AGREEMENT AND PLAN OF MERGER
BY AND AMONG
INTERSIL CORPORATION,
NEW CASTLE MERGER SUB CORP.,
NEW CASTLE SUB LLC
and
XICOR, INC.
March 14, 2004
TABLE OF CONTENTS
PAGE
----
ARTICLE I THE MERGERS....................................................... 2
1.1. The Step One Merger.......................................... 2
1.2. Effective Time; Closing...................................... 2
1.3. Effects of the Step One Merger............................... 2
1.4. Articles of Incorporation and Bylaws......................... 2
1.5. Directors and Officers of the Interim Surviving Corporation.. 3
1.6. Step Two Merger.............................................. 3
1.7. Alternative Merger Structure................................. 4
ARTICLE II CONVERSION OF SECURITIES......................................... 4
2.1. Conversion of Capital Stock.................................. 4
2.2. Exchange of Certificates..................................... 8
2.3. Dissenting Shares............................................ 10
2.4. Treatment of Stock Options; ESPP............................. 11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY................... 13
3.1. Organization and Standing.................................... 13
3.2. Subsidiaries................................................. 14
3.3. Corporate Power and Authority................................ 14
3.4. Capitalization of the Company................................ 14
3.5. Conflicts; Consents and Approvals............................ 15
3.6. No Material Adverse Effect................................... 16
3.7. Company SEC Documents........................................ 16
3.8. Taxes........................................................ 17
3.9. Compliance with Law.......................................... 18
3.10. Intellectual Property........................................ 18
3.11. Title to Properties.......................................... 22
3.12. Registration Statement; Proxy Statement...................... 23
3.13. Litigation................................................... 23
3.14. Brokerage and Finder's Fees; Expenses........................ 23
3.15. Employee Benefit Plans....................................... 23
3.16. Contracts.................................................... 27
3.17. Labor Matters................................................ 28
3.18. Undisclosed Liabilities...................................... 28
3.19. Operation of the Company's Business; Relationships........... 28
3.20. Permits; Compliance.......................................... 29
3.21. Environmental Matters........................................ 29
3.22. Opinion of Financial Advisor................................. 30
3.23. Board Recommendation......................................... 30
3.24. Related Party Transactions................................... 30
3.25. Takeover Statutes; Rights Plan............................... 30
3.26. Certain Transactions......................................... 30
i
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT, MERGER SUB AND LLC..... 30
4.1. Organization and Standing.................................... 31
4.2. Subsidiaries................................................. 31
4.3. Corporate Power and Authority................................ 32
4.4. Capitalization of Parent, Merger Sub and LLC................. 32
4.5. Conflicts; Consents and Approvals............................ 33
4.6. No Material Adverse Effect................................... 33
4.7. Parent SEC Documents......................................... 34
4.8. Registration Statement; Proxy Statement...................... 34
4.9. Litigation................................................... 34
4.10. Valid Issuance............................................... 35
4.11. Financing.................................................... 35
4.12. Undisclosed Liabilities...................................... 35
4.13. Operation of Parent's Business; Relationships................ 35
4.14. Permits; Compliance.......................................... 35
4.15. Environmental Matters........................................ 36
4.16. Brokerage and Finder's Fees; Expenses........................ 36
4.17. Reorganization............................................... 36
4.18. Compliance with Law.......................................... 36
4.19. Intellectual Property........................................ 37
4.20. Certain Transactions......................................... 37
ARTICLE V COVENANTS......................................................... 37
5.1. Mutual Covenants............................................. 37
5.2. Covenants of Parent.......................................... 39
5.3. Covenants of the Company..................................... 43
ARTICLE VI CONDITIONS....................................................... 49
6.1. Conditions to the Obligations of Each Party.................. 49
6.2. Conditions to Obligations of the Company..................... 49
6.3. Conditions to Obligations of Parent.......................... 50
ARTICLE VII TERMINATION AND AMENDMENT....................................... 51
7.1. Termination.................................................. 51
7.2. Effect of Termination........................................ 52
7.3. Termination Fee; Expenses.................................... 52
7.4. Amendment.................................................... 53
7.5. Extension; Waiver............................................ 53
ARTICLE VIII MISCELLANEOUS.................................................. 54
8.1. No Survival of Representations and Warranties................ 54
8.2. Notices...................................................... 54
8.3. Interpretation; Definitions.................................. 55
8.4. Counterparts................................................. 57
8.5. Entire Agreement............................................. 57
8.6. Third Party Beneficiaries.................................... 57
8.7. Governing Law................................................ 57
8.8. Specific Performance......................................... 57
8.9. Assignment................................................... 57
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8.10. Expenses..................................................... 58
8.11. Disclosure Schedules......................................... 58
EXHIBITS
Exhibit A Form of Company Voting Agreement
Exhibit B Form of Company Affiliate Letter
Exhibit C Form of Step One Certificate of Merger
Exhibit D Form of Certificate of Incorporation
Exhibit E Form of Bylaws
Exhibit F Example of Calculation of Company Stock Conversion
iii
DEFINED TERMS
Term Page
---- ----
1990 Incentive Plan......................................................... 15
1998 Non-statutory Plan..................................................... 15
2000 Option Plan............................................................ 15
2002 Option Plan............................................................ 15
Accelerated Optionees....................................................... 12
Aggregate Consideration..................................................... 6
Agreed Foreign Approvals.................................................... 38
Agreement................................................................... 1
Agreement of Merger......................................................... 2
Antitrust Laws.............................................................. 38
Applicable Laws............................................................. 19
Assumed Purchase Right...................................................... 12
Average Cash Per Share...................................................... 4
Average Closing Price....................................................... 8
Average Stock Per Share..................................................... 4
Cash Consideration.......................................................... 5
Cash Election............................................................... 5
Cash Election Shares........................................................ 6
CERCLA...................................................................... 30
Certificates................................................................ 9
CGCL........................................................................ 1
Claim....................................................................... 40
Closing..................................................................... 2
Closing Date................................................................ 2
Code........................................................................ 1
Combination Cash Election................................................... 5
Combination Stock Election.................................................. 5
Commission.................................................................. 12
Company..................................................................... 1
Company 423 Plan............................................................ 12
Company Acquisition......................................................... 53
Company Affiliate Letter.................................................... 48
Company Board Recommendation................................................ 30
Company Bylaws.............................................................. 14
Company Certificate......................................................... 14
Company Common Stock........................................................ 15
Company Disclosure Schedule................................................. 14
Company Employees........................................................... 43
Company Intellectual Property............................................... 19
Company Option.............................................................. 11
Company Permits............................................................. 29
vi
Company Plan................................................................ 24
Company Preferred Stock..................................................... 15
Company Registered Intellectual Property.................................... 20
Company SEC Documents....................................................... 17
Company Shareholders Meeting................................................ 43
Competing Transaction....................................................... 46
Confidentiality Agreement................................................... 48
Contract.................................................................... 27
Controlled Group Liability.................................................. 24
Converted Option............................................................ 11
DGCL........................................................................ 1
Effective Time.............................................................. 2
Election.................................................................... 5
Election Deadline........................................................... 6
Election Form............................................................... 5
Environmental Laws.......................................................... 30
ERISA....................................................................... 24
ERISA Affiliate............................................................. 24
Exchange Act................................................................ 17
Exchange Agent.............................................................. 8
Exchange Fund............................................................... 9
Excluded Shares............................................................. 8
Foreign Antitrust Laws...................................................... 17
Governmental Authority...................................................... 17
Hazardous Materials......................................................... 30
HSR Act..................................................................... 17
HSR Authority............................................................... 38
Indemnified Person.......................................................... 40
Intellectual Property....................................................... 19
Interim Surviving Corporation............................................... 2
knowledge................................................................... 57
Mailing Date................................................................ 5
Material Adverse Effect..................................................... 56
Maximum Cash Consideration.................................................. 8
Maximum Stock Consideration................................................. 8
Merger Consideration........................................................ 5
Merger Sub.................................................................. 1
Mergers..................................................................... 1
Multiemployer Plan.......................................................... 26
Multiple Employer Plan...................................................... 26
Option Exchange Ratio....................................................... 12
Parent...................................................................... 1
Parent Bylaws............................................................... 32
Parent Certificate.......................................................... 31
Parent Class A Common Stock................................................. 32
Parent Class B Common Stock................................................. 33
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Parent Common Stock......................................................... 33
Parent Disclosure Schedule.................................................. 31
Parent Permits.............................................................. 36
Parent Preferred Stock...................................................... 33
Parent SEC Documents........................................................ 34
Patents..................................................................... 19
Prospectus.................................................................. 23
Proxy Statement............................................................. 23
PTO......................................................................... 20
Public Software............................................................. 22
Qualified Plan.............................................................. 25
Registered Intellectual Property............................................ 20
Registration Statement...................................................... 23
Release..................................................................... 30
Rights Agreement............................................................ 16
Secretary of State.......................................................... 2
Securities Act.............................................................. 10
Step One Merger............................................................. 1
Step Two Certificate of Merger.............................................. 3
Step Two Merger............................................................. 1
Step Two Merger Effective Time.............................................. 3
Stock Consideration......................................................... 5
Stock Election.............................................................. 5
Stock Election Shares....................................................... 6
subsidiary.................................................................. 57
Superior Proposal........................................................... 47
Surviving Company........................................................... 3
Takeover Statute............................................................ 31
Tax......................................................................... 19
Tax Free Valuation Test..................................................... 1
Tax Return.................................................................. 19
Taxes....................................................................... 19
Termination Date............................................................ 52
Top 10 Customers............................................................ 29
Top 10 Suppliers............................................................ 29
Undesignated Shares......................................................... 5
Voting Agreement............................................................ 1
Wachovia Securities......................................................... 24
Withdrawal Liability........................................................ 25
vi
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and
entered into as of the 14th day of March, 2004, by and among Intersil
Corporation, a Delaware corporation ("Parent"), New Castle Merger Sub Corp., a
California corporation and wholly-owned subsidiary of the LLC ("Merger Sub"),
and New Castle Sub LLC, a single member Delaware limited liability company
wholly owned by Parent (the "LLC"), and Xicor, Inc., a California corporation
(the "Company").
BACKGROUND
A. The Board of Directors of Parent has determined that a
combination with the Company is in the best interests of its shareholders.
B. The Board of Directors of the Company has determined that a
combination with Parent is in the best interests of its stockholders.
C. The Boards of Directors of each of the Company, Parent and
Merger Sub and the manager of the LLC believe it is fair to and in the best
interests of their respective companies and the shareholders, stockholders or
sole member of their respective companies that the Company and the Merger Sub
combine into a single company through the merger of Merger Sub with and into the
Company (the "Step One Merger") and the merger of the Company, as surviving
corporation of the Step One Merger, with and into the LLC (the "Step Two
Merger," and together with the Step One Merger, the "Mergers"), with the LLC
being the ultimate surviving entity in the Mergers, and, in furtherance thereof,
have approved and declared the advisability of this Agreement and the Mergers,
upon the terms and subject to the conditions of this Agreement and in accordance
with the California General Corporation Law (the "CGCL") and the Delaware
General Corporation Law (the "DGCL").
D. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's, Merger Sub's and LLC's and the Company's
willingness to enter into this Agreement, each of the directors and executive
officers of the Company is entering into a Voting Agreement in the form attached
as Exhibit A (the "Voting Agreement").
E. If the value of the Parent Common Stock to be issued in the
Step One Merger valued at the Average Closing Price as reported on the Nasdaq
National Market is 40% or more of the total consideration to be paid in exchange
for the Company Shares (including, without limitation, the amount of cash to be
paid in lieu of fractional shares or for Dissenting Shares and any other
payments required to be considered in determining whether the continuity of
interest requirements applicable to reorganizations under Section 368 of the
Code have been satisfied) (the "Tax Free Valuation Test"), then the parties
intend that the Mergers constitute a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
F. The parties intend that the Mergers be accounted for as a
purchase transaction for financial accounting purposes.
TERMS
In consideration of the foregoing and the mutual representations,
warranties, covenants and agreements hereinafter set forth and intending to be
legally bound, the parties hereto agree as follows:
ARTICLE I
THE MERGERS
1.1. The Step One Merger. At the Effective Time (as defined in Section
1.2(a)) and subject to and upon the terms and conditions of this Agreement, the
Agreement of Merger in connection with the Step One Merger attached hereto as
Exhibit C (the "Agreement of Merger") and the applicable provisions of the CGCL,
Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation of the Step One Merger. The Company as the interim
surviving corporation following the Step One Merger is hereinafter sometimes
referred to as the "Interim Surviving Corporation."
1.2. Effective Time; Closing.
(a) Concurrently with the Closing (as defined in Section 1.2(b)),
the parties shall cause the Step One Merger to be consummated by filing with the
Secretary of State of the State of California (the "Secretary of State") an
Agreement of Merger in accordance with Chapter 11 of the CGCL. The Step One
Merger shall become effective (the "Effective Time") when the Agreement of
Merger has been filed with the Secretary of State or at such later time as shall
be agreed upon by the parties and specified in the Agreement of Merger.
(b) The closing of the transactions contemplated hereby (the
"Closing") shall be held at the offices of Dechert LLP, 000 Xxxx Xxxx Xxxx, Xxxx
Xxxx, Xxxxxxxxxx, at 10:00 a.m. local time on the second business day following
the date on which the conditions set forth in Article VI shall have been
satisfied or waived (other than those conditions which by their terms are to be
satisfied at the Closing, but subject to the satisfaction or waiver thereof), or
at such other place or time or on such other date as Parent and the Company may
agree. The date on which the Closing takes place is referred to herein as the
"Closing Date."
1.3. Effects of the Step One Merger. From and after the Effective Time,
the Step One Merger shall have the effects set forth in the CGCL.
1.4. Articles of Incorporation and Bylaws. At the Effective Time, the
Certificate of Incorporation of the Interim Surviving Corporation shall be
amended to read in its entirety as set forth as Exhibit D hereto until
thereafter amended as provided by CGCL and such Articles of Incorporation. At
the Effective Time, the Bylaws of the Interim Surviving Corporation shall be
amended to read in their entirety as set forth as Exhibit E hereto until
thereafter amended as provided by CGCL, the Articles of Incorporation of the
Interim Surviving Corporation and such Bylaws.
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1.5. Directors and Officers of the Interim Surviving Corporation. At the
Effective Time, the directors of Merger Sub immediately prior to the Effective
Time shall be the directors of the Interim Surviving Corporation, and the
corporate officers of Merger Sub immediately prior to the Effective Time, shall
be the officers of the Interim Surviving Corporation, in each case, until their
respective successors are duly elected or appointed and qualified.
1.6. Step Two Merger.
(a) Timing. Immediately following the Effective Time on the
Closing Date, the Interim Surviving Corporation shall be merged directly with
and into the LLC in accordance with DGCL and CGCL. Following the Step Two
Merger, the separate corporate existence of the Interim Surviving Corporation
shall cease and the LLC shall continue as the Surviving Company of the Step Two
Merger. The LLC, as the surviving company following the Step Two Merger is
hereinafter sometimes referred to as the "Surviving Company."
(b) Step Two Merger Effective Time. Immediately following the
Effective Time on the Closing Date, the Step Two Merger shall be consummated by
the LLC filing a Certificate of Merger (the "Step Two Certificate of Merger") as
required by applicable law with respect to the Step Two Merger. The Step Two
Merger shall become effective at such time as the Step Two Certificate of Merger
is duly filed with the Delaware Secretary of State (the "Step Two Merger
Effective Time").
(c) Effect of the Step Two Merger. At the Step Two Merger
Effective Time, the effect of the Step Two Merger shall be as provided in this
Agreement, the Step Two Certificate of Merger and the applicable provisions of
applicable law. Without limiting the foregoing, at the Step Two Merger Effective
Time, all the property, rights, privileges, powers and franchises of the Interim
Surviving Corporation shall vest in the Surviving Company, and all debts,
liabilities and duties of the Interim Surviving Corporation shall become the
debts, liabilities and duties of the Surviving Company.
(d) Certificate of Formation; Operating Agreement.
(i) At the Step Two Merger Effective Time, the Certificate
of Formation of the LLC, as in effect immediately prior to the Step Two Merger
Effective Time, shall be the Certificate of Formation of the Surviving Company
until thereafter amended as provided by DGCL and such Certificate of Formation.
(ii) At the Step Two Merger Effective Time, the Operating
Agreement of the LLC, as in effect immediately prior to the Step Two Merger
Effective Time, shall constitute the Operating Agreement of the Surviving
Company until thereafter amended as provided by law, the Certificate of
Formation of the Surviving Company and such Operating Agreement.
(e) Manager and Officers. At the Step Two Effective Time, the
manager of the LLC immediately prior to the Effective Time shall be the manager
of the Surviving Company, and the officers of the LLC immediately prior to the
Step Two Merger Effective
3
Time, shall be the officers of the Surviving Company, in each case until their
respective successors are duly elected or appointed and qualified.
(f) Treatment of Capital Stock In Step Two Merger. Subject to the
provisions of this Agreement, at the Step Two Merger Effective Time,
automatically by virtue of the Step Two Merger and without any action on the
part of any shareholder:
(i) each membership interest of the LLC outstanding
immediately prior to the Step Two Merger shall be unchanged and shall remain
issued and outstanding; and
(ii) each share of Interim Surviving Corporation common stock
issued and outstanding prior to the Step Two Merger Effective Time shall be
cancelled without consideration and shall cease to be an issued and outstanding
share of Interim Surviving Corporation common stock.
1.7. Alternative Merger Structure. If the Tax Free Valuation Test is not
met, then the parties shall restructure the transaction to provide only for the
Step One Merger, with the Company being the ultimate surviving entity in the
Merger, any reference to "Surviving Company" in this Agreement shall mean the
Company, as the surviving entity of the Merger, and any reference to "Mergers"
in this Agreement shall mean "Merger."
ARTICLE II
CONVERSION OF SECURITIES
2.1. Conversion of Capital Stock. Pursuant to the Step One Merger, and
without any action on the part of the holders of any outstanding shares of
capital stock or securities of the Company:
(a) At the Effective Time, by virtue of the Step One Merger and
without any further action on the part of Parent, the Company or any shareholder
of the Company but subject to the other provisions of Article II of this
Agreement, each share of Company Common Stock then issued and outstanding, other
than Excluded Shares (as such term is defined in Section 2.1(h) below) and
Dissenting Shares, if any, shall be converted into and shall be cancelled in
exchange for the right to receive, at the election of the holder thereof as
provided in Section 2.1(c), either:
(i) cash in an amount equal to the sum of (A) $8.00 (such
amount, as adjusted pursuant to Section 2.1(e), the "Average Cash Per Share")
and (B) the product of (x) 0.335 (such number of shares, as adjusted pursuant to
Section 2.1(e), the "Average Stock Per Share") multiplied by (y) the Average
Closing Price (such amount, the "Cash Consideration "); or
(ii) a number of shares of Parent Common Stock equal to the
sum of (A) the Average Stock Per Share and (B) the quotient (x) the Average Cash
Per Share divided by (y) the Average Closing Price (the "Stock Consideration"
and together with the Cash Consideration, the "Merger Consideration").
4
(b) At the Effective Time, the stock transfer books of the Company
shall be closed as to holders of Company Common Stock immediately prior to the
Effective Time and no transfer of Company Common Stock by any such holder shall
thereafter be made or recognized. If, after the Effective Time, Company
Certificates are properly presented in accordance with Article II of this
Agreement to the Exchange Agent, such certificates shall be canceled and
exchanged for certificates representing the number of whole shares of Parent
Common Stock, if any, and/or a check representing the amount of cash, if any,
into which the Company Common Stock represented thereby was converted in the
Mergers, plus any payment for a fractional share of Parent Common Stock.
(c) Election and Proration Procedures.
(i) Election Forms and Types of Elections. An election form
in such form and substance as designated by Parent and reasonably acceptable to
the Company (the "Election Form") shall be mailed by the Company with the Proxy
Statement/Prospectus (the "Mailing Date") to each holder of record of Company
Common Stock as of the Company Record Date. Parent shall make available one or
more Election Forms as may be reasonably requested by all persons who become
holders of Company Common Stock after the Company Record Date and prior to the
Election Deadline, and the Company shall promptly provide or cause to be
provided to the Exchange Agent all information in the Company's possession
reasonably necessary for it to perform its obligations as specified herein.
Subject to the other provisions of this Article II, each Election Form shall
permit the holder (or the beneficial owner through appropriate and customary
documentation and instructions) to elect (an "Election") to receive either (A)
Parent Common Stock (a "Stock Election") with respect to all of such holder's
Company Common Stock, (B) cash (a "Cash Election") with respect to all of such
holder's Company Common Stock, or (C) Parent Common Stock in exchange for either
a specified number of shares of Company Common Stock (a "Combination Stock
Election") and cash in exchange for a specified number of shares of Company
Common Stock (a "Combination Cash Election"). Any Company Common Stock (other
than Dissenting Shares or Excluded Shares) with respect to which the holder (or
indirectly the beneficial owner) shall not have submitted to the Exchange Agent
an effective, properly completed Election Form, which was received prior to the
Election Deadline, shall be deemed to be "Undesignated Shares" under this
Agreement.
(ii) Proper and Timely Election. Any Election shall have been
properly made and effective only if the Exchange Agent shall have actually
received a properly completed Election Form by 5:00 P.M. (New York City time) on
the day prior to the Closing Date (or such other time and date as the Company
and Parent may mutually agree) (the "Election Deadline"). An Election Form shall
be deemed properly completed only if an Election is indicated for each share of
Company Common Stock covered by such Election Form. Any Election Form may be
revoked or changed by the person submitting such Election Form prior to the
Election Deadline. In the event an Election Form is revoked prior to the
Election Deadline, the shares of Company Common Stock represented by such
Election Form shall automatically become Undesignated Shares unless and until a
new Election is properly made with respect to such shares on or before the
Election Deadline, and Parent shall cause the certificates representing such
shares of Company Common Stock to be promptly returned without charge to the
person submitting the revoked Election Form upon written request to that effect
from the
5
holder who submitted such Election Form. Subject to the terms of this Agreement
and of the Election Form, Parent shall have discretion, which it may delegate in
whole or in part to the Exchange Agent, to determine whether any election,
revocation or change has been properly or timely made and to disregard
immaterial defects in the Election Forms, and any decisions of Parent and
Company required by the Exchange Agent and made in good faith in determining
such matters shall be binding and conclusive. Neither Parent nor the Exchange
Agent shall be under any obligation to notify any person of any defect in an
Election Form.
(iii) Allocation. As of the Effective Time, by virtue of the
Mergers, all of the shares of Company Common Stock outstanding (other than
Dissenting Shares and Excluded Shares) shall be converted into the right to
receive an aggregate consideration consisting of the Maximum Cash Consideration
and the Maximum Stock Consideration, and that the sum of the Maximum Cash
Consideration and Maximum Stock Consideration (the "Aggregate Consideration")
shall be allocated among the holders of Company Common Stock (other than the
Dissenting Shares and Excluded Shares, if any) based on their ownership of
Company Common Stock, their elections and the proration procedures set forth
below.
(iv) Payment and Proration. As promptly as practicable but
not later than five business days after the Effective Time, Parent shall cause
the Exchange Agent to effect the allocation among the holders of Company Common
Stock of rights to receive Parent Common Stock or cash in the Step One Merger in
accordance with the Election Forms as follows:
(1) In the event that the amount of cash payable in
respect of shares of Company Common Stock in respect of which Cash Elections and
Combination Cash Elections have been made and not subsequently revoked or
changed (collectively, the "Cash Election Shares") exceeds the Cash Election
Number, all shares in respect of which Stock Elections and Combination Stock
Elections have been made and not subsequently revoked or changed (the "Stock
Election Shares") and all Undesignated Shares in respect of which Stock
Elections have been deemed to have been made (it being understood that in such
case all Undesignated Shares shall be deemed to be shares in respect of which
Stock Elections have been made) shall be converted into the right to receive
Stock Consideration, and all Cash Election Shares shall be converted into the
right to receive Stock Consideration or Cash Consideration in the following
manner:
(A) Cash Election Shares shall be deemed
converted to Stock Election Shares, on a pro-rata basis for each record holder
of shares of Company Common Stock with respect to those shares, if any, of such
record holder that are Cash Election Shares, so that the number of Cash Election
Shares so converted into Stock Election Shares, when added to the existing Stock
Election Shares, shall equal as closely as practicable the Stock Election
Number, and all such Cash Election Shares so converted into Stock Election
Shares shall be converted into the right to receive Stock Consideration (and
cash in lieu of fractional interests); and
(B) any remaining Cash Election Shares shall be
converted into the right to receive Cash Consideration.
6
(2) In the event that the aggregate number of Stock
Election Shares exceeds the Stock Election Number, all Cash Election Shares and
all Undesignated Shares in respect of which Cash Elections are deemed to have
been made (it being understood that in such case all Undesignated Shares shall
be deemed to be shares in respect of which Cash Elections have been made) shall
be converted into the right to receive Cash Consideration, and all Stock
Election Shares shall be converted into the right to receive Stock Consideration
or Cash Consideration in the following manner:
(A) Stock Election Shares shall be deemed
converted into Cash Election Shares, on a pro-rata basis for each record holder
of shares of Company Common Stock with respect to those shares, if any, of such
record holder that are Stock Election Shares, so that the number of Stock
Election Shares so converted into Cash Election Shares, when added to the
existing Cash Election Shares, shall equal as closely as practicable the Cash
Election Number, and all such Stock Election Shares so converted into Cash
Election Shares shall be converted into the right to receive the Cash
Consideration; and
(B) the remaining Stock Election Shares shall be
converted into the right to receive the Stock Consideration (and cash in lieu of
fractional interests).
(3) In the event that neither clause (A) nor clause
(B) of this Section 2.1(c)(iv) is applicable, Undesignated Shares shall be
deemed Stock Election Shares such that the total number of Stock Election Shares
equals the Stock Election Number and any remaining Undesignated Shares shall be
deemed Cash Election Shares with the result that (x) all Cash Election Shares
and all Undesignated Shares in respect of which Cash Elections are deemed to
have been made shall be converted into the right to receive Cash Consideration,
and (y) all Stock Election Shares and all Undesignated Shares in respect of
which Stock Elections are deemed to have been made shall be converted into the
right to receive Stock Consideration (and cash in lieu of fractional interests).
(d) As of the Effective Time, each Excluded Share shall be
canceled and extinguished and shall not be converted.
(e) Without limiting any other provision of this Agreement, the
Average Cash Per Share and/or Average Stock Per Share, as applicable, shall be
adjusted to reflect fully the effect of any stock split, reverse stock split,
stock dividend (including any dividend or distribution of securities convertible
into Parent Common Stock or Company Common Stock), extraordinary dividend or
distribution, reorganization, reclassification, recapitalization or other like
change with respect to Parent Common Stock or the Company Common Stock occurring
or having a record date or an effective date on or after the date of this
Agreement and prior to the Effective Time.
(f) No fraction of a share of Parent Common Stock will be issued
by virtue of the Step One Merger. Instead, each holder of shares of Company
Common Stock who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common Stock to
be received by such holder) shall receive from
7
Parent an amount of cash (rounded down to the nearest whole cent) equal to the
product of (i) such fraction, multiplied by (ii) the Average Closing Price.
(g) As of March 11, 2004, the Maximum Stock Consideration would be
9,779,283.4 shares of Parent Common Stock and the Maximum Cash Consideration
would be $233,535,132. The conversion of Company Shares for either cash or
shares of Parent Common Stock is further explained on Exhibit F attached to this
Agreement.
(h) For purposes of Section 2.1, any calculation of a portion of a
share of Parent Common Stock shall be rounded to the nearest fifth decimal
place, and any cash payment shall be rounded to the nearest cent.
(i) For purposes of this Agreement, "Excluded Shares" means any
shares of Company Common Stock held as of the Effective Time (i) by the Company
or any Subsidiary of the Company or (ii) by the Company as treasury shares; the
"Maximum Cash Consideration" shall mean the amount equal to the product of (x)
the Average Cash Per Share and (y) the number of issued shares of Company Common
Stock immediately prior to the Effective Time minus the sum of (A) the number of
shares of Excluded Shares and (B) the number of Dissenting Shares; the "Maximum
Stock Consideration" shall mean the number of shares equal to the product of (x)
the Average Stock Per Share and (y) the number of issued shares of Company
Common Stock immediately prior to the Effective Time minus the sum of (A) the
number of shares of Excluded Shares and (B) the number of Dissenting Shares; the
"Cash Election Number" shall mean the quotient of (i) the Maximum Cash
Consideration divided by (ii) the Cash Consideration; the "Stock Election
Number" shall mean the quotient of (i) the Maximum Stock Consideration divided
by (ii) the Stock Consideration; and the "Average Closing Price" shall mean the
lesser of (i) the closing price of a share of Parent Common Stock on the day
before the Closing Date and (ii) the average of the high and low trading prices
of the Parent Common Stock on the day before the Closing Date.
2.2. Exchange of Certificates.
(a) Exchange Agent. As promptly as practical, and in no event
later than 5 business days, following the Effective Time, Parent shall deposit,
or shall cause to be deposited, with American Stock Transfer & Trust Company or
such other exchange agent as may be designated by Parent and reasonably
acceptable to the Company (the "Exchange Agent"), for the benefit of the holders
of Company Common Stock, for exchange in accordance with this Section 2.2,
certificates representing shares of Parent Class A Common Stock issuable
pursuant to Section 2.1(a) in exchange for outstanding shares of Company Common
Stock and cash in an amount required to be paid pursuant to this Article II
(such shares of Parent Class A Common Stock and cash, together with any
dividends or distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund").
(b) Exchange Procedures. As soon as practicable after the
Effective Time, Parent shall instruct the Exchange Agent to mail to each holder
of record of a certificate or certificates that immediately prior to the
Effective Time represented outstanding shares of Company Common Stock whose
shares were converted into the right to receive shares of Parent Class A Common
Stock pursuant to Section 2.1(a) and/or the Cash Consideration
8
("Certificates"), (i) a letter of transmittal in customary form, which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Parent may
reasonably specify, including offering holders of Certificates the ability to
hold their shares of Parent Class A Common Stock in book entry form in lieu of
the certificates provided for below and (ii) instructions for effecting the
surrender of the Certificates in exchange for certificates representing shares
of Parent Class A Common Stock. Upon surrender of a Certificate for cancellation
to the Exchange Agent, together with a duly executed letter of transmittal, the
holder of such Certificate shall be entitled to receive in exchange therefor (x)
a certificate or certificates representing that whole number of shares of Parent
Class A Common Stock which such holder has the right to receive pursuant to
Section 2.1(a) in such denominations and registered in such names as such holder
may request and (y) a check representing the amount of Cash Consideration and
cash in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, which such holder has the right to receive pursuant to
the provisions of this Article II, after deduction of any required withholding
tax. No interest will be paid or accrued on the Cash Consideration or the cash
in lieu of fractional shares, if any, and unpaid dividends and distributions, if
any, payable to holders of shares of Company Common Stock. In the event of a
transfer of ownership of shares of Company Common Stock which is not registered
on the transfer records of the Company, a certificate representing the proper
number of shares of Parent Class A Common Stock, together with a check for the
Cash Consideration plus cash to be paid in lieu of fractional shares, if any,
and unpaid dividends and distributions, if any, may be issued to such transferee
if the Certificate representing such shares of Company Common Stock held by such
transferee is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid.
(c) Distributions with Respect to Unexchanged Shares.
Notwithstanding any other provision of this Agreement, no dividend or other
distribution declared or made after the Effective Time with respect to any
shares of Parent Class A Common Stock having a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate, and no Merger
Consideration or cash payment in lieu of fractional shares shall be paid to any
such holder, until the holder shall surrender such Certificate as provided in
this Section 2.3. Subject to the effect of Applicable Laws (as defined in
Section 3.9), there shall be paid to the holder of the certificates representing
whole shares of Parent Class A Common Stock issued in exchange therefor, without
interest, (i) at the time of surrender of such Certificate, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore payable with respect to such whole shares of Parent Class A Common
Stock and not paid, less the amount of any withholding taxes that may be
required thereon, and (ii) at the appropriate payment date subsequent to
surrender of such Certificate, the amount of dividends or other distributions
with a record date after the Effective Time but prior to surrender and a payment
date subsequent to surrender payable with respect to such whole shares of Parent
Class A Common Stock, less the amount of any withholding taxes that may be
required thereon.
(d) No Further Ownership Rights in Company Common Stock. The
Merger Consideration paid upon surrender of Certificates in accordance with the
terms hereof shall be deemed to have been paid in full satisfaction of all
rights pertaining to the shares of Company
9
Common Stock represented thereby, and there shall be no further registration of
transfers on the stock transfer books of the Company of shares of Company Common
Stock outstanding immediately prior to the Effective Time. All Certificates
presented to the Surviving Corporation after the Effective Time for any reason
shall be cancelled and exchanged as provided in this Section 2.3. Certificates
surrendered for exchange by any person constituting an "affiliate" of the
Company for purposes of Rule 145(c) under the Securities Act of 1933, as amended
(together with the rules and regulations thereunder, the "Securities Act"),
shall not be exchanged until Parent has received written undertakings from such
person in the form attached as Exhibit B.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund
that remains undistributed to holders of Company Common Stock 180 days after the
date of the mailing required by Section 2.2(b) shall be delivered to Parent upon
demand therefor, and holders of Certificates previously representing shares of
Company Common Stock who have not theretofore complied with this Section 2.3
shall thereafter look only to Parent for the Merger Consideration payable in
respect of such shares of Company Common Stock, any cash in lieu of fractional
shares of Parent Class A Common Stock to which they are entitled pursuant to
Section 2.2(a), or any dividends or other distributions with respect to Parent
Class A Common Stock to which they are entitled pursuant to Section 2.3(c), in
each case, without any interest thereon.
(f) No Liability. Neither Parent, the Surviving Corporation nor
the Exchange Agent shall be liable to any person in respect of any shares of
Parent Class A Common Stock (or dividends or distributions with respect thereto)
or cash from the Exchange Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificates shall
not have been surrendered prior to seven years after the Effective Time of the
Mergers (or immediately prior to such earlier date on which any shares of Parent
Class A Common Stock, any dividends or distributions with respect thereto, or
any cash in lieu of fractional shares in respect of such Certificate would
otherwise escheat to or become the property of any Governmental Authority (as
defined in Section 3.5)), any such shares, dividends or distributions or cash in
respect of such Certificate shall, to the extent permitted by Applicable Laws,
become the property of Parent, free and clear of all claims or interest of any
person previously entitled thereto.
(g) Investment of Exchange Fund. The Exchange Agent shall invest
the cash included in the Exchange Fund, as directed by Parent, on a daily basis.
Any interest and other income resulting from such investments shall be paid to
Parent upon termination of the Exchange Fund pursuant to Section 2.3(e).
(h) Missing Certificates. In the event any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact and
providing an appropriate indemnity or surety bond consistent with Parent's
ordinary course with respect to its own stockholders by the person claiming such
Certificate to be lost, stolen or destroyed, the Exchange Agent will pay in
exchange for such lost, stolen or destroyed Certificate the Merger
Consideration, cash in lieu of fractional shares and any dividends and other
distributions, if any, deliverable in respect thereof pursuant to this
Agreement.
10
2.3. Dissenting Shares.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any shares of capital stock of the Company that, as of the Effective
Time, are or may become "Dissenting Shares" within the meaning of Section
1300(b) of the California Corporations Code shall not be converted into or
represent the right to receive Merger Consideration in accordance with Section
2.1, and the holder or holders of such shares shall be entitled only to such
rights as may be granted to such holder or holders in Chapter 13 of the CGCL;
provided, however, that if the status of any such shares as "Dissenting Shares"
shall not be perfected, or if any such shares shall lose their status as
"Dissenting Shares," then, as of the later of the Effective Time or the time of
the failure to perfect such status or the loss of such status, such shares shall
automatically be converted into and shall represent Undesignated Shares in
accordance with Section 2.1(c)(i).
(b) The Company shall give Parent (i) prompt notice of any written
demand received by the Company prior to the Effective Time to require the
Company to purchase shares of capital stock of the Company pursuant to Chapter
13 of the CGCL and of any other demand, notice or instrument delivered to the
Company prior to the Effective Time pursuant to the CGCL, and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
any such demand, notice or instrument. The Company shall not make any payment or
settlement offer prior to the Effective Time with respect to any such demand
unless Parent shall have consented in writing to such payment or settlement
offer.
2.4. Treatment of Stock Options; ESPP.
(a) Prior to the Effective Time, the Company shall take all such
actions as may be necessary to cause each unexpired and unexercised option to
purchase Company Common Stock (each, a "Company Option") outstanding as of the
Effective Time to be automatically converted at the Effective Time into an
option (a "Converted Option") to purchase Parent Common Stock. Each Converted
Option will continue to have, and be subject to, substantially the same terms
and conditions, except that (i) each Converted Option shall be exercisable (or
will become exercisable in accordance with its terms) 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 Company Option
immediately prior to the Effective Time multiplied by the Option Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock, (ii)
the per share exercise price for the shares of Parent Common Stock issuable upon
exercise of such converted Company Option will be equal to the quotient
determined by dividing the exercise price per share of Company Common Stock at
which such Company Option was exercisable immediately prior to the Effective
Time by the Option Exchange Ratio, rounded up to the nearest whole cent, and
(iii) only with respect to those individuals set forth in Section 2.4(a) of the
Company Disclosure Schedule ("Accelerated Optionees"), prior to the Effective
Time the Company shall take such actions necessary to amend the Company Options
granted to such Accelerated Optionees to provide that all unvested Company
Options shall become 100% vested as of the Effective Time. Continuous employment
or service with Company or its subsidiaries shall be credited to the optionee
for all purposes with respect to Company Options, including for purposes of
determining the vesting of all converted Company Options after the Effective
Time. "Option Exchange Ratio" means the Stock
11
Consideration. The conversion of Company Options provided for in this Section
2.4(a) with respect to any Company Options that are intended to be "incentive
stock options" (as defined in Section 422 of the Code) shall be effected in a
manner consistent with Section 424(a) of the Code and otherwise in a manner
designed to preserve incentive stock option treatment, except that any incentive
stock options granted to Accelerated Optionees that are accelerated in
accordance with this Section 2.4(a) shall be accelerated even if the such
acceleration causes such Company Options to no longer qualify as incentive stock
options.
(b) Parent agrees to file with the Securities and Exchange
Commission (the "Commission") as promptly as practicable, and in any event
within five business days after the Closing Date a registration statement on
Form S-8 or other appropriate form under the Securities Act to register the
shares of Parent Class A Common Stock upon exercise of the Converted Options and
use its reasonable efforts to cause such registration statement to remain
effective until the exercise or expiration of such options.
(c) Prior to the Effective Time, the Company shall establish a
"New Exercise Date" as such term is defined in the Company's 1998 Employee Stock
Purchase Plan (the "Company 423 Plan") for all purchase rights under the Company
423 Plan that are outstanding immediately prior to the Effective Time in
accordance with Section 19(c) of the Company 423 Plan, in accordance with the
following provisions:
(i) Only if the Closing occurs on or before April 30, 2004,
this Section 2.4(c)(i) shall apply. Under this Section 2.4(c)(i), the New
Exercise Date shall be April 30, 2004, and all outstanding purchase rights (each
an "Assumed Purchase Right") under the Company 423 Plan as of the Effective Time
shall be assumed by Parent. The Assumed Purchase Rights shall continue to have,
and be subject to, the terms and conditions set forth in the Company 423 Plan
with the New Exercise Date established in accordance with this Section 2.4(c)(i)
and the documents governing the Assumed Purchase Rights, except that the number
of shares of Parent Class A Common Stock issuable upon exercise thereof shall
equal the number of shares of Company Common Stock otherwise issuable upon
exercise thereof multiplied by the Option Exchange Ratio and the purchase price
of such shares of Parent Class A Common Stock on the Purchase Date (as defined
in the Company 423 Plan) shall be the lower of (i) the quotient determined by
dividing 85% of the fair market value per share of the Company Common Stock on
the "Enrollment Date" (as defined in the Company 423 Plan) of the Assumed
Purchase Right by the Option Exchange Ratio or (ii) 85% of the fair market value
per share of the Parent Class A Common Stock on the "New Exercise Date" (with
the number of shares rounded down to the nearest whole share and the purchase
price rounded up to the nearest whole cent). Notwithstanding the foregoing, any
assumed Purchase Right shall be converted from a right to purchase Company
Common Stock under the Company 423 Plan to the right to purchase Parent Class A
Common Stock in accordance with Section 424 of the Code. The Assumed Purchase
Rights shall be exercised on the New Exercise Date, and each participant in the
Company 423 Plan shall, accordingly, be issued shares of Parent Class A Common
Stock at such time.
(ii) Only if the Closing occurs on or after May 1, 2004 but
on or before September 30, 2004, shall this Section 2.4(c)(ii) apply. Under this
Section 2.4(c)(ii), the New Exercise Date shall be September 30, 2004, and all
outstanding purchase rights under the
12
Company 423 Plan as of the Effective Time shall be assumed by Parent and become
Assumed Purchase Rights, which shall be converted to purchase rights to purchase
Company Common Stock in the same manner as described in Section 2.4(c)(i) above
using the New Exercise Date provided for in this Section 2.4(c)(ii). The Assumed
Purchase Rights shall continue to have, and be subject to, the terms and
conditions set forth in the Company 423 Plan with the New Exercise Date
established in accordance with this Section 2.4(c)(i). Notwithstanding the
foregoing, any assumed Purchase Right shall be converted from a right to
purchase Company Common Stock under the Company 423 Plan to the right to
purchase Parent Class A Common Stock in accordance with Section 424 of the Code.
The Assumed Purchase Rights shall be exercised on the New Exercise Date, and
each participant in the Company 423 Plan shall, accordingly, be issued shares of
Parent Class A Common Stock at such time.
(iii) Only if the Closing occurs on or after October 1, 2004,
shall this Section 2.4(c)(iii) apply. Under this Section 2.4(c)(iii), the New
Exercise Date shall be the date established by the Company in accordance with
Section 19(c) of the Plan under the Company 423 Plan which date may not be later
than the Closing Date. Outstanding purchase rights shall be exercised prior to
the Effective Time and no outstanding purchase rights under the Company 423 Plan
shall be assumed by the Parent or the Parent 423 Plan.
(iv) Regardless of whether Section 2.4(c)(i) , 2.4(c)(ii) or
2.4(c)(iii) applies, the provisions of this Section 2.4(c)(iv) shall apply in
any event. The Company 423 Plan and all outstanding purchase rights thereunder
shall terminate on the New Exercise Date, and no additional purchase rights
shall be granted and no additional Purchase Periods shall commence following
such date. Parent agrees that employees of Company may participate in Parent's
employee stock purchase plan (the "Parent 423 Plan"), subject to the terms and
conditions of such Parent 423 Plan and to the extent permitted by the Code,
beginning with the first Purchase Period (as defined in the Parent 423 Plan)
that begins following the New Exercise Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce Parent and Merger Sub to enter into this
Agreement, the Company hereby represents and warrants to Parent and Merger Sub
that, except as set forth in the written disclosure schedule prepared by the
Company which is dated as of the date of this Agreement and arranged in sections
corresponding to the numbered and lettered sections contained in this Article
III and was previously delivered to Parent in connection herewith (the "Company
Disclosure Schedule"):
3.1. Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California with full corporate power and authority to own, lease, use and
operate its properties and to conduct its business as and when now owned,
leased, used, operated and conducted. Each subsidiary (as defined in Section
8.3) of the Company is a corporation duly organized and validly existing and in
good standing under the laws of the jurisdiction of its incorporation with full
corporate power and
13
authority to own, lease, use and operate its properties and to conduct its
business as and where now owned, leased, used, operated and conducted. The
Company and each subsidiary of the Company is duly qualified to do business and
in good standing in each jurisdiction in which the nature of the business
conducted by it or the property it owns, leases or operates requires it to so
qualify, except where the failure to be so qualified or in good standing in such
jurisdiction, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect (as defined in Section 8.3) on the Company.
The Company is not in default in the performance, observance or fulfillment of
any material provision of its Articles of Incorporation or its Bylaws, each as
in effect on the date hereof (the "Company Certificate" and the "Company
Bylaws," respectively). The Company has heretofore made available to Parent a
complete and correct copy of the Company Certificate and the Company Bylaws.
3.2. Subsidiaries. The Company does not own, directly or indirectly, any
equity or other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise, except for the subsidiaries and other
entities listed in Exhibit 21 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2003. The Company is not subject to any
obligation or requirement to provide funds to or make any investment (in the
form of a loan, capital contribution or otherwise) in any entity or enterprise
that is not wholly owned by the Company. The Company owns directly or indirectly
each of the outstanding shares of capital stock (or other ownership interests
having by their terms ordinary voting power to elect a majority of directors or
others performing similar functions with respect to such subsidiary) of each of
the Company's subsidiaries, free and clear of all liens, pledges, security
interests, claims or other encumbrances. Each of the outstanding shares of
capital stock of each of the Company's subsidiaries is duly authorized, validly
issued, fully paid and nonassessable. All of the capital stock of each
subsidiary of the Company is owned by the Company and/or one or more
wholly-owned subsidiaries of the Company. There are no outstanding
subscriptions, options, warrants, puts, calls, agreements, understandings,
claims or other commitments or rights of any type relating to the issuance,
sale, repurchase or transfer of any capital stock or other securities of any
subsidiary of the Company, nor are there outstanding any securities that are
convertible into or exchangeable for any shares of capital stock or other
securities of any subsidiary of the Company, and neither the Company nor any
subsidiary of the Company has any obligation of any kind to issue any additional
shares of capital stock or other securities of any subsidiary of the Company or
to pay for or repurchase any shares of capital stock or other securities of any
subsidiary of the Company or any predecessor thereof.
3.3. Corporate Power and Authority. The Company has all requisite
corporate power and authority to enter into and deliver this Agreement, to
perform its obligations hereunder and, subject to approval of the Mergers and
the transactions contemplated hereby by the shareholders of the Company, to
consummate the transactions contemplated by this Agreement. The execution,
delivery and performance of this Agreement by the Company have been duly
authorized by all necessary corporate action on the part of the Company, subject
to approval of the Mergers and the transactions contemplated hereby by the
shareholders of the Company. This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid and binding obligation of the
Company enforceable against it in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, or (ii) as limited
14
by laws relating to the availability of specific performance, injunctive relief,
or other equitable remedies.
3.4. Capitalization of the Company. The authorized capital stock of the
Company consists solely of (a) 200,000,000 shares of common stock, no par value
per share ("Company Common Stock"), and (b) 5,000,000 shares of preferred stock,
no par value per share ("Company Preferred Stock"). As of March 11, 2004, (i)
29,191,891 shares were issued and outstanding, (ii) no shares were issued and
held in treasury (which does not include the shares reserved for issuance set
forth in clauses (iii) through (ix) below) and no shares were held by
subsidiaries of the Company, (iii) 1,281,750 shares were issuable upon the
exercise of outstanding options and 909,525 shares were reserved for issuance
for future grants pursuant to the Company's 1990 Incentive and Non-incentive
Stock Option Plan ("1990 Incentive Plan"), (iv) 4,951,300 shares were issuable
upon the exercise of outstanding options and 31,848 shares were reserved for
issuance for future grants pursuant to the Company's 1998 Non-statutory Stock
Option Plan ("1998 Non-statutory Plan"), (v) 42,000 shares were issuable upon
the exercise of outstanding options and 958,000 shares were reserved for
issuance for future grants pursuant to the Company's 2002 Stock Option Plan
("2002 Option Plan"), (vi) 14,750 shares were issuable upon the exercise of
outstanding options and no shares were reserved for issuance for future grants
pursuant to the Company's 1995 Director Option Plan ("1995 Option Plan"), (vii)
215,000 shares were issuable upon the exercise of outstanding options and
255,000 shares were reserved for issuance for future grants pursuant to the
Company's 2000 Director Option Plan ("2000 Option Plan"), (viii) 380,000 shares
were reserved for issuance pursuant to the Company's 423 Plan, and (ix) 922,461
shares were issuable upon exercise of the warrants issued in connection with the
Company's 2001 note financing. As of the date hereof, no shares of Company
Preferred Stock were issued and outstanding or reserved for issuance, except for
a series of 200,000 shares of Company Preferred Stock designated as Series A
Participating Preferred Stock reserved for issuance pursuant to the Preferred
Stock Rights Agreement dated as of October 9, 2001 between the Company and
American Stock Transfer & Trust Company (the "Rights Agreement"), none of which
is issued and outstanding as of the date hereof. Each outstanding share of
Company capital stock is duly authorized and validly issued, fully paid and
nonassessable, and has not been issued in violation of any preemptive or similar
rights. Other than as set forth above, there are no outstanding subscriptions,
options, warrants, puts, calls, agreements, understandings, claims or other
commitments or rights of any type relating to the issuance, sale, repurchase or
transfer by the Company of any securities of the Company, nor are there
outstanding any securities that are convertible into or exchangeable for any
shares of capital stock of the Company, and neither the Company nor any
subsidiary of the Company has any obligation of any kind to issue any additional
securities or to pay for or repurchase any securities of the Company or any
predecessor. The Company Disclosure Schedule accurately sets forth as of March
11, 2004 the names of the holders of, and the number of shares of Company Common
Stock issuable upon exercise of, Company Options and the exercise price and
vesting schedule with respect thereto. Between March 11, 2004 and the date of
this Agreement, the Company has not granted any options to purchase capital
stock of the Company. The Company has no agreement, arrangement or
understandings to register any securities of the Company or any of its
subsidiaries under the Securities Act or under any state securities law and has
not granted registration rights to any person or entity (other than agreements,
arrangements or
15
understandings with respect to registration rights that are no longer in effect
as of the date of this Agreement).
3.5. Conflicts; Consents and Approvals. Except in the case of (b), for
any of the following that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company, neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby will:
(a) conflict with, or result in a breach of any provision of, the
Company Certificate or the Company Bylaws;
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with the giving of
notice, the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or otherwise)
to terminate, accelerate, modify or call a default under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of the Company under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
contract, undertaking, agreement, lease or other instrument or obligation to
which the Company or any of its subsidiaries is a party;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or any of its subsidiaries or any of their
respective properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing by the Company or any of its affiliates with, any third
party or any local, domestic, foreign or multi-national or supra-national court,
tribunal, administrative agency or commission or other governmental or
regulatory body, agency, instrumentality or authority (a "Governmental
Authority"), other than (i) approval of the Mergers and the transactions
contemplated hereby by shareholders of the Company, (ii) actions required by the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder (the "HSR Act"), (iii) filings and
consents under non-U.S. laws and regulations intended to prohibit, restrict or
regulate actions or transactions having the purpose or effect of monopolization,
restraint of trade, harm to competition or effectuating foreign investment
("Foreign Antitrust Laws"), (iv) registrations, filings, consents, approvals or
other actions required under federal and state securities laws and the rules of
the Nasdaq Stock Market, Inc. as are contemplated by this Agreement, and (v) the
filing of the Agreement of Merger with the Secretary of State.
3.6. No Material Adverse Effect. Except as specifically disclosed in the
Company SEC Documents (as defined in Section 3.7) filed with the Commission
prior to the date of this Agreement, since December 31, 2003, there has been no
Material Adverse Effect on the Company.
3.7. Company SEC Documents. The Company has timely filed with the
Commission all forms, reports, schedules, statements and other documents
required to be filed by it since December 31, 2000 under the Securities Exchange
Act of 1934, as amended (together with the
16
rules and regulations thereunder, the "Exchange Act") or the Securities Act
(such documents, as supplemented and amended since the time of filing,
collectively, the "Company SEC Documents"). The Company SEC Documents,
including, without limitation, any financial statements or schedules included or
incorporated by reference therein, at the time filed (and, in the case of
registration statements and proxy statements, on the dates of effectiveness and
the dates of mailing, respectively) (a) did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein (and, in the case of any
prospectus, in light of the circumstances under which they were made), not
misleading, and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be. The
financial statements of the Company included in the Company SEC Documents at the
time filed (and, in the case of registration statements and proxy statements, on
the dates of effectiveness and the dates of mailing, respectively) complied as
to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the Commission with respect thereto,
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q of the Commission), and fairly presented (subject, in the
case of the unaudited interim financial statements, to normal, recurring
year-end audit adjustments consistent with past practice), in all material
respects, the consolidated financial position of the Company and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended. No subsidiary of
the Company is subject to the periodic reporting requirements of the Exchange
Act or required to file any form, report or other document with the Commission,
the Nasdaq Stock Market, Inc., any stock exchange or any other comparable
Governmental Authority.
3.8. Taxes. (a) The Company and its subsidiaries (i) have duly filed all
material Tax Returns (as defined in Section 3.8(d)) (including, but not limited
to, those filed on a consolidated, combined or unitary basis) required to have
been filed by the Company or its subsidiaries, all of which Tax Returns are true
and correct in all material respects; (ii) have within the time and manner
prescribed by Applicable Laws paid all material Taxes (as defined in Section
3.8(d)), required to be paid in respect of the periods covered by such Tax
Returns or otherwise due to any Governmental Authority; (iii) have established
in accordance with their normal accounting practices and procedures, accruals
and reserves that are adequate for the payment of all Taxes not yet due and
payable; (iv) are not delinquent in the payment of any material Tax; and (v)
have not received written notice of any deficiencies for any Tax from any
Governmental Authority against the Company or any of its subsidiaries, which
deficiency has not been satisfied. Neither the Company nor any of its
subsidiaries is the subject of any currently ongoing Tax audit. With respect to
any taxable period ended prior to December 31, 1999 all federal income Tax
Returns including the Company or any of its subsidiaries have been audited by
the Internal Revenue Service or are closed by the applicable statute of
limitations. There are no liens with respect to Taxes upon any of the properties
or assets, real or personal, tangible or intangible, of the Company or any of
its subsidiaries (other than liens for Taxes not yet due and any liens on the
landlord's interest in any facilities leased by the Company). No claim has ever
been made in writing by a Governmental Authority in a jurisdiction where the
Company or its subsidiaries do not file Tax Returns that the Company or any of
its subsidiaries is or may be
17
subject to taxation by that jurisdiction. Neither the Company nor any of its
subsidiaries has filed an election under Section 341(f) of the Code to be
treated as a consenting corporation.
(b) Neither the Company nor any of its subsidiaries is obligated
by any contract, agreement or other arrangement to indemnify any other person
with respect to Taxes. Neither the Company nor any of its subsidiaries is now or
has ever been a party to or bound by any contract, agreement or other
arrangement (whether or not written and including, without limitation, any
arrangement required or permitted by Applicable Laws (including pursuant to
Treasury Regulation Section 1.1502-6 or any analogous provision of state, local
or foreign law)) that (i) requires the Company or any of its subsidiaries to
make any Tax payment to or for the account of any other person other than
landlords under Company leases, (ii) affords any other person the benefit of any
net operating loss, net capital loss, investment Tax credit, foreign Tax credit,
charitable deduction or any other credit or Tax attribute which could reduce
Taxes (including, without limitation, deductions and credits related to
alternative minimum Taxes) of the Company or any of its subsidiaries, or (iii)
requires or permits the transfer or assignment of income, revenues, receipts or
gains to the Company or any of its subsidiaries from any other person.
(c) The Company and its subsidiaries have withheld and paid all
material Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
shareholder or other third party.
(d) Assuming that the Tax FreeValuation Test is satisfied, the
Company knows of no reason that would cause the Mergers to fail to qualify as
reorganization under Section 368(a) of the Code. Neither the Company nor any of
its affiliates has taken or agreed to take any action (other than actions
specifically contemplated by the Agreement) that would prevent the Mergers from
constituting a reorganization qualifying under the provisions of Section 368(a)
of the Code.
(e) For purposes of this Agreement, (i) "Tax" (and, with
correlative meaning, "Taxes") means any federal, state, local or foreign income,
gross receipts, property, sales, use, license, excise, franchise, employment,
payroll, premium, withholding, alternative or added minimum, ad valorem,
inventory, transfer or excise tax, or any other tax, custom, duty, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any Governmental Authority, and (ii) "Tax
Return" means any return, report or similar statement required to be filed with
respect to any Tax (including any attached schedules), including, without
limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
3.9. Compliance with Law. Except as specifically disclosed in the Company
SEC Documents filed with the Commission prior to the date hereof, the Company is
in material compliance with all applicable laws, statutes, orders, rules or
regulations promulgated, or judgments, decisions or orders entered, by any
Governmental Authority (all such laws, statutes, orders, rules, regulations,
judgments, decisions and orders, collectively, "Applicable Laws"), relating to
the Company or its business or properties. Except as specifically disclosed in
the Company SEC Documents filed with the Commission prior to the date hereof, no
material
18
investigation or review by any Governmental Authority with respect to the
Company is pending, or, to the knowledge of the Company, threatened, nor has any
Governmental Authority indicated in writing an intention to conduct the same.
3.10. Intellectual Property.
(a) Definitions. For the purposes of this Agreement, the following
terms have the following definitions:
(i) "Intellectual Property" shall mean any or all of the
following and all rights in, arising out of, or associated therewith: (A) all
United States, international and foreign patents and applications therefor and
all reissues, divisions, renewals, extensions, provisional, continuations and
continuations-in-part thereof ("Patents"); (B) all inventions (whether
patentable or not), invention disclosures, improvements, trade secrets,
proprietary information, know how, technology, technical data and customer
lists, and all documentation relating to any of the foregoing; (C) all works of
authorship, copyrights, copyright registrations and applications therefor and
all other rights corresponding thereto throughout the world; (D) all
semiconductor manufacturing processes and all semiconductor circuit designs; (E)
all rights in mask works and registrations and applications therefor; (F) all
industrial designs and any registrations and applications therefor throughout
the world; (G) all trade names, logos, domain names common law trademarks and
service marks, trademark and service xxxx registrations and applications
therefor and all goodwill associated therewith throughout the world; (H) all
rights in databases and data collections throughout the world; and (I) any
similar, corresponding or equivalent rights to any of the foregoing.
(ii) "Company Intellectual Property" shall mean any
Intellectual Property that is owned, purported to be owned or exclusively
licensed by the Company or any of its subsidiaries, including without limitation
any rights in any design code, documentation, masks and tooling for packaging of
semiconductors in connection with all current products and products in design
and development.
(iii) "Registered Intellectual Property" shall mean all United
States, international and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks and service marks,
applications to register trademarks and service marks, intent-to-use
applications, or other registrations or applications related to trademarks and
service marks, and any domain name registrations; (iii) registered copyrights
and applications for copyright registration; (iv) any mask work registrations
and applications to register mask works; and (v) any other Intellectual Property
that is the subject of an application, certificate, filing, registration or
other document issued by, filed with, or recorded by, any state, government or
other public legal authority.
(iv) "Company Registered Intellectual Property" means all of
the Registered Intellectual Property owned by, or filed in the name of, the
Company or any of its subsidiaries.
(b) Section 3.10(b) of the Company Disclosure Schedule is a
complete and correct list of all Company Registered Intellectual Property and
specifies, where applicable, the
19
jurisdictions in which each such item of Company Registered Intellectual
Property has been filed, issued or registered and lists any proceedings or
actions before any court, tribunal (including the United States Patent and
Trademark Office (the "PTO") or equivalent authority anywhere in the world)
related to any of the Company Registered Intellectual Property.
(c) No Company Intellectual Property (excepting any Intellectual
Property exclusively licensed-in) or product (excepting any third party
Intellectual Property licensed-in) of the Company is subject to any proceeding
or outstanding decree, order, judgment, or stipulation restricting in any manner
the use, transfer, or licensing thereof by the Company or any of its
subsidiaries. No Company Intellectual Property (excepting any Intellectual
Property exclusively licensed-in) is subject to any proceeding or outstanding
decree, order, judgment, or stipulation which may affect the validity or
enforceability of such Company Intellectual Property. No Company Intellectual
Property (excepting any Intellectual Property exclusively licensed-in) is
subject to any contract, license or agreement restricting the use, transfer, or
licensing thereof by the Company or any of its subsidiaries in a manner which
could reasonably be expected to have a Material Adverse Effect on the Company.
(d) All necessary registration, maintenance and renewal fees, and
annuities currently due in connection with such Company Registered Intellectual
Property have been made, and all legally required documents, recordations and
certificates in connection with such Company Registered Intellectual Property
have been filed with the relevant patent, copyright, trademark or other
authorities in the United States or foreign jurisdictions, as the case may be,
for the purposes of perfecting, prosecuting or maintaining such Company
Registered Intellectual Property. To the knowledge of the Company, each item of
Company Registered Intellectual Property that is not an application is valid and
subsisting.
(e) The Company owns and has good and exclusive title to, each
material item of Company Intellectual Property (excepting any Intellectual
Property exclusively licensed-in) free and clear of any lien or encumbrance
(excluding non-exclusive licenses). The Company is the exclusive owner of or is
licensed or otherwise permitted to use all trademarks and service marks and
trade names used in connection with the operation or conduct of the business of
the Company and its subsidiaries, including the sale, distribution or provision
of any of the Company's products by the Company or its subsidiaries and the
Company owns exclusively, and has good title to, or is licensed or otherwise
permitted to use, all copyrighted works that are included with or incorporated
into products of the Company or which the Company or any of its subsidiaries
otherwise purports to own.
(f) To the extent that any material technology, software or
Intellectual Property has been developed or created independently or jointly by
a third party for the Company or any of its subsidiaries or is incorporated into
any of the Company's products, the Company has either (i) obtained ownership of,
and is the exclusive owner of, or (ii) obtained a license sufficient for the
conduct of its business as currently conducted) to such third party's
Intellectual Property in such work, material or invention.
(g) Neither the Company nor any of its subsidiaries has granted
any exclusive license with respect to, any material Intellectual Property that
is or was Company Intellectual
20
Property, to any third party. In the past three (3) years, neither Company nor
or any of its subsidiaries has transferred ownership of any material Company
Intellectual Property, nor permitted the Company's rights in such Company
Intellectual Property to lapse or enter the public domain.
(h) Section 3.10(h) of the Company Disclosure Schedule is a
complete and correct list of all material contracts, licenses and agreements to
which the Company or any of its subsidiaries is a party: (i) with respect to
Company Intellectual Property licensed or transferred to any third party (ii)
pursuant to which a third party has licensed or transferred ownership of any
Intellectual Property to the Company.
(i) All contracts, licenses and agreements listed in Section
3.10(h) of the Company Disclosure Schedule are in full force and effect. The
consummation of the transactions contemplated by this Agreement will neither
violate nor result in the breach, modification, cancellation, termination or
suspension of such contracts, licenses and agreements listed in Section 3.10(h)
of the Company Disclosure Schedule. Each of the Company and its subsidiaries is
in material compliance with, and has not materially breached any term of any
such contracts, licenses and agreements listed in Section 3.10(h) of the Company
Disclosure Schedule and, to the knowledge of the Company, all other parties to
such contracts, licenses and agreements are in compliance with, and have not
breached any term of, such contracts, licenses and agreements. Following the
Closing Date, the Surviving Corporation will be permitted to exercise all of the
Company's and its subsidiaries' rights under such contracts, licenses and
agreements to the same extent the Company and its subsidiaries would have been
able to had the transactions contemplated by this Agreement not occurred and
without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments that the Company would otherwise be required
to pay. Neither this Agreement nor the transactions contemplated by this
Agreement, including the assignment to Parent or Merger Sub, by operation of law
or otherwise, of any contracts or agreements to which the Company or any of its
subsidiaries is a party, will result in (i) either Parent's or the Merger Sub's
granting to any third party any right to or with respect to any Intellectual
Property right owned by, or licensed to, either of them, (ii) either the
Parent's or the Merger Sub's being bound by, or subject to, any non-compete or
other restriction on the operation or scope of their respective businesses, or
(iii) either the Parent's or the Merger Sub's being obligated to pay any
royalties or other amounts to any third party in excess of those payable by the
Company prior to the Closing.
(j) The operation of the business of the Company and its
subsidiaries as such business is currently conducted, including (i) the
Company's and its subsidiaries' design, development, manufacture, distribution,
reproduction, marketing or sale of the products or services of the Company and
its subsidiaries (including the Company's products) and (ii) the Company's use
of any product, device or process, has not and does not infringe or
misappropriate the Intellectual Property of any third party or constitute unfair
competition or unfair trade practices under the laws of any jurisdiction.
(k) Neither the Company nor any of its subsidiaries has received
notice from any third party in the past three (3) years that the operation of
the business of the Company or any of its subsidiaries or any act, product or
service of the Company or any of its subsidiaries,
21
infringes or misappropriates the Intellectual Property of any third party or
constitutes unfair competition or trade practices under the laws of any
jurisdiction.
(l) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the Company, to the
Company's knowledge, no third party is infringing on any of the Intellectual
Property owned by the Company.
(m) The Company and each of its subsidiaries has taken reasonable
steps under the circumstances to protect the Company's and its subsidiaries'
rights in the Company's confidential information and trade secrets that it
wishes to protect or any trade secrets or confidential information of third
parties that it is obligated to protect provided to the Company or any of its
subsidiaries, and, without limiting the foregoing, each of the Company and its
subsidiaries has and enforces a policy requiring each employee and contractor to
execute a proprietary information/confidentiality agreement substantially in the
form provided to Parent, and all current and former employees, and the
consultants of the Company and any of its subsidiaries have executed such an
agreement.
(n) No Public Software (as such term is defined below) was or is,
in whole or in part, incorporated in or distributed with any Company
Intellectual Property or Company products. For the purposes of this Agreement,
"Public Software" means any software that contains, or is derived in any manner
(in whole or in part) from, any software that is distributed as free software,
open source software (e.g., Linux) or similar licensing or distribution models,
including software licensed or distributed under any of the following licenses
or distribution models, or licenses or distribution models similar to any of the
following: (A) GNU's General Public License (GPL) or Lesser/Library GPL (LGPL),
(B) the Artistic License (e.g., PERL), (C) the Mozilla Public License, (D) the
Netscape Public License, (E) the Sun Community Source License (SCSL), (F) the
Sun Industry Standards License (SISL), (G) the BSD License, and (H) the Apache
License.
(o) Section 3.10(h) of the Company Disclosure Schedule is a
complete and correct list of all material contracts, licenses and agreements
under which Company or any of its subsidiaries has delivered copies of or
disclosed, or promised to deliver or disclose any source code of any material
software owned by Company or any of its subsidiaries, whether pursuant to an
escrow arrangement or otherwise.
(p) Section 3.10(p) of the Company Disclosure Schedule identifies
all non-expired agreements pursuant to which Company or one of its subsidiaries
has a material obligation or material duty to indemnify a third party with
respect to the infringement or misappropriation of any Intellectual Property.
3.11. Title to Properties. Except as disclosed in the Company SEC
Documents filed prior to the date hereof, each of the Company and its
subsidiaries (i) has good and marketable title to all of its material properties
(real, personal or intangible) and assets that are reflected on the latest
balance sheet included in such Company SEC Documents as being owned by the
Company or one of its subsidiaries or acquired after the date thereof which are,
individually or in the aggregate, material to the Company's business on a
consolidated basis (except properties sold or otherwise disposed of since the
date thereof in the ordinary course of business), free and clear
22
of (A) all liens, mortgages, easements, irregularities of title or other
encumbrances of any nature except (1) statutory liens securing payments not yet
due and (2) such imperfections or irregularities of title or other liens (other
than real property mortgages or deeds of trust) as do not materially affect the
use of the properties or assets subject thereto or affected thereby or otherwise
materially impair business operations at such properties, and (B) all real
property mortgages and deeds of trust except that secured indebtedness that is
properly reflected in the latest Company SEC Documents filed prior to the date
hereof, and (ii) is the lessee or sublessee of all leasehold estates listed in
the Company SEC Documents or acquired after the date thereof and is in
possession of the properties purported to be leased thereunder, and each such
lease is valid without default thereunder by the lessee (or event which with
notice or lapse of time, or both, would constitute a material default) or, to
the Company's knowledge, the lessor where such default could reasonably be
expected to have a Material Adverse Effect.
3.12. Registration Statement; Proxy Statement. None of the information
provided by the Company for inclusion in the registration statement on Form S-4
(such registration statement as amended, supplemented or modified, the
"Registration Statement") to be filed with the Commission by Parent under the
Securities Act, including the prospectus relating to the shares of Parent Class
A Common Stock to be issued in the Mergers (as amended, supplemented or
modified, the "Prospectus") and the proxy statement and form of proxy relating
to the vote of the shareholders of the Company with respect to the Mergers (as
amended, supplemented or modified, the "Proxy Statement"), at the time the
Registration Statement becomes effective or, in the case of the Proxy Statement,
at the date of mailing and at the date of the Company Shareholders Meeting, will
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein (and, in the case of the Proxy Statement, in light of the circumstances
under which they were made), not misleading. The Proxy Statement, except for
such portion thereof that relates to Parent and its subsidiaries (as to which no
representations or warranties are made), will comply as to form in all material
respects with the provisions of the Exchange Act.
3.13. Litigation. Except as specifically disclosed in the Company SEC
Documents filed with the Commission prior to the date of this Agreement, there
is no suit, claim, action, proceeding, audit or investigation pending or, to the
knowledge of the Company, threatened against the Company or its subsidiaries
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on the Company. Since December 31, 2000 the Company has
not been subject to any outstanding order, writ, injunction or decree
specifically applicable to the Company which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on the Company.
3.14. Brokerage and Finder's Fees; Expenses. Except in connection with the
retention of Wachovia Capital Markets, LLC ("Wachovia Securities") (the fees of
which firm shall be the sole responsibility of the Company), neither the Company
nor any shareholder, director, officer or employee thereof has incurred or will
incur on behalf of the Company any brokerage, finder's or similar fee in
connection with the transactions contemplated by this Agreement. The Company has
heretofore made available to Parent a complete and correct copy of the
engagement letter between the Company and Wachovia Securities.
23
3.15. Employee Benefit Plans. (a) For purposes of this Agreement, the
following terms have the definitions given below:
"Company Plan" means each (i) "employee benefit plan," as defined in
Section 3(3) of ERISA (including any "multiemployer plan" as defined in Section
3(37) of ERISA), and (ii) all other pension, retirement, supplemental
retirement, deferred compensation, excess benefit, profit sharing, bonus,
incentive, stock purchase, stock ownership, stock option, stock appreciation
right, employment, severance, salary continuation, termination,
change-of-control, health, life, disability, group insurance, vacation, holiday
and fringe benefit plan, program, contract or arrangement (whether written or
unwritten, qualified or nonqualified, funded or unfunded and including any that
have been frozen or terminated) currently maintained, contributed to, or
required to be contributed to, by the Company or any ERISA Affiliate or under
which the Company or any ERISA Affiliate has any liability.
"Controlled Group Liability" means any and all liabilities under (i)
Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 and 4971 of the
Code, (iv) the continuation coverage requirements of Section 601 et seq. of
ERISA and Section 4980B of the Code, or (v) corresponding or similar provisions
of foreign laws or regulations, in each case other than pursuant to the Plans.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1)
of ERISA that includes the first entity, trade or business, or that is a member
of the same "controlled group" as the first entity, trade or business pursuant
to Section 4001(a)(14) of ERISA.
"Withdrawal Liability" means liability to a Multiemployer Plan (as
defined in Section 3.16(f)) as a result of a complete or partial withdrawal from
such Multiemployer Plan or reorganization of such Multiemployer Plan, as those
terms are defined in Part I of Subtitle E of Title IV of ERISA.
(b) With respect to each Company Plan, the Company has made
available to Parent a correct and complete copy of each document relating to a
material liability with respect thereto, including without limitation the
following (where applicable): (i) each writing constituting a part of such
Company Plan, including without limitation all plan documents, trust agreements,
and insurance contracts and other funding vehicles; (ii) the most recent Annual
Report (Form 5500 Series) and accompanying schedule, if any; (iii) the current
summary plan description, if any; (iv) the most recent annual financial report,
if any; and (v) the most recent determination letter from the Internal Revenue
Service, if any. No Company Plan is now nor at any time has been subject to Part
3, Subtitle B of Title I of ERISA or Title IV of ERISA.
(c) The Company Plans which are "employee pension benefit plans"
within the meaning of Section 3(2) of ERISA and which are intended to meet the
qualification requirements of Section 401(a) of the Code, or Sections 401(k) or
401(m) of the Code, as
24
applicable (each a "Qualified Plan"), to the Company's knowledge, now meet, and
at all times since their inception have met, the requirements for such
qualification, and the related trusts are now, and at all times since their
inception have been, exempt from taxation under Section 501(a) of the Code. Each
of the Qualified Plans has received a favorable determination from the Internal
Revenue Service, and no such determination letter has been revoked nor, to the
Company's knowledge, are there any existing circumstances why any such
determination letter should be revoked, nor has any Qualified Plan been amended
(or failed to be amended) since the date of its most recent determination letter
in any respect which would adversely affect the qualified status of any
Qualified Plan or the related trust.
(d) All contributions required to be made to any Company Plan by
Applicable Laws or by any plan document or other contractual undertaking, and
all premiums due or payable with respect to insurance policies funding any
Company Plan, before the date hereof have been made or paid in full on or before
the final due date thereof and through the Effective Time will be made or paid
on time.
(e) The Company and its subsidiaries have materially complied, and
are now in material compliance, with all applicable provisions of ERISA and the
Code and all Applicable Laws relating to employees and employee benefits. Each
Company Plan has been established and operated in material compliance with its
terms and Applicable Laws. There is not now, and there are no existing
circumstances that, individually or in the aggregate, would reasonably be
expected to give rise to, any requirement for the posting of security with
respect to a Company Plan or the imposition of any lien on the assets of the
Company or any of its subsidiaries or any Company Plan under ERISA or the Code.
The Company and its subsidiaries are each in material compliance with all
Applicable Laws respecting employment.
(f) No Company Plan is a "multiemployer plan" within the meaning
of Section 4001(a)(3) of ERISA (a "Multiemployer Plan") or a plan that has two
or more contributing sponsors at least two of whom are not under common control,
within the meaning of Section 4063 of ERISA (a "Multiple Employer Plan"), nor
has the Company or any of its subsidiaries or any of their respective ERISA
Affiliates, at any time within six years before the date hereof, contributed to
or been obligated to contribute to any Multiemployer Plan or Multiple Employer
Plan. With respect to each Multiemployer Plan: (i) neither the Company nor any
of its ERISA Affiliates has incurred any Withdrawal Liability that has not been
satisfied in full; (ii) neither the Company nor any ERISA Affiliate has received
any notification, nor has any reason to believe, that any such Company Plan is
in reorganization, is insolvent, or has been terminated, or could reasonably be
expected to be in reorganization, to be insolvent, or to be terminated; and
(iii) no circumstances exist which individually or in the aggregate could
reasonably be expected to result in Withdrawal Liability with respect to a Plan.
(g) There does not now exist, and there are no existing
circumstances that individually or in the aggregate would reasonably be expected
to result in, any material Controlled Group Liability. Without limiting the
generality of the foregoing, neither the Company nor any of its subsidiaries nor
any of their respective ERISA Affiliates has engaged in any transaction
described in Section 4069 or Section 4204 of ERISA.
25
(h) No Company Plan provides benefits, including, without
limitation, death or medical benefits, beyond retirement, and in the case of
everything else except death benefits, beyond termination of service for any
reasons except retirement, other than (A) coverage mandated by law or (B) death
or retirement benefits under a Qualified Plan. Neither the Company nor any ERISA
Affiliate has made a written or oral representation to any current or former
employee promising or guaranteeing any employer paid continuation of medical,
dental, life or disability coverage for any period of time beyond retirement or
termination of employment.
(i) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby either solely as a result
thereof or in conjunction with any other events will result in, or constitute an
event which, with the passage of time or the giving of notice or both will
result in, cause the accelerated vesting or delivery of, or increase the amount
or value of, any payment or benefit to any employee, officer, director or
consultant of the Company or any of its subsidiaries. Without limiting the
generality of the foregoing, no amount paid or payable by the Company or any of
its subsidiaries or affiliates in connection with the transactions contemplated
hereby either solely as a result thereof or in conjunction with any other events
will be an "excess parachute payment" within the meaning of Section 280G of the
Code. There is no agreement, plan, arrangement or other contract covering any
employee or independent contractor or former employee or independent contractor
of the Company that, considered individually or considered collectively with any
other such Contracts (as defined in Section 3.16), will, or could reasonably be
expected to, give rise directly or indirectly to the payment of any amount that
would not be deductible pursuant to Section 280G or Section 162 of the Code, nor
will the Company be required to "gross up" or otherwise compensate or reimburse
any such person because of the imposition of any excise tax.
(j) There are no pending, or, to the knowledge of the Company,
threatened material actions (other than claims for benefits in the ordinary
course), audits or investigations with respect to the Company Plans by any
Governmental Authority or otherwise, and, to the knowledge of the Company, there
are no circumstances that would give rise to such actions, audits or
investigations. There are no material filings or applications to any
Governmental Authority which are currently outstanding or being prepared by the
Company or any Company Plan with respect to the Company Plans, including, but
not limited to filings under the Employee Plans Compliance Resolution System (as
set forth in Rev. Proc. 2003-44, and any successor thereto) or the Voluntary
Fiduciary Correction or Delinquent Filer Voluntary Compliance programs of the
Department of Labor.
(k) Section 3.15(k) to the Company Disclosure Schedule sets forth
a list of each employment, consulting, severance or similar agreement under
which the Company or any of its subsidiaries is or could reasonably be expected
to become obligated to provide compensation or benefits in excess of $100,000,
and the Company provided to Parent a copy of each such agreement.
(l) No employer securities, employer real property (within the
meaning of Section 407 of ERISA) or other employer property is included in the
assets of any Plan.
26
(m) No event has occurred, and there exists no condition or set of
circumstances in connection with any Plan, under which the Parent, Merger Sub,
the Company or any of its subsidiaries, directly or indirectly, could reasonably
be expected to be subject to any risk of material liability under Sections 409
or 502 of ERISA or Section 4975 of the Code.
(n) Company maintains policies or practices on the proper
classification for all employees, leased employees, consultants and independent
contracts, for all purposes (including, without limitation, for all tax purpose
and for purposes of determining eligibility to participate in any Plan) and has
materially complied with such policies and practices.
3.16. Contracts. Section 3.16 to the Company Disclosure Schedule lists all
contracts, agreements, guarantees, leases (other than real property leases) and
executory commitments (each a "Contract"), other than Plans and any Contracts
heretofore filed as an exhibit to any Company SEC Document since December 31,
2000, that exist as of the date hereof to which the Company is a party or by
which it is bound and which fall within any of the following categories: (a)
Contracts not entered into in the ordinary course of the Company's business
other than those that individually or in the aggregate are not material to the
business of the Company, (b) joint venture and partnership agreements, (c)
Contracts containing covenants purporting to limit the freedom of the Company or
any of its affiliates to compete in any line of business in any geographic area
or to hire any individual or group of individuals, (d) Contracts which after the
Effective Time would have the effect of limiting the freedom of Parent or its
subsidiaries (including the Surviving Corporation) to compete in any line of
business in any geographic area or to hire any individual or group of
individuals, (e) Contracts which contain minimum purchase conditions in excess
of $500,000, or requirements or other terms that restrict or limit the
purchasing relationships of the Company or its affiliates, or any customer,
licensee or lessee thereof, (f) Contracts relating to any outstanding commitment
for capital expenditures in excess of $500,000, (g) indentures, mortgages,
promissory notes, loan agreements or guarantees of borrowed money in excess of
$1,000,000 in the aggregate, letters of credit or other agreements or
instruments of the Company or commitments for the borrowing or the lending by
the Company of amounts in excess of $1,000,000 in the aggregate, or providing
for the creation of any charge, security interest, encumbrance or lien upon any
of the assets of the Company with an aggregate value in excess of $1,000,000,
(h) Contracts providing for "earn-outs" or other contingent payments by the
Company involving more than $100,000 in the aggregate over the terms of all such
Contracts, (i) Contracts associated with off balance sheet financing, including
but not limited to arrangements for the sale of receivables, (j) all licenses or
similar agreements granting the right to use any material Intellectual Property
identified in Section 3.10(h) of the Company Disclosure Schedule, (k) stock
purchase agreements, asset purchase agreements or other acquisition or
divestiture agreements relating to material transactions since January 1, 1999,
(l) any distribution agreements, or (m) any agreement that is material to the
Company and its subsidiaries taken as a whole, irrespective of amount. All
material Contracts are valid and binding obligations of the Company and, to the
knowledge of the Company, the valid and binding obligation of each other party
thereto. Neither the Company nor, to the knowledge of the Company, any other
party thereto is in material violation of or in default in respect of, nor has
there occurred an event or condition which with the passage of time or giving of
notice (or both) would constitute a material default under or permit the
termination of, any Contract listed in Section 3.16 of the Company Disclosure
Schedule. Set forth in Section 3.16(i) to the
27
Company Disclosure Schedule is a description of any material changes to the
amount and terms of the indebtedness of the Company and its subsidiaries from
(i) the Exhibits to the Company's Form 10-K for the period ended December 31,
2003 filed with the Commission, with respect to the terms of such indebtedness,
and (ii) the description in the financial statements (including the notes
thereto) incorporated in the Company's Form 10-K for the period ended December
31, 2003 filed with the Commission, with respect to the amount of such
indebtedness. Set forth in Section 3.16(j) to the Company Disclosure Schedule is
the amount of the annual premium currently paid by the Company for its
directors' and officers' liability insurance.
3.17. Labor Matters. At the present time and during the past three years,
(A) no unfair labor practice complaint or charge against the Company has been
brought before, or, to the knowledge of the Company, threatened by, the National
Labor Relations Board or any other government agency or court in any
jurisdiction; (B) there has not occurred or, to the knowledge of the Company,
been threatened any labor strike, dispute, picketing, slowdown, stoppage, or
other similar labor activity against or involving the Company; (C) the Company
is not, nor has been party to any collective bargaining agreement and there are
no labor unions or other organizations representing, purporting to represent,
or, to the knowledge of the Company, attempting to represent any employee; (D)
the Company is not, nor ever has been a party to, or threatened with, any union
organizing or election activity or any dispute or controversy with a union
involving its employees; (E) the Company has not experienced any material labor
difficulty; and (F) the Company has no knowledge that the Company's relations
with its employees are other than satisfactory. To the knowledge of the Company,
no key employee of the Company intends to terminate employment with the Company.
3.18. Undisclosed Liabilities. Except (i) as and to the extent disclosed
or reserved against in the consolidated balance sheet of the Company as of
December 31, 2003 included in the Company SEC Documents, or disclosed in the
footnotes to the financial statements as of such date or the footnotes to the
December 31, 2003 financial statements included in the Company SEC Documents
filed prior to the date hereof, (ii) as incurred after December 31, 2003 in the
ordinary course of business consistent with prior practice and not prohibited by
this Agreement, or (iii) as described in the Company SEC documents filed since
December 31, 2003 but prior to the date hereof, the Company does not have any
liabilities or obligations of any nature, whether known or unknown, absolute,
accrued, contingent or otherwise and whether due or to become due, that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on the Company.
3.19. Operation of the Company's Business; Relationships. (a) Since
December 31, 2003 through the date of this Agreement and except for entering
into this Agreement, the Company has not engaged in any transaction which, if
done after execution of this Agreement, would violate in any material respect
Section 5.3(c), except as specifically disclosed in the Company SEC Documents
filed with the Commission prior to the date of this Agreement.
(b) The Company has made available to Parent a list of the
Company's top ten customers (determined by fiscal year 2003 annual revenue) (the
"Top 10 Customers") and the Company's top ten suppliers (determined by fiscal
year 2003 annual expense) (the "Top 10 Suppliers"). To the knowledge of the
Company, (i) from December 31, 2003 to the date hereof,
28
none of the Top 10 Customers has indicated in writing that it will stop or
materially decrease purchasing materials, products or services from the Company,
and (ii) since December 31, 2003, none of the Top 10 Suppliers has indicated in
writing that it will stop or materially decrease the supply of materials,
products or services to the Company, or impose conditions or credit limits on
the Company.
3.20. Permits; Compliance. The Company is in possession of all material
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted (collectively, the "Company Permits"), except where the failure to be
in possession of such Company Permits would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Company.
3.21. Environmental Matters. Except as would not reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect on the
Company, the Company and its subsidiaries and the properties and operations of
the Company and its subsidiaries and, with respect to the operations of the
Company, its predecessors, are not subject to any pending or, to the knowledge
of the Company, threatened action under any Environmental Law, including without
limitation with respect to any present or former operations, facilities or
subsidiaries and, with respect to the operations of the Company, its
predecessors. Except as would not reasonably be expected, individually or in the
aggregate, to result in a Material Adverse Effect on the Company, there has been
no Release (as defined below) of any Hazardous Materials (as defined below) into
the environment by the Company or its subsidiaries or their predecessors, and
there are no Hazardous Materials present at, on, under, within or which have
migrated from, any properties of the Company or its subsidiaries or, including
without limitation any former property owned, leased or operated by the Company,
its subsidiaries, or their respective predecessors, with respect to the
operations of the Company, its subsidiaries or their respective predecessors.
Neither the Company nor any of its subsidiaries nor, with respect to the
operations of the Company, its or its subsidiaries' corporate predecessors (x)
has received any written notice that the Company, any of its subsidiaries or
their predecessors or any of their respective present or former operations or
facilities is or may be a potentially responsible party or otherwise liable in
connection with any site used for the disposal of or otherwise containing
Hazardous Materials, or (y) to the knowledge of the Company, without further
inquiry, has disposed of, arranged for the disposal of, or transported any
Hazardous Materials to any site which is listed on the U.S. Environmental
Protection Agency's National Priorities List or which is otherwise subject to
material remediation, investigation or a clean-up order or agreement from or
with a Governmental Authority. The Company and its subsidiaries have made
available to Parent all material internal and external environmental audits and
reports (in each case relevant to the Company, any of its subsidiaries or their
predecessors) in the possession of the Company or its subsidiaries. The term
"Environmental Laws" means all Applicable Laws relating to pollution or
protection of the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") and other Applicable Laws relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants,
contaminants, or industrial, toxic or hazardous substances or wastes,
(collectively, "Hazardous Materials") into the environment, or otherwise
relating to the
29
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued,
entered, promulgated or approved thereunder, as in effect on the date hereof.
"Release" shall have the meaning as defined in are interpreted under CERCLA.
3.22. Opinion of Financial Advisor. The Company has received the opinion
of Wachovia Securities to the effect that, as of the date of this Agreement, the
Merger Consideration is fair from a financial point of view to the shareholders
of the Company, and as of the date of this Agreement, such opinion has not been
withdrawn or revoked or modified in any material respect. The Company shall
provide a copy of the written confirmation of such opinion as promptly as
practicable.
3.23. Board Recommendation. As of the date of this Agreement, the Board of
Directors of the Company, at a meeting duly called and held at which a quorum
was present throughout, has by the requisite vote of the directors (i)
determined that this Agreement and the transactions contemplated hereby,
including the Mergers, are advisable and in the best interests of the Company
Shareholders and (ii) resolved to recommend that the holders of the shares of
Company Common Stock entitled to vote thereon approve and adopt this Agreement
and the transactions contemplated herein, including the Mergers (the "Company
Board Recommendation"). As of the date of this Agreement, the Company Board
Recommendation has not been withdrawn, revoked or modified.
3.24. Related Party Transactions. Since the date of the Company's proxy
statement filed on December 31, 2003, no event has occurred that would be
required to be reported under Item 404 of Regulation S-K promulgated by the
Commission.
3.25. Takeover Statutes; Rights Plan. The Company has taken all actions
such that no restrictive provision of any "fair price," "moratorium," "control
share acquisition," "interested shareholder" or other similar anti-takeover
statute or regulation (each a "Takeover Statute") or restrictive provision of
any applicable anti-takeover provision in the governing documents of the Company
is, or at the Effective Time will be, applicable to the Company, Parent, Merger
Sub, the Mergers, this Agreement, the Voting Agreements or any of the other
transactions contemplated hereby or thereby. After giving effect to the
amendment to the Rights Plan effective as of the date hereof, the Rights Plan is
inapplicable to the Mergers, this Agreement, the Voting Agreement, and the
transactions contemplated hereby or thereby.
3.26. Certain Transactions. Neither the Company nor any of its
subsidiaries is a party to, or has any commitment to become a party to, any
joint venture agreement, partnership agreement or any Contract associated with
off balance sheet financing, including arrangements for the sale of receivables.
30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT, MERGER SUB AND LLC
In order to induce Company to enter into this Agreement, Parent,
Merger Sub and LLC hereby represent and warrant to the Company that, except as
set forth in the written disclosure schedule prepared by Parent which is dated
as of the date of this Agreement and arranged in sections corresponding to the
numbered and lettered sections contained in this Article IV and was previously
delivered to the Company in connection herewith (the "Parent Disclosure
Schedule"):
4.1. Organization and Standing. Each of Parent and Merger Sub and each
subsidiary (as defined in Section 8.3) of Parent is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation with full corporate power and authority to
own, lease, use and operate its properties and to conduct its business as and
where now owned, leased, used, operated and conducted. LLC is a limited
liability company duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization with full power and authority
to own, lease, use and operate its properties and to conduct its business as and
where now owned, leased, used, operated and conducted. Each of Parent and each
subsidiary of Parent is duly qualified to do business and in good standing in
each jurisdiction in which the nature of the business conducted by it or the
property it owns, leases or operates requires it to so qualify, except where the
failure to be so qualified or in good standing in such jurisdiction individually
or in the aggregate would not reasonably be expected to have a Material Adverse
Effect on Parent. Parent is not in default in the performance, observance or
fulfillment of any provision of its Restated Certificate of Incorporation or its
Bylaws, each as in effect on the date hereof (the "Parent Certificate" and the
"Parent Bylaws," respectively). Parent has heretofore furnished to the Company a
complete and correct copy of the Parent Certificate and the Parent Bylaws.
4.2. Subsidiaries. Parent does not own, directly or indirectly, any
equity or other ownership interest in any corporation, partnership, joint
venture or other entity or enterprise, except for the subsidiaries and other
entities listed in Exhibit 21 to Parent's Annual Report on Form 10-K for the
fiscal year ended January 2, 2004. Except as set forth in Section 4.2 to the
Parent Disclosure Schedule, Parent is not subject to any obligation or
requirement to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any entity or enterprise that is not
wholly owned by Parent. Parent owns directly or indirectly each of the
outstanding shares of capital stock (or other ownership interests having by
their terms ordinary voting power to elect a majority of directors or others
performing similar functions with respect to such subsidiary) of each of
Parent's subsidiaries, free and clear of all liens, pledges, security interests,
claims or other encumbrances. Each of the outstanding shares of capital stock of
each of Parent's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable. All of the capital stock of each subsidiary of Parent is owned by
Parent and/or one or more wholly-owned subsidiaries of Parent. There are no
outstanding subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type relating to
the issuance, sale, repurchase or transfer of any capital stock or other
securities of any subsidiary of Parent, nor are there outstanding any securities
which are convertible into or
31
exchangeable for any shares of capital stock or other securities of any
subsidiary of Parent, and neither Parent nor any subsidiary of Parent has any
obligation of any kind to issue any additional shares of capital stock or other
securities of any subsidiary of Parent or to pay for or repurchase any shares of
capital stock or other securities of any subsidiary of Parent or any predecessor
thereof.
4.3. Corporate Power and Authority. Parent, Merger Sub and LLC have all
requisite power and authority to (a) enter into and deliver this Agreement and
(b) perform their obligations hereunder to consummate the transactions
contemplated by this Agreement. The execution, delivery and performance of this
Agreement by Parent, Merger Sub and LLC have been duly authorized by all
necessary corporate action on the part of Parent, Merger Sub and LLC. This
Agreement has been duly executed and delivered by Parent, Merger Sub and LLC and
constitutes the legal, valid and binding obligation of Parent, Merger Sub and
LLC enforceable against them in accordance with its terms, except (i) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium, and other laws
of general application affecting enforcement of creditors' rights generally, or
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.
4.4. Capitalization of Parent, Merger Sub and LLC. (a) As of March 10,
2004, Parent's authorized capital stock consisted solely of (x) 300,000,000
shares of Class A common stock, par value $.01 per share ("Parent Class A Common
Stock"), of which (i) 139,894,961 shares were issued and outstanding, (ii)
2,357,690 shares were issued and held in treasury (which does not include the
shares reserved for issuance set forth in clause (iii) below) and no shares were
held by subsidiaries of Parent, (iii) 17,432,246 shares were reserved for
issuance upon the exercise of outstanding options, (iv) no shares were reserved
for issuance upon the conversion of Parent Class B Common Stock (as defined
below) into Parent Class A Common Stock, (v) 5,496,291 shares were reserved for
future issuance under outstanding options granted by Parent, and (vi) no shares
reserved for issuance upon the exercise of outstanding warrants issued by
Parent; (y) 300,000,000 shares of Class B common stock, par value $.01 per share
("Parent Class B Common Stock" and, with the Parent Class A Common Stock, the
"Parent Common Stock"), of which (i) no shares were issued and outstanding, (ii)
no shares were issued and held in treasury and no shares were held by
subsidiaries of Parent, and (iii) 159,684,897 shares were reserved for issuance
upon the conversion of Parent Class A Common Stock into Parent Class B Common
Stock; and (z) 100,000 shares of Preferred Stock, par value $.01 per share
("Parent Preferred Stock"), of which (i) no shares were issued and outstanding,
(ii) no shares were issued and held in treasury and no shares were held by
subsidiaries of Parent, and (iii) no shares were reserved for issuance. Each
outstanding share of Parent capital stock is duly authorized and validly issued,
fully paid and nonassessable, and has not been issued in violation of any
preemptive or similar rights. Other than as set forth in the first sentence
hereof , there are no outstanding subscriptions, options, warrants, puts, calls,
agreements, understandings, claims or other commitments or rights of any type
relating to the issuance, sale, repurchase or transfer by Parent of any
securities of Parent, nor are there outstanding any securities which are
convertible into or exchangeable for any shares of capital stock of Parent, and
neither Parent nor any subsidiary of Parent has any obligation of any kind to
issue any additional securities or to pay for or repurchase any securities of
Parent or any predecessor. Parent has no agreement, arrangement or
understandings to register any securities of Parent or any of its subsidiaries
under the
32
Securities Act or under any state securities law and has not granted
registration rights to any person or entity (other than agreements, arrangements
or understandings with respect to registration rights that are no longer in
effect as of the date of this Agreement); copies of all such agreements have
previously been made available to the Company.
(b) The authorized capital stock of Merger Sub consists solely of
100 shares of common stock, $.01 par value per share, all of which, as of the
date hereof, are issued and outstanding and are held directly by Parent. All of
the outstanding shares of Merger Sub's common stock have been duly authorized
and validly issued, and are fully paid and nonassessable. Merger Sub has no
subsidiaries. Merger Sub was formed for the purpose of consummating the Mergers
and has no material assets or liabilities except as necessary for such purpose.
(c) LLC is a single member Delaware limited liability company, and
all of the outstanding membership interests of the LLC are owned by Parent.
Parent has not elected to treat LLC as a corporation for federal income Tax
purposes. Other than Merger Sub, LLC has no subsidiaries. LLC was formed for the
purpose of consummating the Mergers and has no material assets or liabilities
except as necessary for such purpose.
4.5. Conflicts; Consents and Approvals. Except, in the case of (b), as
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Parent, neither the execution and delivery of this
Agreement by Parent, Merger Sub or LLC, nor the consummation of the transactions
contemplated hereby or thereby, will:
(a) conflict with, or result in a breach of any provision of, the
Parent Certificate or the Parent Bylaws or the Articles of Incorporation and
Bylaws of Merger Sub or the organizational document of LLC;
(b) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with the giving of
notice, the passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time or otherwise)
to terminate, accelerate, modify or call a default under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of Parent under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust, license, contract,
undertaking, agreement, lease or other instrument or obligation to which Parent
or any of its subsidiaries is a party;
(c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Parent or any of its subsidiaries or any of their
respective properties or assets; or
(d) require any action or consent or approval of, or review by, or
registration or filing by Parent, Merger Sub or LLC or any of their affiliates
with, any third party or any Governmental Authority, other than (i) actions
required by the HSR Act, (ii) filings and consents under Foreign Antitrust Laws,
and (iii) registrations, filings, consents, approvals or other actions required
under federal and state securities laws and the rules of the Nasdaq Stock
Market, Inc. as are contemplated by this Agreement, and (iv) the filing of the
Agreement of Merger with the Secretary of State.
33
4.6. No Material Adverse Effect. Except as specifically disclosed in the
Parent SEC Documents (as defined in Section 4.7) filed with the Commission prior
to the date of this Agreement, since December 31, 2003, there has been no
Material Adverse Effect on Parent.
4.7. Parent SEC Documents. Parent has timely filed with the Commission
all forms, reports, schedules, statements and other documents required to be
filed by it since December 31, 2001 under the Exchange Act or the Securities Act
(such documents, as supplemented and amended since the time of filing,
collectively, the "Parent SEC Documents"). The Parent SEC Documents, including,
without limitation, any financial statements or schedules included or
incorporated by reference therein, at the time filed (and, in the case of
registration statements and proxy statements, on the dates of effectiveness and
the dates of mailing, respectively) (a) did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein (and in the case of any
prospectus, in light of the circumstances under which they were made), not
misleading, and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be. The
financial statements of Parent included in the Parent SEC Documents at the time
filed (and, in the case of registration statements and proxy statements, on the
dates of effectiveness and the dates of mailing, respectively) complied as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the Commission with respect thereto, were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited statements, as permitted by Form
10-Q of the Commission), and fairly presented (subject, in the case of the
unaudited interim financial statements, to normal, recurring year-end audit
adjustments consistent with past practice), in all material respects, the
consolidated financial position of Parent and its consolidated subsidiaries as
at the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended. No subsidiary of Parent is or has been subject
to the periodic reporting requirements of the Exchange Act or required to file
any form, report or other document with the Commission, the Nasdaq Stock Market,
Inc., any stock exchange or any other comparable Governmental Authority.
4.8. Registration Statement; Proxy Statement. None of the information
provided by Parent for inclusion in the Registration Statement or the Proxy
Statement, at the time the Registration Statement becomes effective or, in the
case of the Proxy Statement, at the date of mailing and at the date of the
Company Shareholders Meeting, will contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements therein (and, in the case of the Proxy
Statement, in light of the circumstances under which they were made), not
misleading. The Proxy Statement, except for the portion thereof that relates to
the Company and its subsidiaries (as to which no representations or warranties
are made), will comply as to form in all material respects with the provisions
of the Exchange Act, and the Registration Statement, except for such portion
thereof that relates to the Company and its subsidiaries (as to which no
representations or warranties are made), will comply as to form in all material
respects with the provisions of the Securities Act.
4.9. Litigation. Except as specifically disclosed in the Parent SEC
Documents filed with the Commission prior to the date of this Agreement, there
is no action pending or, to the
34
knowledge of Parent, threatened against Parent which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on
Parent or a material adverse effect on the ability of Parent to consummate the
transactions contemplated hereby. Since December 31, 2003, Parent has not been
subject to any outstanding order, writ, injunction or decree specifically
applicable to Parent which, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect on Parent.
4.10. Valid Issuance. The Parent Class A Common Stock to be issued in the
Mergers and upon the exercise of Converted Options, when issued in accordance
with the provisions of this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable, free of all liens and encumbrances and not subject
to preemptive rights, and will be issued in compliance with the Securities Act
and applicable state securities laws.
4.11. Financing. Parent possesses and will possess sufficient cash funds
and has and will have available to it adequate financial resources to pay all
required cash amounts to the Company's shareholders pursuant to Article II of
this Agreement.
4.12. Undisclosed Liabilities. Except (i) as and to the extent disclosed
or reserved against in the consolidated balance sheet of Parent as of December
31, 2003 included in the Parent SEC Documents, or disclosed in the footnotes to
the financial statements as of such date or the footnotes to the December 31,
2003 financial statements included in the Parent SEC Documents filed prior to
the date hereof, (ii) as incurred after December 31, 2003 in the ordinary course
of business consistent with prior practice and not prohibited by this Agreement,
or (iii) as described in the Parent SEC Documents filed since December 31, 2003
but prior to the date hereof, Parent has not incurred through the date hereof
any liabilities or obligations of any nature, whether known or unknown,
absolute, accrued, contingent or otherwise and whether due or to become due,
that, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Parent.
4.13. Operation of Parent's Business; Relationships.
(a) Since December 31, 2003 through the date of this Agreement and
except for entering into this Agreement, Parent has not engaged in any
transaction, except in the ordinary course of business or as specifically
disclosed in the Parent SEC Documents filed with the Commission prior to the
date of this Agreement. From December 31, 2003 until the date hereof, Parent has
not declared, set aside or paid any dividend or other distribution in respect of
any capital stock of Parent, nor split, combined or reclassified any of its
capital stock.
(b) From December 31, 2003 to the date hereof, to the Parent's
knowledge, no material customer of Parent has indicated in writing that it will
stop or materially decrease purchasing materials, products or services from
Parent and since December 31, 2003, to the Parent's knowledge, no material
supplier of Parent has indicated in writing that it will stop or materially
decrease the supply of materials, products or services to Parent, in each case,
the effect of which individually or in the aggregate would reasonably be
expected to have a Material Adverse Effect on Parent.
35
4.14. Permits; Compliance. Parent is in possession of all material
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted (collectively, the "Parent Permits"), except where the failure to be
in possession of such Parent Permits would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Parent.
4.15. Environmental Matters. Except for matters disclosed in the Parent
SEC Documents filed prior to the date hereof and except as would not reasonably
be expected, individually or in the aggregate, to result in a Material Adverse
Effect on the Parent, the Parent and its subsidiaries and the properties and
operations of the Parent and its subsidiaries and, with respect to the
operations of the Parent, its predecessors, are not subject to any pending or,
to the knowledge of the Parent, threatened action under any Environmental Law,
including without limitation with respect to any present or former operations,
facilities or subsidiaries and, with respect to the operations of the Parent,
its predecessors. Except as would not reasonably be expected, individually or in
the aggregate, to result in a Material Adverse Effect on the Parent, there has
been no Release of any Hazardous Materials into the environment by the Parent or
its subsidiaries or their predecessors, and there are no Hazardous Materials
present at, on, under, within or which have migrated from, any properties of the
Parent or its subsidiaries or, including without limitation any former property
owned, leased or operated by the Parent, its subsidiaries, or their respective
predecessors, with respect to the operations of the Parent, its subsidiaries or
their respective predecessors. Neither the Parent nor any of its subsidiaries
nor, with respect to the operations of the Parent, its or its subsidiaries'
corporate predecessors (x) has received any written notice that the Parent, any
of its subsidiaries or their predecessors or any of their respective present or
former operations or facilities is or may be a potentially responsible party or
otherwise liable in connection with any site used for the disposal of or
otherwise containing Hazardous Materials, or (y) to the knowledge of the Parent,
without further inquiry, has disposed of, arranged for the disposal of, or
transported any Hazardous Materials to any site which is listed on the U.S.
Environmental Protection Agency's National Priorities List or which is otherwise
subject to a material remediation, investigation or clean-up order or agreement
from or with a Governmental Authority.
4.16. Brokerage and Finder's Fees; Expenses. Except in connection with the
retention of Xxxxx Xxxxxxx (the fees of which firm shall be the sole
responsibility of Parent), neither Parent nor any director, officer or employee
thereof has incurred or will incur on behalf of Parent any brokerage, finder's
or similar fee in connection with the transactions contemplated by this
Agreement.
4.17. Reorganization. Assuming that the Tax Free Valuation Test is
satisfied, Parent knows of no reason that would cause the Mergers to fail to
qualify as reorganization under Section 368(a) of the Code. Neither Parent nor
any of its affiliates has taken or agreed to take any action (other than actions
specifically contemplated by the Agreement) that would prevent the Mergers from
constituting a reorganization qualifying under the provisions of Section 368(a)
of the Code.
36
4.18. Compliance with Law. Except as specifically disclosed in the Parent
SEC Documents filed with the Commission prior to the date hereof, the Parent is
in material compliance with all Applicable Laws entered by any Governmental
Authority, relating to the Parent or its business or properties. Except as
specifically disclosed in the Parent SEC Documents filed with the Commission
prior to the date hereof, no material investigation or review by any
Governmental Authority with respect to the Parent is pending, or, to the
knowledge of the Parent, threatened, nor has any Governmental Authority
indicated in writing an intention to conduct the same.
4.19. Intellectual Property.
(a) The operation of the business of Parent and its subsidiaries
as such business is currently conducted, including (i) Parent's and its
subsidiaries' design, development, manufacture, distribution, reproduction,
marketing or sale of the products or services of Parent and its subsidiaries
(including Parent's products) and (ii) Parent's use of any product, device or
process, has not and does not infringe or misappropriate the Intellectual
Property (as defined in Section 3.10) of any third party or constitute unfair
competition or unfair trade practices under the laws of any jurisdiction.
(b) Neither the Parent nor any of its subsidiaries has, in the
past three (3) years, received notice from any third party that the operation of
the business of Parent or any of its subsidiaries or any act, product or service
of Parent or any of its subsidiaries, infringes or misappropriates the
Intellectual Property of any third party or constitutes unfair competition or
trade practices under the laws of any jurisdiction.
4.20. Certain Transactions. Neither Parent nor any of its subsidiaries is
a party to, or has any commitment to become a party to, any joint venture
agreement, partnership agreement or any Contract associated with off balance
sheet financing, including arrangements for the sale of receivables.
ARTICLE V
COVENANTS
5.1. Mutual Covenants.
(a) HSR Act Filings; Reasonable Efforts; Notification. (i) Each of
Parent and the Company shall (A) make or cause to be made the filings required
of such party or any of its subsidiaries or affiliates under the HSR Act with
respect to the transactions contemplated hereby as promptly as practicable and
in any event within five business days after the date of this Agreement, (B)
cooperate with the other party in connection with any such filing and in
connection with resolving any investigation or other inquiry of any such agency
or other Governmental Authority under any Foreign Antitrust Laws the parties
reasonably agree are applicable (the "Agreed Foreign Approvals") with respect to
any such filing or any such transaction. Each party shall use all reasonable
efforts to furnish to each other all information required for any application or
other filing to be made pursuant to any Applicable Laws in connection with the
Mergers and the other transactions contemplated by this Agreement. Each
37
party shall promptly inform the other party of any communication with, and any
proposed understanding, undertaking, or agreement with, any Governmental
Authority regarding any such filings or any such transaction. Neither party
shall independently participate in any formal meeting with any Governmental
Authority in respect of any such filings, investigation, or other inquiry
without giving the other party prior notice of the meeting and, to the extent
permitted by such Governmental Authority, the opportunity to attend and/or
participate. The parties hereto will consult and cooperate with one another in
connection with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to the HSR Act or other
Antitrust Laws.
(ii) Each of Parent and the Company shall use reasonable
efforts to resolve such objections, if any, as may be asserted by the Federal
Trade Commission or the Department of Justice (either, an "HSR Authority") or
any Governmental Authority with respect to the transactions contemplated by this
Agreement under the HSR Act, the Xxxxxxx Act, as amended, the Xxxxxxx Act, as
amended, the Federal Trade Commission Act, as amended, any Foreign Antitrust
Laws, and any other federal, state or foreign statutes, rules, regulations,
orders, decrees, administrative or judicial doctrines or other laws that are
designed to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade (collectively, "Antitrust Laws"). Parent
shall be entitled to direct any proceedings or negotiations with any
Governmental Authority relating to any of the foregoing described in this
paragraph (ii) or to the matters described in paragraph (i) of this Section
5.1(a), provided that it shall afford the Company a reasonable opportunity to
participate therein, and provided, further, that nothing in this sentence shall
affect the parties' rights and obligations contained in the third, fourth and
fifth sentences of Section 5.1(a)(i). Notwithstanding the foregoing or any other
provision of this Agreement, nothing in this Section 5.1(a) shall limit a
party's right to terminate this Agreement pursuant to Section 7.1, so long as
such party has up to then complied in all material respects with its obligations
under this Section 5.1(a). Each of Parent and the Company shall use all
reasonable efforts to take such action as may be required to cause the
expiration or early termination of the notice period under the HSR Act or other
Antitrust Laws with respect to such transactions as promptly as possible after
the execution of this Agreement.
(iii) Each of the parties shall use all reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Mergers and the other transactions contemplated by this
Agreement, including (A) the obtaining of all other necessary actions or
nonactions, waivers, consents, licenses, permits, authorizations, orders and
approvals from Governmental Authorities and the making of all other necessary
registrations and filings (including other filings with Governmental
Authorities, if any), subject to the limitations of Section 5.1(a)(ii), (B) the
obtaining of all consents, approvals or waivers from third parties related to or
required in connection with the Mergers that are necessary to consummate the
Mergers and the transactions contemplated by this Agreement or required to
prevent a Material Adverse Effect on Parent or the Company from occurring prior
to or after the Effective Time, (C) the preparation of the Proxy Statement, the
Prospectus and the Registration Statement, (D) the taking of all action
necessary to ensure that the Mergers constitute a reorganization within the
meaning of Section
38
368(a) of the Code and (E) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement.
(iv) Notwithstanding anything to the contrary in this
Agreement, neither Parent nor the Company shall be required to (i) hold separate
(including by trust or otherwise) or divest any of their respective businesses
or assets or (ii) waive any of the conditions to the Mergers set forth in
Article VI of this Agreement as they apply to such party.
(b) Tax Free Treatment. Each of the parties shall use all
reasonable efforts to cause the Mergers to constitute a "reorganization" under
Section 368(a) of the Code and to deliver the factual representations requested
by counsel described in Section 6.2(e) and 6.3(e) of this Agreement. Provided
that the Tax Free Valuation Test is met, then each of Parent, Merger Sub and LLC
shall report the Mergers as a reorganization within the meaning of Section
368(a) of the Code. Each of the parties shall provide to tax counsel certain
factual representations reasonably requested by such tax counsel in connection
with their provision of tax opinions to be included as exhibits to the
Registration Statement.
(c) Public Announcements. Each of the parties agrees that it shall
not, nor shall any of their respective affiliates, issue or cause the
publication of any press release or other public announcement with respect to
the Mergers, this Agreement or the other transactions contemplated hereby
without the prior approval of the other party, except such disclosure as may be
required by law or by any listing agreement with the Nasdaq Stock Market, Inc.,
or a national securities exchange; provided, if such disclosure is required by
law or any such listing agreement, such disclosure may not be made without prior
consultation of the other parties.
(d) Proxy Statement; Registration Statement. As promptly as
practicable after the execution of this Agreement, the Company shall prepare the
Proxy Statement, and the Company shall each file the Proxy Statement with the
Commission. Each of Parent and the Company shall, as promptly as practicable,
furnish the other party with all information concerning it as may be required
for inclusion in the Proxy Statement and the Registration Statement.
(e) Section 16 Matters. Prior to the Effective Time, Parent and
the Company shall take all such steps as may be required to cause the Mergers
and the transactions contemplated hereby, including any dispositions of Company
Common Stock (including derivative securities with respect to the Company Common
Stock) and acquisitions of Parent Common Stock (including derivative securities
with respect to Parent Common Stock) by each individual who is or will be
subject to the reporting requirements of Section 16(a) of the Exchange Act with
respect to the Company or Parent, as the case may be, to be exempt under Rule
16b-3 promulgated under the Exchange Act, such steps to be taken in accordance
with the No-Action Letter dated January 12, 1999 issued by the SEC regarding
such matters.
5.2. Covenants of Parent.
(a) Registration Statement. Parent shall prepare and file the
Registration Statement with the Commission as soon as is reasonably practicable
and shall use all reasonable
39
efforts to have the Registration Statement declared effective by the Commission
as promptly as practicable and to maintain the effectiveness of the Registration
Statement through the Effective Time. If, at any time prior to the Effective
Time, Parent shall obtain knowledge of any information pertaining to Parent that
would require an amendment or supplement to the Registration Statement, Parent
shall so advise the Company in writing and shall promptly furnish the Company
with all information as shall be required for such amendment or supplement and
shall promptly take such action as shall be required to amend or supplement the
Registration Statement. Parent shall take such other reasonable actions (other
than qualifying to do business in any jurisdiction in which it is not so
qualified) required to be taken under any applicable state securities laws in
connection with the issuance of shares of Parent Class A Common Stock in the
Mergers.
(b) Indemnification; Directors' and Officers' Insurance.
(i) From and after the Effective Time, Parent shall
indemnify, defend and hold harmless any person who is now, or has been at any
time prior to the date hereof, or who becomes prior to the Effective Time, a
director, officer, employee or agent (an "Indemnified Person") of the Company or
any of its subsidiaries against all losses, claims, damages, liabilities, costs
and expenses (including reasonable fees and expenses of legal counsel selected
by the Indemnified Person with the consent of Parent, which consent will not be
unreasonably withheld), judgments, fines and amounts paid in settlement in
connection with any actual or threatened action, suit, claim, proceeding or
investigation (each a "Claim") to the extent such Indemnified Person acted in
good faith and in a manner reasonably believed to be in the best interest of the
Company and, in the case of a criminal proceeding, to the extent such
Indemnified Person had no reasonable cause to believe such Indemnified Person's
conduct was unlawful and to the extent that any such Claim is based on, or
arises out of: (x) the fact that such Indemnified Person is or was a director or
officer of the Company or any of its subsidiaries or is or was serving at the
request of the Company or any of its subsidiaries as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise; or
(y) this Agreement or any of the transactions contemplated hereby, in each case
to the extent that any such Claim pertains to any matter or fact arising,
existing or occurring prior to or at the Effective Time, regardless of whether
such Claim is asserted or claimed prior to, at or after the Effective Time, to
the full extent permitted under the CGCL, the Company Certificate or the Company
Bylaws or any indemnification agreement in effect prior to the date hereof and
listed in Section 5.2(c) to the Company Disclosure Schedule (complete and
correct copies of which have been previously provided to Parent), including
provisions relating to advancement of expenses incurred in the defense of any
such Claim. Without limiting the generality of the preceding sentence, in the
event any Indemnified Person becomes involved in any Claim, after the Effective
Time, Parent shall periodically advance to such Indemnified Person its legal and
other expenses (including the cost of any investigation and preparation incurred
in connection therewith), subject to the provisions of paragraph (ii) of this
Section 5.2(b), and subject to the providing by such Indemnified Person of an
undertaking to reimburse all amounts so advanced in the event of a final
non-appealable determination by a court of competent jurisdiction that such
Indemnified Person is not entitled thereto.
40
(ii) The Indemnified Person shall control the defense of any
Claim with counsel selected by the Indemnified Person, which counsel shall be
reasonably acceptable to Parent, provided that Parent shall be permitted to
participate in the defense of such Claim at its own expense. Parent shall not be
obligated to pay the fees and expenses of more than one counsel for all
Indemnified Persons in any single Claim except to the extent that, in the
opinion of independent legal counsel selected by the Indemnified Person, which
counsel shall be reasonably acceptable to Parent, representation of two or more
of such Indemnified Persons would present a conflict of interest under
applicable standards of conduct in the legal profession. Parent shall not be
liable for any settlement effected without its written consent, which consent
shall not unreasonably be withheld.
(iii) Parent and the Company agree that all rights to
indemnification of liabilities, and all limitations with respect thereto,
existing in favor of any Indemnified Person, as provided in the Company
Certificate or the Company Bylaws and any indemnification agreement in effect at
the date hereof and listed in Section 5.2(b) to the Company Disclosure Schedule,
shall survive the Mergers and shall continue in full force and effect, without
any amendment thereto; provided, however, that in the event any Claim is
asserted or made, any determination required to be made with respect to whether
an Indemnified Person's conduct complies with the standards set forth under the
CGCL, the Company Certificate or the Company Bylaws or any such agreement, as
the case may be, shall be made as permitted by the CGCL; and provided further
that nothing in this Section 5.2(c) shall impair any rights or obligations of
any current or former director or officer of the Company or its subsidiaries,
including pursuant to the respective certificates of incorporation or bylaws of
Parent or the Company, or their respective subsidiaries, under the CGCL or
otherwise.
(iv) For a period of six years after the Effective Time,
Parent shall cause to be maintained in effect the current policies of directors'
and officers' and fiduciary liability insurance maintained by the Company
(provided that Parent may substitute therefor policies with terms and conditions
that are no less advantageous to former officers and directors of the Company)
only with respect to claims arising from facts or events which occurred at or
before the Effective Time; provided that Parent shall not be required to pay in
the aggregate for D&O Insurance in excess of 750% of the last annual premium
paid prior to the date hereof, but in such case shall purchase as much coverage
as possible for such amount.
(v) The provisions of this Section 5.2(b) are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Person, his or
her heirs and his or her personal representatives. Parent will not, nor will
Parent permit the Surviving Corporation to, merge or consolidate with any other
Person or sell all or substantially all of Parent's or such subsidiary's assets
unless Parent or the Surviving Corporation ensures that the surviving or
resulting entity assumes the obligations imposed by this Section 5.2(b).
(c) Executive Vice President of Parent. Simultaneously with the
execution of this Agreement and effective at the Effective Time, Parent
appointed Xxxxx XxXxxxx to serve as the Executive Vice President and General
Manager of the Standard Linear Products Group of Parent.
41
(d) Nasdaq Listing. Parent shall use all reasonable efforts to
cause the shares of Parent Class A Common Stock issuable pursuant to the Mergers
(including, without limitation, the shares of Parent Class A Common Stock
issuable upon the exercise of the Converted Options) to be approved for listing
on the Nasdaq National Market, subject to official notice of issuance, prior to
the Effective Time.
(e) Notification of Certain Matters. Parent shall give prompt
notice to the Company of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would likely cause any representation or
warranty by Parent contained in this Agreement to be untrue or inaccurate at or
prior to the Effective Time in any material respect and (ii) any material
failure of Parent to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this Section 5.2(e) shall not limit or
otherwise affect the remedies available hereunder to the Company.
(f) Employees and Employee Benefits. From and after the Effective
Time, except as otherwise provided in Section 2.4, Parent shall treat all
service for vesting and eligibility purposes by the Company Employees (as
defined below) with the Company and their respective predecessors prior to the
Effective Time, to the extent credited under the terms of the Company Plans
prior to the Effective Time, as service with Parent for eligibility and vesting
purposes under Parent's employee benefits plans and on or before the first
anniversary of the Effective Time, shall, to the extent permitted by applicable
law, provide Company Employees with benefits that are substantially similar in
the aggregate to those benefits provided to similarly situated Parent employees.
With respect to any medical or dental benefit plan in which the Company
Employees participate after the Effective Time, Parent shall use all reasonable
efforts to waive or cause to be waived any pre-existing condition exclusions and
actively-at-work requirements (provided, however, that no such waiver shall
apply to a pre-existing condition of any Company Employee who was, as of the
Effective Time, treated under a Company Plan as a pre-existing condition), and
shall provide that any covered expenses incurred on or before the Effective Time
by a Company Employee or a Company Employee's covered dependent shall be taken
into account for purposes of satisfying applicable deductible, coinsurance and
maximum out-of-pocket provisions after the Effective Time to the same extent as
such expenses are taken into account for the benefit of similarly situated
employees of Parent and subsidiaries of Parent. For purposes of this Section
5.2(f), "Company Employees" shall mean persons who are, as of the Effective
Time, employees of the Company.
(g) Subsequent Financial Statements. Parent shall provide to the
Company, sufficiently in advance so as to permit a reasonable period of time to
review and discuss the contents thereof, its financial results for any period
after the date of this Agreement prior to making such results publicly
available, it being understood that the Company shall have no liability by
reason of such review and discussion.
(h) Prohibition on Certain Transactions.
(i) Prior to the date of the Company Shareholders Meeting,
without the written consent of the Company, Parent shall not enter into a
definitive agreement, or
42
publicly announce an intention to enter into a definitive agreement for any
acquisition, disposition, merger or other business combination involving Parent
or any of its subsidiaries if such transaction would present a material risk of
making it materially more difficult to obtain any HSR approval or authorization
or Agreed Foreign Approvals.
(ii) Prior to the date of the Company Shareholders Meeting,
if Parent enters into a definitive agreement, or publicly announce an intention
to enter into a definitive agreement, without the written consent of the
Company, to acquire a business where a comparison of the most recent annual
financial statements of the business to be acquired and Parent's most recent
annual consolidated financial statements filed at or prior to the date of
acquisition indicates that the business would be a significant subsidiary
pursuant to the conditions specified in Section 1-02(w) of Regulation S-X
promulgated under the Exchange Act, then the Termination Date (as such term is
defined in Section 7.1(c)) shall be extended to December 31, 2004 applicable to
Parent's right to terminate this Agreement.
5.3. Covenants of the Company.
(a) The Company Shareholders Meeting. The Company shall take all
action in accordance with the federal securities laws, the CGCL and the Company
Certificate and the Company Bylaws necessary to convene a special meeting of the
shareholders of the Company entitled to vote (the "Company Shareholders
Meeting") to be held and completed on the earliest practicable date following
the effectiveness of the Registration Statement and mutually determined by the
parties, to consider and vote upon approval of the Mergers, this Agreement and
the transactions contemplated hereby. Subject to Section 5.3(d), neither the
Board of Directors of the Company nor any committee thereof shall withdraw,
amend or modify, or propose or resolve to withdraw, amend or modify, in a manner
adverse to Parent, the Company Board Recommendation. Nothing contained in this
Section 5.3(a) shall limit the Company's obligation to hold and convene the
Company Shareholders Meeting (regardless of whether the Company Board
Recommendation shall have been withdrawn, amended or modified).
(b) Proxy Statement; Registration Statement. The Company shall
cooperate with Parent in the preparation and filing of the Registration
Statement in a timely fashion and shall use all reasonable efforts to assist
Parent in having the Registration Statement declared effective by the Commission
as promptly as practicable and in maintaining the effectiveness of the
Registration Statement through the Effective Time. If, at any time prior to the
Effective Time, the Company shall obtain knowledge of any information pertaining
to the Company that would require any amendment or supplement to the
Registration Statement or the Proxy Statement, the Company shall so advise
Parent in writing and shall promptly furnish Parent with all information as
shall be required for such amendment or supplement and shall promptly take such
action as shall be required to amend or supplement the Registration Statement
and/or Proxy Statement. The Company shall use all reasonable efforts to mail at
the earliest practicable date to the shareholders of the Company the Proxy
Statement, which shall include all information required under Applicable Laws to
be furnished to the shareholders of the Company in connection with the Mergers
and the transactions contemplated thereby and shall include the written opinion
of Wachovia Securities described in Section 3.23, to the extent such opinion is
43
then in effect, and the Company Board Recommendation to the extent not
previously withdrawn in compliance with Section 5.3(d).
(c) Conduct of the Company's Operations. During the period from
the date of this Agreement to the Effective Time, except as otherwise expressly
contemplated by this Agreement and the transactions contemplated hereby or as
set forth in Section 5.3(c) to the Company Disclosure Schedule, without the
prior written consent of Parent (which consent shall not be unreasonably
withheld, delayed or conditioned), the Company shall conduct its operations in
the ordinary course, and shall use all reasonable efforts to maintain and
preserve its business organization and to retain the services of its officers
and key employees and maintain relationships with customers, suppliers, lessees,
licensees and other third parties to the end that its goodwill and ongoing
business shall not be impaired in any material respect. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the earlier of the termination of this Agreement or the Effective Time, the
Company shall not, except as otherwise expressly contemplated by this Agreement
and the transactions contemplated hereby or as set forth in Section 5.3(c) to
the Company Disclosure Schedule, without the prior written consent of Parent
(which consent shall not be unreasonably withheld, delayed or conditioned):
(i) do or effect any of the following actions with respect
to its securities: (A) adjust, split, combine or reclassify its capital stock,
(B) make, declare or pay any dividend or distribution on, or directly or
indirectly redeem, purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible into or exchangeable for any
shares of its capital stock, (C) grant any person any right or option to acquire
any shares of its capital stock, other than not in excess of 50,000 shares of
Company Common Stock per employee and 250,000 shares of Company Common Stock in
the aggregate, which options shall have an exercise price not less than the fair
market value of the Company Common Stock on the date of grant for grants to
newly hired or promoted employees and shares to be granted under the Company 423
Plan, (D) issue, deliver or sell or agree to issue, deliver or sell any
additional shares of its capital stock or any other securities or obligations
convertible into or exchangeable or exercisable for any shares of its capital
stock or such securities (except pursuant to (1) the exercise of Company Options
which are outstanding as of the date hereof or which are granted by the Company
prior to the Effective Time in compliance with the terms of this Agreement, (2)
the Company 423 Plan in accordance with Section 2.4, or (3) the Company's 401(k)
plan as in effect on the date hereof) or (E) enter into any agreement,
understanding or arrangement with respect to the sale, voting, registration or
repurchase of its capital stock;
(ii) directly or indirectly sell, transfer, lease, pledge,
mortgage, encumber or otherwise dispose of any of its property or assets other
than in the ordinary course of business;
(iii) amend the Company Certificate or the Company Bylaws;
(iv) merge or consolidate with any other person;
(v) acquire assets or capital stock of or other equity
interests in any other person;
44
(vi) incur, create, assume or otherwise become liable for any
indebtedness for borrowed money or, assume, guarantee, endorse or otherwise as
an accommodation become responsible or liable for the obligations of any other
individual, corporation or other entity;
(vii) enter into or modify any employment, severance, stay-put
termination or similar agreements or arrangements with, or grant any bonuses,
salary increases, severance or termination pay to, any officer, director,
consultant or employee other than ordinary course offer letters to newly hired
employees that provide for employment that is "at will" and which do not provide
any post termination benefits except as may be required by Applicable Laws, or
otherwise increase the compensation or benefits provided to any officer,
director, consultant or employee except as may be required by Applicable Laws;
(viii) enter into, adopt or amend any employee benefit or
similar plan except as may be required by Applicable Laws;
(ix) change any method or principle of accounting in a manner
that is inconsistent with past practice except to the extent required by
generally accepted accounting principles as advised by PricewaterhouseCoopers
LLP, or make any material Tax election (unless required by law or consistent
with prior practice) or settle any material Tax liability which is the subject
of dispute between the Company and a Governmental Authority;
(x) amend, terminate or modify any Contract listed in
Section 3.17 of the Company Disclosure Schedule or enter into any Contract that,
if it were in effect as of the date hereof, would be required to be listed in
Section 3.17 of the Company Disclosure Schedule;
(xi) enter into any confidentiality, standstill or
non-compete agreements or arrangements which after the Effective Time would
apply or purport to apply to Parent or any of its subsidiaries (other than the
Company or any of its subsidiaries);
(xii) incur or commit to any capital expenditures,
individually or in the aggregate, in excess of the amount set forth in Section
5.3(c) to the Company Disclosure Schedule;
(xiii) modify or waive any of its rights under any provision
of any confidentiality agreement or standstill agreement;
(xiv) enter into any license of technology outside the
Company's ordinary and usual course of business consistent with past practices;
(xv) enter into or carry out any other transaction other than
in the ordinary and usual course of business or other than as permitted pursuant
to the other clauses in this Section 5.3(c);
(xvi) permit or cause any subsidiary to do any of the
foregoing or agree or commit to do any of the foregoing; or
45
(xvii) agree in writing or otherwise to take any of the
foregoing actions.
(d) No Solicitation. (i) During the term of this Agreement, the
Company shall not, and shall not authorize or permit any of its subsidiaries or
any of its or its subsidiaries' directors, officers, agents or representatives,
and shall not authorize or knowingly permit any of its employees (who are not
officers), directly or indirectly, to (A) solicit, initiate, encourage or
facilitate, or furnish or disclose non-public information in furtherance of, any
inquiries or the making of any proposal with respect to any recapitalization,
merger, consolidation or other business combination involving the transfer of
more than 15% of the capital stock of the Company or more than 15% of the assets
of the Company and its subsidiaries, taken as a whole, or acquisition of 15% or
more of the capital stock from the Company (other than upon exercise of Company
Options that are outstanding as of the date hereof or that are granted in
accordance with this Agreement) or 15% or more of the assets of the Company and
its subsidiaries, taken as a whole, in a single transaction or a series of
transactions, or any acquisition by the Company of any material assets or
capital stock of any other person upon completion of which such person would
control 15% or more of the Company's capital stock or assets, or any combination
of the foregoing (a "Competing Transaction"), or (B) negotiate or otherwise
engage in discussions with any person (other than Parent or its respective
directors, officers, employees, agents and representatives) with respect to any
Competing Transaction or (C) enter into any agreement, arrangement or
understanding requiring the Company to abandon, terminate or fail to consummate
the Mergers or any other transaction contemplated by this Agreement; provided,
that, at any time before the approval of the Mergers by the shareholders of the
Company, the Company may furnish information to, and negotiate or otherwise
engage in discussions with, any person who delivers a bona fide written proposal
for a Competing Transaction that was not solicited or encouraged after the date
of this Agreement if and to the extent the Board of Directors of the Company
determines in good faith by a majority vote, after consultation with its outside
legal counsel, that failing to take such action would reasonably be likely to
result in a breach of the fiduciary duties of the Board of Directors of the
Company under Applicable Laws and determines in good faith by a majority vote,
after consulting with Wachovia Securities (or any other nationally recognized
investment banking firm), that such proposal for the Competing Transaction
constitutes or is reasonably likely to result in a Superior Proposal; provided,
further, that the Company prior to taking any such action notifies Parent not
less than two business days prior to taking such action (which notice shall
identify the person making the proposal and describe the terms thereof) and
receives from the person making the proposal an executed confidentiality
agreement containing terms at least as restrictive on the other person as the
terms of the Confidentiality Agreement (as defined in Section 5.3(f)) are to
Parent. The Company shall notify Parent of any proposal for a Competing
Transaction (including the material terms and conditions thereof and the
identity of the person making it) as promptly as practicable (but in no event
more than 24 hours) after its receipt thereof, and shall thereafter inform
Parent on a prompt basis of any material changes to the terms and conditions of
such proposal, and shall promptly give Parent a copy of any information
delivered to such person that has not previously been reviewed by Parent. The
Company shall immediately cease, and shall cause its and its subsidiaries'
respective officers, directors and representatives to cease, all existing
activities, discussions and negotiations with any parties conducted heretofore
with respect to any proposal for a Competing Transaction. A "Superior Proposal"
is a proposal for a Competing Transaction that is, if accepted, reasonably
likely to be consummated and is more favorable to the Company's
46
shareholders from a financial point of view than the transactions contemplated
by this Agreement (including any adjustment to the terms and conditions proposed
by Parent in response to such Competing Transaction).
(ii) Notwithstanding any other provision of this Section
5.3(d), in the event that before the approval of the Mergers by the shareholders
of the Company, the Board of Directors of the Company determines in good faith
by a majority vote, after consultation with outside legal counsel, that failure
to do so would constitute a breach of the fiduciary duties of the Company Board
of Directors under Applicable Laws, the Board of Directors of the Company may
(subject to this and the following sentences) (A) withdraw, amend or modify, in
a manner adverse to Parent, the Company Board Recommendation and (B) in the
event of any such withdrawal, amendment or modification in connection with a
Competing Transaction (after giving effect to any adjustment to the terms and
conditions proposed by Parent in response to such Competing Transaction) take
and disclose to the shareholders of the Company a position with respect to a
Superior Proposal by disclosing such withdrawn, amended or modified Company
Board Recommendation and, to the extent applicable, a recommendation with
respect to such Superior Proposal in connection with a tender or exchange offer
for the Company securities; provided that in the case of clause (B) the Company
has complied with its obligations under this Section 5.3(d) in connection with
such Superior Proposal and gives Parent two business days prior written notice
of its intention to do so. Consistent with the terms of this Section 5.3(d), the
Company may take any action to the extent necessary in order to comply with
Rules 14d-9 and 14e-2 promulgated under the Exchange Act. The Company Board of
Directors shall not, in connection with any such withdrawal, amendment or
modification of the Company Board Recommendation, take any action to change the
approval of the Board of Directors of the Company for purposes of causing any
state takeover statute or other state law to be applicable to the transactions
contemplated hereby, including this Agreement and the Mergers. If the reason for
the change in the Company Board Recommendation is the Company's receipt of a
proposal for a Competing Transaction that it has determined to be a Superior
Proposal, and within such two business day period, Parent proposes in writing to
modify the terms and conditions of this Agreement, the Company's Board of
Directors shall determine in good faith whether such terms as modified by Parent
are at least as favorable to the Company's shareholders from a financial point
of view as such Superior Proposal, and if the Company's Board of Directors
determines in good faith that such terms as modified are at least as favorable
as such Superior Proposal, the Board of Directors of the Company may not
withdraw, amend or modify, in a manner adverse to Parent, the Company Board
Recommendation.
(e) Affiliates of the Company. The Company shall use all
reasonable efforts to cause each person listed in Section 5.3(e) of the Company
Disclosure Schedule and each additional person, if any, who may be at the
Effective Time an "affiliate" of the Company for purposes of Rule 145 under the
Securities Act to execute and deliver to Parent no less than 30 days prior to
the date of the Company Stockholders Meeting, the written undertakings in the
form attached hereto as Exhibit B (the "Company Affiliate Letter"). The
foregoing notwithstanding, Parent shall be entitled to place legends as
specified in the Company Affiliate Letter on the certificates evidencing any of
the shares of Parent Class A Common Stock to be received by (i) any such
"affiliate" of the Company specified in such letter or (ii) any person Parent
reasonably identifies (by written notice to the Company) as being a person who
may be
47
deemed an "affiliate" for purposes of Rule 145 under the Securities Act,
pursuant to the terms of this Agreement, and to issue appropriate stop transfer
instructions to the transfer agent for the shares of Parent Class A Common
Stock, consistent with the terms of the Company Affiliate Letter, regardless of
whether such person has executed the Company Affiliate Letter and regardless of
whether such person's name appears on the letter to be delivered pursuant to the
preceding sentence.
(f) Access. The Company shall permit representatives of Parent to
have reasonable access at all reasonable times to the Company's premises,
properties, books, records, contracts, documents, customers and suppliers, and
shall cause its independent accountants to give Parent access to such
accountants' work papers; provided, however, that such access to any of the
Company's premises shall be subject to the Company's reasonable security
measures, operating procedures and insurance requirements and shall not include
the right to perform any "invasive" testing or any investigation that requires
the consent of any landlord or lender of landlord. Information obtained by
Parent pursuant to this Section 5.3(f) shall be subject to the provisions of the
Confidentiality Agreement by and between Parent and the Company, dated as of
March 8, 2004 (the "Confidentiality Agreement"), which agreement remains in full
force and effect. No investigation conducted pursuant to this Section 5.3(f) or
otherwise shall affect or be deemed to modify any representation or warranty
made in this Agreement. Notwithstanding the foregoing, the Company shall have no
obligation to provide Parent with information if the Company determines in good
faith, upon written advice of its outside antitrust counsel, that providing
information may violate any Applicable Laws.
(g) Notification of Certain Matters. The Company shall give prompt
notice to Parent of (i) the occurrence or non-occurrence of any event the
occurrence or non-occurrence of which would likely cause any representation or
warranty by the Company contained in this Agreement to be untrue or inaccurate
at or prior to the Effective Time in any material respect and (ii) any material
failure of the Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 5.3(g) shall not limit
or otherwise affect the remedies available hereunder to Parent.
(h) Subsequent Financial Statements. The Company shall provide to
Parent, sufficiently in advance so as to permit a reasonable period of time to
review and discuss the contents thereof, its financial results for any period
after the date of this Agreement prior to making such results publicly available
and prior to filing any Company SEC Documents after the date of this Agreement,
it being understood that Parent shall have no liability by reason of such review
and discussion.
(i) No Redemption of Rights Plan. Other than the amendment
described in Section 5.3(j) of the Company Disclosure Schedule, between the date
of this Agreement and the earlier of the Effective Time and the termination of
this Agreement, the Company shall not (a) redeem, amend or waive any provisions
of the Rights Plan (other than such amendments as are necessary to accommodate
this Agreement and the transactions contemplated hereby, but not with respect to
any Competing Transaction) or (b) implement or adopt any so-called "poison
pill," shareholder rights plan or other similar plan; provided, however, that
notwithstanding
48
anything to the contrary in this Agreement, the Company may (i) amend the Rights
Plan solely for the purpose of extending the Distribution Date thereunder to
that time immediately prior to the consummation of an unsolicited exchange or
tender offer by a third party and (ii) take any action in connection with the
Rights Plan that is required by order of a court of competent jurisdiction. The
Company shall contest any claim, action or proceeding, seeking to require the
Company to take action with respect to the Rights Plan.
ARTICLE VI
CONDITIONS
6.1. Conditions to the Obligations of Each Party. The obligations of the
Company, LLC, Merger Sub and Parent to consummate the Mergers shall be subject
to the satisfaction of the following conditions:
(a) This Agreement, the Mergers and the transactions contemplated
hereby shall have been approved and adopted by the shareholders of the Company
entitled to vote thereon in the manner required by all Applicable Laws.
(b) Any applicable waiting periods (and any extensions thereof,
including any written commitment to an HSR Authority to defer or delay
consummation of the Mergers notwithstanding expiration of such waiting periods)
under the HSR Act or any Agreed Foreign Approvals relating to the Mergers and
the transactions contemplated by this Agreement shall have expired or been
terminated.
(c) No provision of any Applicable Laws and no judgment,
injunction, order or decree shall prohibit or enjoin the consummation of the
Mergers or the transactions contemplated by this Agreement.
(d) There shall not be pending any action by any Governmental
Authority (i) challenging or seeking to restrain or prohibit the consummation of
the Mergers or any of the other transactions contemplated by this Agreement,
(ii) seeking to prohibit or limit the ownership or operation by Parent, the
Surviving Corporation or any of their respective subsidiaries of, or to compel
Parent, the Surviving Corporation or any of their respective subsidiaries to
dispose of or hold separate, any material portion of the business or assets of
Parent, the Company or any of their respective subsidiaries, as a result of the
Mergers or any of the other transactions contemplated by this Agreement or (iii)
seeking to prohibit Parent or any subsidiary of Parent from effectively
controlling the business or operations of the Company or the subsidiaries of the
Company.
(e) The Commission shall have declared the Registration Statement
effective under the Securities Act, and no stop order or similar restraining
order suspending the effectiveness of the Registration Statement shall be in
effect and no proceedings for such purpose shall be pending before or threatened
by the Commission or any state securities administrator.
49
6.2. Conditions to Obligations of the Company. The obligations of the
Company to consummate the Mergers and the transactions contemplated hereby shall
be subject to the fulfillment of the following conditions unless waived by the
Company:
(a) The representations and warranties of Parent, Merger Sub and
LLC set forth in Article IV (which for purposes of this paragraph (a) shall be
read as though none of them contained any Material Adverse Effect or materiality
qualifier) shall be true and correct in all respects on and as of the Closing
Date with the same effect as though made on and as of the Closing Date (except
for such representations and warranties made as of a specified date, the
accuracy of which will be determined as of the specified date), except where the
failure of the representations and warranties in the aggregate to be true and
correct in all respects would not have a Material Adverse Effect on Parent.
(b) Parent shall have performed in all material respects its
obligations and agreements and shall have complied in all material respects with
its covenants to be performed and complied with by it hereunder at or prior to
the Effective Time.
(c) Parent shall have furnished the Company with a certificate
dated the Closing Date signed on behalf of it by its President or any Vice
President to the effect that the conditions set forth in Sections 6.2(a) and (b)
have been satisfied.
(d) Since the date of this Agreement, there shall not have been
and be continuing a Material Adverse Effect on Parent.
(e) The Company shall have received an opinion from Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx, Professional Corporation dated the Closing Date, based upon
certain factual representations of the Company and Parent reasonably requested
by such counsel, to the effect that provided the Tax Free Valuation Test is
satisfied, the Mergers will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, provided,
however, that if Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx does not render such opinion,
this condition shall nonetheless be deemed to be satisfied with respect to the
Company if Dechert LLP, counsel to Parent renders such opinion to the Company.
6.3. Conditions to Obligations of Parent. The obligations of Parent to
consummate the Mergers and the other transactions contemplated hereby shall be
subject to the fulfillment of the following conditions unless waived by Parent:
(a) The representations and warranties of the Company set forth in
Article III (which for purposes of this paragraph (a) shall be read as though
none of them contained any Material Adverse Effect or materiality qualifier)
shall be true and correct in all respects on and as of the Closing Date with the
same effect as though made on and as of the Closing Date (except for such
representations and warranties made as of a specified date, the accuracy of
which will be determined as of the specified date), except for changes permitted
by Section 5.3(c) and except where the failure of the representations and
warranties in the aggregate to be true and correct in all respects would not
have a Material Adverse Effect on the Company.
50
(b) The Company shall have performed in all material respects its
obligations and agreements and shall have complied in all material respects with
its covenants to be performed and complied with by it hereunder at or prior to
the Effective Time.
(c) The Company shall have furnished Parent with a certificate
dated the Closing Date signed on its behalf by its President or any Vice
President to the effect that the conditions set forth in Sections 6.3(a) and (b)
have been satisfied.
(d) Since the date of this Agreement, there shall not have been
and be continuing a Material Adverse Effect on the Company.
(e) Parent shall have received an opinion from Dechert LLP, dated
the Closing Date, based upon certain factual representations of Parent and the
Company reasonably requested by such counsel, to the effect that provided the
Tax Free Valuation Test is satisfied, the Mergers will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code, provided, however, that if Dechert LLP does not render such opinion,
this condition shall nonetheless be deemed to be satisfied with respect to
Parent if Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, counsel to
the Company renders such opinion to Parent.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1. Termination. This Agreement may be terminated and the Mergers may be
abandoned at any time prior to the Effective Time (notwithstanding any approval
of this Agreement by the shareholders of the Company and the stockholders of
Parent):
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if a judgment, injunction,
order or decree of a court or other competent Governmental Authority enjoining
Parent or the Company from consummating the Mergers shall have been entered and
such judgment, injunction, order or decree shall have become final and
nonappealable;
(c) by either Parent or the Company if the Mergers shall not have
been consummated before September 30, 2004 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 7.1(c)
shall not be available to any party whose failure or whose affiliates' failure
to perform any covenant or obligation under this Agreement has been the
principal cause of or resulted in the failure of the Mergers to occur on or
before such date;
(d) by Parent or the Company if at the Company Shareholders
Meeting (including any adjournment or postponement thereof) the requisite vote
of the shareholders of the Company to approve the Mergers, this Agreement and
the transactions contemplated hereby shall not have been obtained; provided that
a party may not terminate this Agreement pursuant to this subsection if the
failure to obtain such shareholders approval has been principally caused by
51
or resulted from its or its affiliates' action or failure to act and such action
or failure to act constitutes a breach of this Agreement.
(e) by Parent or the Company if there shall have been a material
breach by the other of any of its representations, warranties, covenants or
agreements contained in this Agreement, which breach would result in the failure
to satisfy one or more of the conditions set forth in Section 6.2(a) or 6.2(b)
(in the case of a breach by Parent) or Section 6.3(a) or 6.3(b) (in the case of
a breach by the Company), and such breach, if it is of a nature that it may be
cured, shall not have been cured within 30 days after notice thereof shall have
been received by the party alleged to be in breach;
(f) by Parent if, before the Company Shareholders Meeting, (i) the
Board of Directors of the Company or any committee thereof shall have withdrawn
or modified, in a manner adverse to Parent, the Company Board Recommendation;
(ii) the Company shall have failed to include in the Proxy Statement the
recommendation of the Board of Directors of the Company in favor of the adoption
of this Agreement; (iii) the Board of Directors of the Company shall have failed
to reaffirm its recommendation in favor of the adoption and approval of this
Agreement and the approval of the Mergers within ten business days after Parent
requests in writing that such recommendation be reaffirmed; or (iv) the Board of
Directors of the Company or any committee thereof having authority to bind the
Board of Directors of the Company shall have approved or publicly recommended
any Competing Transaction; (v) a tender or exchange offer relating to securities
of the Company in excess of 20% of its outstanding voting securities shall have
been commenced by a person unaffiliated with Parent, and the Company shall not
have sent to its shareholders pursuant to Rule 14e-2 promulgated under the
Exchange Act, within ten business days after such tender or exchange offer is
first published, sent or given, a statement disclosing that the Company's Board
of Directors recommends rejection of such tender or exchange offer; or
(g) By the Company if the Board of Directors of the Company has
approved a Superior Proposal; provided that the Company may not terminate this
Agreement pursuant to this subsection unless it has complied with Section 5.3(d)
hereof.
7.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement, except for this Section 7.2,
the provisions of the second sentence of Section 5.3(f) and Sections 7.3, 8.7
and 8.10, shall become void and have no effect, without any liability on the
part of any party or its directors, officers, shareholders or stockholders.
Notwithstanding the foregoing, nothing in this Section 7.2 shall relieve any
party to this Agreement of liability for a breach of any provision of this
Agreement.
7.3. Termination Fee; Expenses.
(a) In the event that this Agreement is terminated (i) pursuant to
Section 7.1(f); (ii) pursuant to Section 7.1(g); or (iii) pursuant to Section
7.1(d) in the event (A) prior to the Company Shareholders Meeting, a Competing
Transaction shall have been made known to the Company, and the fact of such
Competing Transaction shall have become publicly known or shall have been made
directly to the shareholders of the Company generally, and such Competing
Transaction shall not have been withdrawn and (B) within 9 months of such
52
termination, the Company consummates a Company Acquisition (as defined below),
then in any such event, the Company shall pay to Parent a termination fee equal
to $15.8 million. "Company Acquisition" means (x) a merger, consolidation, share
exchange, business combination or similar transaction involving the Company as a
result of which the voting securities of the Company owned by the shareholders
of the Company immediately prior to consummation of such transaction are
converted into voting securities in the aggregate that do not constitute a
majority of voting securities of the entity surviving or resulting from such
transaction (or the ultimate parent entity thereof), (y) a sale, lease,
exchange, transfer or other disposition of a majority of the assets of the
Company and its subsidiaries, taken as a whole, in a single transaction or
series of transactions or (z) the acquisition, by a person (other than Parent or
any affiliate thereof or any person with respect to which the voting securities
of the Company immediately prior to such acquisition shall have been converted
into a majority of such person's voting securities immediately after such
acquisition) or group (as such term is defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) of beneficial ownership
of more than the a majority of the Company Common Stock, in either case whether
by tender or exchange offer or otherwise. For purposes of this Section 7.3(a),
the term "Competing Transaction" shall be deemed to substitute "a majority" in
place of each instance of the term "15%" therein in the case of clause (y) and
"85%" therein in the case of clauses (x) and (z).
(b) The amounts payable by the Company pursuant to this Section
7.3 shall be paid pursuant to this Section 7.3 regardless of any alleged breach,
other than a willful or intentional breach, by Parent of its obligations
hereunder; provided, that no payment made by the Company pursuant to this
Section 7.3 shall operate or be construed as a waiver by the Company of any
breach of this Agreement by Parent, Merger Sub or LLC or of any rights of the
Company in respect thereof.
(c) Any payment required to be made pursuant to paragraph (a) of
this Section 7.3 shall be made to the Parent not later than two business days
after delivery to the Company of notice of demand for payment, or, if earlier,
upon the consummation of a Company Acquisition if such payment is required
pursuant to Section 7.3(a)(ii) or 7.3(a)(iii), and shall be made by wire
transfer of immediately available funds to an account designated by Parent.
7.4. Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after adoption of this Agreement by stockholders of Parent or the
Company, but after any such approval, no amendment shall be made which by law
requires further approval or authorization by the stockholders of Parent or the
Company without such further approval or authorization. Notwithstanding the
foregoing, this Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
7.5. Extension; Waiver. At any time prior to the Effective Time, Parent
(with respect to the Company) and the Company (with respect to Parent) by action
taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of such party, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any
53
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
ARTICLE VIII
MISCELLANEOUS
8.1. No Survival of Representations and Warranties. The representations
and warranties made herein by the parties hereto shall not survive the Effective
Time. This Section 8.1 shall not limit any covenant or agreement of the parties
hereto which by its terms contemplates performance after the Effective Time or
after the termination of this Agreement.
8.2. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed) or dispatched by a nationally recognized overnight courier service to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent:
Intersil Corporation
000 Xxxxx Xxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn.: Xxxxxx Xxxxx, Esq.
Fax: 000-000-0000
with a copy to:
Dechert LLP
0000 Xxxx Xxxxxx
0000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attn.: Xxxxxxxxxxx X. Xxxxxx, Esq.
Fax: 000-000-0000
(b) if to Merger Sub:
New Castle Merger Sub Corp.
c/o Intersil Corporation
000 Xxxxx Xxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn.: Xxxxxx Xxxxx, Esq.
Fax: 000-000-0000
with a copy to:
54
Dechert LLP
0000 Xxxx Xxxxxx
0000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attn.: Xxxxxxxxxxx X. Xxxxxx, Esq.
Fax: 000-000-0000
(c) if to LLC:
New Castle Sub LLC
c/o Intersil Corporation
000 Xxxxx Xxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn.: Xxxxxx Xxxxx, Esq.
Fax: 000-000-0000
with a copy to:
Dechert LLP
0000 Xxxx Xxxxxx
0000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attn.: Xxxxxxxxxxx X. Xxxxxx, Esq.
Fax: 000-000-0000
(d) if to the Company:
Xicor, Inc.
000 Xxxxxx Xxxxx Xxxx
Xxxx 0
Xxxxxxxx, XX 00000
Attn.: Xxxxx XxXxxxx
Fax: 000-000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, PC
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attn.: Xxx X. Xxxxxxxx, Esq.
Fax: 000-000-0000
8.3. Interpretation; Definitions. (a) When a reference is made in this
Agreement to an Article or Section, such reference shall be to an Article or
Section of this Agreement unless otherwise indicated. The headings and the table
of contents contained in this Agreement are for
55
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(b) For the purposes of any provision of this Agreement, a
"Material Adverse Effect" with respect to any party shall be deemed to occur if
one or more events, changes or effects applicable to such provision that
together have occurred which would reasonably be expected to have a material
adverse effect on (i) the business, net assets, results of operations or
financial condition of such party and its subsidiaries taken as a whole or (ii)
the ability of such party to consummate the transactions contemplated by this
Agreement; provided, however, that none of the following shall be deemed, singly
or in the aggregate, to constitute, or be considered in determining whether
there exists, a Material Adverse Effect: (a) any failure by the party to meet
projections, forecasts or analyst expectations for any period ending (or for
which revenues or earnings are released) on or after the date of this Agreement,
in each case in and of themselves and not intending to exclude from the
definition of Material Adverse Effect any underlying reason for such failure;
(b) any decrease in the market price of shares of Company Common Stock in the
case of the Company or Parent Class A Common Stock in the case of Parent (but
not any change or effect underlying such decrease to the extent such change or
effect would otherwise constitute a Material Adverse Effect on such party); or
(c) any event, change or effect to the extent primarily resulting from or
relating to any of the following: (i) the announcement of the transactions
contemplated by, or compliance with the terms of, this Agreement (including any
cancellations of or delays in customer orders, any reduction in sales, any
disruption in supplier, distributor, partner or similar relationships or any
loss of employees); (ii) conditions, events or circumstances affecting the
industries in which the entity participates, the U.S. economy as a whole or
foreign economies in any locations where the entity has material operations or
sales except if such entity is adversely affected in a materially
disproportionate manner as compared to similarly situated entities; (iii) any
change in accounting requirements or principles or any change in applicable
laws, rules or regulations in each case in and of themselves and not intending
to exclude from the definition of Material Adverse Effect any underlying issues
of the Company; (iv) any litigation brought or threatened by stockholders of the
entity (whether on behalf of the entity or otherwise) in respect of the
announcement of this Agreement or the transactions contemplated thereby,
including consummation of the Mergers; (v) in the case of the Company, any
actions taken or announced by Parent or taken or announced by the Company at the
prior written request or prior written direction of Parent, or any inaction or
failures to act by Parent or by the Company at the prior written request or
prior written direction of Parent; or (vi) in the case of the Company, the
failure by Parent to comply with the terms of or to take actions required by
this Agreement.
(c) For purposes of this Agreement, a "subsidiary" of any person
means another person, an amount of the voting securities or other voting
ownership or voting partnership interests (or, in the case of a trust,
beneficial interests) of which is sufficient to elect at least a majority of its
Board of Directors or other governing body (or, if there are no such voting
securities or interests, 50% or more of the equity interests of which is owned
directly or indirectly by such first person).
56
(d) For purposes of this Agreement, "knowledge" of a party shall
mean the actual knowledge after reasonable inquiry of all elected officers of
such party with a title of vice president or higher.
(e) For purposes of this Agreement, references to any financial
statements or any component thereof shall be deemed to include the footnotes
thereto.
(f) For purposes of this Agreement, the term "including" shall
mean "including, without limitation."
8.4. Counterparts. This Agreement may be executed in counterparts, which
together shall constitute one and the same Agreement. The parties may execute
more than one copy of the Agreement, each of which shall constitute an original.
8.5. Entire Agreement. This Agreement (including the documents and the
instruments referred to herein), the Voting Agreements, and the Confidentiality
Agreement (other than the paragraph relating to the Company's exclusivity
obligations thereunder, which paragraph is superseded in its entirety hereby),
constitute the entire agreement among the parties and supersede all prior
agreements and understandings, agreements or representations by or among the
parties, written and oral, with respect to the subject matter hereof and
thereof.
8.6. Third Party Beneficiaries. Except for the agreement set forth in
Section 5.2(c), nothing in this Agreement, express or implied, is intended or
shall be construed to create any third party beneficiaries.
8.7. Governing Law. This Agreement shall be governed by the laws of the
State of California, without giving effect to the conflict of laws principles
thereof. Each party hereby irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the courts of the State of California and of the
United States of America, in each case located in the State of California, for
any action (and agrees not to commence any action except in any such court), and
further agrees that service of process, summons, notice or document by U.S.
registered mail to its respective address set forth in Section 8.2 shall be
effective service of process for any action brought against it in any such
court. Each party hereby irrevocably and unconditionally waives any objection to
the laying of venue of any action in the courts of the State of California or of
the United States of America, in each case located in the State of California,
and hereby further irrevocably and unconditionally waives and agrees not to
plead or claim in any such court that any action brought in any such court has
been brought in an inconvenient forum.
8.8. Specific Performance. The transactions contemplated by this
Agreement are unique. Accordingly, each of the parties acknowledges and agrees
that, in addition to all other remedies to which it may be entitled, each of the
parties hereto is entitled to a decree of specific performance and injunctive
and other equitable relief, and the parties hereto agree to waive any
requirement for the securing or posting of any bond in connection with the
obtaining thereof.
8.9. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties; provided, that Parent, Merger
57
Sub or LLC may assign any of Merger Sub's or LLC's rights and obligation under
this Agreement to any other wholly-owned direct or indirect subsidiary of Parent
upon notice to the Company. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
8.10. Expenses. Subject to the provisions of Section 7.3, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses.
8.11. Disclosure Schedules. The Company Disclosure Schedule and the Parent
Disclosure Schedule shall be arranged in separate parts corresponding to the
numbered and lettered Sections contained in this Agreement. The information
disclosed in any numbered or lettered part shall be deemed to relate to,
supplement and qualify: (i) the particular representation, warranty or other
provision set forth in the corresponding numbered or lettered Section of this
Agreement, (ii) any representation, warranty or other provision cross-referenced
to such numbered or lettered part and (iii) any other provision of this
Agreement to which such disclosed information is relevant but only if the
relevance of such disclosure to such other provision of this Agreement is
readily apparent from the actual text of such disclosure.
[Signature Page for Merger Agreement to Follow]
58
IN WITNESS WHEREOF, Parent, Merger Sub, LLC and the Company have
signed this Agreement as of the date first written above.
INTERSIL CORPORATION
By:
-------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President and Chief Executive
Officer
NEW CASTLE MERGER SUB CORP.
By:
-------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President
NEW CASTLE SUB LLC
By: Intersil Corporation, as the sole member
By:
-----------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President and Chief Executive
Officer
XICOR, INC.
By:
-------------------------------------
Name: Xxxxx XxXxxxx
Title: President and Chief Executive
Officer
