EXHIBIT 2.01
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ILLUMINA, INC.,
a Delaware corporation
SEMAPHORE ACQUISITION SUB, INC.,
a Delaware corporation
CYVERA CORPORATION,
a Delaware corporation
AND
THE STOCKHOLDER REPRESENTATIVE (AS DEFINED HEREIN)
DATED AS OF FEBRUARY 22, 2005
TABLE OF CONTENTS
TABLE OF CONTENTS
PAGE
ARTICLE I. THE MERGER.................................................................................... 1
1.1. The Merger............................................................................. 1
1.2. Closing; Effective Time................................................................ 1
1.3. Effects of the Merger.................................................................. 2
1.4. Certificate of Incorporation; Bylaws................................................... 2
1.5. Directors and Officers of the Surviving Corporation.................................... 2
ARTICLE II. CONVERSION OF SHARES......................................................................... 2
2.1. Conversion of Stock.................................................................... 2
2.2. Aggregate Merger Consideration Value................................................... 4
2.3. Escrow................................................................................. 4
2.4. Exchange of Company Stock Certificates................................................. 5
2.5. Fractional Shares...................................................................... 6
2.6. Company Stock Options.................................................................. 6
2.7. Withholding Rights..................................................................... 7
2.8. Tax Consequences....................................................................... 7
2.9. Dissenting Shares...................................................................... 8
2.10. Restricted Stock....................................................................... 8
2.11. Certain defined terms.................................................................. 9
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................... 9
3.1. Organization, Etc. .................................................................... 9
3.2. Authority Relative to this Agreement................................................... 10
3.3. No Violations, Etc. ................................................................... 10
3.4. Board Approval......................................................................... 11
3.5. Capitalization......................................................................... 11
3.6. Financial Statements................................................................... 12
3.7. Absence of Undisclosed Liabilities..................................................... 13
3.8. Absence of Changes or Events........................................................... 13
TABLE OF CONTENTS
(CONTINUED)
3.9. No Subsidiaries........................................................................ 14
3.10. Litigation............................................................................. 14
3.11. Insurance.............................................................................. 14
3.12. Contracts and Commitments.............................................................. 15
3.13. Labor Matters; Employment and Labor Contracts.......................................... 16
3.14. Compliance with Laws................................................................... 17
3.15. Government Contracts................................................................... 17
3.16. Intellectual Property Rights........................................................... 18
3.17. Accounts Receivable.................................................................... 20
3.18. Order Backlog.......................................................................... 20
3.19. Product and Service Warranties......................................................... 20
3.20. Taxes.................................................................................. 20
3.21. Employee Benefit Plans; ERISA.......................................................... 23
3.22. Environmental Matters.................................................................. 25
3.23. Customers.............................................................................. 26
3.24. Finders or Brokers..................................................................... 26
3.25. Title to Property...................................................................... 26
3.26. Transactions with Affiliates........................................................... 26
3.27. Books and Records...................................................................... 27
3.28. Third Party Consents................................................................... 27
3.29. Disclosure............................................................................. 27
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...................................... 27
4.1. Organization, Etc. .................................................................... 27
4.2. Authority Relative to this Agreement................................................... 28
4.3. No Violations, Etc. ................................................................... 28
4.4. Capitalization......................................................................... 29
4.5. SEC Documents.......................................................................... 29
4.6. Disclosure............................................................................. 30
ARTICLE V. COVENANTS..................................................................................... 30
5.1. Conduct of Business During Interim Period.............................................. 30
TABLE OF CONTENTS
(CONTINUED)
5.2. No Solicitation........................................................................ 32
5.3. Access to Information.................................................................. 34
5.4. Company Recapitalization............................................................... 34
5.5. Preparation of Information Statement; Stockholder Approval............................. 34
5.6. Stockholder Acknowledgments and Agreements............................................. 35
5.7. Commercially Reasonable Efforts........................................................ 35
5.8. Public Announcements................................................................... 35
5.9. Notification of Certain Matters........................................................ 35
5.10. Confidentiality........................................................................ 36
5.11. Certain Employee Benefit Matters....................................................... 36
5.12. Fees and Expenses...................................................................... 36
5.13. Employee Benefit Plans and Arrangements................................................ 36
5.14. Necessary Consents..................................................................... 37
5.15. Financial Statements................................................................... 37
5.16. Repayment of Indebtedness.............................................................. 37
5.17. Management Bonus and Recapitalization Payments, etc. .................................. 37
5.18. Tax Status of Merger................................................................... 37
5.19. Termination of Agreements.............................................................. 37
5.20. Environmental Compliance............................................................... 38
ARTICLE VI. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY.................................................. 38
6.1. Stockholder Approval................................................................... 38
6.2. Statute or Action...................................................................... 38
ARTICLE VII. CONDITIONS TO THE OBLIGATIONS OF PARENT, MERGER SUB AND THE COMPANY......................... 38
7.1. Additional Conditions to the Obligations of the Company................................ 38
7.2. Additional Conditions to the Obligations of Parent and Merger Sub...................... 39
ARTICLE VIII. TERMINATION................................................................................ 41
8.1. Termination............................................................................ 41
8.2. Notice of Termination; Effect of Termination........................................... 42
8.3. Termination Fees and Expenses.......................................................... 42
8.4. Company Acknowledgment................................................................. 43
TABLE OF CONTENTS
(CONTINUED)
ARTICLE IX. INDEMNIFICATION.............................................................................. 43
9.1. Indemnification........................................................................ 43
9.2. Claims................................................................................. 43
9.3. Limitations on Indemnification......................................................... 45
9.4. Escrow Set-off......................................................................... 45
9.5. Right to Indemnification not Affected by Knowledge..................................... 45
9.6. Appointment of Stockholder Representative.............................................. 46
9.7. Liability and Authority of Stockholder Representative; Successors and Assigns.......... 47
ARTICLE X. REGISTRATION RIGHTS........................................................................... 48
10.1. Registration of Shares................................................................. 48
10.2. Obligations of Parent.................................................................. 48
10.3. Expenses............................................................................... 49
10.4. Indemnification........................................................................ 49
ARTICLE XI. MISCELLANEOUS................................................................................ 52
11.1. Amendment and Modification............................................................. 52
11.2. Waiver of Compliance; Consents......................................................... 52
11.3. Survival............................................................................... 52
11.4. Notices................................................................................ 52
11.5. Assignment; Successors and Assigns; Third Party Beneficiaries.......................... 54
11.6. Governing Law.......................................................................... 54
11.7. Consent to Jurisdiction; Venue......................................................... 54
11.8. Attorneys' Fees........................................................................ 55
11.9. Counterpart............................................................................ 55
11.10. Severability........................................................................... 55
11.11. Interpretation......................................................................... 55
11.12. Entire Agreement....................................................................... 55
11.13. Definition of "law".................................................................... 55
11.14. Rules of Construction.................................................................. 55
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and entered
into as of February 22, 2005, by and among Illumina, Inc., a Delaware
corporation ("PARENT"), Semaphore Acquisition Sub, Inc., a Delaware corporation
("MERGER SUB"), and CyVera Corporation, a Delaware corporation (the "COMPANY"),
with respect to the following facts:
RECITALS
A. The respective boards of directors of Parent, Merger Sub and the
Company have approved and declared advisable the merger of Merger Sub with and
into the Company (the "MERGER") upon the terms and subject to the conditions set
forth herein, and have determined that the Merger and the other transactions are
fair to, and in the best interests of, their respective stockholders.
B. For United States federal income tax purposes, it is intended that the
Merger will qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "CODE"), and this
Agreement is hereby adopted by the parties as a plan of reorganization for
purposes of Section 368 of the Code.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, and agreements set forth below, the
parties hereto agree as follows:
ARTICLE I.
THE MERGER
1.1. THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporation Law (the "DGCL"), (i)
Merger Sub shall merge with and into the Company, (ii) the separate corporate
existence of Merger Sub shall cease and (iii) the Company shall be the surviving
corporation and shall survive under the name "CyVera Corporation." The Company,
as the surviving corporation after the Merger, is hereinafter sometimes referred
to as the "SURVIVING CORPORATION."
1.2. CLOSING; EFFECTIVE TIME. The closing of the transactions contemplated
by this Agreement (the "CLOSING") will take place at 10:00 a.m., California
time, on a date to be specified by the parties (the "CLOSING DATE"), which shall
be no later than the second business day after satisfaction or waiver of the
conditions set forth in Articles VI and VII (other than those conditions that by
their terms are to be satisfied at the Closing, but subject to the satisfaction
or waiver of those conditions), at the offices of Xxxxxx Xxxxxx White &
XxXxxxxxx LLP, 0000 Xx Xxxxx Xxxxxxx Xxxxx, 0xx Xxxxx, Xxx Xxxxx, Xxxxxxxxxx,
unless another date or place is agreed to in writing by the parties hereto. At
the Closing, the parties shall cause the Merger to be consummated by filing a
Certificate of Merger substantially in the form of Exhibit A attached hereto
(the "CERTIFICATE OF MERGER") with the Secretary of State of the State of
Delaware, in accordance with the relevant provisions of the DGCL (the time of
such filing, or such later time
as may be agreed in writing by the parties and specified in the Certificate of
Merger, being the "EFFECTIVE TIME").
1.3. EFFECTS OF THE MERGER. The effects of the Merger shall be as provided
in this Agreement, the Certificate of Merger and the applicable provisions of
the DGCL. Without limiting the foregoing, at the Effective Time all the
property, rights, privileges, powers and franchises of the Company and Merger
Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation.
1.4. CERTIFICATE OF INCORPORATION; BYLAWS.
(a) The Certificate of Incorporation of the Company shall be amended
in the Merger to read in its entirety as set forth in Exhibit H hereto, and as
amended shall be the Certificate of Incorporation of the Surviving Corporation.
(b) From and after the Effective Time, the bylaws of the Merger Sub,
as in effect immediately prior to the Effective Time, shall be the bylaws of the
Surviving Corporation.
1.5. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The directors
and officers of Merger Sub immediately prior to the Effective Time shall be the
initial directors and officers of the Surviving Corporation, until their
respective successors are duly elected and qualified.
ARTICLE II.
CONVERSION OF SHARES
2.1. CONVERSION OF STOCK. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any Outstanding
Company Shares (as defined in Section 2.1(c)) or the holder of any outstanding
shares of capital stock of Merger Sub:
(a) Subject to Section 2.1(f), each issued and outstanding share of
Company Preferred Stock (as defined in Section 3.5) (other than Dissenting
Shares (as defined in Section 2.9) and shares to be cancelled in accordance with
Section 2.1(d)) shall be converted into the right to receive (i) that number of
shares of voting common stock, par value $0.01 per share, of Parent ("PARENT
COMMON STOCK"), equal to the quotient obtained by dividing $0.50 (the
"LIQUIDATION PREFERENCE") by the Parent Closing Price (as defined in Section
2.1(e)) plus (ii) the Common Stock Merger Consideration (as defined in Section
2.1(b)) for each share of Company Common Stock issuable upon conversion of the
share of Company Preferred Stock plus (iii) when and if any shares of Parent
Common Stock are released from the Escrow Fund pursuant to the terms of the
Escrow Agreement (as such terms are hereinafter defined in Section 2.3), the
Common Stock Escrow Merger Consideration (as defined in Section 2.1(b)) for each
share of Company Common Stock issuable upon conversion of the share of Company
Preferred Stock (collectively, the "PREFERRED STOCK MERGER CONSIDERATION").
(b) Subject to Section 2.1(f), each issued and outstanding share of
Company Common Stock (as defined in Section 3.5) (other than Dissenting Shares
and shares to be cancelled in accordance with Section 2.1(d)) shall be converted
into the right to receive (i) that
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number of shares (the "COMMON STOCK MERGER CONSIDERATION") of Parent Common
Stock equal to the quotient obtained by dividing (x) (A) the "Aggregate Merger
Consideration Value" (as defined in Section 2.2 below) divided by (B) the Parent
Closing Price, by (y) the total number of outstanding shares of Company Common
Stock on a fully diluted basis (and by way of clarification, fully converted and
exchanged) immediately prior to the Effective Time (the "COMMON STOCK EXCHANGE
RATIO") plus (ii) when and if any shares of Parent Common Stock are released
from the Escrow Fund pursuant to the terms of the Escrow Agreement (as such
terms are hereinafter defined in Section 2.3), that number of shares of Parent
Common Stock equal to the quotient obtained by dividing the number of shares so
released by the total number of outstanding shares of Company Common Stock, on
an as-converted to Common Stock basis (and, by way of clarification, excluding
outstanding and unexercised stock options and warrants), immediately prior to
the Effective Time (the "COMMON STOCK ESCROW MERGER CONSIDERATION"). The
Preferred Stock Merger Consideration, Common Stock Merger Consideration and the
Common Stock Escrow Merger Consideration are collectively referred to as the
"MERGER CONSIDERATION."
(c) As of the Effective Time, subject to Section 2.9, each
outstanding share of Company Preferred Stock and each outstanding share of
Company Common Stock (collectively referred to as the "OUTSTANDING COMPANY
SHARES") shall no longer be outstanding and shall automatically be cancelled and
shall cease to exist, and each holder of a certificate, which immediately prior
to the Effective Time represented any Outstanding Company Shares (each, a
"COMPANY CERTIFICATE"), shall cease to have any rights with respect thereto,
except the right to receive the consideration payable in respect thereof
pursuant to the terms hereof upon surrender of such Company Certificate in
accordance with Section 2.4 and release from the Escrow Fund, as the case may
be.
(d) Each Outstanding Company Share that is owned at the Effective
Time by the Company, Parent, Merger Sub or any Subsidiary (as defined in Section
2.11) thereof, shall automatically be cancelled and shall cease to exist, and no
shares of Parent Common Stock or other consideration shall be delivered in
exchange therefor.
(e) The "PARENT CLOSING PRICE" shall mean the average closing price
of Parent Common Stock quoted on the Nasdaq National Market ("NASDAQ") for the
ten (10) consecutive trading days preceding the Closing Date; provided, however,
that if such price is (i) less than $9.1809, the Parent Closing Price shall be
$9.1809 or (ii) more than $11.2211, the Parent Closing Price shall be $11.2211.
(f) Notwithstanding anything to the contrary in this Section 2.1, if
between the date of this Agreement and the Effective Time the outstanding shares
of capital stock of the Company shall have been changed into a different number
of shares or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination, exchange of shares or
similar transaction (other than the Recapitalization, as defined in Section
5.4), the consideration payable pursuant to the terms hereof shall be
appropriately adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination, exchange of shares or
similar transaction.
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(g) Each share of common stock, $0.0001 par value, of Merger Sub
outstanding immediately prior to the Effective Time shall be converted into and
shall represent one share of common stock, $0.0001 par value, of the Surviving
Corporation.
(h) At the Effective Time, to the extent any Outstanding Company
Shares are subject to restrictions on transfer, vesting, or otherwise, the
Parent Common Stock issued in exchange therefor in the Merger shall be subject
to the same restrictions.
2.2. AGGREGATE MERGER CONSIDERATION VALUE. For purposes of this Agreement,
the "Aggregate Merger Consideration Value" shall mean $14,960,000 plus the
Escrow Adjustment (as defined in Section 2.3), minus each of the following:
(a) The dollar value of (x) any bonuses or retention amounts (or
similar amounts) to be paid pursuant to the Company's management pursuant to a
bonus plan adopted by the Compensation Committee of the Company Board on
November 12, 2004, and by the Company Board on January 13, 2005 (the "MANAGEMENT
BONUS PLAN") and (y) any severance payments paid or payable by the Company to
any of its employees;
(b) Any amounts borrowed by, or advanced to, the Company in
connection with any loans made to the Company under the Loan and Security
Agreement dated January 18, 2005, between Parent and the Company (the "LOAN
AGREEMENT"), together with all interest and penalties thereon, if any, to the
extent outstanding and not repaid by the Company prior to the Effective Time;
(c) Any amount paid or payable to holders of Company Common Stock
pursuant to the Recapitalization (as defined in Section 5.4);
(d) Any fees and expenses incurred by the Company directly in
connection with this Agreement and the transactions contemplated hereby
(including, but not limited to, fees relating to the Audit, as defined in
Section 5.15) in excess of $150,000;
(e) All costs, including all premiums and related expenses, in
excess of $50,000, related to the continuation of the Company's existing
director's and officer's liability insurance policy or policies beyond the
Effective Time;
(f) The aggregate value of the Liquidation Preference for all shares
of Company Preferred Stock; and
(g) An amount equal to the product of (x) (A) the Escrow Fund
divided by (B) the total number of outstanding shares of Company Common Stock on
a fully diluted basis (and, by way of clarification, fully converted and
exchanged) immediately prior to the Effective Time, and (y) the aggregate number
of shares of Company Common Stock subject to Company Options outstanding
immediately prior to the Effective Time (the "OPTION ADJUSTMENT AMOUNT").
2.3. ESCROW. At the Effective Time, that number of shares of Parent Common
Stock equal to $2,540,000 minus the Escrow Adjustment, divided by the Parent
Closing Price (the "ESCROW FUND"), shall be delivered to Comerica Bank (the
"ESCROW AGENT") to be held for a period of one year from the Closing Date
pursuant to the terms of that certain Escrow Agreement
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attached hereto as Exhibit B (the "ESCROW AGREEMENT"). The Escrow Fund shall be
held by the Escrow Agent in accordance with the Escrow Agreement to satisfy any
claims for indemnification made by Parent or the Surviving Corporation pursuant
to Article IX hereof. The size of the Escrow Fund shall be calculated pursuant
to the terms hereof and shall be set forth in Schedule 2.3 at Closings.
For purposes hereof, "ESCROW ADJUSTMENT" shall mean the dollar amount
resulting from the following formula:
$333,750((A-70)/30)
where "A" is the percentage (expressed as a number) of all outstanding
shares of Company Common Stock held by persons who have signed a Release.
2.4. EXCHANGE OF COMPANY STOCK CERTIFICATES.
(a) Promptly after the Effective Time, Parent shall cause to be
mailed to each holder of Outstanding Company Shares immediately prior to the
Effective Time a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Company Certificates shall pass,
only upon proper delivery of the Company Certificates to Parent) along with the
Stockholder Acknowledgments and Agreements (as defined in Section 5.6) and
instructions for surrender of the Company Certificates. Upon surrender to Parent
of a Company Certificate(s), the holder thereof shall be entitled to receive in
exchange therefor the consideration payable in respect thereof provided for in
this Agreement, at the times provided for herein. Holders that have not already
done so shall return to Parent along with such Company Certificate(s) fully
executed Stockholder Acknowledgments and Agreements as required hereunder. No
Merger Consideration will be issued to a Person (as defined in Section 2.11) who
is not the registered owner of a surrendered Company Certificate, unless (i) the
Company Certificate so surrendered has been properly endorsed or otherwise is in
proper form for transfer, and (ii) such Person shall either (A) pay any transfer
or other tax required by reason of such issuance or (B) establish to the
satisfaction of Parent that such tax has been paid or is not applicable. Until
surrendered in accordance with the provisions of this Section 2.4, from and
after the Effective Time, each Company Certificate shall be deemed to represent,
for all purposes, only the right to receive the consideration payable in respect
of the Outstanding Company Shares formerly represented thereby as determined in
accordance with Section 2.1, payable at the times provided for therein and
without interest.
(b) Notwithstanding anything to the contrary in this Agreement,
neither Parent nor the Surviving Corporation shall be liable to any holder of
Outstanding Company Shares for cash delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(c) In the event that any Company Certificates shall have been lost,
stolen or destroyed, Parent shall issue and pay in respect of such lost, stolen
or destroyed Company Certificates, upon the making of an affidavit of that fact
by the holder thereof, at the times provided therein, the consideration payable
in respect thereof in accordance with Section 2.1; provided, however, that
Parent may, in its discretion and as a condition precedent to the issuance
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thereof, require the owner of such lost, stolen or destroyed Company Certificate
to deliver a bond in such amount as it may reasonably direct as indemnity
against any claim that may be made against Parent with respect to the Company
Certificates alleged to have been lost, stolen or destroyed.
2.5. FRACTIONAL SHARES. No fractional shares of Parent Common Stock shall
be issued in connection with the Merger, no dividends or other distributions of
Parent shall relate to fractional shares that would otherwise be issuable
pursuant to the terms hereof, and such fractional shares that would otherwise be
issuable shall not entitle the owner thereof to voting or any other rights as a
stockholder of Parent. Instead, each holder of Outstanding Company Shares who
would otherwise be entitled to a fractional share of Parent Common Stock (after
aggregating all fractional shares of Parent Common Stock to be received by such
holder in connection with the Merger) shall receive from Parent an amount of
cash (rounded down to the nearest whole cent) equal to the product obtained by
multiplying (i) the fractional share that would otherwise be issuable by (ii)
the Parent Closing Price.
2.6. COMPANY STOCK OPTIONS.
(a) At the Effective Time, each outstanding Company Option (as
defined in Section 3.5(b)) granted under the Company's 2003 Employee, Director
and Consultant Stock Plan, as amended (the "COMPANY STOCK PLAN"), whether vested
or unvested, held by an employee of the Company immediately prior to the
Effective Time shall be assumed by Parent. Any and all Outstanding Company
Options not held by an employee of the Company immediately prior to the
Effective Time, and any options, warrants and other securities convertible into
or exchangeable for shares of Company Common Stock immediately prior to the
Effective Time shall be cancelled and/or terminated without any consideration
being payable in respect thereof and shall no longer be outstanding at the
Effective Time. Each Company Option assumed by Parent under this Agreement (an
"ADJUSTED OPTION") shall continue to have, and be subject to, the same terms and
conditions (including, without limitation, all vesting requirements and
restrictions or limitations on transfer) as are in effect immediately prior to
the Effective Time, except that, (A) such option shall be exercisable for that
number of whole shares of Parent Common Stock equal to the product of the number
of shares of Company Common Stock that were issuable upon exercise of such
option immediately prior to the Effective Time multiplied by the Option Exchange
Ratio (as defined below) and rounded down to the nearest whole number of shares
of Parent Common Stock and (B) the per share exercise price for the shares of
Parent Common Stock issuable upon exercise of such assumed option shall be equal
to the quotient obtained by dividing the exercise price per share of Company
Common Stock at which such option was exercisable immediately prior to the
Effective Time by the Option Exchange Ratio, rounded up to the nearest whole
cent. The Company shall take all steps, including the adoption of any necessary
resolutions and the effectuation of any necessary amendments to the Company
Stock Plan, as are necessary to implement the provisions of this Section 2.6.
The aggregate number of shares of Parent Common Stock purchasable upon exercise
of the Adjusted Options is referred to herein as the "OPTION SHARES."
For purposes of this Section 2.6, "OPTION EXCHANGE RATIO" shall mean the
quotient obtained by dividing (x) (A) the Aggregate Merger Consideration Value
plus the Escrow Fund plus the Option Adjustment Amount divided by (B) the Parent
Closing Price, by (y) the total
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number of outstanding shares of Company Common Stock on a fully diluted basis
(and by way of clarification, fully converted and exchanged) immediately prior
to the Effective Time.
(b) Within forty-five (45) days after the Effective Time, Parent
shall prepare and file with the SEC a registration statement on Form S-8 (or
another appropriate form) registering the Option Shares. Such registration
statement shall be kept effective (and the current status of the prospectus or
prospectuses required thereby shall be maintained) at least for so long as any
Adjusted Options remain outstanding.
(c) As soon as practicable after the Effective Time, Parent shall
deliver to all employees of the Company that held any outstanding Company
Options immediately prior to the Effective Time (the "OPTIONEES") appropriate
notices setting forth such Optionees' rights pursuant to the Adjusted Options
and stating that such Company Options have been assumed by Parent and shall
continue in effect on the same terms and conditions (subject to the adjustments
required by this Section 2.6 after giving effect to the Merger).
2.7. WITHHOLDING RIGHTS. Parent shall be entitled to deduct and withhold
from the Merger Consideration otherwise payable to any holder of Outstanding
Company Shares pursuant to Section 2.1 such amounts as may be required to be
deducted and withheld with respect to the making of such payment under the Code
or under any state or local tax law. If any withholding obligation may be
avoided by such holder providing information to Parent, Parent shall request
such information before withholding. To the extent that amounts are so withheld
and paid over to the appropriate taxing authority, Parent will be treated as
though it withheld from the type of consideration from which withholding is
required an appropriate amount otherwise payable pursuant to this Agreement to
any holder of Outstanding Company Shares in order to provide for such
withholding obligation.
2.8. TAX CONSEQUENCES. For United States income tax purposes, it is
intended by the parties hereto that the Merger qualify as a reorganization
within the meaning of Section 368(a) of the Code and that this Agreement be a
"PLAN OF REORGANIZATION." Except as contemplated by this Agreement, none of the
parties will knowingly take any action before or after the Effective Time that
would cause the Merger to fail to qualify as a reorganization within the meaning
of Section 368(a) of the Code. The Company hereby acknowledges and agrees that
Parent and Merger Sub have not given any tax advice in connection with the
Merger or otherwise. The Company further acknowledges and agrees that it has had
an opportunity to consult with its tax advisor as to the tax consequences
arising from or related to the Merger and all other transactions contemplated
herein.
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2.9. DISSENTING SHARES.
(a) Notwithstanding anything to the contrary in this Agreement,
Outstanding Company Shares held by any holder who has properly exercised and
perfected appraisal rights for such shares in accordance with Section 262 of the
DGCL ("DISSENTING SHARES") shall not be converted into or represent the right to
receive any Merger Consideration, but the holder of the Dissenting Shares shall
be entitled only to such rights as are granted by applicable law.
(b) Notwithstanding the provisions of Section 2.9(a), if any holder
of Dissenting Shares shall effectively withdraw or lose (through failure to
perfect or otherwise) such holder's appraisal rights under applicable law, then,
as of the later of the Effective Time or the occurrence of such event, each of
such holder's Outstanding Company Shares shall automatically be converted into
and represent only the right to receive the consideration payable in respect
thereof, as provided in this Agreement, upon surrender of the applicable Company
Certificates or release from the Escrow Fund, as the case may be, without
interest.
(c) The Company shall give the notice specified in Section 262(d) of
the DGCL to all stockholders of the Company in accordance with the requirements
of such Section.
(d) The Company shall give Parent (i) prompt notice of any demands
for appraisal received by the Company, withdrawals of such demands, and any
other related instruments served pursuant to Section 262 of the DGCL and
received by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the DGCL. The Company
shall not, except with the prior written consent of Parent, make any payment
with respect to any demands for appraisal or offer to settle or settle any such
demands.
2.10. RESTRICTED STOCK. The Merger and the other transactions contemplated
hereby shall qualify as a private placement under Rule 506 of Regulation D under
the Securities Act of 1933 (the "SECURITIES ACT") and the shares of Parent
Common Stock issued in connection with the Merger shall constitute "restricted
securities" under the Securities Act. Parent shall have no obligation to
register such shares under the Securities Act except as set forth in Article X.
The shares of Parent Common Stock issued in connection with the Merger may not
be offered, sold, assigned, pledged or otherwise transferred, except following
registration of such shares under the Securities Act or in reliance on an
exemption from registration under the Securities Act. The certificates
representing the Parent Common Stock shall bear the following restrictive
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), OR ANY STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, OR
OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED PURSUANT TO THE
PROVISIONS OF THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR AN OPINION
OF COUNSEL SATISFACTORY TO PARENT IS OBTAINED AND DELIVERED BY THE HOLDER
OF THIS CERTIFICATE STATING THAT SUCH OFFER, SALE, ASSIGNMENT, PLEDGE, OR
8
TRANSFER IS EXEMPT FROM SUCH REGISTRATION OR QUALIFICATION.
2.11. CERTAIN DEFINED TERMS. The following capitalized terms used in this
Agreement shall have the following meanings:
(a) "AFFILIATE" of, or "AFFILIATED" with, a specified Person shall
mean a Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the specified
Person.
(b) "EXCESSIVE APPRAISAL COSTS" means any and all amounts paid by
Parent, Merger Sub or any of their respective Affiliates or Subsidiaries with
respect to Dissenting Shares which are in excess (on a per shares basis) of the
Merger Consideration that would otherwise be payable in respect thereof pursuant
to this Agreement, based on the Parent Closing Price.
(c) "PERSON" shall mean any individual, group, organization,
corporation, partnership, joint venture, limited liability company, trust or
entity of any kind.
(d) "SUBSIDIARY" when used with respect to any Person, shall mean
any corporation or other organization, whether incorporated or unincorporated,
of which (A) at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the board of directors
or others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person
(through ownership of securities, by contract or otherwise) or (B) such Person
or any Subsidiary of such Person is a general partner of any general partnership
or a manager of any limited liability company.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company makes to Parent and Merger Sub the representations and
warranties contained in this Article III, in each case subject to the exceptions
set forth in the disclosure statement, dated as of the date hereof and delivered
by the Company to Parent prior to the execution of this Agreement (the "COMPANY
DISCLOSURE STATEMENT"). The Company Disclosure Statement shall be arranged in
schedules corresponding to the numbered and lettered Sections of this Article
III, and the disclosure in any schedule of the Company Disclosure Statement
shall qualify only the corresponding Section of this Article III. "COMPANY'S
KNOWLEDGE" or similar expressions shall mean the actual knowledge of all
directors and executive officers of the Company, or such actual knowledge as
would exist after due inquiry.
3.1. ORGANIZATION, ETC.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of Delaware, and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. The Company is duly qualified as a foreign
corporation to do business, and is in good standing, in
9
each jurisdiction where the character of its owned or leased properties or the
nature of its activities makes such qualification necessary.
(b) The Company is not in violation of any provision of its
Certificate of Incorporation, bylaws or any other charter or governing
documents. Schedule 3.1(b) of the Company Disclosure Statement sets forth (i)
each jurisdiction in which the Company is qualified to do business as a foreign
corporation, and (ii) the names of the current directors and officers of the
Company. The Company has made available to Parent or its counsel accurate and
complete copies of its Certificate of Incorporation, bylaws and any other
charter documents, as currently in effect, and all such documents (including
amendments, restatements and corrections thereof) comply in all respects with
the DGCL and are enforceable in accordance with their respective terms. All
factual statements set forth in, certified by, or implied by the Certificate of
the General Counsel of CiDRA Corporation dated February 16, 2005, a copy of
which was delivered to Parent, were, as of the time of the delivery of such
certificate, true and accurate in all respects.
(c) The Company solicited the consent of each stockholder of the
Company in connection with each action of the stockholders of the Company taken
by written consent, or in connection therewith provided the notice required by
Section 228(e) of the DGCL.
3.2. AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has full corporate
power and authority to (i) execute and deliver this Agreement, and (ii) assuming
the approval and adoption of this Agreement by a majority in voting power of the
Outstanding Company Shares, which is the only vote of Company stockholders
required under the DGCL and the Company's Certificate of Incorporation (the
"STOCKHOLDER APPROVAL"), consummate the Merger and the other transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the Merger and the other transactions contemplated hereby and
thereby have been duly and validly authorized by the unanimous vote of the board
of directors of the Company (the "COMPANY BOARD") and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the Merger and the other transactions contemplated hereby and
thereby other than the Stockholder Approval. This Agreement has been duly and
validly executed and delivered by the Company. This Agreement constitutes, and
each of the other documents, agreements or instruments to be delivered hereunder
by the Company when executed and delivered by the Company will be duly and
validly executed and delivered by the Company and will constitute, assuming due
authorization, execution and delivery by Parent and Merger Sub, a valid and
binding agreement of the Company, and subject to the Stockholder Approval,
enforceable against the Company in accordance with its terms, except to the
extent limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting the enforcement of creditors' rights generally or by
general equitable principles.
3.3. NO VIOLATIONS, ETC. No filing with or notification to, and no permit,
authorization, consent or approval of, any court, administrative agency,
commission, governmental division or department, tribunal, quasi-governmental
authority or other governmental or regulatory body, authority or instrumentality
("GOVERNMENT ENTITY") is necessary on the part of the Company for the
consummation by the Company of the Merger and the other transactions
contemplated hereby, except for (i) the filing of the Certificate of Merger as
required by the DGCL and (ii) compliance with the applicable requirements of the
Securities
10
Act, state securities or "Blue Sky" laws and state takeover laws. Neither the
execution and delivery of this Agreement nor consummation of the Merger and the
other transactions contemplated hereby and thereby nor compliance by the Company
with all of the provisions hereof and thereof, subject to obtaining Stockholder
Approval (i) conflict with or result in any violation of any provision of the
Certificate of Incorporation, bylaws or other charter document of the Company,
(ii) violate any material order, writ, injunction, decree, statute, rule or
regulation applicable to the Company, or by which any of its properties or
assets may be bound, or (iii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default under, or result
in any material change in, or give rise to any right of termination,
cancellation, acceleration, redemption or repurchase by any other person under,
any of the terms, conditions or provisions of any material note, bond, mortgage,
indenture, deed of trust, license, lease, contract, agreement or other
instrument or obligation to which the Company is a party or by which the Company
or any of its properties or assets may be bound. Schedule 3.3 of the Company
Disclosure Statement lists all consents, waivers, notifications, disclosures and
approvals required to be obtained or made in connection with the consummation of
the transactions contemplated hereby under any of the Company's notes, bonds,
mortgages, indentures, deeds of trust, licenses or leases, contracts, agreements
or other instruments or obligations. The Company, together with any "ultimate
parent entity" (as such term is defined in regulations under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), at 16 C.F.R. 801.1(a)(3)) does not meet the size of person test set forth
in the XXX Xxx xx 00 X.X.X. 00x(x).
3.4. BOARD APPROVAL. The Company Board has, at a meeting duly held on
February 18, 2005, (i) determined that this Agreement and the Merger, and the
transactions contemplated in connection therewith, are fair to and in the best
interests of the Company and its stockholders, (ii) approved and adopted this
Agreement, (iii) recommended approval and adoption of this Agreement to the
stockholders of the Company, and (iv) authorized that the Company take all
action necessary to exempt the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and thereby from the
provisions of all applicable state anti-takeover statutes and regulations,
including, but not limited to, any such statutes or regulations provided for
pursuant to the DGCL.
3.5. CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
10,100,000 shares of common stock, par value $0.001 per share (the "COMPANY
COMMON STOCK") and 10,000,000 shares of preferred stock, par value $0.001 per
share (the "COMPANY PREFERRED STOCK"), of which 5,000,000 shares are designated
Series A Preferred Stock and 5,000,000 shares are designated Series A-1
Preferred Stock. As of February 22, 2005, (i) 4,009,000 shares of Company Common
Stock were issued and outstanding, (ii) 5,000,000 shares of Series A Preferred
Stock were issued and outstanding, (iii) no shares of Series A-1 Preferred Stock
were issued and outstanding and (iv) 469,000 shares of Company Common Stock were
reserved for issuance upon the exercise of outstanding options granted pursuant
to the Company Stock Plan. All of the outstanding shares of Company Common Stock
and Company Preferred Stock are, and all shares which may be issued pursuant to
the exercise of outstanding Company Options or otherwise will be, when issued in
accordance with the respective terms thereof, duly authorized, validly issued,
fully paid and non-assessable. The rights, preferences and privileges of the
11
Company Preferred Stock are as set forth in the Certificate of Incorporation of
the Company. Set forth on Schedule 3.5(a) of the Company Disclosure Statement is
a complete listing of the holders of all Outstanding Company Shares and, to the
Company's Knowledge, each such holder has full voting power with respect to all
shares set forth opposite his/her respective name.
(b) Except as set forth in Schedule 3.5(b) of the Company Disclosure
Statement, there are no other equity securities of any class of the Company.
Except for the options to purchase Company Common Stock granted by the Company
under the Company Stock Plan (the "COMPANY OPTIONS"), there are no warrants,
options, convertible securities, calls, rights, stock appreciation rights,
preemptive rights, rights of first refusal, or agreements or commitments of any
nature obligating the Company to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other equity interests
of the Company, or obligating the Company to grant, issue, extend, accelerate
the vesting of, or enter into, any such warrant, option, convertible security,
call, right, stock appreciation right, preemptive right, right of first refusal,
agreement or commitment. There are no voting trusts, proxies or other agreements
or understandings with respect to the capital stock of the Company to which the
Company is a party or of which the Company has Knowledge.
(c) True and complete copies of the Company Stock Plan and of the
forms of all agreements and instruments relating to or issued under the Company
Stock Plan, have been provided to, or made available to, Parent or its counsel.
Such agreements, instruments, and forms have not been amended, modified or
supplemented except as provided or made available to Parent or its counsel, and
there are no agreements to amend, modify or supplement any such agreements,
instruments or forms.
(d) Schedule 3.5(d) of the Company Disclosure Statement sets forth
the following information, as of February 22, 2005, with respect to each Company
Option: the aggregate number of shares issuable thereunder, the type of option,
the grant date, the expiration date, the exercise price and the vesting
schedule. Each Company Option was granted in accordance with the terms of the
Company Stock Plan. Each holder of a Company Option has executed a stock option
agreement in the form provided to counsel for Parent. Except as set forth in
Schedule 3.5(d) of the Company Disclosure Statement, no Company Options are
"incentive stock options" within the meaning of Section 422 of the Code. The
terms of the Company Stock Plan do not prohibit the assumption of the Options as
provided in Section 2.6. Consummation of the Merger will not accelerate vesting
of any Company Option.
3.6. FINANCIAL STATEMENTS. The Company has provided to Parent or its
counsel copies of: the unaudited balance sheets of the Company as of December
31, 2004 (the "COMPANY BALANCE SHEET"), and the related unaudited income
statements and statements of cash flows for year ended December 31, 2004
(collectively, the "COMPANY FINANCIAL STATEMENTS"). The Company was not in
existence prior to October 2003. The Company Financial Statements (a) were
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved and (b) fairly present in all material respects the financial position
of the Company as at the respective dates thereof and the results of its
operations and cash flows for the periods indicated in accordance with GAAP
(subject to normal year-end accruals and adjustments).
12
3.7. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in Schedule
3.7 of the Company Disclosure Statement, the Company does not have any material
liabilities (absolute, accrued, contingent or otherwise) other than (i)
liabilities included in the Company Balance Sheet and the related notes thereto,
(ii) normal or recurring liabilities incurred since December 31, 2004 (the
"BALANCE SHEET DATE") in the ordinary course of business consistent with past
practice and not in excess of $10,000 individually or in the aggregate, and
(iii) liabilities under this Agreement and any related document.
3.8. ABSENCE OF CHANGES OR EVENTS. Except as contemplated by this
Agreement and except as set forth in Schedule 3.8 of the Company Disclosure
Statement, since the Balance Sheet Date, the Company has not, directly or
indirectly:
(a) formed any Subsidiary;
(b) authorized for issuance, issued, sold, delivered, granted or
issued any options, warrants, calls, subscriptions or other rights for, or
otherwise agreed or committed to issue, sell or deliver any shares of any class
of capital stock of the Company or any securities convertible into or
exchangeable or exercisable for shares of any class of capital stock of the
Company other than pursuant to and in accordance with the Company Stock Plan, or
as otherwise set forth on Schedule 3.5(b) or Schedule 3.5(d) of the Company
Disclosure Statement;
(c) (i) created or incurred any indebtedness for borrowed money
exceeding $10,000 in the aggregate, (ii) assumed, guaranteed, endorsed or
otherwise as an accommodation become responsible for the obligations of any
other individual, firm or corporation, made any loans or advances to any other
individual, firm or corporation exceeding $10,000 in the aggregate (except in
the ordinary course of business consistent with past practice), or (iii) entered
into any oral or written material agreement or any commitment or transaction or
incurred any liabilities material to the Company taken as a whole, or involving
in excess of $10,000;
(d) instituted any change in accounting methods, principles or
practices other than as required by GAAP and disclosed in the notes to the
Company Financial Statements;
(e) revalued any assets, including without limitation, writing down
the value of inventory or writing off notes or accounts receivable in excess of
amounts previously reserved as reflected in the Company Balance Sheet;
(f) suffered any damage, destruction or loss, whether covered by
insurance or not, except for such as would not, individually and in the
aggregate exceed $10,000;
(g) (i) increased in any manner the compensation of any of its
directors, officers or, other than in the ordinary course of business consistent
with past practice, non-officer employees; (ii) granted any severance or
termination pay to any Person; (iii) entered into any oral or written
employment, consulting, indemnification or severance agreement with any Person;
(iv) adopted, become obligated under, or amended any employee benefit plan,
program or arrangement; or (v) repriced any Company Options;
(h) sold, transferred, leased, licensed, pledged, mortgaged,
encumbered, or otherwise disposed of, or agreed to sell, transfer, lease,
license, pledge, mortgage, encumber, or
13
otherwise dispose of, any material properties, (including intangibles, real,
personal or mixed), except in the ordinary course of business consistent with
past practice;
(i) amended its Certificate of Incorporation, bylaws, or any other
charter document, or 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;
(j) made any capital expenditures exceeding $10,000 in the
aggregate;
(k) paid, discharged or satisfied any material claims, liabilities
or obligations (absolute, accrued, contingent or otherwise), other than the
payment, discharge or satisfaction of liabilities (including, without
limitation, accounts payable) in the ordinary course of business consistent with
past practice, or collected, or accelerated the collection of, any amounts owed
(including, without limitation, accounts receivable) other than their collection
in the ordinary course of business consistent with past practice;
(l) waived, released, assigned, settled or compromised any material
claim or litigation, or commenced a lawsuit other than for the routine
collection of bills; or
(m) agreed or committed to do any of the things described in the
preceding clauses (a) through (l).
3.9. NO SUBSIDIARIES. The Company has no Subsidiaries, does not directly
or indirectly own any equity interest in any Person, has no rights or
contractual obligations to acquire any such interest and is not a party to any
partnership or joint venture.
3.10. LITIGATION.
(a) There is no private or governmental claim, action, suit (whether
in law or in equity), investigation or proceeding of any nature ("ACTION")
pending or, to the Company's Knowledge, threatened against the Company, or any
of its officers and directors (in their capacities as such), or involving any of
their assets, before any Government Entity. There is no Action pending or, to
the Company's Knowledge, threatened which in any manner challenges, seeks to, or
is reasonably likely to prevent, enjoin, alter or delay the transactions
contemplated by this Agreement.
(b) There is no outstanding judgment, order, writ, injunction or
decree of any Government Entity in a proceeding to which the Company, or any of
its assets is or was a party or by which the Company, or any of its assets is
bound.
3.11. INSURANCE. Schedule 3.11 of the Company Disclosure Statement lists
all insurance policies (including without limitation workers' compensation
insurance policies) covering the business, properties or assets of the Company,
the premiums and coverages of such policies, and all claims made against any
such policies since the Company's inception. All such policies are in effect,
and true and complete copies of all such policies have been made available to
Parent or its counsel. The Company has not received notice of the cancellation
or threat of cancellation of any of such policy.
14
3.12. CONTRACTS AND COMMITMENTS.
(a) Other than as set forth in Schedule 3.12 of the Company
Disclosure Statement, the Company is not a party to or bound by any written
contract, obligation or commitment or, to the Company's Knowledge, any oral
contract, obligation or commitment, of any type in any of the following
categories which is currently in effect:
(i) agreements or arrangements that contain severance pay,
understandings with respect to expatriate benefits, or post-employment
liabilities or obligations of such company;
(ii) agreements or plans under which benefits will be
increased or accelerated by the occurrence of any of the transactions
contemplated by this Agreement or under which the value of the benefits will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(iii) agreements, contracts or commitments relating to the
disposition or acquisition of assets other than in the ordinary course of
business consistent with past practice, or relating to an ownership interest in
any corporation, partnership, joint venture or other business enterprise;
(iv) agreements, contracts or commitments (A) relating to the
acquisition, transfer, development, sharing, license (to or by the Company), or
use of any Company IP Right, as defined in Section 3.16 (except for any contract
pursuant to which any Company IP Right is licensed to the Company under any
third party software license generally available to the public), or (B) with
respect to the manufacturing, distribution or marketing of any products of the
Company;
(v) agreements, contracts or commitments for the purchase of
materials, supplies or equipment: (A) that provide for purchase prices the
Company reasonably believes are substantially greater than those presently
prevailing for such materials, supplies or equipment, (B) that are with sole or
single source suppliers, or (C) from any Affiliate of the Company for purchase
prices substantially greater than those presently prevailing for such materials,
supplies or equipment;
(vi) guarantees or other agreements, contracts or commitments
under which the Company is absolutely or contingently liable for (A) the
performance of any other person, firm or corporation, or (B) the whole or any
part of the indebtedness or liabilities of any other person, firm or
corporation;
(vii) powers of attorney authorizing the incurrence of a
material obligation on the part of the Company;
(viii) agreements, contracts or commitments which limit or
restrict (A) where the Company may conduct business, (B) the type or lines of
business (current or future) in which the Company may engage, or (C) any
acquisition of assets or stock (tangible or intangible) by the Company;
15
(ix) agreements, contracts or commitments containing any
agreement with respect to a change of control of the Company;
(x) agreements, contracts or commitments for the borrowing or
lending of money, or the availability of credit, other than pursuant to the Loan
Agreement;
(xi) agreements, contracts or commitments for the provision of
indemnification benefits to any Person;
(xii) any hedging, option, derivative or other similar
transaction and any foreign exchange position or contract for the exchange of
currency; or
(xiii) any joint marketing or joint development agreement, or
any license or distribution agreement relating to any product of the Company
(other than standard customer, distributor and reseller license agreements
entered into by the Company in the ordinary course of business consistent with
past practice).
(b) Neither the Company, nor to the Company's Knowledge, any other
party thereto has breached, violated or defaulted under, or received notice that
it has breached, violated or defaulted under, nor to the Company's Knowledge
does there exist any condition under which, with the passage of time or the
giving of notice or both, is reasonably expected to cause such a breach,
violation or default under, any material agreement, contract or commitment to
which the Company is a party or, to the Company's Knowledge, by which the
Company or any of its properties or assets may be bound (any such agreement,
contract or commitment, a "COMPANY CONTRACT"). All of the Company Contracts are
listed on Schedule 3.12 of the Company Disclosure Statement.
(c) Each Company Contract is a valid, binding and enforceable
obligation of the Company that is a party thereto and to the Company's
Knowledge, of the other party or parties thereto, in accordance with its terms,
and is in full force and effect, except to the extent enforcement may be limited
by applicable bankruptcy, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights generally or by general principles of equity.
(d) An accurate and complete copy of each Company Contract has been
provided or made available to Parent or its counsel.
3.13. LABOR MATTERS; EMPLOYMENT AND LABOR CONTRACTS.
(a) The Company is not a party to any union contract or other
collective bargaining agreement, nor to the Company's Knowledge, are there any
activities or proceedings of any labor union to organize any the Company's
employees. The Company is in material compliance with all applicable (i) laws,
regulations and agreements respecting employment and employment practices, (ii)
terms and conditions of employment and (iii) occupational health and safety
requirements.
(b) There is no labor strike, slowdown or stoppage pending (or to
the Company's Knowledge any labor strike or stoppage threatened) against the
Company. No petition for certification has been filed and is pending before the
National Labor Relations Board with
16
respect to any employees of the Company who are not currently organized. The
Company has no obligations under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA"), with respect to any former employees or
qualifying beneficiaries thereunder. There are no controversies pending or, to
the Company's Knowledge, threatened, between the Company and any of its
employees.
(c) Except as set forth in Schedule 3.13(c) of the Company
Disclosure Statement, the Company is not a party to or bound by any employment
agreements or arrangements that are not terminable at will by the Company.
(d) To the Company's Knowledge, no current or former employee has
alleged, notified the Company in writing or any other form, complained of, or
made a claim or brought any legal or administrative proceeding alleging any
improper employment acts or discriminatory conduct by the Company or its agents.
(e) Set forth in Schedule 3.13 of the Company Disclosure Statement
is a complete list of all agreements between the Company and any of its
officers, directors, employees, agents or consultants.
3.14. COMPLIANCE WITH LAWS.
(a) The Company has not materially violated or failed to comply
with, any law of any Government Entity. The Company has all permits, licenses
and franchises from Government Entities required to conduct its business as now
being conducted and as proposed to be conducted.
(b) All returns and information made or given by the Company to any
governmental authority in any country regarding the importation, exportation or
re-exportation of products, services, or technology has been correct, and the
Company (i) has at all times been in material compliance with the regulations of
all U.S. government departments and agencies, including, without limitation, the
U.S. Customs Service, the U.S. Department of Commerce, the U.S. Department of
the Treasury and the U.S. Department of State, (ii) has obtained all necessary
permits required by any foreign government department or agency or any U.S.
government department or agency, relating to the importation of any product into
the U.S. from any foreign country or exportation or re-exportation of any
product from the U.S. or any foreign entity to any foreign country, (iii) has
maintained all documents and records as required by any U.S. government
department or agency, including all documents relevant to those imports and
exports, (iv) is not, and has not been, the subject of any audit, assessment,
review, investigation or inquiry by any governmental, judicial, administrative
or regulatory body or agency in any country regarding the importation,
exportation or re-exportation of products, services, or technology, and (v) has
never been convicted of, or indicted for, a violation of any law, regulation or
order of any governmental, judicial, administrative or regulatory body or agency
in any country relating to the importation, exportation or re-exportation of
products, services, or technology.
3.15. GOVERNMENT CONTRACTS. Except as set forth in Schedule 3.15 of the
Company Disclosure Statement, the Company currently is not and has never been a
party to a Government
17
Contract and has never tendered a bid for a Government Contract. For purposes of
this Section, "GOVERNMENT CONTRACT" shall mean any prime contract, subcontract,
letter contract, purchase order or delivery order executed or submitted to or on
behalf of any Government Entity or any prime contractor or higher-tier
subcontractor, or under which any Government Entity or any such prime contractor
or subcontractor otherwise has or may acquire any right or interest.
3.16. INTELLECTUAL PROPERTY RIGHTS. For purposes of this Agreement,
"INTELLECTUAL PROPERTY" shall mean all patents, copyrights, trade secrets,
know-how, mask works, trademarks, trade dress and service marks, and all other
industrial or intellectual property rights recognized in any jurisdiction and
applications or registrations in any of the foregoing.
(a) Except as set forth in Schedule 3.16(a) of the Company
Disclosure Statement, the Company owns or has the right to use all Intellectual
Property necessary to conduct its business as now conducted and as proposed to
be conducted (such Intellectual Property and the rights thereto are collectively
referred to herein as the "COMPANY IP RIGHTS"). To the Company's Knowledge, all
Company IP Rights represent valid, enforceable and unexpired rights.
(b) Schedule 3.16(b) of the Company Disclosure Statement sets forth,
with respect to all Company IP Rights owned by or licensed to the Company and
registered with any Government Entity or for which an application for
registration has been filed with any Government Entity, (i) a brief description
of such Company IP Rights, and (ii) the names of the jurisdictions covered by
the applicable issuance, registration or application. Schedule 3.16(b) of the
Company Disclosure Statement identifies and provides a brief description of, and
identifies any ongoing royalty or payment obligations with respect to, each
Company IP Right that is licensed or otherwise made available to the Company by
any Person (except for any Company IP Right that is licensed to the Company
under any third party software license generally available to the public), and
identifies the agreement under which such Company IP Right is being licensed or
otherwise made available to the Company. The Company has good, valid and
marketable title to all of the Company IP Rights (except for Intellectual
Property comprising Company IP Rights that are merely licensed to the Company),
free and clear of all encumbrances, except (i) as set forth in Schedule 3.16(b)
of the Company Disclosure Statement and (ii) for any lien for current taxes not
yet due and payable. The Company has a valid right to use and otherwise exploit
all Company IP Rights in the manner necessary for its business as currently
conducted and currently planned to be conducted and, as to Intellectual Property
comprising Company IP Rights that are merely licensed to the Company, the
Company has a valid license. The Company has not developed jointly, nor does it
jointly own or have joint rights with any other Person relating to, any Company
IP Rights that are material to the business of the Company.
(c) The Company has taken commercially reasonable measures and
precautions to protect and maintain the confidentiality and secrecy of all
Company IP Rights (except Company IP Rights whose value would be unimpaired by
public disclosure) and otherwise to maintain and protect the value of all
Company IP Rights.
(d) To the Company's Knowledge, it is not misappropriating or making
any unlawful use of, and the Company has not at any time misappropriated or made
any unlawful
18
use, of, or received any notice or other communication (in writing or otherwise)
of any actual, alleged, possible or potential infringement, misappropriation or
unlawful use of, any valid, enforceable and unexpired Intellectual Property
rights owned or used by any other Person. To the Company's Knowledge, no Person
is misappropriating, infringing or making unlawful use of any of the Company IP
Rights. To the Company's Knowledge, the Company has not inadvertently lost trade
secret status for any information material to the Company or the confidential
information of third parties.
(e) The Company has not licensed (in writing, orally, or otherwise)
any of the Company IP Rights to any Person, nor does any Person have an option
to license any Company IP Rights owned by the Company. The Company has not
granted to any Person any other right of use or exploitation (in writing,
orally, or otherwise) regarding the Company IP Rights.
(f) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not constitute a
breach of any instrument or agreement governing any Company IP Rights, and will
not (i) cause the modification of any terms of any licenses or agreements
relating to any Company IP Rights, (ii) cause the forfeiture or termination of
any Company IP Rights, (iii) give rise to a right of forfeiture or termination
of any Company IP Rights or (iv) impair the right of the Company and the
Surviving Corporation to use, sell or license any Company IP Rights or portion
thereof.
(g) Except as set forth in Schedule 3.16(g) of the Company
Disclosure Statement, neither the manufacture, marketing, license, sale or
intended use of any product or technology currently licensed or sold or under
development by the Company: (i) violates any license or agreement between the
Company and any third party or (ii) to the Company's Knowledge infringes any
valid, enforceable and unexpired patents or any other Intellectual Property of
any other party; and there is no pending or, to the Company's Knowledge
threatened claim or litigation contesting the validity, ownership or right to
use, sell, license or dispose of any Company IP Rights or asserting that any
Company IP Rights or the proposed use, sale, license or disposition thereof
infringe the valid, enforceable and unexpired Intellectual Property of any third
party.
(h) The Company has provided or made available to Parent a true and
complete copy of its standard form of employee confidentiality agreement which
assigns all employee inventions, know-how and discoveries to the Company and all
employees have executed such an agreement. All consultants or third parties with
access to proprietary information of the Company have executed non-disclosure
agreements which assign inventions, know-how and discoveries made under
consulting agreements to the Company, and which refer to or include the Company
IP Rights.
(i) To the Company's Knowledge, none of its employees or consultants
is obligated under any contract, covenant or other agreement or commitment of
any nature, or subject to any judgment, decree or order of any Government
Entity, that would interfere with the use of such employee's or consultant's
best efforts to promote the interests of the Company or that would conflict with
the business of the Company as presently conducted or proposed to be conducted.
The Company has not entered into any agreement to indemnify any other person,
including but not limited to any employee or consultant of the Company, against
any charge of
19
infringement, misappropriation or misuse of any Intellectual Property, other
than indemnification provisions contained in purchase orders or customer
agreements arising in the ordinary course of business. All current and former
officers, employees and consultants of the Company have signed valid and
enforceable written confidentiality, non-disclosure and invention assignment
agreements which, among other matters, include an assignment of any and all
rights, title and interest and claims in any Intellectual Property that any such
officer, employee or consultant has or may have by reason of any contribution,
participation or other role in the development, conception, creation, reduction
to practice or authorship of any invention, innovation, development or work of
authorship or any other Intellectual Property that is used in the business of
the Company, and the Company possesses signed copies of all such written
assignments by such officers, employees and consultants.
3.17. ACCOUNTS RECEIVABLE.
(a) Except as set forth in the Company Balance Sheet, (i) each
account receivable of the Company (the "ACCOUNTS RECEIVABLE") represents a sale
made in the ordinary course of business and which arose pursuant to an
enforceable contract for a bona fide sale of goods or for services performed,
and the Company has performed all of its obligations to produce the goods or
perform the services to which such Accounts Receivable relate, other than
amounts recorded as deferred revenue, and (ii) to the Company's Knowledge, no
Account Receivable is subject to any claim for reduction, counterclaim, set-off,
recoupment or other claim for credit, allowances or adjustment by the obligor
thereof.
(b) Schedule 3.17(b)(i) lists all customers representing 5% or more
of the Company's consolidated revenues for the last two fiscal years and
Schedule 3.17(b)(ii) lists a complete and accurate aging list of all Accounts
Receivable of the Company as of December 31, 2004, which list shall be updated
and delivered to Parent on or before the Closing Date.
3.18. ORDER BACKLOG. Schedule 3.18 of the Company Disclosure Statement
contains a list of the aggregate orders for the products or services of the
Company as of the Balance Sheet Date, and identifies each customer included in
the backlog and the description of the products or services ordered and prices
for each product or service by customer. No customer who has placed an order
included in such backlog has refused, or, to the Company's Knowledge, intends to
refuse, delivery of any ordered products or services in accordance with the
terms of such orders.
3.19. PRODUCT AND SERVICE WARRANTIES. The standard written forms of
product and service warranties and guarantees utilized by the Company as of the
date of this Agreement have been provided or made available to Parent or its
counsel. During the period commencing two years prior to the date of this
Agreement, the Company has not made any other written warranties (which remain
in effect) with regard to products and/or services supplied by any such company.
3.20. TAXES.
(a) For the purposes of this Agreement, a "TAX" or, collectively, "TAXES,"
means (i) any and all United States federal, state and local, and any and all
foreign and other taxes,
20
assessments and other governmental charges, duties, impositions and liabilities,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, gains,
franchise, capital stock, severance, withholding, payroll, recapture,
employment, excise, unemployment insurance, social security, business license,
occupation, business organization, stamp, environmental and property taxes,
together with all interest, penalties and additions imposed with respect to such
amounts and (ii) any liability imposed by applicable law for the payment of
Taxes of another person, including as a result of being a successor to or
transferee of any individual or entity or pursuant to Treas. Reg. Section
1.1502-6 or comparable provisions of state, local or foreign tax law.
(b) The Company has filed all returns, estimates, information
statements and reports relating to Taxes ("RETURNS") required to be filed by it
prior to the date of this Agreement, and such Returns are true and correct and
were completed in accordance with applicable law with respect to all material
items. The Company has delivered to Parent correct and complete copies of all
Federal and state income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company or any of its
Subsidiaries.
(c) The Company has (A) timely paid all Taxes due and payable by it
as shown on the Returns and all Taxes payable without the necessity of a Return,
and (B) timely paid all Taxes for which a written notice of assessment or
collection has been received. The Company Balance Sheet reflects all liability
for unpaid Taxes of the Company for periods (or portions of periods) through the
date thereof and the Company does not have any liability for unpaid Taxes
accruing after the date of the Company Financial Statement except for Taxes
arising in the ordinary course of business.
(d) Neither the Internal Revenue Service (the "IRS") nor any other
taxing authority has asserted any claim for Taxes in writing, or, to the
Company's Knowledge, is threatening to assert any claims for Taxes. No Tax
deficiency notice or notice of assessment of collection has been received in
writing by the Company except as described on Schedule 3.20(d) of the Company
Disclosure Statement. No audit or other examination of any Return of the Company
is presently in progress, nor has the Company been notified in writing of any
request for such an audit or other examination. No power of attorney to deal
with Tax matters or waiver of any statute of limitations with respect to Taxes
has been granted by the Company and is currently in effect. The Company has not
availed itself of any Tax amnesty, Tax holiday or similar relief in any
jurisdiction. The Company has not been granted any extension of time for filing
any Tax Return which has not been filed.
(e) The Company will not be required to include in income, or
exclude any item of deduction from, Taxable income for any Taxable period (or
portion thereof) ending after the Closing Date as a result of any (i) change in
method of accounting for a Taxable period ending on or prior to the Closing
Date; (ii) "closing agreement" described in Section 7121 of the Code (or any
corresponding or similar provision of state, local, or foreign Tax law); (iii)
intercompany transactions or any excess loss account described in Treasury
Regulations under Section 1502 of the Code (or any corresponding or similar
provision of state, local, or foreign Tax law); (iv) installment sale or open
transaction disposition made on or prior to the Closing Date; or (v) prepaid
amount received on or prior to the Closing Date.
21
(f) None of the Tax attributes (including net operating loss carry
forwards and general business Tax credits) of the Company is limited by Sections
269, 382, 383, 384 or 1502 of the Code (or any corresponding or similar
provision of state, local, or foreign Tax law) except as a result of the Merger.
(g) The Company has not been either a "distributing corporation" or
a "controlled corporation" in a distribution of stock qualifying for Tax-free
treatment under Section 355 of the Code (i) in the two years prior to the date
of this Agreement or (ii) in a distribution that could otherwise constitute part
of a "plan" or "series of related transactions" (within the meaning of Section
355(e) of the Code) in conjunction with the Merger.
(h) The Company is not and has never been a "United States real
property holding corporation" within the meaning of Section 897 of the Code, and
the Company has filed with the Internal Revenue Service all statements, if any,
which are required under Section 1.897-2(h) of the Treasury Regulations.
(i) The Company has not consummated, has not participated in, and is
not currently participating in any transaction which was or is a "Tax shelter"
transaction as defined in Sections 6662, 6011, 6012 or 6111 of the Code or the
Treasury Regulations promulgated thereunder or which was or is a "Listed
Transaction" or a "Reportable Transaction" as those terms are defined in the
Code and the Treasury regulations thereunder.
(j) The Company has disclosed on its Tax Returns any Tax reporting
position taken in any Tax Return which could result in the imposition of
penalties under Section 6662 of the Code or any comparable provisions of state,
local or foreign law.
(k) The Company has withheld or collected and paid over to the
appropriate Government Entity (or are properly holding for such payment) all
Taxes required by law to be withheld or collected with respect to its
operations, including withholdings on payments to the Company for sales and use
taxes or payments by the Company to employees or independent contractors on
account of Federal, state, and foreign income Taxes, the Federal Insurance
Contribution Act, and the Federal Unemployment Tax Act.
(l) There are no liens for Taxes upon the assets of the Company
(other than liens for property Taxes that are not yet due or delinquent).
(m) There is no contract, agreement, plan or arrangement (including
this Agreement) covering any employee or former employee of any Company that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to Sections 280G or 404 of the Code, or that
give rise to any amounts subject to excise tax under Section 4999 of the Code.
There is no obligation to pay any compensation subject to Section 409A pursuant
to a deferred compensation plan that does not comply with the requirements of
Section 409A.
(n) The Company has not filed any consent agreement under Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the
Code) owned by the Company.
22
(o) The Company is not and has not been a member of an affiliated
group of corporations filing a consolidated federal income tax return (or a
group of corporations filing a consolidated, combined or unitary income tax
return under comparable provisions of state, local or foreign tax law) other
than a group the common parent of which is or was the Company, and the Company
does not have any liability for the Taxes of any Person under Section 1.1502-6
of the Treasury Regulations (or any similar provision of state, local or foreign
law) as a transferee or successor, by Contract or otherwise. The Company is not
a party to or bound by any Tax sharing, Tax indemnity, or Tax allocation
agreement nor does the Company have any liability or potential liability to
another party under any such agreement.
(p) The Company has no obligation, actual or contingent, under any
agreement or arrangement with any other Person with respect to Taxes of such
other Person, including any indemnity against any Tax in connection with any
compensation amounts or any arrangements for the leasing of real or personal
property.
(q) The Company has made available to Parent true copies of all
Returns that the Company has filed since its inception and true copies of all
correspondence and other written submissions to or written communications with
any Tax authorities.
(r) The Company is not a party to any "long term contract" within
the meaning of Section 460 of the Code.
3.21. EMPLOYEE BENEFIT PLANS; ERISA.
(a) Set forth on Schedule 3.21(a) of the Company Disclosure
Statement are all "EMPLOYEE PENSION BENEFIT PLANS" as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
("PENSION PLANS"), "EMPLOYEE WELFARE BENEFIT PLANS" as defined in Section 3(1)
of ERISA ("WELFARE PLANS"), or stock bonus, stock option, restricted stock,
stock appreciation right, stock purchase, bonus, incentive, deferred
compensation, severance, holiday, or vacation plans, or any other employee
benefit plan, program, policy or arrangement covering employees (or former
employees) employed in the United States that either is maintained or
contributed to by the Company or any ERISA Affiliate (as hereinafter defined) or
to which the Company or any of ERISA Affiliate is obligated to make payments or
otherwise may have any liability (collectively, the "EMPLOYEE BENEFIT PLANS")
with respect to employees or former employees of the Company, or any ERISA
Affiliate. For purposes of this Agreement, "ERISA AFFILIATE" shall mean any
person (as defined in Section 3(9) of ERISA) that is or has been a member of any
group of persons described in Section 414(b), (c), (m) or (o) of the Code,
including without limitation the Company.
(b) The Company, and each of the Pension Plans and Welfare Plans,
are in compliance, in all material respects, with the applicable provisions of
ERISA, the Code and other applicable laws.
(c) All contributions to, and payments from, the Pension Plans which
are required to have been made in accordance with the Pension Plans have been
timely made.
(d) Except as set forth in Schedule 3.21(d) of the Company
Disclosure Statement, all of the Company's Pension Plans intended to qualify
under Section 401 of the Code have been
23
determined by the IRS to be so qualified, and no event has occurred and, to the
Company's Knowledge, no condition exists with respect to the form or operation
of such Pension Plans which would cause the loss of such qualification or
exemption or the imposition of any material liability, penalty or tax under
ERISA or the Code.
(e) To the Company's Knowledge, there are (i) no investigations
pending by any Government Entity involving the Pension Plans or Welfare Plans,
nor (ii) pending or threatened claims (other than routine claims for benefits),
suits or proceedings against any Pension or Welfare Plan, against the assets of
any of the trusts under any Pension or Welfare Plan or against any fiduciary of
any Pension or Welfare Plan with respect to the operation of such plan or
asserting any rights or claims to benefits under any Pension Plan or against the
assets of any trust under such plan. To the Company's Knowledge, there are no
facts which would give rise to any liability under this Section 3.21(e).
(f) None of the Company or any employee of the foregoing, nor any
trustee, administrator, other fiduciary or any other "party in interest" or
"disqualified person" with respect to the Pension Plans or Welfare Plans, has
engaged in a "prohibited transaction" (as such term is defined in Section 4975
of the Code or Section 406 of ERISA).
(g) Neither the Company nor any ERISA Affiliate maintains or
contributes to, nor have they ever maintained or contributed to, any pension
plan subject to Title IV of ERISA or Section 412 of the Code or Section 302 of
ERISA.
(h) Neither the Company nor any ERISA Affiliate has incurred any
material liability under Title IV of ERISA that has not been satisfied in full.
(i) Neither the Company nor any ERISA Affiliate has any material
liability (including any contingent liability under Section 4204 of ERISA) with
respect to any multi-employer plan, within the meaning of Section 3(37) of
ERISA, covering employees (or former employees) employed in the United States.
(j) With respect to each of the Employee Benefit Plans, true,
correct and complete copies of the following documents have been made available
to Parent or its counsel: (i) the plan document and any related trust agreement,
including amendments thereto, (ii) any current summary plan descriptions,
participation notices, summary descriptions, and other material communications
to participants relating to the Employee Benefit Plans, (iii) the three most
recent Forms 5500, if applicable, and (iv) the most recent IRS determination
letter, if applicable.
(k) None of the Welfare Plans maintained by the Company provides for
continuing benefits or coverage for any participant or any beneficiary of a
participant following termination of employment, except as may be required under
COBRA, or except at the expense of the participant or the participant's
beneficiary. The Company has complied with the notice and continuation
requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title
I of ERISA and the regulations thereunder and with any similar state laws that
require continuation of group health plan coverage following termination of
employment.
24
(l) No liability under any Pension Plan or Welfare Plan has been
funded nor has any such obligation been satisfied with the purchase of a
contract from an insurance company as to which the Company has received notice
that such insurance company is in rehabilitation or a comparable proceeding.
(m) Except as set forth in Schedule 3.21(m) of the Company
Disclosure Statement, the consummation of the transactions contemplated by this
Agreement will not result in an increase in the amount of compensation or
benefits or accelerate the vesting or timing of payment of any benefits or
compensation payable to or in respect of any employee of the Company under any
Employee Benefit Plan.
(n) The Company has no Foreign Plans and has never had any Foreign
Plan. For purposes hereof, the term "FOREIGN PLAN" shall mean any plan, program,
policy, arrangement or agreement maintained or contributed to by, or entered
into with, the Company with respect to employees (or former employees) employed
outside the United States to the extent the benefits provided thereunder are not
mandated by the laws of the applicable foreign jurisdiction.
(o) To the Company's Knowledge, there are no claims, suits or facts
concerning the operation or benefits of any Employee Benefit Plan other than a
Pension or Welfare Plan.
(p) Each of the Employee Benefit Plans can be terminated by the
Company within a period of 30 days following the Effective Time in accordance
with the terms of such Plan (and the provisions of ERISA and the Code), without
any additional contribution to such Employee Benefit Plan or the payment of any
additional compensation or amount or the additional vesting or acceleration of
any vesting provided under the Employee Benefit Plan.
3.22. ENVIRONMENTAL MATTERS. Schedule 3.22 to the Company Disclosure
Statement identifies all real property now or previously owned, leased or
occupied by the Company (the "REAL PROPERTY"). The Company is in material
compliance with and, within the period of all applicable statutes of limitation,
has complied in all material respects with all applicable Environmental Laws (as
defined below) and has not received notice of any liability under any
Environmental Law.
(a) To the Company's Knowledge, there has not been any underground
or aboveground storage tank or other underground storage receptacle or related
piping, or any impoundment or other disposal area containing hazardous materials
located on any Real Property owned, leased or operated by the Company, and no
asbestos or polychlorinated biphenyls have been used or disposed of, or have
been located at, on, or under any such facility or property during the period of
such ownership lease or operation.
(b) For purposes of this Agreement, "ENVIRONMENTAL LAW" means any
law or regulation, now in effect and as amended, and any judicial or
administrative interpretation thereof, in each case relating to the environment
or harm to or the protection of human health or animals or plants, including,
without limitation, laws relating to public and workers health and safety,
emissions, discharges or releases of chemicals or any other pollutants or
contaminants or industrial, radioactive, dangerous, toxic or hazardous
substances or wastes (whether in solid or liquid form or in the form of a gas or
vapor) into the environment or otherwise relating to the
25
manufacture, processing, use, treatment, storage, distribution, disposal
transport or handling of substances or wastes. Environmental Laws include,
without limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act, as amended, 42 USC 9601 et seq. ("CERCLA"), the Resource
Conservation and Recovery Act, 42 USC, 6901 et seq., the Hazardous Materials
Transportation Act, 49 USC, 6901 et seq., the Clean Water Act 33 USC, 1251 et
seq., the Toxic Substances Control Act, 15 USC, 2601 et seq., the Clean Air Act,
42 USC, 7401 et seq., the Safe Drinking Water Act, 42 USC, 300f et seq., the
Atomic Energy Act, 42 USC, 2201 et seq., and the Federal Food Drug and Cosmetic
Act, 21 USC, 301 et seq., and comparable state and local ordinances and
statutes.
3.23. CUSTOMERS. With respect to the customers of the Company, since the
Balance Sheet Date, there has not been any substantial change in the nature of
the business conducted or course of dealing between the Company and any of its
customers, including without limitation the termination of the relationship,
cancellation of any order, notice of breach of any contract, commitment or
arrangement, or threat of same or of the institution of any litigation related
to or arising out of any customer relationship.
3.24. FINDERS OR BROKERS. The Company has not employed any investment
banker, broker, finder or intermediary in connection with the transactions
contemplated hereby who is or will be entitled to a fee or any commission upon
consummation of the Merger.
3.25. TITLE TO PROPERTY. Except as set forth in Schedule 3.25 of the
Company Disclosure Statement, the Company has good and valid title to all of its
properties, interests in properties and assets, real and personal, reflected in
the Company Balance Sheet or acquired after the Balance Sheet Date, except for
those sold or otherwise disposed in the ordinary course of business since the
Balance Sheet Date, and has valid leasehold interests in all leased properties
and assets, in each case free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except (i) liens for current
taxes not yet due and payable, (ii) such imperfections of title, liens and
easements as do not and will not materially detract from or interfere with the
use of the properties subject thereto or affected thereby or otherwise
materially impair the Company's business operations involving such properties,
or (iii) liens securing debt reflected on the Company Balance Sheet. The Company
owns no real property.
3.26. TRANSACTIONS WITH AFFILIATES. Except for (a) transactions relating
to purchases of shares of Company Common Stock, (b) regular salary payments and
fringe benefits under an individual's compensation package with the Company, and
(c) contracts or agreements contemplated herein, no officer, director, or
spouse, parent, sibling or child of any such person, or any other employee has
any agreement, understanding or proposed transaction related to indebtedness
owed to the Company, nor is the Company indebted (or committed to make loans or
extend or guarantee credit) to any of them. No officer, director or spouse,
parent, sibling or child of any such person has any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or with
which the Company has a business relationship, or any firm or corporation that
competes with the Company. Except as set forth in Schedule 3.26 of the Company
Disclosure Statement, no spouse, parent, sibling or child of any officer or
director of the Company is directly or indirectly interested in any material
contract with the Company.
26
3.27. BOOKS AND RECORDS. The minute books and other corporate records of
the Company as made available to Parent contain a true and complete record in
all material aspects of all actions taken at all meetings and by all written
consents in lieu of meetings of the stockholders, the Company Board and
committees thereof. The stock transfer ledgers and other similar records of the
Company accurately reflect all issuances and record transfers in the capital
stock of the Company.
3.28. THIRD PARTY CONSENTS. Other than as set forth in Schedule 3.3 of the
Company Disclosure Statement, no consent, approval or authorization of any third
party on the part of the Company is required in connection with the consummation
of the transactions contemplated hereunder.
3.29. DISCLOSURE. No representation or warranty of the Company contained
in this Agreement, nor any financial statement or certificate or schedule to
this Agreement or exhibit to this Agreement, nor any other document, certificate
or opinion delivered in connection with the transactions contemplated hereby,
each delivered by the Company in accordance with this Agreement, including,
without limitation, the Company Disclosure Statement, misstates a material fact
or omits to state a material fact necessary to make the statements herein or
therein, in light of the circumstances in which they were made, not misleading.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent makes to the Company the representations and warranties contained
in this Article IV, in each case subject to the exceptions set forth in the
disclosure statement, dated as of the date hereof, delivered by Parent and
Merger Sub to the Company in connection with the execution of this Agreement
(the "PARENT DISCLOSURE STATEMENT"). The Parent Disclosure Statement shall be
arranged in schedules corresponding to the numbered and lettered Sections of
this Article IV, and the disclosure in any schedule of the Parent Disclosure
Statement shall qualify only the corresponding Section of this Article IV.
4.1. ORGANIZATION, ETC
(a) Each of Parent and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. Parent is
duly qualified as a foreign corporation to do business, and is in good standing,
in each jurisdiction where the character of its owned or leased properties or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified or in good standing would not, individually and
in the aggregate, have a Parent Material Adverse Effect (as defined below). For
the purposes of this Agreement, "PARENT MATERIAL ADVERSE EFFECT" means any
change, event or effect that is materially adverse to the business, operations,
assets, condition (financial or otherwise) or results of operations of Parent
and any Parent Material Subsidiary (as defined below), taken as a whole;
provided, however, that the following shall not be taken into account in
determining whether there has been or would be a Parent Material Adverse Effect:
any change which occurs as a result of the announcement of
27
this Agreement or the pendency of the transactions contemplated hereby,
including, without limitation, any reduction in the trading price of shares of
Parent Common Stock on any publicly traded market.
(b) Neither Parent nor Merger Sub is in violation of any provision
of its Certificate of Incorporation, bylaws or other charter or governing
documents.
4.2. AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and Merger Sub
has full corporate power and authority to execute and deliver this Agreement and
the other agreements contemplated hereby and to consummate the Merger and the
other transactions contemplated hereby. The execution and delivery of this
Agreement and the other agreements contemplated hereby and the consummation of
the Merger and the other transactions contemplated hereby have been duly and
validly authorized by the board of directors of each of Parent and Merger Sub
and no other corporate proceedings on the part of either Parent or Merger Sub or
stockholders are necessary to authorize this Agreement and the other agreements
contemplated hereby or to consummate the Merger and the other transactions
contemplated hereby. This Agreement and the other agreements contemplated hereby
have been duly and validly executed and delivered by Parent and Merger Sub and
constitute, and each of the other documents, agreements or instruments to be
delivered hereunder by Parent or Merger Sub when executed and delivered by
Parent or Merger Sub will be duly and validly executed and delivered by Parent
or Merger Sub, as the case may be, and will constitute, assuming due
authorization, execution and delivery by the Company, a valid and binding
agreement of each of Parent and Merger Sub, enforceable against each of them in
accordance with its terms, except to the extent that its enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally or by
general equitable principles.
4.3. NO VIOLATIONS, ETC. No filing with or notification to, and no permit,
authorization, consent or approval of, any Government Entity is necessary on the
part of either Parent or Merger Sub for the consummation by Parent or Merger Sub
of the Merger or the other transactions contemplated hereby except for (i) the
filing of the Certificate of Merger as required by the DGCL and (ii) compliance
with the applicable requirements of the Securities Act, state securities or
"Blue Sky" laws and state takeover laws. Neither the execution and delivery of
this Agreement and the other agreements contemplated hereby nor the consummation
of the Merger or the other transactions contemplated hereby, nor compliance by
Parent and Merger Sub with all of the provisions hereof and thereof will (i)
conflict with or result in any breach of any provision of the Certificate of
Incorporation, bylaws or other charter documents of Parent or any of Parent's
Subsidiaries, (ii) violate any material order, writ, injunction, decree,
statute, rule or regulation applicable to Parent, or any of Parent's
Subsidiaries or by which any of their properties or assets may be bound, or
(iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default, or give rise to any right of
termination, cancellation, acceleration, redemption or repurchase by any other
Person under, any of the terms, conditions or provisions of any material note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Parent or any of Parent's Subsidiaries is a
party or by which any of them or any of their properties or assets may be bound.
No consent, waiver, approval, notification or disclosure is required to be
obtained or made in connection with the consummation of the transactions
contemplated hereby under Parent's or
28
any of Parent's Subsidiaries notes, bonds, mortgages, indentures, deeds of
trust, licenses or leases, contracts, agreements or other instruments or
obligations the failure to obtain which would reasonably be expected to have a
Parent Material Adverse Effect.
4.4. CAPITALIZATION.
(a) The authorized capital stock of Parent consists of 120,000,000
shares of Parent Common Stock and 10,000,000 shares of preferred stock, of which
120,000 shares are designated Series A Junior Participating Preferred Stock. As
of February 18, 2005, 38,568,377 shares of Parent Common Stock were issued and
outstanding and no shares of Series A Junior Participating Preferred Stock were
issued and outstanding. The authorized capital stock of Merger Sub consists of
1,000 shares of Common Stock, $0.0001 par value, all of which are issued and
outstanding as of the date hereof and owned by Parent. Merger Sub was formed for
the purpose of consummating the Merger and has no material assets or liabilities
except as necessary for such purpose. At the Effective Time and when issued in
accordance with the terms of this Agreement, the shares of Parent Common Stock
to be issued pursuant to Article II will be duly authorized, validly issued,
fully paid and nonassessable and will be free and clear of all encumbrances and
liens, except for any liens and encumbrances created by the holders of the
Outstanding Company Shares, and are not subject to preemptive rights created by
statute, the Certificate of Incorporation or bylaws of Parent or any agreement
to which Parent is a party or by which it is bound.
(b) Except as set forth on the SEC Documents (as defined in Section
4.5), there are no warrants, options, convertible securities, calls, rights,
stock appreciation rights, preemptive rights, rights of first refusal, or
agreements or commitments of any nature obligating Parent to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other equity interests of Parent, or obligating Parent to grant, issue,
or enter into, any such warrant, option, convertible security, call, right,
stock appreciation right, preemptive right, right of first refusal, agreement or
commitment, other than options to purchase Parent Common Stock granted in the
ordinary course of Parent's business.
4.5. SEC DOCUMENTS. Parent has filed in a timely manner all documents that
it was required to file with the Securities and Exchange Commission (the "SEC")
under Sections 13, 14(a) and 15(d) of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT") and all rules and regulations thereunder, since
July 28, 2000, the date on which Parent became subject to such reporting
requirements. As of their respective filing dates, all documents filed by Parent
with the SEC (the "SEC DOCUMENTS") complied in all material respects with the
requirements of the Exchange Act or the Securities Act, as applicable, and all
rules and regulations thereunder. None of the SEC Documents contained, as of
their respective dates, any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The financial statements of Parent included in the SEC
Documents (the "PARENT FINANCIAL STATEMENTS") comply in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto. The Parent Financial Statements
have been prepared in accordance with GAAP consistently applied and fairly
present in all material respects the consolidated financial position of Parent
and its Subsidiaries at the dates thereof and the results of operations and cash
flows of Parent and its
29
Subsidiaries for the periods then ended in accordance with GAAP (subject, in the
case of unaudited statements, to normal accruals and adjustments).
4.6. DISCLOSURE. No representation or warranty of Parent or Merger Sub
contained in this Agreement, nor any financial statement or certificate or
schedule to this Agreement or exhibit to this Agreement, each delivered by
Parent or Merger Sub in accordance with this Agreement, including, without
limitation, the Parent Disclosure Statement, misstates a material fact or omits
to state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading.
ARTICLE V.
COVENANTS
5.1. CONDUCT OF BUSINESS DURING INTERIM PERIOD. Except as contemplated or
required by this Agreement or as expressly consented to in writing by Parent,
during the period from the date of this Agreement to the earlier of the
termination of this Agreement or the Effective Time, the Company will (i)
conduct its operations according to its ordinary and usual course of business
consistent with past practice, (ii) use all commercially reasonable efforts to
preserve intact its business organization, to keep available the services of its
officers and employees in each business function and to maintain satisfactory
relationships with its suppliers, distributors, customers and others having
business relationships with it, and (iii) not take any action that would
adversely affect the Company's ability to consummate the Merger or the other
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, and except as otherwise contemplated or required by this
Agreement, prior to the earlier of the termination of this Agreement or the
Effective Time the Company will not, directly or indirectly, do any of the
following without the prior written consent of Parent:
(a) enter into, violate, amend or otherwise modify or waive any of
the terms of (i) any license or partnership, joint venture, or other agreement
relating to the joint development or transfer of technology or Company IP
Rights; or (ii) any other agreements, commitments or contracts (other than to
effect the acceleration of the vesting schedules of the shares of Company Common
Stock governed by the Stock Restriction Agreements, each dated December 15,
2003, between the Company and each of Xxxx Xxxxxx, Xxxx Xxxx, Xxxxx Xxxxxx,
Xxxxxx XxXxxxx, Xxxxxxxx Xxxxxxx and Xxxxxx Xxxxxx, such acceleration to be
effective upon the Closing);
(b) authorize, solicit, propose or announce an intention to
authorize, recommend or propose, or enter into any agreement in principle or an
agreement with any other person with respect to: (i) any plan of liquidation or
dissolution, any acquisition of a material amount of assets or securities, any
disposition of a material amount of assets or securities (whether by sale,
lease, hypothecation or otherwise) outside the ordinary course of business; or
(ii) any material change in capitalization, or any partnership, association,
joint venture, joint development, technology transfer, or other material
business alliance;
(c) fail to renew any insurance policy naming it as a beneficiary or
a loss payee, or take any steps or fail to take any steps that would permit any
insurance policy naming it as a
30
beneficiary or a loss payee to be cancelled, terminated or materially altered,
except in the ordinary course of business consistent with past practice and
following written notice to Parent;
(d) maintain its books and records in a manner other than in the
ordinary course of business consistent with GAAP and past practices;
(e) enter into any hedging, option, derivative or other similar
transaction or any foreign exchange position or contract for the exchange of
currency other than in the ordinary course of business consistent with past
practice;
(f) institute any change in its accounting methods, principles or
practices other than as required by GAAP, or re-value any of its assets,
including without limitation, writing-off notes or accounts receivables;
(g) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, contingent or otherwise), other than the
payment, discharge or satisfaction of liabilities (including accounts payable)
in the ordinary course of business consistent with past practice, or collect, or
accelerate the collection of, any amounts owed (including accounts receivable)
other than the collection in the ordinary course of business;
(h) split, combine or reclassify any shares of its capital stock,
other than as may be required under Section 6.2;
(i) declare or pay any dividend or make any distribution to
stockholders of the Company;
(j) issue any capital stock or options, warrants or rights to
purchase or acquire capital stock, or change the terms of any outstanding
securities, other than upon the exercise of Company Options or outstanding
warrants;
(k) waive, release, assign, settle or compromise any material claim
or litigation, or commence a lawsuit other than for the routine collection of
accounts receivable or for a breach of this Agreement;
(l) make any loans (except for business travel advances in the
ordinary course of business consistent with past practice) to any officer,
director, consultant or employee, or to any related entity or Person;
(m) enter into any new transaction with or create or assume any new
obligation or liability to any Affiliate;
(n) merge or consolidate with any Person, or acquire any material
assets of any Person, or form or create any Subsidiary;
(o) sell, transfer or license to any Person or otherwise extend,
amend or modify any rights to the Company IP Rights;
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(p) in respect of any Taxes, make or change any material election
changing any accounting method, enter into any closing agreement, settle any
material claim or assessment, or consent to any extension or waiver of the
limitation period applicable to any material claim or assessment except as
required by applicable law;
(q) take or agree to take any of the actions described in this
Section 5.1, or any action which would make any of its representations or
warranties contained in this Agreement untrue or incorrect in any material
respect or prevent it from performing, or cause it not to perform, its covenants
hereunder;
(r) amend its Certificate of Incorporation (other than to effect the
Recapitalization) or bylaws; or
(s) hire any additional employees or materially modify any existing
employee compensation arrangements.
5.2. NO SOLICITATION.
(a) The Company shall not, nor shall it authorize or permit any of
its directors, officers or employees or any investment banker, financial
advisor, attorney, accountant or other advisor, agent or representative
(collectively, "REPRESENTATIVES") retained by it to, directly or indirectly
through another person, (i) solicit, engage in discussions or negotiate with any
person (whether or not such discussions or negotiations are initiated by the
Company), or take any other action intended or designed to facilitate the
efforts of any Person, other than Parent, relating to the possible acquisition
of the Company (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise) or any significant portion of its capital stock or assets
by any person other than Parent (an "ALTERNATE ACQUISITION"), (ii) provide
information with respect to the Company to any Person relating to a possible
Alternate Acquisition by any Person, (iii) enter into an agreement with any
Person providing for a possible Alternate Acquisition, or (iv) make or authorize
any statement, recommendation or solicitation in support of any possible
Alternate Acquisition by any Person. Without limiting the foregoing, it is
agreed that any violation of the restrictions set forth in the preceding
sentence by any Representative of the Company shall be a breach of this Section
5.2(a) by the Company. The Company shall immediately cease and cause to be
terminated all existing discussions or negotiations with any Person with respect
to any Alternate Acquisition and request the prompt return or destruction of all
confidential information previously furnished. Notwithstanding the foregoing,
but only until the Stockholder Approval has been obtained, the Company and any
of the Company's Representatives may (y) participate in discussions or
negotiations with, review information from, and, subject to compliance with
Section 5.2(c), furnish non-public information to any third party that has made
an unsolicited proposal for an Alternate Acquisition (a "POTENTIAL ACQUIROR") or
(z) make or authorize any statement, recommendation or solicitation in support
of an unsolicited Alternate Acquisition, in each case if the Company Board
determines in good faith (I) that such Alternate Acquisition proposal is
reasonably likely to lead to a transaction that is more favorable to the Company
and its stockholders than the Merger (a "SUPERIOR PROPOSAL"), it being
acknowledged and agreed that the Company Board intends to, and will, consult a
financial advisor prior to making such a determination unless the Alternate
Acquisition proposal is for all cash consideration to the Company's stockholders
for a total value greater than the value of the Merger, and (II) following
32
consultation with outside legal counsel, that the failure to participate in such
discussions or negotiations, to review such information or furnish such
information regarding, an Alternate Acquisition would violate the Company
Board's fiduciary duties under applicable law.
(b) The Company Board shall unanimously recommend that the Company's
stockholders approve and adopt this Agreement and shall not withdraw, amend or
modify, or propose or resolve to withdraw, amend or modify, in a manner adverse
to Parent, such unanimous recommendation. For purposes of this Agreement, said
recommendation of the Company Board shall be deemed to have been modified in a
manner adverse to Parent if said recommendation shall no longer be unanimous (a
"UNANIMITY CHANGE"); provided that, for all purposes of this Agreement, an
action by the Company Board or any committee thereof shall be unanimous if each
member of the Company Board or committee has approved such action other than (i)
any such member who has appropriately abstained from voting on such matter
because of an actual conflict of interest and (ii) any such member who is unable
to vote in connection with such action as a result of death or disability.
Notwithstanding the foregoing, if the Company Board (or, in connection with a
Unanimity Change, any member thereof) determines prior to Stockholder Approval
being obtained, based on the advice of outside legal counsel, that withholding,
amending or modifying such recommendation is necessary to comply with its
fiduciary duties to the Company's stockholders under applicable law, the Company
Board (or, in connection with a Unanimity Change, any member thereof) may so
withhold, amend or modify such recommendation solely to the extent necessary to
comply with its (or his or her) fiduciary duties so long as the Company Board
shall have provided Parent forty-eight (48) hours advance notice of the
intention to do so; provided, however, that if, following consultation with
outside legal counsel, the Company Board (or, in connection with a Unanimity
Change, any member thereof) determines that complying with such forty-eight (48)
hour advance notice requirement would result in a breach of the Company Board's
fiduciary duties under applicable law, the Company Board may provide notice to
Parent simultaneous with its first notification to the Company's stockholders of
such withheld, amended or modified recommendation.
(c) The Company shall immediately (but in any event within 24 hours)
advise Parent in writing of any oral or written proposal for an Alternate
Acquisition, or inquiry that could reasonably be expected to result in an
Alternate Acquisition proposal, the material terms and conditions of any such
Alternate Acquisition and the identity of the Person who presented the Alternate
Acquisition or made the inquiry, as the case may be. The Company shall (i) keep
Parent informed of the status and terms of any such inquiry and Alternate
Acquisition proposal and (ii) provide to Parent as soon as practicable after
receipt of delivery thereof copies of all correspondence and other written
material sent or provided to the Company from any Person that describes any of
the terms or conditions of a proposed Alternate Acquisition.
(d) Because of the difficulty of measuring economic losses as a
result of the breach of the covenants contained in this Section 5.2, and because
of the immediate and irreparable damage that would be caused for which Parent
would have no other adequate remedy, the Company agrees that the covenants
contained in this Section 5.2 may be enforced against it by injunctions,
restraining orders and other equitable actions. Nothing herein shall be
construed as prohibiting Parent from pursuing any other available remedy for
such breach or threatened breach, including the recovery of damages.
33
5.3. ACCESS TO INFORMATION.
(a) From the date of this Agreement until the Effective Time or the
termination of this Agreement, the Company will afford Parent and Parent's
authorized representatives (including counsel, environmental and other
consultants, accountants, auditors and agents) full access during normal
business hours and upon reasonable notice to all of its facilities, personnel
and operations and to all books and records of the Company, and will permit
Parent and its authorized representatives to review the Company Financial
Statements and books and records and to conduct inspections as they may
reasonably request. The Company will instruct its officers to furnish such
Persons with such financial and operating data and other information with
respect to its business, prospects and properties as such Persons may from time
to time reasonably request.
(b) From the date of this Agreement until the Effective Time or the
termination of this Agreement, Parent will afford the Company and the Company's
authorized representatives (including counsel, environmental and other
consultants, accountants, auditors and agents) reasonable access during normal
business hours and upon reasonable notice to all of its facilities, executive
personnel and operations.
5.4. COMPANY RECAPITALIZATION. On or before the Closing, the Company shall
effect a reverse stock split of the Company Common Stock in the ratio of one (1)
share for each eight thousand eight hundred shares outstanding (the
"RECAPITALIZATION").
5.5. PREPARATION OF INFORMATION STATEMENT; STOCKHOLDER APPROVAL.
(a) As soon as practicable after the date of this Agreement, the
Company (with the cooperation of Parent) shall prepare a confidential written
information statement (the "INFORMATION STATEMENT") for delivery to the holders
of Outstanding Company Shares who have not executed and delivered to Parent
irrevocable written consents approving and adopting this Agreement, the Merger
and the other transactions contemplated herein, and shall use commercially
reasonable efforts to cause the Information Statement to be delivered to such
holders of Outstanding Company Shares as promptly as practicable following the
date of this Agreement in accordance with Sections 228(e) and 262(d)(2) of the
DGCL. Other than with respect to information specifically provided by Parent for
inclusion in the Information Statement, which information Parent covenants shall
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements or facts contained therein not misleading,
the Company covenants that the Information Statement shall not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements or facts contained therein not misleading. In connection
with the Information Statement, the Company Board shall recommend to the
Company's stockholders that they execute and deliver to the Secretary of the
Company the Waiver of Appraisal Rights and Stockholder Acknowledgment in the
form attached hereto as Exhibit G (the "WAIVER"), thereby waiving any and all
rights they may have to exercise dissenters' or appraisal rights with respect to
the Merger. Notwithstanding the foregoing, if the Company Board determines,
based on the advice of outside counsel, that withholding, amending or modifying
such recommendation is necessary to comply with its fiduciary duties to the
Company's stockholders under applicable law, the Company Board may so withhold,
amend or modify such recommendation solely to the extent necessary to
34
comply with its fiduciary duties so long as the Company Board shall have
provided Parent forty-eight (48) hours advance notice of its intention to do so;
provided, however, that it, based on the advice of outside legal counsel, the
Company Board determines that complying with such forty-eight (48) hour advance
notice requirement would result in a breach of the Company Board's fiduciary
duties under applicable law, the Company Board may provide notice to Parent
simultaneous with its first notification to the Company's stockholders of such
withheld, amended or modified recommendation.
(b) The Company will use its best efforts to obtain a Waiver from
each of the holders of Outstanding Company Shares solicited pursuant to Section
5.5(a), and will comply with all applicable laws, rules and regulation in
connection with the solicitation of such Waivers.
5.6. STOCKHOLDER ACKNOWLEDGMENTS AND AGREEMENTS. As soon as practicable
after the date of this Agreement, the Company will use its commercially
reasonable efforts to obtain from each holder of Outstanding Company Shares (to
be outstanding as of the Effective Time) a completed and executed investor
questionnaire in the form attached hereto as Exhibit F (the "QUESTIONNAIRE") and
an executed Stockholder Acknowledgment and Consent in the form attached hereto
as Exhibit D (the "ACKNOWLEDGMENT AND CONSENT") and a General Release in the
form attached hereto as Exhibit J (the "RELEASE," and together with the
Questionnaire and the Acknowledgment and Consent, the "STOCKHOLDER
ACKNOWLEDGMENTS AND AGREEMENTS").
5.7. COMMERCIALLY REASONABLE EFFORTS. Subject to the terms and conditions
of this Agreement and to the requirements of applicable law, Parent, Merger Sub
and the Company shall use their commercially reasonable efforts to take, or
cause to be taken, all other actions and do, or cause to be done, all other
things necessary, proper or appropriate under applicable laws to consummate and
make effective the transactions contemplated by this Agreement, including,
without limitation, obtaining all necessary governmental and private party
consents, approvals or waivers. Parent shall cause Merger Sub to perform all of
its obligations under this Agreement and shall not take any action that would
cause the Company to fail to perform its obligations hereunder. The Company
shall not take any action that would cause Parent or Merger Sub to fail to
perform their obligations hereunder.
5.8. PUBLIC ANNOUNCEMENTS. Before issuing any press release or otherwise
making any public statement with respect to the Merger or any of the other
transactions contemplated hereby, Parent, Merger Sub and the Company agree to
consult with each other as to its form and substance, and agree not to issue any
such press release, make such a general communication to employees (other than
the Information Statement and discussions directly related thereto) or make any
other public statement without first using reasonable efforts to mutually agree
upon, or to obtain the other party's approval of (which shall not be
unreasonably withheld or delayed), the content of such proposed release, general
communication or other public statement; provided that either party may make
such disclosures or statements as it reasonably believes may be required by
applicable law or regulation or rule of any national securities exchange
(including, for this purpose, The Nasdaq Stock Market, Inc.); and provided
further, that the Company shall make no such press release or other public
statement without the written consent of Parent.
5.9. NOTIFICATION OF CERTAIN MATTERS. Each of the Company and Parent shall
promptly notify the other party of the occurrence or non-occurrence of any event
the respective occurrence
35
or non-occurrence of which would be reasonably likely to cause any condition to
the obligations of the notifying party to effect the Merger not to be fulfilled.
Each of the Company and Parent shall also give prompt notice to the other of any
communication, not solicited or requested by Company or Parent, from any Person
alleging that the consent of such Person is or may be required in connection
with the Merger or other transactions contemplated hereby.
5.10. CONFIDENTIALITY. Except for disclosures expressly permitted by the
terms of the two Confidentiality Agreements, dated as of October 29, 2004,
between Parent and the Company (as each may be amended from time to time, the
"CONFIDENTIALITY AGREEMENTS"), each of Parent and the Company shall hold, and
shall cause its officers, employees, accountants, counsel, financial advisors
and other representatives to hold, all information received from the other,
directly or indirectly, in confidence in accordance with the Confidentiality
Agreements.
5.11. CERTAIN EMPLOYEE BENEFIT MATTERS. Concurrently with the execution
and delivery of this Agreement, Parent shall extend offers of employment to each
of the individuals listed on Schedule 5.11 hereto. The compensation provided to
each such employee, and any other employees of the Company immediately prior to
the Effective Time who continue as employees of Parent or any of its
Subsidiaries following the Effective Time (collectively, the "CONTINUING COMPANY
EMPLOYEES") shall be determined by Parent in its sole discretion, and all
Continuing Company Employees shall be eligible to participate in Parent's
employee welfare and benefit plans on the same terms as any other similarly
situated Parent employee; provided, however, that the Continuing Company
Employees shall be given credit for time in service of the Company for purposes
of meeting any eligibility and vesting requirements and for purposes of
determining contribution levels under such plans; and provided, further that
Parent shall cause its medical, dental and prescription drug benefit plans to
waive any waiting period and restrictions and limitations for pre-existing
conditions and shall credit each such Continuing Employee and his or her
dependents under Parent's benefit plans to the extent that such individuals have
met deductibles, co-pays and out-of-pocket limits under the welfare benefit
plans of the Company during the year in which said individuals become enrolled
in Parent's plans. Notwithstanding anything to the contrary, it is acknowledged
and agreed that all Continuing Company Employees will be eligible to participate
in Parent's medical, dental and prescription drug benefit plans effective as of
the first day of the month following the month in which the Effective Time
occurs.
5.12. FEES AND EXPENSES. Except as set forth in Section 2.2(d), Section
2.2(e) and Section 8.3, all fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses whether or not the Merger is consummated.
5.13. EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. The Company shall terminate
any Employee Benefit Plans that are governed by Section 401 of the Code
immediately prior to the Effective Time upon the request of Parent. In the event
that the distribution or rollover of assets from the trust of a Code Section 401
plan that is terminated will trigger liquidation, surrender or other fees that
will be imposed on the terminated plan or any participant or beneficiary of such
terminated plan, the Company shall take such actions as are necessary to
reasonably estimate the amount of such fees and provide such reasonable estimate
in writing to Parent prior to the Effective Time. Any Employee Benefit Plan that
is governed by Section 401(K) of the Code and
36
relies on a standardized prototype document shall be amended prior to the
Effective Time so as not to require all corporations that are members of the
same controlled group of corporations as the employer sponsoring such plan to
participate in such plan. The Company shall file any delinquent Form 5500s
through the Department of Labor Delinquent Filer Voluntary Compliance Program
prior to the Effective Time.
5.14. NECESSARY CONSENTS. The Company will use its best efforts to obtain
such consents and authorizations of third parties, give notices to third parties
and take such other actions as may be necessary or appropriate in order to
effect the consummation of the Merger and the other transactions contemplated by
this Agreement and to enable the Company to carry on its business after the
Effective Time substantially as such business was conducted by it prior to the
Effective Time.
5.15. FINANCIAL STATEMENTS. Promptly following the execution of this
Agreement, the Company shall engage (if not already engaged) an independent
auditing firm of nationally recognized standing (the COMPANY AUDITOR") to
conduct an audit of the Company's financial statements for the year ended
December 31, 2004 (the "AUDIT"). Such audit shall be completed prior to Closing
and the Company shall deliver such audited financial statements to Parent prior
to Closing.
Additionally, the Company shall supply to Parent, within fifteen (15)
calendar days following the end of each calendar month, unaudited financial
statements (balance sheet, income statements and cash flow statements) (the
"INTERIM FINANCIAL STATEMENTS") for each monthly period beginning January 1,
2005.
5.16. REPAYMENT OF INDEBTEDNESS. At the Closing, the Company shall cause
all officers and directors of the Company to repay in full any and all
obligations they owe to the Company.
5.17. MANAGEMENT BONUS AND RECAPITALIZATION PAYMENTS, ETC. Parent will pay
at Closing (i) all amounts due and owing pursuant to the Management Bonus Plan
in the aggregate amount of no more than $1,050,000, and (ii) certain severance
payments of no more than $220,000 in the aggregate that the Company is obligated
to pay to its officers. In addition, within fourteen (14) days after the
Closing, Parent will pay to the appropriate parties the amounts due and owing to
the holders of fractional Company shares resulting from the Recapitalization.
5.18. TAX STATUS OF MERGER. If at the Closing it is mutually determined by
Parent and the Company that the Merger will not qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Code, the Merger
shall be restructured as a forward triangular merger that qualifies as a
tax-free reorganization within the meaning of Section 368(a) of the Code, unless
Parent and the Company mutually agree otherwise. In such event, this Agreement
shall be deemed appropriately modified to reflect such form of merger.
5.19. TERMINATION OF AGREEMENTS. The Company shall terminate each of the
agreements listed on Schedule 5.19 (the "TERMINATED AGREEMENTS") hereto under
circumstances that result in no ongoing liability under any of such agreements
on the part of the Company or Parent.
37
5.20. ENVIRONMENTAL COMPLIANCE. Promptly following execution of this
Agreement, the Company will diligently work to meet requirements governing its
record keeping and certification of compliance with Environmental Laws,
including those dealing with hazardous waste and discharges of waste water and
storm water, and the Company will bear the associated costs. To the extent that
failure to have met these record keeping and certification requirements results
in a fine, penalty, or the imposition of other costs, such fine, penalty or cost
(collectively, "ENVIRONMENTAL COSTS") shall be treated as Damages subject to the
indemnification provisions of Article IX of this Agreement.
ARTICLE VI.
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY
The respective obligations of each party to this Agreement to effect the
Merger and the other transactions contemplated by this Agreement shall be
subject to the fulfillment on or before the Effective Time of each of the
following conditions, any one or more of which may be waived in writing by all
the parties hereto:
6.1. STOCKHOLDER APPROVAL. The Stockholder Approval shall have been
obtained.
6.2. STATUTE OR ACTION. No law shall have been enacted or promulgated,
entered or enforced by any Government Entity, which remains in effect that
prohibits the consummation of the Merger in accordance with the terms of this
Agreement or otherwise makes it illegal, nor shall any Government Entity have
instituted any Action that remains pending and that seeks, and which is
reasonably likely, to enjoin, restrain or prohibit the consummation of the
Merger in accordance with the terms of this Agreement.
ARTICLE VII.
CONDITIONS TO THE OBLIGATIONS OF PARENT, MERGER SUB AND THE COMPANY
7.1. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to effect the Merger and the other transactions
contemplated by this Agreement shall be subject to the fulfillment of each of
the following additional conditions, any one or more of which may be waived in
writing by the Company:
(a) The representations and warranties of Parent and Merger Sub
contained in this Agreement (without regard to any materiality exceptions or
provisions therein) shall be true and correct, in all material respects, as of
the Effective Time, with the same force and effect as if made at the Effective
Time, except (i) for changes specifically permitted by the terms of this
Agreement, and (ii) to the extent such representations and warranties speak as
of an earlier date.
(b) Parent and Merger Sub shall have performed and complied in all
material respects with all agreements, obligations, covenants and conditions
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date.
38
(c) Parent and Merger Sub shall have furnished certificates of their
President and Treasurer or Chief Financial Officer to evidence compliance with
the conditions set forth in Sections 7.1(a) and (b) of this Agreement.
(d) Parent shall have executed and delivered the Escrow Agreement.
(e) The Company shall have received an opinion of counsel to Parent
substantially in form of Exhibit I hereto.
(f) There shall not have occurred, since the date hereof, any
change, event or effect that is materially adverse to the business, operations,
assets, condition (financial or otherwise), results of operations, or prospects
of Parent.
7.2. ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB.
The obligations of Parent and Merger Sub to effect the Merger and the other
transactions contemplated by this Agreement shall be subject to the fulfillment
of each of the following additional conditions, any one or more of which may be
waived in writing by Parent:
(a) The representations and warranties of the Company contained in
this Agreement (without regard to any materiality exceptions or provisions
therein) shall be true and correct, in all material respects, as of the
Effective Time, with the same force and effect as if made at the Effective Time,
except (i) for changes specifically permitted by the terms of this Agreement and
(ii) to the extent such representations and warranties speak as of an earlier
date.
(b) The Company shall have performed and complied in all material
respects with all agreements, obligations, covenants and conditions required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.
(c) The Company shall have furnished certificates of its President
and Treasurer or Chief Financial Officer to evidence compliance with the
conditions set forth in Section 7.2(a) and (b) of this Agreement.
(d) Parent and Merger Sub shall have received an opinion of Company
Counsel substantially in the form of Exhibit C attached hereto, dated as of the
Closing Date.
(e) The consents, waivers, notifications, disclosures and approvals
listed in Schedule 3.3 of the Company Disclosure Statement shall have been
obtained or made.
(f) The Stockholder Representative shall have executed and delivered
the Escrow Agreement.
(g) The Company shall have received and delivered to Parent fully
executed copies of (x) Acknowledgment and Consents, Questionnaires, and Waivers
representing (in each case) not less than 90% of the Outstanding Company Shares
(as of the Effective Time), and (y) Releases representing not less than 75% of
the Outstanding Company Shares (as of the Effective Time).
39
(h) Each holder of Outstanding Company Shares who is entitled to
receive ten percent (10%) or more of the shares of Parent Common Stock to be
issued pursuant to Section 2.1 shall have executed a lock-up agreement in the
form attached hereto as Exhibit E (the LOCK-UP AGREEMENT").
(i) The Company shall not have been named as a party to any material
Action before any Government Entity.
(j) The Company shall have delivered to Parent a statement that the
interest in the Company is not a United States real property interest as
contemplated by Section 1.1445-2(c)(3) of the regulations promulgated under the
Code.
(k) No more than ten percent (10%) of the Outstanding Company Shares
shall be Dissenting Shares.
(l) The Company shall have effected the Recapitalization.
(m) Each Continuing Company Employee designated by an asterisk on
Schedule 5.11 hereto shall have executed and delivered his or her employment
offer letter with Parent or any of its Subsidiaries in the form provided to such
Continuing Company Employee.
(n) The Company shall have delivered to Parent the executed
resignations of each of the Company's officers and directors from all positions
and offices hold with the Company, effective as of the Effective Time.
(o) The Company Auditor shall have completed the Audit and the
Company shall have delivered the audited financial statements and the opinion of
the Company Auditor to Parent; additionally, the Company shall have delivered to
Parent all required Interim Financial Statements. The audited financial
statements resulting from the Audit shall be substantially the same in all
material respects as the Company Financial Statements, and the Interim Financial
Statements shall reflect only operations in the normal course of the Company's
business with no material adverse changes from the audited financial statements.
(p) Each of the Terminated Agreements shall be terminated, effective
as of the Closing, under terms reasonably acceptable to Parent.
(q) The Company shall have executed a new lease agreement regarding
its current office space covering a period of at least three (3) years from
Closing, all material terms of such lease agreement shall be at least as
favorable to the Company as those contained in the Company's current Sublease
dated December 15, 2003, and all necessary consents and approvals for such lease
agreement (including from the Master Landlord (as defined in the Sublease dated
December 15, 2003)) shall have been obtained.
(r) There shall not have occurred, since the date hereof, any
change, event or effect that is materially adverse to the business, operations,
assets, condition (financial or otherwise), results of operations, or prospects
of the Company.
40
ARTICLE VIII.
TERMINATION
8.1. TERMINATION. Subject to the provisions of this Section 8.1, this
Agreement may be terminated at any time prior to the Effective Time, whether
before or after the Stockholder Approval:
(a) by mutual written consent duly authorized by the boards of
directors of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have
been consummated by April 30, 2005, which date may be extended by mutual consent
of the parties hereto (the "TERMINATION DATE"); provided, however, that the
right to terminate this Agreement under this Section 8.1(b) shall not be
available to any party whose action or failure to act has proximately caused the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes a breach of this Agreement;
(c) by either Parent or the Company if the average closing price per
share of Parent Common Stock quoted on the Nasdaq for the ten (10) consecutive
trading days preceding the Closing Date is less than seventy five percent (75%)
of the average closing price per share of Parent Common Stock as quoted on the
Nasdaq for the ten (10) consecutive trading days preceding the date of this
Agreement;
(d) by Parent if a Company Triggering Event (as defined in Section
8.1(f)) shall have occurred; or
(e) by the Company, if there exists a breach or breaches of any
representation, warranty or covenant of Parent or Merger Sub contained in this
Agreement such that the Closing condition set forth in Section 7.1(a) or (b)
would not be satisfied; provided, however, that the Company shall not be
permitted to terminate this Agreement pursuant to this Section 8.1(e) if the
Company shall have breached in any material respect its obligations under this
Agreement in any manner that shall have proximately caused such breach or
breaches by Parent.
(f) For purposes of this Agreement, a "COMPANY TRIGGERING EVENT"
shall be deemed to have occurred if: (i) the Company Board or any committee
thereof shall for any reason fail to unanimously recommend to the stockholders
of the Company that they vote in favor of this Agreement and the Merger; (ii)
the Company Board or any committee thereof shall for any reason fail to
unanimously recommend to the stockholders of the Company who have not voted for
or executed a written consent approving and adopting this Agreement and the
Merger and the other transactions contemplated hereby that they execute a
Waiver; (iii) the condition set forth in Section 7.2(k) is not satisfied or the
Stockholder Approval has not been obtained within one (1) hour following
execution of this Agreement; (iv) any of the Company's representations or
warranties is untrue as of the date of this Agreement; or (v) the Company shall
have breached any covenant of the Company contained in this Agreement such that,
in the case of clauses (iv) and (v) of this Section 8.1(f), any of the Closing
conditions set forth in Article VI or Article VII would not be satisfied;
provided, however, Parent shall not be permitted to terminate this
41
Agreement pursuant to Section 8.1(d) if Parent shall have breached in any
material respect its obligations under this Agreement in any manner that shall
have proximately caused such breach or breaches by the Company.
8.2. NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination of this
Agreement under Section 8.1 will be effective immediately upon the delivery of a
written notice of the terminating party to the other parties hereto. In the
event of the termination of this Agreement as provided in Section 8.1, this
Agreement shall be of no further force or effect, except (i) Sections 5.8 and
5.10, this Article VIII, and Article XI, each of which shall survive the
termination of this Agreement and shall be enforceable by each party against the
other party, and (ii) nothing herein shall relieve any party from liability for
any intentional breach of this Agreement or fraud.
8.3. TERMINATION FEES AND EXPENSES.
(a) The Company shall promptly pay a break-up fee to Parent in the
amount of $500,000 plus all of Parent's documented reasonable out-of-pocket
expenses incurred in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, Parent's due diligence
examination of the Company and its business, assets and operations
(collectively, the "TERMINATION FEE"), within two business days of written
demand by Parent if:
(i) Parent terminates this Agreement pursuant to Section
8.1(d), other than for a Company Triggering Event set forth in Section
8.1(f)(iii); or
(ii) (A) Parent terminates this Agreement pursuant to Section
8.1(b), (B) the Company shall have received a proposal for an Alternate
Acquisition, and such proposal shall not have been withdrawn prior to the
Termination Date and (C) within twelve (12) months of such termination of this
Agreement, the Company enters into or consummates a transaction involving an
Alternate Acquisition with any third party other than Parent or any of its
Affiliates.
(b) In the event the Company terminates this Agreement pursuant to
Section 8.1(e), Parent will promptly (i.e., within two business days of written
demand) pay to the Company all of the Company's documented reasonable
out-of-pocket expenses incurred in connection with this Agreement and the
transactions contemplated hereby.
(c) In the event Parent terminates this Agreement pursuant to
Section 8.1(d) because of a Company Triggering Event set forth in Section
8.1(f)(iii), the Company will promptly pay to Parent (i.e., within two business
days of written demand) all of Parent's documented reasonable out-of-pocket
expenses incurred in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, Parent's due diligence
examination of the Company and its business, assets and operations.
(d) In the event the Company pays to Parent the Termination Fee
pursuant to this Section 8.3, such payment shall constitute Parent's sole and
exclusive remedy unless the payment of the Termination Fee was occasioned by
Parent's termination of this Agreement because of a Company Triggering Event
defined in Section 8.1(f)(iv) or Section 8.1(f)(v) under circumstances where
such termination right of Parent was occasioned by an intentional act or
42
omission by the Company (in which case Parent shall also be entitled to any and
all remedies available at law or in equity, and the same shall be cumulative).
8.4. COMPANY ACKNOWLEDGMENT. The Company acknowledges that the agreements
contained in Section 8.3 are an integral part of the transactions contemplated
by this Agreement, and that, without these agreements, neither Parent nor the
Company would enter into this Agreement. Accordingly, if the Company fails to
pay in a timely manner the amounts due pursuant to such section, and, in order
to obtain such payment, Parent makes a claim that results in a judgment against
the Company for the amounts set forth in such section, the Company shall pay to
Parent its reasonable costs and expenses (including reasonable attorneys' fees
and expenses) in connection with such suit, together with interest on the
amounts set forth in such subsection at the applicable prime rate in effect on
the date such payment was required to be made. Payment of the fees and expenses
described in Section 8.3 shall be credited toward any damages incurred by Parent
or Merger Sub in the event of the breach of this Agreement by the Company.
ARTICLE IX.
INDEMNIFICATION
9.1. INDEMNIFICATION. Subject to the limitations set forth in this Article
IX, the holders of the Outstanding Company Shares, severally, but not jointly,
solely to the extent of their ownership percentage of voting stock of the
Company, shall from and after the Effective Time indemnify, defend, and hold
harmless each of Parent and, effective at and after the Effective Time, the
Surviving Corporation, and their respective directors, officers, agents,
attorneys and affiliates and successors and permitted assigns (each an
"INDEMNITEE" and, collectively, the "INDEMNITEES") from and against any and all
losses, obligations, deficiencies, liabilities, claims, damages, Excessive
Appraisal Costs, Environmental Costs, fines, costs and expenses (including
without limitation the amount of any compromise or settlement and all reasonable
legal and other expenses incurred in connection with the investigation,
prosecution or defense of any matter indemnified pursuant hereto, but net of
insurance proceeds paid to the party incurring such loss) (collectively,
"DAMAGES") that any Indemnitee may sustain, suffer or incur and which result
from, arise out of, or are caused by breach of any representation, warranty,
covenant, agreement or certificate made or delivered by or to be performed by
the Company in this Agreement.
9.2. CLAIMS.
(a) Any claim under Section 9.1 shall be made by written notice from
the Indemnitee to the Stockholder Representative specifying in reasonable detail
the amount and basis of the claim. When an Indemnitee seeking indemnification
under Section 9.1 receives notice of any claim by a third party ("THIRD PARTY
CLAIM"), including without limitation any Government Entity, which is to be the
basis for a claim for indemnification hereunder, the Indemnitee shall give
written notice to the Escrow Agent reasonably indicating (to the extent known)
the nature of such claims and the basis thereof and shall include with such
notice the claim and any and all documentation provided by the claimant, and the
Escrow Agent will promptly notify the Stockholder Representative of such Third
Party Claim. The notice shall be given as soon as practicable, but in the event
of a complaint filed with any Government Entity,
43
not later than ten days after the Indemnitee has received written notice of the
Third Party Claim. Any failure by an Indemnitee to provide such notice shall not
affect the obligations of the holders of Outstanding Company Shares hereunder,
except to the extent of any Damages caused by such delay.
(b) Upon notice from the Indemnitee, the holders of the Outstanding
Company Shares may, but shall not be required to, assume the defense of any such
Third Party Claim, including its compromise or settlement, by counsel of their
own choosing reasonably acceptable to the Indemnitee, and the holders of the
Outstanding Company Shares, if it is a claim for which indemnification is agreed
or determined to be applicable and such holders assume the defense, shall pay
all costs and expenses thereof and shall be fully responsible for the outcome
thereof; provided, however, that the Stockholder Representative shall consult
regularly with the Indemnitee regarding the defense of such Third Party Claim
and may not settle or compromise any Third Party Claim without the Indemnitee's
prior written consent (which consent shall not be unreasonably withheld or
delayed) and that the Indemnitee shall be entitled to participate in the defense
of such Third Party Claim at its own expense. The Stockholder Representative
shall give written notice to the Indemnitee of the intention of the holders of
the Outstanding Company Shares to assume the defense of any such Third Party
Claim within ten days after receipt of the Indemnitee's written notice with
respect to such Third Party Claim and shall acknowledge in writing whether it
accepts liability to the Indemnitee for any Damages of the Indemnitee as a
result of such Third Party Claim; provided, that the Stockholder Representative
shall have the right to dispute any Third Party Claim. If the Stockholder
Representative does not, within ten days after receipt of the Indemnitee's
written notice, give written notice to the Indemnitee of the assumption by the
holders of the Outstanding Company Shares of the defense of the Third Party
Claim, the holders of the Outstanding Company Shares shall be deemed to have
waived their rights to defend the Third Party Claim.
(c) The holders of the Outstanding Company Shares shall have no
liability with respect to any compromise or settlement of a Third Party Claim
effected without the prior written consent of the Stockholder Representative
(which consent shall not be unreasonably withheld or delayed). Notwithstanding
the foregoing, if the party that has made or filed the Third Party Claim seeks
remedies other than monetary damages that could materially adversely affect the
business or results of operations of Parent or the Surviving Corporation, then
the Indemnitee, Parent and/or the Surviving Corporation shall assume the defense
of any such Third Party Claim, including its compromise or settlement, by
counsel of its own choosing reasonably acceptable to the Stockholder
Representative; in which event, if such Damages are determined to exist, the
holders of the Outstanding Company Shares shall pay all reasonable costs and
expenses of such defense and investigation and the holders of the Outstanding
Company Shares shall be responsible for all other Damages related to the outcome
thereof (which costs, expenses and other Damages may be payable to the Company
and other Indemnities from the Escrow Fund); provided, however, that the
Indemnitee shall consult regularly with the Stockholder Representative regarding
the defense of such Third Party Claim and may not settle or compromise any such
Third Party Claim without the Stockholder Representative's prior written consent
(which consent shall not be unreasonably withheld or delayed) and that the
holders of the Outstanding Company Shares shall be entitled to participate in
the defense of any such Third Party Claim at their own expense.
44
9.3. LIMITATIONS ON INDEMNIFICATION.
(a) The holders of Outstanding Company Shares shall have no
liability for amounts payable pursuant to their indemnification obligations in
Section 9.1 until the total of all such Damages incurred by the Indemnitees,
individually or in the aggregate, exceeds Seventy-Five Thousand Dollars
($75,000), and then indemnification by the holders of Outstanding Company Shares
shall apply to all Damages including such Seventy-Five Thousand Dollars
($75,000).
(b) The Escrow Fund shall be the sole source of recovery for Damages
pursuant to Section 9.1, except for fraud or other violations of law. There
shall be no limit on the amount of recovery for Damages arising from fraud or
other violations of law, other than such limits as may be imposed by applicable
law and by Section 9.3(c).
(c) The maximum aggregate amount of indemnification for Damages for
which a particular holder of Outstanding Company Shares may be responsible to
Parent hereunder shall be equal to the aggregate value of all Merger
Consideration received by such holder, plus all reasonable out-of pocket
expenses (including attorneys' fees) incurred by Parent in connection with the
collection of such amounts from such holder; provided, however, that Parent
shall not be entitled to recover duplicative costs in satisfaction of its
out-of-pocket expenses.
(d) The representations and warranties set forth in Article III and
related indemnification rights shall survive the Closing for one (1) year;
provided, however, that any such expiration of time shall not affect a bona fide
claim for indemnification timely made prior to such expiration. There shall be
no time limit on claims for Damages arising from fraud or other violations or
law unless the time for filing any such claim has expired according to
applicable law.
9.4. ESCROW SET-OFF. Subject to the limitations set forth in Section 9.3,
Parent shall first set-off the amount of any claim for indemnity under Sections
9.1 and 9.2 against the Escrow Fund subject to the Escrow Agreement in
accordance with the terms and conditions contained therein and herein. To the
extent that any claim for indemnification hereunder is covered by insurance held
by the Indemnitee, such Indemnitee shall be entitled to indemnification only
with respect to the amount of Damages that are in excess of the cash proceeds
received by such Indemnitee pursuant to such insurance. If such Indemnitee
receives insurance proceeds prior to the time such claim is paid, then the
amount payable pursuant to such claim shall be reduced by the amount of the
insurance proceeds. If such Indemnitee receives insurance proceeds after such
claim is paid, then upon receipt by the Indemnitee of any insurance proceeds
pursuant with respect to such claim, such Indemnitee shall repay any portion of
such amount which was previously paid to the Indemnitee from the Escrow Fund in
satisfaction of such claim.
9.5. RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE. The right to
indemnification based on a party's representations, warranties, covenants or
agreements set forth in this Agreement will not be affected by any investigation
conducted with respect to, or any knowledge acquired (or capable of being
acquired) at any time, whether before or after the execution and delivery of
this Agreement or the Closing Date, with respect to the accuracy or inaccuracy
of or compliance with any such representation, warranty, covenant or agreement
by
45
the other party; provided, however, that this provision shall not modify the
exceptions to the Company's representations and warranties set forth in the
Company Disclosure Statement.
9.6. APPOINTMENT OF STOCKHOLDER REPRESENTATIVE. The approval and adoption
of this Agreement by the Company's stockholders shall constitute the following
actions binding upon each of the Company's stockholders:
(a) the irrevocable authorization, direction and appointment of
Xxxxx Xxxxxx and any successor designated pursuant to this Section 9.6 (the
"STOCKHOLDER REPRESENTATIVE") as sole and exclusive agent, attorney-in-fact and
representative of each holder of Outstanding Company Shares and such Person's
heirs, representatives and successors;
(b) the approval and authorization for all of the arrangements
relating thereto, including: (i) the execution, delivery and performance of the
Escrow Agreement by the Stockholder Representative; (ii) the receipt and
distribution of the Escrow Fund to the holders of the Outstanding Company Shares
pursuant to the terms of the Escrow Agreement; (iii) the Stockholder
Representative's performance of his obligations under this Agreement and the
Escrow Agreement, including, without limitation, taking any and all actions,
incurring any costs and expenses for the account of the holders of the
Outstanding Company Shares and making any and all determinations which may be
required or permitted to be taken by the Stockholder Representative or the
holders of the Outstanding Company Shares, including in connection with Article
IX; and (iv) the exercise of such rights, power and authority as are incidental
to the foregoing; and
(c) the irrevocable relinquishment of the right of each holder of
the Outstanding Company Shares to act independently and other than through the
Stockholder Representative with respect to the foregoing, any such rights being
irrevocably and exclusively delegated to the Stockholder Representative. Without
limiting the generality of the foregoing, any notice hereunder delivered to an
Indemnitee by a holder of the Outstanding Company Shares other than through the
Stockholder Representative shall be of no effect, and each notice delivered by
an Indemnitee to the Stockholder Representative shall be effective as against
each holder of the Outstanding Company Shares.
(d) The original Stockholder Representative shall indicate in
writing his acceptance of such appointment and his agreement to be bound by the
terms of this Agreement as they relate to the Stockholder Representative and the
duties and responsibilities thereof by executing this Agreement for such limited
purpose in the space provided on the signature pages hereof.
(e) Any actions, exercises of rights, power or authority and any
decisions or determinations made by the Stockholder Representative shall be
absolutely and irrevocably binding on each holder of the Outstanding Company
Shares as if each such Person personally had taken such action, exercised such
rights, power or authority or made such decision or determination in such
Person's individual capacity.
46
9.7. LIABILITY AND AUTHORITY OF STOCKHOLDER REPRESENTATIVE; SUCCESSORS AND
ASSIGNS.
(a) The Stockholder Representative shall not incur any liability
with respect to any action taken or suffered by him in reliance upon any note,
direction, instruction, consent, statement or other document believed by him to
be genuinely and duly authorized, nor for other action or inaction as the
Stockholder Representative, excepting only his own willful misconduct or gross
negligence. The Stockholder Representative may, in all questions arising
hereunder, or under the Escrow Agreement, rely on the advice of legal counsel
and for anything done, omitted or suffered in good faith by the Stockholder
Representative based on such advice, the Stockholder Representative shall not be
liable to anyone.
(b) The Stockholder Representative shall have full power and
authority to represent the stockholders of the Company, and their successors and
assigns, within the scope of his appointment pursuant to Section 9.6, and all
action taken by the Stockholder Representative hereunder shall be binding upon
the holders of the Outstanding Company Shares, and their successors and assigns,
as if expressly confirmed and ratified in writing by each of them. The
appointment of the Stockholder Representative under this Agreement shall survive
the death, incapacity or any assignment of rights or assets of any such holder.
Without limiting the generality of the foregoing, the Stockholder Representative
shall have full power and authority on behalf of the holders of Outstanding
Company Shares to: (i) interpret all of the terms and provisions of this
Agreement and the Escrow Agreement; (ii) to the extent of the Escrow Fund,
compromise or settle any claims asserted under this Agreement, the Escrow
Agreement or otherwise in connection with the transactions contemplated by this
Agreement; and (iii) authorize payments, delivery or issuance with respect
thereto out of the Escrow Fund, on behalf of the holders of Outstanding Company
Shares.
(c) Each holder of Outstanding Company Shares shall be liable to the
extent of his, her or its Proportionate Percentage of any expenses (including
reasonable attorneys' fees) paid or incurred by the Stockholder Representative
in connection with the performance of his obligations as Stockholder
Representative. For purposes of this Agreement, the term "PROPORTIONATE
PERCENTAGE" shall mean, with respect to each such holder, a fraction (expressed
as a percentage) the numerator of which is the number of the Outstanding Company
Shares owned by such holder immediately prior to the Effective Time and the
denominator of which is the total number of Outstanding Company Shares
immediately prior to the Effective Time. For purposes of clarity, each holder of
Outstanding Company Shares shall make payments required by this Section 9.7 out
of his/her/its personal funds and not from the Escrow Fund.
(d) The Stockholder Representative may resign at any time by
submitting a written resignation to Parent. In the event of the death, physical
or mental incapacity or resignation of the Stockholder Representative, a
successor Stockholder Representative shall be elected by a majority in voting
power of the holders of the Outstanding Company Shares (immediately prior to the
Effective Time), pursuant to a procedure to be mutually agreed upon among such
holders. Such holders shall cause to be delivered to Parent prompt written
notice of such election of a successor Stockholder Representative. Pending the
election of a successor Stockholder Representative, such holder holding the
largest number of votes of the Outstanding Company Shares (excluding the former
Stockholder Representative) as of immediately prior to the Effective Time shall
act as the interim Stockholder Representative. Each interim and
47
successor Stockholder Representative shall have all the power, authority, rights
and privileges conferred by this Agreement upon the original Stockholder
Representative, and the term "Stockholder Representative" as used herein shall
be deemed to include any interim or successor Stockholder Representative. Any
successor Stockholder Representative shall indicate in writing his acceptance of
such appointment and his agreement to be bound by the terms of this Agreement
and the Escrow Agreement applicable to the Stockholder Representative.
ARTICLE X.
REGISTRATION RIGHTS
10.1. REGISTRATION OF SHARES. Parent shall, as soon as practicable, but in
no event later than forty-five (45) days following the Effective Time, prepare
and file with the SEC a registration statement on Form S-3 (or other appropriate
form) (the "REGISTRATION STATEMENT") for the resale of all shares of Parent
Common Stock issued as Merger Consideration.
10.2. OBLIGATIONS OF PARENT. With respect to the Registration Statement
pursuant to this Article X, Parent shall:
(a) prepare and file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection therewith as may be
necessary to keep the Registration Statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of all Parent
Common Stock covered by the Registration Statement for a period equal to the
later of (i) one (1) year or (ii) ninety (90) days following the date no holder
of Outstanding Company Shares is restricted from selling its shares of Parent
Common Stock pursuant to a Lock-Up Agreement;
(b) use all reasonable efforts to register or qualify the Parent Common
Stock covered by the Registration Statement under the securities or blue sky
laws of such jurisdiction within the United States as shall be reasonably
requested by the Stockholder Representative for the distribution of the Parent
Common Stock covered by the Registration Statement and do any and all other acts
or things that may be necessary or advisable to enable each holder of the Parent
Common Stock covered by the Registration Statement to consummate the public sale
or other disposition of stock in such jurisdictions (provided that nothing
contained in this provision shall require Parent to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 10.2(b), (ii) subject itself to taxation in any
jurisdiction, or (iii) take any action that would subject it to general service
of process in any such jurisdiction);
(c) promptly notify the Stockholder Representative at any time when a
prospectus relating thereto is required to be delivered under the Securities Act
of the happening of any event as a result of which the prospectus included in
the Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances under which they were made, and at the request of the Stockholder
Representative promptly prepare and furnish to any holder a reasonable number of
copies of the prospectus (including a preliminary prospectus or a supplement to
or an amendment of such prospectus, or a
48
revised prospectus, as may be necessary) so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made; provided, that Parent
shall notify the Stockholder Representative, promptly after it shall receive
notice thereof, of the date and time the Registration Statement and each
post-effective amendment thereto has become effective or a supplement to any
prospectus forming a part of such Registration Statement has been filed;
provided, however, that Parent reserves the right (without penalty) to suspend
the effectiveness of the Registration Statement, in each instance for up to
sixty (60) consecutive days, as is necessary or appropriate to make sure the
Registration Statement or prospectus does not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made;
(d) advise the Stockholder Representative promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of the Registration Statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued; and
(e) use reasonably commercial efforts to cause the Registration Statement
to be declared effective by the SEC as soon as practicable following filing
thereof.
10.3. EXPENSES. All expenses incurred in connection with the registration
pursuant to this Agreement, excluding underwriters' or brokers' discounts and
commissions, but including without limitation all registration, filing and
qualification fees, word processing, duplicating, printers' and accounting fees,
listing fees, messenger and delivery expenses, all fees and expenses of
complying with state securities or blue sky laws, and the fees and disbursements
of counsel for Parent shall be paid by Parent. Each holder shall bear and pay
the fees and disbursements of legal counsel engaged by such holder and
underwriting commissions and discounts and brokerage fees applicable to
securities offered for such holder's account in connection with any
registrations, filings and qualifications made pursuant to this Agreement.
10.4. INDEMNIFICATION. In the event any Parent Common Stock is included in
a Registration Statement under this Agreement:
(a) Parent shall indemnify and hold harmless each holder and each
person, if any, who controls such holder or participating person within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which they may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or proceedings in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arise out of
or are based on any untrue or alleged untrue statement of any material fact
contained in the Registration Statement on the effective date thereof (including
any prospectus filed under Rule 424 under the Securities Act or any amendments
or supplements thereto) or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
Parent of any rule or regulation
49
promulgated under the Securities Act, or state securities laws, or common law,
applicable to Parent in connection with any such registration, qualification or
compliance, and shall reimburse each such holder or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage or liability; provided,
however, that the indemnity agreement contained in this Section 10.4(a) shall
not apply to amounts paid in settlement of any such loss, claim, damage or
liability if such settlement is effected without the consent of Parent (which
shall not be unreasonably withheld); provided, further, that Parent shall not be
liable to any holder or controlling person in any such case for any such loss,
claim, damage or liability to the extent that it arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged omission
made in connection with the Registration Statement, preliminary prospectus,
final prospectus or amendments or supplements thereto, in reliance upon and in
conformity with information furnished expressly for use in connection with such
registration by any such holder or controlling person or any violation by such
holder or controlling person of any rule or regulation promulgated under the
Securities Act, or state securities laws, or common law, applicable to such
holder or controlling person in connection with any such registration,
qualification or compliance. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of any such holder
or controlling person, and shall survive the transfer of such securities by such
holder, and any termination of this Agreement.
(b) Each holder participating in such Registration, severally, and
not jointly, shall indemnify and hold harmless Parent, each of Parent's
directors and officers, each person, if any, who controls Parent within the
meaning of the Securities Act, and each agent and any underwriter for Parent
(within the meaning of the Securities Act) against any losses, claims, damages
or liabilities, joint or several, to which Parent or any such director, officer,
controlling person, agent or underwriter may become subject, under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or proceedings in respect thereof) arise solely out of or are based
solely upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement (including any prospectus filed
under Rule 424 under the Securities Act or any amendments or supplements
thereto) or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, preliminary or final
prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with information furnished by or on behalf of such holder expressly
for use in connection with such Registration; or any violation by such holder or
his controlling persons, if any, of any rule or regulation promulgated under the
Securities Act, or state securities laws, or common law, applicable to such
holder or controlling persons in connection with any such registration,
qualification or compliance, and each such holder shall reimburse any legal or
other expenses reasonably incurred by Parent or any such director, officer,
controlling person, agent or underwriter in connection with investigating or
defending any such loss, claim, damage or liability; provided, however, that the
indemnity agreement contained in this Section 10.4(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage or liability if such
settlement is effected without the consent of such holder; and provided,
further, that the liability of each holder hereunder shall be limited to the
gross proceeds received by such holder from the sale of
50
Parent Common Stock covered by such Registration Statement, except in the case
of gross negligence or fraud.
(c) Promptly after receipt by an indemnified party under this
section of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against any indemnifying
party under this section, notify the indemnifying party in writing of the
commencement thereof and the indemnifying party shall have the right to
participate in and assume the defense thereof with counsel selected by the
indemnifying party and reasonably satisfactory to the indemnified party;
provided, however, that an indemnified party shall have the right to retain its
own counsel, with all fees and expenses thereof to be paid by such indemnified
party, and to be apprised of all progress in any proceeding the defense of which
has been assumed by the indemnifying party. The failure to notify an
indemnifying party promptly of the commencement of any such action, if and to
the extent prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
10.4, but the omission so to notify the indemnifying party will not relieve it
of any liability that it may have to any indemnified party otherwise than under
this Section 10.4.
(d) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified party in connection with the actions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action; provided, that
the liability of each holder hereunder shall be limited to the gross proceeds
received by such holder from the sale of Parent Common Stock covered by such
Registration Statement, except in the case of gross negligence or fraud. The
amount paid or payable by a party as a result of the losses, claims, damages or
liabilities referred to above shall be deemed to include any legal or other fees
or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 10.4(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
51
ARTICLE XI.
MISCELLANEOUS
11.1. AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement of
Parent, Merger Sub and the Company at any time prior to the Effective Time;
provided, however, that after approval and adoption of this Agreement by the
stockholders of the Company, no amendment shall be made which by law requires
the further approval of such stockholders without such further approval;
provided, further, that no amendment of Section 9.6 or Section 9.7 shall be made
without the consent of the Stockholder Representative.
11.2. WAIVER OF COMPLIANCE; CONSENTS. Any failure of Parent or Merger Sub,
on the one hand, or the Company, on the other hand, to comply with any
obligation, covenant, agreement or condition herein may be waived by the Company
or Parent or Merger Sub, respectively, only by a written instrument signed by
the party or parties granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in this
Section 11.2.
11.3. SURVIVAL. Except as set forth in Article IX, no representations or
warranties contained herein or in any certificates or other documents delivered
prior to Closing shall be deemed to survive Closing. This Section 11.3 shall not
limit any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time.
11.4. NOTICES. All notices and other communications hereunder shall be in
writing and shall be delivered personally, by overnight courier or similar means
or sent by facsimile with written or electronic confirmation of receipt, to the
parties at the addresses specified below (or at such other address for a party
as shall be specified by like notice). Any such notice shall be effective upon
receipt, if delivered personally or by overnight courier or on the next business
day following transmittal if sent by confirmed facsimile. Notices shall be
delivered as follows:
If to the Company (before the
Closing), to: CyVera Corporation
00 Xxxxxx Xxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President
52
with a copy (which shall not constitute
notice) to: Xxxxxx & Xxxx LLP
One Century Tower
P.O. Box 1832
000 Xxxxxx Xxxxxx
Xxx Xxxxx, XX 00000-0000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxx Xxxxx, Esq.
if to Parent, or Merger Sub, to: Illumina, Inc.
0000 Xxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President
with a copy (which shall not constitute
notice) to: Xxxxxx Xxxxxx White & XxXxxxxxx LLP
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxx, Esq.
If to the Stockholder Representative
(on or after the Closing) to: Xxxxx Xxxxxx
00 Xxxxxx Xxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
53
with a copy (which shall not constitute
notice) to: Xxxxxx & Xxxx LLP
One Century Tower
P.O. Box 1832
000 Xxxxxx Xxxxxx
Xxx Xxxxx, XX 00000-0000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxx Xxxxx, Esq.
11.5. ASSIGNMENT; SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES.
Neither this Agreement nor any right, interest or obligation hereunder shall be
assigned by any of the parties hereto without the prior written consent of the
other parties; provided, however, that Parent or Merger Sub may (i) assign any
and all of their rights and interests hereunder to an acquiror of Parent or
Parent's businesses or assets or to one or more of their Affiliates and (ii)
designate one or more Affiliates to perform their obligations hereunder. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. Except as provided in
Article IX with respect to Indemnitees, the Stockholder Representative and the
Escrow Agent, this Agreement is not intended to confer any rights or remedies
upon any Person other than the parties hereto.
11.6. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Delaware, without
giving effect to its conflicts of laws principles or rules.
11.7. CONSENT TO JURISDICTION; VENUE. The parties hereto agree that all
actions or proceedings arising in connection with this Agreement shall be
initiated and tried exclusively in the State and Federal courts located in the
county of New Castle, State of Delaware. The aforementioned choice of venue is
intended by the parties to be mandatory and not permissive in nature, thereby
precluding the possibility of litigation between the parties with respect to or
arising out of this Agreement in any jurisdiction other than that specified in
this Section 11.7. Each party hereby waives any right it may have to assert the
doctrine of forum non conveniens or similar doctrine or to object to venue with
respect to any proceeding brought in accordance with this paragraph, and
stipulates that the State and Federal courts located in the County of New
Castle, State of Delaware shall have in personam jurisdiction and venue over
each of them for the purposes of litigating any dispute, controversy or
proceeding arising out of or related to this Agreement. Each party hereby
authorizes and accepts service of process sufficient for personal jurisdiction
in any action against it as contemplated by this Section 11.7 by registered or
certified mail, return receipt requested, postage prepaid, to its address for
the giving of notices as set forth in this Agreement, or in the manner set forth
in Section 11.4 of this Agreement for the giving of notice. Any final judgment
rendered against a party in any action or proceeding shall be conclusive as to
the subject of such final judgment and may be enforced in other jurisdictions in
any manner provided by law.
Stockholder Representative hereby irrevocably designates Corporation
Service Company (in such capacity, the "Process Agent"), with an office located
at 0000 Xxxxxxxxxxx Xxxx, Xxx.
00
000, Xxxxxxxxxx, XX 00000, County of New Castle, Delaware, its designee,
appointee and agent to receive, for and on its behalf, service of process in
such jurisdiction in any litigation arising out of or relating to this Agreement
and such service shall be deemed complete upon delivery thereof to the Process
Agent; provided that in the case of any such service upon the Process Agent, the
party effecting such service shall also deliver a copy thereof to the
Stockholder Representative in the manner provided in Section 11.4 of this
Agreement.
11.8. ATTORNEYS' FEES. Except as otherwise set forth in this Agreement, in
the event of any dispute between the parties hereto arising out of or relating
to this Agreement or the interpretation, performance, or breach thereof, the
prevailing party shall be entitled to recover from the other party its
reasonable expenses, including outside attorneys' fees, incurred therein or in
the enforcement or collection of any judgment or award rendered therein.
11.9. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Facsimile transmission of
any signed original document or retransmission of any signed facsimile
transmission will be deemed the same as delivery of an original. At the request
of any party, the parties will confirm facsimile transmission by signing a
duplicate original document.
11.10. SEVERABILITY. In case any one or more of the provisions contained
in this Agreement should be finally determined to be invalid, illegal or
unenforceable in any respect against a party hereto, it shall be adjusted if
possible to effect the intent of the parties. In any event, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby, and such invalidity, illegality
or unenforceability shall only apply as to such party in the specific
jurisdiction where such final determination shall have been made.
11.11. INTERPRETATION. The Article and Section headings contained in this
Agreement are solely for the purpose of reference and shall not in any way
affect the meaning or interpretation of this Agreement.
11.12. ENTIRE AGREEMENT. This Agreement, including the exhibits hereto and
the documents and instruments referred to herein, and the Confidentiality
Agreements embody the entire agreement and understanding of the parties hereto
in respect of the subject matter contained herein and supersedes all prior and
contemporaneous agreements or understandings between the parties on the subject
matters contained herein, including that certain letter dated December 23, 2004.
There are no representations, promises, warranties, covenants, or undertakings,
other than those expressly set forth or referred to herein and therein.
11.13. DEFINITION OF "LAW". When used in this Agreement, "LAW" refers to
any applicable law (whether civil, criminal or administrative) including,
without limitation, common law, statute, statutory instrument, treaty,
regulation, directive, decision, code, order, decree, writ, injunction
(preliminary or permanent), temporary restraining order, resolution or judgment
of any Government Entity.
11.14. RULES OF CONSTRUCTION.
55
(a) Each party to this Agreement has been represented by counsel
during the preparation and execution of this Agreement, and therefore waives any
rule of construction that would construe ambiguities against the party drafting
this Agreement.
(b) Whenever the context requires, the gender of all words used in
this Agreement includes the masculine, feminine and neuter.
(c) All accounting terms not otherwise defined in this Agreement
have the meanings ascribed to them in accordance with GAAP.
(d) The words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section, or other subdivision.
* * *
56
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have executed this
Agreement as of the date first above written.
PARENT:
ILLUMINA, INC
By: /s/ Xxx X. Xxxxxxx
------------------------------------------
Name: Xxx X. Xxxxxxx
Title: President and Chief Executive Officer
MERGER SUB:
SEMAPHORE ACQUISITION SUB, INC.
By: /s/Xxx X. Xxxxxxx
------------------------------------------
Name: Xxx X. Xxxxxxx
Title: President
COMPANY:
CYVERA CORPORATION
By: /s/ Xxxx Xxxxxx
------------------------------------------
Name: Xxxx Xxxxxx
Title: President and Chief Executive Officer
STOCKHOLDER REPRESENTATIVE:
/s/ Xxxxx Xxxxxx
----------------------------------------------
Xxxxx Xxxxxx
[Signature Page to Agreement and Plan of Merger]
LIST OF ATTACHMENTS*
GLOSSARY OF TERMS
SCHEDULE 5.11 - Continuing Company Employees
SCHEDULE 5.19 - Terminated Agreements
EXHIBIT A - Certificate of Merger
EXHIBIT B - Escrow Agreement
EXHIBIT C - Form of Opinion of Company Counsel
EXHIBIT D - Form of Stockholder Acknowledgment and Consent
EXHIBIT E - Form of Lock-Up Agreement
EXHIBIT F - Form of Investor Questionnaire
EXHIBIT G - Form of Waiver of Appraisal Rights and Stockholder
Acknowledgment
EXHIBIT H - Certificate of Incorporation of Surviving Corporation
EXHIBIT I - Form of Opinion of Counsel to Parent
EXHIBIT J - Form of General Release
*NOTE: Illumina will furnish supplementally a copy of any schedule or
exhibit to this Agreement to the Securities and Exchange Commission upon
request.
GLOSSARY OF TERMS
Accounts Receivable................................................................ 3.17(a)
Acknowledgment and Consent......................................................... 5.6
Action............................................................................. 3.10
Adjusted Option.................................................................... 2.6(a)
Affiliate; Affiliated.............................................................. 2.11(a)
Aggregate Merger Consideration Value............................................... 2.2
Agreement.......................................................................... Preamble
Alternate Acquisition.............................................................. 5.2(a)
Audit.............................................................................. 5.15
Balance Sheet Date................................................................. 3.7
CERCLA............................................................................. 3.22(b)
Certificate of Merger.............................................................. 1.2
Closing............................................................................ 1.2
Closing Date....................................................................... 1.2
COBRA.............................................................................. 3.13(b)
Code............................................................................... Recitals
Common Stock Merger Consideration.................................................. 2.1(b)
Common Stock Escrow Merger Consideration........................................... 2.1(b)
Common Stock Exchange Ratio........................................................ 2.1(b)
Company............................................................................ Preamble
Company Auditor.................................................................... 5.15
Company Balance Sheet.............................................................. 3.6
Company Board...................................................................... 3.2
Company Certificate................................................................ 2.1(c)
Company Common Stock............................................................... 3.5(a)
Company Contract................................................................... 3.12(b)
Company Disclosure Statement....................................................... ARTICLE III
Company Financial Statements....................................................... 3.6
Company IP Rights.................................................................. 3.16(a)
Company Options.................................................................... 3.5(b)
Company Preferred Stock............................................................ 3.5(a)
Company Stock Plan................................................................. 2.6(a)
Company Triggering Event........................................................... 8.1(f)
Company's Knowledge................................................................ ARTICLE III
Confidentiality Agreements......................................................... 5.10
Continuing Company Employees....................................................... 5.11
Damages............................................................................ 9.1
DGCL............................................................................... 1.1
Dissenting Shares.................................................................. 2.9(a)
Effective Time..................................................................... 1.2
Employee Benefit Plans............................................................. 21(a)
Environmental Costs................................................................ 5.20
Environmental Law.................................................................. 3.22(b)
i
GLOSSARY OF TERMS
(CONTINUED)
ERISA.............................................................................. 3.21(a)
ERISA Affiliate.................................................................... 3.21(a)
Escrow Adjustment.................................................................. 2.3
Escrow Agent....................................................................... 2.3
Escrow Agreement................................................................... 2.3
Escrow Fund........................................................................ 2.3
Exchange Act....................................................................... 4.5
Excessive Appraisal Costs.......................................................... 2.11(b)
Foreign Plan....................................................................... 3.21(n)
GAAP............................................................................... 3.6
Government Contract................................................................ 3.15
Government Entity.................................................................. 3.3
HSR Act............................................................................ 3.3
Indemnitee; Indemnitees............................................................ 9.1
Information Statement.............................................................. 5.5(a)
Intellectual Property.............................................................. 3.16
Interim Financial Statements....................................................... 5.15
IRS................................................................................ 3.20(d)
Law................................................................................ 11.13
Liquidation Preference............................................................. 2.1(a)
Loan Agreement..................................................................... 2.2(b)
Lock-Up Agreement.................................................................. 7.2(h)
Management Bonus Plan.............................................................. 2.2(a)
Merger............................................................................. Recitals
Merger Consideration............................................................... 2.1(b)
Merger Sub......................................................................... Preamble
Nasdaq............................................................................. 2.1(e)
Option Adjustment Amount........................................................... 2.2(g)
Option Exchange Ratio.............................................................. 2.6(a)
Option Shares...................................................................... 2.6(a)
Optionees.......................................................................... 2.6(c)
Outstanding Company Shares......................................................... 2.1(c)
Parent............................................................................. Preamble
Parent Closing Price............................................................... 2.1(e)
Parent Common Stock................................................................ 2.1(a)
Parent Disclosure Statement........................................................ ARTICLE IV
Parent Financial Statements........................................................ 4.5
Parent Material Adverse Effect..................................................... 4.1(a)
Pension Plans...................................................................... 3.21(a)
Person............................................................................. 2.11(c)
Potential Acquiror................................................................. 5.2(a)
Preferred Stock Merger Consideration............................................... 2.1(a)
Proportionate Percentage........................................................... 9.7(c)
Questionnaire...................................................................... 5.6
Real Property...................................................................... 3.22
Recapitalization................................................................... 5.4
ii
GLOSSARY OF TERMS
(CONTINUED)
Registration Statement............................................................. 10.1
Release............................................................................ 5.6
Representatives.................................................................... 5.2(a)
Returns............................................................................ 3.20(b)
SEC................................................................................ 4.5
SEC Documents...................................................................... 4.5
Securities Act..................................................................... 2.10
Stockholder Acknowledgments and Agreements......................................... 5.6
Stockholder Approval............................................................... 3.2
Stockholder Representative......................................................... 9.6(a)
Subsidiary......................................................................... 2.11(d)
Superior Proposal.................................................................. 5.2(a)
Surviving Corporation.............................................................. 1.1
Tax; Taxes......................................................................... 3.20(a)
Terminated Agreements.............................................................. 5.19
Termination Date................................................................... 8.1(b)
Termination Fee.................................................................... 8.3(a)
Third Party Claim.................................................................. 9.2(a)
Unanimity Change................................................................... 5.2(b)
Waiver............................................................................. 5.5(a)
Welfare Plans...................................................................... 3.21(a)
iii
