the assets thereafter acquired by it (except to
the extent that such assets have been disposed of after the Balance Sheet Date
in the ordinary course of business consistent with past practice), free and
clear of all Encumbrances, except for Permitted Encumbrances and except as set
forth in Section 3.19 of the Company Letter.
Section 3.20 Contracts. Except as set forth in Section 3.20 of the
Company Letter, neither the Company nor any Subsidiary of the Company is a party
to or bound by:
(i) any contract for the purchase of goods or raw materials
involving payments in excess of $250,000 in the aggregate, other than
customary purchase orders;
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(ii) any contract for the sale of goods or services involving
payments in excess of $250,000 in the aggregate, other than customary
purchase orders;
(iii) any contract for the purchase, licensing or development of
software to be used by the Company or any Subsidiary of the Company other
than contracts for the purchase or licensing of shrink-wrap,
off-the-shelf software not involving the payment of more than $250,000 in
the aggregate;
(iv) any guarantee of the obligations or liabilities of customers,
suppliers, officers, directors, employees, Affiliates of the Company or
its Subsidiaries or any other Persons;
(v) any agreement which provides for, or relates to, the
incurrence by the Company or any Subsidiary of the Company of debt for
borrowed money or the extension of credit by the Company or any
Subsidiary of the Company to any other Person (except for a standby
letter of credit from Xxxxx Fargo Bank, National Association in an amount
not to exceed $150,000 in the aggregate and except for the extension of
credit prior to the date hereof to certain employees, former employees
and directors of the Company in connection with purchases of Company
Common Stock, none of which obligations will be outstanding as of the
Closing Date);
(vi) any agreement or understanding with a third party that
restricts the Company or any Subsidiary from carrying on its business
anywhere in the world;
(vii) any contract which provides for, or relates to, any
confidentiality arrangement (other than any such arrangement entered into
in the ordinary course of business consistent with past practice) or any
non-competition arrangement (other than any such arrangement solely for
the benefit of the Company or any of its Subsidiaries) with any Person,
including any current or former officer or employee of the Company or any
Subsidiary;
(viii) any contract or group of related contracts for capital
expenditures in excess of $100,000 in the aggregate for any single
project or in excess of $250,000 in the aggregate for any related series
of projects;
(ix) any partnership, joint venture or other similar arrangement
or agreement involving a sharing of profits or losses;
(x) any other contract which involves payments or receipts by
the Company or any Subsidiary of the Company of more than $100,000, other
than the Common Stock Purchase Agreement; or
(xi) any contract for any purpose (whether or not required to be
listed or described in Section 3.20 of the Company Letter) which is
material to the Company, any Subsidiary of the Company or their
respective businesses, other than any such contract made in the ordinary
course of business consistent with past practice.
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Section 3.21 Status of Contracts. Except as set forth in Section
3.21 of the Company Letter and except as would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, each of the leases,
contracts and other agreements listed in Sections 3.12, 3.18 and 3.20 of the
Company Letter (collectively, the "Company Agreements") constitutes a valid and
binding obligation of the Company and, to the Knowledge of the Company, the
other parties thereto and is in full force and effect and (except as set forth
in Section 3.4 of the Company Letter and except for those Company Agreements
which by their terms will expire prior to the Effective Time or are otherwise
terminated prior to the Effective Time in accordance with the provisions hereof)
will continue in full force and effect after the Effective Time, in each case
without breaching the terms thereof or resulting in the forfeiture or impairment
of any rights thereunder and without the consent, approval or act of, or the
making of any filing with, any other party. Except as would not, individually or
in the aggregate, have a Material Adverse Effect on the Company, each of the
Company and its Subsidiaries has fulfilled and performed in all material
respects its obligations under each of the Company Agreements to which it is a
party, and neither the Company nor any Subsidiary of the Company is in, or is
alleged to be in, breach or default under, nor, to the Knowledge of the Company,
is there or, to the Knowledge of the Company, is there alleged to be any basis
for termination of any of the Company Agreements and, to the Knowledge of the
Company, no other party to any of the Company Agreements has breached or
defaulted thereunder, and no event has occurred and no condition or state of
facts exists which, with the passage of time or the giving of notice or both,
would constitute such a breach or default by the Company or any Subsidiary of
the Company, or, to the Knowledge of the Company, by any such other party.
Complete and correct copies of each of the Company Agreements have heretofore
been delivered by the Company to Parent.
Section 3.22 Insurance. Each of the Company and its Subsidiaries
maintains policies of fire and casualty, liability (general, products and other
liability), workers' compensation and other forms of insurance and bonds in such
amounts and against such risks and losses as are insured against by companies
engaged in the same or a similar business. The Company and its Subsidiaries
shall keep or cause such insurance or comparable insurance in full force and
effect through the Effective Time. Each of the Company and its Subsidiaries has
complied with each such insurance policy and has not failed to give any notice
or to present any claim thereunder in a due and timely manner, except where any
noncompliance or failure would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
Section 3.23 Takeover Statutes and Charter Provisions. To the
Knowledge of the Company, no state takeover statutes or charter or bylaw
provisions are applicable to the Merger, this Agreement, the Voting Agreements,
the Parent Ancillary Agreements and the Company Ancillary Agreements, and the
transactions contemplated hereby and thereby.
Section 3.24 Required Vote of Company Stockholders. The
affirmative vote of the holders of a majority of the outstanding shares of
Company Common Stock and the outstanding shares of Company Preferred Stock,
voting together as one class, is required to adopt this Agreement. No other vote
of the securityholders of the Company is required by law, the Company Charter,
the Company Bylaws or otherwise in order for the Company to consummate the
Merger and the transactions contemplated hereby and by the Parent Ancillary
Agreements and the Company Ancillary Agreements.
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Section 3.25 Brokers. No broker, investment banker or other Person
is entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
Section 3.26 Ownership of Company Stock. No stockholder or group
(as defined in Section 13(d)(3) of the Exchange Act) of stockholders of the
Company will own 30% or more of the issued and outstanding shares of Parent
Common Stock as a result of the Merger.
ARTICLE IV
COVENANTS
Section 4.1 Conduct of Business of the Company Pending the
Merger. Except as expressly permitted by this Section 4.1, during the period
from the date of this Agreement through the Effective Time, the Company shall,
and shall cause each of its Subsidiaries to, in all material respects carry on
its business in the ordinary course of its business as currently conducted and,
to the extent consistent therewith, use commercially reasonable efforts to
preserve intact its current business organizations, keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it to the end that
its goodwill and ongoing business shall be unimpaired at the Effective Time.
Without limiting the generality of the foregoing, and except as otherwise
expressly contemplated by this Agreement or as set forth in Section 4.1 of the
Company Letter, the Company shall not, and shall not permit any of its
Subsidiaries to, without the prior written consent of Parent:
(i) (A) declare, set aside or pay any dividends on, or make any
other actual, constructive or deemed distributions in respect of, any of
its capital stock, or otherwise make any payments to its stockholders in
their capacity as such (other than (x) the LLC Units (as hereinafter
defined) and (y) dividends or distributions by Subsidiaries to other
Subsidiaries (other than the LLC) or to the Company), (B) 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 (C) purchase, redeem or otherwise acquire
any shares of capital stock of the Company or any other securities
thereof or any rights, warrants or options to acquire, any such shares or
other securities (except to the extent Company Stock Options are
exercised or shares of Company Preferred Stock are converted into Company
Common Stock, in each case in accordance with the terms thereof as in
effect on the date hereof, and except to the extent of purchases from
employees and directors of the Company, in each case pursuant to the
Restricted Stock Agreements in place as of the date hereof and in
accordance with their respective terms as in effect on the date hereof);
(ii) issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock, any other voting securities or
equity equivalent or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities,
equity equivalent or convertible securities, other than (A) the issuance
of shares of Company Common Stock pursuant to the Company Stock Options
outstanding on the date of this Agreement, in each case, in accordance
with their current terms and
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(B) the issuance of shares of Company Common Stock upon conversion of
shares of Company Preferred Stock in accordance with their current terms;
(iii) amend its charter or bylaws or other comparable charter or
organizational documents;
(iv) (A) acquire or agree to acquire by merging or consolidating
with, by purchasing a substantial portion of the assets of or equity in
or by any other manner, any business or any corporation, limited
liability company, partnership, association or other business
organization or division thereof, or (B) otherwise acquire or agree to
acquire any assets other than (x) assets acquired in the ordinary course
of business consistent with past practice and (y) the acquisition of up
to an additional 653,594 shares of Series B Convertible Redeemable
Preferred Stock of Corona at the Third Closing in accordance with Article
II of the Corona Stock Purchase Agreement;
(v) sell, transfer, lease, license, mortgage, pledge, encumber
or otherwise dispose of any of its properties or assets, other than
sales, leases or licenses of products or services in the ordinary course
of business consistent with past practice and other than transfers of the
LLC Assets to the LLC in accordance with Section 5.15;
(vi) create, incur or assume, or agree to create, incur or
assume, any indebtedness for borrowed money, guarantee any such
indebtedness, enter into, as lessee, any capitalized lease obligations
(as defined in Statement of Financial Accounting Standards No. 13), or
make any loans, advances or capital contributions to, or other
investments in, any other Person, other than (A) indebtedness, loans,
advances, capital contributions and investments between the Company and
any of its wholly owned Subsidiaries or between any of such wholly owned
Subsidiaries, (B) cash management activities carried on in the ordinary
course of business consistent with past practice and not material to the
Company and its Subsidiaries taken as a whole and (C) advances to
employees for travel and related business expenses consistent with
Company policies and past practices;
(vii) alter (through merger, liquidation, reorganization,
restructuring or in any other fashion) the corporate structure or
ownership of the Company or any Subsidiary (other than in accordance with
Section 5.15 with respect to the LLC Assets);
(viii) enter into, adopt or amend any severance plan, agreement or
arrangement, Company Plan or Company Employment Agreement, including,
without limitation, the Company Stock Options (other than normal
compensation arrangements entered into with non-officer employees or
consultants hired after the date hereof in the ordinary course of its
business consistent with past practice);
(ix) accelerate or delay collection of notes or accounts
receivable in advance of or beyond their regular due dates or the dates
when the same would be collected in the ordinary course of its business
consistent with past practice;
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(x) delay or accelerate payment of any account payable or other
liability beyond or in advance of its due date or the date when such
liability would be paid in the ordinary course of its business consistent
with past practice;
(xi) increase the compensation payable or to become payable to
its directors, officers, employees or consultants or grant any severance
or termination pay to, or enter into or amend any employment or severance
agreement with, any current or former director or officer of the Company
or any of its Subsidiaries, except, in case of employees other than
directors or executive officers, as may be in the ordinary course of
business consistent with the Company's past practice in connection with
annual compensation reviews, or establish, adopt, enter into or, except
as may be required to comply with applicable law, amend or take action to
enhance or accelerate any rights or benefits under, any labor, bonus,
profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement
for the benefit of any current or former director, officer or employee;
(xii) knowingly violate or knowingly fail to perform any
obligation or duty imposed upon it or any Subsidiary by any applicable
federal, state or local law, rule, regulation, guideline or ordinance,
except any such violation or failure that would not, individually or in
the aggregate, have a Material Adverse Effect on the Company;
(xiii) make any change to accounting policies or procedures (other
than actions required to be taken by GAAP);
(xiv) prepare or file any Tax Return inconsistent with past
practice or, on any such Tax Return, take any position, make any election
or adopt any method that is inconsistent with positions taken, elections
made or methods used in preparing or filing similar Tax Returns in prior
periods;
(xv) settle or compromise any material federal, state, local or
foreign income tax liability;
(xvi) enter into, amend or terminate (A) any agreement or contract
material to the Company and its Subsidiaries, taken as a whole, other
than in the ordinary course of business consistent with past practice,
(B) any noncompetition agreement, other than solely for the benefit of
the Company or any of its Subsidiaries, or (C) any agreement pursuant to
which any third party is granted marketing, distribution, manufacturing
or any other rights with respect to any Company product, services,
processes or technology, other than in the ordinary course of business
consistent with past practice; or make or agree to make any new capital
expenditure or expenditures which, individually, is in excess of $100,000
or, in the aggregate, are in excess of $250,000, other than capital
expenditures with respect to the completion of the Company's plating
facility in Mesa, Arizona in an amount not to exceed $500,000 in the
aggregate;
(xvii) waive or release any material right or claim or pay,
discharge or satisfy any material claims, liabilities or obligations
(absolute, accrued, asserted or unasserted,
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contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected or
reserved against in the Balance Sheet or incurred in the ordinary course of
business consistent with past practice;
(xviii) settle or compromise any litigation or arbitration proceeding
if such settlement or compromise requires payment by the Company or any of
its Subsidiaries of $100,000 or more in the aggregate; or
(xix) authorize, recommend, propose or announce an intention to do
any of the foregoing or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
Section 4.2 Conduct of Business of Parent Pending the Merger. Except
as expressly permitted by this Section 4.2 or as set forth in Section 4.2 of the
Parent Letter, during the period from the date of this Agreement through the
Effective Time, Parent shall, and shall cause each of its Subsidiaries to, in
all material respects carry on its business in the ordinary course of its
business as currently conducted and, to the extent consistent therewith, use
commercially reasonable efforts to preserve intact its current business
organizations, keep available the services of its current officers and employees
and preserve its relationships with customers, suppliers and others having
business dealings with it to the end that its goodwill and ongoing business
shall be unimpaired at the Effective Time. Without limiting the generality of
the foregoing, and except as otherwise expressly contemplated by this Agreement
or as set forth in Section 4.2 of the Parent Letter, Parent shall not, and shall
not permit any of its Subsidiaries to, without the prior written consent of the
Company:
(i) (A) declare, set aside or pay any dividends on, or make any
other actual, constructive or deemed distributions in respect of, any of
its capital stock, or otherwise make any payments to its stockholders in
their capacity as such, other than dividends or distributions by
Subsidiaries to other Subsidiaries or to Parent, (B) 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 (C) purchase, redeem or otherwise acquire
any shares of capital stock of Parent or any other securities thereof or
any rights, warrants or options to acquire, any such shares or other
securities, in each case except in connection with the Rights Agreement and
except in connection with the Parent Stock Plans;
(ii) issue, deliver, sell, pledge, dispose of or otherwise encumber
any shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities, equity equivalent
or convertible securities, other than (A) the issuance of shares of Parent
Common Stock pursuant to Parent Stock Plans outstanding on the date of this
Agreement, in each case, in accordance with their current terms, (B) the
issuance of options to acquire Parent Common Stock pursuant to the Parent
Stock Plans to employees hired after the date hereof and (C) the issuance
of securities of Parent in accordance with the terms of the Rights
Agreement;
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(iii) amend its charter or bylaws or other comparable charter or
organizational documents, except as contemplated by this Agreement;
(iv) (A) acquire or agree to acquire by merging or consolidating
with, by purchasing a substantial portion of the assets of or equity in or
by any other manner, any business or any corporation, limited liability
company, partnership, association or other business organization or
division thereof or (B) otherwise acquire or agree to acquire any assets,
other than assets acquired in the ordinary course of business consistent
with past practice;
(v) sell, transfer, lease, license, mortgage, pledge, encumber or
otherwise dispose of any of its properties or assets, other than sales,
leases or licenses of products or services in the ordinary course of
business consistent with past practice;
(vi) create, incur or assume, or agree to create, incur or assume,
any indebtedness for borrowed money, guarantee any such indebtedness, enter
into, as lessee, any capitalized lease obligations (as defined in Statement
of Financial Accounting Standards No. 13), or make any loans, advances or
capital contributions to, or other investments in, any other Person, other
than (A) indebtedness, loans, advances, capital contributions and
investments between Parent and any of its wholly owned Subsidiaries or
between any of such wholly owned Subsidiaries, (B) cash management
activities carried on in the ordinary course of business consistent with
past practice and not material to Parent and its Subsidiaries taken as a
whole and (C) advances to employees for travel and related business
expenses consistent with Parent policies and past practices;
(vii) alter (through merger, liquidation, reorganization,
restructuring or in any other fashion) the corporate structure or ownership
of Parent or any Subsidiary;
(viii) enter into, adopt or amend any severance plan, agreement or
arrangement, Parent Plan or employment agreement with an executive officer,
including, without limitation, the Parent Stock Plans, other than in the
ordinary course of business consistent with past practice;
(ix) accelerate or delay collection of notes or accounts receivable
in advance of or beyond their regular due dates or the dates when the same
would be collected in the ordinary course of its business consistent with
past practice;
(x) delay or accelerate payment of any account payable or other
liability beyond or in advance of its due date or the date when such
liability would be paid in the ordinary course of its business consistent
with past practice;
(xi) increase the compensation payable or to become payable to its
directors, officers, employees or consultants or grant any severance or
termination pay to, or enter into or amend any employment or severance
agreement with, any current or former director or officer of Parent or any
of its Subsidiaries, except, in case of employees other than directors or
executive officers, as may be in the ordinary course of business consistent
with Parent's past practice in connection with annual, quarterly or
periodic
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compensation reviews, or establish, adopt, enter into or, except as may be
required to comply with applicable law, amend or take action to enhance or
accelerate any rights or benefits under, any labor, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
current or former director, officer or employee;
(xii) knowingly violate or knowingly fail to perform any obligation
or duty imposed upon it or any Subsidiary by any applicable federal, state
or local law, rule, regulation, guideline or ordinance, except any such
violation or failure that would not, individually or in the aggregate, have
a Material Adverse Effect on Parent;
(xiii) make any change to accounting policies or procedures (other
than actions required to be taken by GAAP);
(xiv) prepare or file any Tax Return inconsistent with past practice
or, on any such Tax Return, take any position, make any election or adopt
any method that is inconsistent with positions taken, elections made or
methods used in preparing or filing similar Tax Returns in prior periods;
(xv) settle or compromise any material federal, state, local or
foreign income tax liability;
(xvi) enter into, amend or terminate (A) any agreement or contract
material to Parent and its Subsidiaries, taken as a whole, other than in
the ordinary course of business consistent with past practice, (B) any
noncompetition agreement, other than solely for the benefit of Parent or
any of its Subsidiaries, or (C) any agreement pursuant to which any third
party is granted marketing, distribution, manufacturing or any other rights
with respect to any Parent product, services, processes or technology,
other than in the ordinary course of business consistent with past
practice; or make or agree to make any new capital expenditure or
expenditures which, individually, is in excess of $1,000,000 or, in the
aggregate, are in excess of $2,500,000, other than with respect to the
consolidation of Parent's manufacturing facilities in California, Florida,
New York and Illinois in an amount not to exceed $500,000;
(xvii) waive or release any material right or claim or pay, discharge
or satisfy any material claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of
liabilities reflected or reserved against in the most recent balance sheet
set forth in the Parent SEC Documents or incurred in the ordinary course of
business consistent with past practice;
(xviii) settle or compromise any litigation or arbitration proceeding
if such settlement or compromise requires payment by Parent or any of its
Subsidiaries of $600,000 or more, other than any litigation or proceeding
disclosed in the Parent SEC Documents; or
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(xix) authorize, recommend, propose or announce an intention to do
any of the foregoing or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
Section 4.3 No Solicitation by the Company.
(a) The Company shall not, nor shall it permit any of its
Subsidiaries to, nor shall it authorize or permit any officer, director or
employee of or any financial advisor, attorney or other advisor or
representative of, the Company or any of its Subsidiaries to, (i) solicit,
initiate or encourage the submission of, any Company Takeover Proposal (as
hereinafter defined), (ii) enter into any agreement with respect to any Company
Takeover Proposal or (iii) participate in any discussions or negotiations
regarding, or furnish to any Person any information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Company Takeover
Proposal; provided, however, that prior to the Company Stockholder Meeting,
nothing contained in this Agreement shall prevent the Company or its Board of
Directors from furnishing non-public information to, or entering into
discussions or negotiations with, any Person in connection with an unsolicited
bona fide written Company Takeover Proposal by such Person, if and only to the
extent that (w) in the reasonable good faith judgment of the Board of Directors
of the Company, such Company Takeover Proposal could, if consummated, result in
a transaction more favorable to the Company's stockholders from a financial
point of view than the Merger (any such more favorable Company Takeover Proposal
being referred to in this Agreement as a "Company Superior Proposal"), (x) the
failure to take such action would, in the reasonable good faith judgment of the
Board of Directors of the Company, after consultation with outside corporate
counsel of the Company, be inconsistent with the fiduciary duties of the Board
of Directors of the Company to the Company's stockholders under applicable law,
(y) prior to furnishing such non-public information to, or entering into
discussions or negotiations with, such Person, such Board of Directors receives
from such Person an executed confidentiality agreement with provisions not less
favorable to the Company than those contained in the Nondisclosure Agreement (as
hereinafter defined) and (z) the Company shall have fully complied with this
Section 4.3. For purposes of this Agreement, "Company Takeover Proposal" means
any proposal or offer, or any expression of interest, by any Person other than
Parent or Sub relating to the Company's willingness or ability to receive or
discuss a proposal or offer for a merger, consolidation or other business
combination involving the Company or any of its Subsidiaries or any proposal or
offer to acquire in any manner, directly or indirectly, a substantial equity
interest in, a substantial portion of the voting securities of, or a substantial
portion of the assets of the Company or any of its Subsidiaries, other than the
transactions contemplated by this Agreement.
(b) The Company shall advise Parent orally (within one business
day) and in writing (as promptly as practicable) of (i) any Company Takeover
Proposal or any inquiry with respect to or which could lead to any Company
Takeover Proposal, (ii) the material terms of such Company Takeover Proposal and
(iii) the identity of the Person making any such Company Takeover Proposal or
inquiry. The Company will keep Parent informed of the status of any such Company
Takeover Proposal or inquiry.
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Section 4.4 No Solicitation by Parent.
(a) Parent shall not, nor shall it permit any of its Subsidiaries
to, nor shall it authorize or permit any officer, director or employee of or any
financial advisor, attorney or other advisor or representative of, Parent or any
of its Subsidiaries to, (i) solicit, initiate or encourage the submission of,
any Parent Takeover Proposal (as hereinafter defined), (ii) enter into any
agreement with respect to any Parent Takeover Proposal or (iii) participate in
any discussions or negotiations regarding, or furnish to any Person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Parent Takeover Proposal; provided, however, that
nothing contained in this Agreement shall prevent Parent or its Board of
Directors from furnishing non-public information to, or entering into
discussions or negotiations with, any Person in connection with an unsolicited
bona fide written Parent Takeover Proposal by such Person, if and only to the
extent that (w) in the reasonable good faith judgment of the Board of Directors
of Parent, such Parent Takeover Proposal could, if consummated, result in a
transaction more favorable to Parent or Parent's stockholders from a financial
point of view than the Merger (any such more favorable Parent Takeover Proposal
being referred to in this Agreement as a "Parent Superior Proposal"), (x) the
failure to take such action would in the reasonable good faith judgment of the
Board of Directors of Parent, after consultation with outside corporate counsel
of Parent, be inconsistent with the fiduciary duties of the Board of Directors
of Parent to Parent's stockholders under applicable law, (y) prior to furnishing
such non-public information to, or entering into discussions or negotiations
with, such Person, such Board of Directors receives from such Person an executed
confidentiality agreement with provisions not less favorable to Parent than
those contained in the Nondisclosure Agreement and (z) Parent shall have fully
complied with this Section 4.4. For purposes of this Agreement, "Parent Takeover
Proposal" means any proposal or offer, or any expression of interest, by any
Person other than the Company or any of its Subsidiaries relating to Parent's
willingness or ability to receive or discuss a proposal or offer for a merger,
consolidation or other business combination involving Parent or any of its
Subsidiaries or any proposal or offer to acquire in any manner, directly or
indirectly, a substantial equity interest in, a substantial portion of the
voting securities of, or a substantial portion of the assets of Parent or any of
its Subsidiaries, other than the transactions contemplated by this Agreement.
(b) Parent shall advise the Company orally (within one business
day) and in writing (as promptly as practicable) of (i) any Parent Takeover
Proposal or any inquiry with respect to or which could lead to any Parent
Takeover Proposal, (ii) the material terms of such Parent Takeover Proposal and
(iii) the identity of the Person making any such Parent Takeover Proposal or
inquiry. Parent will keep the Company informed of the status of any such Parent
Takeover Proposal or inquiry.
Section 4.5 Third Party Standstill Agreements. During the period
from the date of this Agreement through the Effective Time, neither the Company
nor Parent shall terminate, amend, modify or waive any provision of any
confidentiality agreement relating to a Company Takeover Proposal or Parent
Takeover Proposal, respectively, or standstill agreement to which the Company or
any of its Subsidiaries or Parent or any of its Subsidiaries, respectively, is a
party (other than any involving Parent or the Company, respectively). During
such period, each of the Company and Parent agrees to enforce, to the fullest
extent permitted under
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applicable law, the provisions of any such agreements, including injunctions to
prevent any breaches of such agreements and to enforce specifically the terms
and provisions thereof in any court of the United States or any state thereof
having jurisdiction.
Section 4.6 Reorganization. During the period from the date of this
Agreement through the Effective Time, unless the other party shall otherwise
agree in writing, none of Parent, the Company or any of their respective
Subsidiaries shall take any action that, to the Knowledge of Parent or to the
Knowledge of the Company, as the case may be, would jeopardize the qualification
of the Merger as a reorganization within the meaning of Section 368(a) of the
Code. Following the Effective Time, the parties will report the Merger as a
reorganization within the meaning of Section 368(a) of the Code, and will not
take any action inconsistent with such reporting.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Meetings.
(a) As soon as practicable following the date of this Agreement,
the Company will duly call, give notice of, convene and hold a meeting of its
stockholders (including any adjournments or postponements thereof, the "Company
Stockholder Meeting") for the purpose of considering the approval of this
Agreement. The Company will, through its Board of Directors, recommend to its
stockholders and shall use all reasonable efforts to solicit such approval by
its stockholders, and such Board of Directors shall not withdraw or modify, or
propose to withdraw or modify in a manner adverse to Parent, such
recommendation. The Company agrees to deliver to the holders of Company
Preferred Stock all notices required to be delivered to them in connection with
the Merger.
(b) As soon as practicable following the date of this Agreement,
Parent will duly call, give notice of, convene and hold a meeting of its
stockholders (including any adjournments or postponements thereof, the "Parent
Stockholder Meeting" and together with the Company Stockholder Meeting, the
"Stockholder Meetings") for the purpose of considering approval of the Share
Issuance. Parent will, through its Board of Directors, recommend to its
stockholders approval of the Share Issuance and shall use all reasonable efforts
to solicit such approval by its stockholders, and such Board of Directors shall
not withdraw or modify, or propose to withdraw or modify in a manner adverse to
the Company, such recommendation.
Section 5.2 Preparation of the Registration Statement and the Proxy
Statement. Parent shall promptly prepare and file with the SEC the Proxy
Statement and the Registration Statement in which the Proxy Statement will be
included as a prospectus. Each of Parent and the Company shall use its
commercially reasonable efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable after such filing
and shall use its commercially reasonable efforts to keep the Registration
Statement effective as long as is necessary to consummate the Merger. As
promptly as practicable after the Registration Statement shall have become
effective, each of Parent and the Company shall mail the Proxy Statement to its
stockholders. Parent shall also take any action reasonably required to be taken
under any applicable state securities laws in connection with the issuance of
Parent Common
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Stock and Parent Preferred Stock in the Merger, and the Company shall furnish
all information concerning the Company and the holders of Company Common Stock
and the holders of Company Preferred Stock as may be reasonably requested in
connection with any such action and the preparation of the Registration
Statement and Proxy Statement.
Section 5.3 Access to Information. Subject to currently existing
contractual and legal restrictions applicable to Parent or to the Company or any
of their respective Subsidiaries, as the case may be, each of Parent and the
Company shall, and shall cause each of its Subsidiaries to, afford to the
accountants, counsel, financial advisors and other representatives of the other
reasonable access to, and permit them to make such inspections as they may
reasonably require of, during normal business hours during the period from the
date of this Agreement through the Effective Time, all of its employees,
customers, properties, books, contracts, commitments and records (including the
work papers of independent accountants, if available and subject to the consent
of such independent accountants), and, during such period, each of Parent and
the Company shall, and shall cause each of its Subsidiaries to, furnish promptly
to the other all information concerning its business, properties and personnel
as the other may reasonably request. No investigation pursuant to this Section
5.3 shall affect any representation or warranty in this Agreement of any party
hereto or any condition to the obligations of the parties hereto. All
information obtained pursuant to this Section 5.3 shall be kept confidential in
accordance with the Stratos Reciprocal Nondisclosure Agreement between Parent
and the Company (the "Nondisclosure Agreement").
Section 5.4 Compliance with the Securities Act. Each of the
directors of the Company, each trust that owns Shares the beneficiaries of which
include a director of the Company, members of his family or a charitable
organization designated by a director, Xxx Xxxxxxx, Xxx Xxxxxx and Citicorp
Venture Capital Ltd. may be deemed to be "affiliates" of the Company as that
term is used in paragraphs (c) and (d) of Rule 145 under the Securities Act (the
"Rule 145 Affiliates"). The Company shall cause each such Person to execute and
deliver to Parent within 30 days of the date hereof a written agreement in
substantially the form of Exhibit F hereto (the "Company Affiliate Letter"). The
Company shall notify Parent as soon as reasonably practicable if any other
Person is a Rule 145 Affiliate and, prior to the Effective Time, the Company
shall cause each such additional Person who is a Rule 145 Affiliate of the
Company to execute a Company Affiliate Letter. Parent shall be entitled to place
appropriate legends on the certificates evidencing any Parent Common Stock or
Parent Preferred Stock to be received by affiliates of the Company pursuant to
this Agreement and to issue appropriate stop transfer instructions to the
transfer agent for the Parent Common Stock and Parent Preferred Stock,
consistent with the terms of the Company Affiliate Letter.
Section 5.5 Fees and Expenses. (a) Except as provided in this
Section 5.5 and Section 5.9, whether or not the Merger is consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby, including the fees and disbursements of counsel, financial
advisors and accountants, shall be paid by the party incurring such costs and
expenses, provided that all printing expenses and all filing fees (including
filing fees under the HSR Act and Securities Act) shall be divided equally
between Parent and the Company.
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(b) Notwithstanding any provision in this Agreement to the contrary,
(i) if this Agreement is terminated by Parent pursuant to Section 7.1(e) or (ii)
if this Agreement is terminated by the Company pursuant to Section 7.1(g), then,
in each case, the Company shall (without prejudice to any other rights that
Parent may have against the Company for a breach of this Agreement) pay to
Parent a fee of $750,000 in cash, plus all fees and expenses reasonably incurred
by Parent (including the fees and expenses of its counsel) in connection with
this Agreement and the transactions contemplated hereby up to a maximum of
$500,000 in cash, such payment to be made, in the case of clause (i), no later
than one business day following such termination or, in the case of clause (ii),
simultaneously with such termination.
(c) Notwithstanding any provision in this Agreement to the contrary,
if (i) this Agreement is terminated by the Company or Parent pursuant to Section
7.1(f) and a Parent Takeover Proposal existed following the date hereof and
before the date of the Parent Stockholder Meeting and, concurrently with or
within twelve months after any such termination a Third Party Acquisition Event
involving Parent (as hereinafter defined) occurs, or (ii) this Agreement is
terminated by Parent pursuant to Section 7.1(h), then, in each case, Parent
shall (without prejudice to any other rights that the Company may have against
Parent for a breach of this Agreement) pay to the Company a fee of $750,000 in
cash, plus, only if this Agreement is terminated pursuant to Section 7.1(h), all
fees and expenses reasonably incurred by the Company (including the fees and
expenses of its counsel) in connection with this Agreement and the transactions
contemplated hereby up to a maximum of $500,000 in cash, such payment to be
made, in the case of clause (i), on the date of the consummation of the Third
Party Acquisition Event involving Parent or, in the case of clause (ii),
simultaneously with such termination.
(d) Notwithstanding any provision in this Agreement to the contrary,
if this Agreement is terminated by Parent or the Company pursuant to Section
7.1(f), Parent shall (without prejudice to any other rights that the Company may
have against Parent for a breach of this Agreement) pay to the Company all fees
and expenses reasonably incurred by the Company (including the fees and expenses
of its counsel) in connection with this Agreement and the transactions
contemplated hereby up to a maximum of $500,000 in cash, such payment to be made
one business day following such termination.
(e) For purposes of this Agreement, a "Third Party Acquisition
Event" involving Parent means (i) a transaction pursuant to which any person or
group (as such term is defined under the Exchange Act), other than the Company
or any affiliate thereof (a "Parent Third Party"), acquires more than fifty
percent (50%) of the equity securities or voting power of Parent, pursuant to a
tender offer or exchange offer or otherwise, (ii) a merger, consolidation, share
exchange or other business combination involving Parent pursuant to which any
person other than the Company or any affiliate thereof acquires ownership of
more than fifty percent (50%) of the outstanding equity securities or voting
power of Parent, or (iii) any other transaction pursuant to which any Parent
Third Party acquires control of assets of Parent (including, for this purpose,
outstanding equity securities of Subsidiaries of Parent) having a fair market
value equal to more than fifty percent (50%) of the fair market value of all the
consolidated assets of Parent and its Subsidiaries immediately prior to such
transaction.
Section 5.6 Company Stock Options. At the Effective Time, each
Company Stock Option that is outstanding immediately prior to the Effective Time
pursuant to the
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Company Stock Option Agreements shall be cancelled and pursuant to the terms
thereof, the holders of the any such Company Stock Options shall not be entitled
to receive any consideration in respect of such cancellation. The Company shall
take all actions necessary to effect the foregoing provisions of this Section
5.6.
Section 5.7 Commercially Reasonable Efforts.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use commercially reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by this
Agreement, including: (i) obtaining all necessary actions or non-actions,
waivers, consents and approvals from all Governmental Entities and making of all
necessary registrations and filings (including filings with Governmental
Entities) and taking of all reasonable steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity (including those in connection with State Takeover
Approvals), (ii) obtaining all necessary consents, approvals or waivers from
third parties, and (iii) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by this
Agreement. No party to this Agreement shall consent to any voluntary delay of
the consummation of the Merger at the behest of any Governmental Entity without
the consent of the other parties to this Agreement, which consent shall not be
unreasonably withheld, conditioned or delayed.
(b) Each party shall use all commercially reasonable efforts to not
take any action, or enter into any transaction, which would cause any of its
representations or warranties contained in this Agreement to be untrue or result
in a breach of any covenant made by it in this Agreement.
(c) Notwithstanding anything to the contrary contained in this
Agreement, in connection with any filing or submission required or action to be
taken by either Parent or the Company relating to this Agreement or the
transactions contemplated hereby, (i) neither Parent nor any of its Affiliates
shall be required to divest or hold separate or otherwise take or commit to take
any action that limits its freedom of action with respect to, or its ability to
retain, the Company or any of the businesses, product lines or assets of Parent,
the Company or any of their respective Subsidiaries or Affiliates, or that
otherwise would have an adverse effect on Parent or the Company and (ii) the
Company shall not, and shall not permit any of its Affiliates to, take or agree
to take any such action without Parent's prior written consent.
Section 5.8 Public Announcements. Parent and the Company will not
issue any press release with respect to the transactions contemplated by this
Agreement or otherwise issue any written public statements with respect to such
transactions without prior consultation with the other party, except as may be
required by applicable law or by obligations pursuant to any listing agreement
with any national securities exchange or Nasdaq.
Section 5.9 Real Estate Transfer and Gains Tax. The Company or,
after the Merger, the Surviving Corporation will pay any state or local tax
which is attributable to the
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transfer of the beneficial ownership of the Company's or its Subsidiaries' real
property, if any (collectively, the "Gains Taxes"), and any penalties or
interest with respect to the Gains Taxes, payable in connection with the
consummation of the Merger.
Section 5.10 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplated hereby or in
the Parent Ancillary Agreements or the Company Ancillary Agreements, Parent and
the Company and their respective Boards of Directors shall use their
commercially reasonable efforts to grant such approvals and take such actions as
are necessary so that the transactions contemplated hereby and thereby may be
consummated as promptly as practicable on the terms contemplated hereby and
thereby and otherwise act to minimize the effects of any such statute or
regulation on the transactions contemplated hereby and thereby.
Section 5.11 Indemnification of Directors and Officers. Subject to
applicable law, for six years from and after the Effective Time, Parent shall
cause the Surviving Corporation to indemnify and hold harmless all past and
present officers and directors of the Company and of its Subsidiaries to the
same extent such Persons are indemnified as of the date of this Agreement by the
Company pursuant to (a) the Company Charter, (b) the Company Bylaws and (c) the
Director Indemnification Agreements for acts or omissions occurring at or prior
to the Effective Time. For purposes of this Agreement, "Director Indemnification
Agreements" means (i) the Director Indemnification Agreement dated July 12, 2001
between the Company and Xxxxxx Xxxxxx, (ii) the Director Indemnification
Agreement dated July 12, 2001 between the Company and Xxxxxxxx X. Xxxxxxx, (iii)
the Director Indemnification Agreement dated July 12, 2001 between the Company
and Xxxxxxx X. Xxxxx, (iv) the Director Indemnification Agreement dated July 12,
2001 between the Company and Xxxxx Xxxx, and (v) the Director Indemnification
Agreement dated April 11, 2002 between the Company and Xxxx Xxxxxx. The Company
has delivered to Parent a true and correct copy of each Director Indemnification
Agreement and any amendments thereto.
Section 5.12 Notification of Certain Matters. Parent shall use its
commercially reasonable efforts to give prompt notice to the Company, and the
Company shall use its commercially reasonable efforts to give prompt notice to
Parent, of: (a) occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which it is aware and which would be reasonably likely to
cause (i) representation or warranty of the notifying party contained in this
Agreement to be untrue or inaccurate in any material respect or (ii) covenant,
condition or agreement contained in this Agreement not to be complied with or
satisfied in all material respects, or (b) any failure of Parent or the Company,
as the case may be, to comply in a timely manner with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder. The
Company shall use its commercially reasonable efforts to give prompt notice to
Parent of any change or event which would be reasonably likely to have a
Material Adverse Effect on the Company, and Parent shall use its commercially
reasonable efforts to give prompt notice to the Company of any change or event
which would be reasonably likely to have a Material Adverse Effect on Parent.
The delivery of any notice pursuant to this Section 5.12 shall not limit or
otherwise affect the remedies available hereunder to the party receiving such
notice.
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Section 5.13 Stock Exchange Listing. Parent shall use reasonable
efforts to have authorized for quotation on Nasdaq, upon official notice of
issuance, the shares of Parent Common Stock to be issued in connection with the
Merger. Parent shall have no obligation to seek authorization for quotation on
Nasdaq or listing on any stock exchange the shares of Parent Preferred Stock to
be issued in connection with the Merger.
Section 5.14 Indemnity Agreement. No later than immediately prior to
the Effective Time, the Company will cause the Stockholder Representatives to
execute and deliver the Indemnity Agreement to Parent and the Indemnity Agent,
with such changes thereto as may be requested by the Indemnity Agent that are
reasonably acceptable to Parent and the Company.
Section 5.15 Pre-Closing Transfers.
(a) Prior to the Closing, the Company shall take all necessary
action to transfer to STT Properties, LLC, a Delaware limited liability company
(the "LLC"), (i) all equity interests held by the Company in Corona and acquired
pursuant to the Corona Stock Purchase Agreement, (ii) cash in the amount of
$850,000, provided that such amount does not cause Working Capital to be less
than the Target Working Capital, and (iii) the real property ownership rights
the Company or its Subsidiaries have in the following premises located in
Xxxxxxxx Xxxxxxx, Xxxxxxxxxx: (x) 31186 La Baya Drive, (y) 00000 Xx Xxxx Xxxxx
and (z) 00000 Xx Xxxx Xxxxx (collectively, the "LLC Assets"), in each case on
and subject to the following terms:
(A) the LLC Assets shall be transferred on an "as is, where is"
basis and in accordance with the other terms set forth in Section
5.15(a) of the Company Letter (including that the LLC shall
assume, discharge in accordance with their terms, and indemnify
the Company against, all obligations of the Company and its
Subsidiaries with respect to the LLC Assets) and on such other
terms as Parent approves in writing, such approval not to be
unreasonably withheld;
(B) prior to transferring the LLC Assets, the Company shall
cause the LLC to enter with Xxxxxxxxx into the Leases, each
effective no later than the date of payment of the dividend
contemplated by Section 5.15(b), in the forms attached hereto as
Exhibits G-1 and G-2 (the "Leases");
(C) neither the Company nor any of its Subsidiaries shall have
any rights to or any liabilities (actual or contingent) related
to the LLC Assets or the transfer thereof following the Effective
Time, except as set forth in the Lease; and
(D) Corona shall execute a release, effective as of the
Effective Time, releasing the Company and its Subsidiaries from
any obligations to Corona, in form and substance reasonably
acceptable to Parent, or, in the absence thereof, the LLC shall
agree in writing, in form and substance reasonably acceptable to
Parent, to retain and not distribute to its members at least
$850,000 in cash until such time as all obligations of the
Company and its Subsidiaries to Corona pursuant to Article II of
the Xxxxxx Xxxxx
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Xxxxxxxx Xxxxxxxxx with respect to the Third Closing not so
released shall have been extinguished.
(b) Subject to and only following completion of all transfers and
actions (including, without limitation, obtaining the release or writing
contemplated by clause (D) of Section 5.15(a)) contemplated by Section 5.15 in
accordance with the terms thereof, no later than immediately prior to the
Effective Time the Company may declare and pay to its stockholders a dividend,
on a pro rata basis consistent with their then current holdings of the Company,
equal to all of the units of membership interest in the LLC (the "LLC Units").
Such dividend shall be on terms reasonably acceptable to Parent consistent with
the foregoing provisions of Section 5.15(a).
(c) The Company shall not transfer or commit to transfer any
interests it or any of its Subsidiaries has in the any of the LLC Assets until
it shall have (i) delivered written notice to Parent of the proposed terms of
such transfer and (ii) received written acknowledgement from Parent that such
terms are reasonably acceptable.
(d) Parent and the Company agree to appoint an appraiser (mutually
agreeable to both parties) to value each of the LLC Assets as of a date within
five business days of the distribution provided for in Section 5.15(b). Parent
and the Company further agree to use the value determined by such appraiser for
all purposes, including, without limitation, for U.S. federal income tax
purposes, except to the extent that any LLC Asset is sold in an arm's length
transaction within six months of the distribution date (each, a "Post Closing
Sale"), in which case the Company and Parent shall use the actual selling price
of such LLC Asset, net of any selling costs attributable to such Post Closing
Sale (the appraised value or the net sales price, as applicable, the "Agreed
Value"). The Company shall not declare the dividend contemplated by Section
5.15(b) until such time as (i) the appraisal contemplated by this Section
5.15(d) is received and (ii) the Company has provided to Parent all information
necessary, as reasonably requested by Parent (including, without limitation, the
tax basis of each of the LLC Assets), to determine the Tax liability that will
be paid or payable by the Company and its Subsidiaries in connection with the
transfers and actions contemplated by Section 5.15(a) and the dividend
contemplated by Section 5.15(b).
Section 5.16 Working Capital Dividend.
(a) Prior to the Effective Time, the Company may declare and pay to
its stockholders a dividend, on a pro rata basis consistent with their then
current holdings of the Company, consisting of the right to receive the Per
Share Excess Working Capital when finally determined pursuant to Section 1.17
with respect to each then issued and outstanding share of Company Common Stock
and Company Preferred Stock. Such dividend may provide that the Per Share Excess
Working Capital will be paid on January 5, 2004; provided, however, that in the
event the Per Share Excess Working Capital has not been finally determined by
January 5, 2004, then such dividend may provide that the Company will pay the
portion thereof equal to the Interim Per Share Excess Working Capital, subject
to Section 5.16(b), on January 9, 2004 and pay any excess of the Per Share
Excess Working Capital over the Interim Per Share Excess Working Capital as
provided in Section 5.16(b) after the Per Share Excess Working Capital is
finally determined pursuant to Section 1.17(b). The terms of such dividend shall
be subject to
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the reasonable approval of Parent. The right of each stockholder of the Company
to receive such dividend shall not be assigned or transferred in any manner
whatsoever, other than by operation of law.
(b) If the dividend contemplated by Section 5.16(a) is declared and
if the Per Share Excess Working Capital as finally determined pursuant to
Section 1.17(b) exceeds the Interim Per Share Excess Working Capital paid by the
Company to any Company Stockholder pursuant to Section 5.16(a), the Company
shall pay to each such Company Stockholder, within 10 business days after such
final determination, an amount equal to such excess plus interest on such excess
from the Closing Date to the date of payment thereof at the Agreed Rate.
Section 5.17 Discharge of Indebtedness. At or prior to the Closing,
(a) the Company shall discharge, pay and otherwise settle any indebtedness for
borrowed money of the Company and its Subsidiaries on terms and conditions
reasonably satisfactory to Parent, and (b) the Company shall obtain a pay-off
letter or comparable evidence (in each case on terms reasonably satisfactory in
substance and form to Parent) executed by the lenders under such indebtedness to
the effect that all obligations of the Company and its Subsidiaries thereunder
have been satisfied in full, together with appropriate evidence that (i) all
Encumbrances on any asset or property constituting security therefor have been
released and (ii) any letters of credit issued thereunder have been released and
returned to the Company.
Section 5.18 Continuity of Business Enterprise. Parent shall continue
at least one significant historic business line of the Company, or use at least
a significant portion of the Company's historic business assets in a business,
in each case within the meaning of Treasury Regulation ss.1.368-1(d). Parent
shall not liquidate the Company or otherwise transfer a significant part of the
Company's historic business assets to Parent or any of its Subsidiaries prior to
the first anniversary of the Effective Time.
Section 5.19 Post Closing Tax Returns. Parent and the Company shall
cooperate and use reasonable best efforts to prepare and file, as soon as
practicable after the Closing Date, all federal and state income Tax Returns of
the Company.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment or waiver by Parent and the Company at or prior to
the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have been duly
approved by the requisite vote of stockholders of the Company in accordance with
applicable law and the Share Issuance shall have been duly approved by the
requisite vote of stockholders of Parent in accordance with applicable law.
(b) Quotation of Stock. The Parent Common Stock issuable in the
Merger shall have been authorized for quotation on Nasdaq, subject to official
notice of issuance.
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(c) HSR Act. The waiting period (and any extension thereof), if any,
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated.
(d) No Order. No court or other Governmental Entity having
jurisdiction over the Company or Parent, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making the Merger or any of the transactions contemplated hereby
illegal.
(e) Registration Statement. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act. No
stop order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC, and no proceedings for that purpose shall have been
initiated or, to the Knowledge of Parent or the Company, threatened by the SEC.
All necessary state securities or blue sky authorizations (including State
Takeover Approvals) shall have been received.
(f) Parent Common Stock Closing Price. The average, rounded up to
the nearest cent, of the per share closing prices of shares of Parent Common
Stock as quoted on Nasdaq for the ten (10) consecutive trading days ending five
trading days immediately prior to the Effective Time shall have been greater
than or equal to $2.10.
Section 6.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment or waiver by the Company at or prior to the Effective Time of
the following additional conditions:
(a) Performance of Obligations; Representations and Warranties. Each
of Parent and Sub shall have performed in all material respects each of its
agreements and covenants contained in this Agreement required to be performed on
or prior to the Effective Time, each of the representations and warranties of
Parent and Sub contained in this Agreement that is qualified by materiality
shall be true and correct on and as of the Effective Time as if made on and as
of such date (other than representations and warranties which address matters
only as of a certain date which shall be true and correct as of such certain
date) and each of the representations and warranties that is not so qualified
shall be true and correct in all material respects on and as of the Effective
Time as if made on and as of such date (other than representations and
warranties which address matters only as of a certain date which shall be true
and correct in all material respects as of such certain date), in each case
except as contemplated or permitted by this Agreement, and the Company shall
have received a certificate signed on behalf of Parent by an officer thereof to
such effect.
(b) Material Adverse Effect. Since May 1, 2003 through the Effective
Time, there shall not have been any Material Adverse Effect on Parent. The
Company shall have received a certificate signed on behalf of Parent by its
Chief Executive Officer and its Chief Financial Officer to such effect.
(c) Consents. All authorizations, consents, orders, declarations or
approvals of, or filings with, or terminations or expirations of waiting periods
imposed by, any
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Governmental Entity, which the failure to obtain, make or occur would have the
effect of making the Merger or any of the transactions contemplated hereby
illegal or would have, individually or in the aggregate, an adverse effect on
Parent (assuming the Merger had taken place) shall have been obtained, shall
have been made or shall have occurred. Further, Parent shall have obtained the
consent or approval of each Person that is not a Governmental Entity whose
consent or approval shall be required in connection with the transactions
contemplated hereby under any material loan or credit agreement, note, mortgage,
indenture, lease or other agreement or instrument by which Parent or any of its
Subsidiaries is bound.
(d) No Litigation or Injunction. There shall not be instituted or
pending any suit, action or proceeding by any Governmental Entity relating to
this Agreement, any of the Company Ancillary Agreements or Parent Ancillary
Agreements or any of the transactions contemplated herein or therein. No
temporary restraining order, preliminary or permanent injunction or other order
from any court of competent jurisdiction restraining, prohibiting or preventing
the consummation of the Merger shall have been issued and be in effect.
(e) Stockholder Approval. The Share Issuance shall have been duly
approved by the stockholders of Parent. The Company shall have received a
certificate signed on behalf of Parent by its Chief Executive Officer and its
Secretary to such effect.
(f) Board Membership. Parent and Parent's Board of Directors shall
have resolved that, immediately following the Merger, Parent's Board of
Directors shall consist of the individuals listed on Exhibit C hereto.
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger shall be subject
to the fulfillment or waiver by Parent at or prior to the Effective Time of the
following additional conditions:
(a) Performance of Obligations; Representations and Warranties. The
Company shall have performed in all material respects each of its agreements and
covenants contained in this Agreement required to be performed on or prior to
the Effective Time, each of the representations and warranties of the Company
contained in this Agreement that is qualified by materiality shall be true and
correct on and as of the Effective Time as if made on and as of such date (other
than representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date) and each of the
representations and warranties that is not so qualified shall be true and
correct in all material respects on and as of the Effective Time as if made on
and as of such date (other than representations and warranties which address
matters only as of a certain date which shall be true and correct in all
material respects as of such certain date), in each case except as contemplated
or permitted by this Agreement, and Parent shall have received a certificate
signed on behalf of the Company by its Chief Executive Officer and its Chief
Financial Officer to such effect.
(b) Material Adverse Effect. Since the Balance Sheet Date through
the Effective Time, there shall not have been any Material Adverse Effect on the
Company. Parent shall have received a certificate signed on behalf of the
Company by its Chief Executive Officer and its Chief Financial Officer to such
effect.
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(c) Consents. All authorizations, consents, orders, declarations or
approvals of, or filings with, or terminations or expirations of waiting periods
imposed by, any Governmental Entity, which the failure to obtain, make or occur
would have the effect of making the Merger or any of the transactions
contemplated hereby illegal or would have, individually or in the aggregate, an
adverse effect on Parent (assuming the Merger had taken place) shall have been
obtained, shall have been made or shall have occurred. Further, the Company
shall have obtained the consent or approval of each Person that is not a
Governmental Entity whose consent or approval shall be required in connection
with the transactions contemplated hereby (including those transactions related
to the LLC Assets) under any material loan or credit agreement, note, mortgage,
indenture, lease or other agreement or instrument by which the Company or any of
its Subsidiaries is bound.
(d) No Litigation or Injunction. There shall not be instituted or
pending any suit, action or proceeding by any Governmental Entity relating to
this Agreement, any of the Company Ancillary Agreements or Parent Ancillary
Agreements or any of the transactions contemplated herein or therein. No
temporary restraining order, preliminary or permanent injunction or other order
from any court of competent jurisdiction restraining, prohibiting or preventing
the consummation of the Merger shall have been issued and be in effect.
(e) Ancillary Agreements. The Indemnity Agreement shall have been
executed by the Stockholder Representatives and the Indemnity Agent and
delivered to Parent and shall be in full force and effect. The Leases shall have
been executed by the LLC and Xxxxxxxxx, and delivered to Parent and shall be in
full force and effect.
(f) Capital Structure Certificate. The Company shall have delivered
a certificate of its Chief Executive Officer and its Chief Financial Officer
setting forth all of the information that would have been required to have been
included in Section 3.2(c) of the Company Letter if this Agreement were dated as
of the Effective Time.
(g) Dissenting Stockholders. The Dissenting Shares shall include (i)
no more than five percent (5%) of the shares of Company Preferred Stock and (ii)
no more than five percent (5%) of the shares of Company Common Stock outstanding
immediately prior to the Effective Time. Parent shall have received a
certificate signed on behalf of the Company by its Chief Executive Officer and
its Chief Financial Officer to such effect.
(h) Stockholder Approval. This Agreement shall have been duly
approved by the stockholders of the Company. Parent shall have received a
certificate signed on behalf of the Company by its Chief Executive Officer and
its Secretary to such effect.
(i) FIRPTA Certificate. The Company shall have delivered, not more
that 20 days prior to the Closing Date, a statement in accordance with Treas.
Reg. (S)(S) 1.1445-2(c)(3) and 1.897-2(h) certifying that the Company is not,
and has not been, a "United States real property holding corporation" for
purposes of Section 897 and 1445 of the Code, and Parent shall not have actual
knowledge that such statement is false or receive a notice that the statement is
false pursuant to Treas. Reg. (S) 1.445-4. The form of such statement is
attached hereto as Exhibit H. In addition, the Company shall have delivered on
the Closing Date the notification to the Internal Revenue Service, in accordance
with the requirements pursuant to Treas. Reg. (S) 1.897-(h)(2), of
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delivery of the statement referred to in the preceding sentence, signed by a
responsible corporate officer of the Company. The Company acknowledges that
Parent may cause the Company to file such notification with the Internal Revenue
Service on or after the Closing Date. The form of such notification is attached
hereto as Exhibit I.
(j) LLC Assets. To the extent any of the transactions or actions
relating to the transfer of the LLC Assets and dividend of the LLC Units shall
have occurred prior to the Closing, such transactions and actions shall have
been completed in accordance with Section 5.15 and the release or writing
contemplated by clause (D) of Section 5.15(a) shall have been obtained, and the
Company shall have delivered a certificate signed on behalf of the Company by
its Chief Executive Officer and its Chief Financial Officer to the effect that
such transactions have been completed and such release or writing has been
obtained in accordance with the terms of Section 5.15 and attaching such
evidence and documents with respect thereto as Parent may reasonably request.
(k) Working Capital Certificate. The Company shall have delivered to
Parent a certificate executed on behalf of the Company by its Chief Executive
Officer and Chief Financial Officer, dated the Closing Date, stating that there
has been conducted under the supervision of such officers a review of all
relevant information and data then available and setting forth the Company's
good faith estimate of the Working Capital as of the Closing Date, prepared in
accordance with the Agreed Accounting Principles, which estimate shall be
greater than or equal to the Target Working Capital, shall set forth in
reasonable detail the basis therefor and shall be subject to approval by Parent,
which approval shall not be unreasonably withheld.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after any approval of the matters
presented in connection with the Merger by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the other party shall have
failed to comply in any material respect with any of its covenants or agreements
contained in this Agreement required to be complied with prior to the date of
such termination, which failure to comply has not been cured within thirty (30)
business days following receipt by such other party of written notice from the
non-breaching party of such failure to comply;
(c) by either Parent or the Company if there has been (i) material
breach by the other party of any representation or warranty that is not
qualified as to materiality which has the effect of making such representation
or warranty not true and correct in all material respects or (ii) breach by the
other party of any representation or warranty that is qualified as to
materiality, in each case which breach has not been cured within thirty (30)
business days following receipt by the breaching party from the non-breaching
party of written notice of the breach;
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(d) by either Parent or the Company if: (i) Merger has not been
effected on or prior to the close of business on December 31, 2003; provided,
however, that the right to terminate this Agreement pursuant to this Section
7.1(d)(i) shall not be available to any party whose failure to fulfill any of
its obligations contained in this Agreement has been the cause of, or resulted
in, the failure of the Merger to have occurred on or prior to the aforesaid date
or (ii) any court or other Governmental Entity having jurisdiction over a party
hereto shall have issued an order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and nonappealable;
(e) by Parent if the stockholders of the Company do not approve this
Agreement at the Company Stockholder Meeting or at any adjournment or
postponement thereof;
(f) by Parent or the Company if the stockholders of Parent do not
approve the Share Issuance at the Parent Stockholder Meeting or at any
adjournment or postponement thereof;
(g) by the Company if the Board of Directors of the Company
reasonably determines that a Company Takeover Proposal constitutes a Company
Superior Proposal; provided, however, that the Company may not terminate this
Agreement pursuant to this Section 7.1(g) unless (x) the Company has delivered
to Parent a written notice of the Company's intent to enter into such an
agreement to effect the Company Superior Proposal, (y) 48 hours have elapsed
following delivery to Parent of such written notice by the Company and (z)
during such 48 hour period the Company has cooperated with Parent, including,
without limitation, informing Parent of the terms and conditions of the Company
Takeover Proposal and the identity of the Person making the Company Takeover
Proposal, with the intent of enabling Parent to agree to a modification of the
terms and conditions of this Agreement so that the transactions contemplated
hereby, as so modified, may be effected; provided, further, that this Agreement
shall not terminate pursuant to this Section 7.1(g) unless simultaneously with
such termination the Company enters into a definitive acquisition, merger or
similar agreement to effect the Company Superior Proposal; or
(h) by Parent if the Board of Directors of Parent reasonably
determines that a Parent Takeover Proposal constitutes a Parent Superior
Proposal; provided, however, that Parent may not terminate this Agreement
pursuant to this Section 7.1(h) unless (x) Parent has delivered to the Company a
written notice of Parent's intent to enter into such an agreement to effect the
Parent Superior Proposal and (y) 48 hours have elapsed following delivery to the
Company of such written notice by Parent; provided, further, that Parent may not
terminate this Agreement pursuant to this Section 7.1(h) unless simultaneously
with such termination Parent enters into a definitive acquisition, merger or
similar agreement to effect the Parent Superior Proposal.
The right of any party hereto to terminate this Agreement pursuant to
this Section 7.1 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any party hereto, any Person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
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Section 7.2 Effect of Termination. In the event of termination of
this Agreement by either Parent or the Company, as provided in Section 7.1, this
Agreement shall forthwith become void, and there shall be no liability hereunder
on the part of the Company, Parent, Sub or their respective officers or
directors (except for the last sentence of Section 5.3 and the entirety of
Section 5.5, which shall survive the termination); provided, however, that
nothing contained in this Section 7.2 shall relieve any party hereto from any
liability for any willful breach of a representation or warranty or any covenant
contained in this Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken 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 the Company and Parent, but, after any such
approval, no amendment shall be made which by law or in accordance with the
rules of Nasdaq requires further approval by the stockholders of Parent 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.
Section 7.4 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by or pursuant to action taken by their respective
Boards of Directors, may, to the extent legally allowed, (a) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and/or (c) waive
compliance with any of the covenants, agreements or conditions contained herein
which may legally be waived. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. 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 those rights.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnity Fund.
(a) Promptly after the Effective Time, the Indemnity Shares shall be
registered in the name of, and be deposited with LaSalle Bank National
Association (or another institution selected by the parties) as Indemnity Fund
and collateral agent (the "Indemnity Agent"). Such deposit shall constitute the
initial Indemnity Fund and shall be governed by the terms set forth herein and
in the Indemnity Agreement. All dividends and distributions in respect of the
Indemnity Shares, whether in cash, additional Parent Common Stock or other
property, received by the Indemnity Agent shall be distributed currently to the
Company Stockholders in accordance with the Indemnity Agreement; provided, that
stock dividends made to effect stock splits or similar events shall be retained
by the Indemnity Agent as part of the Indemnity Fund. The Indemnity Fund shall
be available to indemnify, hold harmless and reimburse any Parent Group Member
from and against any Loss or Expense indemnifiable under this Article VIII and
as provided in the Indemnity Agreement.
(b) Nothing in this Agreement shall limit the liability of the
parties for any breach of any representation, warranty or covenant contained in
this Agreement if it shall be
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terminated, provided that resort to the Indemnity Fund shall be the exclusive
remedy of the Parent Group Members for any such breaches and misrepresentations
following the Effective Time other than for fraud.
(c) For purposes of this Agreement, (i) "Expense" means any and all
expenses incurred in connection with investigating, defending or asserting any
claim, action, suit or proceeding incident to any matter indemnified against
hereunder (including court filing fees, court costs, arbitration fees or costs,
witness fees and reasonable fees and disbursements of legal counsel,
investigators, expert witnesses, consultants, accountants and other
professionals), (ii) "Loss" means any and all losses, costs, obligations,
liabilities, settlement payments, awards, judgments, Taxes, fines, penalties,
damages, expenses, deficiencies or other charges, and (iii) "Parent Group
Members" means Parent and its Affiliates and their respective successors and
assigns, including, after the Effective Time, the Surviving Corporation.
Section 8.2 Indemnification from Indemnity Fund.
(a) Subject to Section 8.1, from and after the Effective Time, each
Parent Group Member shall be indemnified, held harmless and reimbursed from the
Indemnity Fund from and against any and all Loss and Expense incurred by such
Parent Group Member in connection with or arising from:
(i) any breach or failure to perform by the Company of any of its
agreements, covenants or obligations in this Agreement;
(ii) any breach of any warranty or the inaccuracy of any
representation of the Company contained in this Agreement or any
certificate delivered by or on behalf of the Company pursuant to this
Agreement (in each case without giving effect to any materiality, Material
Adverse Change or Material Adverse Effect qualifications or exceptions
contained therein);
(iii) any amounts payable to Parent pursuant to Section 1.6(g); or
(iv) any Post Closing Sale to the extent the net sales proceeds of
the LLC Asset sold (other than any proceeds paid to the Surviving
Corporation pursuant to Section 5.15) exceeds the fair market value assumed
for such asset for purposes of calculating the Excess Working Capital;
provided, however, that the Indemnity Fund shall be used to indemnify and hold
harmless hereunder with respect to the matters set forth in clause (ii) of this
Section 8.2(a) (other than Sections 3.1, 3.2, 3.3, 3.9, 3.12, 3.19 and 3.26, the
certificate delivered pursuant to Section 6.3(a) to the extent it relates to
such Sections, and the other certificates delivered pursuant to Section 6.3, as
to which this proviso shall not apply) only to the extent that (i) any
individual Loss or Expense borne by the Parent Group Members with respect
thereto exceeds $25,000 and (ii) the aggregate amount (without duplication of
Loss or Expense borne by the Parent Group Members with respect thereto) exceeds
$500,000. Any payment pursuant to this Section 8.2 shall be made in the form of
a transfer from the Indemnity Fund to Parent pursuant to the Indemnity
Agreement. The Company Stockholders shall not have any right of contribution
from
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the Company with respect to any Loss or Expense claimed by any Parent Group
Member after the Effective Time.
(b) The Company acknowledges that Parent and the Company have agreed
that Parent will acquire all of the outstanding capital stock of the Company on
a fully diluted basis in exchange for the merger consideration. The Company
further acknowledges that the information set forth in the certificate delivered
pursuant to Section 6.3(f) will be used as the basis for determining the Per
Share Merger Consideration. In the event of any inaccuracy in the certificate
delivered pursuant to Section 6.3(f), Parent will be entitled (but not
obligated) to recalculate the Per Share Merger Consideration and receive a
sufficient number of shares of Parent Common Stock and Parent Preferred Stock in
order that the total merger consideration paid by virtue of this Agreement would
be as would have resulted if such certificate had been true and correct in all
respects at the Effective Time.
(c) The indemnification provided for in this Article VIII shall
terminate one year after the Effective Time (and no claims shall be made by any
Parent Group Member under this Section 8.2 thereafter), except that such
indemnification shall continue as to any Loss or Expense in connection with
which a Claim Notice is given in accordance with the requirements of Section 8.4
on or prior to the date such indemnification obligation would otherwise
terminate in accordance with this Section 8.2, as to which the indemnification
obligation hereunder shall continue until the liability to be satisfied from the
Indemnity Fund shall have been determined pursuant to this Article VIII, and all
Parent Group Members shall have been reimbursed out of the Indemnity Fund for
such Loss or Expense in accordance with the terms hereof.
(d) To the extent Parent receives proceeds from the Indemnity Fund
constituting full indemnification with respect to any Loss or Expense and
thereafter Parent receives insurance proceeds to compensate it for such Loss or
Expense, Parent shall pay to the Company Stockholders, directly or through the
Exchange Agent, on a pro rata basis, such proceeds. Nothing herein shall require
Parent to seek to obtain any such proceeds.
Section 8.3 Termination of Indemnity Fund. Upon termination of the
indemnification obligations under this Article VIII and reimbursement of the
Parent Group Members of Losses and Expenses payable in respect thereof
hereunder, the Indemnity Fund shall terminate and shall be distributed in
accordance with the Indemnity Agreement after payment of any amounts therefrom
due to the Indemnity Agent.
Section 8.4 Notice and Determination of Claims.
(a) If any Parent Group Member wishes to make a claim for
indemnification to be satisfied from the Indemnity Fund, such Parent Group
Member (individually or collectively, the "Claiming Party") shall so notify the
Indemnity Agent in writing (the "Claim Notice") of the facts giving rise to such
claim for indemnification hereunder. The Claim Notice shall be accompanied by a
certificate of the Claiming Party attesting to the Claiming Party's
contemporaneous delivery of a duplicate copy of the Claim Notice to the
Stockholder Representatives. Such Claim Notice shall describe in reasonable
detail (to the extent then known) the Loss or Expense and the method of
computation of such Loss or Expense and contain a reference to the provisions of
this Agreement in respect of which such Loss or Expense
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shall have occurred. If the Claiming Party is not Parent, the Claim Notice must
be accompanied by a certificate from Parent confirming that the Claiming Party
is a Parent Group Member. At the time of delivery of any Claim Notice to the
Indemnity Agent, a duplicate copy of such Claim Notice shall be delivered by the
Claiming Party to the Stockholder Representatives.
(b) Unless the Stockholder Representatives shall have delivered an
Objection in accordance with Section 8.4(c), the Indemnity Agent shall, on the
twentieth day (or such earlier day as the Stockholder Representatives shall
authorize in writing to the Indemnity Agent) after receipt of a Claim Notice
with respect to indemnification for a specified amount, deliver to Parent, for
its account or for the account of each Parent Group Member named in the Claim
Notice, such portion of the Indemnity Fund, valued in accordance with the
Indemnity Agreement, with a value equal to the specified amount.
(c) Until the twentieth (20/th/) day following delivery of a Claim
Notice, the Stockholder Representatives may deliver to the Indemnity Agent a
written objection (an "Objection") to the claim made in such Claim Notice. At
the time of delivery of any Objection to the Indemnity Agent, a duplicate copy
of such Objection shall be delivered to the Claiming Party.
(d) Upon receipt of an Objection properly made, the Indemnity Agent
shall (i) deliver to Parent, for its account or for the account of each Parent
Group Member named in the Claim Notice, such portion of the Indemnity Fund,
valued in accordance with the Indemnity Agreement, with a value equal to that
portion of the amount subject to the Claim Notice, if any, which is not disputed
by the Stockholder Representatives and (ii) designate on its records out of the
Indemnity Fund a portion thereof, valued in accordance with the Indemnity
Agreement, with a value equal to the amount subject to the Claim Notice which is
disputed by the Stockholder Representatives. Thereafter, the Indemnity Agent
shall not dispose of such designated portion of the Indemnity Fund until the
Indemnity Agent shall have received a certified copy of the final decision of
the arbitrators as contemplated by Section 8.5, or the Indemnity Agent shall
have received a copy of the written agreement between the Claiming Party and the
Stockholder Representatives resolving such dispute and setting forth the amount,
if any, which such Claiming Party is entitled to receive. The Indemnity Agent
will deliver to Parent, for its account or for the account of each Parent Group
Member entitled to payment, such portion of the Indemnity Fund, valued in
accordance with the Indemnity Agreement, with a value equal to the amount that
the Claiming Party is entitled to receive as set forth in the arbitration
decision after the expiration of ten (10) business days from the receipt of such
decision or, in the event that the amount to which the Claiming Party is
entitled is established pursuant to an agreement between the Claiming Party and
the Stockholder Representatives, promptly after the Indemnity Agent's receipt of
such agreement.
Section 8.5 Resolution of Conflicts; Arbitration.
(a) The Claiming Party shall deliver a written response to the
Stockholder Representatives in respect of any Objection properly delivered by
the Stockholder Representatives. If after twenty (20) days following delivery of
such response there remains a dispute as to any claims, the Stockholder
Representatives and the Claiming Party shall attempt in good faith for sixty
(60) days to agree upon the rights of the respective parties with respect to
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each of such claims. If the Stockholder Representatives and the Claiming Party
should so agree, a memorandum setting forth such agreement shall be prepared and
signed by both and shall be furnished to the Indemnity Agent. The Indemnity
Agent shall be entitled to rely on any such memorandum and shall distribute the
Parent Common Stock or other property from the Indemnity Fund in accordance with
the terms thereof.
(b) If no such agreement can be reached after good faith
negotiation, either the Claiming Party or the Stockholder Representatives may,
by written notice to the other, demand arbitration of the matter unless the
amount of the Loss or Expense is at issue in pending litigation with a third
party, in which event arbitration shall not be commenced until such amount is
ascertained or both parties agree to arbitration; and in either such event the
matter shall be settled by arbitration conducted by three arbitrators. Within
fifteen (15) days after such written notice is sent, Parent and the Stockholder
Representatives shall each select one arbitrator, and the two arbitrators so
selected shall select a third arbitrator. The decision of the arbitrators as to
the validity and amount of any claim in the related Claim Notice shall be final,
binding and conclusive, and notwithstanding anything in this Section 8.5, the
Indemnity Agent shall be entitled to act in accordance with such decision and
make or withhold payments out of the Indemnity Fund in accordance therewith.
(c) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration shall be held in
Chicago, Illinois under the commercial rules then in effect of the American
Arbitration Association. Each party shall pay its own expenses, and the fees of
each arbitrator and the administrative fee of the American Arbitration
Association shall be paid fifty percent (50%) by Parent and fifty percent (50%)
by the Stockholder Representatives, provided that the Stockholder
Representatives may be reimbursed from the Indemnity Fund for such expenses and
fees.
Section 8.6 Stockholder Representatives.
(a) The "Stockholder Representatives" shall be designated in writing
by the Company by notice to Parent prior to the Effective Time. Each of the
Stockholder Representatives shall be constituted and appointed as agent and
attorney-in-fact for and on behalf of each of the Company Stockholders receiving
consideration pursuant to Article I. The Stockholder Representatives shall have
full power and authority to represent all of such Company Stockholders and their
successors with respect to all matters arising under this Agreement and the
Indemnity Agreement and all actions taken by the Stockholder Representatives
hereunder and thereunder shall be binding upon all such Company Stockholders and
their successors as if expressly confirmed and ratified in writing by each of
them. The Stockholder Representatives shall take any and all actions which they
believe are necessary or appropriate under this Agreement and the Indemnity
Agreement for and on behalf of such Company Stockholders, as fully as if the
Company Stockholders were acting on their own behalf, including, without
limitation, defending all indemnity claims pursuant to Section 8.2, consenting
to, compromising or settling all such indemnity claims, conducting negotiations
with Parent and the Indemnity Agent under this Agreement and the Indemnity
Agreement, taking any and all other actions specified in or contemplated by this
Agreement and the Indemnity Agreement, and engaging counsel, accountants or
other Stockholder Representatives in connection with the foregoing matters.
Without limiting the generality of the foregoing, the
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Stockholder Representatives shall have full power and authority to interpret all
the terms and provisions of this Agreement and the Indemnity Agreement and to
consent to any amendment hereof or thereof on behalf of all such Company
Stockholders and such successors. The Persons designated to serve as the
Stockholder Representatives may be changed by the holders of a majority in
interest of the Indemnity Fund from time to time upon not less than 15 days'
prior written notice to Parent. No bond shall be required of the Stockholder
Representatives, and the Stockholder Representatives shall receive no
compensation for services performed under this Agreement and the Indemnity
Agreement. Any expenses incurred by the Stockholder Representatives in
connection with their services hereunder shall be reimbursed from the Indemnity
Fund upon presentation of appropriate expense documentation as and to the extent
expressly provided in the Indemnity Agreement.
(b) The Stockholder Representatives shall not be liable to the
Company Stockholders for any act done or omitted hereunder or under the
Indemnity Agreement as Stockholder Representatives while acting in good faith
and in the exercise of reasonable judgment, and any act done or omitted pursuant
to the written advice of counsel shall be conclusive evidence of such good
faith. The Company Stockholders shall severally indemnify the Stockholders
Representatives and hold them harmless from and against any loss, liability or
expense incurred without gross negligence or bad faith on the part of the
Stockholders Representatives and arising out of or in connection with the
acceptance and administration of their duties hereunder.
(c) The Stockholder Representatives shall treat confidentially and
not disclose any nonpublic information from or about the Company or Parent or
their respective Subsidiaries to anyone (except on a need to know basis to
individuals who agree to treat such information confidentially).
Section 8.7 Actions of the Stockholder Representatives. A decision,
act, consent or instruction of the Stockholder Representatives shall constitute
a decision of all Company Stockholders for whom shares of Parent Common Stock
otherwise issuable to them are deposited in the Indemnity Fund and shall be
final, binding and conclusive upon each such Company Stockholder, and the
Indemnity Agent and Parent may rely upon any decision, act, consent or
instruction of the Stockholder Representatives as being the decision, act,
consent or instruction of each and every such Company Stockholder. The Indemnity
Agent and each Parent Group Member are hereby relieved from any liability to any
Person for any acts done by them in accordance with such decision, act, consent
or instruction of the Stockholder Representatives. For purposes of this
Agreement and the Indemnity Agreement any action by a majority of the then
Stockholder Representatives shall be deemed to be the action of and binding upon
all of the Stockholder Representatives.
Section 8.8 Third-Party Claims. In the event Parent determines to
make a demand against the Indemnity Fund with respect to a third party claim,
Parent shall notify the Stockholder Representatives of such claim, and the
Stockholder Representatives shall be entitled, at their expense, to participate
in any defense of such claim. Parent shall have the right in its sole discretion
to settle any such claim; provided, however, that Parent may not effect the
settlement of any such claims without the consent of the Stockholder
Representatives, which consent shall not be unreasonably withheld, conditioned
or delayed. In the event that the Stockholder
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Representatives have consented to any such settlement, the Stockholder
Representatives shall have no power or authority to object under Section 8.4 or
any other provision of this Article VIII to the amount paid in such settlement.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Survival of Representations and Warranties. Subject to
Section 8.2(c), the representations and warranties in this Agreement or in any
certificates delivered pursuant to this Agreement shall terminate on the first
anniversary of the Effective Time. Except as otherwise provided in this
Agreement, no claim shall be made for the breach of any representation or
warranty made in this Agreement or in any certificates delivered pursuant to
this Agreement after the date on which such representations and warranties
terminate as set forth in this Section 9.1.
Section 9.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given (i) when delivered personally,
(ii) one day after being delivered to a nationally recognized overnight courier
or (iii) on the business day received (or the next business day if received
after 5 p.m. local time or on a weekend or day on which banks are closed) when
sent via facsimile (with a confirmatory copy sent by such overnight courier) to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent or Sub, to
Stratos Lightwave, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
Sidley Xxxxxx Xxxxx & Xxxx
Bank One Plaza
00 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxx
Xxxx X. Xxxxx
Facsimile No.: (000) 000-0000
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(b) if to the Company, to
Sterling Holding Company
31186 La Xxxx Xxxxx
X.X. Xxx 0000
Xxxxxxxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxx Xxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Bartlit Xxxx Xxxxxx Xxxxxxxxx & Xxxxx
0000 Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Facsimile No.: (000) 000-0000
Section 9.3 Interpretation. When a reference is made in this
Agreement to a Section, Article, Exhibit or Schedule, such reference shall be to
a Section or Article of, or an Exhibit or Schedule attached to, this Agreement
unless otherwise indicated. The Schedules and Exhibits referred to herein shall
be construed with and as an integral part of this Agreement to the same extent
as if they were set forth verbatim herein. The table of contents, table of
defined terms and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. For purposes of this Agreement, (i) the words "include,"
"includes" or "including" shall be deemed to be followed by the words "without
limitation," and (ii) the words "herein," "hereof," "hereby," "hereto" and
"hereunder" refer to this Agreement as a whole.
Section 9.4 Counterparts. This Agreement may be executed in any
number of counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
Section 9.5 Entire Agreement; No Third-Party Beneficiaries. Except
for the Nondisclosure Agreement, this Agreement (including the Exhibits hereto),
the Parent Letter and the Company Letter constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof. This Agreement, except
for the provisions of Section 5.9 and of Section 5.11, is not intended to confer
upon any Person other than the parties hereto any rights or remedies hereunder.
Section 9.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
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Section 9.7 Assignment. Subject to Section 1.1, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties.
Section 9.8 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other terms, conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic and
legal substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated by this Agreement may be
consummated as originally contemplated to the fullest extent possible.
Section 9.9 Enforcement of this Agreement. 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 wording or
were otherwise breached. It is accordingly agreed that the parties hereto shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, such remedy being
in addition to any other remedy to which any party is entitled at law or in
equity.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
STRATOS LIGHTWAVE, INC.
By: /s/ Xxxxx X. XxXxxxxx
-----------------------------------------------
Name: Xxxxx X. XxXxxxxx
Title: President and Chief Executive Officer
SLEEPING BEAR MERGER CORP.
By: /s/ Xxxxx X. XxXxxxxx
-----------------------------------------------
Name: Xxxxx X. XxXxxxxx
Title: President
STERLING HOLDING COMPANY
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chairman
