Exhibit 2
Merger Agreement
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
PARADIGM TECHNOLOGY, INC.,
a Delaware corporation;
PARADIGM ENTERPRISES, INC.
a Delaware corporation; and
IXYS CORPORATION
a Delaware corporation
-------------------------
Dated as of March 6, 1998, as amended on April 10, 1998, May 29, 1998 and July
1, 1998
-------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
SECTION 1. DESCRIPTION OF TRANSACTION................................ A-1
1.1 Merger of Merger Sub into the Company..................... A-1
1.2 Effect of the Merger...................................... A-1
1.3 Closing; Effective Time................................... A-1
1.4 Certificate of Incorporation and Bylaws; Directors and
Officers................................................. A-1
1.5 Conversion of Shares...................................... A-2
1.6 Closing of the Company's Transfer Books................... A-4
1.7 Exchange of Certificates.................................. A-4
1.8 Appraisal Rights.......................................... A-5
1.9 Tax Consequences.......................................... A-5
1.10 Accounting Consequences................................... A-5
1.11 Further Action............................................ A-5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............. A-6
2.1 Due Organization; Subsidiaries; Etc. ..................... A-6
2.2 Certificate of Incorporation and Bylaws................... A-6
2.3 Capitalization, Etc. ..................................... A-6
2.4 Financial Statements...................................... A-7
2.5 Absence of Changes........................................ A-7
2.6 Title to Assets........................................... A-8
2.7 Receivables; Inventory.................................... A-9
2.8 Buildings, Equipment; Leasehold........................... A-9
2.9 Proprietary Assets........................................ A-9
2.10 Contracts................................................. A-10
2.11 Liabilities............................................... A-12
2.12 Compliance with Legal Requirements........................ A-12
2.13 Certain Business Practices................................ A-12
2.14 Governmental Authorizations............................... A-12
2.15 Tax Matters............................................... A-12
2.16 Employee and Labor Matters; Benefit Plans................. A-13
2.17 Environmental Matters..................................... A-15
2.18 Insurance................................................. A-16
2.19 Transactions With Affiliates.............................. A-16
2.20 Legal Proceedings; Orders................................. A-16
2.21 Authority; Inapplicability of Anti-takeover Statutes;
Binding Nature of Agreement.............................. A-17
2.22 Section 203 of the DGCL Not Applicable.................... A-17
2.23 No Existing Discussions................................... A-17
2.24 Vote Required............................................. A-17
2.25 Non Contravention; Consents............................... A-17
2.26 Financial Advisor......................................... A-18
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB... A-18
3.1 Due Organization; Subsidiaries; Etc. ..................... A-18
3.2 Certificate of Incorporation and Bylaws................... A-19
3.3 Capitalization, Etc. ..................................... A-19
3.4 SEC Filings; Financial Statements......................... A-20
3.5 Absence of Changes........................................ A-20
3.6 Title to Assets........................................... A-22
3.7 Receivables; Inventory.................................... A-22
3.8 Buildings, Equipment; Leasehold........................... A-22
i
Page
----
3.9 Proprietary Assets........................................ A-23
3.10 Contracts................................................. A-24
3.11 Liabilities............................................... A-25
3.12 Compliance with Legal Requirements........................ A-25
3.13 Certain Business Practices................................ A-25
3.14 Governmental Authorizations............................... A-25
3.15 Tax Matters............................................... A-26
3.16 Employee and Labor Matters; Benefit Plans................. A-26
3.17 Environmental Matters..................................... A-28
3.18 Insurance................................................. A-29
3.19 Transactions with Affiliates.............................. A-29
3.20 Legal Proceedings; Orders................................. A-29
3.21 Authority; Binding Nature of Agreement.................... A-29
3.22 Section 203 of the DGCL Not Applicable.................... A-30
3.23 No Existing Discussions................................... A-30
3.24 Vote Required............................................. A-30
3.25 Non Contravention; Consents............................... A-30
3.26 Fairness Opinion.......................................... A-31
3.27 Financial Advisor......................................... A-31
SECTION 4. CERTAIN COVENANTS OF THE COMPANY.......................... A-31
4.1 Access and Investigation.................................. A-31
4.2 Operation of the Company's Business....................... A-31
4.3 No Solicitation........................................... A-32
4.4 Disclosure................................................ A-32
SECTION 5. CERTAIN COVENANTS OF PARENT............................... A-33
5.1 Access and Investigation.................................. A-33
5.2 Operation of Parent's Business............................ A-33
5.3 No Solicitation........................................... A-35
5.4 Parent Capitalization; Name Change........................ A-36
5.5 Disclosures............................................... A-36
SECTION 6. ADDITIONAL COVENANTS OF THE PARTIES....................... A-36
6.1 Registration Statement; Joint Proxy Statement/Prospectus.. A-36
6.2 Company Stockholders' Meeting............................. A-37
6.3 Parent Stockholders' Meeting.............................. A-37
6.4 Regulatory Approvals...................................... A-38
6.5 Indemnification of Officers and Directors................. A-39
6.6 Additional Agreements..................................... A-40
6.7 Disclosure................................................ A-40
6.8 Affiliate Agreements...................................... A-40
6.9 Tax Matters............................................... A-41
6.10 Corporate Governance...................................... A-41
6.11 Resignations.............................................. A-41
6.12 Registration Rights Agreement............................. A-41
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND
MERGER SUB............................................... A-41
7.1 Accuracy of Representations............................... A-41
7.2 Performance of Covenants.................................. A-41
7.3 Effectiveness of Registration Statement................... A-41
7.4 Parent Stockholder Approval............................... A-42
ii
Page
----
7.5 Company Stockholder Approval............................... A-42
7.6 Agreements and Documents................................... A-42
7.7 No Material Adverse Change................................. A-42
7.8 HSR Act.................................................... A-42
7.9 Additional Shares.......................................... A-42
7.10 No Restraints.............................................. A-42
7.11 Consents................................................... A-42
SECTION 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY......... A-42
8.1 Accuracy of Representations................................ A-42
8.2 Performance of Covenants................................... A-42
8.3 Effectiveness of Registration Statement.................... A-42
8.4 Parent Stockholder Approval................................ A-43
8.5 Company Stockholder Approval............................... A-43
8.6 Parent Capitalization...................................... A-43
8.7 Consents................................................... A-43
8.8 Agreements and Documents................................... A-43
8.9 No Material Adverse Change................................. A-43
8.10 Market for Parent Common Stock............................. A-43
8.11 HSR Act.................................................... A-43
8.12 Additional Shares.......................................... A-43
8.13 Appraisal Rights........................................... A-44
8.14 Blue Sky Law............................................... A-44
8.15 No Restraints.............................................. A-44
8.16 No Governmental Litigation................................. A-44
8.17 No Other Litigation........................................ A-44
8.18 Taxes...................................................... A-44
SECTION 9. TERMINATION................................................ A-44
9.1 Termination................................................ A-44
9.2 Effect of Termination...................................... A-45
9.3 Expenses; Termination Fees................................. A-45
SECTION 10. MISCELLANEOUS PROVISIONS................................... A-45
10.1 Amendment.................................................. A-45
10.2 Waiver..................................................... A-46
10.3 No Survival of Representations and Warranties.............. A-46
10.4 Entire Agreement; Counterparts; Applicable Law............. A-46
10.5 Disclosure Schedule........................................ A-46
10.6 Attorneys' Fees............................................ A-46
10.7 Assignability.............................................. A-46
10.8 Notices.................................................... A-46
10.9 Cooperation................................................ A-47
10.10 Construction............................................... A-47
iii
EXHIBITS
Exhibit A -- Certain Definitions
Exhibit B -- Form of Certificate of Incorporation of Surviving Corporation*
Exhibit C -- Directors of Surviving Corporation*
Exhibit D -- Company Form of Affiliate Agreement*
Exhibit E -- Form of Parent Tax Representation Letter*
Exhibit F -- Form of Company Tax Representation Letter*
Exhibit G -- Registration and Stockholder Rights Agreement
Exhibit H -- Directors of Parent*
Exhibit I -- Form of Legal Opinion of Xxxxxx Godward LLP*
Exhibit J -- Form of Legal Opinion of Pillsbury Madison & Sutro LLP*
--------
*Not included in the Joint Proxy Statement/Prospectus
iv
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
This Agreement And Plan Of Merger And Reorganization (this "Agreement") is
made and entered into as of March 6, 1998 by and among: Paradigm Technology,
Inc., a Delaware corporation ("Parent"); Paradigm Enterprises, Inc., a
Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub");
and Ixys Corporation, a Delaware corporation (the "Company"). Certain
capitalized terms used in this Agreement but not defined herein are defined in
Exhibit A.
Recitals
A. Parent, Merger Sub and the Company intend to effect a merger of Merger
Sub with and into the Company in accordance with this Agreement and the
Delaware General Corporation Law (the "Merger"). Upon consummation of the
Merger, Merger Sub will cease to exist, and the Company will become a wholly
owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For financial reporting purposes, it is intended that
the Merger be accounted for as a "purchase."
C. The respective boards of directors of Parent, Merger Sub and the Company
have approved this Agreement and the Merger.
Agreement
The parties to this Agreement, intending to be legally bound, agree as
follows:
Section 1. Description Of Transaction
1.1 Merger of Merger Sub into the Company. Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 Effect of the Merger. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the Delaware General
Corporation Law (the "DGCL").
1.3 Closing; Effective Time. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxxxx Godward LLP, Five Palo Alto Square, 0000 Xx Xxxxxx Xxxx, Xxxx Xxxx,
Xxxxxxxxxx, at 10:00 a.m. on a date to be agreed upon by Parent and the
Company (the "Closing Date"), which (subject to the satisfaction or waiver of
the conditions set forth in Sections 7 and 8) shall be no later than the fifth
business day after satisfaction of the latest to occur of the conditions set
forth in Sections 7.4, 7.5, 7.7, 8.4, 8.5 and 8.12. Contemporaneously with or
as promptly as practicable after the Closing, the parties shall cause a
properly executed certificate of merger conforming to the requirements of the
DGCL (the "Certificate of Merger") to be filed with the Secretary of State of
the State of Delaware. The Merger shall take effect at the time the
Certificate of Merger is filed with the Secretary of State of the State of
Delaware (the "Effective Time").
1.4 Certificate of Incorporation and Bylaws; Directors and Officers. Unless
otherwise determined by the Company prior to the Effective Time:
(a) the Certificate of Incorporation of the Surviving Corporation shall
be amended and restated as of the Effective Time to conform to Exhibit B;
A-1
(b) the Bylaws of the Surviving Corporation shall be amended and restated
as of the Effective Time to conform to the Bylaws of the Company; and
(c) the directors and officers of the Surviving Corporation immediately
after the Effective Time shall be the respective individuals set forth on
Exhibit C.
1.5 Conversion of Shares.
(a) Subject to Sections 1.5(d) and 1.8, at the Effective Time, by virtue of
the Merger and without any further action on the part of Parent, Merger Sub,
the Company or any stockholder of the Company:
(i) any shares of Company Capital Stock then held by the Company or any
subsidiary of the Company (or held in the Company's treasury) shall be
canceled and retired and shall cease to exist, and no consideration shall
be delivered in exchange therefor;
(ii) any shares of Company Capital Stock then held by Parent or Merger
Sub, or any other subsidiary of Parent, shall be canceled and retired and
shall cease to exist, and no consideration shall be delivered in exchange
therefor;
(iii) except as provided in clauses "(i)" and "(ii)" above and subject to
Sections 1.5(b)(iv), 1.5(d), and 1.8 each share of Company Common Stock
then outstanding shall be converted into the right to receive a fraction of
a share of Parent Common Stock equal to the Exchange Ratio;
(iv) except as provided in clauses "(i)" and "(ii)" above and subject to
Sections 1.5(b)(iv), 1.5(d), and 1.8 each share of Company Preferred Stock
then outstanding shall be converted into the right to receive a fraction of
a share of Parent Common Stock equal to the Exchange Ratio; and
(v) each share of the common stock, par value $0.001 per share, of Merger
Sub then outstanding shall be converted into one share of common stock of
the Surviving Corporation.
(b) The "Exchange Ratio" shall be the greater of (A) the Percentage Formula
Ratio or (B) the Valuation Formula Ratio. The Exchange Ratio shall be
expressed to six digits to the right of the decimal place.
(i) As used herein, the "Percentage Formula Ratio" shall be determined
according to the following formula:
19 x B
-----
A =
C
, where "A" is the Percentage Formula Ratio, expressed to six digits to the
right of the decimal place, "B" is the fully diluted capitalization of
Parent, immediately prior to the Effective Time and having given effect to
the Reverse Stock Split, expressed as the sum of (x) the number of shares
of Parent Common Stock outstanding, (y) the number of shares of Parent
Common Stock into which the outstanding Parent Preferred Stock converts
pursuant to the Parent Preferred Stock Conversion and (z) the aggregate
number of shares of Parent Common Stock for which outstanding warrants,
options or other rights to acquire Parent Common Stock are exercisable and
"C" is the fully diluted capitalization of the Company immediately prior to
the Effective Time, expressed as the sum of (A) the number of shares of
Company Common Stock outstanding, (B) the number of shares of Company
Common Stock issuable upon conversion of the outstanding shares of Company
Preferred Stock and (C) the aggregate number of shares of Company Common
Stock for which outstanding warrants, options or other rights to acquire
Company Common Stock are exercisable (such fully diluted capitalization
being referred to herein as the "Company Fully Diluted Capitalization").
(ii) As used herein, the "Valuation Formula Ratio" shall be determined
according to the following formula:
$150,000,000
---------
D =
(E x C)
, where "D" is the Valuation Formula Ratio, expressed to six digits to the
right of the decimal place, "E" is the average of the closing sale prices
of Parent Common Stock for the ten trading days ending (and
A-2
including) the trading day two business days prior to the date of the
Parent Stockholders' Meeting, adjusted to reflect the Reverse Stock Split,
and "C" is the Company Fully Diluted Capitalization.
(iii) If, between the date of this Agreement and the Effective Time, the
outstanding shares of Company Capital Stock or Parent Common Stock are
changed into a different number or class of shares by reason of any stock
split, stock dividend, reverse stock split, reclassification,
recapitalization or other similar, then the Exchange Ratio shall be
appropriately adjusted. The Exchange Ratio already contemplates the Reverse
Stock Split, and to the extent the Reverse Stock Split is implemented, no
further adjustments to the Exchange Ratio are required.
(c) If any shares of Company Common Stock outstanding immediately prior to
the Effective Time are unvested or are subject to a repurchase option, risk of
forfeiture or other condition under any applicable restricted stock purchase
agreement or other agreement with the Company or under which the Company has
any rights, then the shares of Parent Common Stock issued in exchange for such
shares of Company Common Stock will also be unvested and subject to the same
repurchase option, risk of forfeiture or other condition, and the certificates
representing such shares of Parent Common Stock may accordingly be marked with
appropriate legends. The Company shall take all action that may be necessary
to ensure that, from and after the Effective Time, Parent is entitled to
exercise any such repurchase option or other right set forth in any such
restricted stock purchase agreement or other agreement.
(d) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates or scrip for any such
fractional shares shall be issued. Any holder of Company Capital Stock who
would otherwise be entitled to receive a fraction of a share of Parent Common
Stock (after aggregating all fractional shares of Parent Common Stock issuable
to such holder) shall, in lieu of such fraction of a share and, upon surrender
of such holder's Company Stock Certificate(s) (as defined in Section 1.6), be
paid in cash the dollar amount (rounded to the nearest whole cent), without
interest, determined by multiplying such fraction by the closing price of a
share of Parent Common Stock as reported by the Nasdaq National Market on the
date the Merger becomes effective.
(e) At the Effective Time, all rights with respect to Company Common Stock
under each Company Option then outstanding under the Company Plans (as defined
in Section 2.3(b)) shall be converted into and become rights with respect to
Parent Common Stock, and Parent shall assume each such Company Option in
accordance with the terms (as in effect as of the date of this Agreement) of
the Company Plan under which it was issued and the stock option agreement by
which it is evidenced. From and after the Effective Time, (i) each Company
Option assumed by Parent may be exercised solely for shares of Parent Common
Stock, (ii) the number of shares of Parent Common Stock subject to each such
Company Option shall be equal to the number of shares of Company Common Stock
subject to such Company Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, rounding down to the nearest whole share
(with cash, less the applicable exercise price, being payable for any fraction
of a share), (iii) the per share exercise price under each such Company Option
shall be adjusted by dividing the per share exercise price under such Company
Option by the Exchange Ratio and rounding up to the nearest hundredth of a
cent and (iv) any restriction on the exercise of any such Company Option shall
continue in full force and effect and the term, exercisability, vesting
schedule and other provisions of such Company Option shall otherwise remain
unchanged; provided, however, that each Company Option assumed by Parent in
accordance with this Section 1.5(e) shall, in accordance with its terms, be
subject to further adjustment as appropriate to reflect any stock split, stock
dividend, reverse stock split, reclassification, recapitalization or other
similar transaction subsequent to the Effective Time. Parent shall file with
the SEC, no later than 30 days after the date on which the Form S-4
Registration Statement becomes effective (and in any event prior to the
Merger), a registration statement on Form S-8 relating to the shares of Parent
Common Stock issuable with respect to the Company Options and the Company
Plans assumed by Parent in accordance with this Section 1.5(e).
(f) At the Effective Time, all rights with respect to Company Warrants then
outstanding shall be converted into and become rights with respect to Parent
Common Stock, and Parent shall assume each such Company
A-3
Warrant in accordance with the terms (as in effect as of the date of this
Agreement) of the Warrant by which it is evidenced. From and after the
Effective Time, (i) each Company Warrant assumed by Parent may be exercised
solely for shares of Parent Common Stock, (ii) the number of shares of Parent
Common Stock subject to each such Company Warrant shall be equal to the number
of shares of Company Common Stock subject to such Company Warrant immediately
prior to the Effective Time multiplied by the Exchange Ratio, rounding down to
the nearest whole share (with cash, less the applicable exercise price, being
payable for any fraction of a share), and (iii) the per share exercise price
under each such Company Warrant shall be adjusted by dividing the per share
exercise price under such Company Warrant by the Exchange Ratio and rounding
up to the nearest hundredth of a cent; provided, however, that each Company
Warrant assumed by Parent in accordance with this Section 1.5(f) shall, in
accordance with its terms, be subject to further adjustment as appropriate to
reflect any stock split, stock dividend, reverse stock split,
reclassification, recapitalization or other similar transaction subsequent to
the Effective Time.
1.6 Closing of the Company's Transfer Books. At The Effective Time: (a) All
Shares Of Company Capital Outstanding Immediately Prior To The Effective Time
Shall Automatically Be Canceled And Retired And Shall Cease To Exist, And All
Holders Of Certificates Representing Shares Of Company Capital Stock That Were
Outstanding Immediately Prior To The Effective Time Shall Cease To Have Any
Rights As Stockholders Of The Company; And (b) The Stock Transfer Books Of The
Company Shall Be Closed With Respect To All Shares Of Company Capital Stock
Outstanding Immediately Prior To The Effective Time. No Further Transfer Of
Any Such Shares Of Company Capital Stock Shall Be Made On Such Stock Transfer
Books After The Effective Time. If, After The Effective Time, A Valid
Certificate Previously Representing Any Shares Of Company Capital Stock (a
"company Stock Certificate") Is Presented To The Exchange Agent (as Defined In
Section 1.7) Or To The Surviving Corporation Or Parent, Such Company Stock
Certificate Shall Be Canceled And Shall Be Exchanged As Provided In Section
1.7.
1.7 Exchange of Certificates.
(a) On or prior to the Closing Date, ChaseMellon Shareholder Services, LLC
shall act as exchange agent in the Merger (the "Exchange Agent"). Promptly
after the Effective Time, Parent shall deposit with the Exchange Agent (i)
blank certificates representing the shares of Parent Common Stock issuable
pursuant to this Section 1 and (ii) cash sufficient to make payments in lieu
of fractional shares in accordance with Section 1.5(d). The shares of Parent
Common Stock and cash amounts so deposited with the Exchange Agent, together
with any dividends or distributions received by the Exchange Agent with
respect to such shares, are referred to collectively as the "Exchange Fund."
(b) As soon as reasonably practicable after the Effective Time, the Exchange
Agent will mail to the holders of Company Stock Certificates (i) a letter of
transmittal in customary form and containing such provisions as Parent may
reasonably specify (including a provision confirming that delivery of Company
Stock Certificates shall be effected, and risk of loss and title to Company
Stock Certificates shall pass, only upon delivery of such Company Stock
Certificates to the Exchange Agent) and (ii) instructions for use in effecting
the surrender of Company Stock Certificates in exchange for certificates
representing Parent Common Stock. Upon surrender of a Company Stock
Certificate to the Exchange Agent for exchange, together with a duly executed
letter of transmittal and such other documents as may be reasonably required
by the Exchange Agent or Parent, (1) the holder of such Company Stock
Certificate shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of Parent Common Stock that such
holder has the right to receive pursuant to the provisions of Section 1.5 (and
cash in lieu of any fractional share of Parent Common Stock in accordance with
Section 1.5(d)), and (2) the Company Stock Certificate so surrendered shall be
canceled. Until surrendered as contemplated by this Section 1.7, each Company
Stock Certificate shall be deemed, from and after the Effective Time, to
represent only the right to receive shares of Parent Common Stock (and cash in
lieu of any fractional share of Parent Common Stock) as contemplated by this
Section 1. If any Company Stock Certificate shall have been lost, stolen or
destroyed, Parent may, in its discretion and as a condition precedent to the
issuance of any certificate representing Parent Common Stock, require the
owner of such lost, stolen or destroyed Company Stock Certificate to provide
an appropriate affidavit (but in no event a surety bond) as
A-4
indemnity against any claim that may be made against the Exchange Agent,
Parent or the Surviving Corporation with respect to such Company Stock
Certificate.
(c) No dividends or other distributions declared or made with respect to
Parent Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Company Stock Certificate with respect to
the shares of Parent Common Stock represented thereby until such holder
surrenders such Company Stock Certificate in accordance with this Section 1.7
(at which time such holder shall be entitled, subject to the effect of
applicable escheat or similar laws, to receive all such dividends and
distributions, without interest).
(d) Any portion of the Exchange Fund that remains undistributed to holders
of Company Stock Certificates as of the date 180 days after the date on which
the Merger becomes effective shall be delivered to Parent upon demand, and any
holders of Company Stock Certificates who have not theretofore surrendered
their Company Stock Certificates in accordance with this Section 1.7 shall
thereafter look only to Parent for satisfaction of their claims for Parent
Common Stock, cash in lieu of fractional shares of Parent Common Stock and any
dividends or distributions with respect to Parent Common Stock.
(e) Each of the Exchange Agent, Parent and the Surviving Corporation shall
be entitled to deduct and withhold from any consideration payable or otherwise
deliverable pursuant to this Agreement to any holder or former holder of
Company Capital Stock such amounts as may be required to be deducted or
withheld therefrom under the Code or any provision of state, local or foreign
tax law or under any other applicable Legal Requirement. To the extent such
amounts are so deducted or withheld, such amounts shall be treated for all
purposes under this Agreement as having been paid to the Person to whom such
amounts would otherwise have been paid.
(f) Neither Parent nor the Surviving Corporation shall be liable to any
holder or former holder of Company Capital Stock or to any other Person with
respect to any shares of Parent Common Stock (or dividends or distributions
with respect thereto), or for any cash amounts, delivered to any public
official pursuant to any applicable abandoned property law, escheat law or
similar Legal Requirement.
1.8 Appraisal Rights. Notwithstanding anything to the contrary contained in
this Agreement, any shares of Company Capital Stock for which, as of the
Effective Time, "appraisal rights" within the meaning of Section 262 of the
DGCL shall have been perfected, shall not be converted into or represent the
right to receive Parent Common Stock in accordance with Section 1.5 (or cash
in lieu of fractional shares in accordance with Section 1.5(d)), and the
holder or holders of such shares shall be entitled only to such rights as may
be granted to such holder or holders in Section 262 of the DGCL; provided,
however, if any holders of such shares shall lose its appraisal rights, then,
as of the later of the Effective Time or the loss of such rights, such shares
shall automatically be converted into and shall represent only the right to
receive (upon the surrender of the certificate or certificates representing
such shares) Parent Common Stock in accordance with Section 1.5 (and cash in
lieu of fractional shares in accordance with Section 1.5(d)).
1.9 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of
the Code. The parties to this Agreement hereby adopt this Agreement as a "plan
of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of
the United States Treasury Regulations.
1.10 Accounting Consequences. For financial reporting purposes, the Merger
is intended to be accounted for as a "purchase."
1.11 Further Action. If, at any time after the Effective Time, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full
right, title and possession of and to all rights and property of Merger Sub
and the Company, the officers and directors of the Surviving Corporation and
Parent shall be fully authorized (in the name of Merger Sub, in the name of
the Company and otherwise) to take such action.
A-5
Section 2. Representations And Warranties Of The Company
Except as disclosed in the Company Disclosure Schedule, the Company
represents and warrants to Parent and Merger Sub as follows:
2.1 Due Organization; Subsidiaries; Etc.
(a) The Company does not own more than 50% of the shares of the voting
capital stock, or more than 50% of the equity interest of any nature in any
Entity except for the corporations identified in Part 2.1(a)(i) of the
Acquired Corporation Disclosure Schedule (such corporations being collectively
referred to, with the Company, as the "Acquired Corporations"); and none of
the Acquired Corporations owns any capital stock of, or any equity interest of
any nature in, any other Entity, other than the Acquired Corporations. None of
the Acquired Corporations has agreed, and none of the Acquired Corporations is
obligated or bound to any contract under which it may become obligated, to
make any future investment in or capital contribution to any other Entity.
None of the Acquired Corporations has, at any time, been a general partner of
any general partnership, limited partnership or other Entity.
(b) Each of the Acquired Corporations is a corporation or other legal entity
duly organized, validly existing and in good standing (with respect to
jurisdictions which recognize such concept) under the laws of the jurisdiction
of its organization and has all necessary power and authority: (i) to conduct
its business in the manner in which its business is currently being conducted;
(ii) to own and use its assets in the manner in which its assets are currently
owned and used; and (iii) to perform its obligations under all Contracts by
which it is bound.
(c) Each of the Acquired Corporations is qualified to do business as a
foreign corporation, and is in good standing, (with respect to jurisdictions
which recognize such concept) under the laws of all jurisdictions where the
nature of its business requires such qualification and where the failure to be
so qualified would have a Material Adverse Effect on the Acquired
Corporations.
2.2 Certificate of Incorporation and Bylaws. The Company has delivered to
Parent accurate and complete copies of the certificate of incorporation,
bylaws and other charter and organizational documents, including all
amendments thereto, of the Company.
2.3 Capitalization, Etc.
(a) The entire authorized capital stock of the Company consists of: (i)
250,000,000 shares of common stock, $0.001 par value per share; and (ii)
116,000,000 shares of preferred stock, $0.001 par value per share, of which
41,200,000 shares have been designated as Series A Preferred Stock and
74,382,633 shares have been designated as Series B Preferred Stock. There are,
as of the date of this Agreement: (i) 72,557,485 shares of Company Common
Stock issued and outstanding; (ii) 37,026,730 shares of Series A Preferred
Stock issued and outstanding and; (iii) 74,382,633 shares of Series B
Preferred Stock issued and outstanding. All of the outstanding shares of
Company Capital Stock have been duly authorized and validly issued, and are
fully paid and nonassessable. As of the date of this Agreement, there are no
shares of Company Capital Stock held by any of the other Acquired
Corporations. As of the date of this Agreement, and except as set forth in
Part 2.3(a) of the Acquired Corporation Disclosure Schedule: (i) none of the
outstanding shares of Company Capital Stock is entitled or subject to any
preemptive right, right of participation, right of maintenance or any similar
right; (ii) none of the outstanding shares of Company Capital Stock is subject
to any right of first refusal in favor of the Company; and (iii) there is no
Acquired Corporation Contract relating to the voting or registration of, or
restricting any Person from purchasing, selling, pledging or otherwise
disposing of (or granting any option or similar right with respect to), any
shares of Company Capital Stock. None of the Acquired Corporations is under
any obligation or bound by any contract pursuant to which it may become
obligated to repurchase, redeem or otherwise acquire any outstanding shares of
Company Capital Stock.
(b) As of the date of this Agreement, 5,527,850 shares of Company Common
Stock are reserved for future issuance pursuant to stock options granted and
outstanding under the Company's common stock option plans (the "Company
Plans"), (stock options granted by the Company pursuant to the Company Plans
are referred to
A-6
in this Agreement as "Company Options") and 2,663 shares of Company Common
Stock are reserved and available for future issuance pursuant to future grants
of stock options. Part 2.3(b) of the Acquired Corporation Disclosure Schedule
sets forth the following information with respect to each Company Option
outstanding as of the date of this Agreement: (i) the name of the optionee;
(ii) the number of shares of Company Common Stock subject to such Company
Option; (iii) the exercise price of such Company Option; (iv) the date on
which such Company Option was granted; (v) the applicable vesting schedule and
the extent to which such Company Option is vested and exercisable as of the
date of this Agreement; and (vi) the date on which such Company Option
expires. The Company has delivered to Parent an accurate and complete copy of
the Company Plans.
(c) As of the date of this Agreement, 19,265,176 shares of Company Common
Stock are reserved for future issuance pursuant to outstanding warrants to
purchase Company Common Stock (the "Company Warrants"). The Company has
delivered to Parent an accurate and complete copy of the forms of all such
warrants.
(d) Except as set forth in Part 2.3(a), Part 2.3(b) and Part 2.3(c) of the
Acquired Corporation Disclosure Schedule, as of the date of this Agreement
there is no: (i) outstanding subscription, option, call, warrant or right
(whether or not currently exercisable) granted by the Company to acquire any
shares of Company Capital Stock or other securities of the Company; (ii)
outstanding security, instrument or obligation that is or may become
convertible into or exchangeable for any shares of Company Capital Stock or
other securities of the Company; (iii) stockholder rights plan (or similar
plan commonly referred to as a "poison pill") or Contract under which the
Company is or may become obligated to sell or otherwise issue any shares of
(iv) Company Capital Stock or any other securities; or condition or
circumstance that may give rise to or provide a basis for the assertion of a
claim by any Person to the effect that such Person is entitled to acquire or
receive any shares of Company Capital Stock or other securities of the
Company.
(e) All outstanding shares of Company Capital Stock, all outstanding Company
Options, all outstanding warrants to purchase Company Common Stock and all
outstanding shares of capital stock of each subsidiary of the Company have
been issued and granted in compliance with (i) all applicable securities laws
and other applicable Legal Requirements and (ii) all requirements set forth in
applicable Contracts.
2.4 Financial Statements.
(a) The Company has delivered to Parent the following financial statements
and notes (collectively, the "Company Financial Statements"):
(i) The audited balance sheets of the Company as of March 31, 1997 and
1996 and the related audited consolidated income statements, consolidated
statements of stockholders' equity and consolidated statements of cash
flows of the Company and its subsidiaries for the years then ended,
together with the notes thereto and the unqualified report and opinion of
Coopers & Xxxxxxx LLP relating thereto; and
(ii) the unaudited consolidated balance sheet of the Company as of
December 31, 1997 (the "Company Unaudited Interim Balance Sheet"), and the
related consolidated unaudited income statement of the Company and its
subsidiaries for the nine months then ended.
(b) The Company Financial Statements are accurate and complete in all
material respects and present fairly the consolidated financial position of
the Company and its subsidiaries as of the respective dates thereof and the
results of consolidated operations and (in the case of the financial
statements referred to in Section 2.4(a)(i)) consolidated cash flows of the
Company and its subsidiaries for the periods covered thereby. The Company
Financial Statements have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods covered (except that the financial statements referred to in Section
2.4(a)(ii) do not contain footnotes and are subject to normal and recurring
year-end audit adjustments, which will not, individually or in the aggregate,
be material in magnitude).
2.5 Absence of Changes.
(a) Since December 31, 1997;
(i) there has not been any material loss, damage or destruction to, or
any material interruption in the use of, any of the assets of any of the
Acquired Corporations (whether or not covered by insurance).
A-7
(ii) none of the Acquired Corporations has (A) declared, accrued, set
aside or paid any dividend or made any other distribution in respect of any
shares of capital stock or (B) repurchased, redeemed or otherwise
reacquired any shares of capital stock or other securities;
(iii) none of the Acquired Corporations has issued, granted or authorized
the issuance of (A) any capital stock or other security (except for Company
Common Stock issued upon the exercise of outstanding Company Options), (B)
any option, warrant or right to acquire any capital stock or any other
security (except for Company Options described in Part 2.3(b) of the
Acquired Corporation Disclosure Schedule) or (C) any instrument convertible
into or exchangeable for any capital stock or other security;
(iv) the Company has not amended or waived any of its rights under, or
permitted the acceleration of vesting under, (i) any provision of any of
the Company Plans, (ii) any provision of any agreement evidencing any
outstanding Company Option, or (iii) any restricted stock purchase
agreement;
(v) there has been no amendment to the certificate of incorporation,
bylaws or other charter or organizational documents of any of the Acquired
Corporations;
(vi) other than in relation to Parent, none of the Acquired Corporations
has (A) received any Acquisition Proposal or (B) solicited, initiated,
encouraged or induced, or provided any nonpublic information to or entered
into any discussions with, any Person for the purpose of soliciting,
initiating, encouraging or inducing, the making or submission of any
Acquisition Proposal;
(vii) none of the Acquired Corporations has changed any of its methods of
accounting or accounting practices in any respect; and
(viii) none of the Acquired Corporations has agreed or committed to take
any of the actions referred to in clauses "(ii)" through "(vii)" above.
(b) Since March 31, 1997, except as is reflected in the Company Unaudited
Interim Balance Sheet, there has not been any material adverse change in the
business, condition, assets, capitalization, liabilities, operations,
financial performance or prospects of the Acquired Corporations taken as a
whole, and no event has occurred that could reasonably be expected to have a
Material Adverse Effect on any of the Acquired Corporations.
2.6 Title to Assets.
(a) Part 2.6 of the Acquired Corporation Disclosure Schedule contains a
complete and accurate list of all real property, leaseholds, or other
interests in real property owned by the Acquired Corporations (all such
property owned by the Acquired Corporations being referred to herein as the
"Acquired Corporation Owned Real Property" and all such real property leased
by the Acquired Corporations being referred to herein as the "Acquired
Corporation Leased Real Property"). The Acquired Corporations hold the
leasehold interests of the Acquired Corporation Leased Real Property under the
real property leases described in Part 2.6 of the Acquired Corporation
Disclosure Schedule.
(b) Each of the Acquired Corporations owns, and has good, valid and
marketable title to, all assets purported to be owned by it, including: (i)
all assets reflected on the Company Unaudited Interim Balance Sheet; (ii) all
other assets reflected in the books and records of each of the Acquired
Corporations as being owned by such Acquired Corporation; and (iii) the real
property identified in Part 2.6 of the Acquired Corporation Disclosure
Schedule. All of said assets are owned by the Acquired Corporations free and
clear of any Encumbrances, except for (1) any lien for current taxes not yet
due and payable, (2) minor liens that have arisen in the ordinary course of
business and that do not (in any case or in the aggregate) materially detract
from the value of the assets subject thereto or materially impair the
operations of any of the Acquired Corporations and (3) liens described in Part
2.6 of the Acquired Corporation Disclosure Schedule. All buildings, plants and
structures owned or leased by the Acquired Corporations lie wholly within the
boundaries of the real property owned or leased by the Acquired Corporations
and do not encroach upon the property of, or otherwise conflict with the
property rights of, any other Person.
A-8
2.7 Receivables; Inventory.
(a) All existing accounts receivable of the Acquired Corporations (including
those accounts receivable reflected on the Company Unaudited Interim Balance
Sheet that have not yet been collected and those accounts receivable that have
arisen since December 31, 1997 and have not yet been collected) (i) represent
valid obligations of customers of the Acquired Corporations arising from bona
fide transactions entered into in the ordinary course of business and (ii), to
the best of the Company's knowledge, except as set forth in Part 2.7(a) of the
Acquired Corporation Disclosure Schedule, will be collected in full, without
any counterclaim or set off (net of an allowance for doubtful accounts not to
exceed $500,000 in the aggregate).
(b) Part 2.7(b) of the Acquired Corporation Disclosure Schedule contains an
accurate and complete list as of the date of this Agreement of all loans and
advances made by any of the Acquired Corporations to any employee, director,
consultant or independent contractor of any of the Acquired Corporations,
other than routine travel advances made to employees in the ordinary course of
business.
(c) All inventory of the Acquired Corporations, whether or not reflected in
the Company Unaudited Interim Balance Sheet, consists of a quality and
quantity usable and salable in the ordinary course of business, except for
obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the Company Unaudited
Interim Balance Sheet. All inventories not written off have been priced at the
lower of cost or net realizable value on a first in, first out basis. The
quantities of each item of inventory (whether raw materials, work-in-process
or finished goods) are not excessive, but are reasonable in the present
circumstances of the Acquired Corporations.
2.8 Buildings, Equipment; Leasehold. The buildings, plants, structures and
all material items of equipment and other tangible assets owned by or leased
to the Acquired Corporations are adequate for the uses to which they are being
put, are in good condition and repair (ordinary wear and tear excepted), are
adequate for the conduct of the respective businesses of the Acquired
Corporations in the manner in which such businesses are currently being
conducted, and are in compliance with all applicable Legal Requirements.
2.9 Proprietary Assets.
(a) Part 2.9(a)(i) of the Acquired Corporation Disclosure Schedule sets
forth, with respect to each Proprietary Asset owned by the Acquired
Corporations and registered with any Governmental Body or for which an
application has been filed with any Governmental Body, (i) a brief description
of such Proprietary Asset and (ii) the names of the jurisdictions covered by
the applicable registration or application. Part 2.9(a)(ii) of the Acquired
Corporation Disclosure Schedule identifies and provides a brief description of
any ongoing royalty or payment obligations in excess of $10,000 with respect
to, each Proprietary Asset that is licensed or otherwise made available to any
of the Acquired Corporations by any Person (except for any Proprietary Asset
that is licensed to any of the Acquired Corporations under any third party
software license generally available to the public at a price per central
processing unit less than $5,000), and identifies the Contract under which
such Proprietary Asset is being licensed or otherwise made available to such
Acquired Corporation. To the Company's knowledge, the Acquired Corporations
have good, valid and marketable title to all of the Proprietary Assets
identified in Part 2.9(a)(i) of the Acquired Corporation Disclosure Schedule
and to all other Proprietary Assets that an Acquired Corporation purports to
own, free and clear of all Encumbrances, except for (i) any lien for current
taxes not yet due and payable and (ii) minor liens that have arisen in the
ordinary course of business and that do not (individually or in the aggregate)
materially detract from the value of the assets subject thereto or materially
impair the operations of any of the Acquired Corporations. The Acquired
Corporations have a valid right to use, license and otherwise exploit all
Proprietary Assets identified in Part 2.9(a)(ii) of the Acquired Corporation
Disclosure Schedule. Except as set forth in Part 2.9(a)(iii) of the Acquired
Corporation Disclosure Schedule, none of the Acquired Corporations has
developed jointly with any other Person any Proprietary Asset that is material
to the business of the Acquired Corporations with respect to which such other
Person has any rights. Except as set forth in Part 2.9(a)(iv) of the Acquired
Corporation Disclosure Schedule, there is no Acquired Corporation Contract
pursuant to which any Person has any right (whether or not currently
exercisable) to use, license or otherwise exploit any Proprietary Asset.
A-9
(b) Each of the Acquired Corporations has taken reasonable measures and
precautions to protect and maintain the confidentiality, secrecy and value of
all material Acquired Corporation Proprietary Assets (except Acquired
Corporation Proprietary Assets whose value would be unimpaired by disclosure).
Without limiting the generality of the foregoing, except as set forth in Part
2.9(b) of the Acquired Corporation Disclosure Schedule, (i) all current
employees of the Acquired Corporations who are or were involved in, or who
have contributed to, the creation or development of any material Acquired
Corporation Proprietary Asset have executed and delivered to the Company an
agreement that is substantially identical to the form of Confidential
Information and Invention Assignment Agreement previously delivered by the
Company to Parent and (ii) all current consultants and independent contractors
to the Acquired Corporations who are or were involved in, or who have
contributed to, the creation or development of any Acquired Corporation
Proprietary Asset have executed and delivered to the Company an agreement
(containing no exceptions to or exclusions from the scope of its coverage)
that is substantially identical to the form of Consultant Confidential
Information and Invention Assignment Agreement previously delivered by the
Company to Parent. No current or former employee, officer, director,
stockholder, consultant or independent contractor has any right, claim or
interest in or with respect to any Acquired Corporation Proprietary Asset.
None of the Acquired Corporations has disclosed or delivered to any Person, or
permitted the disclosure or delivery to any escrow agent or other Person, of
the source code, or any portion or aspect of the source code, or any
proprietary information or algorithm contained in any source code, of any
Acquired Corporation Proprietary Asset.
(c) To the best knowledge of the Company: (i) all patents, trademarks,
service marks and copyrights held by each of the Acquired Corporations are
valid, enforceable and subsisting; (ii) none of the Acquired Corporation
Proprietary Assets and no Proprietary Asset that is currently being developed
by any of the Acquired Corporations (either by itself or with any other
Person) infringes, misappropriates or conflicts with any Proprietary Asset
owned or used by any other Person; (iii) none of the products that are or have
been designed, created, developed, assembled, manufactured or sold by any of
the Acquired Corporations is infringing, misappropriating or making any
unlawful or unauthorized use of any Proprietary Asset owned or used by any
other Person, and none of such products has at any time infringed,
misappropriated or made any unlawful or unauthorized use of, and none of the
Acquired Corporations has received any notice or other communication (in
writing or otherwise) of any actual, alleged, possible or potential
infringement, misappropriation or unlawful or unauthorized use of, any
Proprietary Asset owned or used by any other Person; and (iv) no other Person
is infringing, misappropriating or making any unlawful or unauthorized use of,
and no Proprietary Asset owned or used by any other Person infringes or
conflicts with, any material Acquired Corporation Proprietary Asset.
(d) The Acquired Corporation Proprietary Assets constitute all of the
Proprietary Assets necessary to enable each of the Acquired Corporations to
conduct their business in the manner in which such business has been and is
being conducted. None of the Acquired Corporations has (i) licensed any of the
material Acquired Corporation Proprietary Assets to any Person on an exclusive
basis or (ii) entered into any covenant not to compete or Contract limiting
its ability to exploit fully any material Acquired Corporation Proprietary
Assets or to transact business in any market or geographical area or with any
Person.
2.10 Contracts.
(a) Part 2.10 of the Acquired Corporation Disclosure Schedule identifies
each Acquired Corporation Contract that constitutes an "Acquired Corporation
Material Contract" as of the date of this Agreement. For purposes of this
Agreement, each of the following shall be deemed to constitute an "Acquired
Corporation Material Contract":
(i) any Contract relating to the employment of, or the performance of
services by, any employee or consultant with annual compensation in excess
of $150,000, and any Contract pursuant to which any of the Acquired
Corporations is, or may become, obligated to make any severance,
termination or similar payment, bonus or relocation payment or any other
payment (other than payments in respect of salary) in excess of $150,000,
to any current or former employee or director of any of the Acquired
Corporations;
(ii) each lease, rental or occupancy agreement, installment and
conditional sales agreement, and other Contract affecting the ownership of,
leasing of, title to, use of, or any leasehold or other interest in, any
real
A-10
or personal property (except for any personal property lease, installment
sales agreement or conditional sales agreement providing for aggregate
payments by or to the Acquired Corporations of less than $25,000 and except
for sales acknowledgments and purchase orders in the ordinary course of
business);
(iii) any Contract relating to the acquisition, transfer, development,
sharing or license of any Proprietary Asset (except for (A) any Contract
pursuant to which any Proprietary Asset is licensed to any Acquired
Corporation under any third party software license generally available to
the public at a price per central processing unit of less than $5,000, (B)
any license implied in the sale by the Company of a tangible product or (C)
any Contract between Acquired Corporations);
(iv) any Contract which provides for indemnification of any officer,
director, employee or agent of any Acquired Corporation;
(v) any Contract imposing any restriction on the right or ability of any
Acquired Corporation (A) to compete with any other Person, (B) to acquire
any product or other asset or any services from any other Person, to sell
any product or other asset to or perform any services for any other Person
or to transact business or deal in any other manner with any other Person,
or (C) to develop or distribute any technology;
(vi) any Contract (A) relating to the acquisition, issuance, voting,
registration, sale or transfer of any securities, (B) providing any Person
with any preemptive right, right of participation, right of maintenance or
any similar right with respect to any securities, or (C) providing the
Company with any right of first refusal with respect to, or right to
repurchase or redeem, any securities;
(vii) any Contract requiring that any Acquired Corporation give any
notice or provide any information to any Person prior to accepting an
Acquisition Proposal;
(viii) any Contract that has a term of more than 90 days and that may not
be terminated without penalty within 90 days after the delivery of a
termination notice by an Acquired Corporation (other than for the sale of
products by an Acquired Corporation entered into in the ordinary course of
business);
(ix) any Contract pursuant to which any of the Acquired Corporations is
or may become obligated to make payments aggregating in excess of $100,000
or pursuant to which any of the Acquired Corporations is or may be entitled
to receive in excess of $100,000 (other than for the sale of products or
the purchase of components or materials by an Acquired Corporation entered
into in the ordinary course of business);
(x) any Contract (not otherwise identified in clauses "(i)" through
"(ix)" of this sentence) that has or could reasonably be expected to have a
material effect on the business, condition, assets, liabilities,
capitalization, operations, financial performance or prospects of any of
the Acquired Corporations or on any of the transactions contemplated by
this Agreement (other than for the sale of products or the purchase of
components or materials by an Acquired Corporation entered into in the
ordinary course of business); and
(xi) any other Contract, if a breach of such Contract could reasonably be
expected to have a Material Adverse Effect on any of the Acquired
Corporations.
There is no Acquired Corporation Contract to which any Governmental Body is
a party or under which any Governmental Body has any rights or obligations, or
directly or indirectly benefiting any Governmental Body (including any
subcontract or other Contract between any Acquired Corporation and any
contractor or subcontractor to any Governmental Body).
(b) Each Acquired Corporation Contract that is an Acquired Corporation
Material Contract is valid and in full force and effect, and is enforceable by
the respective Acquired Corporation in accordance with its terms, subject to
(i) laws of general application relating to bankruptcy, insolvency and the
relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
(c) Except as set forth in Part 2.10 of the Acquired Corporation Disclosure
Schedule: (i) none of the Acquired Corporations has violated or breached, or
committed any default under, any Acquired Corporation Contract and, to the
best of each of the knowledge of the Acquired Corporations, no other Person
has violated or breached, or committed any default under, any Acquired
Corporation Contract; (ii) to the best of the knowledge
A-11
of the Acquired Corporations, no event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time or both) will,
or could reasonably be expected to, (A) result in a violation or breach of any
of the provisions of any Acquired Corporation Contract, (B) give any Person
the right to declare a default or exercise any remedy under any Acquired
Corporation Contract, (C) give any Person the right to a rebate, chargeback,
penalty or change in delivery schedule under any Acquired Corporation
Contract, (D) give any Person the right to accelerate the maturity or
performance of any Acquired Corporation Contract, or (E) give any Person the
right to cancel, terminate or modify any Acquired Corporation Contract; and
(iii) since September 30, 1997, none of the Acquired Corporations has received
any notice or other communication regarding any actual or possible violation
or breach of, or default under, any Acquired Corporation Contract.
(d) No Person is renegotiating, or has a right pursuant to the terms of any
Acquired Corporation Material Contract to renegotiate, any amount paid or
payable to the Acquired Corporation under any Acquired Corporation Material
Contract or any other material term or provision of any Acquired Corporation
Material Contract.
2.11 Liabilities. None of the Acquired Corporations has any accrued,
contingent or other liabilities of any nature, either matured or unmatured
(whether or not required to be reflected in financial statements in accordance
with GAAP, and whether due or to become due), except for: (a) liabilities
identified as such in the "liabilities" column of the Company Unaudited
Interim Balance Sheet; (b) normal and recurring liabilities that have been
incurred by any of the Acquired Corporations since December 31, 1997 in the
ordinary course of business and consistent with past practices; and (c)
liabilities described in Part 2.11 of the Acquired Corporation Disclosure
Schedule.
2.12 Compliance with Legal Requirements. Each of the Acquired Corporations
is, and has at all times since December 31, 1994 been, in compliance with all
applicable Legal Requirements, except where the failure to comply with such
Legal Requirements has not had, either individually or in the aggregate, and
could not reasonably be expected to have, a Material Adverse Effect on the
Acquired Corporations. Since December 31, 1994, none of the Acquired
Corporations has received any notice or other communication from any
Governmental Body regarding any actual or possible violation of, or failure to
comply with, any Legal Requirement.
2.13 Certain Business Practices. None of the Acquired Corporations or any
director, officer, agent or employee of any of the Acquired Corporations has
(i) used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to foreign
or domestic political parties or campaigns or violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or (iii) made any other
unlawful payment.
2.14 Governmental Authorizations. The Company holds all Governmental
Authorizations necessary to enable it to conduct its business in the manner in
which such business is currently being conducted. All such Governmental
Authorizations are valid and in full force and effect. The Company is, and at
all times since December 31, 1994 has been, in substantial compliance with the
terms and requirements of such Governmental Authorizations. Since December 31,
1994, none of the Acquired Corporations has received any notice or other
communication from any Governmental Body regarding (a) any actual or possible
violation of or failure to comply with any term or requirement of any material
Governmental Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
material Governmental Authorization. Part 2.14 of the Acquired Corporation
Disclosure Schedule contains an accurate and complete list of all presently
effective United States Government Authorizations relating to the real or
personal property of the Company, and the Company is in compliance with such
Governmental Authorizations.
2.15 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of the Acquired
Corporations with any Governmental Body with respect to any taxable period
ending on or before the Closing Date (the "Acquired
A-12
Corporation Returns") (i) have been or will be filed on or before the
applicable due date (including any extensions of such due date), and (ii) have
been, or will be when filed, prepared in all material respects in compliance
with all applicable Legal Requirements. All amounts shown on the Acquired
Corporation Returns to be due on or before the Closing Date have been or will
be paid on or before the Closing Date.
(b) The Company Unaudited Interim Balance Sheet fully accrues all actual and
contingent liabilities for Taxes with respect to all periods through the date
thereof in accordance with GAAP. The Acquired Corporations will establish, in
the ordinary course of business and consistent with past practices, reserves
adequate for the payment of all Taxes for the period from December 31, 1997
through the Closing Date.
(c) No Acquired Corporation Return has ever been examined or audited by any
Governmental Body. No extension or waiver of the limitation period applicable
to any of the Acquired Corporation Returns has been granted (by any of the
Acquired Corporations or any other Person), and no such extension or waiver
has been requested from any of the Acquired Corporations.
(d) No claim or Legal Proceeding is pending or, to the best knowledge of the
Acquired Corporations, has been threatened against or with respect to any of
the Acquired Corporations in respect of any material Tax. There are no
unsatisfied liabilities for material Taxes (including liabilities for
interest, additions to tax and penalties thereon and related expenses) with
respect to any notice of deficiency or similar document received by any of the
Acquired Corporations with respect to any material Tax (other than liabilities
for Taxes asserted under any such notice of deficiency or similar document
which are being contested in good faith by such Acquired Corporation and with
respect to which adequate reserves for payment have been established). There
are no liens for material Taxes upon any of the assets of any of the Acquired
Corporations except liens for current Taxes not yet due and payable. None of
the Acquired Corporations has entered into or become bound by any agreement or
consent pursuant to Section 341(f) of the Code. None of the Acquired
Corporations has been, or will be, required to include any adjustment in
taxable income for any tax period (or portion thereof) pursuant to Section 481
or 263A of the Code or any comparable provision under state or foreign Tax
laws as a result of transactions or events occurring, or accounting methods
employed, prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract covering any
employee or independent contractor or former employee or independent
contractor of any of the Acquired Corporations that, considered individually
or considered collectively with any other such Contracts, will, or could
reasonably be expected to, give rise directly or indirectly to the payment of
any amount that would not be deductible pursuant to Section 280G or Section
162 of the Code. None of the Acquired Corporations is, or has ever been, a
party to or bound by any tax indemnity agreement, tax sharing agreement, tax
allocation agreement or similar Contract.
2.16 Employee and Labor Matters; Benefit Plans.
(a) Part 2.16(a) of the Acquired Corporation Disclosure Schedule identifies
each salary, bonus, vacation, deferred compensation, incentive compensation,
stock purchase, stock option, severance pay, termination pay, death or
disability benefits, hospitalization, medical, life or other insurance,
flexible benefits, supplemental unemployment benefits, profit-sharing, pension
or retirement plan, program or agreement and each other employee benefit plan
or arrangement maintained within the United States (collectively, the
"Acquired Corporation Plans") sponsored, maintained, contributed to or
required to be contributed to by any of the Acquired Corporations or any ERISA
Affiliate (as defined in Section 2.16(d) below) for the benefit of any current
or former employee in the United States of any of the Acquired Corporations or
any ERISA Affiliate.
(b) Except as set forth in Part 2.16(a) of the Acquired Corporation
Disclosure Schedule, neither the Acquired Corporations nor any ERISA Affiliate
maintain, sponsor or contribute to, or have at any time in the past
maintained, sponsored or contributed to, any employee pension benefit plan (as
defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), whether or not excluded from coverage under
specific Titles or Subtitles of ERISA) that is maintained within the United
States for the benefit
A-13
of employees or former employees of the Acquired Corporations or any ERISA
Affiliate (an "Acquired Corporation Pension Plan"). None of the Acquired
Corporation Pension Plans identified in the Acquired Corporation Disclosure
Schedule is a multiemployer plan (within the meaning of Section 3(37) of
ERISA) or is subject to Section 412 of the Code, Part 3 of Subtitle B of Title
I of ERISA or Title IV of ERISA.
(c) Except as set forth in Part 2.16(a) of the Acquired Corporation
Disclosure Schedule, neither the Acquired Corporations nor any ERISA Affiliate
maintain, sponsor or contribute to any: employee welfare benefit plan (as
defined in Section 3(1) of ERISA, whether or not excluded from coverage under
specific Titles or Subtitles of ERISA) that is maintained within the United
States for the benefit of any employees or former employees of any of the
Acquired Corporations or any ERISA Affiliate (an "Acquired Corporation Welfare
Plan"). None of the Acquired Corporation Plans identified in the Acquired
Corporation Disclosure Schedule is a multiemployer plan (within the meaning of
Section 3(37) of ERISA).
(d) None of the Acquired Corporations has or has ever been required to be
treated as a single employer with any other Person under Section 4001(b)(1) of
ERISA or Section 414(b), (c), (m) or (o) of the Code (an "ERISA Affiliate").
None of the Acquired Corporations has ever been a member of an "affiliated
service group" within the meaning of Section 414(m) of the Code with any other
Person within the United States. Neither the Acquired Corporations nor any
ERISA Affiliate has ever made a complete or partial withdrawal from a
multiemployer plan, as such term is defined in Section 3(37) of ERISA, that is
maintained within the United States, resulting in "withdrawal liability," as
such term is defined in Section 4201 of ERISA (without regard to subsequent
reduction or waiver of such liability under either Section 4207 or 4208 of
ERISA).
(e) Neither the Acquired Corporations nor any ERISA Affiliate has any plan
or commitment to create any additional Acquired Corporation Welfare Plans or
Acquired Corporation Pension Plans, or to modify or change any existing
Acquired Corporation Welfare Plan or Acquired Corporation Pension Plan (other
than to comply with applicable law) in a manner that would affect any employee
of any of the Acquired Corporations or any ERISA Affiliate.
(f) No Acquired Corporation Plan provides death, medical or health benefits
(whether or not insured) with respect to any current or former employee of any
of the Acquired Corporations or any ERISA Affiliate after any such employee's
termination of service (other than benefit coverage mandated by applicable
law, including coverage provided pursuant to COBRA (as defined in Section
2.16(g) below)).
(g) With respect to any Acquired Corporation Plan constituting a group
health plan within the meaning of Section 4980B(g)(2) of the Code or Section
607(1) of ERISA, the provisions of Section 4980B of the Code and Sections 601
through 609 of ERISA ("COBRA") have been complied with in all material
respects.
(h) Each of the Acquired Corporation Plans has been operated and
administered in all material respects in accordance with applicable Legal
Requirements, including but not limited to ERISA and the Code.
(i) Each of the Acquired Corporation Plans intended to be qualified under
Section 401(a) of the Code has received a favorable determination as to its
qualification from the Internal Revenue Service, and nothing has occurred that
would adversely affect such qualification.
(j) Except as set forth in Part 2.16(j) of the Acquired Corporation
Disclosure Schedule, neither the execution, delivery or performance of this
Agreement, nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will result in any payment in the United
States (including any bonus, golden parachute or severance payment) to any
current or former employee or director of any of the Acquired Corporations
(whether or not under any Plan), or materially increase the benefits payable
under any Plan, or result in any acceleration of the time of payment or
vesting of any such benefits.
(k) Part 2.16(k) of the Acquired Corporation Disclosure Schedule contains a
list of all salaried employees located in the United States of each of the
Acquired Corporations or any ERISA Affiliate as of the date of this
A-14
Agreement whose salaries are in excess of $150,000 per year, and correctly
reflects, in all material respects, their salaries, any other compensation
payable to them (including compensation payable pursuant to bonus, deferred
compensation or commission arrangements), their dates of employment and their
positions. Neither any of the Acquired Corporations nor any ERISA Affiliate is
a party to any collective bargaining agreement or other Contract with a labor
union involving any of their employees located in the United States. There has
not been, is not now pending, and no Person has threatened to commence any
slowdown, work stoppage, labor or dispute or any similar activity or dispute
in the United States affecting any of the Acquired Corporations or any ERISA
Affiliates or their employees since December 31, 1997. All of the employees in
the United States of each of the Acquired Corporations and any ERISA
Affiliates are "at will" employees.
(l) Part 2.16(l) of the Acquired Corporation Disclosure Schedule identifies
each employee in the United States of each of the Acquired Corporations or any
ERISA Affiliate who is not fully available to perform work because of
disability or other leave and sets forth the basis of such leave and the
anticipated date of return to full service.
(m) Each of the Acquired Corporations and any ERISA Affiliate in the United
States is in compliance in all material respects with all applicable Legal
Requirements and Contracts relating to employment, employment practices,
wages, bonuses and terms and conditions of employment, including employee
compensation matters.
(n) Each of the Acquired Corporations has good labor relations, and none of
the Acquired Corporations has any knowledge of any facts indicating that (i)
the consummation of the Merger or any of the other transactions contemplated
by this Agreement will have a material adverse effect on the labor relations
of any of the Acquired Corporations, or that (ii) any of the key employees of
the Company intends to terminate his or her employment with such Acquired
Corporation.
(o) The employee benefit plans and arrangements that are currently
maintained by the Acquired Corporations in Germany are in material compliance
with applicable German laws.
2.17 Environmental Matters.
(a) Each of the Acquired Corporations is, and at all times has been, in
compliance in all material respects with all applicable Environmental Laws,
which compliance includes (i) the possession by each of the Acquired
Corporations of all permits and other Governmental Authorizations required
under applicable Environmental Laws, and (ii) compliance with the terms and
conditions thereof (and the violation of which would have a Material Adverse
Effect).
(b) None of the Acquired Corporations has received any notice or other
communication (in writing or otherwise), whether from a Governmental Body,
citizens group, employee or otherwise, that alleges that an Acquired
Corporation is not in compliance with any Environmental Law or is or may be
required to undertake or bear any Environmental Liabilities. To the best
knowledge of each of the Acquired Corporations, there are no circumstances
that may prevent or interfere with the compliance by any of the Acquired
Corporations with any Environmental Law or that may require any of the
Acquired Corporations to undertake or bear any Environmental Liabilities in
the future (other than routine Environmental Liabilities incurred in the
ordinary course of business consistent with past practices) with respect to
any Property, any other property or otherwise. To the best knowledge of each
of the Acquired Corporations, no current or prior owner of any Acquired
Corporation Property has received any notice or other communication (in
writing or otherwise), whether from a Government Body, citizens group,
employee or otherwise, that alleges that such current or prior owner or such
Acquired Corporation has not been or is not in compliance with any
Environmental Law or is or may be required to undertake or bear any
Environmental Liabilities.
(c) (i) To the best knowledge of each of the Acquired Corporations all
Acquired Corporation Property and all surface water, groundwater and soil
associated with such Acquired Corporation Property and (ii) to the knowledge
of the Company without independent investigation, all Property to which the
Company has sent any Material of Environmental Concern are free of any
material environmental contamination by any Material of
A-15
Environmental Concern in any concentration that may require any costs of
investigation, response, removal or remedial action.
(d) The Company has delivered to Parent true and complete copies and results
of any reports, studies, analyses, tests, or monitoring possessed or initiated
by any of the Acquired Corporations pertaining to Materials of Environmental
Concern in, on, or under any Acquired Corporation Property, or concerning
compliance by any of the Acquired Corporations, or any other Person for whose
conduct it is or may be held responsible, with Environmental Laws.
(e) For purposes of this Agreement: (i) "Environmental Law" means any
federal, state, local or foreign Legal Requirement relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface or subsurface strata), including any law or
regulation relating to emissions, discharges, releases or threatened releases
of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern; (ii) "Materials
of Environmental Concern" include chemicals, pollutants, contaminants, wastes,
toxic substances, asbestos, petroleum and petroleum products and any other
substance that is now or hereafter regulated by any Environmental Law or that
is otherwise a danger to health, reproduction or the environment; (iii)
"Environmental Liabilities" include any cost, damages, expense, liability,
obligation, fine, penalty, judgment, award, loss or other responsibility
arising from or under Environmental Law, including financial responsibility
under Environmental Law for investigation, removal, containment, remediation,
response or other cleanup costs or corrective action; and (iv) "Acquired
Corporation Property" shall include any property, parcel or facility now or
heretofore owned, leased, used or controlled by any of the Acquired
Corporations or geologically or hydrologically adjoining any such property,
parcel or facility.
2.18 Insurance. The Company has delivered to Parent a copy of each material
insurance policy and each material self insurance program relating to the
business, assets or operations of each of the Acquired Corporations in the
United States. Each such insurance policy is in full force and effect. Since
December 31, 1994, none of the Acquired Corporations has received any notice
or other communication regarding any actual or possible (a) cancellation or
invalidation of any insurance policy, (b) refusal of any coverage or rejection
of any material claim under any insurance policy, or (c) material adjustment
in the amount of the premiums payable with respect to any insurance policy.
Except as set forth in Part 2.18 of the Acquired Corporation Disclosure
Schedule, there is no pending claim (including any workers' compensation
claim) under or based upon any insurance policy applicable to any of the
business, assets or operations of any of the Acquired Corporations.
2.19 Transactions With Affiliates. Except as set forth in Part 2.19 of the
Acquired Corporation Disclosure Schedule, since December 31, 1994, no event
has occurred that would be required to be reported by the Company pursuant to
Item 404 of Regulation S K promulgated by the SEC, were the Company required
to report to its stockholders in accordance with such Item. Part 2.19 of the
Acquired Corporation Disclosure Schedule identifies each person who is an
"affiliate" (as that term is used in Rule 145 under the Securities Act) of the
Company as of the date of this Agreement.
2.20 Legal Proceedings; Orders.
(a) Except as set forth in Part 2.20 of the Acquired Corporation Disclosure
Schedule, there is no pending Legal Proceeding and (to the best knowledge of
each of the Acquired Corporations) no Person has threatened to commence any
Legal Proceeding: (i) that involves any of the Acquired Corporations or any of
the assets owned or used by any of the Acquired Corporations; or (ii) that
challenges, or that may have the effect of preventing, delaying, making
illegal or otherwise interfering with, the Merger or any of the other
transactions contemplated by this Agreement. To the best knowledge of each of
the Acquired Corporations, no event has occurred, and no claim, dispute or
other condition or circumstance exists, that will, or that could reasonably be
expected to, give rise to or serve as a basis for the commencement of any such
Legal Proceeding.
(b) Except as set forth in Part 2.20 of the Acquired Corporation Disclosure
Schedule, there is no material order, writ, injunction, judgment or decree to
which any of the Acquired Corporations, or any of the assets owned
A-16
or used by any of the Acquired Corporations, is subject. To the best knowledge
of each of the Acquired Corporations, no officer or key employee of any of the
Acquired Corporations is subject to any order, writ, injunction, judgment or
decree that prohibits such officer or other employee from engaging in or
continuing any conduct, activity or practice relating to the business of any
of the Acquired Corporations.
2.21 Authority; Inapplicability of Anti-takeover Statutes; Binding Nature of
Agreement. The Company has the absolute and unrestricted right, power and
authority to enter into and to perform its obligations under this Agreement.
The Board of Directors of the Company (at a meeting duly called and held) has
(a) unanimously determined that the Merger is advisable and fair and in the
best interests of the Company and its stockholders, (b) unanimously authorized
and approved the execution, delivery and performance of this Agreement by the
Company and has unanimously approved the Merger, (c) unanimously recommended
the adoption of this Agreement by the holders of Company Common Stock and
directed that this Agreement be submitted for consideration by the Company's
stockholders at the Company Stockholders' Meeting (as defined in Section
6.2(a)), and (d) adopted a resolution having the effect of causing the Company
not to be subject to any state takeover law or similar Legal Requirement that
might otherwise apply to the Merger or any of the other transactions
contemplated by this Agreement. This Agreement constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable
remedies.
2.22 Section 203 of the DGCL Not Applicable. As of the date hereof and at
all times on or prior to the Effective Time, Section 203 of the DGCL is, and
will be, inapplicable to the execution, delivery and performance of this
Agreement and to the consummation of the Merger and the other transactions
contemplated by this Agreement.
2.23 No Existing Discussions. None of the Acquired Corporations, nor any
Representative of any of the Acquired Corporations, is engaged, directly or
indirectly, in any discussions or negotiations with any other Person relating
to any Acquisition Proposal.
2.24 Vote Required. The affirmative vote of the holders of (a) a majority of
the shares of Company Common Stock and Company Preferred Stock, voting as a
single class, outstanding on the record date for the Company Stockholder's
Meeting and (b) a majority of the shares of Company Preferred Stock
outstanding on the record date for the Company Stockholders' Meeting to adopt
this Agreement (the "Company Required Vote") is the only vote of the holders
of any class or series of the Company's capital stock necessary to consummate
the transactions contemplated by this Agreement.
2.25 Non-Contravention; Consents. Neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in
this Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of the
provisions of the certificate of incorporation, bylaws or other charter or
organizational documents of any of the Acquired Corporations, or (ii) any
resolution adopted by the stockholders, the board of directors, or similar
governing body, or any committee of the board of directors, or similar
governing body, of any of the Acquired Corporations;
(b) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge the Merger or any
of the other transactions contemplated by this Agreement or to exercise any
remedy or obtain any relief under, any Legal Requirement or any order,
writ, injunction, judgment or decree to which any of the Acquired
Corporations, or any of the assets owned or used by any of the Acquired
Corporations, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by any of the Acquired Corporations or that
otherwise relates to the business of
A-17
any of the Acquired Corporations or to any of the assets owned or used by
any of the Acquired Corporations;
(d) contravene, conflict with or result in a violation or breach of, or
result in a default under, any provision of any Acquired Corporation
Contract that is or would constitute an Acquired Corporation Material
Contract, or give any Person the right to (i) declare a default or exercise
any remedy under any such Acquired Corporation Contract, (ii) a rebate,
chargeback, penalty or change in delivery schedule under any such Acquired
Corporation Contract, (iii) accelerate the maturity or performance of any
such Acquired Corporation Contract, or (iv) cancel, terminate or modify any
term of any such Acquired Corporation Contract;
(e) result in the imposition or creation of any Encumbrance upon or with
respect to any asset owned or used by any of the Acquired Corporations
(except for minor liens that will not, in any individual case or in the
aggregate, materially detract from the value of the assets subject thereto
or materially impair the operations of any of the Acquired Corporations);
or
(f) result in, or increase the likelihood of, the disclosure, delivery or
transfer of any material asset of any of the Acquired Corporations to any
Person.
Except as may be required by the DGCL and the HSR Act, none of the Acquired
Corporations was, is nor will be required to make any filing with or give any
notice to, or to obtain any Consent from, any Person in connection with (x)
the execution, delivery or performance of this Agreement or any of the other
agreements referred to in this Agreement, or (y) the consummation of the
Merger or any of the other transactions contemplated by this Agreement.
2.26 Financial Advisor. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Merger or any of the other transactions contemplated by this Agreement based
upon arrangements made by or on behalf of the Company.
Section 3. Representations and Warranties of Parent and Merger Sub
Except as disclosed in the Parent Disclosure Schedule, Parent and Merger Sub
represent and warrant to the Company as follows:
3.1 Due Organization; Subsidiaries; Etc.
(a) Neither Parent nor Merger Sub own any shares of capital stock of, or
equity interest of any nature in, any Entity except for the corporations
identified in Part 3.1(a)(i) of the Parent Disclosure Schedule; and neither
Parent, Merger Sub nor any of the other corporations identified in Part
3.1(a)(i) of the Parent Disclosure Schedule owns any capital stock of, or any
equity interest of any nature in, any other Entity, other than those
identified in Part 3.1(a)(ii) of the Parent Disclosure Schedule. Neither
Parent nor Merger Sub has agreed, nor is obligated or bound to any contract
under which it may become obligated, to make any future investment in or
capital contribution to any Entity. Neither Parent nor Merger Sub has, at any
time, been a general partner of any general partnership, limited partnership
or other Entity.
(b) Parent and Merger Sub are corporations duly organized, validly existing
and in good standing under the laws of the jurisdiction of their incorporation
and each has all necessary power and authority: (i) to conduct its business in
the manner in which its business is currently being conducted; (ii) to own and
use its assets in the manner in which its assets are currently owned and used;
and (iii) to perform its obligations under all Contracts by which it is bound.
Merger Sub was incorporated for purposes of consummating the Merger and has
never conducted any business or other activities, except in connection with
this Agreement.
(c) Each of Parent and Merger Sub are qualified to do business as a foreign
corporation, and is in good standing, under the laws of all jurisdictions
where the nature of its business requires such qualification and where the
failure to be so qualified would have a Material Adverse Effect on Parent or
Merger Sub.
A-18
3.2 Certificate of Incorporation and Bylaws. Parent has delivered to the
Company accurate and complete copies of the certificate of incorporation,
bylaws and other charter and organizational documents, including all
amendments thereto, of Parent and Merger Sub.
3.3 Capitalization, Etc.
(a) The authorized capital stock of Parent consists of: (i) 25,000,000
shares of common stock, $.01 par value per share ("Parent Common Stock"), of
which 14,881,039 shares have been issued and are outstanding as of the date of
this Agreement; and (ii) 5,000,000 shares of Preferred Stock, $.01 par value
per share, of which 30 shares of Series A Preferred Stock, $.01 par value, 68
shares of Series B Preferred Stock, $.01 par value, and 85 shares of Series C
Preferred Stock, $.01 par value are outstanding as the date of this Agreement
("Parent Preferred Stock"). All of the outstanding shares of Parent Common
Stock have been duly authorized and validly issued, and are fully paid and
nonassessable. Parent does not hold any of its shares of capital stock in its
treasury. Except as set forth in Part 3.3(a) of the Parent Disclosure
Schedule: (i) none of the outstanding shares of Parent Common Stock or Parent
Preferred Stock is entitled or subject to any preemptive right, right of
participation, right of maintenance or any similar right; (ii) none of the
outstanding shares of Parent Common Stock or Parent Preferred Stock is subject
to any right of first refusal in favor of Parent; and (iii) there is no
Contract relating to the voting or registration of, or restricting any Person
from purchasing, selling, pledging or otherwise disposing of (or granting any
option or similar right with respect to), any shares of Parent Common Stock or
Parent Preferred Stock. Parent is not under any obligation or bound by any
contract pursuant to which it may be obligated to repurchase, redeem or
otherwise acquire any outstanding shares of Parent Common Stock. The
authorized capital of Merger Sub consists of 1,000 shares of Common Stock, par
value $.01 per share, 100 of which are issued and outstanding and are held,
beneficially and of record, by Parent.
(b) As of the date of this Agreement: (i) 1,039,764 shares of Parent Common
Stock are reserved for future issuance pursuant to stock options granted and
outstanding under Parent's 1994 Stock Option Plan, as amended (the "Parent
Options") and 458,236 shares of Parent Common Stock are reserved and available
for future issuance pursuant to future grants of stock options; and (ii)
141,653 shares of Parent Common Stock are reserved for future issuance
pursuant to Parent's 1995 Employee Stock Purchase Plan (the "1995 Purchase
Plan"). Part 3.3(b)(i) of the Parent Disclosure Schedule sets forth the
following information with respect to each Parent Option outstanding as of the
date of this Agreement: (i) the particular plan pursuant to which such Parent
Option was granted; (ii) the name of the optionee; (iii) the number of shares
of Parent Common Stock subject to such Parent Option; (iv) the exercise price
of such Parent Option; (v) the date on which such Parent Option was granted;
(vi) the applicable vesting schedules and the extent to which such Parent
Option is vested and exercisable as of the date of this Agreement; and (vii)
the date on which such Parent Option expires. Parent has delivered to the
Company accurate and complete copies of all stock option plans pursuant to
which Parent has granted outstanding stock options, and the forms of all stock
option agreements evidencing such options. Part 3.3(b)(ii) of the Parent
Disclosure Schedule sets forth the following information with respect to the
outstanding warrants to purchase Parent Common Stock: (1) the number of shares
of Parent Common Stock subject to such warrants; (2) the exercise price of
such warrants; and (3) the date on which such warrants expire. Parent has
delivered to the Company an accurate and complete copy of the forms of all
such warrants.
(c) Except as set forth in Part 3.3(a), or Part 3.3(b)(i) or Part 3.3(b)(ii)
of Parent Disclosure Schedule, there is no: (i) outstanding subscription,
option, call, warrant or right (whether or not currently exercisable) granted
by Parent to acquire any shares of the capital stock or other securities of
Parent; (ii) outstanding security, instrument or obligation that is or may
become convertible into or exchangeable for any shares of the capital stock or
other securities of Parent; (iii) stockholder rights plan (or similar plan
commonly referred to as a "poison pill") or Contract under which Parent is or
may become obligated to sell or otherwise issue any shares of its capital
stock or any other securities; or (iv) condition or circumstance that may give
rise to or provide a basis for the assertion of a claim by any Person to the
effect that such Person is entitled to acquire or receive any shares of
capital stock or other securities of Parent.
(d) All outstanding shares of Parent Common Stock, all outstanding Parent
Options and all outstanding warrants to purchase Parent Common Stock have been
issued and granted in compliance with (i) all applicable
A-19
securities laws and other applicable Legal Requirements, and (ii) all
requirements set forth in applicable Contracts.
3.4 SEC Filings; Financial Statements.
(a) Parent has delivered to the Company accurate and complete copies of all
registration statements, proxy statements, reports, schedules, forms and other
documents filed by Parent with the SEC since December 31, 1994 (the "Parent
SEC Documents"). All statements, reports, schedules forms and other documents
required to have been filed by Parent with the SEC have been so filed. As of
the time it was filed with the SEC (or, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing): (i)
each of the Parent SEC Documents complied in all material respects with the
applicable requirements of the Securities Act or the Exchange Act (as the case
may be); and (ii) none of the Parent SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) The financial statements (including any related notes) contained in the
Parent SEC Documents: (i) complied as to form in all material respects with
the published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC, and except that the unaudited financial statements may not contain
footnotes and are subject to normal and recurring year-end adjustments which
will not, individually or in the aggregate, be material in amount); and (iii)
fairly present the financial position of Parent as of the respective dates
thereof and the results of operations and cash flows of Parent for the periods
covered thereby.
(c) Parent has delivered to the Company the audited balance sheet of Parent
as of December 31, 1997 (the "Parent Audited Balance Sheet") and the related
audited consolidated income statement, consolidated statement of stockholders'
equity and consolidated statement of cash flows of Parent and its subsidiaries
for the years then ended, together with the notes thereto and the unqualified
report and opinion of Price Waterhouse LLP relating thereto (collectively, the
"Parent Financial Statements.") The Parent Financial Statements are accurate
and complete in all material respects and present fairly the consolidated
financial position of Parent and its subsidiaries as of the respective dates
thereof and the results of consolidated operations and consolidated cash flows
of Parent and its subsidiaries for the periods covered thereby. The Parent
Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered.
3.5 Absence of Changes. Since December 31, 1997;
(a) there has not been any material adverse change in the business,
condition, assets, capitalization, liabilities, operations, financial
performance or prospects of Parent, and no event has occurred that could
reasonably be expected to have a Material Adverse Effect on Parent; and
(b) there has not been any material loss, damage or destruction to, or any
material interruption in the use of, any of the assets of Parent (whether or
not covered by insurance).
(c) Parent has not (i) declared, accrued, set aside or paid any dividend or
made any other distribution in respect of any shares of capital stock, or (ii)
repurchased, redeemed or otherwise reacquired any shares of capital stock or
other securities;
(d) Except for the sale and issuance, prior to the Effective Time, of
convertible Preferred Stock of Parent that is convertible, in the aggregate,
into not more than 2,000,000 shares of Parent Common Stock (the "Preferred
Sale"), Parent has not issued, granted or authorized the issuance of (i) any
capital stock or other .20 security (except for Parent Common Stock issued
upon the exercise of outstanding Parent Options or pursuant to the 1995
Purchase Plan), (ii) any option, warrant or right to acquire any capital stock
or any other security (except for Parent Options described in Part 3.3(b)(i)
of the Parent Disclosure Schedule), or (iii) any instrument convertible into
or exchangeable for any capital stock or other security;
A-20
(e) Parent has not amended or waived any of its rights under, or permitted
the acceleration of vesting under, (i) any provision of any of Parent's stock
option plans, (ii) any provision of any agreement evidencing any outstanding
Parent Option, or (iii) any restricted stock purchase agreement;
(f) except as contemplated by this Agreement and except in connection with a
Preferred Sale, there has been no amendment to the certificate of
incorporation, bylaws or other charter or organizational documents of Parent,
and Parent has not effected or been a party to any merger, consolidation,
share exchange, business combination, recapitalization, reclassification of
shares, stock split, reverse stock split or similar transaction or received
any Acquisition Proposal;
(g) other than in relation to the Company, Parent has not (i) received any
Acquisition Proposal, or (ii) solicited, initiated, encouraged or induced, or
provided any nonpublic information to or entered into any discussions with any
Person for the purpose of soliciting, initiating, encouraging or inducing, the
making or submission of any Acquisition Proposal;
(h) Parent has not formed any subsidiary or acquired any equity interest or
other interest in any other Entity, other than Merger Sub;
(i) Parent has not made any capital expenditures which, when added to all
other capital expenditures made by or on behalf of Parent since December 31,
1997, exceed $50,000 in the aggregate;
(j) except in the ordinary course of business and consistent with past
practices, Parent has not (i) entered into or permitted any of the assets
owned or used by it to become bound by any Parent Material Contract (as
defined in Section 2.10), or (ii) amended or terminated, or waived any
material right or remedy under, any Parent Material Contract;
(k) Parent has not (i) acquired, leased or licensed any material right or
other material asset from any other Person, (ii) sold or otherwise disposed
of, or leased or licensed, any material right or other material asset to any
other Person, or (iii) waived or relinquished any right, except for rights or
other assets acquired, leased, licensed or disposed of in the ordinary course
of business and consistent with past practices;
(l) Parent has not written off as uncollectable, or established any
extraordinary reserve with respect to, any account receivable or other
indebtedness;
(m) Parent has not made any pledge of any of its assets or otherwise
permitted any of its assets to become subject to any Encumbrance, except for
pledges of immaterial assets made in the ordinary course of business and
consistent with past practices;
(n) Parent has not (i) lent money to any Person, or (ii) incurred or
guaranteed any indebtedness for borrowed money;
(o) Parent has not (i) established or adopted any Parent Welfare Plan (as
defined in Section 3.16(c)) or Parent Pension Plan (as defined in Section
3.16(b)), (ii) caused or permitted any Parent Welfare Plan or Parent Pension
Plan to be amended in any material respect, or (iii) paid any bonus or made
any profit sharing or similar payment (other than as committed pursuant to
plan or agreement prior to June 30, 1997) to, or materially increased the
amount of the wages, salary, commissions, fringe benefits or other
compensation or remuneration payable to, any of its directors, officers or
employees;
(p) Parent has not changed any of its methods of accounting or accounting
practices in any respect;
(q) Parent has not made any material Tax election;
(r) Parent has not commenced or settled any Legal Proceeding;
A-21
(s) Parent has not entered into any material transaction or taken any other
material action that has had, or could reasonably be expected to have, a
Material Adverse Effect on Parent;
(t) Parent has not entered into any material transaction or taken any other
material action outside of the ordinary course of business or inconsistent
with past practices; and
(u) Parent has not agreed or committed to take any of the actions referred
to in clauses "(a)" through "(t)" above.
3.6 Title to Assets.
(a) Part 3.6 of the Parent Disclosure Schedule contains a complete and
accurate list of all real property, leaseholds, or other interests in real
property owned by Parent (all such property owned by Parent being referred to
herein as the "Parent Owned Real Property" and all such real property leased
by Parent being referred to herein as the "Parent Leased Real Property").
Parent holds the leasehold interests of the Parent Leased Real Property under
the real property leases described in Part 3.6 of the Parent Disclosure
Schedule.
(b) Parent owns, and has good, valid and marketable title to, all assets
purported to be owned by it, including: (i) all assets reflected on the Parent
Audited Balance Sheet; (ii) all other assets reflected in the books and
records of Parent as being owned by Parent; and (iii) the real property
identified on Part 3.6 of the Parent Disclosure Schedule. All of said assets
are owned by Parent free and clear of any Encumbrances, except for (1) any
lien for current taxes not yet due and payable, (2) minor liens that have
arisen in the ordinary course of business and that do not (in any case or in
the aggregate) materially detract from the value of the assets subject thereto
or materially impair the operations of Parent and (3) liens described in Part
3.6 of the Parent Disclosure Schedule. All buildings, plants, and structures
owned or leased by Parent lie wholly within the boundaries of the real
property owned or leased by Parent and do not encroach upon the property of,
or otherwise conflict with the property rights of, any other Person.
3.7 Receivables; Inventory.
(a) All existing accounts receivable of Parent (including those accounts
receivable reflected on the Parent Audited Balance Sheet that have not yet
been collected and those accounts receivable that have arisen since December
31, 1997 and have not yet been collected) (i) represent valid obligations of
customers of Parent arising from bona fide transactions entered into in the
ordinary course of business, (ii) to the best of Parent's knowledge, except as
set forth in Part 3.7(a) of the Parent Disclosure Schedule, will be collected
in full, without any counterclaim or set off (net of an allowance for doubtful
accounts not to exceed $65,000 in the aggregate).
(b) Part 3.7(b) of the Parent Disclosure Schedule contains an accurate and
complete list as of the date of this Agreement of all loans and advances made
by Parent to any employee, director, consultant or independent contractor of
Parent, other than routine travel advances made to employees in the ordinary
course of business.
(c) All inventory of Parent, whether or not reflected in the Parent Audited
Balance Sheet, consists of a quality and quantity usable and salable in the
ordinary course of business, except for obsolete items and items of below-
standard quality, all of which have been written off or written down to net
realizable value in the Parent Audited Balance Sheet. All inventories not
written off have been priced at the lower of cost or market on a first in,
first out basis. The quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of Parent.
3.8 Buildings, Equipment; Leasehold. The buildings, plants, structures and
all material items of equipment and other tangible assets owned by or leased
to Parent are adequate for the uses to which they are being put, are in good
condition and repair (ordinary wear and tear excepted), are adequate for the
conduct of the business of Parent in the manner in which such business is
currently being conducted, and are in compliance with all applicable Legal
Requirements.
A-22
3.9 Proprietary Assets.
(a) Part 3.9(a)(i) of the Parent Disclosure Schedule sets forth, with
respect to each Proprietary Asset owned by Parent and registered with any
Governmental Body or for which an application has been filed with any
Governmental Body, (i) a brief description of such Proprietary Asset, and (ii)
the names of the jurisdictions covered by the applicable registration or
application. Part 3.9(a)(ii) of the Parent Disclosure Schedule identifies and
provides a brief description of, any ongoing royalty or payment obligations in
excess of $10,000 with respect to, each Proprietary Asset that is licensed or
otherwise made available to Parent by any Person (except for any Proprietary
Asset that is licensed to Parent under any third party software license
generally available to the public at a price per central processing unit of
not less than $5,000), and identifies the Contract under which such
Proprietary Asset is being licensed or otherwise made available to Parent. To
the knowledge of Parent, Parent has good, valid and marketable title to all of
the Proprietary Assets identified in Part 3.9(a)(i) of the Parent Disclosure
Schedule and to all other Proprietary Assets that Parent purports to own, free
and clear of all Encumbrances, except for (i) any lien for current taxes not
yet due and payable, and (ii) minor liens that have arisen in the ordinary
course of business and that do not (individually or in the aggregate)
materially detract from the value of the assets subject thereto or materially
impair the operations of Parent. To the knowledge of Parent, Parent has a
valid right to use, license and otherwise exploit all Proprietary Assets
identified in Part 3.9(a)(ii) of the Parent Disclosure Schedule. Except as set
forth in Part 3.9(a)(iii) of the Parent Disclosure Schedule, Parent has not
developed jointly with any other Person any Proprietary Asset that is material
to the business of Parent with respect to which such other Person has any
rights. Except as set forth in Part 3.9(a)(iv) of the Parent Disclosure
Schedule, to Parent's knowledge there is no Parent Contract pursuant to which
any Person has any right (whether or not currently exercisable) to use,
license or otherwise exploit any Parent Proprietary Asset.
(b) Parent has taken reasonable measures and precautions to protect and
maintain the confidentiality, secrecy and value of all material Parent
Proprietary Assets (except Parent Proprietary Assets whose value would be
unimpaired by disclosure). Without limiting the generality of the foregoing,
except as set forth in Part 3.9(b) of the Parent Disclosure Schedule, (i) all
current employees of Parent who are or were involved in, or who have
contributed to, the creation or development of any Parent Proprietary Asset
have executed and delivered to Parent an agreement that is substantially
identical to the form of Confidential Information and Invention Assignment
Agreement previously delivered by Parent to the Company, and (ii) all current
consultants and independent contractors to Parent who are or were involved in,
or who have contributed to, the creation or development of any material Parent
Proprietary Asset have executed and delivered to Parent an agreement
(containing no exceptions to or exclusions from the scope of its coverage)
that is substantially identical to the form of Consultant Confidential
Information and Invention Assignment Agreement previously delivered by Parent
to the Company. No current or former employee, officer, director, stockholder,
consultant or independent contractor has any right, claim or interest in or
with respect to any Parent Proprietary Asset. Parent has not disclosed or
delivered to any Person, or permitted the disclosure or delivery to any escrow
agent or other Person, of the source code, or any portion or aspect of the
source code, or any proprietary information or algorithm contained in any
source code, of any Parent Proprietary Asset.
(c) To the best knowledge of Parent: (i) all patents, trademarks, service
marks and copyrights held by Parent are valid, enforceable and subsisting;
(ii) none of the Parent Proprietary Assets and no Proprietary Asset that is
currently being developed by Parent (either by itself or with any other
Person) infringes, misappropriates or conflicts with any Proprietary Asset
owned or used by any other Person; (iii) none of the products that are or have
been designed, created, developed, assembled, manufactured or sold by Parent
is infringing, misappropriating or making any unlawful or unauthorized use of
any Proprietary Asset owned or used by any other Person, and none of such
products has at any time infringed, misappropriated or made any unlawful or
unauthorized use of, and Parent has not received any notice or other
communication (in writing or otherwise) of any actual, alleged, possible or
potential infringement, misappropriation or unlawful or unauthorized use of,
any Proprietary Asset owned or used by any other Person; (iv) no other Person
is infringing, misappropriating or making any unlawful or unauthorized use of,
and no Proprietary Asset owned or used by any other Person infringes or
conflicts with, any material Parent Proprietary Asset.
A-23
(d) The Parent Proprietary Assets constitute all the Proprietary Assets
necessary to enable Parent to conduct its business in the manner in which such
business has been and is being conducted. Parent has not (i) licensed any of
the material Parent Proprietary Assets to any Person on an exclusive basis, or
(ii) entered into any covenant not to compete or Contract limiting its ability
to exploit fully any material Parent Proprietary Assets or to transact
business in any market or geographical area or with any Person.
3.10 Contracts.
(a) Part 3.10 of the Parent Disclosure Schedule identifies each Parent
Contract that constitutes a "Parent Material Contract" as of the date of this
Agreement. For purposes of this Agreement, each of the following shall be
deemed to constitute a "Parent Material Contract":
(i) any Contract relating to the employment of, or the performance of
services by, any employee or consultant, and any Contract pursuant to which
Parent is, or may become, obligated to make any severance, termination or
similar payment, bonus or relocation payment or any other payment to any
current or former employee or director of Parent;
(ii) each lease, rental or occupancy agreement, installment and
conditional sale agreement, and other Contract affecting the ownership of,
leasing of, title to, use of, or any leasehold or other interest in, any
real or personal property (except for any personal property lease,
installment sale agreement or conditional sales agreements providing for
aggregate payments by or to Parent of less than $25,000 and except for
sales acknowledgements and purchase orders in the ordinary course of
business);
(iii) any Contract relating to the acquisition, transfer, development,
sharing or license of any Proprietary Asset (except for (A) any Contract
pursuant to which any Proprietary Asset is licensed to Parent under any
third party software license generally available to the public at a price
per central processing unit of less than $5,000, or (B) any license implied
in the sale by Parent of a tangible product);
(iv) any Contract which provides for indemnification of any officer,
director, employee or agent of Parent;
(v) any Contract imposing any restriction on the right or ability of
Parent (A) to compete with any other Person, (B) to acquire any product or
other asset or any services from any other Person, to sell any product or
other asset to or perform any services for any other Person or to transact
business or deal in any other manner with any other Person, or (C) to
develop or distribute any technology;
(vi) any Contract (A) relating to the acquisition, issuance, voting,
registration, sale or transfer of any securities, (B) providing any Person
with any preemptive right, right of participation, right of maintenance or
any similar right with respect to any securities, or (C) providing Parent
with any right of first refusal with respect to, or right to repurchase or
redeem, any securities;
(vii) any Contract requiring that Parent give any notice or provide any
information to any Person prior to accepting any Acquisition Proposal;
(viii) any Contract that has a term of more than 90 days and that may not
be terminated without penalty within 90 days after the delivery of a
termination notice by Parent (other than for the sale of products or the
purchase of components or materials by Parent entered into in the ordinary
course of business);
(ix) any Contract pursuant to which Parent is or may become obligated to
make payments aggregating in excess of $25,000 or pursuant to which Parent
is or may be entitled to receive in excess of $25,000 (other than for the
sale of products or the purchase of components or materials by Parent
entered into in the ordinary course of business);
(x) any Contract (not otherwise identified in clauses "(i)" through
"(ix)" of this sentence) that has or could reasonably be expected to have a
material effect on the business, condition, assets, liabilities,
capitalization, operations, financial performance or prospects of Parent or
on any of the transactions contemplated by this Agreement (other than for
the sale of products by Parent entered into in the ordinary course of
business); and
A-24
(xi) any other Contract, if a breach of such Contract could reasonably be
expected to have a Material Adverse Effect on Parent.
There is no Parent Contract to which any Governmental Body is a party or
under which any Governmental Body has any rights or obligations, or directly
or indirectly benefiting any Governmental Body (including any subcontract or
other Contract between Parent and any contractor or subcontractor to any
Governmental Body).
(b) Each Parent Contract that is a Parent Material Contract is valid and in
full force and effect, and is enforceable by Parent in accordance with its
terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
(c) Except as set forth in Part 3.10 of the Parent Disclosure Schedule: (i)
Parent has not violated or breached, or committed any default under, any
Parent Contract, and, to the best of the knowledge of Parent, no other Person
has violated or breached, or committed any default under, any Parent Contract;
(ii) to the best of the knowledge of Parent, no event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of
time) will, or could reasonably be expected to, (A) result in a violation or
breach of any of the provisions of any Parent Contract, (B) give any Person
the right to declare a default or exercise any remedy under any Parent
Contract, (C) give any Person the right to a rebate, chargeback, penalty or
change in delivery schedule under any Parent Contract, (D) give any Person the
right to accelerate the maturity or performance of any Parent Contract, or (E)
give any Person the right to cancel, terminate or modify any Parent Contract;
and (iii) since September 30, 1997, Parent has not received any notice or
other communication regarding any actual or possible violation or breach of,
or default under, any Parent Contract.
(d) No Person is renegotiating, or has a right pursuant to the terms of any
Parent Material Contract to renegotiate, any amount paid or payable to Parent
under any Material Contract or any other material term or provision of any
Material Contract.
3.11 Liabilities. Parent has no accrued, contingent or other liabilities of
any nature, either matured or unmatured (whether or not required to be
reflected in financial statements in accordance with GAAP, and whether due or
to become due), except for: (a) liabilities identified as such in the
"liabilities" column of the Parent Audited Balance Sheet; (b) normal and
recurring liabilities that have been incurred by Parent since December 31,
1997 in the ordinary course of business and consistent with past practices;
and (c) liabilities described in Part 3.11 of the Parent Disclosure Schedule.
3.12 Compliance with Legal Requirements. Parent is, and has at all times
since December 31, 1994 been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had, either individually or in the aggregate, and could not reasonably
be expected to have, a Material Adverse Effect on Parent. Since December 31,
1994, Parent has not received any notice or other communication from any
Governmental Body regarding any actual or possible violation of, or failure to
comply with, any Legal Requirement.
3.13 Certain Business Practices. Neither Parent nor any director, officer,
agent or employee of Parent has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political
activity, (ii) made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (iii) made any other unlawful payment.
3.14 Governmental Authorizations. Parent holds all Governmental
Authorizations necessary to enable Parent to conduct its business in the
manner in which such business is currently being conducted. All such
Governmental Authorizations are valid and in full force and effect. Parent is,
and at all times since September 30, 1994 has been, in substantial compliance
with the terms and requirements of such Governmental Authorizations. Since
September 30, 1994, Parent has not received any notice or other communication
from any
A-25
Governmental Body regarding (a) any actual or possible violation of or failure
to comply with any term or requirement of any material Governmental
Authorization, or (b) any actual or possible revocation, withdrawal,
suspension, cancellation, termination or modification of any material
Governmental Authorization. Part 3.14 of the Parent Disclosure Schedule
contains an accurate and complete list of all presently effective United
States Government Authorizations relating to the real or personal property of
Parent, and Parent is in compliance with all such Governmental Authorizations.
3.15 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of Parent with any
Governmental Body with respect to any taxable period ending on or before the
Closing Date (the "Parent Returns") (i) have been or will be filed on or
before the applicable due date (including any extensions of such due date),
and (ii) have been, or will be when filed, prepared in all material respects
in compliance with all applicable Legal Requirements. All amounts shown on the
Parent Returns to be due on or before the Closing Date have been or will be
paid on or before the Closing Date.
(b) The Parent Audited Balance Sheet fully accrues all actual and contingent
liabilities for Taxes with respect to all periods through the date thereof in
accordance with GAAP. Parent will establish, in the ordinary course of
business and consistent with its past practices, reserves adequate for the
payment of all Taxes for the period from December 31, 1997 through the Closing
Date.
(c) No Parent Return has ever been examined or audited by any Governmental
Body. No extension or waiver of the limitation period applicable to any Parent
Returns has been granted (by Parent or any other Person), and no such
extension or waiver has been requested from Parent.
(d) No claim or Legal Proceeding is pending or, to the best knowledge of
Parent, has been threatened against or with respect to Parent in respect of
any material Tax. There are no unsatisfied liabilities for material Taxes
(including liabilities for interest, additions to tax and penalties thereon
and related expenses) with respect to any notice of deficiency or similar
document received by Parent with respect to any material Tax (other than
liabilities for Taxes asserted under any such notice of deficiency or similar
document which are being contested in good faith by Parent and with respect to
which adequate reserves for payment have been established). There are no liens
for material Taxes upon any of the assets of the Company except liens for
current Taxes not yet due and payable. Parent has not entered into or become
bound by any agreement or consent pursuant to Section 341(f) of the Code.
Parent has not been, nor will be, required to include any adjustment in
taxable income for any tax period (or portion thereof) pursuant to Section 481
or 263A of the Code or any comparable provision under state or foreign Tax
laws as a result of transactions or events occurring, or accounting methods
employed, prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract covering any
employee or independent contractor or former employee or independent
contractor of Parent that, considered individually or considered collectively
with any other such Contracts, will, or could reasonably be expected to, give
rise directly or indirectly to the payment of any amount that would not be
deductible pursuant to Section 280G or Section 162 of the Code. Parent is not,
nor has ever been, a party to or bound by any tax indemnity agreement, tax
sharing agreement, tax allocation agreement or similar Contract.
3.16 Employee and Labor Matters; Benefit Plans.
(a) Part 3.16(a) of the Parent Disclosure Schedule identifies each salary,
bonus, vacation, deferred compensation, incentive compensation, stock
purchase, stock option, severance pay, termination pay, death or disability
benefits, hospitalization, medical, life or other insurance, flexible
benefits, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement and each other employee benefit plan or
arrangement maintained within the United States (collectively, the "Parent
Plans") sponsored, maintained, contributed to or required to be contributed to
by Parent or any ERISA Affiliate for the benefit of any current or former
employee of Parent or any ERISA Affiliate.
A-26
(b) Except as set forth in Part 3.16(a) of the Parent Disclosure Schedule,
neither Parent nor any ERISA Affiliate maintains, sponsors or contributes to,
or has at any time in the past maintained, sponsored or contributed to, any
employee pension benefit plan (as defined in Section 3(2) of ERISA, whether or
not excluded from coverage under specific Titles or Subtitles of ERISA) that
is maintained within the United States for the benefit of employees or former
employees of Parent or any ERISA Affiliate (a "Parent Pension Plan"). None of
the Parent Pension Plans identified in the Parent Disclosure Schedule is a
multiemployer plan (within the meaning of Section 3(37) of ERISA) or is
subject to Section 412 of the Code, Part 3 of Subtitle B of Title I of ERISA
or Title IV of ERISA.
(c) Except as set forth in Part 3.16(a) of the Parent Disclosure Schedule,
neither Parent nor any ERISA Affiliate maintains, sponsors or contributes to
any: employee welfare benefit plan (as defined in Section 3(1) of ERISA,
whether or not excluded from coverage under specific Titles or Subtitles of
ERISA) that is maintained within the United States for the benefit of any
employees or former employees of Parent or any ERISA Affiliate (a "Parent
Welfare Plan"). None of the Parent Welfare Plans identified in the Parent
Disclosure Schedule is a multiemployer plan (within the meaning of Section
3(37) of ERISA).
(d) With respect to each Parent Plan, Parent has delivered to the Company:
(i) an accurate and complete copy of such Parent Plan (including all
amendments thereto); (ii) an accurate and complete copy of the annual report,
if required under ERISA, with respect to such Parent Plan for the last two
years; (iii) an accurate and complete copy of the most recent summary plan
description, together with each summary of material modifications, if required
under ERISA, with respect to such Parent Plan, (iv) if such Parent Plan is
funded through a trust or any third party funding vehicle, an accurate and
complete copy of the trust or other funding agreement (including all
amendments thereto) and accurate and complete copies the most recent financial
statements thereof; (v) accurate and complete copies of all Contracts relating
to such Parent Plan, including service provider agreements, insurance
contracts, minimum premium contracts, stop-loss agreements, investment
management agreements, subscription and participation agreements and
recordkeeping agreements; and (vi) an accurate and complete copy of the most
recent determination letter received from the Internal Revenue Service with
respect to such Parent Plan (if such Parent Plan is intended to be qualified
under Section 401(a) of the Code).
(e) Parent is not and has never been required to be treated as a single
employer with any ERISA Affiliate. Parent has never been a member of an
"affiliated service group" within the meaning of Section 414(m) of the Code
with any other Person within the United States. Neither Parent nor any ERISA
Affiliate has ever made a complete or partial withdrawal from a multiemployer
plan, as such term is defined in Section 3(37) of ERISA, that is maintained
within the United States, resulting in "withdrawal liability," as such term is
defined in Section 4201 of ERISA (without regard to subsequent reduction or
waiver of such liability under either Section 4207 or 4208 of ERISA).
(f) Neither Parent nor any ERISA Affiliate has any plan or commitment to
create any additional Parent Welfare Plans or Parent Pension Plans, or to
modify or change any existing Parent Welfare Plan or Parent Pension Plan
(other than to comply with applicable law) in a manner that would affect any
employee of Parent or any ERISA Affiliate.
(g) Except as set forth in Part 3.16(k) of the Parent Disclosure Schedule,
no Parent Plan provides death, medical or health benefits (whether or not
insured) with respect to any current or former employee of Parent or any ERISA
Affiliate after any such employee's termination of service (other than benefit
coverage mandated by applicable law, including coverage provided pursuant to
COBRA).
(h) With respect to any Parent Plan constituting a group health plan within
the meaning of Section 4980B(g)(2) of the Code or Section 607(1) of ERISA, the
provisions of COBRA have been complied with in all material respects.
(i) Each of the Parent Plans has been operated and administered in all
material respects in accordance with applicable Legal Requirements, including
but not limited to ERISA and the Code.
A-27
(j) Each of the Parent Plans intended to be qualified under Section 401(a)
of the Code has received a favorable determination as to its qualification
from the Internal Revenue Service, and nothing has occurred that would
adversely affect such qualification.
(k) Except as set forth in Part 3.16(k) of the Parent Disclosure Schedule,
neither the execution, delivery or performance of this Agreement, nor the
consummation of the Merger or any of the other transactions contemplated by
this Agreement, will result in any payment (including any bonus, golden
parachute or severance payment) to any current or former employee or director
of Parent (whether or not under any Parent Plan), or materially increase the
benefits payable under any Parent Plan, or result in any acceleration of the
time of payment or vesting of any such benefits.
(l) Part 3.16(l) of the Parent Disclosure Schedule contains a list of all
salaried employees of Parent located in the United States or any ERISA
Affiliate as of the date of this Agreement whose salaries are in excess of
$150,000 per year, and correctly reflects, in all material respects, their
salaries, any other compensation payable to them (including compensation
payable pursuant to bonus, deferred compensation or commission arrangements),
their dates of employment and their positions. Neither Parent nor any ERISA
Affiliate is a party to any collective bargaining agreement or other Contract
with a labor union involving any of its employees located in the United
States. There has not been, is not now pending, and no Person has threatened
to commence any slowdown, work stoppage, labor or dispute or union organizing
activity or any similar activity or dispute in the United States affecting
Parent or any ERISA Affiliates or their employees. All of the employees of
Parent and any ERISA Affiliates are "at will" employees.
(m) Part 3.16(m) of the Parent Disclosure Schedule identifies each employee
of Parent or any ERISA Affiliate who is not fully available to perform work
because of disability or other leave and sets forth the basis of such leave
and the anticipated date of return to full service.
(n) Parent and each ERISA Affiliate are in compliance in all material
respects with all applicable Legal Requirements and Contracts relating to
employment, employment practices, wages, bonuses and terms and conditions of
employment, including employee compensation matters.
(o) Parent has good labor relations, and Parent has no knowledge of any
facts indicating that (i) the consummation of the Merger or any of the other
transactions contemplated by this Agreement will have a material adverse
effect on the labor relations of Parent, or that (ii) any of the key employees
of Parent intends to terminate his or her employment with Parent.
3.17 Environmental Matters.
(a) Except as set forth in Part 3.17(a) of the Parent Disclosure Schedule,
Parent is, and at all times has been, in compliance in all material respects
with all applicable Environmental Laws, which compliance includes (i) the
possession by Parent of all permits and other Governmental Authorizations
required under applicable Environmental Laws, and (ii) compliance with the
terms and conditions thereof (and the violation of which would have a Material
Adverse Effect).
(b) Except as set forth in Part 3.17(b) of the Parent Disclosure Schedule,
Parent has not received any notice or other communication (in writing or
otherwise), whether from a Governmental Body, citizens group, employee or
otherwise, that alleges that Parent is not in compliance with any
Environmental Law or is or may be required to undertake or bear any
Environmental Liabilities. To the best knowledge of Parent, there are no
circumstances that may prevent or interfere with the compliance by Parent with
any Environmental Law or that may require Parent to undertake or bear any
Environmental Liabilities in the future (other than routine Environmental
Liabilities incurred in the ordinary course of business consistent with past
practices) with respect to any Parent Property, any other property or
otherwise. To the best knowledge of Parent, no current or prior owner of any
Parent Property has received any notice or other communication (in writing or
otherwise), whether from a Government Body, citizens group, employee or
otherwise, that alleges that such current or prior owner or Parent
A-28
has not been or is not in compliance with any Environmental Law or is or may
be required to undertake or bear any Environmental Liabilities.
(c) (i) To the best knowledge of Parent all Parent Property and all surface
water, groundwater and soil associated with such Parent Property and (ii) to
the knowledge of Parent without independent investigation, all Property to
which Parent has sent any Material of Environmental Concern are free of any
material environmental contamination by any Material of Environmental Concern
in any concentration that may require any costs of investigation, response,
removal or remedial action.
(d) Parent has delivered to the Company true and complete copies and results
of any reports, studies, analyses, tests, or monitoring possessed or initiated
by Parent pertaining to Materials of Environmental Concern in, on, or under
any Parent Property, or concerning compliance by Parent, or any other Person
for whose conduct it is or may be held responsible, with Environmental Laws.
(e) For purposes of this Section 3.17, "Parent Property" shall include any
property, parcel or facility now or heretofore owned, leased, used or
controlled by Parent or geologically or hydrologically adjoining any such
property, parcel or facility.
3.18 Insurance. Parent has delivered to the Company a copy of each material
insurance policy and each material self insurance program relating to the
business, assets or operations of Parent in the United States. Each such
insurance policy is in full force and effect. Since December 31, 1994, Parent
has not received any notice or other communication regarding any actual or
possible (a) cancellation or invalidation of any insurance policy, (b) refusal
of any coverage or rejection of any material claim under any insurance policy,
or (c) material adjustment in the amount of the premiums payable with respect
to any insurance policy. Except as set forth in Part 3.18 of the Parent
Disclosure Schedule, there is no pending claim (including any workers'
compensation claim) under or based upon any insurance policy applicable to the
business, assets or operations of Parent.
3.19 Transactions with Affiliates. Except as set forth in the Parent SEC
Reports, since the date of Parent's last proxy statement filed with the SEC,
no event has occurred that would be required to be reported by Parent pursuant
to Item 404 of Regulation S-K promulgated by the SEC. Part 3.19 of the Parent
Disclosure Schedule identifies each person who is an "affiliate" (as that term
is used in Rule 145 under the Securities Act) of Parent as of the date of this
Agreement.
3.20 Legal Proceedings; Orders.
(a) Except as set forth in Part 3.20 of the Parent Disclosure Schedule,
there is no pending Legal Proceeding, and (to the best knowledge of Parent) no
Person has threatened to commence any Legal Proceeding: (i) that involves
Parent or any of the assets owned or used by Parent; or (ii) that challenges,
or that may have the effect of preventing, delaying, making illegal or
otherwise interfering with, the Merger or any of the other transactions
contemplated by this Agreement. To the best knowledge of Parent, no event has
occurred, and no claim, dispute or other condition or circumstance exists,
that will, or that could reasonably be expected to, give rise to or serve as a
basis for the commencement of any such Legal Proceeding.
(b) There is no material order, writ, injunction, judgment or decree to
which Parent, or any of the assets owned or used by Parent, is subject. To the
best knowledge of Parent, no officer or key employee of Parent is subject to
any order, writ, injunction, judgment or decree that prohibits such officer or
other employee from engaging in or continuing any conduct, activity or
practice relating to the business of Parent.
3.21 Authority; Binding Nature of Agreement. Parent and Merger Sub have the
absolute and unrestricted right, power and authority to enter into and to
perform their obligations under this Agreement. The Board of Directors of
Parent (at a meeting duly called and held) has (a) unanimously determined that
the Merger is advisable and fair and in the best interests of the Company and
its stockholders, (b) unanimously authorized and approved the execution,
delivery and performance of this Agreement by Parent and has unanimously
A-29
approved the Merger and the creation and issue of a sufficient amount of
authorized Parent Common Stock, and (c) unanimously recommended the adoption
of this Agreement by the holders of Parent Common Stock and directed that this
Agreement be submitted for consideration by Parent's stockholders at the
Parent Stockholders' Meeting (as defined in Section 6.3(a)). This Agreement
constitutes the legal, valid and binding obligation of Parent and Merger Sub,
enforceable against them in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive
relief and other equitable remedies.
3.22 Section 203 of the DGCL Not Applicable. As of the date hereof and at
all times on or prior to the Effective Time, Section 203 of the DGCL is, and
will be, inapplicable to the execution, delivery and performance of this
Agreement and to the consummation of the Merger and the other transactions
contemplated by this Agreement.
3.23 No Existing Discussions. Neither Parent, nor any Representative of
Parent, is engaged, directly or indirectly, in any discussions or negotiations
with any other Person relating to any Acquisition Proposal.
3.24 Vote Required. The affirmative vote of the holders of a majority of the
outstanding shares of capital stock of Parent to adopt the Agreement, the
Parent Preferred Stock Conversion, the Reverse Stock Split, the Increased
Authorization and the Name Change at the duly convened Parent Stockholders'
Meeting (the "Parent Required Vote") is the only vote of the holders of any
class or series of Parent's capital stock necessary to consummate the
transactions contemplated by this Agreement.
3.25 Non Contravention; Consents. Neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in
this Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of the
provisions of the certificate of incorporation, bylaws or other charter or
organizational documents of Parent or Merger Sub, or (ii) any resolution
adopted by the stockholders, the board of directors or any committee of the
board of directors of Parent or Merger Sub;
(b) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge the Merger or any
of the other transactions contemplated by this Agreement or to exercise any
remedy or obtain any relief under, any Legal Requirement or any order,
writ, injunction, judgment or decree to which Parent or Merger Sub, or any
of the assets owned or used by Parent or Merger Sub, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by Parent or Merger Sub or that otherwise
relates to the business of Parent or Merger Sub or to any of the assets
owned or used by Parent or Merger Sub;
(d) contravene, conflict with or result in a violation or breach of, or
result in a default under, any provision of any Parent Contract that is or
would constitute a Material Contract, or give any Person the right to (i)
declare a default or exercise any remedy under any such Parent Contract,
(ii) a rebate, chargeback, penalty or change in delivery schedule under any
such Parent Contract, (iii) accelerate the maturity or performance of any
such Parent Contract, or (iv) cancel, terminate or modify any term of such
Parent Contract;
(e) result in the imposition or creation of any Encumbrance upon or with
respect to any asset owned or used by Parent (except for minor liens that
will not, in any case or in the aggregate, materially detract from the
value of the assets subject thereto or materially impair the operations of
Parent); or
(f) result in, or increase the likelihood of, the disclosure, delivery or
transfer of any material asset of Parent to any Person.
A-30
Except as may be required by the Securities Act, the Exchange Act, the DGCL,
the HSR Act and the rules of the National Association of Securities Dealers,
Inc. (the "NASD Rules") (as they relate to the Form S-4 Registration Statement
and the Joint Proxy Statement/Prospectus), neither Parent nor Merger Sub was,
is nor will be required to make any filing with or give any notice to, or to
obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the Merger or any of
the other transactions contemplated by this Agreement.
3.26 Fairness Opinion. Parent's Board of Directors has received the written
opinion of Alliant Partners, financial advisor to Parent, dated the date of
this Agreement, to the effect that the Merger is fair to the stockholders of
Parent from a financial point of view. Parent has furnished an accurate and
complete copy of said written opinion to the Company.
3.27 Financial Advisor. Except for Alliant Partners, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or any of the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent. The total of all fees, commissions and other amounts that have been
paid by Parent to Alliant Partners in connection with the Merger and all fees,
commissions and other amounts that may become payable to Alliant Partners by
Parent in connection with the Merger if the Merger is consummated will not
exceed $325,000. Parent has furnished to the Company accurate and complete
copies of all agreements under which any such fees, commissions or other
amounts have been paid or may become payable and all indemnification and other
agreements related to the engagement of Alliant Partners.
Section 4. Certain Covenants of the Company
4.1 Access and Investigation. During the period from the date of this
Agreement through the Effective Time (the "Pre Closing Period"), the Company
shall: (a) provide Parent and Parent's Representatives with reasonable access
to the Company, the Company's Representatives, personnel and assets and to all
existing books, records, Tax Returns, work papers and other documents and
information relating to the Company; and (b) provide Parent and Parent's
Representatives, as Parent may reasonably request, with such copies of the
existing books, records, Tax Returns, work papers and other documents and
information relating to the Company, and with such additional financial,
operating and other data and information regarding the Company.
4.2 Operation of the Company's Business.
(a) During the Pre-Closing Period, the Company shall not (without the prior
written consent of Parent):
(i) declare, accrue, set aside or pay any dividend or make any other
distribution in respect of any shares of capital stock, or repurchase,
redeem or otherwise reacquire any shares of capital stock or other
securities except as the Company deems appropriate to consummate the
Merger;
(ii) amend or permit the adoption of any amendment to its certificate of
incorporation or bylaws or other charter or organizational documents,
except as the Company deems appropriate to consummate the Merger; or
(iii) change any of its methods of accounting or accounting practices in
any respect.
(b) During the Pre Closing Period, the Company shall promptly notify Parent
in writing of: (i) the discovery by the Company of any event, condition, fact
or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes a material inaccuracy in any
representation or warranty made by the Company in this Agreement; (ii) any
event, condition, fact or circumstance that occurs, arises or exists after the
date of this Agreement and that would cause or constitute a material
inaccuracy in any representation or warranty made by the Company in this
Agreement if (A) such representation or warranty had been made as of the time
of the occurrence, existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement;
A-31
(iii) any material breach of any covenant or obligation of the Company; and
(iv) any event, condition, fact or circumstance that would make the timely
satisfaction of any of the conditions set forth in Sections 7 or 8 impossible
or unlikely or that has had or could reasonably be expected to have a Material
Adverse Effect on the Company. No notification given to Parent pursuant to
this Section 4.2(b) shall limit or otherwise affect any of the
representations, warranties, covenants or obligations of Parent contained in
this Agreement.
4.3 No Solicitation.
(a) The Company shall not directly or indirectly, and shall not authorize or
permit any Representative of the Company directly or indirectly to, (i)
solicit, initiate, encourage or induce the making, submission or announcement
of any Acquisition Proposal or take any action that could reasonably be
expected to lead to an Acquisition Proposal, (ii) furnish any information
regarding the Company to any Person in connection with or in response to an
Acquisition Proposal, (iii) engage in discussions or negotiations with any
Person with respect to any Acquisition Proposal, (iv) approve, endorse or
recommend any Acquisition Proposal or (v) enter into any letter of intent or
similar document or any Contract contemplating or otherwise relating to any
Acquisition Transaction; provided, however, that, prior to the approval of
this Agreement by the Company Required Vote, this Section 4.3(a) shall not
prohibit the Company from furnishing nonpublic information regarding the
Company to, or entering into discussions with, any Person in response to a
Superior Offer that is submitted by such Person (and not withdrawn) if (1)
neither the Company nor any Representative of the Company shall have violated
any of the restrictions set forth in this Section 4.3(a), (2) the Board of
Directors of the Company concludes in good faith, based upon the advice of its
outside legal counsel, that failure to do so would create a substantial risk
of liability for breach of its fiduciary obligations to the Company's
stockholders under applicable law, (3) prior to furnishing any such nonpublic
information to, or entering into discussions with, such Person, the Company
gives Parent written notice of the identity of such Person and of the
Company's intention to furnish nonpublic information to, or enter into
discussions with, such Person, and the Company receives from such Person an
executed confidentiality agreement containing customary limitations on the use
and disclosure of all nonpublic written and oral information furnished to such
Person by or on behalf of the Company, and (4) prior to furnishing any such
nonpublic information to such Person, the Company furnishes such nonpublic
information to Parent (to the extent such nonpublic information has not been
previously furnished by the Company to Parent). Without limiting the
generality of the foregoing, the Company acknowledges and agrees that any
violation of any of the restrictions set forth in the preceding sentence by
any Representative of the Company, whether or not such Representative is
purporting to act on behalf of the Company, shall be deemed to constitute a
breach of this Section 4.3 by the Company.
(b) The Company shall promptly advise Parent orally and in writing of any
Acquisition Proposal (including the identity of the Person making or
submitting such Acquisition Proposal and the terms thereof) that is made or
submitted by any Person during the Pre-Closing Period. The Company shall keep
Parent fully informed with respect to the status of any such Acquisition
Proposal and any modification or proposed modification thereto.
(c) The Company shall immediately cease and cause to be terminated any
existing discussions with any Person that relate to any Acquisition Proposal.
(d) Notwithstanding anything in this Agreement to the contrary, the Company
shall not be bound, obligated or otherwise restricted under this Section 4.3
or otherwise under this Agreement with respect to any potential, proposed or
actual merger, consolidation, share exchange, business combination, issuance
of securities, acquisition of securities, tender offer, exchange offer or
similar transaction that does not involve a change in the ownership of the
equity securities of the Company sufficient to result in the stockholders of
the Company as of the date hereof not holding a majority of the voting power
of the outstanding securities of the Company.
4.4 Disclosure. None of the information supplied or to be supplied by or on
behalf of the Company for inclusion or incorporation by reference in the Form
S-4 Registration Statement to be filed with the SEC by Parent in connection
with the issuance of Parent Common Stock in the Merger will, at the time the
Form S-4 Registration Statement is filed with the SEC or at the time it
becomes effective under the Securities Act, contain
A-32
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. None of the information supplied or to be supplied by or on behalf
of the Company for inclusion or incorporation by reference in the Joint Proxy
Statement/Prospectus will, at the time the Joint Proxy Statement/Prospectus is
mailed to the stockholders of Parent and the Company or at the time of the
Parent Stockholders' Meeting or the Company Stockholders' Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading.
Section 5. Certain Covenants of Parent
5.1 Access and Investigation. During the Pre-Closing Period, Parent shall:
(a) provide the Company and the Company's Representatives with reasonable
access to Parent, Parent's Representatives, personnel and assets and to all
existing books, records, Tax Returns, work papers and other documents and
information relating to Parent; and (b) provide the Company and the Company's
Representatives with such copies of the existing books, records, Tax Returns,
work papers and other documents and information relating to Parent, and with
such additional financial, operating and other data and information regarding
Parent, as the Company may reasonably request. Without limiting the generality
of the foregoing, during the Pre-Closing Period, Parent shall promptly provide
the Company with copies of:
(i) all material operating and financial reports prepared by Parent for
its senior management, including (A) copies of the unaudited monthly
balance sheets of Parent and the related unaudited monthly income
statements of operations, statements of stockholders' equity and statements
of cash flows and (B) copies of any sales forecasts, marketing plans,
development plans, discount reports, write-off reports, hiring reports and
capital expenditure reports prepared for Parent's senior management;
(ii) any written materials or communications sent by or on behalf of
Parent to its stockholders;
(iii) any material notice, document or other communication sent by or on
behalf of Parent to any party to any Parent Contract or sent to Parent by
any party to any Parent Contract (other than any communication that relates
solely to commercial transactions between Parent and the other party to any
such Parent Contract and that is of the type sent in the ordinary course of
business and consistent with past practices);
(iv) any notice, report or other document filed with or sent to any
Governmental Body in connection with the Merger or any of the other
transactions contemplated by this Agreement; and
(v) any material notice, report or other document received by Parent from
any Governmental Body.
5.2 Operation of Parent's Business.
(a) During the Pre-Closing Period: (i) Parent shall conduct its business and
operations (A) in the ordinary course and in accordance with past practices
and (B) in compliance with all applicable Legal Requirements and the
requirements of all Parent Contracts that constitute Parent Material
Contracts; (ii) Parent shall use all reasonable efforts to preserve intact its
current business organization, keeps available the services of its current
officers and employees and maintains its relations and goodwill with all
suppliers, customers, landlords, creditors, licensors, licensees, employees
and other Persons having business relationships with Parent; (iii) Parent
shall keep in full force all insurance policies referred to in Section 3.18;
(iv) Parent shall provide all notices, assurances and support required by any
Parent Contract relating to any Proprietary Asset in order to ensure that no
condition under such Parent Contract occurs which could result in, or could
increase the likelihood of, any transfer, disclosure or release by Parent of
any Proprietary Asset; and (v) Parent shall (to the extent requested by the
Company) cause its officers to report regularly to the Company concerning the
status of Parent's business.
(b) During the Pre-Closing Period, Parent shall not (without the prior
written consent of the Company):
(i) declare, accrue, set aside or pay any dividend or make any other
distribution in respect of any shares of capital stock, or repurchase,
redeem or otherwise reacquire any shares of capital stock or other
securities;
A-33
(ii) except in connection with a Preferred Sale, sell, issue, grant or
authorize the issuance or grant of (A) any capital stock or other security,
(B) any option, call, warrant or right to acquire any capital stock or
other security, or (C) any instrument convertible into or exchangeable for
any capital stock or other security (except that Parent may issue Parent
Common Stock upon the valid exercise of Parent Options outstanding as of
the date of this Agreement and except that Parent may reprice outstanding
stock options or grant stock awards in exchange for cancellation of
existing stock options, if any awards so granted correspond in number of
shares to the stock options so cancelled and if the aggregate number of
shares so repriced or granted, when combined with the number of shares
subject to options that are not repriced or cancelled, does not exceed
1,039,764);
(iii) except for the full vesting of Parent stock options that may occur
on the Effective Date as a result of the Merger or any repricing of stock
options, amend or waive any of its rights under, or accelerate the vesting
under, any provision of Parent's stock option plans, any provision of any
agreement evidencing any outstanding stock option or any restricted stock
purchase agreement, or otherwise modify any of the terms of any outstanding
option, warrant or other security or any related Contract;
(iv) other than as contemplated by this Agreement and except in
connection with a Preferred Sale, amend or permit the adoption of any
amendment to its certificate of incorporation or bylaws or other charter or
organizational documents, or effect or become a party to any merger,
consolidation, share exchange, business combination, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
(v) form any subsidiary or acquire any equity interest or other interest
in any other Entity;
(vi) make any capital expenditure (except that Parent may make capital
expenditures that, when added to all other capital expenditures made on
behalf of Parent during the Pre Closing Period, do not exceed $50,000 in
the aggregate);
(vii) enter into or become bound by, or permit any of the assets owned or
used by it to become bound by, any Parent Contract that constitutes or
would constitute a Parent Material Contract other than in the ordinary
course of business, or amend or terminate, or waive or exercise any
material right or remedy (including any right to repurchase shares of
Parent Common Stock) under, any Parent Contract that constitutes a Parent
Material Contract;
(viii) acquire, lease or license any right or other asset from any other
Person or sell or otherwise dispose of, or lease or license, any right or
other asset to any other Person (except in each case for assets acquired,
leased, licensed or disposed of by Parent in the ordinary course of
business and consistent with past practices), or waive or relinquish any
material right;
(ix) write off as uncollectable, or establish any extraordinary reserve
with respect to, any accounts receivable or other indebtedness, other than
in the ordinary course of business;
(x) make any pledge of any of its assets or otherwise permit any of its
assets to become subject to any encumbrance, except for pledges of
immaterial assets made in the ordinary course of business and consistent
with past practices;
(xi) except pursuant to lines of credit and subject to credit limits in
effect prior to the date of this Agreement and except for up to an
additional $1,000,000 in indebtedness for borrowed money which may be
incurred by Parent, lend money to any Person or incur or guarantee any
indebtedness;
(xii) except for severance and fully vested deferred compensation that is
payable upon termination of employment from Parent without cause on or
after the Effective Date, establish, adopt or amend any employee benefit
plan, pay any bonus or make any profit sharing or similar payment to, or
increase the amount of the wages, salary, commissions, fringe benefits or
other compensation or remuneration payable to, any of its directors,
officers or employees;
(xiii) hire any new employee or engage any consultant or independent
contractor;
(xiv) change any of its methods of accounting or accounting practices in
any respect;
A-34
(xv) make any Tax election;
(xvi) commence or settle any Legal Proceeding, except to enforce its
rights under this Agreement;
(xvii) enter into any material transaction or take any other material
action outside the ordinary course of business or inconsistent with past
practices;
(xviii) enter into any material transaction or take any other material
action that could reasonably be expected to have a Material Adverse Effect
on Parent; or
(xix) agree or commit to take any of the actions described in clauses
"(i)" through "(xviii)" of this Section 5.2(b).
(c) During the Pre Closing Period, Parent shall promptly notify the Company
in writing of: (i) the discovery by Parent of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes a material inaccuracy in any
representation or warranty made by Parent in this Agreement; (ii) any event,
condition, fact or circumstance that occurs, arises or exists after the date
of this Agreement and that would cause or constitute a material inaccuracy in
any representation or warranty made by Parent in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or (B)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement; (iii) any material breach of any
covenant or obligation of Parent; and (iv) any event, condition, fact or
circumstance that would make the timely satisfaction of any of the conditions
set forth in Sections 7 or 8 impossible or unlikely or that has had or could
reasonably be expected to have a Material Adverse Effect on Parent. No
notification given to the Company pursuant to this Section 5.2(c) shall limit
or otherwise affect any of the representations, warranties, covenants or
obligations of Parent contained in this Agreement.
5.3 No Solicitation.
(a) Parent shall not directly or indirectly, and shall not authorize or
permit any Representative of Parent directly or indirectly to, (i) solicit,
initiate, encourage or induce the making, submission or announcement of any
Acquisition Proposal or take any action that could reasonably be expected to
lead to an Acquisition Proposal, (ii) furnish any information regarding Parent
to any Person in connection with or in response to an Acquisition Proposal,
(iii) engage in discussions or negotiations with any Person with respect to
any Acquisition Proposal, (iv) approve, endorse or recommend any Acquisition
Proposal or (v) enter into any letter of intent or similar document or any
Contract contemplating or otherwise relating to any Acquisition Transaction;
provided, however, that, prior to the approval of this Agreement by the Parent
Required Vote, this Section 5.3(a) shall not prohibit Parent from furnishing
nonpublic information regarding Parent to, or entering into discussions with,
any Person in response to a Superior Offer that is submitted by such Person
(and not withdrawn) if (1) neither Parent nor any Representative of Parent
shall have violated any of the restrictions set forth in this Section 5.3(a),
(2) the Board of Directors of Parent concludes in good faith, based upon the
advice of its outside legal counsel, that failure to do so would create a
substantial risk of liability for breach of its fiduciary obligations to
Parent's stockholders under applicable law, (3) prior to furnishing any such
nonpublic information to, or entering into discussions with, such Person,
Parent gives the Company written notice of the identity of such Person and of
Parent's intention to furnish nonpublic information to, or enter into
discussions with, such Person, and Parent receives from such Person an
executed confidentiality agreement containing customary limitations on the use
and disclosure of all nonpublic written and oral information furnished to such
Person by or on behalf of Parent, and (4) prior to furnishing any such
nonpublic information to such Person, Parent furnishes such nonpublic
information to the Company (to the extent such nonpublic information has not
been previously furnished by Parent to the Company). Without limiting the
generality of the foregoing, Parent acknowledges and agrees that any violation
of any of the restrictions set forth in the preceding sentence by any
Representative of Parent, whether or not such Representative is purporting to
act on behalf of Parent, shall be deemed to constitute a breach of this
Section 5.3 by Parent.
(b) Parent shall promptly advise the Company orally and in writing of any
Acquisition Proposal (including the identity of the Person making or
submitting such Acquisition Proposal and the terms thereof) that is made or
A-35
submitted by any Person during the Pre-Closing Period. Parent shall keep the
Company fully informed with respect to the status of any such Acquisition
Proposal and any modification or proposed modification thereto.
(c) Parent shall immediately cease and cause to be terminated any existing
discussions with any Person that relate to any Acquisition Proposal.
5.4 Parent Capitalization; Name Change. Prior to the Closing, Parent shall
(a) cause all of its outstanding preferred stock to be converted into Parent
Common Stock in accordance with the provisions of Parent's Certificate of
Incorporation (the "Parent Preferred Stock Conversion"), (b) cause the Parent
Common Stock to be combined on a one hundred fifty (150) for one (1) basis
(the "Reverse Stock Split Ratio"), such that, in one or more steps, each one
hundred fifty (150) outstanding shares of Parent Common Stock shall be
combined into one (1) share of Parent Common Stock (the "Reverse Stock Split")
(c) increase the number of authorized shares of Parent Common Stock to
40,000,000 (the "Increased Authorization") and (d) take all requisite
corporate action necessary (including board and stockholder approval) to
approve the change of Parent's name to a name designated by the Company prior
to the filing of the Form S-4 Registration Statement (the "Name Change").
5.5 Disclosures. None of the information supplied or to be supplied by or on
behalf of Parent for inclusion or incorporation by reference in the Form S-4
Registration Statement will, at the time the Form S-4 Registration Statement
is filed with the SEC or at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are
made, not misleading. None of the information supplied or to be supplied by or
on behalf of Parent for inclusion or incorporation by reference in the Joint
Proxy Statement/Prospectus will, at the time the Joint Proxy
Statement/Prospectus is mailed to the stockholders of Parent and the Company
or at the time of the Parent Stockholders' Meeting or the Company
Stockholders' Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances under which
they are made, not misleading. The Joint Proxy Statement/Prospectus will
comply as to form in all material respects with the provisions of the Exchange
Act and the Securities Act and the rules and regulations promulgated by the
SEC thereunder.
SECTION 6. Additional Covenants of the Parties
6.1 Registration Statement; Joint Proxy Statement/Prospectus.
(a) As promptly as practicable after the date of this Agreement, Parent and
the Company shall prepare and cause to be filed with the SEC the Form S-4
Registration Statement and the Joint Proxy Statement/Prospectus. Each of
Parent and the Company shall use all reasonable efforts to cause the Form S-4
Registration Statement (including the Joint Proxy Statement/Prospectus) to
comply with the rules and regulations promulgated by the SEC, to respond
promptly to any comments of the SEC or its staff and to have the Form S-4
Registration Statement declared effective under the Securities Act as promptly
as practicable after it is filed with the SEC. Each of Parent and the Company
shall use all reasonable efforts to cause the Joint Proxy Statement/Prospectus
to be mailed to the parties' stockholders, as promptly as practicable after
the Form S-4 Registration Statement is declared effective under the Securities
Act. The Company shall promptly furnish to Parent all information concerning
the Company and the Company's stockholders that may be required or reasonably
requested in connection with any action contemplated by this Section 6.1. If
any event relating to the Company occurs, or if the Company becomes aware of
any information that should be disclosed in an amendment or supplement to the
Form S-4 Registration Statement or the Joint Proxy Statement/Prospectus, then
the Company shall promptly inform Parent thereof and shall cooperate with
Parent in filing such amendment or supplement with the SEC and, if
appropriate, in mailing such amendment or supplement to the stockholders of
the Company.
(b) Prior to the Effective Time, Parent shall use reasonable efforts to
obtain all regulatory approvals needed to ensure that the Parent Common Stock
to be issued in the Merger will be registered or qualified under the
securities law of every jurisdiction of the United States in which any
registered holder of Company Common
A-36
Stock has an address of record on the record date for determining the
stockholders entitled to notice of and to vote at the Company Stockholders'
Meeting.
6.2 Company Stockholders' Meeting.
(a) The Company shall take all action necessary under all applicable Legal
Requirements to call, give notice of, convene and hold a meeting of the
holders of Company Common Stock to consider, act upon and vote upon the
adoption of this Agreement (the "Company Stockholders' Meeting"). The Company
Stockholders' Meeting will be held as promptly as practicable and in any event
within 45 days after the Form S-4 Registration Statement is declared effective
by the SEC. The Company shall ensure that the Company Stockholders' Meeting is
called, noticed, convened, held and conducted, and that all proxies solicited
in connection with the Company Stockholders' Meeting are solicited, in
compliance with all applicable Legal Requirements. The Company's obligation to
call, give notice of, convene and hold the Company Stockholders' Meeting in
accordance with this Section 6.2(a) shall not be limited or otherwise affected
by the commencement, disclosure, announcement or submission of any Superior
Offer or other Acquisition Proposal, or by any withdrawal, amendment or
modification of the recommendation of the Board of Directors of the Company
with respect to the Merger.
(b) Subject to Section 6.2(c): (i) the Board of Directors of the Company
shall unanimously recommend that the Company's stockholders vote in favor of
the adoption of this Agreement at the Company Stockholders' Meeting; (ii) the
Joint Proxy Statement/Prospectus shall include a statement to the effect that
the Board of Directors of the Company has unanimously recommended that the
Company's stockholders vote in favor of the adoption of this Agreement at the
Company Stockholders' Meeting; and (iii) neither the Board of Directors of the
Company nor any committee thereof shall withdraw, amend or modify, or propose
or resolve to withdraw, amend or modify, in a manner adverse to Parent, the
unanimous recommendations of the Board of Directors of the Company that the
Company's stockholders vote in favor of the adoption of this Agreement. For
purposes of this Agreement, said recommendations of the Board of Directors
shall be deemed to have been modified in a manner adverse to Parent if said
recommendations shall no longer be unanimous.
(c) Nothing in Section 6.2(b) shall prevent the Board of Directors of the
Company from withdrawing, amending or modifying its unanimous recommendations
in favor of the adoption of this Agreement at any time prior to the adoption
of this Agreement by the Company Required Vote if (i) a Superior Offer is made
to the Company and is not withdrawn, and (ii) the Board of Directors of the
Company concludes in good faith, in light of such offer, based upon the advice
of its outside counsel, that the failure to withdraw, amend or modify such
recommendation would create a substantial risk of liability for breach of its
fiduciary obligations to the Company's stockholders under applicable law.
Nothing contained in this Section 6.2 shall limit the Company's obligation to
call, give notice of, convene and hold the Company Stockholders' Meeting
(regardless of whether the unanimous recommendation of the Board of Directors
of the Company shall have been withdrawn, amended or modified).
6.3 Parent Stockholders' Meeting.
(a) Parent shall take all action necessary under all applicable Legal
Requirements to call, give notice of, convene and hold a meeting of the
holders of Parent Common Stock to consider, act upon and vote upon (i) the
adoption of this Agreement, (ii) the Parent Preferred Stock Conversion, (iii)
the Reverse Stock Split, (iv) the Increased Authorization and (v) the Name
Change (the "Parent Stockholders' Meeting"). The Parent Stockholders' Meeting
will be held as promptly as practicable and in any event within 45 days after
the Form S-4 Registration Statement is declared effective by the SEC. Parent
shall ensure that the Parent Stockholders' Meeting is called, noticed,
convened, held and conducted, and that all proxies solicited in connection
with the Parent Stockholders' Meeting are solicited, in compliance with all
applicable Legal Requirements. Parent's obligation to call, give notice of,
convene and hold the Parent Stockholders' Meeting in accordance with this
Section 6.3(a) shall not be limited or otherwise affected by the commencement,
disclosure, announcement or submission of any Superior Offer or other
Acquisition Proposal, or by any withdrawal, amendment or modification of the
recommendation of the Board of Directors of Parent with respect to the Merger.
A-37
(b) Subject to Section 6.3(c): (i) the Board of Directors of Parent shall
unanimously recommend that Parent's stockholders vote in favor of (A) the
adoption of this Agreement, (B) the Parent Preferred Stock Conversion, (C) the
Reverse Stock Split (D) the Increased Authorization, and (E) the Name Change
at the Parent Stockholders' Meeting; (ii) the Joint Proxy Statement/Prospectus
shall include a statement to the effect that the Board of Directors of Parent
has unanimously recommended that Parent's stockholders vote in favor of (A)
the adoption of this Agreement, (B) the Parent Preferred Stock Conversion, (C)
the Reverse Stock Split, (D) the Increased Authorization and (E) the Name
Change at the Parent Stockholders' Meeting; and (iii) neither the Board of
Directors of Parent nor any committee thereof shall withdraw, amend or modify,
or propose or resolve to withdraw, amend or modify, in a manner adverse to the
Company, the unanimous recommendation of the Board of Directors of Parent that
Parent's stockholders vote in favor of (A) the adoption of this Agreement, (B)
the Parent Preferred Stock Conversion, (C) the Reverse Stock Split, (D) the
Increased Authorization and (E) the Name Change. For purposes of this
Agreement, said recommendation of the Board of Directors shall be deemed to
have been modified in a manner adverse to the Company if said recommendation
shall no longer be unanimous.
(c) Nothing in Section 6.3(b) shall prevent the Board of Directors of Parent
from withdrawing, amending or modifying its unanimous recommendation in favor
of the adoption of this Agreement and amending the Form S-4 Registration
Statement (provided that Parent shall use its best efforts not to delay the
Parent Stockholders' Meeting if it amends the Form S-4 Registration Statement)
at any time prior to the adoption of this Agreement by the Parent Required
Vote if (i) a Superior Offer is made to Parent and is not withdrawn, (ii)
neither Parent nor any of its Representatives shall have violated any of the
restrictions set forth in Section 5.3, and (iii) the Board of Directors of
Parent concludes in good faith, in light of such offer, based upon the advice
of its outside counsel, that failure to withdraw, amend or modify such
recommendation would create a substantial risk of liability for breach of its
fiduciary obligations to Parent's stockholders under applicable law. Nothing
contained in this Section 6.3 shall limit Parent's obligation to call, give
notice of, convene and hold the Parent Stockholders' Meeting (regardless of
whether the unanimous recommendation of the Board of Directors of Parent shall
have been withdrawn, amended or modified).
6.4 Regulatory Approvals. The Company and Parent shall use all reasonable
efforts to file, as soon as practicable after the date of this Agreement, all
notices, reports and other documents required to be filed with any
Governmental Body with respect to the Merger and the other transactions
contemplated by this Agreement, and to submit promptly any additional
information requested by any such Governmental Body. Without limiting the
generality of the foregoing, Parent shall, and the Company shall use
reasonable efforts to cause Asea Xxxxx Boveri AG ("ABB") to, prepare and file
the notifications required under the HSR Act in connection with the Merger.
The Company and Parent shall respond as promptly as practicable to (a) any
inquiries or requests received from the Federal Trade Commission or the
Department of Justice for additional information or documentation and (b) any
inquiries or requests received from any state attorney general or other
Governmental Body in connection with antitrust or related matters. The Company
and Parent shall (1) give each other prompt notice of the commencement of any
Legal Proceeding by or before any Governmental Body with respect to the Merger
or any of the other transactions contemplated by this Agreement, (2) keep the
other party informed as to the status of any such Legal Proceeding, and (3)
promptly inform the other party of any communication to or from the Federal
Trade Commission, the Department of Justice or any other Governmental Body
regarding the Merger. To the extent within their control, the Company and
Parent will consult and cooperate with one another, and will consider in good
faith the views of one another, in connection with any analysis, appearance,
presentation, memorandum, brief, argument, opinion or proposal made or
submitted in connection with any Legal Proceeding under or relating to the HSR
Act or any other federal or state antitrust or fair trade law. In addition,
except as may be prohibited by any Governmental Body or by any Legal
Requirement, to the extent permitted by ABB, in connection with any Legal
Proceeding under or relating to the HSR Act or any other federal or state
antitrust or fair trade law or any other similar Legal Proceeding, each of the
Company and Parent agrees to permit authorized Representatives of the other
party to be present at each meeting or conference relating to any such Legal
Proceeding and to have access to and be consulted in connection with any
document, opinion or proposal made or submitted to any Governmental Body in
connection with any such Legal Proceeding.
A-38
6.5 Indemnification of Officers and Directors.
(a) From and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of the
Company pursuant to (i) each indemnification agreement currently in effect
between Parent and each person who is or was a director or officer of Parent
at or prior to the Effective Time and (ii) any indemnification provision under
the Company's Certificate of Incorporation or By-Laws and any indemnification
provision under Parent's Certificate of Incorporation or By-Laws, all as is in
effect on the date hereof (the persons to be indemnified pursuant to the
agreements or provisions referred to in this Section 6.5(a) shall be referred
to as, collectively, the "Indemnified Parties"). The Certificate of
Incorporation and By-Laws of the Surviving Corporation shall contain the
provisions with respect to indemnification and exculpation from liability set
forth in the Company's Certificate of Incorporation and By-Laws on the date of
this Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six years after the Effective Time in any manner that
would adversely affect the rights thereunder of any Indemnified Party.
(b) Without limiting the provisions of Section 6.5(a), during the period
ending six years after the Effective Time, Parent will indemnify and hold
harmless each Indemnified Party against and from any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, to the extent such claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, to the extent such claim, action, suit, proceeding or
investigation arises out of or pertains to (1) any action or omission or
alleged action or omission in his or her capacity as a director or officer of
the Company, Parent or any of their subsidiaries (regardless of whether such
action or omission, or alleged action or omission, occurred prior to, on or
after the Closing Date) or (2) any of the transactions contemplated by this
Agreement, in each case to the full extent a corporation is permitted under
the DGCL to indemnify its own directors and officers, as the case may be;
provided, however, that if, at any time prior to the sixth anniversary of the
Effective Time, any Indemnified Party delivers to Parent a written notice
asserting a claim for indemnification under this Section 6.5(b), then the
claim asserted in such notice shall survive the sixth anniversary of the
Effective Time until such time as such claim is fully and finally resolved. In
the event of any such claim, action, suit, proceeding or investigation, (i)
Parent will have the right to control the defense thereof after the Effective
Time (it being understood that, by electing to control the defense thereof,
Parent will be deemed to have waived any right to object to the indemnified
Parties' entitlements to indemnification hereunder with respect thereto), (ii)
any counsel retained by the Indemnified Parties with respect to the defense
thereof for any period after the Effective Time must be reasonably
satisfactory to Parent, and (iii) after the Effective Time, Parent will pay
the reasonable fees and expenses of such counsel, promptly after statements
therefor are received (provided that in the event that any Indemnified Party
is not entitled to indemnification hereunder, any amounts advanced on his or
her behalf shall be remitted to the Surviving Corporation); provided, however,
that neither Parent nor the Surviving Corporation nor any Indemnified Party,
will be liable for any settlement effected without its express written
consent. The Indemnified Parties as a group may retain only one law firm (in
addition to local counsel) to represent them with respect to any single action
unless counsel for any Indemnified Party determines in good faith that, under
applicable standards of professional conduct, a conflict exists or is
reasonably likely to arise on any material issue between the positions of any
two or more Indemnified Parties. Notwithstanding anything to the contrary
contained in this Section 6.5(b) or elsewhere in this Agreement, Parent agrees
that it will not settle or compromise or consent to the entry of any judgment
or otherwise seek termination with respect to any claim, action, suit,
proceeding or investigation for which indemnification may be sought under this
Agreement unless such settlement, compromise, consent or termination includes
an unconditional release of all Indemnified Parties from all liability arising
out of such claim, action, suit, proceeding or investigation. Without limiting
the foregoing, in any case in which approval of or a determination by the
Surviving Corporation is required to effectuate any indemnification, the
Indemnified Parties will conclusively be deemed to have met the applicable
standards for indemnification with respect to any actions or omissions of such
Indemnified Parties as an officer or director of the Company or Parent on or
prior to the Effective Time relating to any of the transactions contemplated
by this Agreement.
A-39
(c) Parent and the Surviving Corporation jointly and severally agree to pay
all expenses, including attorneys' fees, that may be incurred by the
Indemnified Parties in enforcing the indemnity and other obligations provided
for in this Section 6.5.
(d) Parent shall maintain in effect for a period of three years after the
Effective Time the policy of officers' and directors' liability insurance
maintained by Parent on the date of this Agreement, with coverage in amount
and scope at least as favorable as the Parent's existing directors' and
officers' liability insurance coverage, provided that such policy shall not be
required to be maintained if equivalent coverage is provided to such Persons
under another policy of officers' and directors' liability insurance; and
provided further that in no event shall Parent be required to expend in any
one year an amount in excess of 150% of the annual premium currently paid by
Parent for such insurance; and provided further, that if the annual premiums
of such insurance coverage exceed such amount, Parent shall be obligated to
obtain a policy with the greatest coverage available for a cost not exceeding
such amount.
(e) This Section 6.5 shall survive the consummation of the Merger and the
Effective Time, is intended to benefit and may be enforced by the Company,
Parent, the Surviving Corporation and the Indemnified Parties, and shall be
binding on all successors and assigns of Parent and the Surviving Corporation.
6.6 Additional Agreements.
(a) Subject to Section 6.6(b), Parent and the Company shall use all
reasonable efforts to take, or cause to be taken, all actions necessary to
consummate the Merger and make effective the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, but subject to
Section 6.6(b), each party to this Agreement (i) shall make all filings (if
any) and give all notices (if any) required to be made and given by such party
in connection with the Merger and the other transactions contemplated by this
Agreement, (ii) shall use all reasonable efforts to obtain each Consent (if
any) required to be obtained (pursuant to any applicable Legal Requirement or
Contract, or otherwise) by such party in connection with the Merger or any of
the other transactions contemplated by this Agreement, and (iii) shall use all
reasonable efforts to lift any restraint, injunction or other legal bar to the
Merger. Each party shall promptly deliver to the other party a copy of each
such filing made, each such notice given and each such Consent obtained by
such party during the Pre-Closing Period.
(b) Notwithstanding anything to the contrary contained in this Agreement,
neither Parent nor the Company shall have any obligation under this Agreement
(i) to dispose of any assets; (ii) to discontinue offering any product; (iii)
to license or otherwise make available to any Person any technology, software
or other Proprietary Asset; (iv) to hold separate any assets or operations
(either before or after the Closing Date); or (v) to make any commitment (to
any Governmental Body or otherwise) regarding its future operations.
6.7 Disclosure. Parent and the Company shall consult with each other before
issuing any press release or otherwise making any public statement with
respect to the Merger or any of the other transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, neither party
shall, nor shall permit any of its Representatives to, make any disclosure
regarding the Merger or any of the other transactions contemplated by this
Agreement unless (a) the other party shall have approved such disclosure or
(b) the party making such disclosure shall have been advised in writing by its
outside legal counsel that such disclosure is required by applicable law.
6.8 Affiliate Agreements. The Company shall use all reasonable efforts to
cause each Person identified in Part 2.19 of the Acquired Corporation
Disclosure Schedule and each other Person who is or becomes an "affiliate" (as
that term is used in Rule 145 under the Securities Act) of the Company to
execute and deliver to Parent, prior to the date of the mailing of the Joint
Proxy Statement/Prospectus to the Company's stockholders, an Affiliate
Agreement in the form of Exhibit D.
A-40
6.9 Tax Matters.
(a) At or prior to the filing of the Form S-4 Registration Statement, Parent
and Merger Sub and the Company shall execute and deliver to Xxxxxx Godward LLP
and to Pillsbury Madison & Sutro LLP tax representation letters in the forms
attached hereto as Exhibits E and F, respectively.
(b) Parent, Merger Sub and the Company shall each confirm to Xxxxxx Godward
LLP and to Pillsbury Madison & Sutro LLP the accuracy and completeness as of
the Effective Time of the tax representation letters delivered pursuant to
Section 6.9(a).
(c) Parent and the Company shall use all reasonable efforts prior to the
Effective Time to cause the Merger to qualify as a tax free reorganization
under Section 368(a) of the Code.
(d) Following delivery of the tax representation letters pursuant to Section
6.9(a), each of Parent and the Company shall use its reasonable efforts to
cause Pillsbury Madison & Sutro LLP and Xxxxxx Godward LLP, respectively, to
deliver promptly to it a legal opinion satisfying the requirements of Item 601
of Regulation S-K promulgated under the Securities Act. In rendering such
opinions, each of such counsel shall be entitled to rely on the tax
representation letters delivered pursuant to Section 6.9(a).
6.10 Corporate Governance.
(a) Parent shall obtain and deliver to the Company at the Closing the
resignation of each officer and director of Parent, other than the resignation
of Xxxxx Xxxxxxx as a director of Parent.
(b) Parent shall take all necessary action to reconstitute the Board of
Directors of Parent to consist as of the Effective Time of the individuals
identified in Exhibit H.
6.11 Resignations. The parties agree that any written resignation that is
entered into by an employee of Parent, and which is delivered by such employee
at the request of the Company, shall be considered for all purposes a
termination of such employee without cause. A resignation by an individual as
a director or officer of Parent shall not, in and of itself, constitute a
resignation as an employee as described in this Section 6.11.
6.12 Registration Rights Agreement. Parent shall execute and enter into a
Registration and Stockholder Rights Agreement, in the form of Exhibit G, with
ABB and its affiliates.
Section 7. Conditions Precedent to Obligations of Parent and Merger Sub
The obligations of Parent and Merger Sub to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
7.1 Accuracy of Representations. The representations and warranties of each
of the Acquired Corporations contained in this Agreement shall have been
accurate in all material respects as of the date of this Agreement and shall
be accurate in all material respects as of the Closing Date as if made on and
as of the Closing Date (it being understood that, for purposes of determining
the accuracy of such representations and warranties, any update of or
modification to the Acquired Corporation Disclosure Schedule made or purported
to have been made after the date of this Agreement shall be disregarded).
7.2 Performance of Covenants. Each covenant or obligation that the Company
is required to comply with or to perform at or prior to the Closing shall have
been complied with and performed in all material respects.
7.3 Effectiveness of Registration Statement. The Form S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with
respect to the Form S-4 Registration Statement.
A-41
7.4 Parent Stockholder Approval. This Agreement, the Parent Preferred Stock
Conversion, Reverse Stock Split, the Increased Authorization and the Name
Change shall have been duly adopted by the Parent Required Vote.
7.5 Company Stockholder Approval. This Agreement shall have been duly
adopted by the Company Required Vote.
7.6 Agreements and Documents. Parent and the Company shall have received the
following agreements and documents, each of which shall be in full force and
effect:
(a) a legal opinion of Xxxxxx Godward LLP, dated as of the Closing Date,
in the form of Exhibit I; and
(b) a certificate executed on behalf of the Company by its Chief
Executive Officer confirming that the conditions set forth in Sections 7.1,
7.2, 7.5 and 7.7 have been duly satisfied.
7.7 No Material Adverse Change. There shall have been no material adverse
change in the business, condition, capitalization, assets, liabilities,
operations or financial performance of the Company since the date of this
Agreement.
7.8 HSR Act. The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
7.9 Additional Shares. The shares of Parent Common Stock to be issued in the
Merger shall have been approved for trading (subject to notice of issuance) on
the Nasdaq Small Cap Market.
7.10 No Restraints. No temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the Merger shall have
been issued by any court of competent jurisdiction and remain in effect, and
there shall not be any Legal Requirement enacted or deemed applicable to the
Merger that makes consummation of the Merger illegal.
7.11 Consents. All material Consents required to be obtained by the Company
in connection with the Merger and the other transactions contemplated by this
Agreement (including the Consents identified in Part 7.11 of the Acquired
Corporation Schedule) shall have been obtained and shall be in full force and
effect.
Section 8. Conditions Precedent to Obligations of the Company
The obligation of the Company to effect the Merger and otherwise consummate
the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
8.1 Accuracy of Representations. The representations and warranties of
Parent and Merger Sub contained in this Agreement shall have been accurate in
all material respects as of the date of this Agreement and shall be accurate
in all material respects as of the Closing Date as if made on and as of the
Closing Date (it being understood that, for purposes of determining the
accuracy of such representations and warranties, any update of or modification
to the Parent Disclosure Schedule made or purported to have been made after
the date of this Agreement shall be disregarded).
8.2 Performance of Covenants. Each covenant or obligation that Parent or
Merger Sub is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all material respects.
8.3 Effectiveness of Registration Statement. The Form S-4 Registration
Statement shall have become effective in accordance with the provisions of the
Securities Act, and no stop order shall have been issued by the SEC with
respect to the Form S-4 Registration Statement.
A-42
8.4 Parent Stockholder Approval. This Agreement, the Preferred Stock
Conversion, the Reverse Stock Split, the Increased Authorization and the Name
Change shall have been duly adopted by the Parent Required Vote.
8.5 Company Stockholder Approval. This Agreement shall have been duly
adopted and approved by the Company Required Vote.
8.6 Parent Capitalization. The Parent Preferred Stock Conversion, the
Reverse Stock Split and the Increased Authorization shall have been duly
effected.
8.7 Consents. All material Consents required to be obtained in connection
with the Merger and the other transactions contemplated by this Agreement
(including the Consents identified in Part 8.7 of the Parent Disclosure
Schedule) shall have been obtained and shall be in full force and effect.
8.8 Agreements and Documents. The Company shall have received the following
agreements and documents, each of which shall be in full force and effect:
(a) Affiliate Agreements in the form of Exhibit D, executed by each
Person who could reasonably be deemed to be an "affiliate" of the Company
(as that term is used in Rule 145 under the Securities Act);
(b) a legal opinion of Pillsbury Madison & Sutro LLP dated as of the
Closing Date, in the form of Exhibit J;
(c) a legal opinion of Xxxxxx Godward LLP dated as of the Closing Date
and addressed to the Company, to the effect that the Merger will constitute
a reorganization within the meaning of Section 368 of the Code (it being
understood that, in rendering such opinion, Xxxxxx Godward LLP may rely
upon the tax representation letters referred to in Section 6.9); provided,
however, that if Cooley Godward LLP does not render such opinion or
withdraws or modifies such opinion, this condition shall nonetheless be
deemed to be satisfied if counsel to Parent renders such opinion to the
Company. In rendering such opinion, such firm may rely on the tax
representation letters referred to in Section 6.9;
(d) a certificate executed on behalf of Parent by its Chief Executive
Officer confirming that the conditions set forth in Sections 8.1, 8.2, 8.4,
8.6, 8.7 (insofar as it relates to the Consents identified in Part 8.7 of
the Parent Disclosure Schedule), 8.9, 8.10 and 8.18 have been duly
satisfied;
(e) the written resignations of all officers and directors of Parent
(except for the resignation of Xxxxx Xxxxxxx as a director of Parent),
effective as of the Effective Time;
(f) evidence of Parent's compliance with Section 6.10(b); and
(g) a Registration and Stockholder Rights Agreement in the form of
Exhibit G, executed by Parent and ABB.
8.9 No Material Adverse Change. There shall have been no material adverse
change in the business, condition, capitalization, assets, liabilities,
operations or financial performance of Parent since the date of this
Agreement.
8.10 Market for Parent Common Stock. Parent Common Stock shall be traded on
the Nasdaq SmallCap Market and the Company shall be reasonably satisfied that
Parent has complied with NASD Manual Rule 4330 (f).
8.11 HSR Act. The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
8.12 Additional Shares. The shares of Parent Common Stock to be issued in
the Merger shall have been approved for trading (subject to notice of
issuance) in the Nasdaq SmallCap Market.
A-43
8.13 Appraisal Rights. Not more than one percent (1%) of the outstanding
shares of Company Common Stock and not more than one percent (1%) of the
outstanding shares of Company Preferred Stock shall have appraisal rights
available under Section 262 of the DGCL.
8.14 Blue Sky Law. Parent shall have received all permits and other
authorizations required under applicable state securities laws for the
issuance of shares of Parent Common Stock pursuant to the Merger.
8.15 No Restraints. No temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the Merger shall have
been issued by any court of competent jurisdiction and remain in effect, and
there shall not be any Legal Requirement enacted or deemed applicable to the
Merger that makes consummation of the Merger illegal.
8.16 No Governmental Litigation. There shall not be pending or threatened
any Legal Proceeding in which a Governmental Body is or is threatened to
become a party or is otherwise involved: (a) challenging or seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement; (b) relating to the Merger and
seeking to obtain from Parent, the Company or any of its subsidiaries any
damages that may be material to the combined company after the Effective Time;
(c) seeking to prohibit or limit in any material respect Parent's ability to
vote, receive dividends with respect to or otherwise exercise ownership rights
with respect to the stock of the Surviving Corporation; or (d) which would
materially and adversely affect the right of Parent, the Surviving Corporation
or any subsidiary of Parent to own the assets or operate the business of
Parent or of the Company.
8.17 No Other Litigation. There shall not be pending any Legal Proceeding in
which there is a reasonable possibility of an outcome that would have a
Material Adverse Effect on the Company or on Parent: (a) challenging or
seeking to restrain or prohibit the consummation of the Merger or any of the
other transactions contemplated by this Agreement; (b) relating to the Merger
and seeking to obtain from Parent, the Company or any of its subsidiaries any
damages that may be material to the combined company after the Effective Time;
(c) seeking to prohibit or limit in any material respect Parent's ability to
vote, receive dividends with respect to or otherwise exercise ownership rights
with respect to the stock of the Surviving Corporation; or (d) which would
materially and adversely affect the right of Parent, the Surviving Corporation
or any subsidiary of Parent to own the assets or operate the business of
Parent or of the Company.
8.18 Taxes. All Parent Returns due to be filed on or before the Closing Date
(a) shall have been filed and (b) shall have been prepared in all material
respects in compliance with all applicable Legal Requirements.
Section 9. Termination
9.1 Termination. This Agreement may be terminated prior to the Effective
Time (whether before or after adoption of this Agreement by the stockholders
of Parent or the Company):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated by August 14, 1998 (unless the failure to consummate the Merger
is attributable to a failure on the part of the party seeking to terminate
this Agreement to perform any material obligation required to be performed
by such party at or prior to the Effective Time);
(c) by either Parent or the Company if a court of competent jurisdiction
or other Governmental Body shall have issued a final and nonappealable
order, decree or ruling, or shall have taken any other action, having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger;
(d) by either Parent or the Company if (i) the Company Stockholders'
Meeting shall have been held and (ii) this Agreement shall not have been
adopted at such meeting by the Company Required Vote;
(e) by either Parent or the Company if (i) the Parent Stockholders'
Meeting shall have been held and (ii) this Agreement, the Reverse Stock
Split, the Parent Preferred Stock Conversion, the Increased
A-44
Authorization or the Name Change shall not have been adopted at such
meeting by the Parent Required Vote;
(f) by the Company (at any time prior to the adoption of this Agreement
by the Parent Required Vote) if a Triggering Event shall have occurred;
(g) by Parent if any of the Company's representations and warranties
contained in this Agreement shall be or shall have become materially
inaccurate, or if any of the Company's covenants contained in this
Agreement shall have been breached in any material respect; provided,
however, that if an inaccuracy in the Company's representations and
warranties or a breach of a covenant by the Company is curable by the
Company and the Company is continuing to exercise all reasonable efforts to
cure such inaccuracy or breach, then Parent may not terminate this
Agreement under this Section 9.1(g) on account of such inaccuracy or
breach; or
(h) by the Company if any of Parent's representations and warranties
contained in this Agreement shall be or shall have become materially
inaccurate, or if any of Parent's covenants contained in this Agreement
shall have been breached in any material respect; provided, however, that
if an inaccuracy in Parent's representations and warranties or a breach of
a covenant by Parent is curable by Parent and Parent is continuing to
exercise all reasonable efforts to cure such inaccuracy or breach, then the
Company may not terminate this Agreement under this Section 9.1(h) on
account of such inaccuracy or breach.
9.2 Effect of Termination. In the event of the termination of this Agreement
as provided in Section 9.1, this Agreement shall be of no further force or
effect; provided, however, that (a) this Section 9.2, Section 9.3 and Section
10 shall survive the termination of this Agreement and shall remain in full
force and effect, and (b) the termination of this Agreement shall not relieve
any party from any liability for any breach of any representation, warranty or
covenant contained in this Agreement.
9.3 Expenses; Termination Fees.
(a) Except as set forth in this Section 9.3, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses, whether or not
the Merger is consummated;
(b) (i) If this Agreement is terminated by Parent or the Company pursuant to
Section 9.1(e), or if this Agreement is terminated by the Company pursuant to
Section 9.1(f), and (ii) if prior to the date six months after the date of
such termination, (A) Parent enters into any agreement involving an
Acquisition Transaction, (B) a tender offer, an exchange offer, or a share
exchange is commenced that would constitute an Acquisition Transaction if
completed or (C) an Acquisition Transaction is otherwise consummated (each,
the "Alternate Transaction") then, upon consummation of such Alternate
Transaction, Parent shall pay to the Company, in cash, a nonrefundable fee in
the amount of $500,000.
(c) The fee referred to in Section 9.3(b) shall be paid by Parent within two
(2) business days after becoming payable pursuant to Section 9.3(b).
(d) If this Agreement is terminated by Parent or the Company pursuant to
Section 9.1(d), then the Company shall pay to Parent within two (2) business
days of the date of the termination a nonrefundable fee in the amount of
$500,000 to cover Parent's expenses in connection with the proposed
transaction.
Section 10. Miscellaneous Provisions
10.1 Amendment. This Agreement may be amended with the approval of the
respective Boards of Directors of the Company and Parent at any time before or
after adoption of this Agreement by the stockholders of the Company or the
stockholders of Parent; provided, however, that after any such adoption of
this Agreement by Parent's stockholders or the Company's stockholders, no
amendment shall be made which (a) by law requires further approval of the
stockholders of the Company without the further approval of such stockholders
or (b)
A-45
requires further approval of the stockholders of Parent without the further
approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
10.2 Waiver.
(a) No failure on the part of any party to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any
party in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right, privilege
or remedy shall preclude any other or further exercise thereof or of any other
power, right, privilege or remedy.
(b) No party shall be deemed to have waived any claim arising out of this
Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such party; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
10.3 No Survival of Representations and Warranties. None of the
representations and warranties contained in this Agreement or in any
certificate delivered pursuant to this Agreement shall survive the Merger.
10.4 Entire Agreement; Counterparts; Applicable Law. This Agreement and the
other agreements referred to herein constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral,
among or between any of the parties with respect to the subject matter hereof
and thereof. This Agreement may be executed in several counterparts, each of
which shall be deemed an original and all of which shall constitute one and
the same instrument, and shall be governed in all respects by the laws of the
State of Delaware as applied to contracts entered into and to be performed
entirely within Delaware.
10.5 Disclosure Schedule. The Acquired Corporation Disclosure Schedule shall
be arranged in separate parts corresponding to the numbered and lettered
sections contained in Section 2, and the information disclosed in any numbered
or lettered part shall be deemed to relate to and to qualify only the
particular representation or warranty set forth in the corresponding numbered
or lettered section in Section 2, and shall not be deemed to relate to or to
qualify any other representation or warranty. The Parent Disclosure Schedule
shall be arranged in separate parts corresponding to the numbered and lettered
sections contained in Section 3, and the information disclosed in any numbered
or lettered part shall be deemed to relate to and to qualify only the
particular representation or warranty set forth in the corresponding numbered
or lettered section in Section 3, and shall not be deemed to relate to or to
qualify any other representation or warranty.
10.6 Attorneys' Fees. In any action at law or suit in equity to enforce this
Agreement or the rights of any of the parties hereunder, the prevailing party
in such action or suit shall be entitled to receive a reasonable sum for its
attorneys' fees and all other reasonable costs and expenses incurred in such
action or suit.
10.7 Assignability. This Agreement shall be binding upon, and shall be
enforceable by and inure solely to the benefit of, the parties hereto and
their respective successors and assigns; provided, however, that neither this
Agreement nor the Company's rights hereunder may be assigned by the Company
without the prior written consent of Parent, and any attempted assignment of
this Agreement or any of such rights by the Company without such consent shall
be void and of no effect. Except as set forth in Section 6.5 with respect to
the current directors and officers of the Company and Parent, nothing in this
Agreement, express or implied, is intended to or shall confer upon any Person
any right, benefit or remedy of any nature whatsoever under or by reason of
this Agreement.
10.8 Notices. Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to
the address or facsimile telephone number set forth beneath the name of such
party below (or to such other address or facsimile telephone number as such
party shall have specified in a written notice given to the other parties
hereto):
A-46
if to Parent:
Paradigm Technology, Inc.
000 Xxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Pillsbury Madison & Sutro LLP
0000 Xxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxxx Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
if to Merger Sub:
same information as Parent
if to the Company:
IXYS Corporation
0000 Xxxxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000-0000
Attn: Xx. Xxxxxx Xxxxxx
Phone: (000 000-0000
Fax: (000) 000-0000
with a copy to:
Cooley Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
10.9 Cooperation. The Company agrees to cooperate fully with Parent and to
execute and deliver such further documents, certificates, agreements and
instruments and to take such other actions as may be reasonably requested by
Parent to evidence or reflect the transactions contemplated by this Agreement
and to carry out the intent and purposes of this Agreement.
10.10 Construction.
(a) For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not be
applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including," and
variations thereof, shall not be deemed to be terms of limitation, but rather
shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement to
"Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
A-47
In Witness Whereof, the parties have caused this Agreement to be executed as
of the date first above written.
Paradigm Technology, Inc.
By: _________________________________
Name: _______________________________
Title: ______________________________
Paradigm Enterprises, Inc.
By: _________________________________
Name: _______________________________
Title: ______________________________
IXYS Corporation
By: _________________________________
Name: _______________________________
Title: ______________________________
A-48
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquired Corporation Contract. "Acquired Corporation Contract" shall mean
any Contract: (a) to which any Acquired Corporation is a party; (b) by which
any Acquired Corporation or any asset of any Acquired Corporation is or may
become bound or under which any Acquired Corporation has, or may become
subject to, any obligation; or (c) under which any Acquired Corporation has or
may acquire any right or interest.
Acquired Corporation Disclosure Schedule. "Acquired Corporation Disclosure
Schedule" shall mean the disclosure schedule that has been prepared by the
Company in accordance with the requirements of Section 10.5 and that has been
delivered by the Company to Parent on the date of this Agreement and signed by
the President of the Company.
Acquired Corporation Proprietary Asset. "Acquired Corporation Proprietary
Asset" shall mean any Proprietary Asset owned by or licensed to any Acquired
Corporation or otherwise used by any Acquired Corporation.
Acquisition Proposal. "Acquisition Proposal" shall mean any offer, proposal
or inquiry (other than offers, proposals or inquiries exchanged between Parent
and the Company) contemplating or otherwise relating to any Acquisition
Transaction.
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction or series of related transactions (other than a Preferred Sale)
involving:
(a) any merger, consolidation, share exchange, business combination,
issuance of securities, acquisition of securities, tender offer, exchange
offer or other similar transaction (i) in which the Subject Corporation is
a constituent corporation, (ii) in which a Person or "group" (as defined in
the Exchange Act and the rules promulgated thereunder) of Persons directly
or indirectly acquires the Subject Corporation or more than 50% of the
Subject Corporation's business or directly or indirectly acquires
beneficial or record ownership of securities representing more than 20% of
the outstanding securities of any class of voting securities of the Subject
Corporation or (iii) in which the Subject Corporation issues securities
representing more than 20% of the outstanding securities of any class of
voting securities of the Subject Corporation;
(b) any sale, lease, exchange, transfer, license, acquisition or
disposition of more than 50% of the assets of the Subject Corporation; or
(c) any liquidation or dissolution of the Subject Corporation.
Agreement. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached, as it may be amended from
time to time.
ABB. "ABB" shall have the meaning assigned to it in Section 6.4 of the
Agreement.
Company Capital Stock. "Company Capital Stock" shall mean the Company Common
Stock and Company Preferred Stock, collectively.
Company Option. "Company Option" shall have the meaning ascribed to it in
Section 2.3(b) of the Agreement.
Company Common Stock. "Company Common Stock" shall mean the Common Stock,
$0.001 par value per share, of the Company.
Company Plans. "Company Plans" shall have the meaning ascribed to it in
Section 2.3(b) of the Agreement.
A-49
Company Preferred Stock. "Company Preferred Stock" shall mean the Series A
Preferred Stock, $0.001 par value per share, of the Company and the Series B
Preferred Stock, $0.001 par value per share, of the Company, collectively.
Company Warrant. "Company Warrant" shall have the meaning ascribed to it in
Section 2.3(c) of the Agreement.
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental
Authorization).
Contract. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, option,
warranty, purchase order, license, sublicense, insurance policy, benefit plan
or legally binding commitment or undertaking of any nature.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on
the voting of any security, any restriction on the transfer of any security or
other asset, any restriction on the receipt of any income derived from any
asset, any restriction on the use of any asset and any restriction on the
possession, exercise or transfer of any other attribute of ownership of any
asset).
Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
Form S-4 Registration Statement. "Form S-4 Registration Statement" shall
mean the registration statement on Form S-4 to be filed with the SEC by Parent
in connection with the issuance of Parent Common Stock in the Merger, as said
registration statement may be amended prior to the time it is declared
effective by the SEC.
Governmental Authorization. "Governmental Authorization" shall mean any: (a)
permit, license, certificate, franchise, permission, clearance, registration,
qualification or authorization issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
Governmental Body. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
HSR Act. "HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
Increased Authorization. "Increased Authorization" shall have the meaning
ascribed to it in Section 5.4 of the Agreement.
Joint Proxy Statement/Prospectus. "Joint Proxy Statement/Prospectus" shall
mean the joint proxy statement/prospectus to be sent to (i) the Parent's
stockholders in connection with the Parent Stockholders' Meeting and (ii) the
Company's stockholders in connection with the Company Stockholders' Meeting.
Legal Proceeding. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry,
audit,
A-50
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
Legal Requirement. "Legal Requirement" shall mean any federal, state, local,
municipal, foreign or other law, statute, constitution, principle of common
law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
Material Adverse Effect. An event, violation, inaccuracy, circumstance or
other matter will be deemed to have a "Material Adverse Effect" on:
(a) Parent if such event, violation, inaccuracy, circumstance or other
matter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in the Agreement
but for the presence of "Material Adverse Effect" or other materiality
qualifications, or any similar qualifications, in such representations and
warranties) would have a material adverse effect on (i) the business,
condition, capitalization, assets, liabilities, operations or financial
performance of Parent; (ii) the ability of Parent to consummate the Merger
or any of the other transactions contemplated by this Agreement or to
perform obligations under this Agreement; or (iii) Parent's ability to
vote, receive dividends with respect to or otherwise exercise ownership
rights with respect to the stock of the Surviving Corporation. An event,
violation, inaccuracy, circumstance or other matter will be deemed to have
a "Material Adverse Effect" on Parent if such event, violation, inaccuracy,
circumstance or other matter (considered together with all other matters
that would constitute exceptions to the representations and warranties set
forth in the Agreement but for the presence of "Material Adverse Effect" or
other materiality qualifications, or any similar qualifications, in such
representations and warranties) would have a material adverse effect on the
business, condition, assets, liabilities, operations or financial
performance of Parent and its subsidiaries, taken as a whole.
(b) The Acquired Corporations if such event, violation, inaccuracy,
circumstance or other matter (considered together with all other matters
that would constitute exceptions to the representations and warranties set
forth in the Agreement but for the presence of "Material Adverse Effect" or
other materiality qualifications, or any similar qualifications, in such
representations and warranties) would have a material adverse effect on (i)
the business, condition, capitalization, assets, liabilities, operations or
financial performance of the Acquired Corporations, taken as a whole; or
(ii) the ability of the Acquired Corporations to consummate the Merger or
any of the other transactions contemplated by this Agreement or to perform
obligations under this Agreement. An event, violation, inaccuracy,
circumstance or other matter will be deemed to have a "Material Adverse
Effect" on the Acquired Corporations if such event, violation, inaccuracy,
circumstance or other matter (considered together with all other matters
that would constitute exceptions to the representations and warranties set
forth in the Agreement but for the presence of "Material Adverse Effect" or
other materiality qualifications, or any similar qualifications, in such
representations and warranties) would have a material adverse effect on the
business, condition, assets, liabilities, operations or financial
performance of the Acquired Corporations, taken as a whole.
Name Change. "Name Change" shall have the meaning ascribed to it in Section
5.4 of the Agreement.
Parent Audited Balance Sheet. "Parent Audited Balance Sheet" shall have the
meaning ascribed to it in Section 3.4(c).
Parent Contract. "Parent Contract" shall mean any Contract: (a) to which
Parent is a party; (b) by which Parent or any asset of Parent is or may become
bound or under which Parent has, or may become subject to, any obligation; or
(c) under which Parent has or may acquire any right or interest.
Parent Disclosure Schedule. "Parent Disclosure Schedule" shall mean the
disclosure schedule that has been prepared by Parent in accordance with the
requirements of Section 10.5 and that has been delivered by Parent to the
Company on the date of this Agreement and signed by the President of Parent.
A-51
Parent Preferred Stock Conversion. "Parent Preferred Stock Conversion" shall
have the meaning ascribed to it in Section 5.4 of the Agreement.
Parent Proprietary Asset. "Parent Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to Parent or otherwise used by Parent.
Person. "Person" shall mean any individual, Entity or Governmental Body.
Preferred Sale. "Preferred Sale" shall have the meaning ascribed to it in
Section 3.5(d).
Proprietary Asset. "Proprietary Asset" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system,
computer software, computer program, source code, algorithm, invention,
design, blueprint, engineering drawing, proprietary product, technology,
proprietary right or other intellectual property right or intangible asset; or
(b) right to use or exploit any of the foregoing.
Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
Reverse Stock Split. "Reverse Stock Split" shall have the meaning ascribed
to it in Section 5.4 of the Agreement.
SEC. "SEC" shall mean the United States Securities and Exchange Commission.
Securities Act. "Securities Act" shall mean the Securities Act of 1933, as
amended.
Subject Corporation. "Subject Corporation" shall mean Parent when the
context of the Agreement so indicates, or the Company when the context of the
Agreement so indicates.
Superior Offer. "Superior Offer" shall mean an unsolicited, bona fide
written offer made by a third party to purchase more than 50% of outstanding
capital stock of the Subject Corporation on terms that the board of directors
of the Subject Corporation determines in its reasonable judgment, based upon
the written advice of its financial advisor, to be more favorable to the
stockholders of the Subject Corporation than the terms of the Merger;
provided, however, that any such offer shall not be deemed to be a "Superior
Offer" if any financing required to consummate the transaction contemplated by
such offer is not committed and is not reasonably capable of being obtained by
such third party.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax,
business tax, withholding tax or payroll tax), levy, assessment, tariff, duty
(including any customs duty), deficiency or fee, and any related charge or
amount (including any fine, penalty or interest), imposed, assessed or
collected by or under the authority of any Governmental Body.
Tax Return. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any
Tax.
Triggering Event. A "Triggering Event" shall be deemed to have occurred if:
(i) the Board of Directors of Parent shall have failed to recommend, or shall
for any reason have withdrawn or shall have amended or modified in a manner
adverse to the Company its unanimous recommendation in favor of adoption of
each of
A-52
this Agreement, the Parent Preferred Stock Conversion and the Reverse Stock
Split; (ii) Parent shall have failed to include in the Joint Proxy
Statement/Prospectus the unanimous recommendation of the Board of Directors of
Parent in favor of adoption of each of this Agreement, the Parent Preferred
Stock Conversion and the Reverse Stock Split; (iii) the Board of Directors of
Parent fails to reaffirm its unanimous recommendation in favor of adoption of
each of this Agreement, the Parent Preferred Stock Conversion and the Reverse
Stock Split within five business days after the Company requests in writing
that such recommendation be reaffirmed; (iv) the Board of Directors of Parent
shall have approved, endorsed or recommended any Acquisition Proposal; (v)
Parent shall have entered into any letter of intent or similar document or any
Contract relating to any Acquisition Proposal; (vi) Parent shall have failed
to hold the Parent Stockholders' Meeting as promptly as practicable and in any
event within 45 days after the Form S-4 Registration Statement is declared
effective under the Securities Act; (vii) a tender or exchange offer relating
to securities of Parent shall have been commenced and Parent shall not have
sent to its securityholders, within five business days after the commencement
of such tender or exchange offer, a statement disclosing that Parent
recommends rejection of such tender or exchange offer; or (viii) an
Acquisition Proposal is publicly announced, and Parent (A) fails to issue a
press release announcing its opposition to such Acquisition Proposal within
five business days after such Acquisition Proposal is announced or (B)
otherwise fails to actively oppose such Acquisition Proposal.
A-53