AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER dated as of March 19, 1999 (this
"AGREEMENT"), is entered into by and among FLIR Systems, Inc., an Oregon
corporation ("ACQUIROR"), Irabu Acquisition Corporation, a Delaware corporation
and a wholly-owned subsidiary of Acquiror ("SUB"), Inframetrics, Inc., a
Delaware corporation ("TARGET") and the shareholders of Target listed on Exhibit
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A hereto (each a "TARGET SHAREHOLDER" and together, the "TARGET SHAREHOLDERS").
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RECITALS:
A. The Boards of Directors of Acquiror, Sub and Target deem it
advisable and in the best interests of each corporation and their respective
shareholders that Acquiror and Target combine in order to advance the long-term
business interests of Acquiror and Target;
B. The combination of Acquiror and Target shall be effected by the
terms of this Agreement through a transaction in which Sub will merge with and
into Target, Target will become a wholly-owned subsidiary of Acquiror and the
shareholders of Target will become shareholders of Acquiror (the "MERGER");
C. For Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "CODE");
D. For accounting purposes, it is intended that the Merger shall be
accounted for as a pooling of interests transaction;
E. As a condition and inducement to Acquiror's willingness to enter
into this Agreement, certain employees of Target who are also shareholders of
Target (including Xxx X. Xxxxx, Xxxxxx X. Xxxxx, Xxxxxx Xxxxxxxxx and Xxxxxx
Xxxxxxxxxx) have, concurrently with the execution of this Agreement each
executed and delivered an Employment Agreement in the form attached hereto as
Exhibit B (the "EMPLOYMENT AGREEMENTS"), which agreements shall only become
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effective at the Effective Time (as defined in Section 1.1 below).
F. As a further condition and inducement to Acquiror's willingness to
enter into this Agreement, each Target Shareholder has executed and delivered to
Acquiror a Shareholders Agreement in the form attached hereto as Exhibit C (the
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"SHAREHOLDERS AGREEMENTS").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
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ARTICLE 1
THE MERGER
Section 1.1 Effective Time of the Merger. Subject to the provisions of
this Agreement, an agreement of merger (the "AGREEMENT OF MERGER") in such
mutually acceptable form as is required by the relevant provisions of the
Delaware General Corporation Law ("DELAWARE LAW") shall be duly executed and
delivered by the parties hereto and thereafter delivered to the Secretary of
State of the State of Delaware for filing on the Closing Date (as defined in
Section 1.2). The Merger shall become effective upon the due and valid filing of
the Agreement of Merger with the Secretary of State of the State of Delaware or
at such time thereafter as is provided in the Agreement of Merger (the
"EFFECTIVE TIME").
Section 1.2 Closing. The closing of the Merger (the "CLOSING") will take
place at 10:00 a.m., Oregon time, on a date to be specified by Acquiror and
Target, which shall be no later than the sixth business day after satisfaction
or waiver of the latest to occur of the conditions set forth in Article 8 (other
than the delivery of the officers certificates and opinions of counsel and other
documents referred to therein) (the "CLOSING DATE"), at the offices of Xxxx
Xxxxx LLP, 000 X.X. Xxxxxxxx, Xxxxx 0000, Xxxxxxxx, Xxxxxx unless another date
or place is agreed to in writing by Acquiror and Target.
Section 1.3 Effects of the Merger.
(a) At the Effective Time (i) the separate existence of Sub shall
cease and Sub shall be merged with and into Target (Sub and Target are sometimes
referred to below as the "CONSTITUENT CORPORATIONS" and Target following
consummation of the Merger is sometimes referred to below as the "SURVIVING
CORPORATION"), (ii) the Certificate of Incorporation of Sub shall be the
Certificate of Incorporation of the Surviving Corporation, except that Article 1
thereof shall be amended to read: "The name of the corporation is Inframetrics,
Inc.," and (iii) the Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation.
(b) At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of Delaware Law. Without limiting the
generality of the foregoing, at and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises of a
public as well as of a private nature, and be subject to all the restrictions,
disabilities and duties of each of the Constituent Corporations.
Section 1.4 Directors and Officers. The directors of Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, and the officers of Sub
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed.
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ARTICLE 2
CONVERSION OF SECURITIES
Section 2.1 Conversion of Capital Stock.
(a) Conversion of Target Class B Stock. Immediately prior to the
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Effective Time, each Target Shareholder that holds of record any shares of Class
B Stock, $.01 par value, of Target ("TARGET CLASS B STOCK") shall be deemed to
have delivered a written election to Target pursuant to Article IV Section A.6
of Target's Amended and Restated Certificate of Incorporation ("TARGET
CERTIFICATE OF INCORPORATION") electing to convert the shares of Target Class B
Stock held by such Target Shareholder into shares of Redeemable Preferred Stock,
$.01 par value, of Target ("TARGET REDEEMABLE PREFERRED STOCK") and shares of
Common Stock, $.01 par value, of Target ("TARGET COMMON STOCK"). Without any
further action on the part of any holder of Target Class B Stock, each share of
Target Class B Stock shall be deemed to have been converted into (i) the number
of shares of Target Redeemable Preferred Stock which results from dividing the
Class B Liquidation Preference Amount (as defined below) by the Redeemable Base
Liquidation Amount (as defined below) and (ii) ten (10) shares of Target Common
Stock (in the case of both (i) and (ii), subject to any applicable adjustments
from the date hereof through the Closing Date in accordance with the Target
Certificate of Incorporation). The shares of Target Common Stock deemed to be
issued upon the conversion of the Target Class B Stock are referred to herein as
the "COMMON CONVERSION SHARES." "CLASS B LIQUIDATION PREFERENCE AMOUNT" means
$147.06 plus cumulative dividends at the rate per annum of ten and three-fourths
percent (10.75%) from September 30, 1996 through the Closing Date. "REDEEMABLE
BASE LIQUIDATION AMOUNT" means $147.06.
(b) At the Effective Time, by virtue of the Merger and without any
action on the part of the holder of any shares of Target Class B Stock, Target
Common Stock, Target Redeemable Preferred Stock or capital stock of Sub or
Acquiror:
(i) Capital Stock of Sub. Each issued and outstanding share of
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the capital stock of Sub shall be converted into and become one fully paid
and nonassessable share of Common Stock, $.01 par value, of the Surviving
Corporation.
(ii) Cancellation of Acquiror-Owned and Target-Owned Stock. All
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shares of Target Common Stock, Target Class B Stock or Target Redeemable
Preferred Stock that are owned by Acquiror, Sub, Target or any other direct
or indirect Subsidiary (as defined below) of Acquiror or Target shall be
canceled and retired and shall cease to exist and no stock of Acquiror or
other consideration shall be delivered in exchange. All shares of Common
Stock, $.01 par value, of Acquiror ("ACQUIROR COMMON STOCK") owned by
Target shall remain unaffected by the Merger. As used in this Agreement,
the word "SUBSIDIARY" means, with respect to any other party, any
corporation or other organization, whether incorporated or unincorporated,
of which (i)
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such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by
such party or any Subsidiary of such party do not have a majority of the
voting interest in such partnership) or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power
to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization or a
majority of the profit interests in such other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries.
(c) Exchange Ratio.
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(i) Subject to Sections 2.2 and 2.4, each share of Target
Redeemable Preferred Stock deemed to be issued and outstanding by virtue of
the operation of Section 2.1(a) (other than shares to be canceled in
accordance with Section 2.1(b) and any Dissenting Shares as defined in and
to the extent provided in Section 2.3) shall be converted into the right to
receive a number of fully paid and nonassessable shares of Acquiror Common
Stock equal to the "Redeemable Preferred Exchange Ratio." The "REDEEMABLE
PREFERRED EXCHANGE RATIO" shall be determined by dividing $147.06 by the
average of the closing sale prices of Acquiror Common Stock on the Nasdaq
Stock Market for each of the 20 trading days ending on the sixth trading
day immediately preceding the Closing Date (the "CLOSING STOCK PRICE").
The shares of Acquiror Common Stock into which such shares of Target
Redeemable Preferred Stock are converted are referred to herein as the
"REDEEMABLE PREFERRED CONVERSION SHARES."
(ii) Subject to Sections 2.2 and 2.4, each issued and outstanding
share of Target Common Stock, including the Common Conversion Shares,
(other than shares to be canceled in accordance with Section 2.1(b) and any
Dissenting Shares as defined in and to the extent provided in Section 2.3)
shall be converted into the right to receive a number of fully paid and
nonassessable shares of Acquiror Common Stock equal to the "Common Stock
Exchange Ratio." The "COMMON STOCK EXCHANGE RATIO" shall be determined by
dividing the difference between (i) 2,300,000 and (ii) the number of
Redeemable Preferred Conversion Shares, by the sum of (x) the total number
of shares of Target Common Stock issued and outstanding at the Effective
Time, plus (y) the Common Conversion Shares, plus (z) the total number of
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shares of Target Common Stock issuable upon exercise of Target Options (as
defined in Section 2.1(d)) outstanding at the Effective Time, whether
vested or unvested.
(iii) All shares of Target Common Stock and Target Redeemable
Preferred Stock, when converted as provided in this Section 2.1(c), shall
no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing any
such shares shall cease to have any rights with respect thereto, except the
right to receive the shares of Acquiror Common Stock and
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any cash in lieu of fractional shares of Acquiror Common Stock to be issued
or paid in consideration therefor upon the surrender of such certificate in
accordance with Section 2.4, without interest.
(iv) Subject to Sections 9.1(f) and (g), the Common Stock
Exchange Ratio shall not change as a result of fluctuations in the market
price of Acquiror Common Stock between the date of this Agreement and the
Effective Time. If, between the date of this Agreement and the Effective
Time, the outstanding shares of Acquiror Common Stock shall have been
changed into a different number of shares or a different class by reason of
any reclassification, split-up, stock dividend or stock combination, then
the Exchange Ratio shall be correspondingly adjusted.
(d) Target Stock Options. At the Effective Time, all then outstanding
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options, whether vested or unvested, ("TARGET OPTIONS") to purchase Target
Common Stock issued under Target's Stock Option Plans (the "TARGET OPTION PLAN")
will be assumed by Acquiror in accordance with Section 6.5. All of the Target
Options are listed in Section 3.5 of the Target Disclosure Schedule attached
hereto.
Section 2.2 Escrow Agreement. At the Effective Time or such later time as
determined in accordance with Section 2.3(b), Acquiror will deposit in escrow
certificates representing ten percent of the number of shares of Acquiror Common
Stock issuable to the Target Shareholders at the Effective Time. Such shares
shall be held in escrow on behalf of the Target Shareholders entitled to receive
shares of Acquiror Common Stock at the Effective Time, on a pro rata basis, in
accordance with each such Target Shareholder's percentage ownership ("PRO RATA
PORTION") of Acquiror Common Stock to be issued in the Merger pursuant to
Section 2.1(c). Such shares (the "ESCROW SHARES") shall be held by the escrow
agent (the "ESCROW AGENT") as security for the indemnification obligations under
Article 10 and pursuant to the provisions of an escrow agreement (the "ESCROW
AGREEMENT") to be executed pursuant to Section 7.6.
Section 2.3 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Target Common Stock or Target Class B Stock held by a holder who
has exercised such holder's appraisal rights in accordance with Section 262 of
Delaware Law, and who, as of the Effective Time, has not effectively withdrawn
or lost such appraisal rights ("DISSENTING SHARES"), shall not be converted into
or represent a right to receive Acquiror Common Stock pursuant to Section 2.1,
but the holder of the Dissenting Shares shall only be entitled to such rights as
are granted by Section 262 of Delaware Law.
(b) Notwithstanding the provisions of Section 2.3(a), if any holder of
shares of Target Common Stock or Target Class B Stock who asserts his appraisal
rights with respect to such shares in accordance with Section 262 of Delaware
law shall effectively withdraw or lose (through failure to perfect or otherwise)
his rights to receive payment for the fair market value
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of such shares under Delaware Law, then, as of the later of the Effective Time
or the occurrence of such event, such holder's shares shall automatically be
converted into and represent only the right to receive Acquiror Common Stock and
payment for fractional shares as provided in Sections 2.1(c) and 2.6, without
interest, upon surrender of the certificate or certificates representing such
shares; provided that if such holder effectively withdraws or loses his
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appraisal rights after the Effective Time, then, at such time Acquiror will
deposit in escrow certificates representing such holder's Pro Rata Portion of
the Escrow Shares.
(c) Target shall give Acquiror (i) prompt notice of any written
demands for appraisal with respect to any shares of capital stock of Target
pursuant to Section 262 of Delaware Law, withdrawals of such demands, and any
other instruments concerning appraisal served pursuant to Delaware Law and
received by the Target and (ii) the opportunity to participate in all
negotiations and proceedings with respect to appraisal rights under Delaware
Law. Target shall not, except with the prior written consent of Acquiror,
voluntarily make any payment with respect to any appraisal rights with respect
to Target Common Stock or Target Class B Stock or offer to settle or settle any
such demands.
Section 2.4 Exchange of Certificates.
(a) From and after the Effective Time, each holder of an outstanding
certificate or certificates ("CERTIFICATES") which represented shares of Target
Common Stock or Target Class B Stock immediately prior to the Effective Time
shall have the right to surrender each Certificate to Acquiror, and receive
promptly in exchange for all Certificates surrendered by such holder a
certificate representing the number of whole shares of Acquiror Common Stock
(other than the Escrow Shares, which shall be deposited as provided by Section
2.2 of this Agreement) into which the Target Common Stock or Target Class B
Stock evidenced by the Certificates so surrendered shall have been converted
pursuant to the provisions of Article 2 of this Agreement. The surrender of
Certificates shall be accompanied by duly completed and executed Letters of
Transmittal in such form as may be mutually agreed by Acquiror and Target.
Until surrendered, each outstanding Certificate which prior to the Effective
Time represented shares of Target Common Stock or Target Class B Stock shall be
deemed for all corporate purposes after the Effective Time to evidence ownership
of the number of whole shares of Acquiror Common Stock into which the shares of
Target Common Stock or Target Class B Stock have been converted but shall,
subject to applicable appraisal rights under Delaware Law and Section 2.3, have
no other rights. Subject to appraisal rights under Delaware Law and Section
2.3, from and after the Effective Time, the holders of shares of Target Common
Stock or Target Class B Stock shall cease to have any rights in respect of such
shares and their rights shall be solely in respect of the Acquiror Common Stock
into which such shares of Target Common Stock or Target Class B Stock have been
converted. From and after the Effective Time, there shall be no further
registration of transfers on the records of Target of shares of Target Common
Stock or Target Class B Stock outstanding immediately prior to the Effective
Time.
(b) If any shares of Acquiror Common Stock are to be issued in the
name of a person other than the person in whose name the Certificate(s)
surrendered in exchange therefor
6
is registered, it shall be a condition to the issuance of such shares that (i)
the Certificate(s) so surrendered shall be transferable, and shall be properly
assigned, endorsed or accompanied by appropriate stock powers, (ii) such
transfer is permitted by applicable law and (iii) the person requesting such
transfer shall pay Acquiror, or its exchange agent, any transfer or other taxes
payable by reason of the foregoing or establish to the satisfaction of Acquiror
that such taxes have been paid or are not required to be paid.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed, Acquiror shall issue in
exchange for such lost, stolen or destroyed Certificate the shares of Acquiror
Common Stock issuable in exchange therefor pursuant to the provisions of this
Article 2. The Board of Directors of Acquiror may in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificate to provide to Acquiror an indemnity agreement
against any claim that may be made against Acquiror with respect to the
Certificate alleged to have been lost, stolen or destroyed.
(d) Neither Acquiror or Target shall be liable to a holder of shares
of Target Common Stock, Target Redeemable Preferred Stock or Target Class B
Stock for shares of Acquiror Common Stock issuable to such holder pursuant to
the provisions of this Article 2 that are delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
Section 2.5 Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to Acquiror Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to the
shares of Acquiror Common Stock represented thereby and no cash payment in lieu
of fractional shares shall be paid to any such holder pursuant to Section 2.6
below until the holder of record of such Certificate shall surrender such
Certificate or applicable documents in lieu thereof pursuant to Section 2.4(c).
Subject to the effect of applicable laws, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of Acquiror Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of Acquiror Common Stock to which such
holder is entitled pursuant to Section 2.6 below and the amount of dividends or
other distributions with a record date after the Effective Time previously paid
with respect to such whole shares of Acquiror Common Stock, and (ii) at the
appropriate payment date, 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 Acquiror
Common Stock.
Section 2.6 No Fractional Shares. No fractional shares of Acquiror Common
Stock shall be issued in the Merger. In lieu of the issuance of any such
fractional shares, Acquiror shall pay to each holder of shares of Target Common
Stock or Target Class B Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Acquiror Common
Stock (after taking into account all Certificates delivered by such holder)
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an amount in cash (rounded to the nearest whole cent and without interest)
determined by multiplying (i) the fraction of a share of Acquiror Common Stock
which such holder would otherwise be entitled to receive by (ii) the Closing
Stock Price.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF TARGET
Section 3.1 Making of Representations and Warranties. As a material
inducement to Acquiror and Sub to enter into this Agreement and consummate the
transactions contemplated hereby, Target represents and warrants to Acquiror and
Sub, except as disclosed in the disclosure schedule delivered to Acquiror
pursuant to this Agreement (the "TARGET DISCLOSURE SCHEDULE"), arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained in
this Article 3, as follows:
Section 3.2 Organization and Corporate Power. Target is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware, and is duly qualified or registered to do business as a foreign
corporation (a) in each jurisdiction listed in Section 3.2 of the Target
Disclosure Schedule and (b) in each jurisdiction in which the failure to be so
qualified or registered could result in a material adverse effect on the
business as presently conducted, assets (including intangible assets),
liabilities, financial condition, property, or results of operations of Target
or any Target Subsidiary (as defined below) in an amount in excess of $100,000
(a "TARGET MATERIAL ADVERSE EFFECT"). Each Subsidiary of Target (each, a "TARGET
SUBSIDIARY") is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization listed in Section 3.2 of the Target
Disclosure Schedule, and is duly qualified or registered to do business as a
foreign corporation (a) in each jurisdiction listed in Section 3.2 of the Target
Disclosure Schedule and (b) in each jurisdiction in which the failure to be so
qualified or registered would have a Target Material Adverse Effect. Section 3.2
of the Target Disclosure Schedule contains a true and complete listing of the
locations of all sales offices, manufacturing facilities, and any other offices
or facilities of Target and each Target Subsidiary and a true and complete list
of all states and other jurisdictions in which Target and each Target Subsidiary
maintains any employees. Each of Target and the Target Subsidiaries has all
required corporate power and authority to carry on its business as presently
conducted, and Target has all required corporate power and authority to enter
into and perform this Agreement and the agreements contemplated hereby to which
it is a party and to carry out the transactions contemplated hereby and thereby.
The copies of the certificate of incorporation and by-laws (or similar
organizational documents) ("CERTIFICATE OF INCORPORATION" and "BYLAWS,"
respectively) of Target and the Target Subsidiaries, as amended to date, which
have been furnished to counsel for Acquiror by Target, are correct and complete
at the date hereof. Neither Target nor any of the Target Subsidiaries is in
violation of any term of its Certificate of Incorporation or Bylaws, or in
violation of any material term of any material agreement, instrument, judgment,
decree, order, statute, rule or government regulation applicable to Target or
any of the Target Subsidiaries or to which Target or any of the Target
Subsidiaries is a party.
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Section 3.3 Corporate Records. The corporate record books of Target and
the Target Subsidiaries accurately record all corporate action taken by its
shareholders and board of directors and committees. The copies of the corporate
records of Target and the Target Subsidiaries, as made available to Acquiror for
review, are true and complete copies of the originals of such documents.
Section 3.4 Authorization and Non-Contravention; Required Filings and
Consents.
(a) Target has all requisite corporate power and authority to enter
into this Agreement and the other documents and agreements executed or to be
executed by or on behalf of Target or the Target Shareholders pursuant hereto or
contemplated hereby (collectively, the "TRANSACTION DOCUMENTS") and to
consummate the transactions contemplated by this Agreement and such Transaction
Documents. The execution and delivery of this Agreement and such Transaction
Documents and the consummation of the transactions contemplated by this
Agreement and such Transaction Documents have been duly authorized by all
necessary corporate action on the part of Target. This Agreement has been and
such Transaction Documents have been or, to the extent not executed as of the
date hereof, will be duly executed and delivered by Target. This Agreement and
each of the Transaction Documents to which Target is a party constitutes, and
each of the Transaction Documents to which Target will become a party when
executed and delivered by Target will constitute, the valid and binding
obligation of Target, enforceable in accordance with its terms.
(b) The execution and delivery by Target of this Agreement and the
Transaction Documents to which it is or will become a party does not, and
consummation of the transactions contemplated by this Agreement or the
Transaction Documents to which it is or will become a party will not, (i)
conflict with, or result in any violation or breach of any provision of the
Certificate of Incorporation or Bylaws of Target or any Target Subsidiary, (ii)
result in any violation or breach of, or constitute (with or without notice or
lapse of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any material benefit),
or require any notice or consent by any party under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or obligation to which Target or any Target Subsidiary is
a party or by which either of them or any of their properties or assets may be
bound, or (iii) conflict with or violate any permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Target or any Target Subsidiary or any of their properties or
assets, except in the case of (ii) and (iii) for any such conflicts, violations,
defaults, terminations, cancellations or accelerations which would not have a
Target Material Adverse Effect.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental entity is required by or with
respect to Target or any Target Subsidiary in connection with the execution and
delivery of this Agreement or the Transaction Documents to which it is or will
become a party or the consummation of the transactions contemplated hereby or
thereby, except for (i) the filing of the Agreement of Merger with the Delaware
Secretary of State, (ii) such consents, approvals, orders, authorizations,
registrations,
9
declarations and filings as may be required under applicable federal and state
securities laws and the laws of any foreign country, and (iii) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not have a Target Material Adverse Effect.
Section 3.5 Capitalization. As of the date hereof and as of the Closing,
the authorized capital stock of Target consists and will consist only of
1,532,000 shares of Target Common Stock of which 218,250 shares are and will be
issued and outstanding (provided, however, that additional shares of Target
Common Stock may be issued prior to Closing upon the due exercise of vested and
outstanding Target Options), 68,000 shares of Target Class B Stock, all of which
shares are and will be issued and outstanding, 350,000 shares of Redeemable
Preferred Stock of which no shares are or will be issued and outstanding, and
50,000 shares of undesignated preferred stock, par value $.01 per share, of
which no shares are or will be issued and outstanding. The outstanding shares of
capital stock of each Target Subsidiary are held beneficially and of record by
Target free and clear of any and all liens, claims, options, charges, pledges,
security interests, voting agreements or trusts, encumbrances, rights or
restrictions of any nature except as set forth in Section 3.5 of the Target
Disclosure Schedule. Except for the Target Options (all of which are disclosed
in Section 3.5 of the Target Disclosure Schedule) and the Target Class B Stock,
neither Target nor any of the Target Subsidiaries has issued or agreed to issue
nor is obligated to issue any warrants, options or other rights to purchase or
acquire any shares of its capital stock, or any securities convertible into such
shares or any warrants, options or other rights to acquire any such convertible
securities. The issued and outstanding shares of Target Common Stock and Target
Class B Stock are held of record by the shareholders of Target as set forth and
identified in the shareholder list attached as Schedule 3.5(a)(i) to the Target
Disclosure Schedule. The issued and outstanding Target Options are held of
record by the option holders as set forth and identified in the option holder
list attached as Schedule 3.5(a)(ii) to the Target Disclosure Schedule. As of
the date hereof, all of the outstanding shares of capital stock of Target and
each of the Target Subsidiaries have been duly and validly authorized and issued
and are fully paid and nonassessable and have been offered, issued, sold and
delivered in compliance with applicable federal and state securities laws and
are not subject to any preemptive rights. There are no preemptive rights, rights
of first refusal, put or call rights or obligations, or anti-dilution rights
with respect to the issuance, sale or redemption of Target's capital stock, nor
are there any obligations to repurchase, redeem or otherwise acquire any shares
of Target's capital stock, other than as set forth in the Target Certificate of
Incorporation and such rights or obligations as are set forth on Section 3.5 of
the Target Disclosure Schedule. Except as set forth in Section 3.5 of the Target
Disclosure Schedule, there are no rights to have Target's capital stock
registered for sale to the public in connection with the laws of any
jurisdiction, and to the best knowledge of Target, there are no agreements
relating to the voting of Target's voting securities and no restrictions on the
transfer of Target's capital stock. All Target Options have been issued in
accordance with the terms of the Target Option Plan and pursuant to the forms of
option agreement previously provided to Acquiror or its representatives. No
option will by its terms require an adjustment in connection with the Merger.
Except as set forth in Section 3.5 of the Target Disclosure Schedule, neither
the consummation of the transactions contemplated by this Agreement or the other
Transaction Documents nor any action taken by Target in connection with
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such transactions will result in (i) any acceleration of vesting in favor of any
optionee under any Target Option; (ii) any additional benefits for any optionee
under any Target Option; or (iii) the inability of Acquiror after the Effective
Time to exercise any right or benefit held by Target prior to the Effective Time
with respect to any Target Option assumed by Acquiror.
Section 3.6 Target Subsidiaries; Investments. Target has no direct or
indirect subsidiaries other than the Target Subsidiaries set forth on Section
3.6 of the Target Disclosure Schedule. Except as set forth on Section 3.6 of the
Target Disclosure Schedule, neither Target nor any of the Target Subsidiaries
owns nor has any direct or indirect equity interest in or Control over any
corporation, partnership, joint venture or other entity of any kind. The term
"CONTROL" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise. As
used in this Agreement, the term "PERSON" shall mean an individual, a
corporation, an association, a partnership, an estate, a trust or any other
entity or organization.
Section 3.7 Prior Transactions. Neither Target nor any Target Subsidiary
is party to, nor is otherwise obligated in any manner under, any agreement,
arrangement or understanding regarding acquisitions, mergers, consolidations,
asset sales, joint ventures or similar transactions.
Section 3.8 Financial Statements. Included in Section 3.8 of the Target
Disclosure Schedule are the following financial statements and schedules of
Target, all of which statements (including the footnotes and schedules thereto)
were prepared in accordance with generally accepted accounting principles
("GAAP") consistently applied during the periods covered thereby (subject, in
the case of unaudited financial statements, to normal year-end adjustments, the
absence of footnotes and other disclosure associated with an audited report) and
fairly present in all material respects the financial condition of Target and
the corporations consolidated with Target in the applicable financial statements
on the dates of such statements and the results of their operations and their
cash flows for the periods covered thereby: (a) audited consolidated balance
sheets of Target as at December 31, 1996 and 1997 and the related statements of
income, retained earnings and cash flow for the respective fiscal years then
ended, in each case certified by the independent certified public accountants of
Target, (b) a consolidated balance sheet of Target as of September 30, 1998 (the
"MOST RECENT BALANCE SHEET") and related statements of income, retained earnings
and cash flow for the nine month period then ended, certified by Target's Chief
Financial Officer, and (c) complete and correct copies of all attorneys'
responses to audit inquiry letters and all management letters from Target's
independent certified public accountants for the periods ended December 31, 1996
and 1997. Nothing has come to the attention of the management of Target since
such respective dates which would indicate that such financial statements and
schedules were not true and correct in all material respects as of the date
thereof.
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Section 3.9 Absence of Undisclosed Liabilities.
(a) As of the date of the Most Recent Balance Sheet, neither Target
nor any of the Target Subsidiaries had any liability of any nature, whether
accrued, absolute, contingent or otherwise, asserted or unasserted, known or
unknown (including without limitation, liabilities as guarantor or otherwise
with respect to obligations of others, or liabilities for taxes due or then
accrued or to become due or contingent or potential liabilities relating to
activities of Target or any Target Subsidiary or the conduct of its business
prior to the date of the Most Recent Balance Sheet regardless of whether claims
in respect thereof had been asserted as of such date), except the liabilities
(i) stated or specifically adequately reserved against on the Most Recent
Balance Sheet, (ii) reflected in Section 3.9(a) of the Target Disclosure
Schedule, or (iii) immaterial liabilities incurred in the ordinary course of
business of Target or the Target Subsidiaries which are not required to be
reflected in the Most Recent Balance Sheet or the notes thereto under GAAP.
(b) As of the Closing Date, neither Target nor any of the Target
Subsidiaries will have any liabilities of any nature, whether accrued, absolute,
contingent or otherwise, asserted or unasserted, known or unknown (including
without limitation, liabilities as guarantor or otherwise with respect to
obligations of others, or liabilities for taxes due or then accrued or to become
due or contingent or potential liabilities relating to activities of Target or
any Target Subsidiary or the conduct of its business prior to the date hereof or
the Closing, as the case may be, regardless of whether claims in respect thereof
had been asserted as of such date), except liabilities (i) stated or adequately
reserved against on the Most Recent Balance Sheet or the notes thereto, (ii)
reflected in Section 3.9(b) of the Target Disclosure Schedule, (iii) incurred in
the ordinary course of business of Target or the Target Subsidiaries consistent
with the terms of this Agreement or (iv) which would not be required to be
disclosed by Target on a balance sheet prepared as of the Closing Date under
GAAP.
Section 3.10 Absence of Certain Developments. Since December 31, 1997,
each of Target and the Target Subsidiaries has conducted its business only in
the ordinary course consistent with past practice and, except as otherwise set
forth in Section 3.10 of the Target Disclosure Schedule, there has not been:
(a) any change in the financial condition, properties, assets,
liabilities, business or operations of Target or any of the Target Subsidiaries,
which change by itself or in conjunction with all other such changes, whether or
not arising in the ordinary course of business, has had a Target Material
Adverse Effect;
(b) any material contingent liability incurred by Target or any of the
Target Subsidiaries as guarantor or otherwise with respect to the obligations of
others or any cancellation of any material debt or claim owing to, or waiver of
any material right of, Target or any of the Target Subsidiaries;
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(c) any material mortgage, encumbrance or lien placed on any of the
properties of Target or any of the Target Subsidiaries which remains in
existence on the date hereof or will remain on the Closing Date;
(d) any material obligation or liability of any nature, whether
accrued, absolute, contingent or otherwise, asserted or unasserted, since the
date of the Most Recent Balance Sheet, incurred by Target or any of the Target
Subsidiaries other than obligations and liabilities incurred in the ordinary
course of business and not prohibited by the terms of this Agreement and, since
June 30, 1998, there has not been any decrease in net working capital;
(e) any purchase, sale or other disposition, or any agreement or other
arrangement for the purchase, sale or other disposition, of any of the material
properties or assets of Target or any of the Target Subsidiaries other than in
the ordinary course of business or as contemplated by this Agreement;
(f) any damage, destruction or loss, whether or not covered by
insurance which has had a Target Material Adverse Effect on the properties,
assets or business of Target or any of the Target Subsidiaries;
(g) any declaration, setting aside or payment of any dividend by
Target or any of the Target Subsidiaries, or the making of any other
distribution in respect of the capital stock of Target or any of the Target
Subsidiaries, or any direct or indirect redemption, purchase or other
acquisition by Target or any of the Target Subsidiaries of its own capital
stock;
(h) any material labor trouble or material claim of unfair labor
practices involving Target or any of the Target Subsidiaries; any material
change in the compensation payable or to become payable by Target or any of the
Target Subsidiaries to any of its officers or employees other than normal merit
increases in accordance with its usual practices, or any bonus payment or
arrangement made to or with any of such officers or employees;
(i) any material change with respect to the officers of Target or any
of the Target Subsidiaries;
(j) any payment or discharge of a material lien or liability of Target
or any of the Target Subsidiaries which was not shown on the Most Recent Balance
Sheet or incurred in the ordinary course of business thereafter;
(k) any obligation or liability incurred by Target or any of the
Target Subsidiaries to any of its officers, directors, stockholders or
employees, including any material increases in compensation, or any loans or
advances made by Target or any of the Target Subsidiaries to any of its
officers, directors, stockholders or employees, except normal compensation and
expense allowances payable to directors, officers or employees;
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(l) any change in accounting methods or practices of Target or any of
the Target Subsidiaries;
(m) any other material transaction entered into by Target other than
transactions in the ordinary course of business; or
(n) any agreement or understanding whether in writing or otherwise,
for Target or any of the Target Subsidiaries to take any of the actions
specified in paragraphs (a) through (m) above.
Section 3.11 Accounts Receivable and Inventories.
(a) Except to the extent reserved against in the Most Recent Balance
Sheet, all of the accounts receivable of Target and each of the Target
Subsidiaries are valid and enforceable claims, neither Target nor any of the
Target Subsidiaries has received notice that such claims are subject to set-off
or counterclaim, and such claims are, in the best judgment of Target, fully
collectable in the normal course of business (assuming the business is conducted
consistent with past practice), after deducting the allowance for doubtful
accounts stated in the Most Recent Balance Sheet and adjusted since the date
thereof in accordance with GAAP. Neither Target nor any of the Target
Subsidiaries has any accounts receivable from any person which is an Affiliate
("AFFILIATE") as defined in Rule 12b-2 under the Securities Exchange Act of
1934, as amended, of any of its directors, officers, employees, or stockholders
except as set forth in Section 3.11 of the Target Disclosure Schedule.
(b) The inventories of Target at September 30, 1998 are shown on the
Most Recent Balance Sheet. Such inventories and the inventories acquired by
Target subsequent to the date of such balance sheet consist of items of a
quality and quantity usable and salable in the normal course of its business
(assuming the business is conducted consistent with past practice) over a period
of not more than one year from the date of this Agreement, subject to recorded
reserves reflected on the Most Recent Balance Sheet. The values of obsolete
materials and materials below standard quality as they relate to the business as
currently conducted have been written down on its books of account to realizable
market value, or adequate reserves have been provided therefor in accordance
with GAAP. All items included in such inventories are owned by Target, except
for sales made subsequent to the date of such balance sheet in the ordinary
course of business, for all of which either the purchaser has made full payment
or the purchaser is obligated to make payment and such obligation is an asset of
Target in accordance with GAAP. All inventories of raw materials and finished
goods are carried on the Most Recent Balance Sheet and are carried on the books
of Target at the lower of cost (first in - first out) or market.
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Section 3.12 Distributions to Shareholder; Transactions with Affiliates.
(a) All distributions, dividends and other payments made by Target to
the Target Shareholders during the calendar years 1997 and 1998 are described in
Section 3.12(a) of the Target Disclosure Schedule, including the date, amount,
recipient and purpose of each such distribution, dividend or payment.
(b) Except as set forth in Section 3.12(b) of the Target Disclosure
Schedule, there are no material loans, leases or other continuing transactions
(other than ordinary compensation payments) between Target or any of the Target
Subsidiaries and any present or former shareholder, director or officer of
Target, or any member of such officer's, director's or shareholder's immediate
family, or any person controlled by such officer, director or shareholder or his
or her immediate family. Except as set forth in Section 3.12(b) of the Target
Disclosure Schedule, no shareholder, director or officer of Target or any of the
Target Subsidiaries, any of their respective spouses or family members, owns
directly or indirectly on an individual or joint basis any material interest in,
or serves as an officer or director or in another similar capacity of, any
material competitor or supplier of Target or any of the Target Subsidiaries, or
any organization which has a material contract or arrangement with Target or any
of the Target Subsidiaries.
Section 3.13 Title to Properties. Except as set forth in Section 3.13 of
the Target Disclosure Schedule, each of Target and the Target Subsidiaries owns
all of its material properties and assets reflected on the Most Recent Balance
Sheet or acquired thereafter, in each case free and clear of all liens,
restrictions or encumbrances. All material equipment included in such properties
which is necessary to the business of Target and the Target Subsidiaries is in
normal operating condition and repair (ordinary wear and tear excepted) and all
leases of real or material personal property to which Target or a Target
Subsidiary is a party are fully effective and afford Target or such Target
Subsidiary, peaceful and undisturbed possession of the subject matter of the
lease. Neither Target nor any Target Subsidiary is in violation of any zoning,
building or safety ordinance, regulation or requirement or other law or
regulation applicable to the operation of its owned or leased properties which
violation would have a Target Material Adverse Effect, nor has it received any
notice of such violation. Neither Target nor any Target Subsidiary owns any real
property or, except as set forth in Section 3.13 of the Target Disclosure
Schedule, any interests in real property. Section 3.13 of the Target Disclosure
Schedule contains a description of all personal property with an individual net
book value in excess of $50,000 or categories of such property (which may be
described based upon such categories) in excess of $100,000. There are no
defaults by Target or any Target Subsidiary or, to the best knowledge of Target,
by any other party which might curtail in any material respect the present use
of the material properties of Target or any Target Subsidiary listed in Section
3.13 of the Target Disclosure Schedule. The performance by Target of this
Agreement will not result in the termination of, or in any increase of any
amounts payable under, any material lease listed in Section 3.13 of the Target
Disclosure Schedule.
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Section 3.14 Tax Matters. Target and each of the Target Subsidiaries has
filed all federal, state, local and foreign tax returns required to be filed by
it through the date hereof, and has paid or caused to be paid all federal,
state, local, foreign and other taxes, including without limitation income
taxes, estimated taxes, excise taxes, sales taxes, use taxes, gross receipts
taxes, franchise taxes, employment and payroll-related taxes, withholding taxes,
stamp taxes, transfer taxes, property taxes, customs and duties, whether or not
measured in whole or in part by net income (collectively, "TAXES"), required to
be paid by it through the date hereof whether disputed or not, except Taxes
which have not yet accrued or otherwise become due, for which adequate provision
has been made in the pertinent financial statements referred to in Section 3.8
above or which the failure to pay would not have a Target Material Adverse
Effect on Target and the Target Subsidiaries taken as a whole. The provisions
for Taxes on the Most Recent Balance Sheet are sufficient as of its date for the
payment of all accrued and unpaid Taxes of any nature of Target or any of the
Target Subsidiaries, and any applicable Taxes owing by Target or any of the
Target Subsidiaries to any jurisdiction, whether or not assessed or disputed.
All Taxes and other assessments and levies which Target or any of the Target
Subsidiaries is required to withhold or collect have been withheld and collected
and have been paid over to the proper governmental authorities. Neither the
Internal Revenue Service ("IRS") nor any other governmental authority is now
asserting or, to the best knowledge of Target, threatening to assert against
Target or any of the Target Subsidiaries any deficiency or claim for additional
Taxes. Except as set forth in Section 3.14 of the Target Disclosure Schedule,
there has not been any audit of any tax return filed by Target or any of the
Target Subsidiaries. Except as set forth in Section 3.14 of the Target
Disclosure Schedule, no waiver or agreement by Target or any of the Target
Subsidiaries is in force for the extension of time for the assessment or payment
of any Taxes. Neither Target nor any of the Target Subsidiaries is a party to
any agreement, contract or arrangement that would result individually or in the
aggregate, in the payment of any "excess parachute payment" within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended (the "CODE").
Section 3.15 Certain Contracts and Arrangements. Except as set forth in
Section 3.15 of the Target Disclosure Schedule (with true and correct copies
delivered to Acquiror), neither Target nor any of the Target Subsidiaries is
currently a party or subject to or bound by:
(a) any plan or contract providing for collective bargaining or the
like, or any contract or agreement with any labor union;
(b) any contract, lease or agreement creating any obligation of Target
or any of the Target Subsidiaries to pay to any third party $100,000 or more
with respect to any single such contract or agreement;
(c) any contract or agreement for the sale, license, lease or
disposition of products in excess of $100,000;
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(d) any contract containing covenants directly or explicitly limiting
in any material respect the freedom of Target or any of the Target Subsidiaries
to compete in any line of business or with any person or entity;
(e) any material license agreement (as licensor or licensee);
(f) any contract or agreement for the purchase of any leasehold
improvements, equipment or fixed assets for a price in excess of $100,000;
(g) any indenture, mortgage, promissory note, loan agreement, guaranty
or other agreement or commitment for borrowing in excess of $100,000 or any
pledge or security arrangement;
(h) any joint venture, partnership, manufacturing, development or
supply agreement;
(i) any employment contracts or agreements with officers, directors or
stockholders of Target or any of the Target Subsidiaries;
(j) any stock redemption or purchase agreements or other agreements
affecting or relating to the capital stock of Target or any of the Target
Subsidiaries, including without limitation any agreement with any shareholder of
Target or any of the Target Subsidiaries which includes without limitation,
anti-dilution rights, registration rights, voting arrangements or operating
covenants;
(k) any pension, profit sharing, retirement or stock options plans;
(l) any agreement providing for the payment of any royalty, dividend
or similar arrangement based on the revenues or profits of Target or any of the
Target Subsidiaries;
(m) any executory acquisition, merger or similar agreement;
(n) any material contract with a governmental body under which Target,
or any of the Target Subsidiaries, may have an obligation for renegotiation;
(o) any sales representative or distributorship agreement;
(p) any dealer, reseller, OEM, value added reseller, agency or
franchise agreement;
(q) any agreement which requires prior approval in connection with a
change in control of Target or which will be in default or which gives rise to
termination rights following a change in control of Target; or
17
(r) any other material contract not executed in the ordinary course of
business.
All material contracts, agreements, leases and instruments to which Target
or any of the Target Subsidiaries is a party or by which Target or any of the
Target Subsidiaries is obligated are valid and are in full force and effect and
constitute legal, valid and binding obligations of Target or such Target
Subsidiary, and, to the best knowledge of Target, are enforceable in accordance
with their respective terms. Target has no knowledge of any notice or threat to
terminate any such agreements, which termination would have a Target Material
Adverse Effect. Neither Target nor any of the Target Subsidiaries is in default
in complying with any material provisions of any material contract, agreement or
instrument, and to the best knowledge of Target, no condition or event or fact
exists which, with notice, lapse of time or both would constitute a default
thereunder on the part of Target or such Target Subsidiary, except for any such
default, condition, event or fact that, individually or in the aggregate, would
not have a Target Material Adverse Effect. Except as specifically indicated on
the Target Disclosure Schedule, none of the material contracts of Target
provides for indemnification by Target of any third party. No claims have been
made or threatened that would require indemnification by Target, and Target has
not paid any amounts to indemnify any third party as a result of indemnification
requirements of any kind.
Section 3.16 Intellectual Property Rights; Employee Restrictions. Except
as set forth in Section 3.16 of the Target Disclosure Schedule:
(a) Target or one of the Target Subsidiaries has exclusive ownership
of, with the right to use, sell, license, dispose of, and bring actions for
infringement of, all Intellectual Property Rights (as hereinafter defined) used
in or necessary to the conduct of its business as presently conducted (the
"TARGET RIGHTS"), which Target Rights are sufficient for the conduct of its
business as presently conducted;
(b) To the best knowledge of Target, the business of Target and each
of the Target Subsidiaries as presently conducted and the production, marketing,
licensing, use and servicing of any products or services of Target and each of
the Target Subsidiaries, do not infringe any patent, trademark, copyright or
trade secret rights of any third parties or any other Intellectual Property
Rights of any third parties;
(c) No claim is pending or, to the best knowledge of Target,
threatened against Target or any of the Target Subsidiaries nor has Target
received any written notice or other written claim from any person asserting
that any of the present or contemplated activities of Target or any of the
Target Subsidiaries infringe or may infringe any Intellectual Property Rights of
such person, and Target is not aware of any infringement by any other person of
any material rights of Target or any of the Target Subsidiaries under any
Intellectual Property Rights; and
(d) Each current and former employee of Target or any of the Target
Subsidiaries, and each of the consultants and independent contractors of Target
or any of the Target Subsidiaries in each case involved in development of any
material Intellectual Property
18
Rights, has executed an agreement regarding confidentiality, proprietary
information and assignment of inventions and copyrights to Target or such Target
Subsidiaries which seeks to protect the confidentiality of, and vests ownership
of inventories and copyrights developed during the term of employment of
engagement in, Target or such Target Subsidiary. Neither Target nor any of the
Target Subsidiaries has received any notice that any of such employees,
consultants or independent contractors is in violation of any such agreement or
in breach of any agreement or arrangement with former or present employers
relating to proprietary information or assignment of inventions.
As used herein, the term "INTELLECTUAL PROPERTY RIGHTS" shall mean all
intellectual property rights, including, without limitation, all of the
registered rights of Target or any of the Target Subsidiaries set forth in
Section 3.16 of the Target Disclosure Schedule, and all patents, patent
applications, patent rights, trademarks, trademark applications, trade names,
service marks, service xxxx applications, copyrights, copyright applications,
computer programs and other computer software, inventions, designs, samples,
specifications, schematics, know-how, trade secrets, proprietary processes and
formulae, all source and object code, algorithms, architecture, structure,
display screens, layouts, development tools, promotional materials, databases,
customer lists, supplier and dealer lists and marketing research, and all
documentation and media constituting, describing or relating to the foregoing,
including without limitation, manuals, memoranda and records. Section 3.16 of
the Target Disclosure Schedule contains a list and brief description of all
patents, patent applications, trademarks and registered copyrights owned by or
registered in the name of Target or any of the Target Subsidiaries or of which
Target or any of the Target Subsidiaries is the licensor or a licensee of a
material right or in which Target or any of the Target Subsidiaries has any
material right.
Section 3.17 Litigation. There is no litigation or governmental or
administrative proceeding or investigation pending or, to the best knowledge of
Target, threatened against Target or any of the Target Subsidiaries or affecting
the properties or assets of Target or any of the Target Subsidiaries, or, as to
matters related to Target, against any officer, director or shareholder or key
employee of Target or any of the Target Subsidiaries, nor, to the best knowledge
of Target, has there occurred any event nor does there exist any condition on
the basis of which any such claim may be asserted. Since January 1, 1997, no
claim has been asserted against Target or any of the Target Subsidiaries for
renegotiation or price redetermination of any material business transaction.
Section 3.18 Permits; Compliance with Laws. Target and each of the Target
Subsidiaries has all necessary franchises, authorizations, approvals, orders,
consents, licenses, certificates, permits, registrations, qualifications or
other rights and privileges (collectively "PERMITS") necessary to permit it to
own its property and to conduct its business as it is presently conducted or
proposed to be conducted and all such Permits are valid and in full force and
effect, except where the failure to obtain such Permit would not have a Target
Material Adverse Effect. No Permit is subject to termination as a result of the
execution of the Agreement or consummation of the transactions contemplated
hereby. Target and each of the Target Subsidiaries is now and has heretofore
been in compliance with all applicable statutes, ordinances,
19
orders, rules and regulations promulgated by any federal, state, municipal or
other governmental authority which apply to the conduct of its business, except
for any such non-compliance or violation that, individually or in the aggregate,
would not have a Target Material Adverse Effect. Target and each of the Target
Subsidiaries has never entered into or been subject to any judgment, consent
decree, compliance order or administrative order with respect to any
environmental or health and safety law or received any request for information,
notice, demand letter, administrative inquiry or formal or informal complaint or
claim with respect to any environmental or health and safety matter or the
enforcement of any such law, except where the facts giving rise to such action
would not have a Target Material Adverse Effect. Neither Target, any Target
Subsidiary nor, to Target's knowledge, any of its or their employees (in their
capacities as such) has directly or indirectly paid or delivered any fee,
commission or other sum of money or item of property, however characterized, to
any finder, agent, government official or other party in the United States or
any other country, that was or is in violation of any federal, state, or local
statute or law or of any statute or law of any other country having
jurisdiction. Neither Target nor any Target Subsidiary has participated directly
or indirectly in any boycotts or other similar practices affecting any of its or
their customers. Target and each Target Subsidiary have complied in all material
respects at all times with any and all applicable federal, state and foreign
laws, rules, regulations, proclamations and orders relating to the importation
or exportation of its or their products.
Section 3.19 Labor Laws. Neither Target nor any of the Target Subsidiaries
is delinquent in material payments to any of its employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed for it as of the date hereof or amounts required to be reimbursed to
such employees. To the best knowledge of Target, Target and each of the Target
Subsidiaries is in compliance in all material respects with all applicable laws
and regulations respecting labor, employment, fair employment practices, terms
and conditions of employment, and wages and hours. There are no charges of
employment discrimination or unfair labor practices or strikes, slowdowns,
stoppages of work or any other concerted interference with the general
operations of Target or any of the Target Subsidiaries existing, pending or
threatened against or involving Target or any of the Target Subsidiaries.
Section 3.20 Information Supplied by Target.
(a) No statements by Target or any Target Shareholder contained in
this Agreement, its exhibits and schedules, nor any of the certificates or
documents, including any of the Transaction Documents and the Information
Statement (as defined in Section 5.1), required to be delivered by Target or any
Target Shareholder to Acquiror under this Agreement contains any untrue
statement of material fact or omits to state a material fact necessary in order
to make the statements contained herein or therein not misleading in light of
the circumstances under which they were made.
(b) Target has provided to, or made available for inspection and
copying by, Acquiror and its counsel true, correct and complete copies of all
documents listed in the Target Disclosure Schedule.
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Section 3.21 Investment Banking; Brokerage Fees. Except as set forth in
Section 3.21 of the Target Disclosure Schedule, Target has not incurred or
become liable for any broker's or finder's fee, banking fees or similar
compensation, relating to or in connection with the transactions contemplated
hereby.
Section 3.22 Employee Benefit Programs.
(a) Section 3.22 of the Target Disclosure Schedule sets forth a list
of every employee benefit plan, stock option, bonus or incentive plan, severance
pay policy or agreement, deferred compensation agreement, or any similar plan or
agreement (an "EMPLOYEE PROGRAM") that has been maintained by Target or any of
the Target Subsidiaries or to which Target or any of the Target Subsidiaries has
contributed at any time during the three-year period ending on the date hereof
and (i) is subject to the Employee Retirement Income Security Act of 1974, as
amended, (ii) involves the issuance of options or other securities, or (iii) is
otherwise material.
(b) The terms and operation of each Employee Program comply in all
material respects with all applicable laws and regulations relating to such
Employee Program. Except as set forth in Section 3.22 of the Target Disclosure
Schedule, there are no unfunded obligations of Target or any of the Target
Subsidiaries under any retirement, pension, profit sharing, deferred
compensation plan or similar program. Each Employee Program which has been
maintained by Target or any of the Target Subsidiaries and which has at any time
been intended to qualify under Section 401(a) or 501(c)(9) of the Code has
received a favorable determination or approval letter from the IRS regarding its
qualification under such section and has, in fact, been qualified under the
applicable section of the Code from the effective date of such Employee Program
through and including the Closing (or, if earlier, the date that all of such
Employee Program's assets were distributed). No event or omission has occurred
which would cause any such Employee Program to lose its qualification under the
applicable Code section. Neither Target nor any of the Target Subsidiaries is
required to make any payments or contributions to any Employee Program pursuant
to any collective bargaining agreement or any applicable labor relations law.
Except as set forth in Section 3.22 of the Target Disclosure Schedule, neither
Target nor any of the Target Subsidiaries has ever maintained or contributed to
any Employee Program providing or promising any health or other nonpension
benefits to terminated or retired employees, except to the extent required by
law.
(c) With respect to each Employee Program maintained by Target or any
of the Target Subsidiaries during the three-year period ending on the date
hereof, complete and correct copies of the following documents (if applicable to
such Employee Program) have previously been delivered to Acquiror: (i) all
documents embodying or governing such Employee Program, and any funding medium
for the Employee Program (including, without limitation, trust agreements) as
they may have been amended to the date hereof; (ii) the most recent IRS
determination or approval letter with respect to such Employee Program under
Code Section 401 or 501(c)(9), and any applications for determination or
approval subsequently filed with the IRS; (iii) the three most recently filed
IRS Forms 5500, with all applicable schedules and accountants'
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opinions attached thereto; (iv) the summary plan description for such Employee
Program (or other descriptions of such Employee Program provided to employees)
and all modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy) related to such Employee Program; and (vi) any
documents evidencing any loan to an Employee Program that is a leveraged
employee stock ownership plan.
Section 3.23 Environmental Matters.
(a) Except as set forth in Section 3.23 of the Target Disclosure
Schedule, and except for commercially reasonable quantities of office supplies,
neither Target nor any of the Target Subsidiaries has ever generated,
transported, used, stored, treated, disposed of, or managed any Hazardous Waste
(as defined below) and, to the best knowledge of Target, (i) no Hazardous
Material (as defined below) has ever been or is threatened to be spilled,
released, or disposed of at any site presently or formerly owned, operated,
leased, or used by Target or any of the Target Subsidiaries, or has ever come to
be located in the soil or groundwater at any such site; (ii) no Hazardous
Material has ever been transported from any site presently or formerly owned,
operated, leased, or used by Target or any of the Target Subsidiaries for
treatment, storage, or disposal at any other place; (iii) neither Target nor any
of the Target Subsidiaries presently owns, operates, leases, or uses, nor has
Target or any of the Target Subsidiaries previously owned, operated, leased, or
used any site on which underground storage tanks are or were located; and (iv)
no lien has ever been imposed by any governmental agency on any property,
facility, machinery, or equipment owned, operated, leased, or used by Target or
any of the Target Subsidiaries in connection with the presence of any Hazardous
Material.
(b) Except as set forth in Section 3.23 of the Target Disclosure
Schedule (i) to the best knowledge of Target, neither Target nor any of the
Target Subsidiaries has any material liability under, nor has it ever violated
in any material respect, any Environmental Law (as defined below); (ii) to the
best knowledge of Target, Target and each of the Target Subsidiaries, any
material property owned, operated, leased, or used by any of them, and any
material facilities and operations thereon are presently in compliance in all
material respects with all applicable Environmental Laws; and (iii) neither
Target nor any of the Target Subsidiaries has ever entered into or been subject
to any judgment, consent decree, compliance order, or administrative order with
respect to any environmental or health and safety matter or received any demand
letter, formal complaint or claim with respect to any environmental or health
and safety matter or the enforcement of any Environmental Law.
(c) Except as set forth in Section 3.23 of the Target Disclosure
Schedule, no material site owned, operated, leased, or used by Target or any of
the Target Subsidiaries contains any asbestos or asbestos-containing material,
any polychlorinated biphenyls (PCBs) or equipment containing PCBs, or any urea
formaldehyde foam insulation.
(d) Target has provided or made available to Acquiror copies of all
material documents, records, and information of Target or any of the Target
Subsidiaries, concerning any material environmental or health and safety matter
relevant to Target or any of the Target
22
Subsidiaries including, without limitation, environmental audits, environmental
risk assessments, site assessments, documentation regarding off-site disposal of
Hazardous Materials, spill control plans, and reports, correspondence, permits,
licenses, approvals, consents, and other authorizations related to environmental
or health and safety matters issued by any governmental agency.
(e) For purposes of this Section 3.23, (i) "HAZARDOUS MATERIAL" shall
mean and include any hazardous waste, hazardous material, hazardous substance,
petroleum product, oil, toxic substance, pollutant, or contaminant, as defined
or regulated under any Environmental Law, or any other substance which may pose
a threat to the environment or to human health or safety; (ii) "HAZARDOUS WASTE"
shall mean and include any hazardous waste as defined or regulated under any
Environmental Law; and (iii) "ENVIRONMENTAL LAW" shall mean any environmental or
health and safety-related law, regulation, rule, ordinance, or by-law at the
foreign, federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted.
Section 3.24 Insurance. The physical properties, assets, business,
operations, employees, officers and directors of Target and each of the Target
Subsidiaries are insured, including errors and omissions insurance, to the
extent disclosed in Section 3.24 of the Target Disclosure Schedule. Except as
set forth in Section 3.24 of the Target Disclosure Schedule, there is no
material claim by Target or any of the Target Subsidiaries pending under any
such policies. Said insurance policies and arrangements are in full force and
effect, all premiums with respect thereto are currently paid, and Target is in
compliance in all material respects with the terms thereof. Said insurance is
sufficient for compliance by Target and each of the Target Subsidiaries with all
requirements of applicable law and all material agreements and leases to which
any of them is a party. Each such insurance policy shall continue to be in full
force and effect following consummation of the transactions contemplated by the
Agreement. Target does not know, after due inquiry, of any threatened
termination of any such policies or arrangements.
Section 3.25 Relationship with Customers and Suppliers. Except as set forth
in Section 3.25 of the Target Disclosure Schedule, no single customer accounted
for more than five percent of the aggregate revenues of Target and the Target
Subsidiaries taken as a whole for the fiscal year ended December 31, 1997 or the
nine-month period ending on the date of the Most Recent Balance Sheet. Except as
set forth in Section 3.25 of the Target Disclosure Schedule, no customer which
accounted for more than five percent of the aggregate revenues of Target and the
Target Subsidiaries taken as a whole for the fiscal year ended December 31, 1997
or the period ending on the date of the Most Recent Balance Sheet or which is
otherwise significant to Target or any of the Target Subsidiaries (each, a
"MATERIAL CUSTOMER"), or any supplier which is significant to Target or any
Target Subsidiary (each, a "MATERIAL SUPPLIER"), has canceled or otherwise
terminated or threatened to cancel or otherwise terminate its relationship with
Target or any of the Target Subsidiaries, or has during said period decreased
materially its usage or purchase of the services or products of Target or any of
the Target Subsidiaries or has decreased materially its services or supplies to
Target or any of the Target Subsidiaries. No Material Customer or Material
Supplier has, to the knowledge of Target, any plan or intention to terminate,
cancel or otherwise materially and adversely modify its relationship with Target
or
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any of the Target Subsidiaries or to decrease materially or limit its usage,
purchase or distribution of the services or products of Target or any of the
Target Subsidiaries or the provision of services or supplies to Target or any of
the Target Subsidiaries, as the case may be.
Section 3.26 Trade Regulation. Target has not terminated its relationship
with or refused to ship Target Products to any dealer, distributor, OEM, third
party marketing entity or customer which had theretofore paid or been obligated
to pay Target in excess of $100,000 in any year. All of the prices charged by
Target in connection with the marketing or sale of any products or services have
been in material compliance with all applicable laws and regulations. No claims
have been communicated or threatened in writing against Target or any Target
Subsidiary with respect to wrongful termination of any dealer, distributor or
any other marketing entity, discriminatory pricing, price fixing, unfair
competition, false advertising, or any other violation of any laws or
regulations relating to anti-competitive practices or unfair trade practices of
any kind, and to Target's knowledge, no specific situation, set of facts, or
occurrence provides any basis for any such claim.
Section 3.27 Products; Product Warranties.
(a) A form of each product warranty relating to products manufactured
or sold by Target within the last two years has been delivered to Acquiror.
(b) The Target Disclosure Schedule sets forth a true and complete list
of (i) all products manufactured, marketed or sold by Target that have been
recalled or withdrawn (whether voluntarily or otherwise) (ii) all proceedings
(whether completed or pending) seeking the recall, withdrawal, suspension or
seizure of any product sold by Target, and (iii) all warranty claims within the
past two years.
(c) Target has no knowledge of any material defect in design,
materials, manufacture or otherwise in any products manufactured, distributed or
sold by Target within the past two years, or any defect in repair to, or
replacement of, any such products, which defect could give rise to a Target
Material Adverse Effect.
(d) Except as provided in any of the standard product warranties
described in this Section Target has not sold any products or services which are
subject to an extended warranty beyond twelve (12) months and which warranty has
not yet expired.
(e) Target Products are able to (i) accurately process, without human
intervention, date/time data (including, but not limited to, calculating,
comparing, sequencing and reporting) from, into, and between the twentieth and
twenty-first centuries and the years 1999 and 2000 and leap year calculations,
and with respect to dates and dates prior to, through, and beyond January 1,
2000 and (ii) correctly differentiate between years in different centuries that
end in the same two digits.
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Section 3.28 Software and Systems Applications. Except as disclosed in
Section 3.28 of the Target Disclosure Schedule, all of the current material
software and all material systems, including material embedded systems, used by
the Target in the operation of its business (the "BUSINESS APPLICATIONS"),
comply with the necessary requirements to function consistently with its current
operation after the year 1999 and after the year 2000, and are otherwise "year
2000 compliant." The term "year 2000 compliant" used in this section means: (i)
to accurately process and report on (including but not limited to calculating,
comparing and sequencing, moving backward and forward in time, including leap-
year calculations), without human intervention, date/time data with respect to
dates and data prior to, through and beyond January 1, 1999 and January 1, 2000;
(ii) to perform without interruption, damage and/or interference due to the
transition from the year 1999 to the year 2000, from the 20th to the 21st
Centuries and/or due to ongoing operation in the 21st Century; and (iii) to
correctly differentiate between years in different centuries that end in the
same two digits and to store and display date information in ways that are
unambiguous as to the applicable century. A description of any non-compliant
Business Application and an estimate of the capital expenditures necessary to
make such Business Application(s) "year 2000 compliant" is set forth in Section
3.28 of the Target Disclosure Schedule.
Section 3.29 Powers of Attorney. Neither Target nor any Target Subsidiary
has any outstanding power of attorney.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND SUB
As a material inducement to Target and the Target Shareholders to enter
into this Agreement and consummate the transactions contemplated hereby,
Acquiror and Sub represent and warrant to Target, except as disclosed in a
filing with the Securities and Exchange Commission (the "COMMISSION") or the
disclosure schedule delivered by Acquiror to Target pursuant to this Agreement
(the "ACQUIROR DISCLOSURE SCHEDULE"), arranged in paragraphs corresponding to
the numbered and lettered paragraphs of this Article 4, as follows:
Section 4.1 Organization of Acquiror and Sub. Each of Acquiror and its
Subsidiaries, including Sub, is a corporation duly organized, validly existing
and in good standing under the laws of its respective jurisdiction of
incorporation and has all requisite corporate power to own, lease and operate
its property and to carry on its business as now being conducted and is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the failure to be so qualified or licensed could result in
a material adverse effect on the business as presently conducted, assets
(including intangible assets), liabilities, financial condition, property or
results of operations of Acquiror and its Subsidiaries taken as a whole, in an
amount in excess of $400,000 (an "ACQUIROR MATERIAL ADVERSE EFFECT").
Section 4.2 Acquiror Capital Structure. The authorized capital stock of
Acquiror consists of 30,000,000 shares of Acquiror Common Stock and 10,000,000
shares of Preferred
25
Stock, par value $.01 ("ACQUIROR PREFERRED STOCK"), of which there were issued
and outstanding as of the close of business on September 30, 1998, 11,940,434
shares of Acquiror Common Stock and no shares of Acquiror Preferred Stock. There
are no other outstanding shares of capital stock or voting securities of
Acquiror other than shares of Acquiror Common Stock issued on or after October
1, 1998 upon the exercise of options issued under the stock option plans of
Acquiror. The authorized capital stock of Sub consists of 1,000 shares of Common
Stock, all of which are issued and outstanding and are held by Acquiror. All
outstanding shares of Acquiror and Sub have been duly authorized, validly
issued, fully paid and are nonassessable and free of any liens or encumbrances
other than any liens or encumbrances created by or imposed upon the holders
thereof. As of the close of business on September 30, 1998, Acquiror has
reserved an aggregate of 1,245,488 shares of Acquiror Common Stock for issuance
to employees, directors and independent contractors upon exercise of outstanding
options to acquire shares of Acquiror Common Stock issued under Acquiror's stock
option plans. Other than as contemplated by this Agreement, and except as
described in this Section 4.2, there are no other options, warrants, calls,
rights, commitments or agreements to which Acquiror or Sub is a party or by
which either of them is bound obligating Acquiror or Sub to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased
or redeemed, any shares of the capital stock of Acquiror or Sub or obligating
Acquiror or Sub to grant, extend or enter into any such option, warrant, call,
right, commitment or agreement. The shares of Acquiror Common Stock to be issued
pursuant to the Merger (including shares of Acquiror Common Stock issued upon
exercise of Target Options assumed by Acquiror) will be duly authorized, validly
issued, fully paid, and non-assessable and issued in compliance with all
applicable federal or state securities laws.
Section 4.3 Authority; No Conflict; Required Filings and Consents.
(a) Each of Acquiror and Sub has all requisite corporate power and
authority to enter into this Agreement and the other Transaction Documents to
which it is or will become a party and to consummate the transactions
contemplated by this Agreement and such Transaction Documents. The execution
and delivery of this Agreement and such Transaction Documents and the
consummation of the transactions contemplated by this Agreement and such
Transaction Documents have been duly authorized by all necessary corporate
action on the part of Acquiror and Sub. This Agreement has been and such
Transaction Documents have been or, to the extent not executed as of the date
hereof, will be duly executed and delivered by Acquiror and Sub. This Agreement
and each of the Transaction Documents to which Acquiror or Sub is a party
constitutes, and each of the Transaction Documents to which Acquiror or Sub will
become a party when executed and delivered by Acquiror or Sub will constitute,
the valid and binding obligation of Acquiror or Sub, enforceable in accordance
with its terms.
(b) The execution and delivery by Acquiror and Sub of this Agreement
and the Transaction Documents to which it is or will become a party does not,
and consummation of the transactions contemplated by this Agreement or the
Transaction Documents to which it is or will become a party will not, (i)
conflict with, or result in any violation or breach of any provision of the
Certificate of Incorporation or Bylaws of Acquiror or Sub, (ii) result in any
violation or
26
breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any material benefit), or require any notice to or
consent by any party under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, contract or other agreement, instrument
or obligation to which Acquiror or Sub is a party or by which either of them or
any of their properties or assets may be bound, or (iii) conflict with or
violate any permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Acquiror or Sub or any
of their properties or assets, except in the case of (ii) and (iii) for any such
conflicts, violations, defaults, terminations, cancellations or accelerations
which would not have an Acquiror Material Adverse Effect.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental entity is required by or with
respect to Acquiror or Sub in connection with the execution and delivery of this
Agreement or the Transaction Documents to which it is or will become a party or
the consummation of the transactions contemplated hereby or thereby, except for
(i) the filing of the Agreement of Merger with the Delaware Secretary of State,
(ii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws and the laws of any foreign country, and (iii) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not have an Acquiror Material Adverse Effect.
Section 4.4 Commission Filings; Financial Statements.
(a) Acquiror has filed with the Commission and made available to
Target or its representatives all forms, reports and documents required to be
filed by Acquiror with the Commission since December 31, 1995 (collectively, the
"ACQUIROR COMMISSION REPORTS"). The Acquiror Commission Reports, including
Acquiror Commission Reports filed after the date of this Agreement until
Closing, (i) at the time filed, complied or will comply in all material respects
with the applicable requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), as the case may be, and (ii) did not or will not at the time
they were or will be filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such Acquiror Commission Reports or necessary in order to make the
statements in such Acquiror Commission Reports, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the financial statements (including, in each case, any
related notes) contained in the Acquiror Commission Reports, including any
Acquiror Commission Reports filed after the date of this Agreement until the
Closing, complied or will comply as to form in all material respects with the
applicable published rules and regulations of the Commission with respect
thereto, was prepared in accordance with GAAP applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as permitted by
Form 10-Q of the Commission) and fairly
27
presented or will fairly present the consolidated financial position of Acquiror
and its Subsidiaries as at the respective dates and the consolidated results of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount.
Section 4.5 Absence of Certain Changes or Events. Since December 31, 1997,
Acquiror and its Subsidiaries have conducted their business only in the ordinary
course and, since such date, there has not been (i) any Acquiror Material
Adverse Effect; (ii) any damage, destruction or loss (whether or not covered by
insurance) with respect to Acquiror or any of its Subsidiaries having an
Acquiror Material Adverse Effect; (iii) any material obligation or liability of
any nature, whether accrued, absolute, contingent or otherwise, asserted or
unasserted, incurred by Acquiror and its Subsidiaries other than obligations and
liabilities incurred in the ordinary course of business; (iv) any purchase, sale
or other disposition, or any agreement or other arrangement for the purchase,
sale or other disposition, of any of the material properties or assets of
Acquiror and its Subsidiaries other than in the ordinary course of business; or
(v) any other material transaction entered into by Acquiror or any of its
Subsidiaries other than transactions in the ordinary course of business.
Section 4.6 Compliance with Laws. Acquiror has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state or local statute, law or regulation with respect to the conduct
of its business, or the ownership or operation of its business, except for
failures to comply or violations which would not have an Acquiror Material
Adverse Effect.
Section 4.7 Pooling of Interests. Neither Acquiror nor any of its
affiliates has taken or agreed to take any action which would prevent Acquiror
from accounting for the business combination to be effected by the Merger as a
pooling of interests.
Section 4.8 Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only as
contemplated by this Agreement.
Section 4.9 Disclosure. No statements by Acquiror contained in this
Agreement, its exhibits and schedules, nor any of the certificates or documents,
including any of the Transaction Documents and the Information Statement (as
defined in Section 5.1), required to be delivered by Acquiror or Sub to Target
under this Agreement contains any untrue statement of material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein not misleading in light of the circumstances under which they were
made.
Section 4.10 Shareholders Consent. No consent or approval of the
shareholders of Acquiror is required or necessary for Acquiror to enter into
this Agreement or the Transaction Documents or to consummate the transactions
contemplated hereby and thereby.
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ARTICLE 5
PRECLOSING COVENANTS OF TARGET
Section 5.1 Approval of Target Shareholders. Prior to the Closing Date and
at the earliest practicable date following the date hereof, Target will solicit
written consents from its shareholders seeking, or hold a shareholders meeting
(the "TARGET SHAREHOLDERS' MEETING") for the purpose of seeking, approval of
this Agreement. If Target holds a shareholders' meeting, the Board of Directors
will solicit proxies from Target's shareholders to vote such shareholders'
shares at the Target Shareholders' Meeting. In soliciting such written consent
or proxies, the Board of Directors of Target will recommend to the shareholders
of Target that they approve this Agreement and shall use its reasonable efforts
to obtain the approval of the shareholders of Target entitled to vote on or
consent to this Agreement in accordance with Delaware Law and Target's
Certificate of Incorporation. Target and Acquiror will prepare as soon as
reasonably practicable an information statement (the "Information Statement")
and if Target holds a shareholders' meeting, a proxy statement, in form and
substance reasonably acceptable to Acquiror, with respect to the solicitation of
written consents and/or proxies from the shareholders of Target to approve this
Agreement.
Section 5.2 Advice of Changes. Target will promptly advise Acquiror in
writing of any event occurring subsequent to the date of this Agreement which
would render any representation or warranty of Target contained in this
Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate in any material respect.
Section 5.3 Operation of Business. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, Target agrees (except to the extent that Acquiror shall
otherwise consent in writing), to carry on its business in the usual, regular
and ordinary course in substantially the same manner as previously conducted, to
pay its debts and taxes when due, subject to good faith disputes over such debts
or taxes, to pay or perform other obligations when due, and, to the extent
consistent with such business, use all reasonable efforts consistent with past
practices and policies to preserve intact its present business organization,
keep available the services of its present officers and key employees and
preserve its relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, to the end that its
goodwill and ongoing businesses shall be unimpaired at the Effective Time.
Target shall promptly notify Acquiror of any event or occurrence not in the
ordinary course of business of Target. Except as expressly contemplated by this
Agreement, Target shall not, without the prior written consent of Acquiror:
(a) Accelerate, amend or change the period of exercisability or the
vesting schedule of options or restricted stock granted under any employee stock
plan or agreements or authorize cash payments in exchange for any Target Option
or any options granted under any of such plans except as specifically required
by the terms of such plans or any related agreements or any such agreements in
effect as of the date of this Agreement and disclosed in the Target Disclosure
Schedule;
29
(b) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock, or
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of capital stock of such party, or purchase or otherwise acquire,
directly or indirectly, any shares of its capital stock except from former
employees, directors and consultants in accordance with agreements providing for
the repurchase of shares in connection with any termination of service by such
party;
(c) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of, any shares of its
capital stock or securities convertible into shares of its capital stock, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities;
(d) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership
or other business organization or division, or otherwise acquire or agree to
acquire any assets;
(e) (i) Increase or agree to increase the compensation payable or to
become payable to its officers or employees, except for increases in salary or
wages of non-officer employees in accordance with past practices, (ii) grant any
additional severance or termination pay to, or enter into any employment or
severance agreements with, officers, (iii) grant any severance or termination
pay to, or enter into any employment or severance agreement, with any nonofficer
employee, except in accordance with past practices, (iv) enter into any
collective bargaining agreement, or (v) establish, adopt, enter into or amend in
any material respect any bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance, or other plan, trust, fund, policy or
arrangement for the benefit of any directors, officers or employees;
(f) Revalue any of its assets, including writing down the value of
inventory or writing off notes or accounts receivable, except pursuant to the
instruction of Target's independent auditors consistent with past practice and
in accordance with GAAP;
(g) Amend or propose to amend its Certificate of Incorporation or
Bylaws;
(h) change accounting methods;
(i) amend or terminate any material contract, agreement or license to
which it is a party except in the ordinary course of business;
(j) make or change any Tax or accounting election, change any annual
accounting period, adopt or change any accounting method, file any amended
Return, enter into any closing agreement, settle any Tax claim or assessment
relating to Target, surrender any right
30
to claim refund of Taxes, consent to any extension or waiver of the limitation
period applicable to any Tax claim or assessment relating to Target, or take any
other action or omit to take any action, if any such election, adoption, change,
amendment, agreement, settlement, surrender, consent or other action or omission
would have the effect of increasing the Tax liability of Target or Acquiror;
(k) enter into any agreement (other than sales contracts entered into
in the ordinary course of business) in which the obligation of Target exceeds
$100,000 or shall not terminate or be subject to termination by Target within
180 days following execution, except purchases of inventory in the ordinary
course of business not in excess of $250,000; or
(l) take, or agree in writing or otherwise to take, any of the actions
described in Sections (a) through (k) above, or any action which is reasonably
likely to make any of Target's representations or warranties contained in this
Agreement untrue or incorrect in any material respect on the date made (to the
extent so limited) or as of the Effective Time.
Section 5.4 Access to Information. Until the Closing, Target shall respond
within two business days to any written request by Acquiror for information
about Target's business, financial condition or results of operations,
including, without limitation, any and all information relating to taxes,
commitments, contracts, leases, licenses, personal property and financial
condition, provided, however, that with respect to specific highly
-------- -------
sensitive competitive information, Target may decline to provide such
information to Acquiror if such information is delivered to Acquiror's
independent accountants and Acquiror is notified of such delivery. Target shall
cause its accountants to cooperate with Acquiror and its agents in making
available all financial information requested, including without limitation the
right to examine all working papers pertaining to all financial statements
prepared or audited by such accountants. No information or knowledge obtained
in any investigation pursuant to this Section shall effect or be deemed to
modify any representation or warranty contained in this Agreement or its
exhibits and schedules. All such access shall be subject to the terms of the
Confidentiality Agreement (as defined in Section 7.1) which will prohibit the
information from being communicated to Acquiror, Sub or their employees,
affiliates or representatives.
Section 5.5 Satisfaction of Conditions Precedent. Target will use its
reasonable best efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Sections 8.1 and 8.2, and Target will use its
reasonable best efforts to cause the transactions contemplated by this Agreement
to be consummated, and, without limiting the generality of the foregoing, to
obtain all consents and authorizations of third parties and to make all filings
with, and give all notices to, third parties which may be necessary or
reasonably required on its part in order to effect the transactions contemplated
by this Agreement. Target shall use its reasonable best efforts to obtain any
and all consents necessary, and to give any and all notices required, with
respect to those contracts listed in Section 3.15 of the Target Disclosure
Schedule in connection with the Merger (the "MATERIAL CONSENTS"). All of the
Material Consents are listed in Section 5.5 of the Target Disclosure Schedule.
31
Section 5.6 Other Negotiations. Prior to the earlier of the termination of
this Agreement or the Effective Time, Target will not (and it will not permit
any of its shareholders, officers, directors, employees, agents and Affiliates
on its behalf to) take any action to solicit, initiate, seek, encourage or
support any inquiry, proposal or offer from, furnish any information to, or
participate in any negotiations with, any corporation, partnership, person or
other entity or group (other than Acquiror) regarding any acquisition of Target,
any merger or consolidation with or involving Target, or any acquisition of any
material portion of the stock or assets of Target or any material license of
Target's Intellectual Property Rights outside of the ordinary course of business
(any of the foregoing being referred to in this Agreement as a "TARGET
ACQUISITION TRANSACTION") or enter into an agreement concerning any Target
Acquisition Transaction with any party other than Acquiror. If between the date
of this Agreement and the termination of this Agreement pursuant to Section 9.1,
Target receives from a third party any offer or indication of interest regarding
any Target Acquisition Transaction, or any request for information regarding any
Target Acquisition Transaction, Target shall (i) notify Acquiror immediately
(orally and in writing) of such offer, indication of interest or request,
including the terms of any proposal therein, and (ii) notify such third party of
Target's obligations under this Agreement.
ARTICLE 6
PRECLOSING AND OTHER COVENANTS OF ACQUIROR AND SUB
Section 6.1 Advice of Changes. Acquiror and Sub will promptly advise
Target in writing of any event occurring subsequent to the date of this
Agreement which would render any representation or warranty of Acquiror or Sub
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect.
Section 6.2 Reservation of Acquiror Common Stock. Acquiror shall reserve
for issuance, out of its authorized but unissued capital stock, the maximum
number of shares of Acquiror Common Stock as may be issuable upon consummation
of the Merger, including shares of Acquiror Common Stock that will be issued
upon exercise of Target Options assumed by Acquiror.
Section 6.3 Satisfaction of Conditions Precedent. Acquiror and Sub will
use their reasonable best efforts to satisfy or cause to be satisfied all the
conditions precedent which are set forth in Sections 8.1 and 8.3, and Acquiror
and Sub will use their reasonable best efforts to cause the transactions
contemplated by this Agreement to be consummated, and, without limiting the
generality of the foregoing, to obtain all consents and authorizations of third
parties and to make all filings with, and give all notices to, third parties
which may be necessary or reasonably required on its part in order to effect the
transactions contemplated hereby.
Section 6.4 Nasdaq National Market Listing. Acquiror shall cause the
shares of Acquiror Common Stock issuable to the shareholders of Target in the
Merger, including shares
32
of Acquiror Common Stock issuable upon exercise of Acquiror Options, to be
authorized for listing on the Nasdaq National Market.
Section 6.5 Stock Options and Employee Benefit Plans.
(a) At the Effective Time, each outstanding Target Option under the
Target Option Plan, whether vested or unvested, shall be assumed by Acquiror and
deemed to constitute an option (an "ACQUIROR OPTION") to acquire on the same
terms and conditions as were applicable under the Target Option the same number
of shares of Acquiror Common Stock as the holder of such Target Option would
have been entitled to receive pursuant to the Merger had such holder exercised
such option in full immediately prior to the Effective Time (rounded down to the
nearest whole number in the case of any Target Option qualified under Section
422 of the Code, and otherwise rounded to the nearest whole number), at a price
per share (rounded up to the nearest whole cent) equal to (i) the aggregate
exercise price for the shares of Target Common Stock otherwise purchasable
pursuant to such Target Option divided by (ii) the number of full shares of
Acquiror Common Stock deemed purchasable pursuant to such Acquiror Option in
accordance with the foregoing. It is expressly recognized and agreed that the
substitution of any Acquiror Option for any Target Option qualified under
Section 422 of the Code is intended to comply with all of the provisions of
Section 424(a) of the Code. Promptly after the Effective Time, Acquiror shall
deliver to the holders of Target Options appropriate notices setting forth such
holder's rights pursuant to the plan and/or the agreements evidencing the grants
of such Acquiror Options. Acquiror shall take all corporate action and comply
with all applicable federal and state securities laws necessary to reserve for
issuance a sufficient number of shares of Acquiror Common Stock for delivery
upon exercise of Acquiror Options assumed by it in accordance with this Section
6.5 immediately after the Effective Time. Acquiror has filed with the
Commission Registration Statement on Form S-8 (File No. 333-65063) covering the
Acquiror Common Stock that will be issued upon the exercise of the Target
Options assumed by Acquiror. Such Registration Statement is effective and
Acquiror will maintain the effectiveness thereof during the term of the Target
Options.
(b) Employees of Target at the Effective Time will be provided with
employee benefit plans, programs and arrangements by the Surviving Corporation
or Acquiror which in the aggregate are no less favorable to such employees than
those provided from time to time by Acquiror and its Subsidiaries to similarly
situated employees. If any employee of Target becomes a participant in any
employee benefit plan, program, policy or arrangement of Acquiror, such employee
shall be given credit for all service prior to the Effective Time with Target to
the extent permissible under applicable law and any pre-existing conditions or
restrictions, waiting period or other such limitations under such plans,
programs or arrangements shall be waived.
Section 6.6 Operation of Business. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, Acquiror agrees (except to the extent that Target shall
otherwise consent in writing), to carry on its business in the usual, regular
and ordinary course in substantially the same manner as previously conducted, to
pay its debts and taxes when due, subject to good faith disputes over
33
such debts or taxes, to pay or perform other obligations when due, and, to the
extent consistent with such business, use all reasonable efforts consistent with
past practices and policies to preserve intact its present business
organization, keep available the services of its present officers and key
employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with it,
to the end that its goodwill and ongoing business shall be unimpaired at the
Effective Time. Acquiror shall promptly notify Target of any event or occurrence
not in the ordinary course of business of Acquiror.
Section 6.7 Other Negotiations. Prior to the earlier of the termination of
this Agreement or the Effective Time, Acquiror will not (and it will not permit
any of its officers, directors, employees, agents and Affiliates on its behalf
to) take any action to solicit, initiate, seek, encourage or support any
inquiry, proposal or offer from, furnish any information to, or participate in
any negotiations with, any corporation, partnership, person or other entity or
group regarding any acquisition of, or by Acquiror, any merger or consolidation
with or involving Acquiror, or any acquisition of any material portion of the
stock or assets of, or by Acquiror or any material license of Acquiror
proprietary rights (any of the foregoing being referred to in this Agreement as
an "ACQUIROR ACQUISITION TRANSACTION") or enter into an agreement concerning any
Acquiror Acquisition Transaction with any party other than Target. If between
the date of this Agreement and the termination of this Agreement pursuant to
Section 9.1, Acquiror receives from a third party any offer or indication of
interest regarding any Acquiror Acquisition Transaction, or any request for
information regarding any Acquiror Acquisition Transaction, Acquiror shall (i)
notify Target immediately (orally and in writing) of such offer, indication of
interest or request, including the full terms of any proposal therein, and (ii)
notify such third party of Acquiror's obligations under this Agreement.
Section 6.8 Board Representation. Acquiror shall use its reasonable best
efforts to cause one (1) person designated by Target who is mutually agreed to
by Target and Acquiror and who is not an employee of Target to be nominated and
elected to Acquiror's Board of Directors at the next annual meeting of
shareholders of Acquiror.
Section 6.9 Retention of Employees. Acquiror will use its reasonable best
efforts to retain substantially all of Target's employees after the Closing,
provided, however, that nothing contained in this Section shall preclude
-------- -------
Acquiror from exercising its prudent business judgment with respect to Target
employment matters.
Section 6.10 Indemnification of Target Officers and Directors. From and
after the Effective Time, the officers and directors of Target immediately prior
to the Effective Time shall be indemnified on the same terms and conditions as
provided by Target's Certificate of Incorporation and Bylaws and Acquiror agrees
to honor the indemnification provisions as contained therein.
ARTICLE 7
OTHER AGREEMENTS
34
Section 7.1 Confidentiality. Each party acknowledges Acquiror and Target
have previously executed a Confidentiality Agreement dated October 8, 1998 (the
"CONFIDENTIALITY AGREEMENT"), which agreement shall continue in full force and
effect in accordance with its terms.
Section 7.2 No Public Announcement. The parties shall make no public
announcement concerning this Agreement, their discussions or any other
memoranda, letters or agreements between the parties relating to the Merger,
except by mutual agreement; provided, however, that either of the parties, but
-------- -------
only after reasonable consultation with the other, including legal counsel, may
make such disclosure as may be required under applicable law, regulation or the
listing standards of the Nasdaq Stock Market.
Section 7.3 Regulatory Filings; Consents; Reasonable Efforts. Subject to
the terms and conditions of this Agreement, Target and Acquiror shall use their
respective reasonable best efforts to (i) make all necessary filings with
respect to the Merger and this Agreement under the Exchange Act and applicable
blue sky or similar securities laws and obtain required approvals and clearances
with respect thereto and supply all additional information requested in
connection therewith; (ii) make merger notification or other appropriate filings
with federal, state or local governmental bodies or applicable foreign
governmental agencies and obtain required approvals and clearances (including
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act the "HSR Act") with
respect thereto and supply all additional information requested in connection
therewith and Acquiror shall use its reasonable best efforts to comply with any
request of the U.S. Department of Justice required to facilitate clearance under
the HSR Act; (iii) obtain all consents, waivers, approvals, authorizations and
orders required in connection with the authorization, execution and delivery of
this Agreement and the consummation of the Merger; and (iv) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable, but no later than
December 31, 1998, provided, however, that such date shall be extended to March
31, 1999 if Acquiror or Target receives a "second request" under the HSR Act.
Section 7.4 Pooling Accounting. Target and Acquiror shall each use its
best efforts to cause the business combination to be effected by the Merger to
be accounted for as a pooling of interests. No party shall intentionally take
any action that would adversely affect the ability of Acquiror to account for
the business combination to be effected by the Merger as a pooling of interests.
Section 7.5 Further Assurances. Prior to and following the Closing, each
party agrees to cooperate fully with the other parties and to execute such
further instruments, documents and agreements and to give such further written
assurances, as may be reasonably requested by any other party to better evidence
and reflect the transactions described herein and contemplated hereby and to
carry into effect the intents and purposes of this Agreement.
35
Section 7.6 Escrow Agreement. On or before the Closing Date, Acquiror
shall, and the parties hereto shall exercise their reasonable best efforts to
cause the Escrow Agent and the Target Shareholders to enter into an Escrow
Agreement in the form attached hereto as Exhibit D.
---------
Section 7.7 FIRPTA. Target shall, prior to the Closing Date, provide
Acquiror with a properly executed Foreign Investment and Real Property Tax Act
of 1980 ("FIRPTA") FIRPTA Notification Letter, substantially in the form of
Exhibit E attached hereto, which states that shares of capital stock of
---------
Target do not constitute "United States real property interests" under Section
897(c) of the Code, for purposes of satisfying Acquiror's obligations under
Treasury Regulation Section 1.1445-2(c)(3). In addition, simultaneously with
delivery of such FIRPTA Notification Letter, Target shall provide to Acquiror a
form of notice to the Internal Revenue Service in accordance with the
requirements of Treasury Regulation Section 1.897-2(h)(2) and substantially in
the form of Exhibit F attached hereto, along with written authorization for
---------
Acquiror to deliver such notice form to the Internal Revenue Service on behalf
of Target upon the Closing of the Merger.
Section 7.8 Blue Sky Laws. Acquiror shall take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of the Acquiror Common Stock in connection
with the Merger. Target shall use its best efforts to assist Acquiror as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable in connection with the issuance of Acquiror Common Stock in
connection with the Merger.
Section 7.9 Information Statement; Other Filings; Board Recommendations.
After the execution of this Agreement, Target and Acquiror will prepare, and
Target will distribute any required Information Statement to the shareholders of
Target at the earliest practicable time. As promptly as practicable after the
date of this Agreement, Acquiror will prepare and file any other filings
required under the Exchange Act, the Securities Act or any other Federal,
foreign or state securities or blue sky laws relating to the Merger and the
transactions contemplated by this Agreement (the "OTHER FILINGS"). The
Information Statement and the Other Filings will comply in all material respects
with all applicable requirements of law and the rules and regulations
promulgated thereunder. Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Information Statement or any Other
Filing, Target or Acquiror, as the case may be, will promptly inform the other
of such occurrence and cooperate in making any appropriate amendment or
supplement, and/or mailing to shareholders of Target, such amendment or
supplement. The Information Statement will include the recommendation of the
Board of Directors of Target in favor of adoption and approval of this Agreement
and approval of the Merger.
Section 7.10 Tax-Free Reorganization. No party shall take any action either
prior to or after the Effective Time that could reasonably be expected to cause
the Merger to fail to qualify as a "reorganization" under Section 368(a) of the
Code. Acquiror will continue at least one significant business line of Target,
or use at least a significant portion of Target's historic business assets in a
business, in each case within the meaning of Reg. (S) 1.368-1(d). All parties
36
shall treat the Merger as a reorganization qualifying under (S) 368(a) of the
Code on their respective tax returns. Acquiror shall reasonably cooperate with
Target in providing information and certifications required for Target to obtain
the legal opinion referred to in Section 8.3(d) of this Agreement.
ARTICLE 8
CONDITIONS TO MERGER
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction, in all material respects, prior to the
Closing Date of the following conditions:
(a) Approvals. Other than the filing provided for by Section 1, all
---------
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods (including the waiting period under the
HSR Act) imposed by, any governmental entity shall have been filed, occurred or
been obtained.
(b) No Injunctions or Restraints; Illegality. No temporary
----------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger or limiting or restricting
conduct or operation of the business of Acquiror after the Merger shall have
been issued, nor shall any proceeding brought by a domestic administrative
agency or commission or other domestic governmental entity, seeking any of the
foregoing be pending; nor shall there be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger which makes the consummation of the Merger illegal.
(c) Pooling Letters. Acquiror shall have received a letter from
---------------
PricewaterhouseCoopers LLP dated as of the Closing Date and addressed to
Acquiror, regarding that firm's concurrence with Acquiror's management's and
Target's management's conclusion that the business combination to be effected by
the Merger will qualify as a pooling of interests transaction under GAAP if
consummated in accordance with this Agreement. Target shall have received a
letter from Ernst & Young LLP dated as of the Closing Date and addressed to
Target, regarding that firm's concurrence with Target's management's and
Acquiror's management's conclusion as to certain criteria required by APB
Opinion #16 for the application of "pooling of interests" accounting to the
Merger, in the form previously provided to Acquiror's counsel.
(d) Nasdaq. The shares of Acquiror Common Stock to be issued in the
------
Merger shall have been approved for quotation on the Nasdaq National Market.
Section 8.2 Additional Conditions to Obligations of Acquiror and Sub. The
obligations of Acquiror and Sub to effect the Merger are subject to the
satisfaction of each of the following conditions, any of which may be waived in
writing exclusively by Acquiror and Sub:
37
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties of Target made pursuant to this Agreement shall be true and correct
in all material respects as of the Closing Date (it being understood that
representations and warranties made "as of the date hereof" shall also be deemed
to have been made as of the Closing Date); and Acquiror shall have received a
certificate signed on behalf of Target by the chief executive officer and the
chief financial officer of Target to such effect.
(b) Performance of Obligations of Target. Target shall have performed
------------------------------------
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date; and Acquiror shall have received
a certificate signed on behalf of Target by the chief executive officer and the
chief financial officer of Target to such effect.
(c) Shareholder Approval. The shareholders of Target entitled to vote
--------------------
on or consent to this Agreement and the Merger in accordance with Delaware Law
and Target's Certificate of Incorporation shall have approved this Agreement and
the Merger.
(d) Blue Sky Laws. Acquiror shall have received all state securities
-------------
or "Blue Sky" permits and other authorizations necessary to issue shares of
Acquiror Common Stock pursuant to the Merger.
(e) Dissenting Shareholders. Not more than 2.5% of Target's issued
-----------------------
and outstanding capital stock as of the Closing shall be held by persons
exercising appraisal rights under Delaware Law with respect to such shares.
(f) Escrow Agreement. The Escrow Agent and the Target Shareholders
----------------
shall have executed and delivered to Acquiror the Escrow Agreement and such
agreement shall remain in full force and effect.
(g) Shareholder Agreements. Each Target Shareholder who is receiving
----------------------
shares of Acquiror Common Stock in the Merger shall have executed and delivered
to Acquiror a Shareholders Agreement, in the form attached hereto as Exhibit C,
---------
and each such agreement shall remain in full force and effect.
(h) Ancillary Agreements. Each of the Employment Agreements executed
--------------------
and delivered concurrently with the execution of this Agreement shall remain in
full force and effect.
(i) Opinion of Counsel and Other Documents. Acquiror shall have
--------------------------------------
received (i) an opinion dated the Closing Date of Xxxxxxx, Procter & Xxxx LLP,
counsel to Target, in a form to be agreed upon by the parties and (ii) such
other certificates and documents with respect to Target as counsel for the
Acquiror shall have reasonably requested.
(j) Approvals. All authorizations, consents, or approvals of, or
---------
notifications to any third party listed in Section 8.2 of the Target Disclosure
Schedule, shall have occurred or been obtained.
38
(k) Termination of Agreements. The following agreements between
-------------------------
Target and certain of its shareholders shall have been terminated: (i)
Shareholders' Agreement by and among Elbit Systems, Inc., Elbit Limited and the
Investors (defined therein) dated as of September 30, 1996, and (ii)
Registration Rights Agreement by and among Elbit Systems, Inc., Elbit Limited
and the Investors dated as of September 30, 1996 .
(l) Fairness Opinion. Acquiror shall have received the written
----------------
opinion of BancBoston Xxxxxxxxx Xxxxxxxx to the effect that the Exchange Ratio
is fair to Acquiror from a financial point of view.
(m) Target Indebtedness. The long-term obligations (including current
-------------------
portion) of Target of the type recorded on the Most Recent Balance Sheet under
the caption "Long-term obligations" shall not be more than $20 million.
(n) Due Diligence. Acquiror shall have received and completed its
-------------
review of all documents and other information requested by Acquiror in writing
prior to the date hereof which have not been delivered to Acquiror on or before
the date hereof; all of which must be satisfactory to Acquiror.
(o) No Material Adverse Change. Except as disclosed in this Agreement
--------------------------
or the Schedules hereto, there shall not have been any change or series of
changes that have a material adverse effect or could reasonably be expected to
have a material adverse effect on the business, financial condition or results
of operations of Target since the date of the Most Recent Balance Sheet.
Section 8.3 Additional Conditions to Obligations of Target. The obligation
of Target to effect the Merger is subject to the satisfaction of each of the
following conditions, any of which may be waived, in writing, exclusively by
Target:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Acquiror and Sub made pursuant to this Agreement shall be true and
correct in all material respects as of the Closing Date (it being understood
that representations and warranties made "as of the date hereof" shall also be
deemed to have been made as of the Closing Date); and Target shall have received
a certificate signed on behalf of Acquiror by the chief executive officer and
the chief financial officer of Acquiror to such effect.
(b) Performance of Obligations of Acquiror and Sub. Acquiror and Sub
----------------------------------------------
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date; and
Target shall have received a certificate signed on behalf of Acquiror by the
chief executive officer and the chief financial officer of Acquiror to such
effect.
39
(c) Shareholder Approval. The shareholders of Target entitled to vote
--------------------
on or consent to this Agreement and the Merger in accordance with Delaware Law
and Target's Certificate of Incorporation shall have approved this Agreement and
the Merger.
(d) Blue Sky Laws. Acquiror shall have received all state securities
-------------
or "Blue Sky" permits and other authorizations necessary to issue shares of
Acquiror Common Stock pursuant to the Merger.
(e) Escrow Agreement. The Escrow Agent and Acquiror shall have
----------------
executed and delivered the Escrow Agreement and such agreement shall remain in
full force and effect.
(f) Approvals. All authorizations, consents or approvals of, or
---------
notifications to any third party listed on Section 8.3 of Acquiror's Disclosure
Schedule, shall have occurred or been obtained.
(g) Target Indebtedness. The outstanding indebtedness of Target to
-------------------
Bank of Boston and the outstanding indebtedness of Target to Elbit Limited
("ELBIT") shall be paid off by FLIR at Closing.
(h) Tax Opinion. Target shall have received the opinion of Xxxxxxx,
-----------
Procter & Xxxx LLP, counsel to Target, to the effect that the Merger will be
treated for Federal income tax purposes as a tax-free reorganization within the
meaning of Section 368(a) of the Code.
(i) Opinion of Counsel and Other Documents. Target shall have
--------------------------------------
received (i) an opinion dated the Closing Date of Xxxx Xxxxx LLP, counsel to
Acquiror, in a form to be agreed upon by the parties and (ii) such other
certificates and documents with respect to Acquiror as counsel for Target shall
have reasonably requested.
(j) No Material Adverse Change. Except as disclosed in this Agreement
--------------------------
or the Schedules or SEC Reports, there shall not have been any change or series
of changes that have a material adverse effect or could reasonably be expected
to have a material adverse effect on the business, financial condition or
results of operations of Acquiror since September 30, 1998.
Section 8.4 Condition to Obligations of Elbit. The obligations of Elbit to
effect the Merger are subject to the satisfaction of the following condition,
which may be waived, in writing, exclusively by Elbit: the outstanding
indebtedness of Target to Elbit shall be paid off by FLIR at Closing.
40
ARTICLE 9
TERMINATION AND AMENDMENT
Section 9.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual written consent of Acquiror and Target;
(b) by either Acquiror or Target, by giving written notice to the
other party, if a court of competent jurisdiction or other Governmental Entity
shall have issued a nonappealable final order, decree or ruling or taken any
other action, in each case having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger, except, if such party relying on
such order, decree or ruling or other action shall not have complied with its
respective obligations under Sections 5.5 or 6.3 of this Agreement, as the case
may be;
(c) by Acquiror or Target, by giving written notice to the other
party, if the other party is in material breach of any representation, warranty,
or covenant of such other party contained in this Agreement, which breach shall
not have been cured, if subject to cure, within 10 business days following
receipt by the breaching party of written notice of such breach by the other
party;
(d) by Acquiror, by giving written notice to Target, if the Closing
shall not have occurred on or before March 31, 1999 by reason of the failure of
any condition precedent under Section 8.1 or 8.2 (unless the failure results
primarily from a breach by Acquiror of any representation, warranty, or covenant
of Acquiror contained in this Agreement);
(e) by Target, by giving written notice to Acquiror, if the Closing
shall not have occurred on or before March 31, 1999 by reason of the failure of
any condition precedent under Section 8.1 or 8.3 (unless the failure results
primarily from a breach by Target of any representation, warranty, or covenant
of Target contained in this Agreement);
(f) by Target, by giving written notice to Acquiror, if the average of
the closing sales prices of Acquiror Common Stock reported in the Wall Street
Journal on the basis of information provided by the Nasdaq Stock Market for each
of the 20 trading days immediately preceding (but not including) the first date
on which all of the conditions set forth in Article 8 shall have been satisfied
or waived, shall be less than $8.00 per share (as adjusted for any stock splits,
reclassifications, stock dividends or the like between the date of this
Agreement and the date of termination); or
(g) by Acquiror, by giving written notice to Target, if the average of
the closing sales prices of Acquiror Common Stock reported in the Wall Street
Journal on the basis of information provided by the Nasdaq Stock Market for each
of the 20 trading days immediately preceding (but not including) the first date
on which all of the conditions set forth in Article 8
41
shall have been satisfied or waived, shall be more than $22.00 per share (as
adjusted for any stock splits, reclassifications, stock dividends or the like
between the date of this Agreement and the date of termination).
Section 9.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall immediately become
void and there shall be no liability or obligation on the part of Acquiror,
Target, Sub or their respective officers, directors, shareholders or Affiliates,
provided, however, that (i) the provisions of the last sentence of Section 5.4
and Sections 7.1, 7.2, 9.2, 9.3 and Article 11 shall survive any termination of
this Agreement, and (ii) nothing herein shall relieve any party from liability
for any breach of this Agreement prior to the date of termination.
Section 9.3 Fees and Expenses.
(a) Except as set forth in this Section 9.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses.
(b) If the Merger is consummated, all legal, accounting, investment
banking, broker's and finder's fees and expenses incurred by Target in its
corporate capacity in connection with the Merger shall be paid by Acquiror or
the Surviving Corporation.
ARTICLE 10
INDEMNIFICATION
Section 10.1 Scope of Indemnification. Each Target Shareholder severally
and not jointly agrees to indemnify and hold harmless Acquiror and Sub, their
affiliates and their respective officers, directors, employees and agents
(individually, an "INDEMNIFIED PARTY" and collectively, the "INDEMNIFIED
PARTIES") from and against and in respect of all losses, liabilities,
obligations, damages, deficiencies, actions, suits, proceedings, demands,
assessments, orders, judgments, fines, penalties, costs and expenses (including
the reasonable fees, disbursements and expenses of attorneys, accountants and
consultants) of any kind or nature whatsoever (whether or not arising out of
third-party claims and including all amounts paid in investigation, defense or
settlement of the foregoing) sustained, suffered or incurred by or made against
any Indemnified Party (a "LOSS" or "LOSSES") arising out of or based upon:
(a) fraud, intentional misrepresentation or a deliberate or willful
breach by Target or the Target Shareholders of any of their representations,
warranties, covenants or agreements under this Agreement or any of the
Transaction Documents or in any certificate, schedule or exhibit delivered under
this Agreement or any of the Transaction Documents, or by reason of any claim,
action or proceeding asserted or instituted arising out of any matter or thing
covered by any such representation, warranty, covenant or agreement; and
42
(b) any other breach of any representation, warranty, covenant or
agreement made by Target or the Target Shareholders in this Agreement or any of
the Transaction Documents or in any schedule, exhibit, certificate, financial
statement, agreement or other instrument delivered under or in connection with
this Agreement or any of the Transaction Documents, or by reason of any claim,
action or proceeding asserted or instituted arising out of any matter or thing
covered by any such representation, warranty, covenant or agreement.
Claims under clauses (a) and (b) of this Section 10.1 are hereinafter
collectively referred to as "INDEMNIFIABLE CLAIMS."
Section 10.2 Limitation of Liability. The indemnification obligation of
the Target Shareholders pursuant to this Section 10 shall be subject to the
following limitations:
(a) The maximum aggregate liability of the Target Shareholders with
respect to the indemnification provided in Section 10.1 (the "AGGREGATE
LIABILITY CAP") shall be equal to 50 percent of the aggregate fair market value
of the Acquiror Common Stock issued to the Target Shareholders in the Merger
calculated based on the Closing Stock Price. The maximum aggregate liability of
each Target Shareholder with respect to the indemnification provided in Section
10.1 shall be such Target Shareholder's Pro Rata Indemnity Share (as defined in
Section 10.2(b)) of the Aggregate Liability Cap.
(b) Except as otherwise provided below, the indemnification obligation
of the Target Shareholders under Section 10.1 shall be satisfied first out of
the Escrow Shares. If any indemnity obligation is satisfied out of the Escrow
Shares, each Target Shareholder shall be considered to have paid that portion of
the indemnity obligation that is equal to the percentage set forth opposite that
Target Shareholder's name on Exhibit A of the Escrow Agreement (the "PRO RATA
INDEMNITY SHARE"). Subject to the Aggregate Liability Cap expressed in Section
10.2(a) above, if the Escrow Shares remaining in escrow on the date a Claim
Notice (as defined below) is sent to the Escrow Agent, valued as provided
herein, are insufficient to satisfy the indemnity obligation hereunder, each
Target Shareholder shall be severally and not jointly liable for the amount of
its Pro Rata Indemnity Share of the remaining deficiency. Any such deficiency
may be paid by surrendering to Acquiror a number of shares of Acquiror Common
Stock having a value (calculated based on the Closing Stock Price) equal to the
deficiency.
(c) Subject to the exceptions set forth in Section 10.2(e), the Target
Shareholders shall not be obligated to indemnify Indemnified Parties in respect
of any Loss arising from Indemnifiable Claims pursuant to Section 10.1(b) until
the cumulative amount of such claims exceeds One Million Dollars ($1,000,000),
whereupon the full amount of such Losses shall be recoverable in accordance with
the terms hereof.
(d) Subject to the exceptions set forth in Section 10.2(e),
indemnification with respect to Losses arising from Indemnifiable Claims
pursuant to Section 10.1(b) shall expire on the date that is 180 days after the
Closing (the "EXPIRATION DATE"); provided, however, that in each case if prior
-------- -------
to the Expiration Date a specific state of facts shall have become known
43
which may constitute or give rise to any Indemnifiable Loss as to which
indemnity may be payable and an Indemnified Party shall have given written
notice of such facts to the Target Shareholders, then the right to
indemnification with respect thereto shall remain in effect until such matter
shall have been finally determined and disposed of, and any indemnification due
in respect thereof shall have been paid.
(e) Notwithstanding anything in this Section 10.2 to the contrary,
Indemnified Parties shall not be subject to any limitation, whether pursuant to
this Section 10.2 or otherwise and shall be entitled to dollar-for-dollar
recovery, in seeking indemnification from the Target Shareholders with respect
to Losses arising under or described in Section 10.1(a).
Section 10.3 Procedure for Indemnification. The obligations and
liabilities of the Target Shareholders in connection with claims for
indemnification for Losses by an Indemnified Party shall be subject to the
following terms and conditions:
(a) The Indemnified Party shall give written notice to each Target
Shareholder (or the designated representative of the Target Shareholders) and
the Escrow Agent (to the extent Escrow Shares remain in escrow) of its claim for
indemnification as promptly as practicable whenever the Indemnified Party shall
have determined that there are facts or circumstances which render or would
reasonably and forseeably render the Target Shareholders liable for
indemnification under this Article 10; provided, however, that the failure to
give a timely notice of a claim for indemnification shall not limit the
indemnification obligations of the Target Shareholders hereunder except to the
extent that the delay in giving such notice materially adversely affects the
ability of the Target Shareholders to either defend against a Third Party Claim
(as hereinafter defined) or in any way mitigate Losses with respect to any
claim. The notice (a "CLAIM NOTICE") shall set forth in reasonable detail the
basis for the claim, the nature of the Losses and the amount thereof. To the
extent such amount is not known, an Indemnified Party shall reasonably estimate
the Losses associated with such claim.
(b) If the Claim Notice states that a claim has been asserted by a
third party against the Indemnified Party (a "THIRD PARTY CLAIM"), the Target
Shareholders or their representative shall have 30 days (or 10 days in the case
of a Third Party Claim with respect to which a complaint has been filed) after
their receipt of the Claim Notice to notify the Indemnified Party in writing
whether the Target Shareholders elect to undertake, conduct and control, through
counsel of their choosing, and at their sole risk and expense, the good faith
settlement or defense of the Third Party Claim.
(i) If within the appropriate time period specified in this
Section 0 above the Target Shareholders notify the Indemnified Party that
they elect to undertake the good faith settlement or defense of the Third
Party Claim, the Target Shareholders shall conduct the defense or undertake
the settlement in good faith and in a diligent manner and the Indemnified
Party shall cooperate with the Target Shareholders in connection therewith
and make available to the Target Shareholders all relevant information
material to the defense of the Third Party Claim. The Indemnified Party
shall
44
be entitled to participate in the settlement or defense of the Third Party
Claim through counsel chosen by the Indemnified Party, provided that the
fees and expenses of the Indemnified Party's counsel shall be borne by the
Indemnified Party unless: (a) the employment of counsel for the Indemnified
Party in connection with the defense of the Third Party Claim shall have
been authorized in writing by the Target Shareholders; (b) the Indemnified
Party shall have reasonably concluded based on the written advice of
counsel that there are defenses available to him, her or it which are
different from or additional to those available to the Target Shareholders;
or (c) the Indemnified Party's legal counsel shall advise the Indemnified
Party in writing, with a copy to the Target Shareholders, that there is a
conflict of interest that would make it inappropriate under applicable
standards of professional conduct to have common counsel. If any of items
(a) through (c) of the immediately preceding sentence apply, the Target
Shareholders shall pay the fees and expenses of the Indemnified Party's
counsel as well as any Losses. The Indemnified Party shall have the right
to approve all settlements of Third Party Claims, which approval will not
be unreasonably withheld. So long as the Target Shareholders are reasonably
contesting the Third Party Claim in good faith, the Indemnified Party shall
not pay or settle the Third Party Claim without the Target Shareholders'
written consent, which consent will not be unreasonably withheld.
(ii) If (a) the Target Shareholders shall not have notified the
Indemnified Party of their election to undertake the good faith settlement
or defense of the Third Party Claim within the time specified by Section
10.3(b) hereof or (b) if, within fifteen (15) days after receipt by the
Target Shareholders of written notice that the Target Shareholders are not
diligently conducting the defense or attempted settlement in good faith,
the Target Shareholders do not provide reasonably sufficient evidence to
the Indemnified Party that the Target Shareholders are diligently
conducting the defense or attempting settlement in good faith, the
Indemnified Party shall thereafter have the right to hire its own counsel
to contest, settle or compromise the Third Party Claim in a reasonably
appropriate manner without waiving any right to indemnification from the
Target Shareholders (including indemnification for the Indemnified Party's
attorneys' fees and expenses).
Section 10.4 Value of Escrow Shares. In the event that any portion of the
indemnity obligation of the Target Shareholders is satisfied out of shares of
Acquiror Common Stock, the price used to determine the value of each share of
Acquiror Common Stock used to satisfy such indemnity obligation shall be equal
to the Closing Stock Price.
Section 10.5 Exclusive Remedy. Except for any remedy of specific
performance or any other equitable remedy to which any party may be entitled,
and except in the case of fraud or any action required to enforce the
indemnification provisions or Sections 6.5(a) or 6.10 of this Agreement, the
indemnification provisions set forth in this Article 10 shall provide the sole
and exclusive rights and remedies under which a party to this Agreement may
assert a claim against another party with respect to any and all breaches of any
representation, warranty, covenant or agreement contained herein made to the
party asserting the claim.
45
Section 10.6 Reliance. No disclosure by any party ("DISCLOSING PARTY") to
this Agreement nor any investigation made by or on behalf of another party with
respect to the Disclosing Party shall be deemed to affect the other party's
reliance on the respective representations and warranties contained in this
Agreement (including the Schedules) and shall not effect a waiver of that
party's rights to indemnity as herein provided for the breach of any of said
representations and warranties.
ARTICLE 11
MISCELLANEOUS
Section 11.1 Survival of Representations and Covenants. All
representations, warranties, covenants and agreements of Target contained in
this Agreement shall survive the Closing. All representations, warranties,
covenants and agreements of Acquiror contained in this Agreement shall terminate
as of the Effective Time, provided that the covenants and agreements contained
in Sections 2.4, 6.5, 6.8, 6.9, 6.10, 7.2, 7.5, 7.10, 9.3 and Article 11 shall
survive the Closing and shall continue in full force and effect.
Section 11.2 Notices. All notices, requests, demands or other
communications which are required or may be given pursuant to the terms of this
Agreement shall be in writing and shall be deemed to have been duly given (i)
upon receipt, if delivered by hand, (ii) one (1) business day after deposit with
a nationally-recognized overnight courier service, with delivery charges prepaid
or otherwise satisfied, or (iii) three (3) days after deposit in the United
States mail, postage prepaid, certified or registered mail, addressed to a party
as follows:
(a) if to Acquiror or Sub:
FLIR Systems, Inc.
00000 X.X. 00xx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx, Esq.
Fax No: 000-000-0000
Telephone No: 000-000-0000
with a copy to:
Xxxx Xxxxx LLP
000 X.X. Xxxxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
Fax No: 000-000-0000
Telephone No: 000-000-0000
46
(b) if to Target, to:
Inframetrics, Inc.
00 Xxxxxxx Xxxx
X. Xxxxxxxxx, XX 00000
Attention: President
Fax No: 000-000-0000
Telephone No: 000-000-0000
with a copy to:
Xxxxxxx, Procter & Xxxx, LLP
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Fax No: 000-000-0000
Telephone No: 000-000-0000
(c) if to Target Shareholders:
At the address set forth beneath each Target Shareholders'
signature below
with a copy to:
Xxxxxxx, Procter & Xxxx, LLP
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Fax No: 000-000-0000
Telephone No: 000-000-0000
Section 11.3 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "INCLUDE,"
"INCLUDES" or "INCLUDING" are used in this Agreement they shall be deemed to be
followed by the words "WITHOUT LIMITATION."
Section 11.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
47
Section 11.5 Entire Agreement; No Third Party Beneficiaries. This
Agreement (including the documents and the instruments referred to herein), the
Confidentiality Agreement, and the Transaction Documents (a) constitute the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
and (b) are not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
Section 11.6 Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware, without giving effect to
its conflicts of laws principles.
Section 11.7 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. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
Section 11.8 Amendment. This Agreement may be amended by the parties
hereto at any time before or after approval of matters presented in connection
with the Merger by the shareholders of Target, but after any such shareholder
approval, no amendment shall be made which by law requires the further approval
of shareholders without obtaining such further approval. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 11.9 Certain Remedies. It is specifically understood and agreed
that any breach of this Agreement by any of the parties hereto will result in
irreparable injury to Acquiror, Sub, Target and the Target Shareholders, as
applicable, that the remedy at law alone will be an inadequate remedy for such
breach and that, in addition to any other remedy it may have, the aggrieved
party shall be entitled to have all obligations, undertakings, agreements,
covenants and other provisions of this Agreement specifically performed by the
breaching party and to seek both temporary and permanent injunctive relief,
without the necessity of proving actual damages, but without limitation of their
rights to recover such damages.
Section 11.10 Severability. In case any of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, any such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement, but this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had been
limited or modified (consistent with its general intent) to the extent necessary
to make it valid, legal or enforceable, or if it shall not be possible to so
limit or modify such invalid, illegal or unenforceable provision or part of a
provision, this Agreement shall be construed as if such invalid, illegal or
unenforceable provision or part of a provision had never been contained in this
Agreement.
48
Section 11.11 Attorneys' Fees. If a proceeding is filed by any party to
enforce this Agreement or otherwise with respect to the subject matter of this
Agreement, the prevailing party or parties shall be entitled to recover
reasonable attorneys' fees incurred in connection with such proceeding as fixed
by the trial court, and if any appeal is taken from the decision of the trial
court, reasonable attorneys' fees as fixed by the appellate court.
Section 11.12 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or the other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations or warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
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.
IN WITNESS WHEREOF, Acquiror, Sub and Target have caused this Agreement and
Plan of Merger to be signed by their respective officers thereunto duly as of
the date first written above.
INFRAMETRICS, INC. FLIR SYSTEMS, INC.
By: /s/ Xxx Xxxxx By: /s/ J. Xxxxxxx Xxxxxxxx
------------------------------ -----------------------
Name: Xxx Xxxxx J. Xxxxxxx Xxxxxxxx III
------------------------- President
Title: President
---------------------------
IRABU ACQUISITION CORPORATION
By: /s/ J. Xxxxxxx Xxxxxxxx
-------------------------------
J. Xxxxxxx Xxxxxxxx III
President
49
TARGET SHAREHOLDERS
Advent Direct Investment Program Limited
Partnership
By:/s/ Xxxxxx X. Xxxxxxxx
----------------------
Name:
----------------------------------
Title:
----------------------------------
Address:c/o Advent International Corporation
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx
Advent Israel Limited Partnership
By:/s/ Xxxxxx X. Xxxxxxxx
----------------------
Name:
----------------------------------
Title:
----------------------------------
Address:c/o Advent International Corporation
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx
Advent Israel (Bermuda) Limited Partnership
By:/s/ Xxxxxx X. Xxxxxxxx
----------------------
Name:
-----------------------------------
Title:
-----------------------------------
Address:c/o Advent International Corporation
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx
EnviroTech Investment Fund I Limited
Partnership
By:/s/ Xxxxxx X. Xxxxxxxx
----------------------
Name:
----------------------------------
Title:
----------------------------------
Address:c/o Advent International Corporation
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx
50
Global Private Equity II Limited Partnership
By:/s/ Xxxxxx X. Xxxxxxxx
----------------------
Name:
----------------------------------
Title:
----------------------------------
Address:c/o Advent International Corporation
00 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx
Commonwealth Capital Ventures Limited
Partnership
By:/s/ Xxxxxxx X. Xxxxx
--------------------
Name:
-----------------------------------
Title:
-----------------------------------
Address: 00 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx
Orion Capital Holdings, Limited Partnership
By:/s/ Xxxxx Xxxxxxxxx
-------------------
Name:
-----------------------------------
Title:
-----------------------------------
Address: c/o Orion Partners, L.P.
00 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxxx
M-K I Partnership, Limited Partnership
By:/s/ Xxxxx Xxxxxxxxx
-------------------
Name:
-----------------------------------
Title:
-----------------------------------
Address: c/o Orion Partners, L.P.
00 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxxxx
51
The Parthenon Group, Inc.
By:/s/ Xxxxxx Xxxxxx
-----------------
Name:
----------------------------------
Title:
----------------------------------
Address: 000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx Xxxxxx
Inframetrics Investment Limited Partnership
By:/s/ Xxx Xxxxx
--------------
Name:
------------------------------------
Title:
------------------------------------
Address: c/o Inframetrics, Inc.
00 Xxxxxxx Xxxx
Xxxxx Xxxxxxxxx, XX 00000-0000
Attn: Xxx Xxxxx and Xxxxxx Xxxxxxxxxx
Elbit Limited
By:/s/ Xxxxxxx Xxxx
----------------
Name:
-----------------------------------
Title:
-----------------------------------
Address: X.X. Xxx 000
Xxxxxxxx Xxxxxxxxxx Xxxxxx
Xxxxx 00000 - Israel
Attn: Xxxxxxx Xxxx
/s/ Xxxxxx Xxxxxxxxxx
---------------------
Xxxxxx Xxxxxxxxxx
Address: 00 Xxxxxxxxx Xxxx
Xxxxxx, XX 00000
/s/ Xxx Xxxxxxxxx
-----------------
Xxx Xxxxxxxxx
Address: 00 Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
52
/s/ Xxxxxx Xxxxxxx
------------------
Xxxxxx Xxxxxxx
Address: 00 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
/s/ Xxx Xxxxx
-------------
Xxx Xxxxx
Address: 00 Xxxxxxx Xxxx
Xxxxxx, XX 00000
/s/ Xxxx Xxxxx
--------------
Xxxx Xxxxx
Address: 00 Xxxxxx Xxxx
Xxxxxxx, XX 00000
/s/ Xxxxxxx Xxxxxxxxx
---------------------
Xxxxxxx Xxxxxxxxx
Address: 00 Xxxxxx Xxxxxx
Xxxxx, XX 00000
53
