Exhibit 1
EXECUTION COPY
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STOCK PURCHASE AGREEMENT
Dated as of May 21, 2008,
among
CBAYSYSTEMS HOLDINGS LIMITED,
CBAY INC.,
and
KONINKLIJKE PHILIPS ELECTRONICS N.V.
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TABLE OF CONTENTS
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ARTICLE I Share Purchase ................................................ 1
Section 1.01. Purchase and Sale ......................................... 1
ARTICLE II Closing; Purchase Price and Payment .......................... 1
Section 2.01. Closing ................................................... 1
Section 2.02. Purchase Price; Delivery of Shares ........................ 1
Section 2.03. Cash Dividend Option ...................................... 2
Section 2.04. Determination of Actual Cash and Approved Exclusions ...... 2
ARTICLE III Representations and Warranties .............................. 3
Section 3.01. Representations and Warranties of Seller with Respect to
the Shares and the Notes .................................. 3
Section 3.02. Representations and Warranties of Seller with respect to
the Company ............................................... 7
Section 3.03. Representations and Warranties of Parent and Buyer ........ 20
ARTICLE IV Covenants Relating to Conduct of Business; No Solicitation ... 25
Section 4.01. Conduct of Business ....................................... 25
Section 4.02. Conduct of Parent Pending the Acquisition ................. 29
Section 4.03. No Solicitation; No Sale .................................. 31
ARTICLE V Additional Agreements ......................................... 31
Section 5.01. Parent Shareholders' Meeting .............................. 31
Section 5.02. Access to Information; Confidentiality .................... 32
Section 5.03. Efforts to Close .......................................... 32
Section 5.04. Indemnification; Advancement of Expenses; Exculpation
and Insurance ............................................. 34
Section 5.05. Fees and Expenses ......................................... 35
Section 5.06. Public Announcements ...................................... 39
Section 5.07. Director Replacement ...................................... 39
Section 5.08. Subscription Agreement .................................... 40
Section 5.09. Waiver .................................................... 40
Section 5.10. Intentionally Omitted ..................................... 40
Section 5.11. Shareholders Agreement .................................... 40
Section 5.12. Amendment of the Company By-laws .......................... 40
Section 5.13. No Company Liability or Obligation ........................ 40
Section 5.14. Acquisition of Parent Common Shares ....................... 40
Section 5.15. Convertible Note Anti-Dilution Adjustments ................ 40
ARTICLE VI Conditions Precedent ......................................... 41
Section 6.01. Conditions to Each Party's Obligation to Effect the
Acquisition ............................................... 41
Section 6.02. Conditions to Obligations of Parent and Buyer ............. 41
Section 6.03. Conditions to Obligation of Seller ........................ 42
Section 6.04. Frustration of Closing Conditions ......................... 43
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ARTICLE VII Termination, Amendment and Waiver ........................... 43
Section 7.01. Termination ............................................... 43
Section 7.02. Effect of Termination ..................................... 45
Section 7.03. Amendment ................................................. 45
Section 7.04. Extension; Waiver ......................................... 45
ARTICLE VIII Indemnification ............................................ 45
Section 8.01. Survival .................................................. 45
Section 8.02. Indemnification ........................................... 46
Section 8.03. Third Party Claims ........................................ 47
ARTICLE IX .............................................................. 48
General Provisions ...................................................... 48
Section 9.01. Notices ................................................... 48
Section 9.02. Definitions ............................................... 49
Section 9.03. Interpretation ............................................ 54
Section 9.04. Mutual Drafting ........................................... 55
Section 9.05. Consents and Approvals .................................... 55
Section 9.06. Counterparts .............................................. 55
Section 9.07. Entire Agreement; No Third-Party Beneficiaries ............ 55
Section 9.08. Governing Law ............................................. 55
Section 9.09. Assignment ................................................ 56
Section 9.10. Specific Enforcement ...................................... 56
Section 9.11. Consent to Jurisdiction ................................... 56
Section 9.12. WAIVER OF JURY TRIAL ...................................... 57
Section 9.13. Severability .............................................. 57
Section 9.14. No Waiver of Rights ....................................... 57
ANNEX I INDEX OF DEFINED TERMS
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") dated as of May 21,
2008, is made among CBAYSYSTEMS HOLDINGS LIMITED, a company incorporated in the
British Virgin Islands ("PARENT"), CBAY INC., a Delaware corporation ("BUYER"),
and KONINKLIJKE PHILIPS ELECTRONICS N.V., a corporation organized under the laws
of the Kingdom of the Netherlands ("SELLER").
WHEREAS, Buyer is a wholly owned subsidiary of Parent;
WHEREAS, Seller beneficially owns 26,085,086 shares (the "SHARES") of
common stock ("COMMON STOCK"), no par value, of MedQuist Inc., a New Jersey
corporation (the "COMPANY"), which represents approximately 69.5% of the
outstanding common stock of the Company;
WHEREAS, Buyer desires to purchase the Shares, Seller desires to sell
the Shares, and Parent, Buyer and Seller desire to make certain representations,
warranties, covenants and agreements in connection with the acquisition of the
Shares by Buyer from Seller (such transaction, the "ACQUISITION"), and also to
prescribe various conditions to the Acquisition.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
Share Purchase
Section 1.01. Purchase and Sale. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing (as defined below),
Seller shall sell to Buyer, and Buyer shall purchase from Seller, the Shares.
ARTICLE II
Closing; Purchase Price and Payment
Section 2.01. Closing. The closing of the Acquisition (the "CLOSING")
will take place at 10:00 a.m. on the second business day after satisfaction or
(to the extent permitted by Law (as defined below)) waiver of the conditions set
forth in Article VI (other than those conditions that by their terms are to be
satisfied at the Closing, but subject to the satisfaction or (to the extent
permitted by Law) waiver of those conditions) at the offices of Xxxxxxx Xxxxxxx
& Xxxxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx, Xxx Xxxxxxx, XX 00000,
unless another time, date or place is agreed to in writing by Parent and Seller.
The date on which the Closing occurs is referred to in this Agreement as the
"CLOSING DATE."
Section 2.02. Purchase Price; Delivery of Shares. In consideration for
the purchase, sale and transfer of the Shares, and upon the terms and subject to
the conditions of this Agreement, at the Closing, (i) Buyer shall pay, or cause
to be paid, to Seller (A) $98,000,000 in cash, without interest, (B) a
Convertible Note (as defined below) having an aggregate principal
amount equal to $90,935,000, plus the Cash Adjustment Amount (as defined below),
and (C) a Bridged Cash Note (as defined below) having an aggregate principal
amount equal to $98,000,946, and (1) less (w) if any Cash Dividend Event occurs,
the Cash Dividend Adjustment Amount, (x) the Cash Adjustment Amount, (y) the
Bridged Cash Adjustment, and (z) the Post-Closing Tax Adjustment Amount, if any;
and (2) if any Cash Dividend Event occurs, plus the Pre-Closing Tax Adjustment
Amount (such cash, Convertible Note and Bridged Cash Note, collectively, the
"PURCHASE PRICE"), and (ii) Seller shall deliver the Shares to Buyer, together
with instruments of transfer reasonably satisfactory to Buyer.
Section 2.03. Cash Dividend Option. Prior to the Closing, provided
that it does not result in the Actual Cash going below $20,000,000, the Company
shall have the right (the "CASH DIVIDEND OPTION") to declare and pay one or more
cash dividends aggregating up to $120 million (the aggregate amount of dividends
in cash actually paid by the Company to its shareholders pursuant to this
Section 2.03, the "CASH DIVIDEND"), to its shareholders of record as of the
close of business on a date any time prior to the Actual Cash Determination
Date. For purposes of this Agreement, declaration and payment by the Company of
a Cash Dividend prior to Closing is referred to herein as the "CASH DIVIDEND
EVENT."
Section 2.04. Determination of Actual Cash and Approved Exclusions.
(a) On the Actual Cash Determination Date, Seller shall prepare, or cause to be
prepared, and deliver to Parent, a statement ("SELLER'S STATEMENT"), which shall
set forth the amounts of (i) Actual Cash, (ii) Approved Exclusion (subject to
paragraph (c) below), (iii) Cash Dividend, (iv) the Taxable Portion of
Pre-Closing Dividend, if any (based on reasonable estimates and assumptions),
and (v) the Taxable Portion Dividend, (based on reasonable estimates and
assumptions), in each case determined by Seller in good faith and in accordance
with the relevant provisions of this Agreement as of such date and the Closing
Date, together with a reasonably detailed worksheet setting forth the
calculation of such amounts. Seller's Statement shall be accompanied by a
certification of an authorized representative of Seller to the effect that the
Seller's Statement has been prepared in good faith and in accordance with the
relevant provisions of this Agreement based on the books and records of the
Company. The calculations and determinations in accordance with this Section
2.04 that are set forth on the Seller's Statement as of the Closing Date, absent
manifest error, shall be used for purposes of the calculation of the
consideration to be paid at Closing.
(b) If Parent disagrees with any part of the Seller Statement, Parent
shall, as soon as practicable but in no event later than twenty (20) days after
Closing, prepare, or cause to be prepared, and deliver to Seller a statement of
such disagreement (the "OBJECTION NOTICE") by setting forth Parent's calculation
of the disputed amount(s), in each case determined by Parent in good faith and
in accordance with the relevant provisions of this Agreement as of the Closing
Date, together with a reasonably detailed worksheet setting forth the
calculation of each disputed amount. The Objection Notice shall be accompanied
by a certification an authorized representative of Parent to the effect that the
Objection Notice has been prepared in good faith and in accordance with the
relevant provisions of this Agreement based on the books and records of the
Company. If no Objection Notice is delivered on or prior to the twentieth (20th)
day after Closing, Seller's Statement shall be deemed to be final and binding on
the parties hereto and their respective Affiliates. If an Objection Notice is
delivered to Seller within twenty (20) days
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after the Closing, then Parent and Seller shall negotiate in good faith to
resolve their disagreements with respect to the computation of the relevant
closing amount(s). In the event that Parent and Seller are unable to resolve any
such disagreements within twenty (20) days after Seller's receipt of the
Objection Notice, Parent and Seller shall submit any remaining disagreements to
a nationally recognized accounting firm mutually acceptable to Purchaser and
Seller (the "AUDITOR") for resolution. Parent and Seller shall use their
respective reasonable best efforts to cause the Auditor to resolve all remaining
disagreements with respect to the computation of the disputed amount(s) as soon
as practicable, but in any event shall direct the Auditor to render a
determination within twenty (20) days after the remaining disagreements are
referred to it. The Auditor shall consider only those items and amounts in
Parent's and Seller's respective calculations of the closing amounts that are
identified as being items and amounts to which Parent and Seller have been
unable to agree. In resolving any disputed item, the Auditor may not assign a
value to any item greater than the greatest value for such item claimed by
either party or less than the smallest value for such item claimed by either
party. The Auditor's determination of the closing amounts shall be based solely
on written materials submitted by Parent and Seller (i.e., not on independent
review). The determination of the Auditor shall be conclusive and binding upon
Parent and Seller and their respective Affiliates. Seller's Statement, as
revised by the Auditor or as agreed to by Parent and Seller or as deemed to be
final and binding in accordance with the terms of this Section 2.04(b), shall be
the "FINAL STATEMENT." Within three (3) business days after the Final Statement
is finally determined, Parent or Seller, as applicable, shall settle any amounts
owed to each other, as applicable, pursuant to the Final Statement by adjusting
the principal amount of the Bridged Cash Note.
(c) Following the date of this Agreement, Seller shall notify Parent
of the material terms of any settlement agreement entered into or payment made
with respect to any litigation that would constitute an Approved Exclusion
promptly following execution of the settlement agreement or payment thereunder.
Notwithstanding any other provision or definition contained in this Agreement,
Seller's Statement shall not include any such settlement agreement or payment as
an Approved Exclusion unless Seller has previously notified Parent of such
matter in accordance with the prior sentence.
ARTICLE III
Representations and Warranties
Section 3.01. Representations and Warranties of Seller with Respect to
the Shares and the Notes. Except as set forth in the disclosure schedule (with
reference to the particular Section or subsection of this Agreement to which the
information set forth in such disclosure schedule relates; provided, however,
that any information set forth in one Section or subsection of such disclosure
schedule shall be deemed to apply to each other Section or subsection thereof or
hereof where such disclosure is reasonably apparent on its face) delivered by
Seller to Parent and Buyer prior to the execution of this Agreement (the "SELLER
DISCLOSURE SCHEDULE"), Seller represents and warrants to Parent and Buyer as
follows:
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(a) Corporate Organization and Qualification. Seller is duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation and has all requisite corporate or organizational
power and authority to enter into this Agreement and consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Seller and, assuming the due authorization, execution and delivery by Parent and
Buyer, constitutes a legal, valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms, subject to bankruptcy, insolvency,
moratorium, reorganization or similar Laws affecting the rights of creditors
generally and the availability of equitable remedies, and no other corporate or
shareholder proceedings on the part of Seller or the Company are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby.
(b) Ownership of the Shares. Except as set forth in Section 3.01(b) of
the Seller Disclosure Schedule, Seller is the record and beneficial owner and
holder of the Shares. The Shares are held free and clear of all Encumbrances (as
defined below) other than restrictions imposed by applicable securities Laws.
Upon the transfer of the Shares to Buyer on the Closing Date in accordance with
this Agreement, Buyer will receive good and valid title to the Shares, free and
clear of all Encumbrances other than restrictions imposed by applicable
securities Laws.
(c) Governmental Filings; No Violations. No license, consent,
clearance, permit, qualification, waiver, approval, order or authorization of,
action by or in respect of, registration, declaration or filing with, or notice
to any supranational, federal, state, local, municipal or foreign government or
any court, administrative, regulatory or other governmental or non-governmental
department, board, bureau, agency, commission, authority or instrumentality
(each, a "GOVERNMENTAL ENTITY") is required by or with respect to Seller in
connection with the execution, delivery and performance of this Agreement by
Seller or consummation of the Acquisition or the other transactions contemplated
by this Agreement, except for (1) the filing of a notification and report form
by Parent under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (including the rules and regulations promulgated thereunder, the "HSR
ACT") and applicable notification or approval requirements under foreign
competition, antitrust or merger control Laws, and the receipt, termination or
expiration, as applicable, of approvals or waiting periods required under the
HSR Act or any other applicable competition, merger control, antitrust or
similar Law or regulation, (2) the filing with the Securities and Exchange
Commission (the "SEC") of such reports under the Securities Exchange Act of
1934, as amended (including the rules and regulations promulgated thereunder,
the "EXCHANGE ACT"), as may be required in connection with this Agreement and
the transactions contemplated by this Agreement, and (3) such other licenses,
consents, clearances, permits, qualifications, waivers, approvals, orders,
authorizations, actions, registrations, declarations, filings and notices the
failure of which to be obtained or made, individually or in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse Effect
(as defined below) or to prevent or materially impede, interfere with, hinder or
delay the consummation by Seller of the Acquisition or the other transactions
contemplated by this Agreement.
(d) No Conflicts. The execution, delivery and performance by Seller of
this Agreement, the consummation by Seller of the Acquisition and the other
transactions
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contemplated by this Agreement and compliance by Seller with the provisions of
this Agreement do not and will not:
(i) conflict with or result in a breach or violation of, or default
under, Seller's Articles of Association,
(ii) with or without notice or lapse of time or both, conflict with or
result in a breach or violation of, a termination (or right of termination)
or a default under, the creation or acceleration of any obligations or the
creation of a lien, pledge, security interest, mortgage, charge,
encumbrance, claim, or other comparable restriction (collectively,
"ENCUMBRANCES"), other than Permitted Encumbrances (as defined below),
under any agreement, lease, license, contract, note, mortgage, indenture,
arrangement or other obligation (each of these items, including all
amendments thereto, a "CONTRACT") to which Seller is a party or any of its
properties, rights or other assets is subject; provided that for purposes
of this clause (ii) the properties, rights or other assets of the Company
are not covered by this representation,
(iii) conflict with or result in a breach or violation of, or default
under, the Company Certificate (as defined below) or the Company By-laws
(as defined below) or the comparable organizational documents of any of the
Company's subsidiaries, or
(iv) subject to the governmental licenses, consents, clearances,
permits, qualifications, waivers, approvals, orders, authorizations,
actions, registrations, declarations, filings and notices referred to in
Section 3.01(c), conflict with or result in a breach or violation of, or
default under (x) any material Law applicable to Seller or its properties,
rights or other assets or (y) any material order, writ, injunction, decree,
judgment or stipulation which, in each case, is expressly applicable by its
terms to Seller or its properties, rights or other assets; provided that
for purposes of this clause (iv) the properties, rights or other assets of
the Company are not covered by this representation,
other than any such conflicts, violations, breaches, defaults, rights, losses or
Encumbrances, in the case of any of clauses (ii) and (iv), that, individually or
in the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect or prevent or materially impede, interfere with, hinder
or delay the consummation by Seller of the Acquisition or the other transactions
contemplated by this Agreement. Seller has terminated, and is not engaged in or
facilitating, any discussions or negotiations regarding to any acquisition of
any Shares (other than by Parent, Buyer and their respective Affiliates pursuant
to this Agreement), whether by way of merger, tender offer, stock sale or
otherwise.
(e) Release from Confidentiality Agreements. The Company has duly
executed and delivered waiver letters (the "WAIVERS") waiving, and has waived,
application of the confidentiality and standstill provisions of the
Confidentiality Agreement (as defined below) and the confidentiality agreement
dated as of December 14, 2007, by and between S.A.C. Private Capital Group, LLC
("SAC PCG") and the Company (the "SAC PCG CONFIDENTIALITY AGREEMENT") with
respect to (i) any previous or ongoing confidential discussions and disclosures
occurring solely among Parent, SAC PCG, Seller and Xxxxxx Brothers Commercial
Corporation Asia Limited (and their respective Representatives) regarding a
possible transaction to which the
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Company would not be a party whereby Parent would acquire the Shares for a price
not in excess of $11.00 per share (prior to any adjustment for the sharing of
expenses or taxes incurred as a result of a dividend paid by the Company and
valuing any convertible notes for purposes thereof at their principal amount) (a
"POSSIBLE SELLER TRANSACTION") and (ii), following the execution of a definitive
agreement respecting a Possible Seller Transaction, any disclosures by Parent
which (A) are legally required or required by stock exchange requirements to be
disclosed by Parent or otherwise consented to in advance, in writing by the
Company in connection with seeking the Parent Shareholder Approval, and (B)
unless consented to in advance, in writing by the Company, do not contain
information which is either proprietary to the Company or subject to the
Company's claim of attorney-client privilege; provided, however, that nothing in
the Waivers shall constitute or be deemed to be the approval by the Board of
Directors of the Company of a Possible Seller Transaction or any acquisition or
transaction relating to or involving the Company by Parent, SAC PCG or Xxxxxx
Brothers Commercial Corporation Asia Limited under the provisions of the New
Jersey anti-takeover statute which restricts certain specified transactions with
interested shareholders; provided further, that nothing in the Waivers shall
obligate the Company to be a party to, or to have any liabilities or obligations
to Parent, SAC PCG or Xxxxxx Brothers Commercial Corporation Asia Limited under
or with respect to, any Possible Seller Transaction or any agreements relating
thereto. The execution, delivery and performance of the Waivers were duly
authorized by the Board of Directors of the Company at a duly called meeting of
the Board of Directors of the Company and each Waiver has been duly executed and
delivered by the Company in accordance with such authorization.
(f) Brokers and Finders. Neither Seller nor any of its Affiliates
(other than the Company) has retained or will retain any investment banker,
financial advisor, broker, finder, agent or similar intermediary or has incurred
or will incur any liability for any finders', brokerage, financial advisor or
similar fees or commissions based on any agreement, arrangement, commitment or
understanding in connection with the transactions contemplated herein, except
that Seller has employed Xxxxxxx, Sachs & Co. as a financial advisor at no cost
to the Company.
(g) Accredited Investor.
(i) Seller is acquiring the Notes (together with the Parent Common
Shares (as defined below) into which the Convertible Note is convertible,
the "SECURITIES") for its own account with the present intention of holding
such securities for investment purposes, and Seller has no present
intention of selling such securities in a public distribution.
(ii) Seller is an "accredited investor," as such term is defined in
Rule 501(a) of Regulation D promulgated under the Securities Act of 1933,
as amended (including the rules and regulations promulgated thereunder, the
"SECURITIES ACT"). Seller acknowledges and agrees that the Notes issued
hereunder to Seller are intended to qualify for an exemption from
registration under the Securities Act and applicable foreign securities
laws.
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(iii) Seller is a sophisticated investor with such knowledge and
experience in business and financial matters as will enable Seller to
evaluate the merits and risks of an investment in the Securities.
(iv) Seller (A) understands that an investment in the Securities
involves a significant degree of risk, including a risk of total loss of
such investment, (B) is fully aware of and understands all the risk factors
related to the Securities and (C) is able to bear the economic risk and
lack of liquidity of an investment in the Securities for an indefinite
period of time. Seller is aware that transfer of the Securities may not be
possible because the Securities have not been registered under the
Securities Act or any applicable state or foreign securities laws and
therefore cannot be sold unless subsequently registered under the
Securities Act and such applicable state or foreign securities laws or an
exemption from such registration is available.
(v) Seller has had an opportunity to review information concerning
Parent and Buyer in detail and to ask questions and receive answers
concerning the terms and conditions of the Securities and the business of
Parent, Buyer and their respective subsidiaries.
(vi) Seller expressly acknowledges that none of Parent, Buyer or any
Affiliate or Representative of any of the foregoing has made any
representations or warranties to it in connection with the Securities other
than the representations and warranties made by the Parent and Buyer in
this Agreement. Seller has, independently and without reliance upon Parent,
Buyer or any Affiliate or Representative of any of the foregoing, and based
on such documents and information as Seller has deemed appropriate, made
its own appraisal of and investigation into the business, operations,
property, financial and other condition and creditworthiness of Parent,
Buyer and their respective subsidiaries and made its own investment
decision with respect to the investment represented by the Securities.
Seller has consulted to the extent deemed appropriate by Seller with
Seller's own advisers as to the financial, tax, legal and related matters
concerning an investment in the Securities and on that basis understands
the financial, legal, tax and related consequences of an investment in the
Securities, and believes that an investment in the Securities is suitable
and appropriate for Seller.
(h) Termination of Governance Agreement. The Governance Agreement,
dated as of May 22, 2000, by and between Seller and the Company (as amended and
supplemented to the date hereof, the "GOVERNANCE AGREEMENT") shall terminate
effective upon the Closing automatically and without further action by any
person.
Section 3.02. Representations and Warranties of Seller with respect to
the Company. Except as set forth (x) in the Seller Disclosure Schedule (with
reference to the particular Section or subsection of this Agreement to which the
information set forth in such disclosure schedule relates; provided, however,
that any information set forth in one Section or subsection of the Seller
Disclosure Schedule shall be deemed to apply to each other Section or subsection
thereof or hereof where such disclosure is reasonably apparent on its face) or
(y) in the Company Reports (as defined below) required to be filed by the
Company since January 1, 2007 and prior to the date hereof (excluding any risk
factor disclosures contained in such
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documents under the heading "Risk Factors" and any disclosure of risks included
in any "forward-looking statements" disclaimer or other statements that are
similarly non-specific and are predictive or forward-looking in nature), if the
relevance of such disclosure as an exception to one or more of the following
representations and warranties is reasonably apparent, Seller represents and
warrants, to Seller's knowledge (without any duty of further inquiry of the
Company), as follows:
(a) Corporate Organization and Qualification. Each of the Company and
its subsidiaries is duly organized, validly existing and in good standing under
the Laws of their respective jurisdiction of incorporation or formation, as the
case may be. Each of the Company and its subsidiaries is in good standing as a
foreign entity in each jurisdiction where the properties owned, leased or
operated, or the business conducted, by it require such qualification, except
for such failure to so qualify or be in such good standing, which, when taken
together with all other such failures, have not had and would not reasonably be
expected to have a Material Adverse Effect. Each of the Company and its
subsidiaries has the requisite corporate or organizational power and authority
to carry on their respective business as they are now being conducted. A
complete and correct copy of the Amended and Restated Certificate of
Incorporation of the Company ("COMPANY CERTIFICATE") and the Second Amended and
Restated By-laws of the Company (the "COMPANY BY-LAWS"), each as amended to
date, is available on The Electronic Data Gathering, Analysis and Retrieval
system of the SEC ("XXXXX"). The Company Certificate and Company By-laws as so
filed on Xxxxx as of the date hereof are in full force and effect. The Company
is not in violation of the Company Certificate or the Company By-laws, and none
of the Company's subsidiaries are in violation of their respective charters,
by-laws or other comparable organizational documents.
(b) Subsidiaries. Section 3.02(b) of the Seller Disclosure Schedule
lists each of the Company's subsidiaries and, for each such subsidiary, the
jurisdiction of incorporation or formation and, as of the date hereof, each
jurisdiction in which such subsidiary is qualified or licensed to do business.
All the issued and outstanding shares of capital stock of, or other equity
interests in, each such subsidiary of the Company have been validly issued and
are fully paid, nonassessable and owned directly or indirectly by the Company
free and clear of all Encumbrances or options to purchase of any kind or nature
whatsoever, and free of any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other equity interests. Except for the capital
stock of, or voting securities or equity interests in, its subsidiaries, the
Company does not own, directly or indirectly, any capital stock of, or other
voting securities or equity interests in, any corporation, partnership, joint
venture, association or other entity.
(c) Capitalization. The authorized capital stock of the Company
consists of 60,000,000 shares of Common Stock, of which 37,543,893 shares were
outstanding on May 13, 2008. All of the outstanding shares of Common Stock have
been duly authorized and are validly issued, fully paid and nonassessable. The
Company has no shares of Common Stock reserved for issuance or required to be
reserved for issuance except that, as of May 14, 2008, there were 1,771,184
shares reserved for issuance under the MedQuist Inc. 2002 Stock Option Plan, the
Summit Health Group, Inc. Stock Option Plan, the Summit Health Group, Inc.
Nonstatutory Stock Option Plan for Non-Employee Directors and the MRC Group,
Inc. Amended and
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Restated 1992 Stock Option Plan (collectively, the "STOCK PLANS"), of which
1,631,791 shares of Common Stock were subject to outstanding options to purchase
shares of Common Stock pursuant to such Stock Plans (collectively, "STOCK
OPTIONS"). Each of the Stock Options was granted with an exercise price that was
not less than the value that the board of directors of the Company reasonably
believed at the time was the grant date fair market value of their underlying
shares of Common Stock. Except as set forth above, there are no pre-emptive
rights (either statutory or pursuant to any Contracts to which the Company is a
party or the Company Certificate or the Company By-laws) nor any outstanding
subscriptions, options, warrants or similar rights to purchase, convertible
securities, preferred shares, stock appreciation rights, phantom stock,
restricted stock, stock units or other similar equity-based awards to which the
Company or any of its subsidiaries is a party relating to the issued or unissued
capital stock or other securities of the Company or any of its subsidiaries.
Section 3.02(c) of the Seller Disclosure Schedule sets forth a true and complete
list of each person in which the Company owns, directly or indirectly, any
equity, membership, partnership, limited liability, voting or similar interest,
and the percentage ownership of such person. Section 3.02(c) of the Seller
Disclosure Schedule sets forth a complete and accurate list, as of May 13, 2008,
of all outstanding Stock Options, the number of shares of Common Stock subject
thereto, the grant dates, vesting schedule, expiration dates, exercise or base
prices (if applicable) and the names of the holders thereof. The Company has no
outstanding bonds, debentures, notes or other indebtedness that entitle their
holders to vote (or which are convertible into, or exchangeable for, securities
entitling their holders to vote) on any matters on which shareholders may vote.
Except as set forth on Section 3.02(c) of the Seller Disclosure Schedule,
neither the Company nor any of its subsidiaries has any (i) indebtedness for
borrowed money, whether contingent, current or funded, secured or unsecured,
(ii) indebtedness (other than as described in clause (i) above) that is
evidenced by a note, bond, debenture, draft, bankers' acceptance, letter of
credit or similar instrument, (iii) material liabilities or obligations for the
deferred purchase price of property or services, (iv) capitalized lease
obligations or (v) guarantees of any of the foregoing of another person
("INDEBTEDNESS"), where the unpaid amount of such obligation as of the date of
this Agreement, individually or with respect to a series of related obligations,
is in excess of $1,000,000.
(d) Company Reports. The Company has filed all reports, schedules,
forms, statements and other documents (including exhibits and other information
incorporated therein) with the SEC required to be filed by the Company since
January 1, 2006 (such documents, together with any documents filed during such
period by the Company with the SEC on a voluntary basis on Current Reports on
Form 8-K, the "COMPANY REPORTS"). None of the subsidiaries of the Company is
subject to the reporting requirements of Sections 13(a) or 15(d) of the Exchange
Act. As of their respective filing dates, the Company Reports complied in all
material respects with the requirements of the provisions of the Securities Act,
the Exchange Act and the Xxxxxxxx-Xxxxx Act of 2002 (the "XXXXXXXX-XXXXX ACT"),
including the rules and regulations promulgated thereunder, applicable to such
Company Reports and did not, as of their respective dates, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated or incorporated by reference therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of the date hereof, there are no outstanding or unresolved
comments in comment letters received from the Division of Corporation Finance of
the SEC relating to the Company Reports. As of the
9
Closing Date, there will be no outstanding or unresolved comments in comment
letters received from the Division of Corporation Finance of the SEC relating to
the Company Reports except for comments that, individually or in the aggregate,
have not had and would not reasonably be expected to have a Material Adverse
Effect.
(e) No Conflicts. The execution, delivery and performance by Seller of
this Agreement, the consummation by Seller of the Acquisition and the other
transactions contemplated by this Agreement, and compliance by Seller with the
provisions of this Agreement do not and will not, with or without notice or
lapse of time or both:
(i) conflict with or result in a breach or violation of, a termination
(or right of termination) or a default under, the creation or acceleration
of any obligations or the creation of an Encumbrance, other than Permitted
Encumbrances (as defined below), under, any Material Contract (as defined
below), or
(ii) conflict with or result in a breach or violation of, a
termination (or right of termination) or a default under, any material
permit, franchise or license issued by any Governmental Entity utilized by
the Company or any of its subsidiaries in connection with the operation of
its business as currently conducted;
other than any such conflicts, violations, breaches, defaults, rights, losses or
Encumbrances that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect.
(f) Financial Statements. Each of the financial statements (including
any related notes) of the Company included in the Company Reports (the
"FINANCIAL STATEMENTS") complied at the time it was filed as to form in all
material respects with the applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto in effect at the time of
filing, has been prepared in accordance with generally accepted accounting
principles in the United States ("GAAP") (except, in the case of unaudited
statements, as permitted by the rules and regulations of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto), and fairly presented in all material respects the consolidated
financial position of the Company and its subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments which were not and are not reasonably expected to be material
in amount). Neither the Company nor any of its subsidiaries is a party to, or
has a legally binding commitment to enter into, any joint venture, off-balance
sheet partnership or any similar Contract (including any Contract relating to
any transaction or relationship between or among the Company or any of its
subsidiaries, on the one hand, and any unconsolidated Affiliate, including any
structured finance, special purpose or limited purpose entity or person, on the
other hand or any "off balance sheet arrangements" (as defined in Item 303(a) of
Regulation S-K under the Exchange Act)), where the purpose or intended effect of
such Contract or arrangement is to avoid disclosure of any material transaction
involving, or material liabilities of, the Company or any of its subsidiaries in
the Financial Statements or Company Reports. The management of the Company has
implemented and maintains disclosure controls and procedures (as defined in Rule
13a-15(e) of the Exchange Act) that are designed to ensure that material
information relating to the Company, including the
10
Company's subsidiaries, is made known to the principal executive officer and the
principal financial officer of the Company by others within those entities, and
that the Company's principal executive officer and principal financial officer
have disclosed, based on their most recent evaluation of internal control over
financial reporting, to the Company's auditors and the audit committee of the
Company's board of directors (or persons performing the equivalent functions):
(A) all significant deficiencies and material weaknesses within their knowledge
in the design or operation of internal control over financial reporting (as
defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to
adversely affect in any material respect the Company's ability to record,
process, summarize and report financial information and (B) any fraud known to
the Company that involves management or other employees who have a significant
role in the Company's internal control over financial reporting. The Company's
principal executive officer and principal financial officer have filed with the
SEC, with respect to the Company Reports, all certifications required to be
filed with the SEC by the Xxxxxxxx-Xxxxx Act and any related rules and
regulations promulgated by the SEC. Neither the Company nor any of its
subsidiaries has outstanding, or has arranged any outstanding, "extensions of
credit" to directors or executive officers of the Company within the meaning of
Section 402 of the Xxxxxxxx-Xxxxx Act. As of April 30, 2008, the Company held
Actual Cash of approximately $153,801,000.
(g) Absence of Certain Changes. Except as disclosed in the Company
Reports required to be filed by the Company since December 31, 2007 and prior to
the date hereof (excluding any risk factor disclosures contained in such
documents under the heading "Risk Factors" and any disclosure of risks included
in any "forward-looking statements" disclaimer or other statements that are
similarly non-specific and are predictive or forward-looking in nature), if the
relevance of such disclosure as an exception to one or more of the following
representations warranties is reasonably apparent, since December 31, 2007, the
Company and its subsidiaries have conducted their respective businesses only in,
and have not engaged in any material transaction other than according to, the
ordinary and usual course of such businesses consistent in all material respects
with past practice, and there has not been (i) any Material Adverse Effect or
any change, effect, state of facts, event or occurrence or combination of the
foregoing which would reasonably be expected to have a Material Adverse Effect;
(ii) other than as permitted in Section 2.03, any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to the capital stock, or any securities convertible,
exchangeable or exercisable into the capital stock, of the Company or any of its
subsidiaries; (iii) any change by the Company in accounting principles,
practices or methods except as required by applicable Law or GAAP; (iv) any
damage, destruction or other casualty loss with respect to any asset or property
owned, leased or otherwise used by the Company or any of its subsidiaries,
whether or not covered by insurance, which, individually or in the aggregate,
have had or would reasonably be expected to have a Material Adverse Effect; (v)
any establishment, adoption, amendment or termination of any of the Company
Plans other than in the ordinary course of business consistent with past
practice; (vi) any granting by the Company or any of its subsidiaries to any
executive officer of the Company or any of its subsidiaries of any increase in
compensation, except for increases in the ordinary course of business consistent
with past practice; (vii) any action taken by the Company or any of its
subsidiaries which, if taken after the date hereof, would have required Parent's
consent pursuant to Section 4.01(a) of this Agreement; (viii) any redemption,
repurchase or other acquisition of
11
any shares of capital stock or of any securities convertible, exchangeable or
exercisable into the capital stock, of the Company or any of its subsidiaries;
or (ix) any granting by the Company or any of its subsidiaries to any executive
officer or director of any severance or termination pay, or any increase
thereof.
(h) Litigation and Liabilities. Except as set forth in Section 3.02(h)
of the Seller Disclosure Schedule, (i) there are no civil, criminal,
administrative or investigative audits, petitions, actions, suits, claims,
hearings, arbitrations or proceedings ("ACTIONS") that are pending or threatened
against the Company or any of its subsidiaries, nor (ii) are there any
outstanding inquiries, judgments, decisions, writs, stipulations, injunctions or
orders of any Governmental Entity or arbitration panel that are, expressly by
their terms, binding upon the Company or any of its subsidiaries or any of their
respective properties, rights or assets which, in each of clauses (i) and (ii),
would reasonably be expected to materially impair the operation of the business
of the Company and its subsidiaries taken as a whole, or their properties and
assets taken as a whole, or which would reasonably be expected to prevent,
materially delay or materially impair the ability of Seller to consummate the
Acquisition and the transactions contemplated in this Agreement. Except for
those liabilities and obligations that are fully reflected or reserved against
on the consolidated balance sheet of the Company included in its Annual Report
on Form 10-K for the period ended December 31, 2007 (the "DECEMBER 2007 BALANCE
SHEET"), and for obligations and liabilities incurred in the ordinary course of
business consistent with past practice since December 31, 2007, neither the
Company nor any of its subsidiaries has incurred any obligation or liabilities
of any nature whatsoever, whether absolute, accrued, contingent, known, unknown
or otherwise, and whether or not required to be disclosed on a balance sheet
prepared in accordance with GAAP, except for those that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect.
(i) Employee Benefits.
(i) The Company Reports accurately describe in all material respects
all bonus, deferred compensation, pension, retirement, profit-sharing,
thrift, savings, employee stock ownership, stock bonus, stock purchase,
restricted stock and stock option plans, all employment or severance
Contracts, other material employee benefit plans and any applicable "change
of control" or similar provisions in any plan, Contract or arrangement that
covers employees or former employees of the Company and its subsidiaries
(the "COMPENSATION AND BENEFIT PLANS"). The Compensation and Benefit Plans
and all other benefit plans, programs, policies, Contracts or arrangements
(regardless of whether they are funded or unfunded, or are foreign or
domestic) covering employees or former employees, directors or independent
contractors of the Company and its subsidiaries (the "EMPLOYEES"),
including "employee benefit plans" within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
are listed in Section 3.02(i)(i) of the Seller Disclosure Schedule and
shall be collectively referred to as the "COMPANY PLANS." True and complete
copies of all Company Plans, including any trust agreement or other funding
instruments and/or insurance Contracts, if any, forming a part of any such
plans, summary plan descriptions and all amendments thereto currently in
effect, and (to the extent applicable to a particular Company Plan) for the
three most recent years, (A) Form 5500 and attached
12
schedules, (B) audited financial statements, and (C) actuarial valuation
reports, have been made available to Parent.
(ii) All Company Plans have been established and administered in
material compliance with their terms and applicable Law. Each Company Plan
intended to be qualified under Section 401(a) of the Internal Revenue Code
of 1986, as amended (the "CODE"), has received a favorable determination
letter from the Internal Revenue Service (the "IRS") with respect to its
form, and the Company has not received any written notice from a
Governmental Entity questioning the validity of, or threatening to revoke,
any such favorable determination letter, and nothing has occurred, whether
by action or failure to act, that otherwise could reasonably be expected to
cause the loss of such qualification. There are no pending or threatened
actions, suits or claims by or on behalf of any Company Plan, or by or on
behalf of any participants or beneficiaries of any Company Plan, alleging
any violation of ERISA or other applicable Law, or alleging a violation of
the terms of any such plan, and, except as set forth in Section 3.02(i)(ii)
of the Seller Disclosure Schedule, no Company Plan is the subject of any
investigation or audit pending or threatened in writing by any Governmental
Entity.
(iii) Neither the Company nor any of its ERISA Affiliates sponsors or
contributes to, nor within the six years preceding the date hereof has
sponsored or contributed to, or otherwise has any liability with regard to,
any plan subject to Title IV of ERISA (including any "multiemployer plan"
within the meaning of Section 3(37) of ERISA). "ERISA AFFILIATE" means (i)
a member of any "controlled group" (as defined in Section 414(b) of the
Code) of which the Company is a member, (ii) a trade or business, whether
or not incorporated, under common control (within the meaning of Section
414(c) of the Code) with the Company, (iii) a member of any affiliated
service group (within the meaning of Section 414(m) of the Code) of which
the Company is a member, or (iv) an entity required to be aggregated with
the Company pursuant to Section 414(o) of the Code. Neither the Company nor
any of its subsidiaries has incurred any current or projected liability in
respect of post-employment or post-retirement health, medical or life
insurance benefits for Employees, except as required under Section 4980B of
the Code or except as may be required pursuant to any other applicable Law.
(iv) All contributions required to be made under the terms of any
Company Plan have been timely made or have been reflected in the financial
statements included in the Company Reports.
(v) Neither the execution of this Agreement nor the consummation of
the transactions contemplated by this Agreement will (whether alone or in
connection with any subsequent termination of employment), except as set
forth in Section 3.02(i)(v) of the Seller Disclosure Schedule, result in
(A) any payments under any of the Company Plans which would not be
deductible under Section 280G of the Code, (B) severance pay or any
increase in severance pay to Employees upon termination of employment after
the date of this Agreement, (C) acceleration of the time of payment or
vesting or result in any payment or funding (through a grantor trust or
otherwise) of compensation or benefits under, increase the amount payable
or result in any other material obligation to, any of
13
the Company Plans, or (D) a limitation or restriction of the right of the
Company to merge, amend or terminate any of the Company Plans.
(vi) Each Company Plan that is subject to Code Section 409A has been
administered in good faith compliance with the applicable requirements of
Code Section 409A and all applicable IRS and Treasury Department guidance
issued thereunder. None of the transactions contemplated by this Agreement
will constitute or result in a deferral of compensation subject to Code
Section 409A.
(j) Brokers and Finders. No finders', brokerage, financial advisor or
similar fees or commissions based on any agreement, arrangement, commitment or
understanding in connection with the transactions contemplated herein shall be
payable to any investment banker, financial advisor, broker, finder, agent or
similar intermediary retained by the Company, other than any fees, if any, that
may be owed to Bear Xxxxxxx & Co. Inc. ("Bear Xxxxxxx") pursuant to the
agreement dated June 29, 2007 between Bear Xxxxxxx and the Company, as amended
on March 8, 2008.
(k) Environmental Matters. Except for such matters that, individually
or in the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect, (i) the Company and its subsidiaries have complied with
all applicable Environmental Laws (as defined below); (ii) the properties
presently or formerly owned or operated by the Company or its subsidiaries (the
"PROPERTIES") do not contain any Hazardous Substance (as defined below) other
than as permitted under applicable Environmental Law; (iii) neither the Company
nor any of its subsidiaries has received any notice, demand letter or request
for information from any Governmental Entity or any third party indicating that
the Company may be in violation of, or liable under, any Environmental Law and
none of the Company, its subsidiaries or the Properties are subject to any court
order, administrative order, decree or indemnity to any third party relating to
any Environmental Law; and (iv) no Hazardous Substance has been disposed of,
transferred, released or transported from any of the Properties, during the time
such Property was owned or operated by the Company or one of its subsidiaries,
in a manner that could result in liability under applicable Environmental Law.
As used herein, "ENVIRONMENTAL LAW" means any Law, regulation, order,
decree, common law, opinion or agency requirement relating to the protection of
the environment or human health and safety and "HAZARDOUS SUBSTANCE" means any
substance in any concentration that is listed, classified or regulated pursuant
to any Environmental Law, including petroleum products, asbestos, lead products
and polychlorinated biphenyls.
(l) Taxes. The Company and its subsidiaries (i) have prepared and duly
and timely filed (taking into account any extension of time within which to
file) all Tax Returns (as defined below) required to be filed by any of them and
all such filed Tax Returns are complete and accurate in all material respects;
(ii) have paid or accrued for all Taxes (as defined below) that are required to
be paid or that have been withheld from amounts owing to any employee, creditor
or third party and are due and payable (whether or not shown on the Tax
Returns), except with respect to matters contested in good faith and for which
provision has been made in good faith on the Financial Statements; and (iii)
have not waived any statute of limitations with respect to Taxes or agreed to
any extension of time with respect to a Tax assessment or
14
deficiency. Neither Company nor any of its subsidiaries (i) is or has ever been
a member of an affiliated group (other than a group the common parent of which
is the Company) filing a consolidated federal income Tax Return, (ii) has any
liability for Taxes of any person arising from the application of Treasury
Regulation Section 1.1502-6 or any analogous provision of state, local or
foreign Law, or as a transferee or successor, or by Contract, or otherwise,
(iii) is a party to, is bound by or has any obligation under any Tax-sharing or
Tax indemnity agreement or similar Contract or arrangement, or (iv) has engaged
in a transaction that would be reportable by or with respect to the Company
pursuant to Sections 6011, 6111, or 6112 of the Code, the Treasury Regulations
promulgated thereunder, or any predecessors thereto. No closing agreement
pursuant to Section 7121 of the Code (or any similar provision of state, local
or foreign Law) has been entered into by or with respect to the Company or any
of its subsidiaries. The Company will not be required to include amounts in
income, or exclude items of deduction, in a taxable period beginning after the
Closing Date (i) pursuant to Section 481(a) of the Code or any similar provision
of state, local or foreign Law as a result of a change in method of accounting
occurring prior to the Closing Date, (ii) as a result of an installment sale or
open transaction arising in a Taxable period (or portion thereof) ending on or
before the Closing Date, (iii) as a result of a prepaid amount received, or
paid, prior to the Closing Date, or (iv) as a result of deferred gains arising
prior to the Closing Date. There are no Encumbrances with respect to Taxes upon
any of the assets, rights or properties of either the Company or its
subsidiaries, other than with respect to Taxes not yet due and payable. As of
the date hereof, no audits, examinations, investigations or other proceedings
against the Company or any of its subsidiaries in respect of Taxes or Tax
matters are pending, and no such audits, examinations, investigations or
proceedings are threatened. The Company has made available to Parent true and
correct copies of the United States federal income Tax Returns filed by the
Company and each of its subsidiaries for all Taxable years ending on or after
2004.
As used in this Agreement, (i) the term "TAX" (including, with
correlative meaning, the terms "TAXES" and "TAXABLE") includes all federal,
state, local and foreign income, profits, franchise, gross receipts,
environmental, customs duty, capital stock, severance, stamp, payroll, sales,
employment, unemployment, disability, use, property, withholding, transfer,
add-on minimum, excise, production, value-added, occupancy and other taxes,
duties or assessments of any nature whatsoever, together with all interest,
penalties and additions imposed with respect to such amounts and any interest in
respect of such penalties and additions, and (ii) the term "TAX RETURN" includes
all returns and reports (including elections, declarations, disclosures,
schedules, estimates, claims for refunds, amended returns and information
returns) required to be supplied to a Governmental Entity relating to Taxes.
(m) Permits; Compliance with Laws. The Company and its subsidiaries
hold all consents, authorizations, registrations, permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities (the "COMPANY
PERMITS") required in order to own their respective assets and to conduct their
respective businesses as currently conducted, except where the failure to hold
such Company Permits has not had and would not reasonably be expected to have,
individually or in the aggregate with all other such failures, a Material
Adverse Effect. All of the Company Permits are in full force and effect and the
Company and its subsidiaries are in compliance with the terms of the Company
Permits, and no Action is pending or threatened in writing that would revoke,
suspend, cancel, terminate, or adversely modify any Company Permit,
15
except for such failures to be in full force and effect and such Actions that
have not had and that would not reasonably be expected to have, individually or
in the aggregate with all other such failures, a Material Adverse Effect. The
operations of the Company (including the obtaining of any Company Permits) and
its subsidiaries have been conducted in compliance with all applicable laws
(including the Health Insurance Portability and Accountability Act of 1996),
statutes, ordinances, regulations, rules, judgments, orders, injunctions,
decrees, arbitration awards, agency requirements, writs, franchises, variances,
exemptions, approvals, licenses or permits ("LAWS") of any Governmental Entity,
except where the failure to comply or the violation has not had and would not
reasonably be expected to have, individually or in the aggregate with all other
such failures or violations, a Material Adverse Effect.
(n) Material Contracts. Except as set forth in Section 3.02(n) of the
Seller Disclosure Schedule or in the exhibit lists of any Company Report, there
are no Contracts (i) that are required to be filed with the Company Reports;
(ii) that are reasonably likely to require either (A) annual payments to or from
the Company and its subsidiaries of more than $1,000,000 or (B) aggregate
payments to or from the Company and its subsidiaries of more than $1,000,000;
(iii) to which the Company or any of its subsidiaries is a party with respect to
any partnership, joint venture or other similar agreement or arrangement
relating to the formation, creation, operation, management or control of any
partnership or joint venture that is material to the Company and its
subsidiaries taken as a whole or in which the Company or any of its subsidiaries
owns any voting or economic interest (excluding any partnership or joint venture
that is wholly owned by the Company or any of its subsidiaries) that is material
to the Company and its subsidiaries taken as a whole; (iv) to which the Company
or any of its subsidiaries is a party that contain any provision or covenant
that (A) materially limits the ability of the Company or any of its subsidiaries
to (1) make, sell or distribute to another person any products or services
offered by the Company or any of its subsidiaries as of the date of this
Agreement, (2) engage in any line of business in which the Company is engaged as
of the date of this Agreement, or (3) compete with any person in any line of
business in which the Company is engaged as of the date of this Agreement, or
(B) grants (1) "most favored nation" status that, following the Closing, would
apply to the Company or any of the Company's subsidiaries or (2) to any person
(other than Employees as part of the business and operations of the Company or
any of its subsidiaries) exclusive rights in respect of any services in any line
of business in which the Company is engaged as of the date of this Agreement or
in any geographic area with respect to or affecting the Company or any of its
subsidiaries; (v) providing for indemnification of any person, except for any
Contract that is entered into in the ordinary course of business consistent with
past practice; (v) that relate to any written settlement agreement with ongoing
obligations on the part of the Company or any of its subsidiaries; or (vi)
containing any commitment to do any of the foregoing. Each such Contract
described in clauses (i) through (vi) is referred to herein as a "MATERIAL
CONTRACT." All Material Contracts are legal, valid and binding, in full force
and effect in accordance with their terms, and enforceable against the Company
and its subsidiaries and the other parties (or, if applicable, assignees)
thereto in accordance with their respective terms (subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar Laws of
general applicability relating to or affecting creditors' rights and to general
equity principles), except for such failures that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Material
Adverse Effect. There is not under any Material Contract any existing breach,
default or event which, after notice or lapse of time, or both, would
16
constitute a breach or a default, by the Company or any of its subsidiaries or
any other party, except to the extent any such breaches or defaults,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect. A complete and correct copy, subject
to redaction, of each Material Contract has previously been made available by
the Company to Parent or its representatives or filed by the Company with the
SEC.
(o) Labor Relations. Except as, individually or in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse Effect,
(i) there is no work stoppage involving the Company or any of its subsidiaries
pending or threatened, and (ii) neither the Company nor any of its subsidiaries
is involved in or threatened with any arbitration, lawsuit or administrative
proceeding. None of the employees of the Company or of any of its subsidiaries
is represented by any labor union or any collective bargaining organization, and
no labor union has publicly announced that it is attempting to organize
employees of the Company or any of its subsidiaries. There is no pending charge
or complaint against the Company or any of its subsidiaries by the National
Labor Relations Board or any comparable state agency. Neither the Company nor
any of its subsidiaries has closed any plant or facility or effectuated any
layoffs of employees within the past three years without complying with all
relevant Laws, including the Worker Adjustment and Retraining Notification Act
(together with any similar state or local statute, rule or regulation, "WARN").
(p) Intellectual Property.
(i) The Company and its subsidiaries own (free and clear of any and
all Encumbrances or adverse claims by former or current employees or
contractors), co-own, or are licensed or otherwise possess sufficient
legally enforceable rights to use, as currently used by the Company (and
will have the same ownership or rights after the Closing Date), all
material intellectual property including patents, inventions, processes,
trademarks, trade names, service marks, other source indicators, domain
names, copyrights and copyrightable works, and any registrations or
applications therefor, technology, know-how, computer software programs or
applications, website content, databases, trade secrets and tangible or
intangible proprietary, confidential or personal information or materials
(collectively, "IP RIGHTS") that are currently used (or, with respect to
trademarks, trade names, and service marks, have been used within the last
five years) in its and its subsidiaries' businesses (collectively, "COMPANY
INTELLECTUAL PROPERTY RIGHTS"). All registrations and applications for
owned Company Intellectual Property Rights are subsisting and unexpired,
and are valid and enforceable.
(ii) Except as set forth in Section 3.02(p)(ii) of the Seller
Disclosure Schedule, (x) the use of the Company Intellectual Property
Rights by the Company or its subsidiaries and the conduct of their
businesses does not conflict with, infringe upon, violate or interfere with
or constitute a misappropriation of any IP Rights of any other person,
where any such conflict, infringement, violation, interference or
misappropriation, individually or in the aggregate, has had or is
reasonably expected to have a Material Adverse Effect; (y) there have been
no claims made and neither the Company nor any of its subsidiaries has
received notice of any claim or otherwise has knowledge that any Company
Intellectual Property Right is invalid, conflicts with the asserted right
of any other person, or has not been used or enforced or has failed to be
17
used or enforced in a manner that would result in the abandonment,
cancellation or unenforceability of any such material Company Intellectual
Property Right; (z) no other person is infringing upon, violating,
interfering with or misappropriating any Company Intellectual Property
Right.
(iii) The Company and its subsidiaries take reasonable actions to
protect (x) the material Company Intellectual Property Rights (including
trade secrets and confidential information) and (y) the operation,
integrity, security and confidentiality of their systems, software,
databases, networks and websites (and information, content and transactions
transmitted thereby or contained therein) from unauthorized use, access,
transmittal, interruption or corruption, and there have been no occurrences
of the foregoing.
(iv) The Company and its subsidiaries (x) cause all persons who
develop intellectual property on behalf of the Company to agree in writing
to the Company's sole ownership of same; and (y) are not party to or bound
by any Contract that allows (or will allow after the Closing Date) another
person to (a) access, possess, use or modify any proprietary source code or
trade secrets (except in the ordinary course of business), or (b) license
or have the right to use any IP Rights of the Company or its subsidiaries
(other than customers in the ordinary course of business consistent with
past practice) or of Parent or any of its Affiliates, except in each case
where such intellectual property is co-owned by the Company and a third
party as disclosed in Section 3.02(p)(iv) of the Seller Disclosure
Schedule.
(v) All products, services, solutions, platforms and technology used,
sold, offered, licensed or distributed by the Company are operational, fit
for their intended purpose and free of material bugs, defects, errors,
viruses and other corruptants.
(q) Real Property.
(i) Neither the Company nor any of its subsidiaries owns any real
property or has an agreement or option to purchase any real property from
any other person. Section 3.02(q)(i) of the Seller Disclosure Schedule
contains a complete and accurate list of all leases, subleases and material
occupancy agreements (the "LEASES") of real property pursuant to which the
Company or any of its subsidiaries is the lessee or sublessee (the "LEASED
PROPERTY").
(ii) The Company or one of its subsidiaries has the right under valid
and existing leases or other written agreements to occupy and use all
Leased Property. The improvements constructed on the Leased Property by the
Company or any of its subsidiaries, including all leasehold improvements,
owned or leased by Company or any of its subsidiaries at the Leased
Property, are in good operating condition and repair, subject to normal
wear and tear.
(iii) Each Lease is in full force and effect, the Company and its
subsidiaries are not in material breach of or in default of their
respective obligations under any Lease, no event has occurred which, with
notice or lapse of time or both, would constitute a breach
18
or default or permit termination, modification or acceleration thereunder
and no Lease is subject to any Encumbrance created by the Company or any of
its subsidiaries which substantially impairs the use of the property to
which it relates in the business of the Company and its subsidiaries as now
conducted.
(r) Personal Property. The Company and its subsidiaries have sole
legal and beneficial ownership of, or a valid leasehold interest in, all of the
tangible personal property owned or leased by the Company or any of its
subsidiaries, which are reflected on the December 2007 Balance Sheet, or
acquired after the date of such balance sheet, and which is material to the
operation of the business of the Company and its subsidiaries as currently
conducted (the "PERSONAL PROPERTY"), free and clear of any Encumbrances other
than Permitted Encumbrances. The Personal Property has been maintained in good
operating condition and repair (subject to normal wear and tear).
(s) Insurance. All material fire and casualty, general liability,
directors' and officers' and errors and omissions policies maintained by the
Company or any of its subsidiaries (i) are in full force and effect, (ii) are
valid and enforceable in accordance with their terms, (iii) are with reputable
insurance carriers and (iv) provide insurance coverage customary and adequate
for the operation of their respective businesses and sufficient to comply with
applicable Law, except for any such failures to maintain insurance policies
that, individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect. Neither the Company nor any of its
subsidiaries is in breach or default with respect to any of their respective
obligations under such insurance policies except for such breach or default
that, individually or in the aggregate, has not had and would not reasonably be
expected to have a Material Adverse Effect. The Company and its subsidiaries
have given notice to insurance carriers of all material claims that may be
covered under such insurance policies and the Company and its subsidiaries have
not received, with respect to any such claim, any refusal of coverage, any
notice that a defense will be afforded with reservation of rights, any notice of
breach, default, cancellation or modification or any other indication that any
insurance policy is no longer in full force and effect or valid and enforceable,
or will not be renewed or that the issuer of any policy is not willing or able
to perform its obligations thereunder.
(t) Billing Practices. Since July 30, 2004, the billing practices of
the Company and its subsidiaries have been consistent in all material respects
with the terms and conditions of the Contracts with the customers of the Company
or any of its subsidiaries. Since July 30, 2004, none of the Company or any of
its subsidiaries has had any material disputes with, and no material claims have
been made against, the Company or any of its subsidiaries relating to the
billing practices of the Company or any of its subsidiaries in connection with
any Contracts entered into on or after July 30, 2004, with the customers of the
Company or any of its subsidiaries, other than claims or disputes that arise in
the ordinary course of business that are not reasonably expected to be material
in the aggregate to the Company and its subsidiaries, taken as a whole.
(u) Transactions with Affiliates. There are no transactions,
agreements, arrangements or understandings that would be required to be
disclosed under Item 404 of Regulation S-K under the Securities Act. The Company
has made available to Parent or its representatives correct and complete copies
of each Contract or other relevant documentation
19
(including any amendments or modifications thereto) providing for each such
transaction, agreement, arrangement or understanding.
Section 3.03. Representations and Warranties of Parent and Buyer.
Except as set forth (x) in the disclosure schedule (with reference to the
particular Section or subsection of this Agreement to which the information set
forth in such disclosure schedule relates; provided, however, that any
information set forth in one Section or subsection of such disclosure schedule
shall be deemed to apply to each other Section or subsection thereof or hereof
where such disclosure is reasonably apparent on its face of) delivered by Parent
to Seller prior to the execution of this Agreement (the "PARENT DISCLOSURE
SCHEDULE") or (y) (i) in Parent's published report and financial accounts for
the year ended December 31, 2007 or its interim results for the six months ended
June 30, 2007, copies of which are set forth in Section 3.03 of the Parent
Disclosure Schedule; (ii) in the admission document of Parent dated June 13,
2007 prepared in accordance with the AIM Rules (as defined below), a copy of
which is set forth in Section 3.03 of the Parent Disclosure Schedule; or (iii)
as publicly announced by Parent (by delivery of an announcement to a Regulatory
Information Service since January 1, 2007, a copy of each of which is set forth
in Section 3.03 of the Parent Disclosure Schedule), and in each case of (i),
(ii) and (iii) above excluding any risk factor disclosures contained in such
documents under the heading "Risk Factors" and any disclosure of risks included
in any "forward-looking statements" disclaimer or other statements that are
similarly non-specific and are predictive or forward-looking in nature, if the
relevance of such disclosure as an exception to one or more of the following
representations and warranties is reasonably apparent, Parent and Buyer
represent and warrant to Seller as follows:
(a) Organization, Standing and Corporate Power. Each of Parent and its
subsidiaries is duly organized, validly existing and in good standing under the
Laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to carry on its business as currently being conducted and to
execute and deliver this Agreement and, subject to the condition in Section
6.01(a), to perform its obligations hereunder. Each of Parent and its
subsidiaries is duly qualified or licensed to do business and is in good
standing in each material jurisdiction in which the nature of its business or
the ownership, leasing or operation of its properties makes such qualification
or licensing necessary, except where the failure to be so qualified or licensed
or in good standing, individually or in the aggregate, has not had and would not
reasonably be expected to have a Parent Material Adverse Effect or to prevent or
materially impede, interfere with, hinder or delay the consummation by Parent or
Buyer of the Acquisition or the other transactions contemplated by this
Agreement.
(b) Authority; Noncontravention.
(i) Each of Parent and Buyer has all requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated by this Agreement, subject to obtaining the
consent set forth in the following sentence. Subject to satisfaction of the
condition set forth in Section 6.02(i), the passing of an ordinary
resolution by holders of a majority of the Parent Common Shares held by
uninterested shareholders voting at a duly held meeting of the holders of
Parent Common Shares or any adjournment or postponement thereof (the
"PARENT SHAREHOLDERS MEETING") to approve, inter alia, (1) the transactions
contemplated by this Agreement and
20
the Subscription Agreement (as defined below) and in connection with the
Acquisition in accordance with the articles of association of Parent and
the AIM Rules, (2) waiver of offer requirements under Article 163 of the
articles of association of the Parent, (3) an increase in the authorized
share capital of the Parent and to authorize the Parent's directors to
allot Parent Common Shares to the Seller and S.A.C. PEI CB Investment, L.P.
(the "SUBSCRIBER") (the passing of such ordinary resolution, the "PARENT
SHAREHOLDER APPROVAL"), and the admission in accordance with the AIM rules
of the enlarged issued share capital of Parent to the AIM market operated
by the London Stock Exchange plc ("AIM ADMISSION"), including, for the
avoidance of doubt, Parent's AIM nominated advisor being satisfied that
Parent is appropriate to being admitted to the AIM market upon consummation
of the transactions contemplated by this Agreement, is required in order to
consummate the transactions contemplated by this Agreement. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated by this Agreement have been duly authorized by
all necessary corporate action on the part of Parent and Buyer, and no
other corporate proceedings on the part of Parent or Buyer, other than
obtaining the Parent Shareholder Approval and AIM Admission, are necessary
to authorize this Agreement or the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
each of Parent and Buyer and, assuming the due authorization, execution and
delivery by Seller, constitutes a legal, valid and binding obligation of
Parent and Buyer, as applicable, enforceable against Parent and Buyer, as
applicable, in accordance with its terms, subject to bankruptcy,
insolvency, moratorium, reorganization or similar Laws affecting the rights
of creditors generally and the availability of equitable remedies. The
execution, delivery and performance of this Agreement and the consummation
of the Acquisition and the other transactions contemplated by this
Agreement and compliance with the provisions of this Agreement do not and
will not (with or without notice or lapse of time or both) conflict with,
result in any violation or breach of or default under, or result in,
termination or acceleration of any obligation, or result in the creation of
any Encumbrance, other than Permitted Encumbrances, under, (x) the
memorandum or articles of association of Parent or the certificate of
incorporation or by-laws of Buyer, (y) any material Contract to which
Parent or Buyer is a party or any of their respective properties, rights or
other assets is subject in any way, or (z) subject to the governmental
filings and other matters referred to in the following sentence, any
material Law applicable to Parent or Buyer or their respective properties,
rights or other assets, or any material order, writ, injunction, decree,
judgment or stipulation, in each case, is expressly applicable by its terms
to Parent or Buyer or their respective properties, rights or other assets,
and in each case of (y) and (z) above, in any way that, individually or in
the aggregate has had or would reasonably be expected to have a Parent
Material Adverse Effect. No material license, consent, clearance, permit,
qualification, waiver, approval, order or authorization of, action by or in
respect of, registration, declaration or filing with, or notice to any
Governmental Entity is required by or with respect to Parent or Buyer in
connection with the execution, delivery and performance of this Agreement
by Parent and Buyer or the consummation by Parent and Buyer of the
Acquisition or the other transactions contemplated by this Agreement,
except for (1) the filing of a pre-merger notification and report form by
Parent under the HSR Act and applicable notification or approval
requirements under foreign competition, antitrust or merger
21
control Laws or regulations and the receipt, termination or expiration, as
applicable, of approvals or waiting periods required under the HSR Act or
any other applicable foreign or domestic competition, merger control,
antitrust or similar Law or regulation, (2) the filing with the SEC of such
reports under the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated by this Agreement and (3)
announcements required in relation to this Agreement and the AIM Admission,
publication of an AIM Admission document, associated filings with
regulatory bodies and any additional requirements imposed by such
regulatory bodies, or as may be required by the AIM Rules in connection
with this Agreement, the transactions contemplated hereby and the
Financing.
(ii) Subject to obtaining the Parent Shareholder Approval and the AIM
Admission, at or prior to the Closing Date, the Notes, which will be dated
as of the Closing Date, will have been duly authorized by the Buyer and
Parent and, on the Closing Date, will have been validly executed and
delivered by the Buyer. When each of the Notes has been duly executed and
delivered by the Buyer, each of the Notes will constitute a legal, valid
and binding obligation of the Buyer, enforceable against the Buyer in
accordance with its terms, subject to bankruptcy, insolvency, moratorium,
reorganization or similar Laws affecting the rights of creditors generally
and the availability of equitable remedies, and no other corporate or
shareholder proceedings on the part of the Buyer or Parent are necessary to
authorize the Notes or to consummate the transactions contemplated thereby.
(iii) Subject to obtaining the Parent Shareholder Approval and the AIM
Admission, all of the ordinary shares of Parent, par value $0.10 (the
"PARENT COMMON SHARES"), to be issued upon conversion of the Convertible
Note, will be duly allotted and reserved for issuance as of the Closing
Date and, when issued and delivered upon conversion of the Convertible
Note, will (x) be newly issued shares, duly allotted, validly issued, fully
paid and nonassessable, (y) not be in violation of any preemptive rights;
provided that immediately prior to the consummation of the Closing and
immediately prior to the time of conversion of the Convertible Note the
person to whom the Parent Common Shares are to be issued holds Parent
Common Shares, and (z) be free of any Encumbrance or adverse claim.
"Nonassessable" shall mean, in relation to fully-paid Parent Common Shares,
that: (i) no holder of Parent Common Shares shall be obliged to contribute
further amounts to Parent, either in order to complete payment in respect
of their shares, to satisfy claims of any claimants of Parent, or
otherwise; and (ii) no holder of Parent Common Shares shall be bound by an
alteration of the Memorandum or Articles of Association of Parent after the
date on which he became a holder of, if and so far as the alteration
requires him to take, or subscribe for additional Parent Common Shares, or
in any way increases his liability to contribute to or to pay money to
Parent.
(c) Financing. Pursuant to a Subscription Agreement, dated as of the
date hereof (the "SUBSCRIPTION AGREEMENT"), by and between Parent and
Subscriber, the Subscriber has committed to provide certain of the financing to
Parent in connection with the transactions contemplated hereby in exchange for
the issuance of Parent Common Shares to the Subscriber. As of the date hereof,
the commitments contained in the Subscription Agreement (the
22
"FINANCING") have not been withdrawn or rescinded in any respect and the
Subscription Agreement has not been amended or modified. To Parent's knowledge,
as of the date hereof, (i) the Subscription Agreement is in full force and
effect in the form so delivered and (ii) the Subscription Agreement constitutes
the valid and binding obligation of the Subscriber, enforceable in accordance
with its terms (subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar Laws of general applicability relating to
or affecting creditors' rights and to general equity principles). The aggregate
proceeds contemplated by the Subscription Agreement will be sufficient when
fully funded for Buyer to pay the cash portion of the Purchase Price and any
other payments to be paid at Closing as contemplated in this Agreement. The
obligations of the Subscriber to fund the amounts contemplated to be funded
under the Subscription Agreement are not subject to any conditions other than as
set forth in the Subscription Agreement. For the avoidance of doubt, it is not a
condition to Closing under this Agreement for Parent to obtain the equity
contribution under the Subscription Agreement or any alternative financing.
(d) SAC Guarantee. Concurrently with the execution of this Agreement,
pursuant to a separate agreement executed by and between Seller and the SAC
Funds, dated as of the date hereof, SAC Funds have delivered a guarantee to
Seller with respect to certain matters on the terms specified therein (the "SAC
GUARANTEE"). To Parent's knowledge, the SAC Guarantee is in full force and
effect and constitutes the legal, valid and binding obligations of its
respective guarantor, enforceable by Seller against SAC Funds in accordance with
its terms, and has not been amended, withdrawn or rescinded in any respect
(subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar Laws of general applicability relating to or affecting
creditors' rights and to general equity principles).
(e) Tax. All material tax returns required to be filed by Parent and
each of its subsidiaries in any jurisdiction have been filed, other than those
filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due pursuant to such returns or pursuant to any assessment received by Parent or
any of its subsidiaries have been paid, other than those being contested in good
faith and for which adequate reserves have been provided and other than any such
failures to file or pay which, individually or in the aggregate, has not had and
would not reasonably be expected to have a Parent Material Adverse Effect.
Neither Parent nor Buyer currently has any plan or intention to sell all or most
of the assets of the Company in a taxable transaction. Neither Parent nor Buyer
is acting as an agent or intermediary for any buyers of all or most of the
assets of the Company.
(f) Financial Statements. Each of (i) the audited consolidated balance
sheets of Parent as of December 31, 2006 and December 31, 2007 (including any
related notes) and (ii) the audited consolidated statements of operations,
stockholders' equity and cash flows of Parent for the years ending December 31,
2006 and December 31, 2007 (including any related notes) (the "PARENT FINANCIAL
STATEMENTS") has been prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly presented in all material respects the consolidated
financial position of Parent and its subsidiaries as of the dates thereof and
the consolidated results of their operations and cash flows for the periods then
ended.
(g) Permits; Compliance with Laws. Parent and its subsidiaries hold
all consents, authorizations, registrations, permits, licenses, variances,
exemptions, orders and approvals of all Governmental Entities (the "PARENT
PERMITS") required in order to own their respective assets and to conduct their
respective businesses as currently conducted, except where the failure to hold
such Parent Permits has not had and would not, individually or in the aggregate
with all other such failures, reasonably be expected to have a Parent Material
Adverse Effect. All of the Parent Permits are in full force and effect and
Parent and its subsidiaries are in compliance with the terms of the Parent
Permits, and no Action is pending or threatened in writing that would revoke,
suspend, cancel, terminate, or adversely modify any Parent Permit, except for
such failures to be in full force and effect and such Actions that have not had
and that would not, individually or in the aggregate with all other such
failures, reasonably be expected to have a Parent Material Adverse Effect. The
operations of Parent (including the obtaining of any Parent Permits) and its
subsidiaries have been conducted in compliance with all applicable Laws of any
Governmental Entity, except where the failure to comply or the violation has not
had and would not, individually or in the aggregate with all other such failures
or violations, reasonably be expected to have a Parent Material Adverse Effect.
23
(h) Accredited Investors.
(i) Buyer is acquiring the Shares for its own account with the present
intention of holding the Shares for investment purposes, and Buyer has no
present intention of selling such securities in a public distribution.
(ii) Buyer is an "accredited investor," as such term is defined in
Rule 501(a) of Regulation D promulgated under the Securities Act.
(iii) Parent and Buyer are sophisticated investors with such knowledge
and experience in business and financial matters as will enable Parent and
Buyer to evaluate the merits and risks of an investment in the Shares.
(iv) Parent and Buyer (A) understand that an investment in the Shares
involves a significant degree of risk, including a risk of total loss of
such investment, (B) are fully aware of and understand all the risk factors
related to the Shares and (C) are able to bear the economic risk and lack
of liquidity of an investment in the Shares for an indefinite period of
time.
(v) Parent and Buyer have had an opportunity to review information
concerning the Company and its subsidiaries in detail and to ask questions
and receive answers concerning the terms and conditions of the Shares and
the business of the Company and its subsidiaries.
(vi) Parent and Buyer expressly acknowledge that neither Seller nor
any of its Affiliates or Representatives has made any representations or
warranties to it in connection with the Shares other than the
representations and warranties made by Seller in this Agreement. Parent and
Buyer have, independently and without reliance upon Seller, the Company or
any Affiliate or Representative of any of the foregoing, and based on such
documents and information as Parent and Buyer have deemed appropriate, made
their own appraisal of and investigation into the business, operations,
property, financial
24
and other condition and creditworthiness of the Company and its
subsidiaries and made their own investment decision with respect to the
investment represented by the Shares. Parent and Buyer have consulted to
the extent deemed appropriate by Parent and Buyer with their own advisers
as to the financial, tax, legal and related matters concerning an
investment in the Shares and on that basis understand the financial, legal,
tax and related consequences of an investment in the Shares, and believes
that an investment in the Shares is suitable and appropriate for Parent and
Buyer.
ARTICLE IV
Covenants Relating to Conduct of Business; No Solicitation
Section 4.01. Conduct of Business.
(a) Conduct of Business by the Company. During the period from the
date of this Agreement to the Closing, except as set forth in Section 4.01(a) of
the Seller Disclosure Schedule, as consented to in writing by Parent (which
consent shall not be unreasonably withheld, delayed or conditioned) or as
otherwise permitted pursuant to Sections 4.01(a)(i) through (xx) of this
Agreement, Seller shall use its reasonable best efforts to cause the Company and
the Company's subsidiaries to (1) carry on its business in the ordinary course
consistent with past practice and in compliance in all material respects with
all applicable Laws, and (2) keep in effect general liability, casualty, product
liability, workers compensation, directors' and officers' liability and other
material insurance policies or self-insurance programs in coverage, scope and
amounts substantially similar to those in effect at the date hereof.
Notwithstanding the foregoing, during the period from the date of this Agreement
to the Closing, except as otherwise set forth in Section 4.01(a) of the Seller
Disclosure Schedule or as otherwise required pursuant to this Agreement, Seller
shall use its reasonable best efforts to cause the Company and the Company's
subsidiaries not to take any of the following actions without Parent's prior
written consent (which consent shall not be unreasonably withheld, delayed or
conditioned):
(i) (x) other than as permitted in Section 2.03, declare, set aside or
pay any dividends on, or make any other distributions (whether in cash,
stock, other securities or property) in respect of, any of its capital
stock, (y) split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities convertible into, in
respect of, in lieu of or in substitution for shares of its capital stock,
or (z) purchase, redeem or otherwise acquire any shares of its capital
stock, any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities, except for issuances,
purchases, redemptions or other acquisitions of capital stock or other
securities required under the terms of any plans (including Company Plans),
arrangements (employment, consulting or otherwise) or Contracts existing on
the date hereof, and set forth in Section 4.01(a)(i) of the Seller
Disclosure Schedule, between the Company or any of its subsidiaries, on the
one hand, and any director or Employee of the Company or any of its
subsidiaries, on the other hand;
(ii) issue, deliver, sell, grant, pledge or otherwise encumber or
subject to any lien any shares of its capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting
25
securities or convertible securities, or any "phantom" stock, "phantom"
stock rights, stock appreciation rights or stock-based performance units,
including pursuant to Contracts as in effect on the date hereof (other than
the issuance of shares of Common Stock upon the exercise of Stock Options
outstanding on the date hereof in accordance with their terms on the date
hereof);
(iii) amend the Company Certificate or the Company By-laws or other
comparable charter or organizational documents of any of the Company's
subsidiaries, except as may be required by applicable Law or the rules and
regulations of the SEC;
(iv) acquire or agree to acquire any assets (including equity or debt
securities) other than immaterial assets acquired in the ordinary course of
business consistent with past practice (which includes any investments made
pursuant to any investment or cash management policies or guidelines of the
Company in effect at the time this Agreement is executed and set forth in
Section 4.01(a)(iv) of the Seller Disclosure Schedule);
(v) (x) sell, lease, license, knowingly abandon or allow to lapse,
mortgage, sell and leaseback, knowingly allow to expire or be cancelled,
terminate, or otherwise encumber or subject to any lien or otherwise
dispose of, in whole or in part, any of its properties, rights or other
assets or any interests therein (including securitizations), except for
sales of inventory and other immaterial assets in the ordinary course of
business consistent with past practice, (y) enter into any lease of
property, except for immaterial property in the ordinary course of
business, or (z) modify or amend any lease of property, except for
immaterial modifications or amendments in the ordinary course of business;
(vi) (w) make any loans, advances or capital contributions to, or
investments in, any other person, other than to employees and consultants
in respect of expenses incurred in the ordinary course of business
consistent with past practice, the Company's expense reimbursement policies
or the applicable consulting arrangement, (x) increase the compensation or
fringe benefits of, or grant any severance or termination pay to, any
present or former director, officer, consultant or employee of the Company
or its subsidiaries (except for increases in salary or wages for, or grants
of severance or termination pay to, non-executive employees and
consultants, in the ordinary course of business consistent with past
practice), (y) establish, adopt, enter into, amend or terminate any Company
Plan or any plan, agreement, program, policy, trust, fund or other
arrangement that would be a Company Plan if it were in existence as of the
date of this Agreement, or (z) grant, amend or adjust the terms of any
equity or equity-based awards with respect to Common Stock;
(vii) make any new capital expenditure or expenditures which in the
aggregate are in excess of (A) $4,000,000 through September 30, 2008 and
(y) $5,000,000 through October 31, 2008 (including expenditures through
September 30, 2008);
(viii) except as required by applicable Law, (v) cancel any
Indebtedness, (w) assign, agree to modify or knowingly waive in any
material respect or, subject to the terms hereof, knowingly fail to enforce
in any material respect, any claims or rights of substantial value, (x)
waive any benefits of, or agree to modify in any respect, or, subject
26
to the terms hereof, knowingly fail to enforce, or consent to any matter
with respect to which consent is required under, any standstill or similar
Contract to which the Company or any of its subsidiaries is a party, or (y)
knowingly waive any material benefits of, or agree to modify in any
material respect, or, subject to the terms hereof, fail to enforce in any
material respect, or consent to any matter with respect to which consent is
required under, any material confidentiality or similar Contract to which
the Company or any of its subsidiaries is a party;
(ix) enter into, modify, amend or terminate any Contract or waive,
release or assign any material rights or claims thereunder, which if so
entered into, modified, amended, terminated, waived, released or assigned
would reasonably be expected to (a) impose any restriction on the ability
of the Company and its subsidiaries to conduct their respective businesses
as currently conducted, (b) impair in any material respect the ability of
the Company to perform its obligations under this Agreement, or (c) prevent
or materially delay the consummation of the transactions contemplated by
this Agreement;
(x) enter into any Contract containing any restriction on the ability
of the Company or any of its Affiliates to assign its rights, interests or
obligations thereunder, unless such restriction expressly excludes any
assignment to Parent or any of its Affiliates in connection with or
following the consummation of the Acquisition and the other transactions
contemplated by this Agreement;
(xi) sell, transfer or license to any person or otherwise extend,
enter into, amend or modify any material rights to the Company Intellectual
Property Rights or any of its subsidiaries other than in the ordinary
course of business consistent with past practice;
(xii) except as required by GAAP, materially writeup, writedown or
writeoff the book value of any assets of the Company or any of its
subsidiaries or make any material change in accounting methods, principles
or practices;
(xiii) enter into a new line of business;
(xiv) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation or recapitalization of the Company or any of its
subsidiaries (other than this Agreement and the Acquisition);
(xv) except as otherwise set forth in Section 9.02(d) of the Seller
Disclosure Schedule or as otherwise required pursuant to this Agreement,
settle or compromise any Action which (a) is material to the Company and
its subsidiaries, taken as a whole, (b) together with other Actions settled
or compromised after the date hereof, requires payment to or by the Company
or any of its subsidiaries in excess of $1,000,000, individually or in the
aggregate, (c) involves injunctive or equitable relief or restrictions on
the business activities of the Company or Parent or their respective
subsidiaries, (d) would involve the issuance of Company securities or (e)
relates to the transactions contemplated hereby;
27
(xvi) (a) incur or prepay any Indebtedness (directly, contingently or
otherwise), other than letters of credit or similar arrangements issued to
or for the benefit of suppliers in the ordinary course of business or
capitalized leases for immaterial replacement personal property in the
ordinary course of business, (b) issue or sell any debt securities, or
warrants or other rights to acquire any debt securities, of the Company or
any of its subsidiaries, (c) guarantee, assume or otherwise become liable
for any Indebtedness of any person other than guarantees, assumptions or
liability for Indebtedness of the Company or any of its subsidiaries in
existence as of the date of this Agreement, (d) enter into any "keep well"
or other agreement to maintain any financial statement condition of any
person, or enter into any arrangement having the economic effect of any of
the foregoing, other than those relating solely to the Company or any of
its subsidiaries, (e) make any loans, advances or capital contributions to,
or investments in, any other person, other than to the Company or any of
its subsidiaries, or (f) become a party to any hedging, derivatives or
similar Contract;
(xvii) enter into any Contract with any Affiliate (other than
contracts solely involving the Company and any of its subsidiaries);
(xviii) effect or permit a "plant closing" or "mass layoff" as those
terms are defined in WARN without complying with the notice requirements
and all other provisions of WARN;
(xix) amend, settle or compromise the Governance Agreement; or
(xx) authorize any of, or commit, resolve or agree to take any of, the
foregoing actions.
(b) Other Actions. Except as otherwise provided in this Agreement,
Seller, Parent and Buyer shall not, and shall not permit any of their respective
subsidiaries to, take any action that would, or that would reasonably be
expected to, result in any of the conditions to the Acquisition set forth in
Article VI not being satisfied.
(c) Advice of Changes; Filings. Seller and Parent shall promptly
advise the other party orally and in writing of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would
reasonably be expected to cause any representation or warranty made by it (and,
in the case of Parent, made by Buyer) contained in this Agreement to become
untrue or inaccurate in any material respect or (ii) the failure of it (and, in
the case of Parent, of Buyer) to comply with or satisfy in any material respect
any covenant, condition or agreement to be complied with or satisfied by it
(and, in the case of Parent, of Buyer) under this Agreement. Seller and Parent
shall, to the extent permitted by Law, promptly provide the other with copies of
all filings made by such party with any Governmental Entity or stock exchange,
other than the London Stock Exchange or the UK Financial Services Authority with
respect to communications with Parent's AIM nominated advisor that, pursuant to
the rules or regulations of such exchange or authority, are to remain
confidential, regarding the Acquisition shall include representatives of Parent,
Buyer and Seller. Subject to applicable Law, the parties will consult and
cooperate with each other in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments and proposals made or submitted to
28
any Governmental Entity or stock exchange, other than to the London Stock
Exchange or the UK Financial Services Authority with respect to communications
with Parent's AIM nominated advisor that, pursuant to the rules or regulations
of such exchange or authority, are to remain confidential, regarding the
Acquisition by or on behalf of any party.
(d) Certain Tax Matters. During the period from the date of this
Agreement to the Closing, Seller shall use its reasonable best efforts to cause
the Company and the Company's subsidiaries to, (a) timely file, consistent with
past practice, all Tax Returns ("POST-SIGNING RETURNS") required to be filed by,
or on behalf of, each such entity; (b) timely pay all Taxes due and payable; (c)
accrue a reserve in the books and records and financial statements of any such
entity in accordance with past practice for all Taxes payable but not yet due;
(d) promptly notify Parent of any Action that is or becomes pending against, or
with respect to, the Company or any of its subsidiaries in respect of any
material amount of Tax and not settle or compromise any such Action without
Parent's consent; (e) not make any material Tax election, other than in the
ordinary course of business, or settle or compromise any material Tax liability,
other than with Parent's consent (which consent shall not be unreasonably
withheld or delayed); and (f) cause all existing Tax sharing agreements, Tax
indemnity obligations and similar agreements, arrangements or practices with
respect to Taxes to which the Company or any of its subsidiaries is or may be a
party or by which the Company or any of its subsidiaries is or may otherwise be
bound to be terminated as of the Closing Date so that after such date neither
the Company nor any of its subsidiaries shall have any further rights or
liabilities thereunder.
Section 4.02. Conduct of Parent Pending the Acquisition. Between the
date of this Agreement and the Closing, except as otherwise expressly
contemplated by this Agreement or the Parent Disclosure Schedule, neither Parent
nor any of its subsidiaries shall, without Seller's prior written consent (which
consent shall not be unreasonably withheld or delayed):
(a) (x) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock, other securities or property) in respect
of, any of Parent's capital stock, (y) split, combine or reclassify any of
Parent's capital stock or issue or authorize the issuance of any other
securities convertible into, in respect of, in lieu of or in substitution for
shares of Parent's capital stock, or (z) purchase, redeem or otherwise acquire
any shares of Parent's capital stock, any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities of
Parent, except for issuances, purchases, redemptions or other acquisitions of
capital stock or other securities required under the terms of any plans,
arrangements (employment, consulting or otherwise) or Contracts existing on the
date hereof, and set forth in Section 4.02(a) of the Parent Disclosure Schedule,
between Parent or any of its subsidiaries, on the one hand, and any director or
Employee of Parent or any of its subsidiaries, on the other hand;
(b) issue, deliver, sell, grant, pledge or otherwise encumber or
subject to any lien any shares of Parent's capital stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities, or any "phantom" stock, "phantom" stock rights, stock appreciation
rights or stock-based performance units, including pursuant to Contracts as in
effect on the date hereof (other than the issuance of the Parent Common Shares
pursuant to the Subscription Agreement
29
and upon the exercise of stock options outstanding on the date hereof in
accordance with their terms on the date hereof);
(c) amend the memorandum or articles of association of Parent or the
certificate of incorporation or by-laws of Buyer or other comparable charter or
organizational documents of any of Parent's subsidiaries, except as may be
required by applicable Law or the rules and regulations of the London Stock
Exchange;
(d) acquire or agree to acquire any assets (including equity or debt
securities) other than immaterial assets acquired in the ordinary course of
business or assets each valued at $1,000,000 or less;
(e) other than with respect to any transaction involving $1,000,000 or
less, (x) sell, lease, license, knowingly abandon or allow to lapse, mortgage,
sell and leaseback, knowingly allow to expire or be cancelled, terminate, or
otherwise encumber or subject to any lien or otherwise dispose of, in whole or
in part, any of its properties, rights or other assets or any interests therein
(including securitizations), except for sales of inventory and other immaterial
assets in the ordinary course of business consistent with past practice, (y)
enter into any lease of property, except for immaterial property in the ordinary
course of business, or (z) modify or amend any lease of property, except for
immaterial modifications or amendments in the ordinary course of business;
(f) except (i) as required by applicable Law and (ii) with respect to
any matter involving $1,000,000 or less, (v) cancel any Indebtedness, (w)
assign, agree to modify or knowingly waive in any material respect or, subject
to the terms hereof, knowingly fail to enforce in any material respect, any
claims or rights of substantial value, (x) waive any benefits of, or agree to
modify in any respect, or, subject to the terms hereof, knowingly fail to
enforce, or consent to any matter with respect to which consent is required
under, any standstill or similar Contract to which Parent or any of its
subsidiaries is a party, or (y) knowingly waive any material benefits of, or
agree to modify in any material respect, or, subject to the terms hereof, fail
to enforce in any material respect, or consent to any matter with respect to
which consent is required under, any material confidentiality or similar
Contract to which Parent or any of its subsidiaries is a party;
(g) except as required by GAAP, materially writeup, writedown or
writeoff the book value of any assets of Parent or any of its subsidiaries or
make any material change in accounting methods, principles or practices;
(h) enter into a new line of business;
(i) except (i) as required pursuant to this Agreement or (ii) with
respect to any transaction involving $1,000,000 or less, (a) incur or prepay any
Indebtedness (directly, contingently or otherwise), other than letters of credit
or similar arrangements issued to or for the benefit of suppliers in the
ordinary course of business or capitalized leases for immaterial replacement
personal property in the ordinary course of business, (b) issue or sell any debt
securities, or warrants or other rights to acquire any debt securities, of
Parent or any of its subsidiaries, (c) guarantee, assume or otherwise become
liable for any Indebtedness of any
30
person other than guarantees, assumptions or liability for Indebtedness of
Parent or any of its subsidiaries in existence as of the date of this Agreement,
(d) enter into any "keep well" or other agreement to maintain any financial
statement condition of any person, or enter into any arrangement having the
economic effect of any of the foregoing, other than those relating solely to
Parent or any of its subsidiaries, (e) make any loans, advances or capital
contributions to, or investments in, any other person, other than to Parent or
any of its subsidiaries, or (f) become a party to any hedging, derivatives or
similar Contract;
(j) adopt a plan of complete or partial liquidation or dissolution of
Parent or resolutions providing for or authorizing such a liquidation or
dissolution of Parent; or
(k) authorize any of, or commit, resolve, propose or agree to take any
of, the foregoing actions.
Section 4.03. No Solicitation; No Sale. Seller shall not, nor shall it
authorize or knowingly permit any of its subsidiaries (other than the Company)
or any of their respective directors, officers or employees or any investment
banker, financial advisor, attorney, accountant or other advisor, agent or
representative (collectively, "REPRESENTATIVES") retained by it or any of its
Affiliates (other than the Company) to, directly or indirectly through another
person, (i) solicit, initiate or knowingly encourage, or take any other action
designed to, or which would reasonably be expected to facilitate any acquisition
of any shares of Common Stock or other Company securities (other than by Parent,
Buyer or their respective Affiliates), whether by way of merger, tender offer,
stock sale or otherwise, or any sale of all or substantially all of the assets
of the Company or any other transaction similar to the foregoing or (ii) enter
into, continue or otherwise participate in any discussions or negotiations
regarding, or furnish to any person any non-public information, or otherwise
cooperate in any way with, any of the matters set forth in clause (i). In no
event will Seller sell, encumber, dispose of or otherwise transfer any of its
Shares to any person other than Parent, Buyer or their respective Affiliates
prior to termination of this Agreement in accordance with Article VII. Seller
shall, and shall cause its Representatives to, cease and terminate any and all
existing discussions and negotiations with any person (other than the Company)
regarding any actual or potential acquisition of the Shares other than to Parent
and Buyer pursuant to this Agreement and shall promptly (and in any event within
72 hours) notify Parent to the extent then known to Seller of the material terms
(including the identity of the person making the proposal) of any proposal,
inquiry or offer to acquire the Shares and thereafter keep Seller reasonably
informed of terms that become known to Seller after such initial notification.
ARTICLE V
Additional Agreements
Section 5.01. Parent Shareholders' Meeting. Subject to Seller's
compliance with Section 5.02 and receipt of the access and/or information
contemplated thereby, Parent shall, promptly following the date of this
Agreement, use its reasonable best efforts to prepare and publish an admission
document in respect of Parent as enlarged by the acquisition of the Shares
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in accordance with the AIM Rules (as defined below) ("ADMISSION DOCUMENT") and
applicable Laws and give notice of and convene the Parent Shareholders Meeting
for the purpose of obtaining the Parent Shareholder Approval in accordance with
the articles of association of Parent and the AIM Rules. "AIM RULES" means the
rules and guidance notes entitled "AIM RULES FOR COMPANIES" published by the
London Stock Exchange as amended or replaced from time to time and those other
rules and guidance notes of the London Stock Exchange which govern the admission
of securities to trading on, and the regulation of, AIM.
Section 5.02. Access to Information; Confidentiality. Subject to the
requirements of applicable Laws and the Confidentiality Agreement (as defined
below), Seller shall use its reasonable best efforts to cause the Company to
provide to Parent, and to Parent's officers, employees, accountants, counsel,
financial advisors, Parent's AIM nominated advisor and other Representatives,
such information and such access to personnel and auditors regarding the Company
and its financial statements as is necessary or reasonably appropriate for the
purpose of obtaining the Parent Shareholder Approval and the AIM Admission or
for any regulatory or legal requirement, including the continuing obligations of
Parent under the AIM Rules, during normal business hours and upon reasonable
prior notice to the Company during the period prior to the Closing or the
termination of this Agreement; provided, however, that in no event shall Seller
be required to cause the Company to furnish any such information which would
result in the breach by the Company of a contractual obligation to a third party
or the termination of any legal privilege. Except for disclosures expressly
permitted by the terms of this Agreement and the Amended and Restated
Confidentiality Agreement, dated as of April 21, 2008, as amended from time to
time, by and between CBaySystems, Ltd. and the Company (as it may be amended
from time to time, the "CONFIDENTIALITY AGREEMENT"), Parent shall hold, and
shall cause its officers, employees, accountants, counsel, financial advisors,
Parent's AIM nominated advisor and other Representatives to hold, all
information received from the Company, directly or indirectly, in confidence in
accordance with the Confidentiality Agreement. No investigation pursuant to this
Section 5.02 or information provided or received by any party hereto pursuant to
this Agreement will affect any of the representations or warranties of the
parties hereto contained in this Agreement, or otherwise impair the rights and
remedies available to Parent and Buyer hereunder.
Section 5.03. Efforts to Close.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, and except as otherwise provided in this Agreement, each of the
parties agrees to use its reasonable best 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, and providing all information,
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Acquisition and the other transactions
contemplated by this Agreement, including using reasonable best efforts to
accomplish the following: (i) the taking of all acts necessary to cause the
conditions to Closing to be satisfied as promptly as practicable, (ii) the
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities, the making of all necessary registrations
and filings (including filings with Governmental Entities) and the taking of all
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entity; (iii) the obtaining of all
necessary consents, approvals or waivers from third parties; (iv) the defense of
32
any Actions, whether judicial or administrative, challenging this Agreement or
the consummation of the Acquisition, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, (v) the execution or delivery of any additional instruments
necessary to consummate the Acquisition and to carry out fully the purposes of
this Agreement in accordance with the terms and conditions hereof, (vi) the
making of all filings required by applicable antitrust or fair trade Law of any
applicable foreign jurisdiction or filings required by any foreign labor
organization or works council, (vii) not taking any other action which would
reasonably be expected to prevent, materially delay or materially impede the
consummation of the Acquisition or the other transactions contemplated by this
Agreement, and (viii) (in the case of Seller, and without prejudice to the
foregoing) the taking of all necessary acts to enable Parent as promptly as is
reasonably practicable to issue a shareholder circular comprising or accompanied
by the Admission Document and otherwise to satisfy in all material respects all
requirements (including those of Parent's AIM nominated advisor) and the taking
of all necessary acts in connection with obtaining the Parent Shareholder
Approval and the proposed admission to trading on the AIM Market (Alternative
Investment Market) of the London Stock Exchange plc of the Parent Common Shares
upon consummation of the Acquisition. In connection with, and without limiting,
the foregoing, Seller and Parent shall duly file with the U.S. Federal Trade
Commission and the Antitrust Division of the Department of Justice the
notification and report form (the "HSR FILING") required under the HSR Act with
respect to the transactions contemplated by this Agreement as promptly as
practicable (and in any event within fifteen (15) business days of the date of
this Agreement). The HSR Filing shall be in substantial compliance with the
requirements of the HSR Act. Each party shall cooperate with the other party to
the extent necessary to assist the other party in the preparation of its HSR
Filing, to request early termination of the waiting period required by the HSR
Act and, if requested, to promptly amend or furnish additional information
thereunder. Seller shall use its reasonable best efforts to cause the Company
and the Company's subsidiaries to (1) take all action that is commercially
reasonable to ensure that no state takeover statute or similar statute or
regulation is or becomes applicable to this Agreement, such as to prohibit the
Acquisition or any of the other transactions contemplated by this Agreement, and
(2) if any state takeover statute or similar statute becomes applicable to this
Agreement, such as to prohibit the Acquisition or any of the other transactions
contemplated by this Agreement, take all action that is commercially reasonable
to ensure that the Acquisition and the other transactions contemplated by this
Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and otherwise to minimize the effect of such
statute or regulation on this Agreement, the Acquisition and the other
transactions contemplated by this Agreement. Nothing in this Agreement shall be
deemed to require Parent to agree or proffer to divest or hold separate any
assets or any portion of any business of Parent, the Company or any of their
respective subsidiaries. Nothing in this Agreement shall be deemed to require
Seller to use its reasonable best efforts to cause the Company to agree or
proffer to divest or hold separate any assets or any portion of any business of
the Company or any of its subsidiaries. Subject to restrictions required by Law,
each of Parent, Buyer and Seller shall promptly supply, and shall cause their
Affiliates or owners promptly to supply, the others with any information which
may be reasonably required in order to make any filings or applications pursuant
to this Section 5.03(a).
33
(b) Subject to applicable Law, each of Parent, Buyer and Seller will
notify the others promptly upon the receipt of: (i) any comments or questions
from any officials of any Governmental Entity or stock exchange in connection
with any filings made pursuant hereto or the Acquisition itself and (ii) any
request by any officials of any Governmental Entity or stock exchange for
amendments or supplements to any filings made pursuant to any applicable Laws,
rules and regulations of any Governmental Entity or stock exchange or answers to
any questions, or the production of any documents relating to an investigation
of the Acquisition by any Governmental Entity or stock exchange, other than the
London Stock Exchange or the UK Financial Services Authority with respect to
communications with Parent's AIM nominated advisor that, pursuant to the rules
or regulations of such exchange or authority, are to remain confidential,
regarding the Acquisition by or on behalf of any party. Whenever any event
occurs that is required to be set forth in an amendment or supplement to any
filing made pursuant to Section 5.03(a), Parent, Buyer or Seller, as the case
may be, will promptly inform the others of such occurrence and cooperate in
filing with the applicable Governmental Entity or stock exchange such amendment
or supplement. Without limiting the generality of the foregoing, each party
shall provide to the other parties (or their respective advisors), upon request,
copies of all correspondence between such party and any Governmental Entity or
stock exchange relating to the Acquisition, other than to the London Stock
Exchange or the UK Financial Services Authority with respect to correspondence
with Parent's AIM nominated advisor that, pursuant to the rules or regulations
of such exchange or authority, are to remain confidential, regarding the
Acquisition by or on behalf of any party. Such materials and the information
contained therein shall be given only to counsel of the recipient and with
respect to Parent, Parent's AIM nominated advisor and counsel to Parent's AIM
nominated advisor, and will not be disclosed by such counsel or advisors to
employees, officers or directors of the recipient without the advance written
consent of the party providing such materials. In addition, to the extent
reasonably practicable, all discussions, telephone calls and meetings with a
Governmental Entity or stock exchange regarding the Acquisition shall include
representatives of Parent, Buyer and Seller, other than the London Stock
Exchange or the UK Financial Services Authority with respect to communications
with Parent's AIM nominated advisor that, pursuant to the rules or regulations
of such exchange or authority, are to remain confidential, regarding the
Acquisition by or on behalf of any party. Subject to applicable Law, the parties
will consult and cooperate with each other in connection with any analyses,
appearances, presentations, memoranda, briefs, arguments and proposals made or
submitted to any Governmental Entity or stock exchange regarding the Acquisition
by or on behalf of any party.
Section 5.04. Indemnification; Advancement of Expenses; Exculpation
and Insurance.
(a) Parent shall use its reasonable best efforts to cause the Company
to continue all rights to indemnification, advancement of expenses and
exculpation from liabilities for acts or omissions occurring at or prior to the
Closing now existing in favor of the current or former directors or officers of
the Company as provided in the Company Certificate, the Company By-laws or any
Contract between such directors or officers and the Company (in each case, as in
effect on the date hereof), without further action, as of the Closing.
34
(b) In the event that the Company or any of its successors or assigns
(i) consolidates with or merges into any other person and is not the continuing
or surviving corporation or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all of its properties and other assets
to any person, then, and in each such case, Parent shall use its reasonable best
efforts to cause proper provision to be made so that the successors and assigns
of the Company shall expressly assume the obligations set forth in this Section
5.04.
(c) For six (6) years after the Closing, Parent shall use its
reasonable best efforts to maintain (directly or indirectly through the
Company's existing insurance programs) in effect the Company's current
directors' and officers' liability insurance in respect of acts or omissions
occurring at or prior to the Closing, covering each person currently covered by
the Company's directors' and officers' liability insurance policy (a complete
and accurate copy of which has been heretofore delivered to Parent); provided,
however, that in no event shall Parent or the Company be required to maintain
directors' and officers' liability insurance pursuant to this Section 5.04(c)
which provides for annual coverage in excess of $20,000,000.
(d) The provisions of this Section 5.04 (i) are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her heirs
and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by Contract or otherwise.
(e) For purposes of Section 5.04(c), the "reasonable best efforts" of
Parent following the Closing shall be deemed to include the reasonable best
efforts of the directors of the Company appointed by Parent (to the extent such
reasonable best efforts by such Parent-appointed directors are not reasonably
likely to result in a conflict with their fiduciary duties as directors of the
Company and to the extent such reasonable best efforts by the Parent, as a
majority shareholder, are not reasonably likely to result in a conflict with its
fiduciary duties to the Company's other shareholders) causing the Company and
its subsidiaries to not take or refrain from taking (as applicable) any action
that would have resulted in a material breach of Section 5.04(c), in each case
as if the Company were a party to this Agreement and the actions that Section
5.04(c) requires Parent to use its reasonable best efforts to cause the Company
to take or refrain from the taking were direct obligations of the Company.
Section 5.05. Fees and Expenses.
(a) Except as provided in paragraph (b) of this Section 5.05, all fees
and expenses incurred in connection with this Agreement, the Acquisition and the
other transactions contemplated by this Agreement shall be paid by the party
incurring such fees or expenses, whether or not the Acquisition is consummated,
it being agreed that: (i) Parent shall pay all of the filing fees for the
pre-merger notification and report forms under the HSR Act and any applicable
merger notification or control Laws, and any other applicable antitrust or fair
trade Law, of any applicable foreign jurisdiction or filings required by any
foreign labor organization or works council; (ii) Seller shall agree to
reimburse the Company through the Closing, if so requested by the Company, for
the reasonably documented out-of-pocket expenses incurred by the Company and its
subsidiaries in connection with (x) the Company providing access to information
as set forth in Section 5.02, and (y) any efforts by the Company pursuant to the
fifth
35
sentence of Section 5.03(a); and (iii) upon consummation of the Acquisition at
the Closing, Parent will reimburse Seller by a cash payment at the Closing for
the aggregate amount of the Seller's reimbursement of the out-of-pocket expenses
of the Company pursuant to clause (ii) of this Section 5.05(a) and Seller shall
provide to Parent appropriate evidence of such expenses at least three business
days prior to the Closing.
(b) If this Agreement is terminated pursuant to Section 7.01(c) or
7.01(e), then Seller shall pay Parent a fee equal to $8,610,000 (collectively,
the "PARENT TERMINATION FEE"), by wire transfer of same-day funds no later than
the third business day following the date of termination of this Agreement (to
an account designated by Parent), it being understood that in no event shall
Seller be required to pay the Parent Termination Fee on more than one occasion.
(c) If this Agreement is terminated pursuant to :
(1) Section 7.01(b)(iii) (when all of the conditions precedent to
Parent's obligation to consummate the Acquisition (other than those conditions
that by their terms are to be satisfied at the Closing) shall have been
satisfied or waived);
(2) Section 7.01(f); or
(3) Section 7.01(d) (but solely with respect to a material and
willful breach of the Parent Fundamental Representations or an obligation of
Parent and Buyer set forth in Sections 5.01, 5.03, 5.05(a), 5.06, 5.07, 5.08,
5.11 and 5.15 of this Agreement and expressly excluding the obligations set
forth in Section 4.02);
then Parent shall pay Seller a fee equal to $8,610,000
(collectively, the "SELLER TERMINATION FEE") by wire transfer of same-day funds
no later than the third business day following the date of termination of this
Agreement (to an account designated by Seller), it being understood that in no
event shall Parent be required to pay the Seller Termination Fee on more than
one occasion. Notwithstanding the foregoing, the Seller Termination Fee shall
not be payable at all in connection with:
(A) a right to terminate this Agreement pursuant to clause (1)
above in the event that there is a failure of a condition set forth in Section
6.01(b), Section 6.01(c) or Section 6.02 which gives Parent the right to
terminate this Agreement pursuant to Section 7.01(c) (assuming for this purpose
only that the condition in Section 6.01(a) had been previously satisfied); or
(B) a right to terminate this Agreement pursuant to clause (1)
above, in the event all of the following requirements are satisfied at the time
of termination of this Agreement:
(x) the representation and warranty in the second sentence
of Section 3.03(b)(i) was true and correct in all material respects on the date
of this Agreement and on the date of the Parent Shareholders Meeting if such
meeting is held; and
(y) within 20 business days after the date of this
Agreement, Parent has obtained valid and binding Parent Voting Agreements (and
provided Seller with appropriate
36
evidence thereof) from uninterested Parent shareholders collectively holding at
least a majority (based on the uninterested voting stock to be outstanding on
the record date of the Parent Shareholders Meeting) of Parent's uninterested
voting stock; and
(z) if such percentage of Parent Voting Agreements is
obtained within such 20-business day period as described in (y) above, Parent
either (i) has voted such irrevocable voting proxies under the Parent Voting
Agreements in favor of approval of the acquisition of the Shares in the
Acquisition and any other required Parent shareholder vote to consummate the
Acquisition and other transactions contemplated by this Agreement and the
Subscription Agreement at the Parent Shareholders Meeting or any adjournment or
postponement thereof, or (ii) has failed to hold the Parent Shareholders Meeting
or an adjournment or postponement thereof at which such irrevocable voting
proxies are voted prior to October 30, 2008 and such failure to hold the Parent
Shareholders Meeting or an adjournment or postponement thereof is primarily
caused either by the failure of Parent to have cooperation or access to
information as contemplated by Section 5.02 or by a temporary restraining order,
preliminary or permanent injunction or other judgment or order issued by any
court of competent jurisdiction or other Law; or
(C) a right to terminate this Agreement pursuant to clause (1)
above in the event the Parent has failed to obtain the Parent Shareholder
Approval prior to October 30, 2008 and such failure is primarily caused either
by the failure of Parent to have cooperation or access to information as
contemplated by Section 5.02 or by a temporary restraining order, preliminary or
permanent injunction or other judgment or order issued by any court of competent
jurisdiction or other Law; or
(D) a right to terminate this Agreement pursuant to Section
7.01(b)(iii)(y) if (i) Parent has timely satisfied the requirement to deliver
number of Parent Voting Agreements set forth in clause (B)(y) above, and (ii)
the failure to obtain the Parent Shareholder Approval prior to October 30, 2008
is primarily caused by the failure to obtain the AIM Admission or other material
regulatory or legal requirements, except where such failure to obtain the AIM
Admission or other material regulatory or legal requirements are primarily
caused by the Parent's inability to obtain financing for the Acquisition, either
pursuant to the Subscription Agreement or otherwise.
(d) Seller and Parent acknowledge and agree that the agreements
contained in Section 5.05(b) and Section 5.05(c) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
neither Parent nor Seller would enter into this Agreement; accordingly:
(i) if Seller fails to promptly pay the amount due pursuant to Section
5.05(b) and, in order to obtain such payment, Parent commences a suit that
results in a judgment against Seller for the Parent Termination Fee, Seller
shall pay to Parent its costs and expenses (including reasonable attorneys'
fees and expenses) in connection with such suit, together with interest on
the amount of the Parent Termination Fee from the date such payment was
required to be made until the date of payment at the prime rate of interest
as published in The Wall Street Journal and in effect on the date such
payment was required to be made; or
37
(ii) if Parent fails promptly to pay the amount due pursuant to
Section 5.05(c), and, in order to obtain such payment, Seller commences a
suit that results in a judgment against Parent for the Seller Termination
Fee, Parent shall pay to Seller its costs and expenses (including
reasonable attorneys' fees and expenses) in connection with such suit,
together with interest on the amount of the Seller Termination Fee from the
date such payment was required to be made until the date of payment at the
prime rate of interest as published in The Wall Street Journal and in
effect on the date such payment was required to be made.
(e) In the event of a termination of this Agreement in connection with
which:
(i) Parent is entitled to receive the Parent Termination Fee, Parent's
right to receive payment of the Parent Termination Fee from Seller pursuant
to this Section 5.05 shall be the sole and exclusive remedy of Parent and
its Affiliates against Seller and any of its current, former or future
representatives, Affiliates, directors, officers, employees, partners,
managers, members or stockholders (each, a "SELLER PARTY") for any loss or
damage suffered as a result of the failure of the Acquisition to be
consummated or any breach of this Agreement or any representation,
warranty, covenant or agreement contained herein or otherwise, and upon
payment of such amount none of the Seller Parties shall have any further
liability or obligation relating to or arising out of this Agreement or the
transactions contemplated hereby. Notwithstanding the foregoing, Parent may
waive receipt of the Parent Termination Fee when one is otherwise payable
pursuant to this Agreement prior to receipt thereof and seek actual damages
(which shall not include consequential damages) in the event of a material
breach by Seller of the representations and warranties set forth in Section
3.01 (other than the last sentence of Section 3.01(e)) (the "SELLER
FUNDAMENTAL REPRESENTATIONS") or in the event of a material and willful
breach of an obligation of Seller set forth in this Agreement taken by, or
effected by inaction of, Seller.
(ii) Seller is entitled to receive the Seller Termination Fee, other
than any rights against the guarantors pursuant to, but only to the extent
provided in, the SAC Guarantee, Seller's right to receive payment of the
Seller Termination Fee from Parent pursuant to this Section 5.05 shall be
the sole and exclusive remedy of Seller and its Affiliates against Parent,
Buyer, the Subscriber and any of their respective current, former or future
representatives, Affiliates, directors, officers, employees, partners,
managers, members or stockholders (each, a "PARENT PARTY") for any loss or
damage suffered as a result of the failure of the Acquisition to be
consummated or any breach of this Agreement or any representation,
warranty, covenant or agreement contained herein or otherwise, and upon
payment of such amount none of the Parent Parties shall have any further
liability or obligation relating to or arising out of this Agreement or the
transactions contemplated hereby.
(f) Notwithstanding anything in this Agreement to the contrary, in the
event the Acquisition is not consummated, the maximum aggregate liability of the
Parent Parties for all damages to Seller shall be limited to the amount of the
Seller Termination Fee. In the event the Acquisition is not consummated, the
maximum aggregate liability of Seller to the Parent Parties shall be limited to
the Parent Termination Fee, except as otherwise specifically permitted or
38
required by Section 5.05(e)(i) and Section 9.10. Without limiting Section 9.10,
in no event shall Seller or any of its Affiliates (other than the Company) seek
any equitable relief or equitable remedies of any kind whatsoever, money damages
or any other recovery, judgment or damages of any kind, including consequential,
indirect, or punitive damages, against Parent, Buyer, or any other Parent Party
in excess of the Seller Termination Fee in connection with this Agreement or the
transactions contemplated hereby, including any breach of this Agreement or any
representation, warranty, covenant or agreement contained herein or otherwise.
Seller acknowledges and agrees that, in the event the Acquisition is not
consummated, it has no right of recovery against, and no personal liability
shall attach to, in each case with respect to Seller Damages, any of the Parent
Parties (other than (x) Parent, but only to the extent provided in this
Agreement, and (y) the guarantors pursuant to, but only to the extent provided
in, the SAC Guarantee), through Parent or otherwise, whether by or through
attempted piercing of the corporate, limited partnership or limited liability
company veil, by or through a claim by or on behalf of Parent against any other
Parent Party, by the enforcement of any assessment or by any legal or equitable
proceeding, by virtue of any statute, regulation or applicable Law, or
otherwise.
Section 5.06. Public Announcements. Parent and Seller shall consult
with each other before issuing, and give each other the opportunity to review
and comment upon, any press release or other public statements made by or on
behalf of it with respect to the transactions contemplated by this Agreement,
including the Acquisition, and the Subscription Agreement, and shall not issue
any such press release or make any such public statement without the prior
written consent of each of the other parties hereto, which consent shall not be
unreasonably withheld, delayed or conditioned, except as required by applicable
Law or by any national securities exchange AIM or any applicable regulatory
body. The parties agree that the initial press release to be issued with respect
to the transactions contemplated by this Agreement shall be in the form
heretofore agreed to by the parties. Seller shall use its reasonable best
efforts to cause the Company (i) not to breach its obligations under the
Confidentiality Agreement and the SAC Confidentiality Agreement and (ii) to
approve, pursuant to the Confidentiality Agreement and the SAC Confidentiality
Agreement, any press releases or public statements jointly approved by Seller
and Parent.
Section 5.07. Director Replacement. Seller shall (i) deliver to Parent
at the Closing evidence reasonably satisfactory to Parent of the resignation,
effective immediately prior to the Closing, of the Seller Directors, (ii) use
its reasonable best efforts to cause the individuals designated by Parent in
writing at least twenty (20) business days prior to the Closing (the "PARENT
DIRECTORS") to be appointed to the board of directors of the Company, effective
immediately prior to the Closing and upon and subject to the effective time of
the resignation of the Seller Directors, as replacements for the Seller
Directors, and (iii) use its reasonable best efforts to cause the Company to
comply with SEC Rule 14f-1 by filing with the SEC, and transmitting to all
holders of record of Common Stock who would be entitled to vote at a meeting for
election of directors of the Company, not less than ten days prior to the
Closing Date, a notice containing such information regarding the Parent
Directors as is contemplated by Rule 14f-1 of the Exchange Act, and Parent
agrees to provide such information to Seller concurrent with Parent's
designation of the Parent Directors. Parent agrees that the Parent Directors
will be persons who meet the requirements of Section 3.01(e) of the Governance
39
Agreement as of the date they are appointed until the Closing Date, to the
extent the Governance Agreement is then in effect. Seller shall use its
reasonable best efforts to deliver to Parent at the Closing evidence reasonably
satisfactory to Parent of the resignation, effective as of the Closing, of those
directors of the Company's subsidiaries designated by Parent to Seller in
writing at least twenty (20) business days prior to the Closing.
Section 5.08. Subscription Agreement. Parent shall use its reasonable
best efforts to cause the Financing to be funded by the Subscriber in accordance
with the Subscription Agreement, subject to the terms, provisions and
limitations thereof. Parent shall not agree to any amendment or modification of
the Subscription Agreement that would reasonably be expected to be adverse to
Seller in any material respect. For the avoidance of doubt, notwithstanding the
foregoing, the obligation of Parent and Buyer to effect the Acquisition shall
not be subject to any financing condition.
Section 5.09. Waiver. On or prior to the Closing Date, Philips Speech
Recognition Systems GmbH, a limited liability company organized under the laws
of Austria ("PSRS"), shall have provided the Company with a waiver,
substantially in the form attached as Exhibit A hereto, through June 30, 2011 of
PSRS' right to provide, prior to June 30, 2011, a two-year advance notice of
termination of the Licensing Agreement between PSRS and the Company, dated May
22, 2000, provided that such waiver from PSRS shall become effective only, and
be conditional, on (i) the Closing of the Acquisition and (ii) the Company
agreeing during the 60-day period following the Closing Date to a similar waiver
of its right to terminate such Licensing Agreement.
Section 5.10. Intentionally Omitted..
Section 5.11. Shareholders Agreement. On the Closing Date, Seller
shall agree to enter into a Shareholders Agreement with Subscriber (which at the
request of Seller will include a separate registration rights agreement among
Seller, Parent and Subscriber) containing the terms set forth in Exhibit B
hereto and/or such additional or modified terms as the parties shall agree (the
"SHAREHOLDERS AGREEMENT").
Section 5.12. Amendment of the Company By-laws. Seller shall use its
reasonable best efforts to cause the Company By-laws to be amended prior to the
Closing to reflect the amendment set forth on Exhibit C.
Section 5.13. No Company Liability or Obligation. The Company shall
have no liability or obligation to any of Parent, Buyer or Seller in connection
with this Agreement and the transactions contemplated hereby.
Section 5.14. Acquisition of Parent Common Shares. Prior to the
Closing Date and after announcement by Parent of the signing of this Agreement
to the London Stock Exchange plc, the Seller shall acquire 000 Xxxxxx Xxxxxx
Shares in a manner to be agreed by Seller and Parent prior to Closing on terms
to be mutually agreed.
Section 5.15. Convertible Note Anti-Dilution Adjustments. At any time
following the date hereof and prior to Closing, if Parent shall take any action
that would have
40
resulted in an anti-dilution adjustment of the Convertible Note had the
Convertible Note been outstanding, the conversion rate of the Convertible Note
shall be equitably adjusted to be effective at the time of the issuance of the
Convertible Note.
ARTICLE VI
Conditions Precedent
Section 6.01. Conditions to Each Party's Obligation to Effect the
Acquisition. The respective obligation of each party to effect the Acquisition
is subject to the satisfaction or (to the extent permitted by Law) waiver on or
prior to the Closing Date of the following conditions:
(a) Parent Shareholder Approval and AIM Admission. The Parent
Shareholder Approval shall have been obtained and AIM Admission shall have
occurred;
(b) HSR Act. The waiting period (and any extension thereof) applicable
to the Acquisition under the HSR Act and applicable foreign competition or
merger control Laws shall have been terminated or shall have expired; and
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other judgment or order issued by any
court of competent jurisdiction or other Law (collectively, "RESTRAINTS") shall
be in effect preventing the consummation of the Acquisition or any of the
transactions contemplated hereby.
Section 6.02. Conditions to Obligations of Parent and Buyer. The
obligations of Parent and Buyer to effect the Acquisition are further subject to
the satisfaction or (to the extent permitted by Law) waiver by Parent on or
prior to the Closing Date of the following conditions:
(a) Fundamental Representations and Warranties. The Seller Fundamental
Representations shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing as if made at and as of such time,
provided that representations made as of a specific date shall be required to be
so true and correct in all material respects as of such date only. Parent and
Buyer shall have received a certificate signed by a duly authorized
representative of Seller as of the Closing Date attesting to the foregoing;
(b) Other Representations and Warranties. The representations and
warranties set forth in (A) the last sentence of Section 3.01(e), and (B)
Section 3.02 shall be true and correct (i) in all material respects as of the
date of this Agreement and (ii) in all respects as of the Closing (without, in
the case of this clause (ii), giving effect to any qualification as to
"knowledge," "materiality" or "Material Adverse Effect" set forth therein) as if
made at and as of such time, except in the case of this clause (ii) where the
failure to be so true and correct, individually and in the aggregate, has not
had, and would not reasonably be expected to have, a Material Adverse Effect,
provided in the case of each of clauses (i) and (ii) that representations made
as of a specific date shall be required to be so true and correct subject to
such qualifications
41
as of such date only. Parent and Buyer shall have received a certificate signed
by a duly authorized representative of Seller as of the Closing Date attesting
to the foregoing;
(c) Performance by Company. Since the date of this Agreement, the
Company shall not have taken or refrained from taking, as applicable, any action
that would have resulted in a material breach of any provision hereof, in each
case as if the Company were a party to this Agreement and the actions that this
Agreement requires Seller to use its reasonable best efforts to cause the
Company to take or refrain from taking were direct obligations of the Company;
(d) Performance of Obligations of Seller. Seller shall have performed
in all material respects all its obligations required to be performed by it
under this Agreement on or prior to the Closing Date, and Parent shall have
received a certificate signed by a duly authorized representative of Seller as
of the Closing Date attesting to the foregoing;
(e) Termination of Governance Agreement. The Governance Agreement
shall have terminated in accordance with its terms effective upon the Closing;
(f) Amendment of Company By-laws. The Company By-laws shall have been
amended to reflect the amendment set forth on Exhibit C;
(g) Seller Statement and Minimum Actual Cash. On the Actual Cash
Determination Date, Seller shall have delivered the Seller Statement certifying
that the Actual Cash as of Closing will equal to or exceed Third Target Cash;
(h) Company Directors. (i) Immediately prior to the consummation of
the Closing, the Parent Directors shall represent a majority of the members of
the board of directors of the Company, and (ii) the Company shall have complied
with SEC Rule 14f-1 by filing with the SEC, and transmitting to all holders of
record of Common Stock who would be entitled to vote at a meeting for election
of directors of the Company, not less than ten days prior to the Closing Date, a
notice containing such information regarding the Parent Directors as is required
under Rule 14f-1 of the Exchange Act; and
(i) Parent Common Shares. Immediately prior to the Closing, Seller
shall own 000 Xxxxxx Xxxxxx Shares.
Section 6.03. Conditions to Obligation of Seller. The obligation of
Seller to effect the Acquisition is further subject to the satisfaction or (to
the extent permitted by Law) waiver by Seller on or prior to the Closing Date of
the following conditions:
(a) Fundamental Representations and Warranties. The representations
and warranties set forth in Section 3.03(a), Section 3.03(b) and Section 3.03(h)
(the "PARENT FUNDAMENTAL REPRESENTATIONS") shall be true and correct in all
material respects as of the date of this Agreement and as of the Closing as if
made at and as of such time, provided that representations made as of a specific
date shall be required to be so true and correct in all material respects as of
such date only. Seller shall have received a certificate signed on behalf of
42
Parent by a duly authorized representative of Parent as of the Closing Date
attesting to the foregoing; and
(b) Other Representations and Warranties. The representations and
warranties of Parent and Buyer contained in this Agreement, other than those to
which Section 6.03(a) applies, shall be true and correct (i) in all material
respects as of the date of this Agreement and (ii) in all respects as of the
Closing (without, in the case of this clause (ii), giving effect to any
qualification as to "materiality" or "Parent Material Adverse Effect" set forth
therein) as if made at and as of such time, except in the case of this clause
(ii) where the failure to be so true and correct, individually and in the
aggregate, has not had, and would not reasonably be expected to have, a Parent
Material Adverse Effect, provided in the case of each of clauses (i) and (ii)
that representations made as of a specific date shall be required to be so true
and correct subject to such qualifications as of such date only. Seller shall
have received a certificate signed on behalf of Parent by a duly authorized
representative of Parent as of the Closing Date attesting to the foregoing; and
(c) Performance of Obligations of Parent and Buyer. Parent and Buyer
shall have performed in all material respects all their respective obligations
required to be performed by each under this Agreement on or prior to the Closing
Date, and Seller shall have received a certificate signed on behalf of Parent by
a duly authorized representative of Parent as of the Closing Date attesting to
the foregoing.
Section 6.04. Frustration of Closing Conditions. In connection with
determining satisfaction of the conditions set forth in Section 6.01, 6.02 or
6.03, none of Seller, Parent or Buyer may rely on the failure of any condition
to be satisfied, if such failure was caused by such party's failure to act in
good faith or to use its reasonable best efforts to consummate the Acquisition
and the other transactions contemplated by this Agreement, as required by and
subject to Section 5.03; provided that no party shall be required to close in
violation of Law or an applicable Restraint.
ARTICLE VII
Termination, Amendment and Waiver
Section 7.01. Termination. This Agreement may be terminated at any
time prior to the Closing Date:
(a) by mutual written consent of Parent, Buyer and Seller;
(b) by either Parent or Seller:
(i) if the Acquisition shall not have been consummated on or before
September 30, 2008; provided, however, that such date is automatically
extended to October 31, 2008 if the Closing has not occurred by September
30, 2008 as a result of the failure to satisfy the condition set forth in
Section 6.01(a) and all other conditions precedent to consummate the
Acquisition (other than those conditions that by their terms are to be
satisfied at the Closing) shall have been satisfied by September 30, 2008;
43
provided further, however, that the right to terminate this Agreement under
this Section 7.01(b)(i) shall not be available to any party whose breach of
a representation or warranty in this Agreement or whose action or failure
to act to take steps referred to in Sections 5.01, 5.02, 5.03, 5.07, 5.08,
5.12 and 5.14 of this Agreement has been a principal cause of or resulted
in the failure of the Acquisition to be consummated on or before such date;
(ii) if any Restraint having any of the effects set forth in Section
6.01(c) shall be in effect and shall have become final and nonappealable;
provided, however, that the right to terminate this Agreement under this
Section 7.01(b)(ii) shall not be available to any party whose breach of a
representation or warranty in this Agreement or whose action or failure to
act has been a principal cause of or resulted in such Restraint; or
(iii) if the Parent Shareholder Approval shall not have been obtained
(x) at the conclusion of the meeting of the holders of Parent Common Shares
duly convened therefor at which a quorum is present and any adjournment or
postponement thereof, or (y) prior to October 30, 2008, in which case this
Agreement may be terminated by Seller on or after October 30, 2008.
(c) by Parent (if neither it nor Buyer is in material breach of its
representations and warranties set forth in Section 3.03 or covenants or
agreements so as to cause any of subsections (a) through (c) of Section 6.01 or
any of subsections (a) through (c) of Section 6.03 not to be satisfied), if
Seller shall have breached or failed to perform any of its representations,
warranties, covenants or agreements set forth in this Agreement (excluding
Seller's agreement to consummate the Acquisition when all of the conditions
precedent to the Seller's obligation to consummate the Acquisition (other than
those conditions that by their terms are to be satisfied at the Closing) have
been satisfied or waived, the termination for which is governed under subsection
(e) below), which breach or failure to perform (A) would give rise to the
failure of a condition set forth in Section 6.01 or Section 6.02 and (B) is
incapable of being cured, or is not cured, by Seller within thirty (30) calendar
days following receipt of written notice of such breach or failure to perform
from Parent;
(d) by Seller (if it is not in material breach of its representations
and warranties set forth in Section 3.01 or Section 3.02, or its covenants or
agreements so as to cause any of subsections (a) through (c) of Section 6.01 or
any of subsections (a) through (i) of Section 6.02 not to be satisfied), if
Parent shall have breached or failed to perform any of its representations,
warranties, covenants or agreements set forth in this Agreement (excluding
Parent's agreement to consummate the Acquisition when all of the conditions
precedent to Parent's obligation to consummate the Acquisition (other than those
conditions that by their terms are to be satisfied at the Closing) have been
satisfied or waived, the termination for which is governed under subsection (f)
below), which breach or failure to perform (A) would give rise to the failure of
a condition set forth in Section 6.01 or Section 6.03 and (B) is incapable of
being cured, or is not cured, by Parent within thirty (30) calendar days
following receipt of written notice of such breach or failure to perform from
Seller;
(e) by Parent if, when all of the conditions precedent to Seller's
obligation to consummate the Acquisition (other than those conditions that by
their terms are to be satisfied at
44
the Closing) have been satisfied or waived, Seller does not consummate the
Acquisition on the Closing Date at a time when Parent is ready, willing and able
to consummate the Acquisition; or
(f) by Seller if, when all of the conditions precedent to Parent's
obligation to consummate the Acquisition (other than those conditions that by
their terms are to be satisfied at the Closing) have been satisfied or waived,
Parent does not consummate the Acquisition on the Closing Date at a time when
Seller is ready, willing and able to consummate the Acquisition.
Section 7.02. Effect of Termination. Except as otherwise expressly
provided in Section 5.05, and subject to the limitations set forth in Sections
5.05 and 9.10, in the event of termination of this Agreement by either Seller or
Parent as provided in Section 7.01, this Agreement shall forthwith become void
and have no effect, without any liability or obligation on the part of Parent,
Buyer or Seller under this Agreement.
Section 7.03. Amendment. This Agreement may be amended by the parties
hereto at any time in a written instrument signed by all parties.
Section 7.04. Extension; Waiver. At any time prior to the Closing, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) to the extent permitted by Law, waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto or (c) to the extent permitted by Law, waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party 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 such rights.
ARTICLE VIII
Indemnification
Section 8.01. Survival. The representations and warranties contained
in this Agreement (other than, following the Closing Date, the representations
and warranties contained in the Seller Fundamental Representations or the Parent
Fundamental Representations) and all certificates delivered at Closing shall
expire either on termination of this Agreement in accordance with Article VII or
on the Closing Date. The representations and warranties set forth in the Seller
Fundamental Representations and in the Parent Fundamental Representations shall
survive from the Closing Date through the expiration of the applicable statute
of limitations (if any). Upon the expiration of the Seller Fundamental
Representations and the Parent Fundamental Representations during the period
following the Closing Date pursuant to this Section 8.01, unless notice of a
claim based on a representation and warranty specifying in reasonable detail the
facts on which the claim is based shall have been delivered to Seller or Parent
(each, an "INDEMNIFYING PARTY"), as applicable, prior to the expiration of such
representation and warranty, such representation and warranty shall be deemed to
be of no further force and effect, as if never made, and no action may be
brought based on the same, whether for breach of contract, tort or under any
other legal theory.
45
Section 8.02. Indemnification.
(a) Indemnification by Seller. To the extent that the Closing occurs
and subject to the terms and conditions of this Article VIII, Parent, Buyer and
their respective Affiliates (collectively, the "PARENT INDEMNIFIED PARTIES")
shall be indemnified and held harmless by Seller for any and all liabilities,
losses, damages, deficiencies, claims, suits, actions or causes of action,
assessments, fines, costs and expenses (including reasonable attorneys' fees),
interest, awards, settlements, judgments and penalties actually suffered or
incurred, other than consequential damages (each a "LOSS"), by any Parent
Indemnified Party, directly or indirectly arising out of or resulting from the
breach of, or inaccuracy in, any of the Seller Fundamental Representations made
by Seller in this Agreement. It will be no defense to an action for breach by
Seller of the Seller Fundamental Representations that (i) Parent, Buyer or their
respective Affiliates and Representatives have (or have not) made investigations
into the affairs of Seller and its subsidiaries or (ii) that Seller could not
have known of the misrepresentation or breach of warranty. Seller hereby waives
any claim of subrogation against, or contribution from, the Company or any of
its subsidiaries in connection with any matter indemnified by Seller under this
Article VIII. Notwithstanding anything contained herein, there shall be no
double recovery for any Losses suffered from facts, circumstances or events
giving rise to a breach, but the facts, circumstances or events giving rise to a
breach could (subject to the provisions hereof) form the basis of a claim
pursuant to this Agreement.
(b) Indemnification by Parent and Buyer. To the extent that the
Closing occurs and subject to the terms and conditions of this Article VIII,
Seller and its Affiliates (collectively, the "SELLER INDEMNIFIED PARTIES" and
collectively with the Parent Indemnified Parties, the "INDEMNIFIED PARTIES")
shall be indemnified and held harmless by Parent and Buyer, jointly and
severally, for any and all Losses by any Seller Indemnified Party, directly or
indirectly arising out of or resulting from the breach of, or inaccuracy in, any
of the Parent Fundamental Representations made by Parent and Buyer in this
Agreement. It will be no defense to an action for breach by Parent or Buyer of
the Parent Fundamental Representations that (i) Seller or its Affiliates and
Representatives have (or have not) made investigations into the affairs of
Parent and its subsidiaries or (ii) that Parent or Buyer could not have known of
the misrepresentation or breach of warranty. Notwithstanding anything contained
herein, there shall be no double recovery for any Losses suffered from facts,
circumstances or events giving rise to a breach, but the facts, circumstances or
events giving rise to a breach could (subject to the provisions hereof) form the
basis of a claim pursuant to this Agreement.
(c) Indemnification Procedures. No claim may be asserted nor may any
proceeding be commenced against Seller for breach of any Seller Fundamental
Representation or against Parent or Buyer for breach of any Parent Fundamental
Representation unless written notice of such claim or proceeding is received by
Seller or Parent, as applicable, describing in reasonable detail the facts and
circumstances with respect to the subject matter of such claim or proceeding on
or prior to the date on which the representation or warranty on which such claim
or proceeding is based ceases to survive as set forth in Section 8.01(a). The
Indemnified Parties shall give the applicable Indemnifying Party notice of any
matter which such Indemnified Party has determined has given or would reasonably
be expected to give rise to a right of indemnification under this Agreement,
within thirty (30) days of such determination, stating the
46
amount of the Loss, if known, and method of computation thereof, and containing
a reference to the provisions of this Agreement in respect of which such right
of indemnification is claimed or arises; provided, however, that no delay on the
part of an Indemnified Party in providing such notice to the applicable
Indemnifying Party will relieve such Indemnifying Party from any obligations
under this Article VIII, except to the extent that such delay actually and
materially prejudices such Indemnifying Party. If an Indemnifying Party does not
respond to such notice in writing within 30 days after receipt thereof, such
Indemnifying Party will have no further right to contest the validity of such
claim.
Section 8.03. Third Party Claims.
(a) If any claim is made by a third party against an Indemnified Party
that, if sustained, would give rise to indemnification under Sections 8.02 of
this Agreement, the Indemnified Party shall promptly notify the applicable
Indemnifying Party in writing of the claim and will afford such Indemnifying
Party the opportunity to defend or to settle the claim at such Indemnifying
Party's sole expense; provided, however, that no delay on the part of an
Indemnified Party in providing such notice to the applicable Indemnifying Party
will relieve such Indemnifying Party from any obligations under this Article
VIII, except to the extent that such delay actually and materially prejudices
such Indemnifying Party. The Indemnifying Party will have the right to defend
or, subject to clause (c) below, settle, at its own expense and with counsel of
its choice, any such matter involving the asserted liability of the Indemnified
Party, if the Indemnifying Party promptly gives written notice of its intention
to do so to the Indemnified Party within 30 days after receipt of notice
thereof. If the Indemnifying Party does not respond to such notice in writing
within 45 days after receipt thereof, the Indemnifying Party will have no
further right to contest the validity of such claim.
(b) In the event that the Indemnifying Party elects not to exercise
the right to undertake any such defense against any third party claim as
provided in (a) above, such Indemnifying Party shall reasonably cooperate with
the Indemnified Party in such defense, and to the extent possible make available
to the Indemnified Party, at the Indemnifying Party's expense, all such
witnesses, pertinent records, materials and information in the Indemnifying
Party's possession or under the Indemnifying Party's control relating thereto as
is reasonably required by the Indemnified Party.
(c) In the event that the Indemnifying Party exercises the right to
undertake any such defense against any third party claim as provided in (a)
above, the Indemnified Party may participate in such defense at its own expense.
The Indemnified Party shall reasonably cooperate with the Indemnifying Party in
such defense and to the extent possible make available to the Indemnifying
Party, at the Indemnifying Party's expense, all such witnesses, pertinent
records, materials and information in the Indemnified Party's possession or
under the Indemnified Party's control relating thereto as is reasonably
requested by the Indemnifying Party. No third party claim may be settled by the
Indemnifying Party without the prior written consent of the Indemnified Party,
which consent will not be unreasonably withheld if such settlement provides for
a full and unconditional release of the Indemnified Party. If the Indemnifying
Party elects to direct the defense of any such third party claim, the
Indemnified Party will not pay, or permit to be paid, any part of such third
party claim unless the Indemnifying Party consents in writing to such payment
(which consent shall not be
47
unreasonably withheld), or unless the Indemnifying Party withdraws from the
defense of such third party claim or unless a final judgment, from which no
appeal may be taken by or on behalf of the Indemnifying Party, is entered
against the Indemnified Party for such third party claim.
ARTICLE IX
General Provisions
Section 9.01. Notices. Except for notices that are specifically
required by the terms of this Agreement to be delivered orally, all notices,
requests, claims, demands and other communications hereunder shall be in writing
and shall be deemed given if delivered personally, telecopied (which is
confirmed) or sent by overnight courier (providing proof of delivery) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
if to Parent or Buyer, to:
CBaySystems Holdings Limited
0000 Xxxx Xxxx
Xxxxxxxx 0000, Xxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Raman Kumar
with a copy to (which shall not constitute notice):
Xxxxx Day
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
and
CMS Xxxxxxx XxXxxxx LLP
Mitre House
000 Xxxxxxxxxx Xxxxxx
Xxxxxx XX0X 0XX
Xxxxxx Xxxxxxx
Facsimile: + 44-20-7367-2000
Attention: Xxxxx Xxxxx, Esq.
and
S.A.C. PEI CB Investment, L.P.
c/o S.A.C. Capital Advisors, LLC
00 Xxxxxxxx Xxxxx Xxxx
00
Xxxxxxxx, Xxxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: General Counsel
with a copy to (which shall not constitute notice):
Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
1999 Avenue of the Stars, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxxx, Esq.
if to Seller, to:
Koninklijkle Philips Electronics N.V.
Xxxxxxxx Center, HBT 17
Xxxxxxxxxxx 0, 0000 XX
X.X. Xxx 00000
0000 XX Xxxxxxxxx
Xxx Xxxxxxxxxxx
Facsimile: (00) 00 00 00000
Attention: Xxxxx Xxxxx, Executive Vice President, Corporate
Mergers & Acquisitions
with a copy to (which shall not constitute notice):
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx
Section 9.02. Definitions. For purposes of this Agreement:
(a) "ACTUAL CASH" means the amount that would be reflected on the line
item "Cash and cash equivalents" on a balance sheet of the Company (i.e.
$153,801,000 at April 30, 2008) as of the close of business on the relevant
date, and, in the case of the Seller Certificate or Final Certificate, as of the
close of business on the business day prior to the Closing Date, in each case
prepared in accordance with U.S. GAAP on a basis consistent with past practices
of the Company, as set forth on the Seller's Statement delivered pursuant to
Section 2.04, and, if the Cash Dividend Event occurs, as determined following
the payment of the last installment of the Cash Dividend.
(b) "ACTUAL CASH DETERMINATION DATE" means the third Business Day
prior to the Closing Date when the Actual Cash is determined and the Seller's
Statement is delivered to Parent.
49
(c) an "AFFILIATE" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person.
(d) "APPROVED EXCLUSION" means Cash and Cash Equivalents actually paid
or agreed to be paid by the Company pursuant to new agreement(s) (the "new
agreements") relating to the matters previously disclosed in writing to Parent
and Subscriber (the "listed matters") that are not greater than the estimated
payments for such listed matters previously agreed in writing by Seller, Parent
and Subscriber; it being understood that if new agreements relating to more than
one of the listed matters are executed prior to Closing, the Approved Exclusion
will equal the lesser of (i) the aggregate of the amounts actually paid or
agreed to be paid under all such new agreements (but not for any other listed
matters) and (ii) the aggregate amounts of the estimated payments for all listed
matters covered by such new agreements (but not for any other listed matters).
(e) "BRIDGED CASH ADJUSTMENT" shall be equal to (i) Second Target
Cash, less (ii) Actual Cash to the extent Actual Cash is (x) less than Second
Target Cash and (y) greater than or equal to Third Target Cash, and times (iii)
Seller's Percentage, provided that if Actual Cash is greater than or equal to
Second Target Cash, the Bridged Cash Adjustment shall be equal to zero.
(f) "BRIDGED CASH NOTE" shall refer to the note issued by Buyer having
the terms set forth on Exhibit D hereto.
(g) "CASH ADJUSTMENT AMOUNT" shall be equal to (i) First Target Cash
(as defined below), less (ii) Actual Cash to the extent Actual Cash is (x) less
than First Target Cash and (y) greater than or equal to Second Target Cash,
times (iii) Seller's Percentage, provided that if Actual Cash is greater than or
equal to First Target Cash, the Cash Adjustment Per Share shall be equal to
zero. For the avoidance of doubt, the Cash Adjustment Amount will be no greater
that $6,947,891.
(h) "CASH DIVIDEND ADJUSTMENT AMOUNT" shall be equal to Seller's
Percentage times the Cash Dividend.
(i) "CONVERTIBLE NOTE" shall refer to the 6.00% convertible notes to
be issued by Buyer and guaranteed by Parent having the terms set forth on
Exhibit E hereto.
(j) "DEPOSIT ACCOUNT" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union, depository
institution or similar organization, other than an account evidenced by a
negotiable certificate of deposit.
(k) "EMPLOYEE" of any person shall include, where the context
requires, any officer of such person whether or not such officer is also an
employee of such person;
(l) "EXCESS CASH" shall be equal to Seller's Percentage times an
amount equal to (i) the Actual Cash minus (ii) First Target Cash; provided that
if First Target Cash is greater than or equal to the Actual Cash, the Excess
Cash shall be equal to zero.
50
(m) "FIRST TARGET CASH" means $140,000,000 minus any Approved
Exclusion, and, if the Cash Dividend Event occurs, less the Cash Dividend.
(n) "MATERIAL ADVERSE EFFECT" means any change, effect, event,
occurrence, state of facts or development that is materially adverse to the
business, financial condition, or results of operations of the Company and its
subsidiaries, taken as a whole; provided that none of the following shall be
deemed, either alone or in combination, to constitute, and none of the following
shall be taken into account in determining whether there has been or will be, a
Material Adverse Effect: (i) any change, effect, event, occurrence, state of
facts or development relating to the United States economy or securities markets
in general, so long as each of the foregoing does not adversely affect the
Company and its subsidiaries, taken as a whole, in a materially disproportionate
manner relative to the other participants in the industries or markets in which
they operate, (ii) any change, effect, event, occurrence, state of facts or
development reasonably attributable to conditions affecting the industry in
which the Company participates, so long as each of the foregoing does not
adversely affect the Company and its subsidiaries, taken as a whole, in a
materially disproportionate manner relative to the other participants in the
industries or markets in which they operate, (iii) any failure, in and of
itself, by the Company to meet any, or any change by the Company of, internal or
published projections, forecasts or revenue or earnings predictions for any
period ending on or after the date of this Agreement (it being understood,
however, that any change, effect, event, occurrence, state of facts or
development causing or contributing to such failure not otherwise excluded in
the other exceptions in clauses (i) through (vii) of this definition shall be
taken into account in determining whether a Material Adverse Effect has
occurred), (iv) the effect of any change in any applicable Laws or GAAP after
the date of this Agreement, so long as each of the foregoing does not adversely
effect the Company and its subsidiaries, taken as a whole, in a materially
disproportionate manner relative to the other participants in the industries or
markets in which they operate, (v) any change arising out of the announcement of
the Acquisition or the other transactions contemplated by this Agreement
(including any loss of or adverse change in the relationship of the Company and
its subsidiaries with their respective employees, customers, partners or
suppliers resulting therefrom), (vi) any change, effect, event, occurrence,
state of facts or development arising out of earthquakes, hurricanes or other
natural disasters, so long as each of the foregoing does not adversely affect
the Company and its subsidiaries, taken as a whole, in a materially
disproportionate manner relative to the other participants in the industries or
markets in which they operate, and (vii) any change, effect, event, occurrence,
state of facts or development arising out of the commencement, occurrence,
continuation or intensification of any war, armed hostilities or acts of
terrorism, so long as each of the foregoing does not adversely affect the
Company and its subsidiaries, taken as a whole, in a materially disproportionate
manner relative to the other participants in the industries or markets in which
they operate. Without limiting the generality of the foregoing, but without
being subject to the foregoing, the parties acknowledge and agree that one or
more disruptions in the DocQment Enterprise Platform of the Company or any of
its subsidiaries after the date hereof that affect their operations or the
ability to meet contractual performance obligations (e.g., service level
agreements) for more than 36 hours in the aggregate shall be a Material Adverse
Effect.
(o) "NOTES" shall refer to the Bridged Cash Note and the Convertible
Note.
51
(p) "PARENT MATERIAL ADVERSE EFFECT" means any change, effect, event,
occurrence, state of facts or development that is materially adverse to the
business, financial condition, or results of operations of Parent and its
subsidiaries, taken as a whole; provided that none of the following shall be
deemed, either alone or in combination, to constitute, and none of the following
shall be taken into account in determining whether there has been or will be, a
Parent Material Adverse Effect: (i) any change, effect, event, occurrence, state
of facts or development relating to the United States, India or world economy or
securities markets in general, so long as each of the foregoing does not
adversely affect Parent and its subsidiaries, taken as a whole, in a materially
disproportionate manner relative to the other participants in the industries or
markets in which they operate, (ii) any change, effect, event, occurrence, state
of facts or development reasonably attributable to conditions affecting the
industry in which Parent participates, so long as each of the foregoing does not
adversely affect Parent and its subsidiaries, taken as a whole, in a materially
disproportionate manner relative to the other participants in the industries or
markets in which they operate, (iii) any failure, in and of itself, by Parent to
meet any, or any change by Parent of, internal or published projections,
forecasts or revenue or earnings predictions for any period ending on or after
the date of this Agreement (it being understood, however, that any change,
effect, event, occurrence, state of facts or development causing or contributing
to such failure not otherwise excluded in the other exceptions in clauses (i)
through (vii) of this definition shall be taken into account in determining
whether a Parent Material Adverse Effect has occurred), (iv) the effect of any
change in any applicable Laws or GAAP after the date of this Agreement, so long
as each of the foregoing does not adversely effect Parent and its subsidiaries,
taken as a whole, in a materially disproportionate manner relative to the other
participants in the industries or markets in which they operate, (v) any change
arising out of the announcement of the Acquisition or the other transactions
contemplated by this Agreement (including any loss of or adverse change in the
relationship of Parent and its subsidiaries with their respective employees,
customers, partners or suppliers resulting therefrom), (vi) any change, effect,
event, occurrence, state of facts or development arising out of earthquakes,
hurricanes or other natural disasters, so long as each of the foregoing does not
adversely affect Parent and its subsidiaries, taken as a whole, in a materially
disproportionate manner relative to the other participants in the industries or
markets in which they operate, and (vii) any change, effect, event, occurrence,
state of facts or development arising out of the commencement, occurrence,
continuation or intensification of any war, armed hostilities or acts of
terrorism, so long as each of the foregoing does not adversely affect Parent and
its subsidiaries, taken as a whole, in a materially disproportionate manner
relative to the other participants in the industries or markets in which they
operate.
(q) "PARENT VOTING AGREEMENTS" means voting agreements with respect to
Parent Shareholders eligible to vote at the Parent Shareholders Meeting which,
among other matters, (i) grant irrevocable powers of attorney to Parent in favor
of approval of the acquisition of Shares in the Acquisition and any other
required Parent shareholder vote to consummate the Acquisition and other
transactions contemplated by this Agreement and the Subscription Agreement and
(ii) commit the holders of shares of such voting stock of Parent to hold such
voting stock through any record date for the Parent Shareholders Meeting and any
adjournment or postponement thereof.
52
(r) "PERMITTED ENCUMBRANCES" means (i) Encumbrances for Taxes,
assessments and governmental charges or levies not yet due and payable or that
are being contested in good faith and by appropriate proceedings; (ii) ordinary
course mechanics', carriers', workmen's, repairmen's, materialmen's statutory
liens, other Encumbrances or security interests that secure a liquidated amount
that are being contested in good faith and by appropriate proceedings; (iii)
Encumbrances imposed by applicable Law; (iv) pledges or deposits to secure
obligations under workers' compensation Laws or similar legislation or to secure
public or statutory obligations; (v) pledges and deposits to secure the
performance of bids, trade contracts, leases, surety and appeal bonds,
performance bonds and other obligations of a similar nature, in each case in the
ordinary course of business; (vi) imperfections of title, liens, easements,
covenants, rights of way or other restrictions on use the existence of which
would not, individually or in the aggregate, have a material effect on the
Company; and (vii) any other Encumbrances that do not secure a liquidated
amount, that have been incurred or suffered in the ordinary course of business
and that would not, individually or in the aggregate, have a material effect on
the Company.
(s) "PERSON" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
(t) "POST-CLOSING BUYER DIVIDEND" shall be equal to (i) the
Post-Closing Dividend times (ii) Seller's Percentage.
(u) "POST-CLOSING BUYER DIVIDEND TAX AMOUNT" shall be equal to (i)
8.0% times (ii) the lesser of (A) Seller's Percentage times the Taxable Portion
of Dividend and (B) the Post-Closing Buyer Dividend; provided that if the Cash
Dividend is greater than or equal to the Taxable Portion of Pre-Closing
Dividend, the Post-Closing Buyer Dividend Tax Amount shall be equal to zero.
(v) "POST-CLOSING BUYER DIVIDEND TAX BURDEN" shall be equal to the
absolute value of an amount equal to (i) the Post-Closing Tax Offset Cushion
minus (ii) the Post-Closing Buyer Dividend Tax Amount; provided that if the
Post-Closing Tax Offset Cushion is greater than or equal to the Post-Closing
Buyer Dividend Tax Amount, the Post-Closing Buyer Dividend Tax Burden shall be
equal to zero.
(w) "POST-CLOSING DIVIDEND" means the aggregate amount of dividends in
cash actually paid to shareholders of the Company commencing from the Closing
Date and through the date on which Buyer repays the Bridged Cash Note in full
(including accrued and unpaid interest thereon).
(x) "POST-CLOSING TAX ADJUSTMENT AMOUNT" shall be equal to (i) 50%
times (ii) the Post-Closing Buyer Dividend Tax Burden.
(y) "POST-CLOSING TAX OFFSET CUSHION" shall be equal to (i) the Excess
Cash minus (ii) the Pre-Closing Seller Dividend Tax Amount; provided that if the
Pre-Closing Seller Dividend Tax Amount is greater than or equal to the Excess
Cash, the Post-Closing Tax Offset Cushion shall be equal to zero.
53
(z) "PRE-CLOSING SELLER DIVIDEND TAX AMOUNT" shall be equal to
Seller's Percentage of (i) 5.0% times (ii) the lesser of (A) the Taxable Portion
of Pre-Closing Dividend and (B) the Cash Dividend.
(aa) "PRE-CLOSING SELLER DIVIDEND TAX BURDEN" shall be equal to the
absolute value of an amount equal to (i) the Excess Cash minus (ii) the
Pre-Closing Seller Dividend Tax Amount; provided that if the Excess Cash is
greater than or equal to the Pre-Closing Seller Dividend Tax Amount, the
Pre-Closing Seller Dividend Tax Burden shall be equal to zero.
(bb) "PRE-CLOSING TAX ADJUSTMENT AMOUNT" shall be equal to (i) 50%
times (ii) the Pre-Closing Seller Dividend Tax Burden.
(cc) "REPRESENTATIVES" means directors, officers or employees or any
investment banker, financial advisor, attorney, accountant or other advisor,
agent or representative of a person.
(dd) "SAC FUNDS" means the parties to the Limited Backup SAC
Guarantee.
(ee) "SECOND TARGET CASH" means $130,000,000 minus any Approved
Exclusion, and, if the Cash Dividend Event occurs, less the Cash Dividend.
(ff) "SELLER'S PERCENTAGE" means a fraction, expressed as a
percentage, equal to 69.4789%.
(gg) a "SUBSIDIARY" of any person means another person, an amount of
the voting securities, other voting rights or voting partnership interests of
which is sufficient to elect at least a majority of its board of directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests) of which is owned directly or indirectly by such first
person.
(hh) "TAXABLE PORTION OF DIVIDEND" shall be equal to the amount of the
earnings and profits of the Company for tax purposes as determined on the Actual
Cash Determination Date and set forth on the Seller's Statement delivered
pursuant to Section 2.04, expressed in dollar amounts.
(ii) "TAXABLE PORTION OF PRE-CLOSING DIVIDEND" means the portion of
the Cash Dividend that is attributable to the earnings and profits of the
Company for tax purposes, as determined by the Company with respect to such Cash
Dividend and set forth on the Seller's Statement delivered pursuant to Section
2.04, expressed in dollar amounts.
(jj) "THIRD TARGET CASH" means $115,000,000 minus any Approved
Exclusion, and, if the Cash Dividend Event occurs, less the Cash Dividend.
Section 9.03. Interpretation. When a reference is made in this
Agreement to an Article, a Section, Exhibit or Schedule, such reference shall be
to an Article of, a Section of, or an Exhibit or Schedule to, this Agreement
unless otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes"
54
or "including" are used in this Agreement, they shall be deemed to be followed
by the words "without limitation". The words "hereof," "herein" and "hereunder"
and words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
References to "this Agreement" shall include the Seller Disclosure Schedule and
the Parent Disclosure Schedule. All terms defined in this Agreement shall have
the defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. References to a person are also to its permitted
successors and assigns. The "reasonable best efforts" of Seller shall be deemed
to include (without any limitation of such term) the reasonable best efforts of
the directors of the Company then appointed by Seller pursuant to Section 3.01
of the Governance Agreement (the "SELLER DIRECTORS") (to the extent such
reasonable best efforts by the Seller Directors are not reasonably likely to
result in a conflict with their fiduciary duties as Seller Directors and to the
extent such reasonable best efforts by the Seller, as a majority shareholder,
are not reasonably likely to result in a conflict with its fiduciary duties to
the Company's other shareholders) causing the Company and its subsidiaries to
not take or refrain from taking (as applicable) any action that would have
resulted in a material breach of any provision hereof, in each case as if the
Company were a party to this Agreement and the actions that this Agreement
requires Seller to use its reasonable best efforts to cause the Company to take
or refrain from the taking were direct obligations of the Company.
Section 9.04. Mutual Drafting. The parties have participated jointly
in negotiating and drafting this Agreement, and this Agreement shall be
construed without regard to any presumption or rule requiring construction or
interpretation in favor of or against any party by virtue of the authorship of
any provision of this Agreement.
Section 9.05. Consents and Approvals. For any matter under this
Agreement requiring the consent or approval of any party to be valid and binding
on the parties hereto, such consent or approval must be in writing.
Section 9.06. Counterparts. This Agreement may be executed in one or
more counterparts (including by facsimile or PDF), 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.
Section 9.07. Entire Agreement; No Third-Party Beneficiaries. This
Agreement (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter of this Agreement (other than the Confidentiality
Agreement, dated as of April 17, 2008, by and between Parent and Seller), and
(b) except for the provisions of Section 5.04, is not intended to and does not
confer upon any person other than the parties any legal or equitable rights or
remedies.
Section 9.08. Governing Law. This Agreement, and all claims or causes
of action (whether at Law, in contract or in tort) that may be based upon, arise
out of or relate to this Agreement or the negotiation, execution or performance
hereof, shall be governed by and construed in accordance with the Laws of the
State of Delaware, except to the extent the Laws of
55
the State of New Jersey are mandatorily applicable in connection with the
Acquisition provisions contained in Articles I and II hereof. Notwithstanding
the foregoing, and for the avoidance of doubt, neither Section 203(d) of the
Delaware General Corporation Law nor any other similar or related Law of the
State of Delaware shall apply to this Agreement, the Acquisition or the other
transactions contemplated hereby.
Section 9.09. Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned, in whole or in
part, by operation of Law or otherwise by any of the parties without the prior
written consent of the other parties, and any assignment without such consent
shall be null and void, except that Parent or Buyer, upon prior written notice
to Seller, may assign, in its sole discretion, any of or all its rights,
interests and obligations under this Agreement (a) in the case of Parent, to any
directly or indirectly wholly owned subsidiary of Parent and (b) in the case of
Buyer, to Parent or to any directly or indirectly wholly owned subsidiary of
Parent, but no such assignment shall relieve Parent or Buyer, as applicable, of
any of its obligations hereunder; provided that any such assignee of Parent or
Buyer, as applicable, shall be primarily liable with respect to the obligations
hereunder and the liability of Parent or Buyer, as applicable, shall be
secondary. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
Section 9.10. Specific Enforcement. The parties agree that irreparable
damage would occur and that Parent and Buyer would not have any adequate remedy
at Law in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached by
Seller and that money damages may not be an adequate remedy therefor. It is
accordingly agreed that, prior to any termination of this Agreement pursuant to
Section 7.01, Parent and Buyer shall be entitled to any and all equitable
remedies available to them (including, but not limited to, specific performance
and injunctive relief) to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any federal court
located in the State of Delaware or in any state court in the State of Delaware
without bond or other security being required, this being in addition to any
other remedy to which they are entitled at Law or in equity. In the event that
any such action shall be brought in equity to enforce the provisions of this
Agreement, Seller shall not allege, and hereby waives the defense, that there is
an adequate remedy at Law. Notwithstanding anything herein to the contrary, the
parties further acknowledge that Seller shall not be entitled to an injunction
or injunctions to prevent breaches of this Agreement by Parent or Buyer, to
enforce specifically the terms and provisions of this Agreement against Parent
or Buyer or otherwise to obtain any equitable relief or remedy against Parent or
Buyer, and that Seller's sole and exclusive remedy with respect to any such
breach shall be the remedy available to Seller set forth in Section 5.05(c).
Section 9.11. Consent to Jurisdiction. Each of the parties hereto (a)
irrevocably consents to submit itself to the exclusive jurisdiction and venue of
the courts of the State of Delaware (or, in the case of any claim as to which
the federal courts have exclusive subject matter jurisdiction, the federal court
of the United States of America) sitting in New Castle County in the State of
Delaware in the event any dispute arises out of this Agreement or the
transactions contemplated by this Agreement, and (b) irrevocably agrees that it
will not bring any
56
action relating to this Agreement or the transactions contemplated by this
Agreement in any court other than the courts of the State of Delaware (or, in
the case of any claim as to which the federal courts have exclusive subject
matter jurisdiction, the federal court of the United States of America) sitting
in New Castle County in the State of Delaware. Each of the parties hereto hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense,
counterclaim or otherwise, in any action or proceeding with respect to this
Agreement, (a) any claim that it is not personally subject to the jurisdiction
of the above-named courts for any reason other than the failure to lawfully
serve process, (b) that it or its property is exempt or immune from jurisdiction
of any such court or from any legal process commenced in such courts (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution of judgment, execution of judgment or otherwise), and (c) to the
fullest extent permitted by applicable Law, that (i) the suit, action or
proceeding in any such court is brought in an inconvenient forum, (ii) the venue
of such suit, action or proceeding is improper or (iii) this Agreement, or the
subject matter hereof, may not be enforced in or by such courts.
Section 9.12. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS
IN THIS SECTION 9.12.
Section 9.13. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable Law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
Section 9.14. No Waiver of Rights. No failure or delay on the part of
any party hereto in the exercise of any right hereunder will impair such right
or be construed to be a waiver of, or acquiescence in, any breach of any
representation, warranty or agreement herein, nor will any single or partial
exercise of any such right preclude other or further exercise thereof or of any
other right.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
57
IN WITNESS WHEREOF, Parent, Buyer and Seller have caused this Agreement to
be signed by their respective officers hereunto duly authorized, all as of the
date first written above.
CBAYSYSTEMS HOLDINGS LIMITED
By
-------------------------------------
Name:
Title:
CBAY INC.
By
-------------------------------------
Name:
Title:
KONINKLIJKE PHILIPS ELECTRONICS N.V.
By
-------------------------------------
Name:
Title:
ANNEX I
Index of Defined Terms
Term Section Reference
---- -----------------------
Acquisition........................................... Recitals
Actions............................................... Section 3.02(h)
Actual Cash........................................... Section 9.02(a)
Actual Cash Determination Date........................ Section 9.02(b)
Admission Document.................................... Section 5.01
Affiliate............................................. Section 9.02(c)
Agreement............................................. Preamble
AIM Admission......................................... Section 3.03(b)(i)
AIM Rules............................................. Section 5.01
Approved Exclusion.................................... Section 9.02(d)
Auditor............................................... Section 2.04(b)
Bridged Cash Adjustment............................... Section 9.02(e)
Bridged Cash Note..................................... Section 9.02(f)
Buyer................................................. Preamble
Cash Adjustment Amount................................ Section 9.02(g)
Cash Dividend......................................... Section 2.03
Cash Dividend Adjustment Amount....................... Section 9.02(h)
Cash Dividend Event................................... Section 2.03
Cash Dividend Option.................................. Section 2.03
Closing............................................... Section 2.01
Closing Date.......................................... Section 2.01
Code.................................................. Section 3.02(i)(ii)
Common Stock.......................................... Recitals
Company............................................... Recitals
Company By-laws....................................... Section 3.02(a)
Company Certificate................................... Section 3.02(a)
Company Intellectual Property Rights.................. Section 3.02(p)(i)
Company Permits....................................... Section 3.02(m)
Company Plans......................................... Section 3.02(i)(i)
Company Reports....................................... Section 3.02(d)
Compensation and Benefit Plans........................ Section 3.02(i)(i)
Confidentiality Agreement............................. Section 5.02
Contract.............................................. Section 3.01(d)(ii)
Convertible Note...................................... Section 9.02(i)
December 2007 Balance Sheet........................... Section 3.02(h)
Deposit Account....................................... Section 9.02(j)
Xxxxx................................................. Section 3.02(a)
employee.............................................. Section 9.02(k)
Employees............................................. Section 3.02(i)(i)
Encumbrances.......................................... Section 3.01(d)(ii)
Environmental Law..................................... Section 3.02(k)
Term Section Reference
---- -----------------------
ERISA................................................. Section 3.02(i)(i)
ERISA Affiliate....................................... Section 3.02(i)(iii)
Excess Cash........................................... Section 9.02(l)
Exchange Act.......................................... Section 3.01(c)
Final Statement....................................... Section 2.04(b)
Financial Statements.................................. Section 3.02(f)
Financing............................................. Section 3.03(c)
First Target Cash..................................... Section 9.02(m)
GAAP.................................................. Section 3.02(f)
Governance Agreement.................................. Section 3.01(h)
Governmental Entity................................... Section 3.01(c)
Hazardous Substance................................... Section 3.02(k)
HSR Act............................................... Section 3.01(c)
HSR Filing............................................ Section 5.03(a)
Indebtedness.......................................... Section 3.02(c)
Indemnified Parties................................... Section 8.02(b)
Indemnifying Party.................................... Section 8.01
IP Rights............................................. Section 3.02(p)(i)
IRS................................................... Section 3.02(i)(ii)
Laws.................................................. Section 3.02(m)
Leased Property....................................... Section 3.02(q)(i)
Leases................................................ Section 3.02(q)(i)
Loss.................................................. Section 8.02(a)
Material Adverse Effect............................... Section 9.02(n)
Material Contract..................................... Section 3.02(n)
Notes................................................. Section 9.02(o)
Objection Notice...................................... Section 2.04(b)
Parent................................................ Preamble
Parent Common Shares.................................. Section 3.03(b)(iii)
Parent Directors...................................... Section 5.07
Parent Disclosure Schedule............................ Section 3.03
Parent Financial Statements........................... Section 3.03(f)
Parent Fundamental Representations.................... Section 6.03(a)
Parent Indemnified Parties............................ Section 8.02(a)
Parent Material Adverse Effect........................ Section 9.02(p)
Parent Party.......................................... Section 5.05(e)(ii)
Parent Permits........................................ Section 3.03(g)
Parent Shareholder Approval........................... Section 3.03(b)(i)
Parent Shareholders Meeting........................... Section 3.03(b)(i)
Parent Termination Fee................................ Section 5.05(b)
Parent Voting Agreements.............................. Section 9.02(q)
Permitted Encumbrances................................ Section 9.02(r)
person................................................ Section 9.02(s)
Personal Property..................................... Section 3.02(r)
Possible Seller Transaction........................... Section 3.01(e)
Post-Closing Buyer Dividend........................... Section 9.02(t)
2
Term Section Reference
---- -----------------------
Post-Closing Buyer Dividend Tax Amount................ Section 9.02(u)
Post-Closing Buyer Dividend Tax Burden................ Section 9.02(v)
Post-Closing Dividend................................. Section 9.02(w)
Post-Closing Tax Adjustment Amount.................... Section 9.02(x)
Post-Closing Tax Offset Cushion....................... Section 9.02(y)
Pre-Closing Seller Dividend Tax Amount................ Section 9.02(z)
Pre-Closing Seller Dividend Tax Burden................ Section 9.02(aa)
Pre-Closing Tax Adjustment Amount..................... Section 9.02(bb)
Post-Signing Returns.................................. Section 4.01(d)
Properties............................................ Section 3.02(k)
PSRS.................................................. Section 5.09
Purchase Price........................................ Section 2.02
Representatives....................................... Sections 4.03, 9.02(dd)
Restraints............................................ Section 6.01(c)
SAC Funds............................................. Section 9.02(ee)
SAC Guarantee......................................... Section 3.03(d)
SAC PCG............................................... Section 3.01(e)
SAC PCG Confidentiality Agreement..................... Section 3.01(e)
Xxxxxxxx-Xxxxx Act.................................... Section 3.02(d)
SEC................................................... Section 3.01(c)
Second Target Cash.................................... Section 9.02(ff)
Securities............................................ Section 3.01(g)(i)
Securities Act........................................ Section 3.01(g)(ii)
Seller................................................ Preamble
Seller Directors...................................... Section 9.03
Seller Disclosure Schedule............................ Section 3.01
Seller Fundamental Representations.................... Section 5.05(e)(i)
Seller Indemnified Parties............................ Section 8.02(b)
Seller Party.......................................... Section 5.05(e)(i)
Seller's Percentage................................... Section 9.02(gg)
Seller's Statement.................................... Section 2.04
Seller Termination Fee................................ Section 5.05(c)
Shares................................................ Recitals
Shareholders Agreement................................ Section 5.11
Stock Options......................................... Section 3.02(c)
Stock Plans........................................... Section 3.02(c)
Subscriber............................................ Section 3.03(b)(i)
Subscription Agreement................................ Section 3.03(c)
subsidiary............................................ Section 9.02(hh)
Tax................................................... Section 3.02(l)
Taxable............................................... Section 3.02(l)
Taxable Portion of Dividend........................... Section 9.02(ii)
Taxable Portion of Pre-Closing Dividend............... Section 9.02(jj)
Taxes................................................. Section 3.02(l)
Tax Return............................................ Section 3.02(l)
Third Target Cash..................................... Section 9.02(kk)
3
Term Section Reference
---- -----------------------
Waivers............................................... Section 3.01(e)
WARN.................................................. Section 3.02(o)
4
EXHIBIT A
FORM OF WAIVER
Dated: _____________________
From: Philips Speech Recognition Systems GmbH
Xxxxxxxx Xxxxxxx 00
X-0000 Xxxxxx, Xxxxxxx,
To: MedQuist Inc.
Xxxx Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxx Xxxxxx 00000
Re: Waiver
Dear Sir or Madam:
Reference is hereby made to that certain Licensing Agreement, dated as
of May 22, 2000 (as amended, the "Agreement"), by and between MedQuist Inc., a
New Jersey corporation ("MQ"), and Philips Speech Processing GmbH, an Austrian
corporation, which agreement has been legally transferred by means of a legal
merger to Philips Austria GmbH and subsequent legal split to Philips Speech
Recognition Systems GmbH ("PSRS").
For good and valuable consideration, PSRS hereby irrevocably waives,
through June 30, 2011, its right to provide, prior to June 30, 2011, a two-year
advance notice to terminate the Agreement.
This letter shall be governed by and construed in accordance with the
domestic laws of the State of New York, without regard to its choice of law
rules.
This letter may be executed in counterparts, each of which when so
executed shall be deemed an original and all of which, shall constitute one and
the same agreement.
[Signature Page Follows]
PHILIPS SPEECH RECOGNITION SYSTEMS GMBH
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED
MEDQUIST INC.
By:
---------------------------------
Name:
Title:
EXHIBIT B
SUMMARY OF TERMS OF SHAREHOLDERS AGREEMENT
The following is a description of the material terms (unless the parties agree
to modifications or additional terms to the agreement prior to its execution)
for a Shareholders Agreement to be entered between Koninklijke Philips
Electronics N.V. ("Philips") and S.A.C. PEI CB Investment, L.P. ("SAC") with
respect to shares of CBay Systems Holdings B.V. (together with its successors,
the "Company") owned by Philips and SAC. References herein to affiliates of SAC
do not include the Company, S.A.C. Capital Associates, LLC, S.A.C. Capital
Advisors, LLC and S.A.C. Capital Management, LLC.
BOARD SEATS Philips shall not have any right to appoint
directors to the Board of Directors of the Company.
IRREVOCABLE PROXY; VOTING For as long as the Shareholder Agreement is in
AGREEMENT effect, Philips will grant SAC an irrevocable proxy
with respect to any voting securities, including any
equity of the Company acquired by Philips upon
exercise of its convertible notes. Such proxy will
entitle SAC to vote Philips shares in favor of
directors and any and all other Shareholder action,
except in the case of any "Excluded Matters" (set
forth below).
The following matters would specifically be covered
by such proxy to the extent requiring shareholder
approval:
1) Acquisitions of businesses or assets or other
investments;
2) Sales, leases, spin-offs and other dispositions
of businesses or assets;
3) Mergers, consolidations, liquidations and
dissolutions and similar transactions;
4) Undertaking an offering or listing/re-listing of
securities;
5) Issuance of equity securities;
6) Declaration and payment of dividends,
distributions and other payments to shareholders;
7) Institution of bankruptcy proceedings;
8) Charter or by-law amendments;
9) Incurrence of debt;
10) Election of directors; and
11) Ratification of auditors.
Notwithstanding the foregoing, the voting by
shareholders with respect to the following matters
would specifically not be covered by such proxy
("Excluded Matters"):
1) Interested party transactions involving a benefit
to SAC that requires or is being submitted for
shareholder approval;
2) Imposing any additional transfer restrictions;
3) Limiting tag-along provisions; and
4) Any action that, by its terms, would cause
Philips to be subject to differential treatment
(including, but not limited to differential,
consideration) as compared to SAC and its
affiliates.
The granting of the proxy by Philips shall not be
deemed to be a waiver or other termination of any
other right or claim that Philips may have as a
shareholder, and Philips reserves and shall have all
of its rights and remedies with respect thereto.
If, for any reason, the proxy is unenforceable,
Philips will agree to vote its shares as directed by
SAC other than on Excluded Matters.
LIMITATIONS ON TRANSFER Transfer rights of Philips and SAC and its
affiliates will be limited to transfers:
(1) to wholly-owned affiliated entities (with
such transfer to the affiliate not subject
to the tag-along and/or drag-along
described below provided the affiliate
agrees to be bound by the Shareholders
Agreement and proxy);
(2) subject to the tag-along and/or drag-along
provisions described below;
(3) in a public offering pursuant to
registration rights described below;
(4) in stock exchange and open market
transactions (other than arranged block
sales), but no more on a daily basis than
25% of the averaged daily trading volume
during the preceding thirty-day period; and
(5) in privately negotiated sales and arranged
block sales that may be executed on the
stock exchange; provided that in no event
shall any sale to a single transferee be
permitted representing more than 20% of the
shares owned by Philips (on an as converted
basis as of the closing date) in any single
transaction or series of transactions,
unless the transferee agrees to be bound by
the Shareholders Agreement and proxy, in
each case consistent with the terms
described herein.
Philips shall notify SAC not less than five
business days prior to any proposed transfer
pursuant to clause 5 above of its intention to
transfer its shares, including the proposed
price range and manner of sale or transfer.
DRAG-ALONG SAC's affiliates ("Dragging Party") will have the
right if they receive an offer to purchase or
otherwise acquire more than 50% of the outstanding
Company equity interests (whether in a sale or
merger), to drag-along all
-2-
(but not less than all) of the equity interests held
by Philips on the identical financial terms to be
paid directly or indirectly to the Dragging Party
and on the same terms and conditions, provided that
Philips shall not be required or be deemed to have
agreed to any representations or indemnity (except
for representations and an indemnity as to good and
unencumbered title to its equity interest and as to
due and proper authorization by Philips),
non-compete, non-solicitation or any other material
non-financial terms or post-closing obligation
without its express written approval.
TAG-ALONG Philips will receive 20 days advance notice
specifying the terms and other conditions and
Philips will have customary tag-along rights with
respect to any sale or series of sales of shares
beneficially owned by SAC and its affiliates that
amount to 25% or more of the equity beneficially
owned by SAC and its affiliates, with such tag-along
rights being for the same percentage of equity
ownership and on the identical financial terms to be
paid directly or indirectly to SAC and on the
identical terms and conditions.
Such tag-along rights shall not apply to any
transfer by SAC to its affiliates or in public
offerings, stock exchange or other open market
sales.
REGISTRATION RIGHTS; Beginning 180 days following conversion of all or a
COOPERATION portion of its notes into equity, Philips will have
an aggregate of one non-transferable demand
registration right under UK securities laws (and any
similar US requirements if the shares are then
registered in the United States), which may be
exercised by Philips with respect to at least 25% of
the shares held by Philips in the aggregate.
The demand registration right of Philips will be
subject to customary limits, as agreed by the
parties in the Shareholders Agreement, including
with respect to blackouts, the number of
registrations and shelf registrations and the
minimum size of an offering.
Philips will also have a reasonable number of
piggyback rights with respect to any underwritten
offering of shares of the Company. Such rights will
be subject to a pro rata cutback among all holders
seeking to register equity interests (other than the
demanding party) unless the underwriters reasonably
require a different allocation.
Philips will be subject to customary lockups (of no
more than 180 days) in connection with underwritten
offerings on terms no more restrictive than those
agreed by SAC and its affiliates, except to the
extent the underwriter agrees to consent to a
shorter lock-up period. Other than an underwriting
effected by a Philips exercise of its demand
registration right, SAC exclusively shall negotiate
lockups with underwriters and select lead managing
underwriters in all underwritten offerings; provided
Philips' approval (not to be unreasonably withheld,
conditioned or delayed) shall be required for any
term applicable to Philips that is inconsistent with
the terms set forth herein (e.g., the lockup
period). In connection with an
-3-
underwriting effected by a Philips exercise of its
demand registration right, (a) Philips exclusively
shall negotiate lockups with underwriters and SAC
shall exclusively select lead managing underwriters
in the underwritten offering (from a list of three
underwriters provided by Philips, in the case of
Philips exercise of its demand); provided Philips'
or SAC's approval (not to be unreasonably withheld,
conditioned or delayed) shall be required for any
term applicable to Philips or SAC, as applicable,
that is inconsistent with the terms set forth herein
(e.g., the lockup period), and (b) SAC and its
affiliates will be subject to customary lockups (of
no more than 180 days) on terms no more restrictive
than those agreed by Philips, except to the extent
the underwriter agrees to consent to a shorter
lock-up period.
SAC will use reasonable best efforts to cause the
Company to provide reasonable cooperation with
Philips in connection with one single proposed
underwriter or privately negotiated sale by Philips,
including providing management presentations and
reasonable due diligence access (subject to
execution of a customary confidentiality and
standstill agreement) to potential buyers.
If requested, the terms of the registration rights
will be included in a separate registration rights
agreement to which the Company is a party.
TERMINATION The Shareholders Agreement will terminate if SAC and
its affiliates beneficially own either (i) less than
10% of the outstanding voting interests in the
Company or (ii) less than the percentage of the
outstanding voting interests in the Company then
owned by Philips.
-4-
EXHIBIT C
PROPOSED BY-LAWS AMENDMENT TO PERMIT RESIGNING DIRECTORS TO APPOINT SUCCESSORS
Section 4.4. Vacancies. Vacancies and any newly created directorships
resulting from any increase in the authorized number of directors and any
vacancies in the Board of Directors resulting from death, resignation,
retirement, disqualification, removal from office or other cause may be filled
by an affirmative vote of a majority of the remaining directors even though
less than a quorum of the Board of Directors, or by a sole remaining director,
and directors so chosen shall hold office until the next annual meeting of the
shareholders and until his or her successor is elected and qualified or until he
or she sooner dies, resigns, is removed or becomes disqualified. Notwithstanding
_______________
the foregoing, if one or more directors shall resign from the Board of Directors
________________________________________________________________________________
effective as of a future date, a majority of the directors then in office,
__________________________________________________________________________
including those who have so resigned as of a future date, shall have the power
______________________________________________________________________________
to fill such vacancy or vacancies, the vote thereon to take effect when such
____________________________________________________________________________
resignation or resignations shall become effective, and each director so elected
________________________________________________________________________________
shall hold office as provided in this Section 4.4 in the filling of other
_________________________________________________________________________
vacancies, if any.
__________________
EXHIBIT D
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE. NEITHER THIS NOTE NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF OTHER THAN (A) IN ACCORDANCE WITH
THE TERMS HEREOF AND (B) PURSUANT TO THE SECURITIES ACT OF 1933 OR UNDER AN
AVAILABLE EXEMPTION FROM REGISTRATION; PROVIDED THAT IF THE TRANSFER IS PURSUANT
TO AN EXEMPTION FROM REGISTRATION, DEBTOR MAY REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL REASONABLY ACCEPTABLE TO DEBTOR THAT SUCH REGISTRATION IS NOT
REQUIRED.
FORM OF PROMISSORY NOTE
$[____]
[____], 2008
FOR VALUE RECEIVED, CBay Inc., a Delaware corporation ("Debtor"), promises
to pay to the order of Koninklijke Philips Electronics N.V. or its permitted
assigns ("Lender"), the principal sum of [____] MILLION DOLLARS and to pay
interest on the outstanding principal of this Promissory Note (the "Note"), in
accordance with Section 2 of this Note.
1. Maturity. Debtor shall repay the unpaid principal in full, together with
all accrued and unpaid interest thereon, on [____], 2008(1) (the "Repayment
Date"); provided, that in the event any order, writ, injunction, decree or
judgment promulgated or entered by any federal, state, local or foreign court or
governmental authority (collectively, "Restraints") is in effect and restrains,
enjoins or otherwise prohibits the payment of a cash dividend by MedQuist, Inc.,
a New Jersey corporation ("MedQuist"), to Debtor, in respect of common stock, no
par value, of MedQuist owned by Debtor as of the date hereof (each such cash
dividend, a "MedQuist Dividend"), in an amount sufficient to satisfy the entire
unpaid principal and accrued and unpaid interest under this Note, the "Repayment
Date" shall be the date that is three business days following Debtor's receipt
of such MedQuist Dividend. Until the repayment in full of the unpaid principal
of this Note, together with all accrued and unpaid interest thereon, if any
Restraint is in effect, Debtor shall use its reasonable best efforts to cause
MedQuist to pay, beginning on [____], 2008(2), one or more quarterly dividends,
individually and in the aggregate in a maximum amount that would not violate any
such Restraint, up to an amount sufficient to repay such unpaid principal and
accrued and unpaid interest; provided, that no such quarterly dividend shall be
required to be paid hereunder if the legally permissible dividend amount is less
than $2,500,000. Following the termination or rescission of all such Restraints,
if the principal of this Note, together with all accrued and unpaid interest
thereon, has not previously been repaid in full, Debtor shall use its reasonable
best efforts to cause MedQuist to pay a cash dividend as soon as practicable in
an amount sufficient to repay such unpaid principal and accrued and unpaid
interest. Following the declaration of any cash dividend on MedQuist's common
stock by
----------
(1) 90 days after date of issuance.
(2) 90 days after date of issuance.
MedQuist's board of directors, Debtor shall use its reasonable best efforts to
cause MedQuist to segregate and hold in one or more separate accounts cash in an
amount sufficient to pay such dividend until such dividend has been paid to
MedQuist's stockholders. All payments under this Note shall be paid in United
States dollars in immediately available funds and shall be applied first against
accrued and unpaid interest, then against principal. For purposes of this
Section 1, the "reasonable best efforts" of Debtor shall (a) be deemed to
include (without any limitation of such term) the reasonable best efforts of the
directors of MedQuist appointed by Guarantor (to the extent such reasonable best
efforts by such Guarantor-appointed directors are not reasonably likely to
result in a conflict with their fiduciary duties as directors of MedQuist)
causing MedQuist to take a specified action, in each case as if MedQuist were a
party to this Note and the actions that this Section 1 requires Debtor to use
its reasonable best efforts to cause MedQuist to take were direct obligations of
MedQuist, and (b) be subject to any fiduciary duties that Debtor may have with
respect to other MedQuist shareholders.
2. Interest. Interest shall accrue and be payable in arrears on the unpaid
principal balance of this Note on the Repayment Date, commencing on the date
hereof and continuing until repayment of this Note, in full, at the rate of
[___]% per annum,(3) calculated on the basis of a 365-day year and actual days
elapsed; provided, however, if the Repayment Date is a date more than 90 days
after the date hereof, the applicable interest rate for each successive 90-day
period (or portion thereof) after the first 90 days for which this Note is
outstanding shall be the rate per annum equal to the annualized yield to
maturity, as of the first day of such 90-day period, of a three-month United
States Treasury xxxx (as complied and published in the most recent Federal
Reserve Statistical Release H.15 (519) (or, if such Statistical Release is no
longer published, any publicly available source of similar market data)).
3. Optional Prepayment. Debtor may prepay, in whole or in part, at any
time, without premium or prepayment penalty, any unpaid principal balance or
accrued and unpaid interest (to, but not including, the date of such prepayment)
prior to the Repayment Date. All payments hereunder shall be credited first to
accrued but unpaid interest, and then to principal.
4. Mandatory Repayment. Not later than three business days following
Debtor's receipt of any MedQuist Dividend prior to the Repayment Date, Debtor
shall apply such MedQuist Dividend to repay all or a portion of any unpaid
principal balance or accrued and unpaid interest payable to Lender hereunder in
an amount equal to the lesser of:
(a) such MedQuist Dividend; and
(b) the unpaid principal balance of this Note, plus all accrued and unpaid
interest thereon (to, but not including, the date of such repayment), as of
the date of such repayment
(any such amount, a "Mandatory Repayment Amount"), without premium or penalty.
All payments hereunder shall be credited first to accrued but unpaid interest,
and then to principal.
5. Change of Control Event. If a Change of Control Event (as defined below)
occurs, Lender may, at its option, exercised by delivering written notice to
Debtor, accelerate
----------
(3) Interest rate to be calculated at closing equal to the 90-day weighted
average treasury rate.
2
repayment of this Note, in which case the principal amount outstanding under
this Note and all interest accrued and unpaid thereon shall be due and payable
immediately. For purposes of this Note, the term "Change of Control Event" means
either (i) the sale of all or substantially all of the assets of Guarantor (as
defined below) to any Person other than an affiliate of Guarantor or of S.A.C.
Private Capital Group, LLC or (ii) a sale or other transfer of ordinary shares
of Guarantor by S.A.C. PEI CB Investment, L.P. ("Investor") if Investor and its
affiliates would, as a result of such transfer, collectively beneficially own
less than 90% of the number of ordinary shares of Guarantor that Investor
beneficially owns at the date of issuance of this Note (as adjusted for any
combinations or subdivisions of Guarantor's ordinary shares and the payment of
any dividends thereon in the form of Guarantor's ordinary shares); provided,
that Debtor shall provide written notice to Lender of such Change of Control
Event promptly, and in no event less than 5 business days prior to such Change
of Control Event; provided, further, that a merger or business combination shall
not be taken into consideration in determining whether a Change of Control Event
has occurred if at least 90% of the value of the consideration received by
Investor in such transaction is in the form of equity interests in the surviving
entity.
6. Default. For purposes of this Note, the term "default" shall mean any of
the following:
(a) The failure by Debtor to pay, for 5 business days, any principal or
interest due and payable on this Note, whether upon mandatory repayment or
otherwise;
(b) Debtor shall (i) make an assignment for the benefit of creditors or
petition or apply to any tribunal for the appointment of a custodian,
receiver or trustee for it or a substantial part of its assets, (ii)
commence any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect, (iii) have had any such
petition or application filed or any such proceeding commenced against it
that is not dismissed within 60 days, (iv) formally consent to approve any
such petition, application, proceeding or order for relief or the
appointment of a custodian, receiver or trustee for it or a substantial
part of its assets, or (v) suffer any such custodianship, receivership or
trusteeship to continue undischarged for a period of 60 days or more; or
(c) Debtor shall adopt a plan of liquidation or dissolution, or the
certificate of incorporation of Debtor shall expire or be revoked.
Upon each such default, Lender may, at its option, exercised by delivering
written notice to Debtor, accelerate repayment of this Note, in which case the
principal amount outstanding under this Note and all interest accrued thereon
shall be due and payable immediately; provided, that if there shall occur a
default described in subparagraph (c), the entire unpaid balance of principal
with interest accrued thereon shall be immediately due and payable without any
action by Lender.
7. Representations and Warranties of Debtor.
(a) Debtor is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite
corporate power and
3
authority to enter into this Note and consummate the transactions
contemplated hereby. This Note has been duly authorized, executed and
delivered by Debtor and constitutes a legal, valid and binding obligation
of Debtor, enforceable against Debtor in accordance with its terms, subject
to bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the rights of creditors generally and the availability of
equitable remedies.
(b) Except for this Note, the Convertible Notes (as defined in the Stock
Purchase Agreement, dated as of May 21, 2008, by and among Guarantor,
Debtor and Lender (the "Stock Purchase Agreement") and any intercompany
note between Guarantor and Debtor that is subordinated to this Note and the
Convertible Note and will not be repaid in whole or in part until after
this Note is repaid in full, Debtor has no (i) indebtedness for borrowed
money, whether contingent, current or funded, secured or unsecured, (ii)
indebtedness that is evidenced by a note, bond, debenture, draft, bankers'
acceptance, letter of credit or similar instrument, (iii) material
liabilities or obligations for the deferred purchase price of property or
services, (iv) capitalized lease obligations, or (v) guarantees of any of
the foregoing of another person.
8. Guarantee.
(a) CBaySystems Holdings Limited, a British Virgin Islands company and the
direct parent of Debtor ("Guarantor"), hereby fully, unconditionally and
irrevocably guarantees, as primary obligor and not merely as surety, to
Lender, the performance by Debtor of all of Debtor's obligations under this
Note, including, but not limited to, the full and punctual payment of any
and all present and future amounts under this Note, whether absolute or
contingent, whether at the Repayment Date or by acceleration, optional
prepayment, mandatory repayment or otherwise, of the principal of and
interest on this Note (collectively, the "Guarantor Obligations").
(b) Guarantor waives presentation to, demand of payment from and protest to
Debtor of any of the Guarantor Obligations and also waives notice of
protest for nonpayment. Guarantor waives (to the extent permitted by law)
notice of any default under this Note or the Guarantor Obligations.
Guarantor further agrees that its guarantee herein (the "Guarantee")
constitutes a continuing guarantee of payment when due (and not a guarantee
of collection) and waives any right to require that any resort be had by
Lender to any security held for payment of the Guarantor Obligations.
(c) Except as set forth in Section 8(h) of this Note, the obligations of
Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (other than payment of the
Guarantor Obligations in full), including any claim of waiver, release,
surrender, alteration or compromise, and shall not be subject to any
defense of setoff, counterclaim, recoupment or termination whatsoever or by
reason of the invalidity, irregularity, illegality or unenforceability of
this Note or the Guarantor Obligations or otherwise. Without limiting the
generality of the foregoing, the Guarantor Obligations shall not be
discharged or impaired or otherwise affected by (i) the failure of Lender
to assert any claim or demand or to enforce any right or remedy against
Debtor or any other Person under this Note or any other agreement executed
or delivered in connection with this Note; (ii) any extension or renewal of
this Note or any other
4
agreement executed or delivered in connection with this Note; (iii) any
rescission, waiver, amendment or modification of any of the terms or
provisions of this Note or any other agreement executed or delivered in
connection with this Note; (iv) any change in the ownership of Debtor or
Guarantor; (v) any default, failure or delay, willful or otherwise, in the
performance of the Guarantor Obligations, (vi) the power, authority or
capacity of Debtor, (vii) the recovery of any judgment against Debtor or
any action to enforce the same, or (viii) any other act or thing or
omission or delay to do any other act or thing which may or might in any
manner or to any extent vary the risk of Guarantor or would otherwise
operate as a discharge of Guarantor as a matter of law or equity.
(d) Until the payment of the Guarantor Obligations in full, Guarantor shall
not exercise any right of subrogation in relation to payments made by
Guarantor pursuant to this Guarantee. If Lender in its sole discretion
elects to give notice of any action in relation to the Collateral to the
Guarantor, 5 business days' prior written notice to Guarantor shall be
reasonable notice of any matters contained in such notice.
(e) Guarantor agrees that its Guarantee herein shall remain in full force
and effect until payment in full of all the Guarantor Obligations or
Guarantor is released from its Guarantee in compliance with Section 8(h) of
this Note. Guarantor further agrees that its obligations hereunder shall
not be delayed or restrained upon the commencement of any voluntary or
involuntary bankruptcy or insolvency proceedings in relation to Debtor or
any of its property whether or not any collection, enforcement or other
action against Debtor or any of its property is stayed or enjoined. If at
any time any payment of any portion of the Guarantor Obligations is
rescinded or must otherwise be restored or returned upon the insolvency,
bankruptcy or reorganization of Debtor or otherwise, Guarantor's
obligations hereunder in relation to such payment shall be reinstated at
such time as though such payment had not been made.
(f) In furtherance of the foregoing and not in limitation of any other
right which Lender has at law or in equity against Guarantor by virtue
hereof, upon the failure of Debtor to pay any of the Guarantor Obligations
when and as the same shall become due, whether at the Repayment Date or by
acceleration, optional prepayment, mandatory repayment or otherwise,
Guarantor hereby promises to and will, upon receipt of written demand by
Lender, forthwith pay, or cause to be paid, in cash, to Lender an amount
equal to the sum of (i) the unpaid amount of such Guarantor Obligations
then due and owing and (ii) accrued and unpaid interest on such Guarantor
Obligations then due and owing (but only to the extent not prohibited by
law) (including interest accruing after the filing of any petition in
bankruptcy or the commencement of any insolvency, reorganization or like
proceeding relating to Debtor or Guarantor whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding).
(g) Guarantor further agrees that, as between Guarantor, on the one hand,
and Lender, on the other hand, (x) the maturity of the Guarantor
Obligations guaranteed hereby may be accelerated as (and to the extent)
provided in this Note for the purposes of the Guarantee herein,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the Guarantor Obligations guaranteed hereby and
(y) in the event of any such declaration of acceleration of such Guarantor
Obligations, such
5
Guarantor Obligations (whether or not due and payable) shall forthwith
become due and payable by Guarantor for the purposes of this Guarantee.
(h) Guarantor shall automatically be released from all of its obligations
under this Note upon payment in full of all principal and accrued and
unpaid interest due under this Note in accordance with its terms.
(i) Guarantor shall pay all costs, fees and expenses (including reasonable
attorneys' fees and expenses) incurred by Lender in collecting or enforcing
Guarantor's obligations hereunder.
(j) Guarantor's liability hereunder is independent of any other guarantees
or other obligations at any time in effect in relation to the Guarantor
Obligations or the Stock Purchase Agreement, and such liability hereunder
may be enforced regardless of the existence, validity, enforcement or non
enforcement of any such other guarantees or obligations. Lender shall have
no obligation to disclose or discuss with Guarantor its assessment of the
financial condition of Debtor.
(k) No failure on the part of Lender to exercise, and no delay in
exercising, any right, remedy or power under the Guarantee shall operate as
a waiver thereof.
9. Security.
(a) Collateral. The due and punctual payment of the principal of, and
interest on, this Note and the Guarantee when and as the same shall be due
and payable, whether at maturity or by acceleration, optional prepayment,
mandatory repayment or otherwise, interest on the overdue principal of and
interest (to the extent permitted by law), if any, on this Note and the
Guarantee and performance of all other obligations of Debtor and Guarantor
hereunder shall be secured by first-priority Liens and security interests
in (i) all shares of MedQuist common stock and (ii) all cash received as a
MedQuist Dividend, in each case now owned or hereafter acquired by Debtor
(such cash and shares, the "Collateral").
(b) Further Assurances.
(i) At Lender's request, Debtor and Guarantor shall, at their sole
expense, do all acts which may be reasonably necessary to confirm that
Lender holds duly created, enforceable and perfected first-priority
Liens and security interests in the Collateral; provided, that
perfection shall not apply to Collateral specifically requiring
perfection through control agreements (including deposit accounts or
securities accounts).
(ii) At Lender's request, Debtor and Guarantor shall, at their sole
expense, execute, acknowledge and deliver such documents and
instruments and take such other actions, which may be necessary to
assure, perfect, transfer and confirm the Liens, benefits, property
and rights conveyed by this Note, including with respect to
after-acquired Collateral; provided, that perfection shall not apply
to Collateral
6
specifically requiring perfection through control agreements
(including deposit accounts or securities accounts).
(c) Impairment of Security Interest. Neither Debtor nor Guarantor shall
take or omit to take any action which would adversely affect in a material
respect or impair the Liens in favor of Lender with respect to the
Collateral. Neither Debtor nor Guarantor shall enter into any agreement
that requires the proceeds received from any sale of Collateral to be
applied, in priority or in parity with this Note, to repay, redeem, defease
or otherwise acquire or retire any indebtedness of any Person.
(d) Maintenance of Collateral. Debtor and Guarantor shall maintain the
Collateral in good, safe and insurable condition and do all other acts as
may be reasonably necessary or appropriate to maintain and preserve the
Collateral, except where the failure to maintain such Collateral would not
reasonably be expected to have a material adverse effect on the Collateral,
taken as a whole.
(e) Release of Liens on the Collateral. The Liens on the Collateral will be
released with respect to this Note and the Guarantee:
(i) in whole, upon payment in full of the unpaid principal, together
with all accrued and unpaid interest thereon, of this Note; or
(ii) with the consent of Lender.
Upon compliance by Debtor with the conditions precedent set forth above,
Lender shall promptly cause to be released and reconveyed to Debtor the
released Collateral and execute and deliver to Debtor such documents as
Debtor shall reasonably request to evidence such termination.
(f) Pledged Stock.
(i) If Lender elects to exercise any of its rights with respect to the
shares of MedQuist common stock pledged as part of the Collateral (the
"Pledged Stock"), it shall provide prior written notice to Debtor.
Unless a default shall have occurred and be continuing and Lender
shall have given notice to Debtor of Lender's intent to exercise its
corresponding rights pursuant to Section 9(f)(ii) of this Note, Debtor
shall be permitted to receive all cash dividends, payments or other
proceeds paid in respect of such Pledged Stock and to exercise all
voting and corporate or other organizational rights with respect to
such Pledged Stock.
(ii) If a default shall occur and be continuing and Lender shall give
notice of its intent to exercise such rights to Debtor, (i) Lender
shall have the right to receive any and all cash dividends, payments
or other proceeds paid in respect of the Pledged Stock and make
application thereof to the unpaid principal balance of or accrued and
unpaid interest on this Note, and (ii) any or all of the Pledged Stock
shall be registered in the name of Lender or its nominee, and Lender
or its nominee may thereafter exercise (x) all voting, corporate and
other rights pertaining to the Pledged Stock at any meeting of
shareholders of MedQuist or
7
any adjournment or postponement thereof or otherwise and (y) any other
rights pertaining to the Pledged Stock as if it were the absolute
owner thereof.
(g) Certain Definitions.
(i) "Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other
title retention agreement or lease in the nature thereof).
(ii) "Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization, limited liability company or government or any agency or
political subdivision thereof or any other entity.
10. Notices. Any notice or communication shall be in writing and delivered
in person, sent by facsimile or delivered by commercial overnight courier
service providing proof of delivery, addressed as follows:
If to Debtor:
CBay Inc.
0000 Xxxx Xxxx
Xxxxxxxx 0000, Xxxxx Xxxxx
Xxxxxxxxx XX 00000
Fax: (000) 000-0000
Attention: Raman Kumar
with copies (which shall not constitute notice) to:
Xxxxx Day
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxxxx
and
Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxxxx
8
If to Guarantor:
CBaySystems Holdings Limited
0000 Xxxx Xxxx
Xxxxxxxx 0000, Xxxxx Xxxxx
Xxxxxxxxx XX 00000
Fax: (000) 000-0000
Attention: Raman Kumar
with copies (which shall not constitute notice) to:
Xxxxx Day
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxxx Xxxxxxxxxx
and
Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxxxx
If to Lender:
Koninklijke Philips Electronics N.V.
Xxxxxxxx Center HBT 17
Xxxxxxxxxxx 0, 0000 XX
X.X. Xxx 00000
0000 XX Xxxxxxxxx
Xxx Xxxxxxxxxxx
Fax: (00) 00 00 00000
Attention: Xxxxx Xxxxx, Executive Vice President, Corporate
Mergers & Acquisitions
with a copy (which shall not constitute notice) to:
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx
Debtor, Guarantor or Lender may, by written notice to the others, designate
additional or different addresses for subsequent notices or communications. Any
notice or communication shall be deemed to have been given or made as of the
date so delivered if personally delivered;
9
when receipt is acknowledged, if sent by facsimile; and one business day after
sending if sent by commercial overnight courier service; provided, that a notice
of change of address shall not be deemed to have been given until actually
received by the addressee. If a notice or communication is sent in the manner
provided above, it is duly given, whether or not the addressee receives it,
except that notices to Debtor shall be effective only upon receipt.
11. Miscellaneous.
(a) Debtor hereby waives presentment, demand, protest, notice of dishonor,
diligence and all other notices, any release or discharge arising from any
extension of time, discharge of a prior party, release of any or all of any
security given from time to time for this Note, or other cause of release
or discharge or defense to payment and performance of its obligations
hereunder other than actual payment in full hereof.
(b) Any term of this Note may be amended or waived with the prior written
consent of each party hereto. No party hereto shall be deemed, by any act
or omission, to have waived any of its rights or remedies hereunder unless
such waiver is in writing and signed by such party and then only to the
extent specifically set forth in such writing. A waiver with reference to
one event shall not be construed as continuing or as a bar to or waiver of
any right or remedy as to a subsequent event. No delay or omission of
Lender to exercise any right, whether before or after a default hereunder,
shall impair any such right or shall be construed to be a waiver of any
right or default, and the acceptance at any time by Lender of any past-due
amount shall not be deemed to be a waiver of the right to require prompt
payment when due of any other amounts then or thereafter due and payable.
(c) Time is of the essence hereof. Upon any default hereunder, Lender may
exercise all rights and remedies provided for herein and by law or equity
or otherwise, including, but not limited to, the right to immediate payment
in full of this Note.
(d) The remedies of Lender as provided herein, or any one or more of them,
or in law or in equity, shall be cumulative and concurrent, and may be
pursued singularly, successively or together at Lender's sole discretion
and may be exercised as often as occasion therefor shall occur.
(e) If any provisions of this Note would require Debtor or Guarantor to pay
interest hereon at a rate exceeding the highest rate allowed by applicable
law, Debtor or Guarantor shall instead pay interest under this Note at the
highest rate permitted by applicable law.
(f) This Note shall be governed by and construed in accordance with the
laws of the State of New York.
(g) This Note shall be binding upon Debtor and Guarantor and their
respective successors and assigns. This Note may not be assigned or
transferred by any party hereto without the written consent of the other
parties. Any purported assignment in violation of this section shall be
null and void and of no force and effect.
10
(h) All payments (including prepayments) to be made by Debtor hereunder,
whether on account of principal, interest or otherwise, shall be made
without setoff or counterclaim.
(i) If any provision of this Note is held to be invalid, illegal, void or
unenforceable by a court of competent jurisdiction, the other provisions of
this Note shall remain in full force and effect and shall be liberally
construed in order to effect the provisions of this Note. It is hereby
stipulated and declared to be the intention of Debtor and Lender that they
would have executed the remaining terms, provisions, covenants and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void or unenforceable.
(j) This Note constitutes the entire understanding between Debtor and
Lender with respect to the subject matter hereof and supersedes any prior
agreements, written or oral, with respect thereto.
[signature page follows]
11
IN WITNESS WHEREOF, Debtor and Guarantor have executed this Note as of the
date first above written.
CBAY INC.
By:
------------------------------------
Name:
Title:
CBAYSYSTEMS HOLDINGS LIMITED
By:
------------------------------------
Name:
Title:
Accepted and agreed as of the date
first above written:
KONINKLIJKE PHILIPS ELECTRONICS N.V.
By:
---------------------------------
Name:
Title:
EXHIBIT E
DESCRIPTION OF THE CONVERTIBLE NOTES
The senior convertible notes (the "Notes") will be issued by CBay Inc., as
issuer, to Koninklijke Philips Electronics N.V. ("Philips"), as lender. The
following description is a summary of the material provisions of the Notes.
When we refer to the "Company," "we," "our" or "us" in this section, we
refer only to CBay Inc., a Delaware corporation, and not to its subsidiaries.
When we refer to "CBay," we refer only to our parent company, CBaySystems
Holdings Limited, a British Virgin Islands company, and not to us or any of
CBay's other subsidiaries.
BRIEF DESCRIPTION OF THE NOTES
The Notes will:
- initially be limited to $[_] million aggregate principal amount;
- bear interest at a rate of 6.00% per year, payable semi-annually in
arrears, on [_] and [_] of each year, commencing on [_], 2008;
- at our option, be payable-in-kind with respect to interest through
[_], 2009;
- be our general unsecured senior obligations, ranking (i) equally in
right of payment with all of our existing and future unsecured senior
indebtedness and (ii) senior in right of payment to (x) any
subordinated indebtedness and (y) any investment in or contribution
(whether as equity or indebtedness) to CBay by S.A.C. Private Capital
Group, LLC ("SAC") or any of its affiliates (a "SAC Investment");
- be unconditionally guaranteed on a senior basis by CBay;
- be convertible by you in whole or in part at any time on or prior to
5:00 p.m., New York City time, on the business day immediately
preceding the maturity date, as described under "-- Conversion
Rights," into cash and ordinary shares of CBay based on a conversion
rate of 0.6048 ordinary shares of CBay per $1.00 principal amount of
Notes, which represents a conversion price of 84 British xxxxx per
share;
- at our option, be subject to redemption by us at any time on or after
[_], 2011, in whole or in part, at the redemption prices set forth
under "-- Optional Redemption";
- at your option, be subject to repurchase by us, upon 90 days' prior
written notice, at any time on or after [_], 2012, in whole or in
part, at the repurchase price set forth under "-- Repurchase at the
Option of the Holder -- Optional Put";
- at your option, be subject to repurchase by us upon specified Change
of Control Events as set forth under "-- Repurchase at the Option of
the Holder -- Change of Control Put";
- not be transferable prior to [_], 2009, other than to affiliates of
Philips, and thereafter be transferable subject to limitations; and
2
- be due on [_], 2015, unless earlier converted, redeemed by us at our
option or repurchased by us at your option.
No sinking fund is provided for the Notes and the Notes will not be subject
to defeasance.
The Notes initially will be issued in denominations of $1.00 principal
amount and whole multiples thereof.
You may present the Notes for conversion into cash and CBay ordinary
shares, registration of transfer and exchange, without service charge, at our
office.
RANKING
The Notes will be our direct and senior unsecured obligations. The Notes
will rank (i) equally in right of payment with all of our existing and future
senior unsecured indebtedness and (ii) senior in right of payment to (x) any of
our subordinated indebtedness and (y) any SAC Investment.
Any existing or future investment in or contribution (whether as equity or
intercompany indebtedness) to the Company by CBay (whether in the form of cash,
securities or other properties) will be subordinated and junior to the Notes in
ranking and in right of payment.
PAYMENT AT MATURITY
On the maturity date, each holder will be entitled to receive on such date
$1.00 in cash for each $1.00 principal amount of Notes, together with accrued
and unpaid interest to, but not including, the maturity date. Principal and
interest will be payable at our office.
INTEREST
The Notes will bear interest at a rate of 6.00% per year. Interest will
accrue from the date of issuance, or from the most recent date to which interest
has been paid or duly provided for. We will pay interest semi-annually, in
arrears on [_] and [_] of each year, commencing on [_], 2008, to holders of
record at 5:00 p.m., New York City time, on the preceding [_] and [_],
respectively. However, on the maturity date, we will pay accrued and unpaid
interest only to the Person to whom we pay the principal amount.
On and prior to [_], 2009, interest may, at our option, be paid entirely by
increasing the principal amount of the outstanding Notes or by issuing
additional Notes, referred to as "paid-in-kind" interest, or "PIK interest," on
the same terms and conditions as the Notes offered hereby (in each case, a "PIK
payment"). PIK interest on the Notes will accrue at a rate of 6.00% per annum
and be payable by issuing Notes in an aggregate principal amount equal to the
amount of PIK interest for the applicable period (rounded to the nearest whole
dollar). Following an increase in the principal amount of the outstanding Notes
as a result of a PIK payment, the Notes will bear interest on such increased
principal amount from and after the date of such PIK payment. Any Notes issued
in certificated form will be dated as of the applicable interest payment date
and will bear interest from and after such date. All Notes issued pursuant to a
PIK payment will mature on [_], 2015 and will be governed by, and subject to the
same terms,
3
provisions and conditions of, the initially issued Notes and shall and have the
same rights and benefits as the Notes issued on the original issue date. Any
additional Notes issued pursuant to a PIK payment will be issued with the
description "PIK" on the face of such Notes and references to "principal amount"
of the Notes includes any increase in the principal amount of the outstanding
Notes as a result of any PIK payment.
Notwithstanding our right to pay PIK interest, the payment of accrued
interest in connection with any redemption or repurchase of Notes as described
below under "--Optional Redemption" or "Repurchase at the Option of Holders"
shall be made solely in cash.
Except to the extent that we elect to pay PIK interest as described above,
we will pay cash interest on:
- any Notes having a principal amount of less than $5.0 million, by
check mailed to the holders of those Notes; provided, however, at
maturity, interest will be payable as described under "-- Payment at
Maturity"; and
- any Notes having a principal amount of $5.0 million or more, by wire
transfer in immediately available funds at the election of the holders
of these Notes, which Notes shall have been duly delivered to us at
least five business days prior to the relevant interest payment date;
provided, however, at maturity, interest will be payable as described
under "-- Payment at Maturity."
Interest on the Notes for a full interest period will be calculated on the
basis of a 360-day year consisting of twelve 30-day months. Interest on the
Notes for any period other than a full interest period will be calculated on the
basis of the actual number of days elapsed during the period and a 365-day year.
If an interest payment date is not a business day, payment will be made on the
next succeeding business day, and no additional interest will accrue thereon.
GUARANTEE
CBay, as a primary obligor and not merely as a surety, by executing the
Notes will fully and unconditionally guarantee (the "Guarantee"), on a senior
unsecured basis, (i) all our obligations under the Notes, whether for payment of
principal of, premium, if any, or interest in respect of the Notes on the terms
set forth in the Notes and (ii) issuance of its ordinary shares upon any
conversion of the Notes.
The guarantee of the Notes will be a general unsecured senior obligation of
CBay. The guarantee will rank (i) equally in right of payment with all existing
and future senior indebtedness of CBay, (ii) senior in right of payment to (x)
all existing and future subordinated indebtedness of CBay and (y) any SAC
Investment, and (iii) be effectively subordinated to all secured indebtedness of
CBay to the extent of the value of the collateral securing such indebtedness.
None of our subsidiaries will guarantee the Notes. In the event of a
bankruptcy, liquidation or reorganization of any of our subsidiaries, the
subsidiaries will pay the holders of their debt and their trade creditors before
they will be able to distribute any of their assets to us.
4
The obligations of CBay under its guarantee will be limited as necessary to
prevent the guarantee from constituting a fraudulent conveyance under applicable
law.
CONVERSION RIGHTS
Unless we have previously redeemed or repurchased the Notes, any holder of
Notes that also holds at least 100 ordinary shares of CBay will have the right
to convert any portion of the principal amount of any Notes (including Notes
issued pursuant to PIK interest) that is an integral multiple of $1.00 on or
prior to 5:00 p.m., New York City time, on the business day immediately
preceding the maturity date. Holders may convert their Notes based on a
conversion rate of 0.6048 CBay ordinary shares per $1.00 principal amount of
Notes (equivalent to a conversion price of 84 British xxxxx per share). The
"conversion price" on any day is equal to $1.00 divided by the conversion rate.
As described under "-- Conversion Procedures --Settlement Upon Conversion," upon
conversion of Notes, we will satisfy our conversion obligation with respect to
the principal amount of the Notes to be converted in cash and CBay ordinary
shares.
Upon conversion, except for any PIK interest payments, any accrued and
unpaid interest on the Notes, up to but not including the conversion date, will
be paid in full in cash on the settlement date.
Other than as set forth under "-- Conversion Procedures -- Conversion Rate
Adjustments," we will not make any payment or other adjustment for dividends on
any ordinary shares issued upon conversion of the Notes.
If you have submitted any or all of your Notes for repurchase, unless you
have withdrawn such Notes in a timely fashion, your conversion rights on the
Notes so subject to repurchase will expire at 5:00 p.m., New York City time, on
the business day preceding the repurchase date, unless we default in the payment
of the repurchase price. If you have submitted any Notes for repurchase, such
Notes may be converted only if you submit a timely withdrawal notice.
CONVERSION PROCEDURES
PROCEDURES TO BE FOLLOWED BY A HOLDER
To convert you must:
- complete and manually sign the conversion notice on the back of the
Note or a facsimile of the conversion notice (which notice shall
include a representation that you hold at least 100 ordinary shares of
CBay and will continue to hold such shares until settlement of the
conversion);
- deliver the completed conversion notice and the Note to be converted
to us;
- if required, furnish appropriate endorsements and transfer documents;
- if required, pay funds equal to interest payable on the next interest
payment date to which you are not entitled; and
5
- if required, pay all transfer or similar taxes, if any.
The conversion date will be the date on which you have satisfied all of the
foregoing requirements. The Notes will be deemed to have been converted
immediately prior to 5:00 p.m., New York City time, on the conversion date.
You will not be required to pay any taxes or duties relating to the
issuance or delivery of CBay ordinary shares if you exercise your conversion
rights, but you will be required to pay any tax or duty that may be payable
relating to any transfer involved in the issuance or delivery of CBay ordinary
shares in a name other than your own. Certificates representing CBay ordinary
shares will be issued and delivered only after all applicable taxes and duties,
if any, payable by you have been paid in full.
SETTLEMENT UPON CONVERSION
Upon conversion, we will deliver to holders in respect of each $1.00
principal amount of Notes being converted a number of CBay ordinary shares equal
to the conversion rate in effect on that day multiplied by $1.00. The minimum
amount for any single conversion shall be $10,000 principal amount of Notes. We
will not issue fractional CBay ordinary shares upon conversion of the Notes.
Instead, we will pay cash in lieu of fractional shares based on the average of
the volume weighted average price per CBay ordinary share on each of the five
trading days immediately preceding the conversion date.
Settlement in cash and CBay ordinary shares will occur on the fifteenth
business day following the delivery of a notice of conversion in accordance with
the terms of the Notes.
A holder receiving CBay ordinary shares upon conversion will not be
entitled to any rights as a holder of CBay ordinary shares, including, among
other things, the right to vote and receive dividends and notices of stockholder
meetings, until the close of business on the conversion date. Such ordinary
shares will be subject to the terms of the Shareholder Agreement.
"Trading day" means a day during which:
- trading in CBay ordinary shares generally occurs on the Alternative
Investment Market of the London Stock Exchange; and
- there is no market disruption event;
provided, however, that if CBay ordinary shares are not traded on the
Alternative Investment Market of the London Stock Exchange or any other
securities exchange or market, then "trading day" shall mean a day that the
volume weighted average price of CBay ordinary shares can be obtained.
"Market disruption event" means:
- a failure by the securities exchange or market referenced in the
definition of "trading day" above to open for trading during its
regular trading session; or
6
- the occurrence or existence prior to 1:00 p.m., London time, on any
trading day for CBay ordinary shares of an aggregate one-half hour of
suspension or limitation imposed on trading (by reason of movements in
price exceeding limits permitted by a stock exchange or otherwise) in
CBay ordinary shares or in any option contracts or futures contracts
relating to CBay ordinary shares.
The "volume weighted average price" per CBay ordinary share on any trading
day means such price as displayed on Bloomberg (or any successor service) page
CBAY LN (equity) VWAP in respect of the period from [9:30 a.m. to 4:00 p.m.,
London time], on such trading day; or, if such price is not available, the
volume weighted average price means the market value per ordinary share of CBay
on such trading day as determined by a nationally recognized independent
investment banking firm retained for this purpose by us.
CONVERSION RATE ADJUSTMENTS
We will adjust the conversion rate in the event of any issuances of CBay
ordinary shares to all or substantially all holders of CBay ordinary shares as a
dividend or distribution on such ordinary shares, or if CBay effects
subdivisions or combinations of its ordinary shares (including, for the
avoidance of doubt, share splits and reverse share splits), in which event the
conversion rate will be adjusted based on the following formula:
CR1 = CR0 X (OS1 / OS0)
where,
CR0 = the conversion rate in effect at 5:00 p.m., London time, on the
record date for such dividend or distribution or the effective date
of such subdivision or combination;
CR1 = the conversion rate in effect immediately after the record date for
such dividend or distribution or the effective date of such
subdivision or combination;
OS0 = the number of ordinary shares of CBay outstanding at 5:00 p.m.,
London time, on the record date for such dividend or distribution or
the effective date of such subdivision or combination; and
OS1 = the number of ordinary shares of CBay that would be outstanding
immediately after, and solely as a result of, such event.
Any adjustment made pursuant to the formula described above shall become
effective immediately after (x) the record date for such dividend or
distribution or (y) the effective date of such subdivision or combination. If
any dividend or distribution described above is declared but not so paid or
made, the conversion rate shall be readjusted to the conversion rate that would
then be in effect if such dividend or distribution had not been declared.
If CBay (i) reclassifies or changes its ordinary shares (other than a
change in par value or changes resulting from a subdivision or combination), or
(ii) consolidates or merges with or into any person or sells, transfers, conveys
or otherwise disposes of all or substantially all of its assets and those of its
subsidiaries taken as a whole to another Person, and in either case the holders
of CBay ordinary shares receive stock, other securities or other property or
assets (including cash or
7
any combination thereof) with respect to or in exchange for their ordinary
shares, each outstanding Note will, without the consent of any holders of the
Notes, become convertible based on the cash, securities or other property
consideration the holders of CBay ordinary shares received in such
reclassification, change, consolidation, merger, sale, lease, transfer,
conveyance or other disposition (the "Reference Property"). If the transaction
causes CBay's ordinary shares to be converted into the right to receive more
than a single type of consideration (determined based in part upon any form of
shareholder election), the Reference Property into which the Notes will become
convertible will be deemed to be the weighted average of the kind and amount of
consideration received by the holders of CBay ordinary shares that effectively
make such an election. In all cases, the provisions above under "-- Settlement
Upon Conversion" relating to the satisfaction of the conversion obligation shall
continue to apply with respect to the calculation of the conversion settlement
amount.
TRANSFERS
The Notes are transferable at any time after [_], 2009; provided that if
any Person would, as of any date, beneficially own more than 20% of the
principal amount of the Notes as of the issue date of the Notes (plus any
accrued or paid PIK interest) as a result of any transfer or transfers, such
transfer or transfers will be prohibited and void unless (i) we give our prior
written consent or (ii) the transferee becomes a party to, and bound by the
terms of, the Shareholder Agreement. Prior to [_], 2009, the Notes may only be
transferred with our prior written consent, other than transfers to affiliates
of Philips. No transfer of Notes will be permitted if such transfer would cause
the Company or CBay to become subject to any prospectus-delivery or similar
requirement.(1) Notwithstanding the foregoing, any purported transfer of the
Note (or a portion of the Note) to any affiliate of Philips on any date shall be
prohibited and void unless such affiliate becomes a party to, and be bound by
the terms of, the Shareholder Agreement.
We will use commercially reasonable efforts to execute a new Note for any
permitted transferee; provided that the transferor of a Note will reimburse us
for all of our reasonable costs and expenses (including attorneys' fees)
incurred in executing and issuing the new Note.
OPTIONAL REDEMPTION
Prior to [_], 2011, we may not redeem the Notes. At any time on and after
[_], 2011, we may redeem all or, from time to time, a part of the Notes in cash
at the following redemption prices (expressed as a percentage of principal
amount) plus accrued and unpaid interest on the Notes, if any, to the applicable
redemption date (subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest payment date), if
redeemed during the twelve-month period beginning on [_] of the years indicated
below:
YEAR PERCENTAGE
---- ----------
2011 ................. 108.00%
2012 ................. 103.00%
2013 and thereafter .. 100.00%
----------
(1) Current limit under UK law is 99 holders.
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If the optional redemption date is on or after an interest record date and
on or before the related interest payment date, the accrued and unpaid interest,
if any, will be paid to the Person in whose name the Note is registered at the
close of business on such record date, and the holder of the Note on such
optional redemption date will be paid the accrued and unpaid interest for the
period commencing from the close of business on such record date.
We will give notice of redemption not less than 30 nor more than 60
calendar days prior to the redemption date to all record holders of Notes at
their addresses set forth in our Notes register.
This notice will state, among other things:
- that you have a right to convert the Note called for redemption, and
the conversion rate then in effect; and
- the date on which your right to convert the Note called for redemption
will expire.
In the case of any partial redemption, selection of the Notes for
redemption will be made by us on a pro rata basis, or, if a pro rata basis is
not practicable, by lot or by such other method as we in good xxxxx xxxx to be
fair and appropriate. If any Note is to be redeemed in part only, the notice of
redemption relating to such Note will state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the holder thereof upon
cancellation of the original Note.
Additionally, we will not be required to:
- issue, register the transfer of, or exchange any Notes during the
period of 15 business days before the mailing of the notice of
redemption, or
- register the transfer of or exchange any Notes so selected for
redemption, in whole or in part, except the unredeemed portion of any
Notes being redeemed in part.
REPURCHASE AT THE OPTION OF THE HOLDER
OPTIONAL PUT
At any time on or after [_], 2012, unless we have exercised our right to
redeem all of the Notes as described above under "-- Optional Redemption," all
holders of the Notes will collectively have a one-time right to require us to
repurchase, at the repurchase price described below, all or a portion of their
Notes if holders representing at least 50% of the Notes then outstanding have
properly delivered and not withdrawn a written repurchase notice.
CHANGE OF CONTROL PUT
If a Change of Control Event occurs, unless we have exercised our right to
redeem all of the Notes as described above under "-- Optional Redemption," you
will have the right to require
9
us to repurchase, at the repurchase price described below, all or part of your
Notes for which you have properly delivered and not properly withdrawn a written
repurchase notice.
A "Change of Control Event" means either (i) the sale of all or
substantially all of the assets of CBay to any Person other than an affiliate of
CBay or of S.A.C. Private Capital Group, LLC or (ii) a sale or other transfer of
ordinary shares of CBay by S.A.C. PEI CB Investment, L.P. ("Investor") if
Investor and its affiliates would, as a result of such transfer, collectively
beneficially own less than 90% of the number of ordinary shares of CBay that
Investor beneficially owns at the date of issuance of the Notes (as adjusted for
any combinations or subdivisions of CBay's ordinary shares and the payment of
any dividends thereon in the form of CBay's ordinary shares); provided, that the
Company shall provide written notice to holders of the Notes of such Change of
Control Event promptly, and in no event less than five business days prior to
such Change of Control Event; provided, further, that a merger or business
combination shall not be taken into consideration in determining whether a
Change of Control Event has occurred if at least 90% of the value of the
consideration received by Investor in such transaction is in the form of equity
interests in the surviving entity.
On or before the twentieth calendar day after the occurrence of a Change of
Control Event, unless we have exercised our right to redeem all of the Notes as
described above under "-- Optional Redemption," we will provide to all record
holders of the Notes on the date of the Change of Control Event at their
addresses shown in our Notes register and to beneficial owners to the extent
required by applicable law, a written notice of the occurrence of the Change of
Control Event and the resulting repurchase right. Such notice shall state, among
other things, that a Change of Control Event has occurred and the procedures you
must follow to require us to repurchase your Notes.
The repurchase date will be a date specified by us in the notice that is
not more than 30 calendar days after the date of the notice.
REPURCHASE PRICE
The repurchase price will be payable in cash and will equal 100% of the
principal amount of the Notes being repurchased, plus accrued and unpaid
interest, if any, to, but excluding, the repurchase date. If the repurchase date
is on or after an interest record date and on or before the related interest
payment date, accrued and unpaid interest, if any, will be paid to the Person in
whose name a Note is registered at the close of business on such record date,
and the holder of the Note on such repurchase date will be paid the accrued and
unpaid interest for the period commencing from the close of business on such
record date.
REPURCHASE PROCEDURES
To exercise your repurchase right, you must deliver a written notice to us
of your exercise of such right (together with the Notes to be repurchased) (x)
for an optional repurchase, not less than 90 days prior to the applicable
repurchase date and (y) for a Change of Control Event repurchase, no later than
the business day immediately preceding the repurchase date. The repurchase
notice must state:
- the certificate numbers of the Notes to be delivered for repurchase;
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- the portion of the principal amount of your Notes to be repurchased,
which must be $1.00 or whole multiples thereof; and
- that the Notes are to be repurchased by us pursuant to the applicable
provisions of the Notes.
The Notes submitted for repurchase must be $1.00 in principal amount or
whole multiples thereof.
If we receive one or more valid optional repurchase notices from holders
representing at least 50% of the Notes then outstanding, we will provide notice
to all holders of the Notes that have not submitted such a notice advising such
holders of the repurchase date for such optional repurchase. Such holders shall
have five business days to deliver a written notice to us, with the information
described above, exercising their right to participate in such repurchase.
You may withdraw your repurchase notice in whole or in part at any time
prior to 5:00 p.m., New York City time, on the business day immediately
preceding the applicable repurchase date, by delivering a written notice of
withdrawal to us. If a repurchase notice is given and withdrawn during that
period, we will not be obligated to repurchase the Notes listed in the
repurchase notice. The withdrawal notice must state:
- the certificate numbers of the withdrawn Notes;
- the principal amount of the withdrawn Notes; and
- the principal amount, if any, which remains subject to the repurchase
notice.
If holders representing at least 50% of the Notes then outstanding deliver
to us optional repurchase notices in the manner described above, the subsequent
withdrawal of one or more such repurchase notices by any such holders will have
no effect on the repurchase exercise by any other holder that has delivered but
not withdrawn an optional repurchase notice, even if the exercising holders as
of the repurchase date represent less than 50% of the Notes then outstanding;
provided, that if all holders that have delivered an optional repurchase notice
withdraw such notices in the manner described above prior to 5:00 p.m., New York
City time, on the business day immediately preceding the applicable repurchase
date, such repurchase shall be cancelled and the one-time optional repurchase
right of the holders of Notes shall not be deemed to have been exercised.
Payment of the repurchase price for a Note for which a repurchase notice
has been delivered and not withdrawn is conditioned upon delivery of the Notes,
together with necessary endorsements, to us. Payment of the repurchase price for
the Notes will be made promptly following the later of the repurchase date and
the time of delivery of the Notes.
If we hold on the repurchase date cash sufficient to pay the repurchase
price of the Notes that holders have elected to require us to repurchase, then,
as of the repurchase date:
- those Notes will cease to be outstanding and interest will cease to
accrue, whether or not the Notes have been delivered to us; and
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- all other rights of the Notes holders will terminate, other than the
right to receive the repurchase price and previously accrued and
unpaid interest upon delivery or transfer of the Notes.
CERTAIN COVENANTS
LIMITATION ON RESTRICTED PAYMENTS
Prior to [_], 2011 CBay will not directly or indirectly:
(1) declare or pay any dividend or make any distribution (whether made in
cash, securities or other property (other than a dividend on CBay
ordinary shares paid in CBay ordinary shares)) on or in respect of its
Capital Stock;
(2) purchase, redeem, retire or otherwise acquire for value any Capital
Stock of CBay or any direct or indirect parent of CBay held by Persons
other than CBay or a subsidiary of CBay (other than in exchange for
Capital Stock of CBay (other than Disqualified Stock)); or
(3) purchase, repurchase, redeem, defease or otherwise acquire or retire
for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment, any subordinated indebtedness;
(any such dividend, distribution, purchase, redemption, repurchase, defeasance,
other acquisition or retirement referred to in clauses (1) or (2) shall be
referred to herein as a "Restricted Payment").
On or after [_], 2011, CBay will not directly or indirectly (x) make a
Restricted Payment if at the time CBay makes such Restricted Payment, the
aggregate amount of such Restricted Payment and all other Restricted Payments
declared or made subsequent to the date of issuance of the Notes (excluding
Restricted Payments made pursuant to the next succeeding paragraph) would exceed
65% of Consolidated Net Income for the period (treated as one accounting period)
from the beginning of the first fiscal quarter commencing after the date of
issuance of the Notes to the end of the most recent fiscal quarter ending prior
to the date of the making of such Restricted Payment for which financial
statements are in existence (or zero, in case such Consolidated Net Income is a
deficit) or (y) purchase, repurchase, redeem, defease or otherwise acquire or
retire for value, prior to scheduled maturity, scheduled repayment or scheduled
sinking fund payment, any subordinated indebtedness for which SAC or an
affiliate of SAC Private Equity Investors, L.P. is the lender.
The provisions of the foregoing paragraphs will not prohibit:
(1) any purchase, repurchase, redemption, defeasance or other acquisition
or retirement of Capital Stock or Disqualified Stock of CBay made by
exchange for, or out of the proceeds of the substantially concurrent
sale of, Capital Stock of CBay (other than Disqualified Stock and
other than Capital Stock issued or sold to a subsidiary or an employee
stock ownership plan or similar trust to the extent such sale to an
employee stock ownership plan or similar trust is financed by
12
loans from or guaranteed by CBay unless such loans have been repaid
with cash on or prior to the date of determination);
(2) any purchase, repurchase, redemption, defeasance or other acquisition
or retirement of Disqualified Stock of CBay made by exchange for or
out of the proceeds of the substantially concurrent sale of
Disqualified Stock of CBay (other than Disqualified Stock with a
maturity date earlier than that of the Disqualified Stock so
purchased, repurchased, redeemed, defeased or otherwise acquired or
retired);
(3) so long as no default or Event of Default has occurred and is
continuing,
(a) the purchase, redemption or other acquisition, cancellation or
retirement for value of Capital Stock, or options, warrants,
equity appreciation rights or other rights to purchase or acquire
Capital Stock of CBay or any subsidiary or any direct or indirect
parent of CBay held by any existing or former employees or
management of CBay or any subsidiary of CBay or their assigns,
estates or heirs, in each case in connection with the repurchase
provisions under employee stock option or stock purchase
agreements or other agreements to compensate management
employees; provided that such Capital Stock, or options,
warrants, equity appreciation rights or other rights to purchase
or acquire Capital Stock, were received for services related to,
or for the benefit of, CBay and its subsidiaries; and provided,
further, that such redemptions or repurchases pursuant to this
clause will not exceed $2.0 million in the aggregate during any
calendar year and $5.0 million in the aggregate for all such
redemptions and repurchases, plus the amount of any capital
contributions to CBay as a result of sales of Capital Stock, or
options, warrants, equity appreciation rights or other rights to
purchase or acquire Capital Stock, of CBay or any direct or
indirect parent of CBay to such Persons; and
(b) loans or advances to employees, officers or directors of CBay or
any subsidiary of CBay the proceeds of which are used to purchase
Capital Stock of CBay, in an aggregate amount not in excess of
$5.0 million with respect to all loans or advances made since the
date of issuance of the Notes (without giving effect to the
forgiveness of any such loan); and
(4) repurchases of Capital Stock deemed to occur upon the exercise of
stock options, warrants or other convertible securities if such
Capital Stock represents a portion of the exercise price thereof.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of such Restricted Payment of the asset(s) or
securities proposed to be paid, transferred or issued by CBay pursuant to such
Restricted Payment. The fair market value of any cash Restricted Payment shall
be its face amount and any non-cash Restricted Payment shall be determined
conclusively by the board of directors of CBay acting in good faith, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value is estimated in good faith by the board of directors of CBay to exceed
$25.0 million. Not less than five business days prior
13
to the date of making any Restricted Payment, CBay shall deliver to all record
holders of the Notes an officers' certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant "Restricted Payments" were computed, together with a
copy of any fairness opinion or appraisal, if required by the terms of the
Notes.
LIMITATION ON LIENS
Other than the Bridge Note, the Company will not, directly or indirectly,
create, Incur or suffer to exist any Lien (other than Permitted Liens) upon any
of its property or assets, whether owned on the issue date of the Notes or
acquired thereafter, which Lien secures any indebtedness for borrowed money,
unless contemporaneously with the Incurrence of such Lien effective provision is
made to secure the Notes equally and ratably with (or senior in priority to in
the case of any Lien with respect to subordinated indebtedness) the indebtedness
secured by such Lien for so long as such indebtedness is so secured.
EVENTS OF DEFAULT; NOTICE AND WAIVER
The Notes will provide that each of the following is an "Event of Default":
(1) default for 15 days or more in any payment of interest on any Note when
due and payable;
(2) default for 15 days in the payment of principal of or premium, if any,
on any Note when due and payable, upon optional redemption, required repurchase
or otherwise;
(3) failure by the Company to comply for 30 days after notice as provided
below with its obligations with respect to conversion, Restricted Payments or
limitation on Liens contained in the Notes;
(4) default under any mortgage, indenture or instrument under which there
is issued or by which there is secured or evidenced any indebtedness for money
borrowed by the Company or CBay (or the payment of which is guaranteed by the
Company or CBay), other than indebtedness owed to us or another subsidiary of
CBay, whether such indebtedness or guarantee now exists, or is created after the
date of issuance of the Notes, if both:
(a) such default either results from the failure to pay any principal
of such indebtedness at its stated final maturity (after giving effect to any
applicable grace periods) or relates to an obligation other than the obligation
to pay principal of any such indebtedness at its stated final maturity and
results in the holder or holders of such indebtedness causing such indebtedness
to become due prior to its Stated Maturity; and
(b) the principal amount of the indebtedness, together with the
principal amount of any other such indebtedness in default for failure to pay
principal at stated final maturity (after giving effect to any applicable grace
periods), or the maturity of which has been so accelerated, aggregates $10.0
million or more at any one time outstanding; or
14
(5) certain events involving our bankruptcy, insolvency or reorganization
or the bankruptcy, insolvency or reorganization of CBay.
However, a default under clause (3) above will not constitute an Event of
Default until the holders of 20% in principal amount of the then-outstanding
Notes notify us of the default and we do not cure such default within the time
specified in clause (3) after receipt of such notice.
If an Event of Default (other than an Event of Default described in clause
(5) above) occurs and is continuing, the holders of at least 20% in principal
amount of the then-outstanding Notes by notice to us may declare the principal
of, and accrued and unpaid interest, if any, on all the Notes to be due and
payable. Upon such a declaration, such principal and accrued and unpaid interest
will be due and payable immediately. In the event of a declaration of
acceleration of the Notes because an Event of Default described in clause (4)
above has occurred and is continuing, the declaration of acceleration of the
Notes shall be automatically annulled if we, CBay, or a subsidiary of CBay
remedy or cure, or the holders of the relevant indebtedness waive, the default
triggering such Event of Default pursuant to clause (4) within 20 days after the
declaration of acceleration with respect thereto and if (a) the annulment of the
acceleration of the Notes would not conflict with any judgment or decree of a
court of competent jurisdiction and (b) all existing events of default, except
nonpayment of principal, premium or interest on the Notes that became due solely
because of the acceleration of the Notes, have been cured or waived. If an Event
of Default described in clause (5) above occurs and is continuing, the principal
of, premium, if any, and accrued and unpaid interest on all the Notes will
become and be immediately due and payable without any declaration or other act
on the part of any holders.
We are required to notify the record holders of the Notes promptly upon
becoming aware of the occurrence of any default under the Notes known to us.
WAIVER
The holders of a majority in aggregate principal amount of the Notes then
outstanding may, on behalf of the holders of all the Notes, waive any past
default or Event of Default under the Notes and its consequences, except:
- our failure to pay principal of or interest on any Notes when due;
- our failure to convert any Notes into cash and CBay ordinary shares as
required by the terms of the Notes;
- our failure to pay the redemption price on the redemption date in
connection with a redemption by us or the repurchase price on the
repurchase date in connection with a holder exercising its repurchase
rights; or
- our failure to comply with any of the provisions of the Notes that
would require the consent of the holder of each outstanding Notes
affected.
15
MODIFICATION
CHANGES REQUIRING APPROVAL OF EACH AFFECTED HOLDER
The terms and conditions of the Notes and the Guarantee may not be modified
or amended without the written consent or the affirmative vote of the holder of
each Note affected by such change (including, without limitation, consents
obtained in connection with a purchase of or tender offer or exchange offer for,
Notes) to:
- extend the maturity of any Notes;
- change the ranking of the Notes;
- reduce the interest rate or extend the time for payment of interest on
any Notes;
- reduce the principal amount of any Notes;
- reduce any amount payable upon redemption or repurchase of any Notes;
- impair the right of a holder to institute suit for payment of any
Notes;
- change the currency in which any Notes are payable;
- change the redemption provisions in a manner adverse to the holders;
- change our obligation to repurchase any Notes at the option of the
holder in a manner adverse to the holders;
- change our obligation to repurchase any Notes upon a Change of Control
Event in a manner adverse to the holders;
- affect the right of a holder to convert any Notes into cash and CBay
ordinary shares or reduce the conversion rate, except as permitted
pursuant to the Notes;
- change our obligation to maintain an office or agency;
- modify certain provisions of the Notes relating to modification of the
terms of the Notes or the Guarantee or waiver under the Notes or the
Guarantee; or
- reduce the percentage of the Notes required for consent to any
modification of the terms of the Notes or any guarantee that does not
require the consent of each affected holder.
For the avoidance of doubt, the only written consent or affirmative vote
required to approve any of the foregoing changes is the written consent or
affirmative vote of each Note affected by such change; the written consent or
affirmative vote of the holders of a majority in aggregate principal amount of
the Notes then outstanding is not additionally required.
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CHANGES REQUIRING NO APPROVAL
The terms and conditions of the Notes and the Guarantee may be modified or
amended by us or CBay, without the consent of the holder of any Notes, to, among
other things:
- provide for conversion rights of holders of the Notes and our
repurchase obligations in the event of any reclassification of CBay
ordinary shares or our merger or consolidation, or sale, conveyance,
transfer or lease of its property and assets substantially as an
entirety, in each case in accordance with the terms of the Notes;
- provide for the assumption, in accordance with the terms of the Notes,
of our obligations to the holders of the Notes in the event of a
merger or consolidation, or sale, conveyance, transfer or lease of our
property and assets substantially as an entirety;
- surrender any right or power conferred upon us;
- add to our covenants for the benefit of the holders of the Notes,
including adding one or more additional put rights in favor of the
holders of the Notes;
- correct any manifest printing, stenographic or clerical error or
omission in the Notes;
- increase the conversion rate; provided that the increase will not
adversely affect the interests of the holders of the Notes;
- secure the Notes; or
- add guarantees of obligations, in addition to the Guarantee, under the
Notes.
CHANGES REQUIRING MAJORITY APPROVAL
The terms and conditions of the Notes and the Guarantee may be modified or
amended, except as described above, with the written consent or affirmative vote
of the holders of a majority in aggregate principal amount of the Notes then
outstanding.
NOTICE OF AMENDMENTS
After a modification or amendment under the Notes becomes effective, we are
required to mail to the holders a notice briefly describing such modification or
amendment. However, the failure to give such notice to all the holders, or any
defect in the notice, will not impair or affect the validity of the modification
or amendment.
NOTES NOT ENTITLED TO CONSENT
Any Notes held by us or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with us shall be
disregarded (from both the numerator and the denominator) for purposes of
determining whether the holders of the requisite aggregate principal amount of
the outstanding Notes have consented to a modification, amendment or waiver of
the terms of the Notes.
17
DISCHARGE
We may satisfy and discharge our obligations under the Notes by delivering
to the holders, after the Notes have become due and payable, whether at stated
maturity, or any redemption date, cash sufficient to pay all of the outstanding
Notes and paying all other sums payable under the Notes by us. Any discharge is
subject to the terms contained in the Notes. The Notes shall also be discharged
upon the conversion of all outstanding Notes (including any Notes accrued or
paid as PIK interest) and the delivery of the applicable securities and cash, if
any, payable in respect of such conversion in accordance with the terms of the
Notes.
REPURCHASE AND CANCELLATION
We may, to the extent permitted by law, repurchase any Notes in the open
market or by tender offer at any price or by private agreement. Any Notes
repurchased by us may, at our option, be cancelled, but may not be reissued or
resold by us.
NO STOCKHOLDER RIGHTS FOR HOLDERS OF NOTES
Holders of Notes, as such, will not have any rights as stockholders of the
Company or CBay (including, without limitation, voting rights and rights to
receive any dividends or other distributions on our common stock or CBay
ordinary shares).
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES OR STOCKHOLDERS
No director, officer, employee, incorporator, stockholder or partner of the
Company or CBay or any other guarantor of the Notes, as such, will have any
liability for any of our obligations under the Notes, for CBay's obligations
under the guarantee or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. The waiver may not be effective to
waive liabilities under the federal securities laws.
NO SETOFF
All payments (including prepayments) to be made by the Company or CBay
hereunder, whether on account of principal, interest, premium or otherwise,
shall be made without any setoff or counterclaim.
GOVERNING LAW
The Notes and the Guarantee shall be governed by, and construed in
accordance with, the laws of the State of New York.
CALCULATIONS IN RESPECT OF THE NOTES
Except as otherwise provided herein, we will be responsible for making all
calculations called for under the Notes. These calculations include, but are not
limited to, determinations of the closing sale price of CBay ordinary shares,
accrued interest payable on the Notes, the amount
18
and timing of any adjustments to the conversion rate and conversion price and
the conversion settlement amount deliverable upon conversion. We or our agents
will make all these calculations in good faith and, absent manifest error, such
calculations will be final and binding on holders of the Notes. We will forward
these calculations to any holder of the Notes upon the request of that holder.
FORM, DENOMINATION AND REGISTRATION
The Notes will be issued:
- in certificated form;
- without interest coupons; and
- in denominations of $1.00 principal amount and integral multiples of
$1.00.
CERTAIN DEFINITIONS
"business day" means each Monday, Tuesday, Wednesday, Thursday and Friday
that is not a day on which the banking institutions in New York City are
authorized or obligated by law or executive order to close or be closed.
"Bridge Note" means that certain secured promissory note issued by the
Company to Philips on the issue date of the Notes.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participation or other equivalents of or
interests in (however designated) equity of such Person, including any preferred
stock and limited liability or partnership interests (whether general or
limited), but excluding any debt securities convertible into such equity.
"Consolidated Net Income" means, for any period, the net income (loss) of
CBay and its consolidated subsidiaries determined in accordance with GAAP.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
of such Person which by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable) or upon the happening of any
event:
- matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise;
- is convertible or exchangeable for indebtedness or Disqualified Stock
(excluding Capital Stock which is convertible or exchangeable solely
at the option of CBay or a subsidiary); or
- is redeemable at the option of the holder of the Capital Stock in
whole or in part,
in each case on or prior to the date that is 91 days after the earlier of the
date (a) of the Stated Maturity of the Notes or (b) on which there are no Notes
outstanding, provided that only the
19
portion of Capital Stock which so matures or is mandatorily redeemable, is so
convertible or exchangeable or is so redeemable at the option of the holder
thereof prior to such date will be deemed to be Disqualified Stock.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of issuance of the Notes, including those
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession.
"Incur" means issue, create, assume, guarantee, incur or otherwise become
liable for. The terms "Incurred" and "Incurrence" have meanings correlative to
the foregoing.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind.
"Net Cash Proceeds" means, with respect to any issuance or sale of Capital
Stock, the cash proceeds of such issuance or sale net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, listing fees,
discounts or commissions and brokerage, consultant and other fees and charges
actually Incurred in connection with such issuance or sale and net of taxes paid
or payable as a result of such issuance or sale (after taking into account any
available tax credit or deductions and any tax sharing arrangements).
"Permitted Liens" means:
(1) pledges or deposits under workers' compensation laws, unemployment
insurance laws or similar legislation, or good faith deposits in
connection with bids, tenders, contracts (other than for the payment
of indebtedness) or leases to the Company is a party, or deposits to
secure public or statutory obligations of the Company or deposits of
cash or United States government bonds to secure surety or appeal
bonds to which the Company is a party, or deposits as security for
contested taxes or import or customs duties or for the payment of
rent, in each case Incurred in the ordinary course of business;
(2) Liens imposed by law, including carriers', warehousemen's, mechanics',
materialmen's and repairmen's Liens, in each case for sums not yet due
or being contested in good faith by appropriate proceedings if a
reserve or other appropriate provisions, if any, as shall be required
by GAAP shall have been made in respect thereof;
(3) Liens for taxes, assessments or other governmental charges not yet
subject to penalties for non-payment or which are being contested in
good faith by appropriate proceedings provided appropriate reserves
required pursuant to GAAP have been made in respect thereof;
(4) Liens in favor of issuers of surety or performance bonds or letters of
credit or bankers' acceptances issued pursuant to the request of and
for the account of the
20
Company in the ordinary course of its business; provided, however,
that such letters of credit do not constitute indebtedness;
(5) encumbrances, ground leases, easements or reservations of, or rights
of others for, licenses, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning,
building codes or other restrictions (including, without limitation,
minor defects or irregularities in title and similar encumbrances) as
to the use of real properties or liens incidental to the conduct of
the business of the Company or to the ownership of its properties
which do not in the aggregate materially adversely affect the value of
said properties or materially impair their use in the operation of the
business of the Company;
(6) leases, licenses, subleases and sublicenses of assets (including,
without limitation, real property and intellectual property rights)
which do not materially interfere with the ordinary conduct of the
business of the Company;
(7) judgment Liens so long as such Lien is adequately bonded and any
appropriate legal proceedings which may have been duly initiated for
the review of such judgment have not been finally terminated or the
period within which such proceedings may be initiated has not expired;
(8) Liens for the purpose of securing indebtedness represented by mortgage
financings, purchase money obligations or other payments Incurred to
finance all or any part of the purchase price or cost of construction
or improvement of assets or property acquired, constructed or improved
in the ordinary course of business provided that:
(a) the aggregate principal amount of indebtedness secured by such
Liens does not exceed the cost of the assets or property so
acquired, constructed or improved; and
(b) such Liens are created within 180 days of construction,
acquisition or improvement of such assets or property and do not
encumber any other assets or property of the Company other than
such assets or property and assets affixed or appurtenant
thereto;
(9) Liens arising solely by virtue of any statutory or common law
provisions relating to banker's Liens, rights of setoff or similar
rights and remedies as to deposit accounts or other funds maintained
with a depositary institution; provided that:
(a) such deposit account is not a dedicated cash collateral account
and is not subject to restrictions against access by the Company
in excess of those set forth by regulations promulgated by the
Federal Reserve Board; and
(b) such deposit account is not intended by the Company to provide
collateral to the depository institution;
(10) Liens arising from Uniform Commercial Code financing statement filings
regarding operating leases entered into by the Company in the ordinary
course of business;
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(11) Liens on property at the time the Company acquired the property,
including any acquisition by means of a merger or consolidation with
or into the Company; provided, however, that such Liens are not
created, Incurred or assumed in connection with, or in contemplation
of, such acquisition; provided further, however, that such Liens may
not extend to any other property owned by the Company;
(12) Liens securing refinancing indebtedness Incurred to refinance, refund,
replace, amend, extend or modify, as a whole or in part, indebtedness
that was previously so secured pursuant to clauses (8), (11) and (12)
of this definition, provided that any such Lien is limited to all or
part of the same property or assets (plus improvements, accessions,
proceeds or dividends or distributions in respect thereof) that
secured (or, under the written arrangements under which the original
Lien arose, could secure) the indebtedness being refinanced or is in
respect of property that is the security for a Permitted Lien
hereunder; provided that the aggregate amount of the refinancing
indebtedness shall not exceed the then-outstanding balance of the
refinanced indebtedness;
(13) any interest or title of a lessor under any capitalized lease
obligation or operating lease; and
(14) Liens under industrial revenue, municipal or similar bonds.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company, government or any agency or political subdivision thereof or
any other entity.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision, but shall not include any contingent obligations to repay, redeem or
repurchase any such principal prior to the date originally scheduled for the
payment thereof.
"Shareholder Agreement" means that certain Shareholder Agreement, dated as
of [_], 2008, by and among Investor, Philips and such other parties as may be
joined thereto from time to time.
