EXHIBIT 2
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AGREEMENT AND PLAN OF MERGER
by and among
VARIAN MEDICAL SYSTEMS, INC.,
VARIAN MEDICAL SYSTEMS NEW ZEALAND, LTD.
and
IMPAC MEDICAL SYSTEMS, INC.
Dated as of June 6, 2000
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS........................................................................2
1.1 DEFINED TERMS.................................................................2
1.2 INTERPRETATION PROVISIONS....................................................12
ARTICLE 2 THE MERGER........................................................................12
2.1 THE MERGER...................................................................12
2.2 EFFECTIVE TIME...............................................................13
2.3 EFFECT OF THE MERGER.........................................................13
2.4 ARTICLES OF INCORPORATION; BYLAWS............................................13
2.5 DIRECTORS AND OFFICERS.......................................................13
2.6 CONVERSION OF SECURITIES.....................................................14
2.7 SURRENDER OF CERTIFICATES....................................................15
2.8 NO FURTHER OWNERSHIP RIGHTS IN SHARES OF COMPANY STOCK AND PREFERRED STOCK...16
2.9 LOST, STOLEN OR DESTROYED CERTIFICATES.......................................16
2.10 ESCROW OF MERGER SHARES......................................................16
2.11 DISSENTING SHARES............................................................16
2.12 OPTIONS......................................................................17
2.13 TAX CONSEQUENCES.............................................................18
2.14 TAKING OF NECESSARY ACTION; FURTHER ACTION...................................18
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................................18
3.1 ORGANIZATION OF THE COMPANY..................................................18
3.2 CAPITALIZATION OF THE COMPANY................................................18
3.3 STOCKHOLDERS' AGREEMENTS, ETC................................................19
3.4 AUTHORIZATION................................................................19
3.5 OFFICERS AND DIRECTORS.......................................................20
3.6 BANK ACCOUNTS................................................................20
3.7 SUBSIDIARIES, ETC............................................................20
3.8 REAL PROPERTY................................................................20
3.9 PERSONAL PROPERTY............................................................21
3.10 ENVIRONMENTAL MATTERS........................................................22
3.11 CONTRACTS....................................................................23
3.12 NO CONFLICT OR VIOLATION; CONSENTS...........................................25
3.13 PERMITS......................................................................25
3.14 FINANCIAL STATEMENTS; BOOKS AND RECORDS......................................25
3.15 ABSENCE OF CERTAIN CHANGES OR EVENTS.........................................26
3.16 LIABILITIES..................................................................27
3.17 LITIGATION...................................................................27
3.18 LABOR MATTERS................................................................28
3.19 EMPLOYEE BENEFIT PLANS.......................................................28
3.20 TRANSACTIONS WITH RELATED PARTIES............................................32
3.21 COMPLIANCE WITH LAW..........................................................32
3.22 INTELLECTUAL PROPERTY........................................................32
3.23 TAX MATTERS..................................................................33
3.24 INSURANCE....................................................................35
3.25 ACCOUNTS RECEIVABLE..........................................................36
3.26 CUSTOMERS....................................................................36
3.27 SUPPLIERS....................................................................36
3.28 BROKERS; TRANSACTION COSTS...................................................36
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3.29 FOREIGN CORRUPT PRACTICES ACT................................................36
3.30 FINANCIAL PROJECTIONS; OPERATING PLAN........................................36
3.31 MATERIAL MISSTATEMENTS OR OMISSIONS..........................................37
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB..................................37
4.1 ORGANIZATION.................................................................37
4.2 CAPITALIZATION...............................................................37
4.3 AUTHORIZATION................................................................38
4.4 NO CONFLICT OR VIOLATION; CONSENTS...........................................38
4.5 REPORTS AND FINANCIAL STATEMENTS.............................................38
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS.........................................39
ARTICLE 5 ACTIONS BY THE COMPANY AND PARENT PRIOR TO THE CLOSING............................39
5.1 CONDUCT OF BUSINESS..........................................................39
5.2 ACCESS BY PARENT.............................................................41
5.3 NOTIFICATION OF CERTAIN MATTERS..............................................41
5.4 NO MERGERS, CONSOLIDATIONS, SALE OF STOCK, ETC...............................41
5.5 POOLING ACCOUNTING TREATMENT.................................................42
5.6 COMPANY STOCKHOLDER APPROVAL.................................................42
5.7 FAIRNESS HEARING; REGISTRATION OF SHARES.....................................42
5.8 FIRPTA COMPLIANCE............................................................43
5.9 NEW YORK STOCK EXCHANGE LISTING OF ADDITIONAL SHARES APPLICATION.............43
5.10 TAKEOVER STATUTES............................................................43
5.11 FURTHER ASSURANCES...........................................................43
5.12 EMPLOYEES....................................................................44
5.13 INDEMNIFICATION..............................................................44
5.14 BOARD MEMBER.................................................................44
5.15 TAX MATTERS..................................................................44
ARTICLE 6 CONDITIONS TO THE COMPANY'S OBLIGATIONS...........................................45
6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS....................................45
6.2 FAIRNESS APPROVAL; EFFECTIVENESS OF REGISTRATION STATEMENT...................45
6.3 GOVERNMENTAL CONSENTS........................................................45
6.4 NO ACTIONS OR COURT ORDERS...................................................45
6.5 STOCKHOLDER APPROVAL.........................................................45
6.6 OPINION OF COUNSEL...........................................................45
6.7 MATERIAL ADVERSE CHANGE......................................................46
6.8 POOLING LETTERS..............................................................46
6.9 LISTING......................................................................46
ARTICLE 7 CONDITIONS TO PARENT'S AND SUB'S OBLIGATIONS......................................46
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS....................................46
7.2 FAIRNESS APPROVAL; EFFECTIVENESS OF REGISTRATION STATEMENT...................46
7.3 CONSENTS.....................................................................46
7.4 NO ACTIONS OR COURT ORDERS...................................................47
7.5 AGREEMENTS; EMPLOYEES........................................................47
7.6 STOCKHOLDER APPROVAL.........................................................47
7.7 OPINION OF COUNSEL...........................................................47
7.8 LISTING......................................................................47
7.9 AGREEMENTS WITH RELATED PARTIES..............................................47
7.10 FIRPTA COMPLIANCE............................................................47
7.11 DIRECTORS....................................................................47
7.12 POOLING LETTERS..............................................................47
7.13 MATERIAL ADVERSE CHANGE......................................................48
7.14 DISSENTERS RIGHTS............................................................48
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7.15 401(K) PLAN TERMINATION......................................................48
7.16 CARECORE CREDIT AGREEMENT....................................................48
ARTICLE 8 CLOSING...........................................................................48
ARTICLE 9 INDEMNIFICATION...................................................................48
9.1 SURVIVAL OF REPRESENTATIONS, ETC.............................................48
9.2 INDEMNIFICATION..............................................................49
9.3 NO RIGHT OF CONTRIBUTION.....................................................51
9.4 THRESHOLD; LIMITATIONS ON INDEMNITY..........................................51
9.5 STOCKHOLDER REPRESENTATIVE; POWER OF ATTORNEY................................51
ARTICLE 10 MISCELLANEOUS....................................................................52
10.1 TERMINATION..................................................................52
10.2 ASSIGNMENT...................................................................53
10.3 NOTICES......................................................................53
10.4 CHOICE OF LAW................................................................54
10.5 REPRESENTATION BY COUNSEL....................................................54
10.6 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS.....................................54
10.7 COUNTERPARTS.................................................................55
10.8 INVALIDITY...................................................................55
10.9 EXPENSES.....................................................................55
10.10 PUBLICITY....................................................................55
10.11 NO THIRD PARTY BENEFICIARIES.................................................55
10.12 DISPUTE RESOLUTION...........................................................56
10.13 WAIVER OF JURY TRIAL.........................................................56
10.14 SERVICE OF PROCESS; CONSENT TO JURISDICTION..................................57
10.15 ATTORNEY FEES................................................................57
SCHEDULE 1.1(b) "TO THE KNOWLEDGE" PARTIES
SCHEDULE 2.5 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
SCHEDULE 3.1 ORGANIZATION OF THE COMPANY
SCHEDULE 3.2(a) AUTHORIZED CAPITALIZATION
SCHEDULE 3.2(b) OPTIONS
SCHEDULES 3.3 STOCKHOLDERS' AGREEMENTS, ETC.
SCHEDULE 3.5 OFFICERS AND DIRECTORS
SCHEDULE 3.6 BANK ACCOUNTS
SCHEDULE 3.7 SUBSIDIARIES, ETC.
SCHEDULE 3.8(b) LEASED REAL PROPERTY
SCHEDULE 3.9(b) OWNED PERSONAL PROPERTY
SCHEDULE 3.9(c) LEASED PERSONAL PROPERTY
SCHEDULE 3.10(a) COMPLIANCE
SCHEDULE 3.10(d) ENVIRONMENTAL INDEMNITIES
SCHEDULE 3.10(f) ENVIRONMENTAL REPORTS
SCHEDULE 3.11(a) CONTRACTS
SCHEDULE 3.11(b) ABSENCE OF DEFAULTS
SCHEDULE 3.12 NO CONFLICT OR VIOLATION; CONSENTS
SCHEDULE 3.13 PERMITS
SCHEDULE 3.15 ABSENCE OF CERTAIN CHANGES OR EVENTS
SCHEDULE 3.17 LITIGATION
SCHEDULE 3.18(c) SEVERANCE OBLIGATIONS
SCHEDULE 3.19 EMPLOYEE BENEFIT PLANS
SCHEDULE 3.20 TRANSACTIONS WITH RELATED PARTIES
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SCHEDULE 3.22(a) GENERAL
SCHEDULE 3.23(a) FILING OF TAX RETURNS
SCHEDULE 3.23(b) PAYMENT OF TAXES
SCHEDULE 3.23(c) AUDIT HISTORY; LIENS, ETC.
SCHEDULE 3.23(d) TAX ELECTIONS
SCHEDULE 3.24 INSURANCE
SCHEDULE 3.25 ACCOUNTS RECEIVABLE
SCHEDULE 3.27 SUPPLIERS
SCHEDULE 3.28 BROKERS; TRANSACTION COSTS
SCHEDULE 4.4 NO CONFLICT OR VIOLATION; CONSENTS
SCHEDULE 5.1 CONDUCT OF BUSINESS
SCHEDULE 6.3 GOVERNMENTAL CONSENTS
SCHEDULE 6.6 OPINION OF COUNSEL
SCHEDULE 7.3 CONSENTS
SCHEDULE 7.7 OPINION OF COUNSEL
SCHEDULE 7.9 AGREEMENTS WITH RELATED PARTIES
SCHEDULE 9.2(a) CONTINUING EMPLOYEES
EXHIBIT A ESCROW AGREEMENT
EXHIBIT B ARTICLES OF INCORPORATION
EXHIBIT C TAX REPRESENTATION LETTERS
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER is dated as of June 6, 2000 (the
"AGREEMENT"), by and among Varian Medical Systems, Inc., a Delaware corporation
("PARENT"), Varian Medical Systems New Zealand, Ltd., a Delaware corporation
("SUB"), and IMPAC Medical Systems, Inc., a California corporation (the
"COMPANY").
RECITALS:
A. The Boards of Directors of Parent, Sub and the Company have determined
that it is advisable and in the best interests of their respective stockholders
for Parent, Sub and the Company to enter into a business combination upon the
terms and subject to the conditions set forth herein.
B. In furtherance of such combination, the Boards of Directors of Parent,
Sub and the Company have each approved the merger of Sub with and into the
Company (the "MERGER"), upon the terms and subject to the conditions set forth
herein, in accordance with the applicable provisions of the California
Corporation Code (the "CCC") and the Delaware General Corporation Law (the
"DGCL").
C. Parent, Sub and the Company intend, by approving resolutions authorizing
this Agreement, to adopt this Agreement as a plan of reorganization and that the
Merger qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "CODE"), and the regulations
promulgated thereunder.
D. Parent, Sub and the Company further intend that the Merger qualify for
pooling of interests accounting treatment under Accounting Principles Board
Opinion No. 16 ("APB 16") and the applicable rules and regulations of the SEC
(as defined herein).
E. Pursuant to the Merger, each outstanding share of common stock, par
value $0.0001 per share, of the Company (the "COMPANY STOCK") shall be converted
solely into the right to receive Parent Stock (as defined herein), upon the
terms and subject to the conditions set forth herein.
F. As an inducement to Parent and Sub to enter into this Agreement, certain
shareholders of the Company have entered into (i) Support Agreements with Parent
(the "SUPPORT AGREEMENTS"), pursuant to which, among other things, such
shareholders have agreed to vote the shares of Company Stock owned by them in
favor of the Merger and adoption of this Agreement, and (ii) Company Affiliate
Agreements ("COMPANY AFFILIATE AGREEMENTS"), pursuant to which, among other
things, certain shareholders of the Company have agreed to refrain from selling
shares of Company Stock and Parent Stock during a specified period prior to and
following consummation of the Merger.
G. As an inducement to the Company to enter into this Agreement, certain
affiliates of Parent have concurrently herewith entered into Parent Affiliate
Agreements ("PARENT AFFILIATE AGREEMENTS"), pursuant to which, among other
things, such stockholders have agreed to refrain
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from selling shares of Parent Stock during a specified period prior to and
following consummation of the Merger.
H. As a further inducement to Parent and Sub to enter into this Agreement
(i) certain shareholders of the Company have concurrently herewith entered into
Non-Competition Agreements (the "NON-COMPETITION AGREEMENTS"), and (ii) certain
employees of the Company have executed Offer Letters (the "OFFER LETTERS"), to
become employees of Parent, each of which shall become effective upon the
occurrence of the Effective Time (as defined below).
I. A portion of the shares of Parent Stock otherwise issuable by Parent in
connection with the Merger shall be placed in escrow by Parent.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Sub and the Company hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINED TERMS. As used herein, the terms below shall have the following
meanings:
"ACTION" shall mean any action, order, writ, injunction, judgment or
decree outstanding, or claim, suit, litigation, proceeding, arbitration,
mediation, investigation or dispute.
"AFFILIATE" of a Person means any other Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"ANCILLARY AGREEMENTS" means the Escrow Agreement, the Non-Competition
Agreements, the Support Agreements, the Parent Affiliate Agreements, the Company
Affiliate Agreements, the Offer Letters and all other agreements required
hereunder.
"ASSETS" means the right, title and interest of the Company and its
Subsidiaries in its properties, assets and rights of any kind, whether tangible
or intangible, real or personal, including without limitation the right, title
and interest in the following:
(a) all Contracts and Contract Rights;
(b) all Fixtures and Equipment;
(c) all Inventory;
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(d) all Books and Records;
(e) all Proprietary Rights;
(f) all Permits;
(g) all return and other rights under or pursuant to all warranties,
representations and guarantees made by suppliers and other third parties in
connection with the Assets or services furnished to the Company or its
Subsidiaries;
(h) all cash, accounts receivable, deposits and prepaid expenses; and
(i) all goodwill.
"BALANCE SHEET" means the consolidated balance sheet of the Company as
of the Balance Sheet Date.
"BALANCE SHEET DATE" means September 30, 1999.
"BENEFIT ARRANGEMENT" means any employment, consulting, severance or
other similar contract, arrangement or policy (written or oral) and each plan,
arrangement, program, agreement or commitment (written or oral) providing for
insurance coverage (including, without limitation, any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, life, health or
accident benefits (including, without limitation, any "voluntary employees'
beneficiary association" as defined in Section 501(c)(9) of the Code providing
for the same or other benefits) or for deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation rights, stock purchases or other
forms of incentive compensation or post-retirement insurance, compensation or
benefits which (a) is not a Welfare Plan, Pension Plan or Multiemployer Plan,
(b) is entered into, maintained, contributed to or required to be contributed
to, as the case may be, by the Company or any ERISA Affiliate or under which the
Company or any ERISA Affiliate may incur any liability, and (c) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with such any entity).
"BOOKS AND RECORDS" means (a) all product, business and marketing
plans, sales and promotional literature and artwork relating to the Assets or
the Business, (b) all books, records, lists, ledgers, financial data, files,
reports, product and design manuals, plans, drawings, technical manuals and
operating records of every kind relating to the Assets or the Business
(including records and lists of customers, distributors, suppliers and
personnel) and (c) all telephone and fax numbers used in the Business, in each
case whether maintained as hard copy or stored in computer memory and whether
owned by the Company or its Affiliates.
"BUSINESS" means the business and operations of the Company and its
Subsidiaries.
"CLOSING" has the meaning set forth in Section 2.1(b).
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"CLOSING DATE" means the date of the Closing.
"CLOSING PRICE" means the closing sales price of the Parent Stock on
the New York Stock Exchange as reported in the Wall St. Journal for the Trading
Day immediately prior to the Closing Date.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY CONFIDENTIALITY AGREEMENT" means that certain Confidentiality
Agreement dated as of December 1, 1999 between Parent and the Company.
"COMPANY MATERIAL ADVERSE EFFECT" or "COMPANY MATERIAL ADVERSE CHANGE"
means a Material Adverse Effect or Material Adverse Change with respect to the
Company and its Subsidiaries, taken as a whole; PROVIDED, HOWEVER, that this
definition shall exclude (i) an adverse development in the Company's
relationship with Siemens Medical Systems, Inc. ("Siemens"), (ii) loss of
customers, sales or employees as a direct result of the announcement of the
Merger, (iii) a change, event or development in the health care information
services business generally, or (iv) changes directly as a result of the Noted
Exceptions.
"COMPANY OPTIONS" means options to purchase shares of Company Stock
issued by the Company pursuant to the Company Stock Option Plans.
"COMPANY STOCK OPTION PLANS" means the 1998 Stock Plan of the Company
and the 1993 Stock Option Plan of the Company.
"COMMON EXCHANGE RATIO" means the result of dividing (i) the Common
Parent Shares, by (ii) the Number of Company Shares minus the Number of
Preferred Shares.
"COMMON PARENT SHARES" means the Number of Parent Shares minus the
Preferred Parent Shares.
"COMPANY STOCK" has the meaning set forth in the Recitals.
"CONSENTS" means any and all Permits and any and all consents,
approvals or waivers from third parties that are required for the consummation
of the transactions contemplated by this Agreement.
"CONTRACT RIGHTS" means all rights and obligations under the
Contracts.
"CONTRACTS" means all agreements, contracts, leases (whether for real
or personal property), purchase orders, undertakings, covenants not to compete,
employment agreements, confidentiality agreements, licenses, instruments,
obligations and commitments to which the Company or one of its Subsidiaries is a
party or by which the Company or one of its Subsidiaries or any of the Assets
are bound or affected, whether written or oral.
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"COURT ORDER" means any judgment, decision, consent decree,
injunction, ruling or order of any foreign, federal, state or local court or
governmental agency, department or authority that is binding on any Person or
its property under applicable law.
"DEFAULT" means (a) a breach of or default under any Contract, (b) the
occurrence of an event that with the passage of time or the giving of notice or
both would constitute a breach of or default under any Contract or (c) the
occurrence of an event that with or without the passage of time or the giving of
notice or both would give rise to a right of termination, renegotiation or
acceleration under any Contract.
"DEPOSITARY AGENT" means U.S. Trust Company National Association, as
depositary agent under the Escrow Agreement, or any alternative or successor
agent which (a) shall be designated by Parent and the Company if designated
prior to Closing and (b) shall be designated in accordance with the terms of the
Escrow Agreement if designated after Closing.
"EFFECTIVE TIME" has the meaning set forth in Section 2.2.
"EMPLOYEE PLANS" means all Benefit Arrangements, Multiemployer Plans,
Pension Plans and Welfare Plans.
"EMPLOYEES" means all officers and directors of the Company and its
Subsidiaries all other Persons employed by the Company and its Subsidiaries on a
full or part-time basis.
"ENCUMBRANCE" means any claim, lien, pledge, option, charge, easement,
tax assessment, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes any agreement to give any of the
foregoing in the future, and any contingent sale or other title retention
agreement or lease in the nature thereof.
"ENVIRONMENTAL CLAIMS" means all notices of violation, liens, claims,
demands, suits, or causes of action for any damage, including, without
limitation, personal injury, property damage (including, without limitation, any
depreciation or diminution of property values), lost use of property or
consequential damages, arising directly or indirectly out of Environmental
Conditions or Environmental Laws. By way of example only (and not by way of
limitation), Environmental Claims include (i) violations of or obligations under
any contract related to Environmental Laws or Environmental Conditions between
the Company and any other person, (ii) actual or threatened damages to natural
resources, (iii) claims for nuisance or its statutory equivalent, (iv) claims
for the recovery of response costs, or administrative or judicial orders
directing the performance of investigations, responses or remedial actions under
any Environmental Laws, (v) requirements to implement "corrective action"
pursuant to any order or permit issued pursuant to the Resource Conservation and
Recovery Act, as amended, or similar provisions of applicable state law,
(vi) claims related to Environmental Laws or Environmental Conditions for
restitution, contribution, or indemnity, (vii) fines, penalties or liens of any
kind against property related to Environmental Laws or Environmental Conditions,
(viii) claims related to Environmental Laws or Environmental Conditions for
injunctive relief or other orders
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or notices of violation from federal, state or local agencies or courts, and
(ix) with regard to any present or former employees, claims relating to exposure
to or injury from Environmental Conditions.
"ENVIRONMENTAL CONDITIONS" means the state of the environment,
including natural resources (e.g., flora and fauna), soil, surface water, ground
water, any present or potential drinking water supply, subsurface strata or
ambient air, relating to or arising out of the use, handling, storage,
treatment, recycling, generation, transportation, release, spilling, leaking,
pumping, pouring, emptying, discharging, injecting, escaping, leaching,
disposal, dumping or threatened release of Hazardous Substances by the Company
or any of its predecessors in interest, or by its respective agents,
representatives, employees or independent contractors when acting in such
capacity on behalf of the Company. With respect to Environmental Claims by third
parties, Environmental Conditions also include the exposure of persons to
Hazardous Substances at the work place or the exposure of persons or property to
Hazardous Substances migrating from or otherwise emanating from or located on
property owned or occupied by the Company.
"ENVIRONMENTAL LAWS" means all applicable federal, state, district and
local laws, all rules or regulations promulgated thereunder, and all orders,
consent orders, judgments, notices, permits or demand letters issued,
promulgated or entered pursuant thereto, relating to pollution or protection of
the environment (including ambient air, surface water, ground water, land
surface, or subsurface strata), including, without limitation, (i) laws relating
to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, industrial materials, wastes or other substances into
the environment and (ii) laws relating to the identification, generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
recovery, transport or other handling of pollutants, contaminants, chemicals,
industrial materials, wastes or other substances. Environmental Laws shall
include, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), the Toxic
Substances Control Act, as amended, the Hazardous Materials Transportation Act,
as amended, the Resource Conservation and Recovery Act, as amended ("RCRA"), the
Clean Water Act, as amended, the Safe Drinking Water Act, as amended, the Clean
Air Act, as amended, the Occupational Safety and Health Act, as amended, and all
analogous laws promulgated or issued by any state or other Governmental
Authority.
"ENVIRONMENTAL REPORTS" means any and all written analyses, summaries
or explanations, in the possession or control of the Company or its
Subsidiaries, prepared for the purpose of analyzing or assessing (a) any
Environmental Conditions in, on or about the properties of the Company or
(b) the Company's compliance with Environmental Laws.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means any entity which is (or at any relevant time
was) a member of a "controlled group of corporations" with, under "common
control" with, or a member of an "affiliated service group" with, or otherwise
required to be aggregated with, the Company as set forth in Section 414(b), (c),
(m) or (o) of the Code.
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"ESCROW AGREEMENT" means the Escrow Agreement to be entered into among
Parent, the Shareholder Representative and the Depositary Agent, substantially
in the form of EXHIBIT A hereto.
"ESCROW SHARES" has the meaning set forth in Section 2.10.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FACILITIES" means all offices, warehouses, administration buildings
and all real property and related facilities leased by the Company or its
Subsidiaries.
"FINANCIAL STATEMENTS" means (a) the consolidated balance sheets of
the Company (or its predecessor, as the case may be) as of September 30, 1999,
1998 and 1997 and the related consolidated statements of income, changes in
stockholders' equity and cash flows, of the Company for the years ended
September 30, 1999 and 1998, together with the report of PricewaterhouseCoopers
LLP thereon, and (b) the consolidated balance sheets of the Company as of March
31, 2000 and March 31, 1999 and the related consolidated statements of income,
changes in stockholders' equity and cash flows, of the Company for the three (3)
and six (6) month periods then ended.
"FIXTURES AND EQUIPMENT" means all of the furniture, fixtures,
furnishings, machinery, computer hardware, and other tangible personal property
owned by the Company or its Subsidiaries, wherever located.
"FORMER PROPERTIES" means all plants, offices, manufacturing
facilities, stores, warehouses, administration buildings and all real property
and related facilities owned, leased or operated by the Company or any
predecessor prior to the date hereof, but excluding the Facilities.
"GAAP" means generally accepted accounting principles as applied in
the United States.
"HAZARDOUS SUBSTANCES" means all pollutants, contaminants, chemicals,
wastes, and any other carcinogenic, ignitable, corrosive, reactive, toxic or
otherwise hazardous substances or materials (whether solids, liquids or gases)
subject to regulation, control or remediation under Environmental Laws. By way
of example only, the term Hazardous Substances includes petroleum, urea
formaldehyde, flammable, explosive and radioactive materials, PCBs, asbestos,
acids, metals, solvents and waste waters.
"HSR ACT" means the Xxxx Xxxxx Xxxxxx Antitrust Improvements Act of
1976, as amended.
"INVENTORY" means all merchandise owned and intended for resale.
"LIABILITY" means with respect to any Person any direct or indirect
liability, indebtedness, obligation, commitment, expense, claim, deficiency,
guaranty or endorsement of or by such Person of any type, whether accrued,
absolute, contingent, matured, unmatured, liquidated, unliquidated, known or
unknown.
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"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" or a similar
phrase means, with respect to any Person, (a) any material adverse effect on or
event, development or change with respect to the business, operations, assets,
liabilities, condition (financial or otherwise), results of operations or
prospects, of such Person and its Subsidiaries, taken as a whole, or (b) any
event or condition which, with the passage of time, the giving or receipt of
notice or the occurrence or nonoccurrence of any other circumstance, action or
event, would reasonably be expected to constitute a "Material Adverse Effect" on
or "Material Adverse Change" with respect to such Person.
"MULTIEMPLOYER PLAN" means any "multiemployer plan," as defined in
Section 4001(a)(3) or 3(37) of ERISA, which (a) the Company or any ERISA
Affiliate maintains, administers, contributes to or is required to contribute
to, or, after September 25, 1980, maintained, administered, contributed to or
was required to contribute to, or under which the Company or any ERISA Affiliate
may incur any liability and (b) covers any employee or former employee of the
Company or any ERISA Affiliate (with respect to their relationship with any such
entity).
"NET SALES TAX LIABILITY" means the amount by which the Company's
Sales Tax Liability exceeds the amounts received by the Company from its
customers with respect to such Sales Tax Liability.
"NOTED EXCEPTIONS" means those items set forth on Schedules 3.15 and
5.1.
"NUMBER OF COMPANY SHARES" means the number of shares of Company Stock
issued and outstanding at the Effective Time plus the number of shares of
Company Stock issuable upon all options, warrants, convertible securities and
other rights to acquire Company Stock, including Company Options, outstanding at
the Effective Time, whether vested or unvested.
"NUMBER OF PARENT SHARES" means 3,271,947 shares of Parent Stock.
"NUMBER OF PREFERRED SHARES" means 1,238,390 shares of Company Stock.
"PARENT MATERIAL ADVERSE CHANGE" has the meaning set forth in Section
4.6 hereof.
"PARENT STOCK" means the common stock, par value $1.00 per share, of
Parent.
"PENSION PLAN" means any "employee pension benefit plan" as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) which (a) the Company or
any ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or, within the five (5) years prior to the Closing Date,
maintained, administered, contributed to or was required to contribute to, or
under which the Company or any ERISA Affiliate may incur any liability
(including, without limitation, any contingent liability) and (b) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with any such entity).
8
"PERMITTED ENCUMBRANCES" means with respect to the Company
(a) statutory liens of landlords, liens of carriers, warehousepersons, mechanics
and materialpersons incurred in the ordinary course of business for sums (i) not
yet due and payable, or (ii) being contested in good faith, if, in either such
case, an adequate reserve, shall have been made therefor in the Company's
financial statements, (b) liens incurred or deposits made in connection with
workers' compensation, unemployment insurance and other similar types of social
security programs or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return of money bonds and similar obligations, in each case in
the ordinary course of business, consistent with past practice, (c) easements,
rights-of-way, restrictions and other similar charges or encumbrances, in each
case, which do not interfere with the ordinary conduct of business of the
Company and do not materially detract from the value of the property upon which
such encumbrance exists, and (d) liens securing taxes, assessments and
governmental charges not yet delinquent.
"PERMITS" means all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, necessary or desirable for
the past, present or anticipated conduct or operation of the Business or
ownership of the Assets.
"PERSON" means any person or entity, whether an individual, trustee,
corporation, limited liability company, general partnership, limited
partnership, trust, unincorporated organization, business association, firm,
joint venture, governmental agency or authority or any similar entity.
"PREFERRED EXCHANGE RATIO" means the result of dividing (i) Preferred
Parent Shares, by (ii) the Number of Preferred Shares.
"PREFERRED PARENT SHARES" means the sum of (i) the number of shares of
Parent Stock equal to $2,000,000 divided by the Thirty Day Average Price, and
(ii) the product of (a) Number of Parent Shares, minus the number of shares of
Parent Stock in clause (i), multiplied by (b) the Preferred Percentage.
"PREFERRED PERCENTAGE" means the result of dividing (i) the Number of
Preferred Shares, by (ii) the Number of Company Shares.
"PROPRIETARY RIGHTS" means all (a) U.S. and foreign trademarks,
service marks, trade dress, logos, trade names and corporate names and the
goodwill associated therewith and registrations and applications for
registration thereof, (b) U.S. and foreign copyrights and registrations and
applications for registration thereof, (c) U.S. and foreign mask work rights and
registrations and applications for registration thereof, (d) Trade Secrets,
(e) URL and domain name registrations, (f) other proprietary rights, (g) copies
and tangible embodiments thereof (in whatever form or medium) and (h) licenses
from third parties granting any rights to Company or Parent (as applicable) with
respect to any of the foregoing.
"REGULATIONS" means any laws, statutes, ordinances, regulations,
rules, notice requirements, court decisions, agency guidelines, and orders of
any foreign, federal, state or local
9
government and any other governmental department or agency, including without
limitation energy, motor vehicle safety, public utility, zoning, building and
health codes, Environmental Laws, occupational safety and health and laws
respecting employment practices, employee documentation, terms and conditions of
employment and wages and hours.
"RELATED PARTY" means (i) any of the Company's officers, directors and
stockholders holding more than 5% of the outstanding shares of Company Stock or
Preferred Stock, and any officers, directors, partners, associates or relatives
of such officers, directors and stockholders, (ii) any Person in which the
Company or any Stockholder or any Affiliate, associate or relative of any such
Person has any direct or indirect interest, and (iii) any direct or indirect
trustee or beneficiary of any Stockholder.
"REPRESENTATIVE" of any Person means any officer, director, principal,
attorney, accountant, agent, employee or other representative of such Person.
"SALES TAX LIABILITY" means sales, use and similar taxes, together
with any interest, penalty, addition to tax of additional amount imposed by any
government authority responsible for the imposition of such taxes owed by the
Company to any State (or State taxing authority) other than California, Florida,
Minnesota, New York and Nevada as of the Closing Date.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"STOCKHOLDER" means each shareholder of the Company and "STOCKHOLDERS"
means all shareholders of the Company, in each case as determined immediately
prior to the Effective Time.
"STOCKHOLDER CONSENT" has the meaning set forth in Section 5.6.
"STOCKHOLDER REPRESENTATIVE" means Xxxxx Xxxxxxxx.
"SUBSIDIARY" means, with respect to any Person, (a) any corporation of
which at least 50% of the securities or interests having, by their terms,
ordinary voting power to elect members to the board of directors, or other
persons performing similar functions with respect to such corporation, is held,
directly or indirectly, by such Person, (b) any partnership or limited liability
company of which (i) such Person is a general partner or managing member or
(ii) such Person possesses a 50% or greater interest in the total capital or
total income of such partnership or limited liability company.
"TAKEOVER STATUTE" means a "fair price," "moratorium," "control share
acquisition" or other similar antitakeover statute or regulation enacted under
state or federal laws in the United States.
10
"TAX RETURN" means any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) including information returns, and any
documents with respect to or accompanying requests for the extension of time in
which to file any such report, return, document, declaration or other
information.
"TAX" means (i) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, AD VALOREM, value added, transfer,
franchise, profits, license, registration, recording, documentary, conveyancing,
gains, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, environmental or windfall profit tax, custom duty or other
tax, governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest, penalty, addition to tax or additional amount
imposed by any governmental authority responsible for the imposition of any such
tax (domestic or foreign), (ii) in the case of the Company, liability for the
payment of any amount described in clause (i) as a result of being or having
been before the Closing Date a member of an affiliated, combined, consolidated
or unitary group, and (iii) liability for the payment of any amounts of the type
described in clause (i) as a result of being party to any agreement or any
express or implied obligation to indemnify any other Person.
"THIRD PARTY LITIGATION" means any Action brought by any third party,
relating to, arising out of, or in connection with, the transactions
contemplated by this Agreement, including the Merger, which is pending at the
Closing.
"THIRTY DAY AVERAGE PRICE" means the average of the closing prices of
the Parent Stock on the New York Stock Exchange as reported in the Wall Street
Journal for the thirty-day period ending three days prior to the Effective Time.
"TO THE KNOWLEDGE" or "KNOWLEDGE" of a party (or similar phrases)
means to the extent of matters which are actually known, after reasonable
inquiry, by such party and when used in respect of the Company, the term "to the
knowledge" or "knowledge" shall mean the matters actually known, after
reasonable inquiry, by each of the individuals listed on Schedule 1.1(b).
"TRADE SECRETS" means all trade secrets and confidential
business information (including ideas, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, research and development information, software, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial, marketing and business data, pricing and cost information, business
and marketing plans marketing mailing and e-mail lists, and customer and
supplier mailing and e-mail lists and information).
"TRADING DAY" means any day on which the New York Stock Exchange is
open and available for at least five (5) hours for the trading of securities.
"TRANSMITTAL LETTER" has the meaning set forth in Section 2.7 hereof.
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"WELFARE PLAN" means any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA, which (a) the Company or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or under which the
Company or any ERISA Affiliate may incur any liability and (b) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with any such entity).
1.2 INTERPRETATION PROVISIONS.
(a) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement, and article, section, schedule and
exhibit references are to this Agreement unless otherwise specified. The meaning
of defined terms shall be equally applicable to the singular and plural forms of
the defined terms. The terms "include" and "including" are not limiting and mean
"including without limitation."
(b) References to agreements and other documents shall be deemed to
include all subsequent amendments and other modifications thereto.
(c) References to statutes shall include all regulations promulgated
thereunder and references to statutes or regulations shall be construed as
including all statutory and regulatory provisions consolidating, amending or
replacing the statute or regulation.
(d) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the construction of this Agreement.
(e) The parties participated jointly in the negotiation and drafting
of this Agreement and the language used in this Agreement shall be deemed to be
the language chosen by the parties to express their mutual intent. If an
ambiguity or question of intent or interpretation arises, then this Agreement
will accordingly be construed as drafted jointly by the parties to this
Agreement, and no presumption or burden of proof will arise favoring or
disfavoring any party to this Agreement by virtue of the authorship of any of
the provisions of this Agreement.
(f) The annexes, schedules and exhibits to this Agreement are a
material part hereof and shall be treated as if fully incorporated into the body
of the Agreement.
ARTICLE 2
THE MERGER
2.1 THE MERGER.
(a) EFFECTIVE TIME. At the Effective Time (as defined in Section 2.2
hereof), and upon the terms and subject to the conditions of this Agreement and
the CCC and the DGCL, Sub shall be merged with and into the Company, the
separate corporate existence of Sub shall cease, and the Company shall continue
as the surviving corporation. The Company, as the surviving corporation after
the Merger, is hereinafter sometimes referred to as the "Surviving Corporation."
12
(b) CLOSING. Unless this Agreement shall have been terminated pursuant
to Section 10.1, and subject to the satisfaction (or the extent permitted, the
waiver) of the conditions set forth in Articles 6 and 7, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place
(i) at the offices of Xxxxxx & Xxxxxxx, 000 Xxxxxxxxxxxx Xxxxx, Xxxxx Xxxx,
Xxxxxxxxxx 00000, as promptly as practicable (and in any event within five (5)
business days) after satisfaction (or the extent permitted, the waiver) of the
conditions set forth in Articles 6 and 7 or (ii) at such other time, date or
place as Parent and the Company may mutually agree.
2.2 EFFECTIVE TIME. As promptly as practicable after the satisfaction (or
the extent permitted, the waiver) of the conditions set forth in Articles 6 and
7, and provided that this Agreement has not been terminated pursuant to Section
10.1, the parties hereto shall cause the Merger to be consummated by executing
and filing an agreement of merger, in form and substance reasonably acceptable
to the Company and Parent as contemplated by the CCC (the "Agreement of
Merger"), with the Secretary of State of California as provided in Section 1108
of the CCC and a certificate of merger as contemplated by the DGCL (the
"Certificate Of Merger"), with the Secretary of State of Delaware as provided in
Section 251 of the DGCL. The time of acceptance by the Secretary of State of
California of such filing being referred to herein as the "Effective Time."
2.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement, the Agreement of Merger and the
applicable provisions of the CCC and the DGCL.
2.4 ARTICLES OF INCORPORATION; BYLAWS.
(a) ARTICLES OF INCORPORATION. At the Effective Time, the Articles of
Incorporation of the Company as in effect immediately prior to the Effective
Time, as amended as set forth in EXHIBIT B hereto, shall be the Articles of
Incorporation of the Surviving Corporation, until duly amended in accordance
with applicable law.
(b) BYLAWS. At the Effective Time, the Bylaws of the Company, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter duly amended in accordance with
applicable law, the Articles of Incorporation of the Surviving Corporation and
such Bylaws.
2.5 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 Articles of Incorporation and Bylaws of
the Surviving Corporation, and the initial officers of the Surviving Corporation
shall be the individuals set forth on SCHEDULE 2.5, in each case until their
respective successors are duly elected or appointed and qualified in the manner
provided in the Articles of Incorporation and Bylaws of the Surviving
Corporation and in accordance with applicable law. Upon request of Parent, the
Company shall cause each or any director of the Company to tender his or her
resignation prior to the Effective Time, with each such resignation to be
effective as of the Effective Time.
13
2.6 CONVERSION OF SECURITIES. At the Effective Time, by virtue of the
Merger and without any further action on the part of Parent, Sub, the Company or
any Stockholder:
(a) NUMBER OF SHARES OF PARENT STOCK ISSUABLE. The number of shares of
Parent Stock to be issued in connection with the Merger (including shares of
Parent Stock issuable upon exercise of all Company Options outstanding as of the
Effective Time to be assumed by Parent as provided herein) in exchange for the
acquisition by Parent of all outstanding shares of Company Stock, Preferred
Stock, all other capital stock of any class or series, and all outstanding
options, warrants, or other securities to acquire capital stock of the Company,
including Company Options, shall not exceed the Number of Parent Shares.
(b) COMPANY STOCK; PREFERRED STOCK. Each share of Company Stock issued
and outstanding immediately prior to the Effective Time (other than shares to be
cancelled pursuant to Section 2.6(d) and Dissenting Shares (as provided in
Section 2.11)) shall be converted into the right to receive, and become
exchangeable for, such number of validly issued, fully paid and nonassessable
shares of Parent Stock as equals the Common Exchange Ratio. Each share of
Preferred Stock issued and outstanding immediately prior to the Effective Time
(other than shares to be cancelled pursuant to Section 2.6(d) and Dissenting
Shares (as provided in Section 2.11)) shall be converted into the right to
receive, and become exchangeable for, such number of validly issued, fully paid
and nonassessable shares of Parent Stock as equals the Preferred Exchange Ratio.
The shares of Parent Stock issued in connection with the Merger as a result of
the conversions provided for in this Section 2.6(b) are sometimes referred to
herein as the "Merger Shares."
(c) SUB STOCK. Each share of common stock, par value $.01 per share,
of Sub issued and outstanding immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
automatically be converted into and thereafter represent one (1) validly issued,
fully paid and nonassessable common share, par value $.01 per share, of the
Surviving Corporation, so that thereafter Parent will be the sole and exclusive
owner of the capital stock of the Surviving Corporation.
(d) CANCELLATION. Each share of Company Stock and Preferred Stock held
in the treasury of the Company or by any Subsidiary of the Company immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, automatically cease to be outstanding,
be canceled and retired without payment of any consideration therefor and cease
to exist.
(e) FRACTIONAL SHARES. No certificates or scrip representing
fractional shares of Parent Stock shall be issued in connection with the Merger,
but in lieu thereof each Stockholder who would otherwise be entitled to receive
a fraction of a Merger Share shall receive from Parent an amount of cash equal
to the product of (i) the fraction of a share of a Merger Share to which such
holder would otherwise be entitled multiplied by (ii) the Closing Price. The
fractional share determination shall be made individually for each Stockholder
after giving effect to the delivery of the Escrow Shares (as defined below) to
the Depositary Agent, it being recognized that, as provided in Section 2.10,
only whole shares may be delivered to the Depositary Agent.
14
(f) ADJUSTMENTS TO EXCHANGE RATIOS. The Common Exchange Ratio and
Preferred Exchange Ratio shall be equitably adjusted to reflect fully the effect
of any stock split, reverse split, stock combination, stock dividend,
reorganization, reclassification, recapitalization or other like change with
respect to Parent Stock, Preferred Stock or Company Stock after the date hereof
and prior to the Effective Time.
2.7 SURRENDER OF CERTIFICATES.
(a) DISTRIBUTION OF TRANSMITTAL LETTER. As soon as practicable after
the Effective Time, Parent shall cause to be mailed to each record holder of
certificates or certificates evidencing Company Stock or Preferred Stock (the
"Certificates") a letter of transmittal in customary form (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to Parent or its designated
representative and shall be in such form and have such other provisions as
Parent shall reasonably specify) (the "Transmittal Letter") and instructions for
such holder's use in effecting the surrender of the Certificate and the exercise
of the rights of such holder to obtain its Merger Shares.
(b) DELIVERY OF CERTIFICATES. Upon surrender to Parent or its
designated representative of any Certificates for cancellation, together with a
duly-executed and completed Transmittal Letter, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate representing the
number of whole shares of Parent Stock (less such holder's pro rata portion of
Merger Shares to be deposited with the Depositary Agent pursuant to Section 2.10
hereof) to which such holder is entitled pursuant to Section 2.6, plus cash in
lieu of fractional shares.
(c) CANCELLATION OF COMPANY STOCK AND PREFERRED STOCK. Upon surrender
of each Certificate and delivery by Parent of the Merger Shares to be delivered
in exchange therefor, such Certificate shall forthwith be canceled. Until so
surrendered, each Certificate (other than Certificates representing Dissenting
Shares) shall be deemed for all corporate purposes to evidence only the right to
receive upon such surrender the aggregate number of Merger Shares into which the
Company Stock or Preferred Stock represented thereby shall have been converted
in accordance with the terms and upon the conditions of this Agreement
(including the requirement that a portion of such Merger Shares be deposited
with the Depositary Agent), plus cash in lieu of fractional shares.
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF COMPANY STOCK
AND PREFERRED STOCK. No dividends or other distributions with respect to Parent
Stock declared or made after the Effective Time and with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Stock represented thereby until the holder of
record of such Certificate shall surrender such Certificate. Subject to
applicable law, promptly following surrender of any such Certificate, there
shall be paid to the record holder of the certificates representing whole shares
of Parent Stock issued in exchange therefor, without interest, at the time of
such surrender, the amount of dividends or other distributions with a record
date after the Effective Time, if any, theretofore payable with respect to such
whole shares of Parent Stock.
15
2.8 NO FURTHER OWNERSHIP RIGHTS IN SHARES OF COMPANY STOCK AND PREFERRED
STOCK. The shares of Parent Stock delivered upon the surrender for exchange of
Company Stock or Preferred Stock in accordance with the terms hereof shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Stock or Preferred Stock, and there shall be no further
registration of transfers of Company Stock or Preferred Stock which were
outstanding immediately prior to the Effective Time on the records of the
Surviving Corporation. If, after the Effective Time, the Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article 2.
2.9 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any Certificates
shall have been lost, stolen or destroyed, Parent shall issue in exchange for
such lost, stolen or destroyed Certificates, upon the making of an affidavit of
that fact by the holder thereof, such shares of Parent Stock as may be required
pursuant to Section 2.7; provided, however, that Parent may, in its sole
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificates to deliver an indemnity or
bond in such sum as it may reasonably direct as indemnity against any claim that
may be made against Parent with respect to the Certificates alleged to have been
lost, stolen or destroyed.
2.10 ESCROW OF MERGER SHARES. Notwithstanding the other provisions of this
Article 2, Parent shall deliver to the Depositary Agent 10% of the Merger Shares
(the "Escrow Shares"). The portion of the Escrow Shares contributed on behalf of
each Stockholder shall be in proportion to the aggregate number of shares of
Parent Stock which such holder would otherwise be entitled under Section 2.6.
The Escrow Shares shall be withheld from the Parent Stock otherwise deliverable
to the Stockholders. The Escrow Shares shall be deposited with the Depositary
Agent and disbursed in accordance with the Escrow Agreement. The Escrow Shares
shall be beneficially owned by the holders on whose behalf such shares were
deposited.
2.11 DISSENTING SHARES
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Stock or Preferred Stock held by a holder who has demanded
and perfected dissenters' rights for such shares in accordance with the CCC and
who, as of the Effective Time, has not effectively withdrawn or lost such
dissenters' rights ("Dissenting Shares") shall not be converted into or
represent a right to receive Parent Stock pursuant to Section 2.6, but the
holder thereof shall only be entitled to such rights as are granted by the CCC.
(b) Notwithstanding the provisions of subsection (a) above, if any
holder of shares of Company Stock or Preferred Stock who demands dissenters'
rights for such shares under the CCC shall effectively withdraw or lose (through
failure to perfect or otherwise) the right to dissenters' rights, then, as of
the later of (i) the Effective Time or (ii) the occurrence of such event, such
holder's shares shall automatically be converted into and represent only the
right to receive Parent Stock as provided in Section 2.6, without interest
thereon, upon surrender of the certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of its receipt of
any written demands for dissenters' rights for any shares of Company Stock or
Preferred Stock,
16
withdrawals of such demands, and any other instruments relating to the Merger
served pursuant to the CCC and received by the Company and (ii) the opportunity
to participate in all negotiations and proceedings with respect to demands for
dissenters' rights under the CCC. The Company shall not, except with the prior
written consent of Parent or as may be required under applicable law,
voluntarily make any payment with respect to any demands for dissenters' rights
for Company Stock or Preferred Stock or offer to settle or settle any such
demands.
2.12 OPTIONS.
(a) Prior to the Effective Time, the Board of Directors of the Company
(the "Company Board") (or, if appropriate, any committee thereof) and the Board
of Directors of Parent (the "Parent Board") (or, if appropriate, any committee
thereof) shall adopt appropriate resolutions and take all other actions
necessary to provide that effective at the Effective Time, each outstanding
Company Option, whether vested or unvested, shall be assumed by Parent and shall
continue in effect on the same terms and conditions as in effect immediately
prior to the Effective Time (subject to the adjustments in this Section 2.12)
and each such Company Option shall be converted automatically into an option (a
"New Option") to purchase the number of shares of Parent Stock, determined as
provided below, at the exercise price, determined as provided below:
(i) The number of shares of Parent Stock to be subject to
the New Option shall be equal to the product of (x) the number of
shares of Company Stock remaining subject (as of immediately prior to
the Effective Time) to the Company Option multiplied by (y) the Common
Exchange Ratio, provided that the number of shares of Parent Stock
resulting therefrom shall be rounded to the nearest whole share of
Parent Stock.
(ii) The exercise price per share of Parent Stock under the
New Option shall be equal to (x) the exercise price per share of the
Company Stock under the Company Option, divided by (y) the Common
Exchange Ratio, provided that such exercise price shall be rounded to
the nearest whole cent.
The adjustment provided herein with respect to any Company Option which is an
"incentive stock option" (as defined in Section 422 of the Code) shall be, and
is intended to be, effected in a manner which is consistent with Section 424(a)
of the Code. Except as provided in this Section 2.12, after the Effective Time,
each New Option shall be exercisable upon the same terms and conditions as were
applicable to the related Company Option immediately prior to the Effective Time
(except that with regard to such New Option, any references to the Company shall
be deemed, as appropriate, to mean Parent). Parent shall take all action
necessary, on or prior to the Effective Time, to authorize and reserve a number
of shares of Parent Stock sufficient for issuance upon the exercise of New
Options as contemplated by this Section 2.12.
(b) Parent shall file promptly after the Effective Time, a
registration statement on Form S-8 (or any successor or other appropriate form)
registering a number of shares of Parent Stock to be issued in connection with
the exercise of the New Options as determined in this Section 2.12.
17
2.13 TAX CONSEQUENCES. It is intended by the parties hereto that the Merger
shall constitute a reorganization within the meaning of Section 368(a) of the
Code. The parties hereto hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
U.S. Treasury Regulations. Unless otherwise required by law, the parties hereto
shall treat the Merger as a reorganization under Section 368 of the Code for all
Tax reporting purposes.
2.14 TAKING OF NECESSARY ACTION; FURTHER ACTION. Each of Parent, Sub, and
the Company will take all such reasonable lawful action as may be necessary or
appropriate in order to effect the Merger in accordance with this Agreement as
promptly as practicable. If, at any time after the Effective Time, any such
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest Parent with full right, title and possession to all the
property, rights, privileges, power and franchises of the Company, the officers
and directors of Sub, Parent and the Company immediately prior to the Effective
Time are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary action.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement of Parent to enter into this Agreement, the Company hereby
makes, as of the date hereof and as of the Closing Date, the following
representations and warranties to Parent, except as otherwise set forth in
written disclosure schedules (the "Schedules") delivered to Parent prior to the
date hereof, a copy of which is attached hereto. The Schedules are numbered to
correspond to the various sections of this Article 3 setting forth certain
exceptions to the representations and warranties contained in this Article 3 and
certain other information called for by this Agreement. Unless otherwise
specified, no disclosure made in any particular Schedule shall be deemed made in
any other Schedule unless expressly made therein (by cross-reference or
otherwise) or the Schedules otherwise expressly and completely disclose the
specific exception. For purposes of this Article 3, the term "Company" shall
mean the Company and, as applicable, the Subsidiaries of the Company.
3.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, with all requisite corporate power and authority to conduct the
Business as it is presently being conducted and to own or lease, as applicable,
the Assets owned or leased by it. The Company is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
such qualification is necessary under applicable law as a result of the conduct
of the Business or the ownership of its properties and where the failure to be
so qualified would, individually or in the aggregate, have a Company Material
Adverse Effect. Each jurisdiction in which the Company is qualified to do
business as a foreign corporation is set forth on SCHEDULE 3.1.
3.2 CAPITALIZATION OF THE COMPANY.
(a) AUTHORIZED CAPITALIZATION. As of the date of this Agreement, the
authorized capitalization of the Company consists of (i) 15,000,000 shares of
Company Stock of
18
which 5,922,128 shares are issued and outstanding and (ii) 1,238,390 shares of
preferred stock, par value $.0001 per share (the "Preferred Stock"), 1,238,390
of which are issued and outstanding, and no additional shares of capital stock
of the Company will be issued after the date hereof except for shares issued in
connection with the exercise of Company Options outstanding on the date hereof.
The Company has no other capital stock authorized, issued or outstanding.
SCHEDULE 3.2(a) sets forth the name of each holder of shares of Company Stock
and Preferred Stock, as well as the number of shares of Company Stock and
Preferred Stock held by each such holder.
(b) OPTIONS. As of the date of this Agreement, 781,520 shares of
Company Stock are reserved for issuance upon the exercise of outstanding Company
Options. SCHEDULE 3.2(b) sets forth the name of each holder of Company Options,
as well as the number of the Company Options held by each such holder, the
number of shares of Company Stock for which each such Company Option is
exercisable, the date upon which each such Company Option becomes exercisable
and the price per share of Company Stock for which each such Company Option is
exercisable (without taking into account whether or not such Company Option is
in fact exercisable on the date hereof). A true and correct copy of each Company
Option and the Company Stock Option Plans have been made available to Parent.
(c) NO OTHER CAPITAL STOCK, OPTIONS, WARRANTS. Except for the Company
Options referred to above, there are no outstanding options, warrants,
convertible securities or rights of any kind to purchase or otherwise acquire
any shares of capital stock or other securities of the Company. Except for the
aggregate of 781,520 shares of Company Stock reserved for issuance upon exercise
of the Company Options, and 1,238,390 shares of Company Stock reserved for
issuance upon conversion of the Preferred Stock, no shares of capital stock of
the Company are reserved for issuance.
(d) VALID ISSUANCES. All outstanding shares of Company Stock and
Preferred Stock are, and any shares of Company Stock issued upon exercise of any
Company will be, validly issued, fully paid and non-assessable and not subject
to any preemptive rights created by statute, the Company's Articles of
Incorporation or Bylaws, or any Contract. The Company Options have been, and the
shares of Company Stock have been or will be, issued in compliance with all
federal and state corporate and securities laws.
3.3 STOCKHOLDERS' AGREEMENTS, ETC. Except as set forth on SCHEDULE 3.3,
there are no stockholder agreements, voting trusts, proxies or other agreements
or understandings with respect to or concerning the purchase, sale or voting of
the capital stock of the Company.
3.4 AUTHORIZATION. The Company has all necessary corporate power and
authority to enter into this Agreement and the Ancillary Agreements to which the
Company is a party and has taken all corporate or other action, other than
Stockholder Consent, necessary to consummate the transactions contemplated
hereby and thereby and to perform its obligations hereunder and thereunder. The
Stockholder Consent is the only consent or approval required to be obtained from
the shareholders of the Company. This Agreement has been duly executed and
delivered by the Company, and this Agreement is, and upon execution and delivery
each of the Ancillary Agreements to which the Company is a party will be, a
valid and binding obligation of the
19
Company, enforceable against the Company in accordance with its terms, except
that enforceability may be limited by the effect of (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors or (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
3.5 OFFICERS AND DIRECTORS. SCHEDULE 3.5 contains a true, correct and
complete list of all the officers and directors of the Company.
3.6 BANK ACCOUNTS. SCHEDULE 3.6 contains a list of all of the Company's
bank accounts, safe deposit boxes and persons authorized to draw thereon or have
access thereto.
3.7 SUBSIDIARIES, ETC. The authorized capital stock of each of the
Company's Subsidiaries is set forth on SCHEDULE 3.7. Excepts as set forth on
SCHEDULE 3.7, all of the outstanding shares of capital stock of the Company's
Subsidiaries are owned of record and beneficially by the Company, free and clear
of all Encumbrances. Except as set forth on SCHEDULE 3.7, since December 31,
1999, no shares of capital stock or other voting securities of any Subsidiary of
the Company were issued, reserved for issuance, issuable or outstanding. All
outstanding shares of capital stock of the Company's Subsidiaries are, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights. There are no bonds, debentures, notes or other indebtedness
of any Subsidiary of the Company having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any matters on
which stockholders of such Subsidiaries may vote. There are no securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company or any of its Subsidiaries is a
party or by which any of them is bound obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other voting securities of any such
Subsidiary or obligating the Company or any of its Subsidiaries to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no outstanding
contractual obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of any such Subsidiary.
There are no voting trusts, proxies or other agreements or understandings to
which the Company or its Subsidiaries is a party or by which the Company or any
of its Subsidiaries is bound with respect to the voting of any shares of capital
stock, or any other equity or voting security or interest of the Company or any
of its Subsidiaries. Except for the Company's interest in the Subsidiaries or as
set forth in SCHEDULE 3.7, neither the Company nor any of its Subsidiaries owns
directly or indirectly any interest or investment in the form of debt or equity
in, and neither the Company nor any of its Subsidiaries is subject to any
obligation or requirement to provide for or to make any investment in, any
Person (other than financially insignificant holdings of publicly reporting
companies held in order to obtain filings).
3.8 REAL PROPERTY.
(a) OWNED REAL PROPERTY. The Company does not own any real property.
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(b) LEASED REAL PROPERTY. SCHEDULE 3.8(b) sets forth all leases
pursuant to which Facilities are leased by the Company (as lessee), true and
correct copies of which have been delivered to Parent. Such leases constitute
all leases, subleases or other occupancy agreements pursuant to which the
Company occupies or uses Facilities. Except as set forth on SCHEDULE 3.8(b), the
Company has good and valid leasehold title to, and enjoys peaceful and
undisturbed possession of, all leased property described in such leases (the
"Leased Property"), free and clear of any and all Encumbrances other than any
Permitted Encumbrances which would not permit the termination of the lease
therefor by the lessor. With respect to each such parcel of Leased Property
(i) there are no pending or, to the knowledge of the Company, threatened
condemnation proceedings relating to, or any pending or, to the knowledge of the
Company, threatened Actions relating to, the Company's leasehold interests in
such Leased Property or any portion thereof, and (ii) the Company has not
received notice of any pending or threatened special assessment relating to such
Leased Property or otherwise has any knowledge of any pending or threatened
special assessment relating thereto. With respect to each lease listed on
SCHEDULE 3.8(b), (i) there has been no material default under any such lease by
the Company or, to the knowledge of the Company, by any other party, (ii) the
execution, delivery and performance of this Agreement and the Ancillary
Agreements and the consummation of the transactions contemplated hereby and
thereby will not cause a material default under any such lease, (iii) no action
has been taken by the Company, and no event has occurred which, with notice or
lapse of time or both, would permit termination, modification or acceleration by
a party thereto without the consent of the Company under any such lease, (iv) no
party has repudiated in writing to the Company any term thereof or threatened in
writing to the Company to terminate, cancel or not renew any such lease, and
(vi) the Company has not assigned, transferred, conveyed, mortgaged or
encumbered any interest therein or in any leased property subject thereto (or
any portion thereof).
3.9 PERSONAL PROPERTY.
(a) GENERAL. The Company owns or leases all personal property (other
than Proprietary Rights) necessary for the conduct of the Business as presently
conducted, and such personal property (taken as a whole) are in such operating
condition and repair (subject to normal wear and tear) as is necessary for the
conduct of the Business as presently conducted.
(b) OWNED PERSONAL PROPERTY. Except as set forth on SCHEDULE 3.9(b),
the Company has good and marketable title to all such personal property (other
than Proprietary Rights) owned by it, free and clear of any and all Encumbrances
other than Permitted Encumbrances. With respect to each such item of personal
property (i) there are no leases, subleases, licenses, options, rights,
concessions or other agreements, written or oral, granting to any party or
parties the right of use of any portion of such item of personal property,
(ii) there are no outstanding options or rights of first refusal in favor of any
other party to purchase any such item of personal property or any portion
thereof or interest therein and (iii) there are no parties (other than the
Company) who are in possession of or who are using any such item of personal
property.
(c) LEASED PERSONAL PROPERTY. The Company has good and valid leasehold
title to all Fixtures and Equipment leased by it from third parties, free and
clear of any and all
21
Encumbrances. SCHEDULE 3.9(c) sets forth all leases for personal property (other
than Proprietary Rights) involving annual payments in excess of $10,000, true
and correct copies of which have been delivered or made available to Parent.
With respect to each lease listed on SCHEDULE 3.9(c), (i) there has been no
material default under such lease by the Company or, to the knowledge of the
Company, by any other party, (ii) the execution, delivery and performance of
this Agreement and the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby will not cause (with or without
notice and with or without the passage of time) a default under any such lease,
(iii) no action has been taken by the Company and no event has occurred which,
with notice or lapse of time or both, would permit termination, modification or
acceleration by a party thereto without the consent of the Company under any
such lease, (iv) no party has repudiated in writing any term thereof or
threatened in writing to terminate, cancel or not renew any such lease, and
(v) the Company has not assigned, transferred, conveyed, mortgaged or encumbered
any interest therein or in any leased property subject thereto (or any portion
thereof).
3.10 ENVIRONMENTAL MATTERS.
(a) COMPLIANCE. The Company is in compliance with all Environmental
Laws, including, without limitation, all Permits required thereunder to conduct
the Business as currently being conducted or proposed to be conducted, except
for such non-compliance as would not reasonably be expected to, individually or
in the aggregate, result in a Company Material Adverse Effect. All such Permits
are listed on SCHEDULE 3.10(a). The Company has not received any notice to the
effect that, or otherwise has knowledge that, (i) it is not in compliance in any
material respect with, or is in violation of, any such Environmental Laws or
Permits required thereunder or (ii) any currently existing circumstances are
reasonably likely to result in a failure of the Company to comply with, or a
violation by the Company of, any such Environmental Laws or Permits required
thereunder. The Company at all times during the previous five (5) years has been
in compliance with all Environmental Laws, except for such non-compliance as
would not reasonably be expected to, individually or in the aggregate, result in
a Company Material Adverse Effect.
(b) ENVIRONMENTAL CLAIMS. There are no existing or, to the knowledge
of the Company, potential Environmental Claims against the Company that,
individually or in the aggregate, could reasonably be expected to have a Company
Material Adverse Effect. The Company has not received any written notification
or otherwise has any knowledge, of any allegation of any actual, or potential
responsibility for, or any inquiry or investigation regarding, any disposal,
release or threatened release at any location of any Hazardous Substance
generated or transported by the Company.
(c) HAZARDOUS SUBSTANCES. No underground tank for Hazardous Substances
is currently located on the Facilities, and there have been no releases of any
Hazardous Substances by the Company, its agents or contractors from any such
underground tank or related piping and there have been no releases by the
Company, it agents or contractors (i.e., any past or present releasing,
spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing, or dumping) of Hazardous Substances in quantities
exceeding the reportable quantities as defined under federal or state law on,
upon or into the Facilities other
22
than those authorized by Environmental Laws including, without limitation, the
Permits required thereunder that, individually or in the aggregate, could
reasonably be expected to have a Company Material Adverse Effect. In addition,
to the knowledge of the Company, there have been no such releases by
predecessors of the Company.
(d) ENVIRONMENTAL INDEMNITIES. Except as set forth on SCHEDULE
3.10(d), the Company is not a party, whether as a direct signatory or as
successor, assign or third-party beneficiary, or otherwise bound, to any lease
or other Contract (excluding insurance policies disclosed on the Schedules)
under which the Company is obligated by or entitled to the benefits of, directly
or indirectly, any representation, warranty, indemnification, covenant,
restriction or other undertaking concerning Environmental Conditions.
(e) NO RELEASES. The Company has not released any other Person from
any claim under any Environmental Law or waived any rights concerning any actual
or existing Environmental Condition.
(f) ENVIRONMENTAL REPORTS. Complete and accurate copies of the
Environmental Reports, as well as all other written environmental reports,
audits or assessments, which have been conducted, either by the Company or any
Person engaged by the Company for such purpose, at any facility owned or
formerly owned by the Company have been made available to Parent and a list of
all such reports, audits and assessments is set forth on SCHEDULE 3.10(f).
3.11 CONTRACTS.
(a) DISCLOSURE. SCHEDULE 3.11 sets forth a complete and accurate list
of all of the Contracts of the following categories:
(i) Contracts not made in the ordinary course of business;
(ii) License agreements or royalty agreements (x) where the
Company is the licensee thereunder that require annual royalty payments in
excess of $25,000 individually (excluding licenses that are commonly available
on standard commercial terms, such as software "shrink-wrap" licenses), and
(y) where the Company is the licensor that either (A) are not entered into in
the ordinary course of business, or (B) are with one of the Company's top 10
customers, measured by revenue for the twelve month period ending April 30,
2000;
(iii) Confidentiality and non-disclosure agreements (whether the
Company is the beneficiary or the obligated party thereunder);
(iv) Contracts or commitments involving future expenditures or
Liabilities, actual or potential, in excess of $50,000 after the date hereof or
otherwise material to the Business or the Assets;
(v) Contracts or commitments relating to commission arrangements
with others that are material to the Business;
23
(vi) Employment contracts, consulting contracts, contracts with
independent contractors, severance agreements, "stay-bonus" agreements and
similar arrangements, including Contracts (A) to employ or terminate executive
officers or other personnel and other contracts with present or former officers
or directors of the Company or (B) that will result in the payment by, or the
creation of any Liability of the Company, the Stockholders or Parent to pay any
severance, termination, "golden parachute," or other similar payments to any
present or former personnel following termination of employment or otherwise as
a result of the consummation of the transactions contemplated by this Agreement;
(vii) Indemnification agreements;
(viii) Promissory notes, loans, agreements, indentures, evidences
of indebtedness, letters of credit, guarantees, or other instruments relating to
an obligation to pay money, whether the Company shall be the borrower, lender or
guarantor thereunder (excluding credit provided by the Company in the ordinary
course of business to purchasers of its products and obligations to pay vendors
in the ordinary course of business and consistent with past practice);
(ix) Contracts containing covenants limiting the freedom of the
Company, or any officer, director, Employee or Affiliate of the Company, to
engage in any line of business or compete with any Person that relates directly
or indirectly to the Business;
(x) Any Contract with the federal, state or local government or
any agency or department thereof;
(xi) Any Contract or other arrangement with a Related Party; and
(xii) Any other Contract under which the consequences of a
default or termination would reasonably be expected to have a Material Adverse
Effect on the Company, individually or in the aggregate.
Complete and accurate copies of all of the Contracts listed on SCHEDULE
3.11(a), including all amendments and supplements thereto, have been made
available to Parent.
(b) ABSENCE OF DEFAULTS. Except as set forth on SCHEDULE 3.11(b), all
of the Contracts set forth on SCHEDULE 3.11(a) are valid, binding and
enforceable in accordance with their terms with no existing (or to the knowledge
of the Company threatened) material Default or dispute. To the knowledge of the
Company, all parties to sucSh Contracts have complied in all material respects
with the provisions thereof, no party is in material Default thereunder and no
notice of any claim of Default has been given to the Company.
(c) PRODUCT WARRANTY. The Company has not committed any act, and there
has been no omission, which may result in, and there has been no occurrence
which may give rise to, product liability or Liability for breach of warranty
(whether covered by insurance or not) on the part of the Company, with respect
to products designed, manufactured, assembled, sold, repaired, maintained,
delivered or installed or services rendered prior to or on the Closing Date
which
24
could reasonably be expected to result in Liability to the Company exceeding
$100,000 in the aggregate.
3.12 NO CONFLICT OR VIOLATION; CONSENTS. Except as set forth on SCHEDULE
3.12, none of the execution, delivery or performance of this Agreement or any
Ancillary Agreement, the consummation of the transactions contemplated hereby or
thereby, nor compliance by the Company with any of the provisions hereof or
thereof, will (a) violate or conflict with any provision of the governing
documents of the Company, (b) violate, conflict with, or result in a breach of
or constitute a default (with or without notice or the passage of time) under,
or result in the termination of, or accelerate the performance required by, or
result in a right to terminate, accelerate, modify or cancel under, or require a
notice under, or result in the creation of any Encumbrance upon any of its
respective assets under, any Contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, security interest or other arrangement to which the
Company is a party or by which the Company is bound or to which any of its
respective assets are subject, (c) violate any applicable Regulation or Court
Order or (d) impose any Encumbrance on any Assets or the Business. Except as set
forth on SCHEDULE 3.12, no notices to, declaration, filing or registration with,
approvals or Consents of, or assignments by, any Persons (including any federal,
state or local governmental or administrative authorities) are necessary to be
made or obtained by the Company in connection with the execution, delivery or
performance of this Agreement or any Ancillary Agreement to which it is a party
or the consummation of the transactions contemplated hereby or thereby.
3.13 PERMITS. SCHEDULE 3.13 sets forth a complete list of all material
Permits, all of which are as of the date hereof, and will be as of the Closing
Date, in full force and effect. The Company has at all times have had, all
material Permits required under any applicable Regulation in its operation of
the Business or in its ownership of the Assets, and owns or possesses such
Permits free and clear of all Encumbrances. The Company is not in default, nor,
to the knowledge of the Company, has the Company received any notice of any
claim of default, with respect to any such Permit. Except as otherwise governed
by law, all such Permits are renewable by their terms or in the ordinary course
of business without the need to comply with any special qualification procedures
or to pay any amounts other than routine filing fees and, except as set forth on
SCHEDULE 3.13, will not be adversely affected by the completion of the
transactions contemplated by this Agreement or the Ancillary Agreements.
3.14 FINANCIAL STATEMENTS; BOOKS AND RECORDS.
(a) GENERAL. The Financial Statements are complete, are in accordance
with the Company's Books and Records and fairly present in all material respects
the financial condition, results of operations and cash flows of the Company as
of the dates and for the periods indicated thereby, in accordance with GAAP
consistently applied throughout the periods covered thereby (except as otherwise
expressly indicated in the notes to the Financial Statements and, in the case of
interim financial statements, for (i) the lack of footnotes and (ii) year-end
audit adjustments that are not material).
25
(b) INTERNAL CONTROLS. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed with management's authorizations, (ii) transactions
are recorded as necessary to permit preparation of financial statements in
accordance with GAAP and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's authorization and
(iv) the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(c) BOOKS AND RECORDS. The Books and Records, taken as a whole, fairly
reflect in all material respects the activities of the Company and the Business.
(d) ALL ACCOUNTS RECORDED. The Company has not engaged in any
transaction, maintained any bank account or used any corporate funds except for
transactions, bank accounts or funds which have been and are reflected in the
normally maintained Books and Records.
(e) CORPORATE RECORDS. The stock records and minute books of the
Company and its predecessor that have been made available to Parent fully
reflect all minutes of meetings, resolutions and other material actions and
proceedings of its stockholders, trustees and board of directors and all
committees thereof, all issuances, transfers and redemptions of capital stock of
which the Company are aware and contain true, correct and complete copies of its
respective Articles of Incorporation and Bylaws and all amendments thereto
through the date hereof.
3.15 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on SCHEDULE
3.15, since the Balance Sheet Date to the date hereof there has not been any:
(a) Company Material Adverse Change;
(b) failure to operate the Business in the ordinary course so as to
use all commercially reasonable efforts to preserve the Business intact and to
preserve the continued services of the Company's employees and the goodwill of
suppliers, customers and others having business relations with the Company or
its Representatives;
(c) resignation or termination of any officer or manager, or any
increase in the rate of compensation payable or to become payable to any officer
or manager or Representative of the Company (other than general,
regularly-scheduled reviews), including the making of any loan to, or the
payment, grant or accrual of any bonus, incentive compensation, service award or
other similar benefit to, any such Person, or the addition to, modification of,
or contribution to any Employee Plan (as defined below);
(d) any payment, loan or advance of any amount to or in respect of, or
the sale, transfer or lease of any properties or the Assets to, or entering into
of any Contract with, any Related Party except regular compensation to
Employees;
(e) sale, assignment, license, transfer or Encumbrance of any of the
Assets, tangible or intangible, singly or in the aggregate, other than sales of
products and services in the ordinary course of business and consistent with
past practice;
26
(f) new Contracts, or extensions, modifications, terminations or
renewals thereof, except for Contracts entered into, modified or terminated in
the ordinary course of business and consistent with past practice;
(g) disposition or lapsing of any Proprietary Rights of the Company,
in whole or in part, or any disclosure of any trade secret, process or know-how
to any Person not an Employee;
(h) change in accounting methods or practices by the Company or
revaluation by the Company of any of the Assets, including writing off or
establishing reserves with respect to inventory, notes or accounts receivable
(other than for which adequate reserves have been previously established;
(i) damage, destruction or loss (whether or not covered by insurance)
materially adversely affecting the Assets, the Business or the prospects of the
Company;
(j) declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of the Company or any redemption,
purchase or other acquisition of any equity securities of the Company;
(k) failure to pay any material obligation of the Company when due;
(l) cancellation of any indebtedness or waiver of any rights of
substantial value to the Company, except in the ordinary course of business and
consistent with past practice;
(m) indebtedness incurred by the Company for borrowed money or any
commitment to borrow money entered into by the Company, or any loans made or
agreed to be made by the Company;
(n) acquisition of any equity interest in any other Person; or
(o) agreement by the Company directly or indirectly to do any of the
foregoing.
3.16 LIABILITIES. The Company has no Liabilities or obligations (absolute,
accrued, contingent or otherwise) except (i) Liabilities which are reflected and
properly reserved against in the Financial Statements, (ii) Liabilities incurred
in the ordinary course of business and consistent with past practice since the
Balance Sheet Date and (iii) Liabilities arising under the Contracts (other than
obligations which are required to be reflected on a balance sheet prepared in
accordance with GAAP) set forth on SCHEDULE 3.11 or Liabilities which are not
required to be disclosed on such Schedule and which have arisen or been incurred
in the ordinary course of business. None of the Liabilities described in this
Section 3.16 relates to any breach of Contract, breach of warranty, tort,
infringement or violation of law or arose out of any Action.
3.17 LITIGATION. Except as set forth on SCHEDULE 3.17, there is no Action,
pending or, to the knowledge of the Company, threatened or anticipated, which if
adversely determined against
27
any the Company, its respective directors or officers, or any other Person could
reasonably be expected to result in a loss to the Company, individually or in
the aggregate, in excess of $100,000. There are presently no outstanding
judgments, decrees or orders of any court or any governmental or administrative
agency against or affecting the Company, the Business or any of the Assets.
SCHEDULE 3.17 contains a complete and accurate description of all Actions since
December 31, 1996 to which the Company has been a party or which relate to any
of the Assets or the Company's officers or directors as such, or any such
Actions which were settled prior to the institution of formal proceedings, other
than Actions brought by the Company for collection of monies owed in the
ordinary course of business.
3.18 LABOR MATTERS.
(a) GENERAL. The Company is not a party to any labor agreement with
respect to its Employees with any labor organization, group or association and
has not experienced any attempt by organized labor or its representatives to
make the Company conform to demands of organized labor relating to its Employees
or to enter into a binding agreement with organized labor that would cover the
Employees of the Company. There is no unfair labor practice charge or complaint
against the Company pending before the National Labor Relations Board or any
other governmental agency arising out of the Company's activities, and the
Company has no knowledge of any facts or information which would give rise
thereto; there is no labor strike or labor disturbance pending or threatened
against the Company nor is any grievance currently being asserted against it;
and the Company has not experienced a work stoppage or other labor difficulty.
There are no material controversies pending or, to the knowledge of the Company
or any Stockholder, threatened between the Company and its Employees, and
neither the Company nor any Stockholder is aware of any facts which could
reasonably result in any such controversy.
(b) COMPLIANCE. The Company is in material compliance with all
applicable Regulations respecting employment practices, terms and conditions of
employment, wages and hours, equal employment opportunity, and the payment of
social security and similar taxes and is not engaged in any unfair labor
practice. The Company is not liable for any claims for past due wages or any
penalties for failure to comply with any of the foregoing.
(c) SEVERANCE OBLIGATIONS. Except as set forth on SCHEDULE 3.18(c),
the Company has not entered into any severance, "stay-bonus" or similar
arrangement in respect of any present or former Employee that will result in any
obligation (absolute or contingent) of Parent or the Company to make any payment
to any present or former Employee following termination of employment or upon
consummation of the transactions contemplated by this Agreement (whether or not
employment is continued for any specified period after the Effective Time).
Except as set forth on SCHEDULE 3.18(c), neither the execution and delivery of
this Agreement or any Ancillary Agreement nor the consummation of the
transactions contemplated hereby or thereby will result in the acceleration or
vesting of any other rights of any Person to benefits under any Employee Plans.
3.19 EMPLOYEE BENEFIT PLANS.
28
(a) SCHEDULE 3.19 contains a complete list of Employee Plans which
cover or have covered employees of the Company. True and complete copies of each
of the following documents have been delivered by the Company to Parent:
(i) Employee Plan (and, if applicable, related trust agreements, annuity
contracts or other funding instruments) which covers or has covered employees of
the Company (with respect to their relationship with the Company) and all
amendments thereto, all current summary plan descriptions, the most recent
summary of material modifications (as defined in ERISA) and all written
interpretations and descriptions thereof which the Company generally distributes
to participants therein and a complete description of any Employee Plan which is
not in writing, (ii) the most recent determination letter issued by the Internal
Revenue Service and any opinion letter issued by the Department of Labor with
respect to each Pension Plan and each voluntary employees' beneficiary
association as defined under Section 501(c)(9) of the Code (other than a
Multiemployer Plan) which covers or has covered employees of the Company (with
respect to their relationship with the Company), (iii) for the three (3) most
recent plan years, Annual Reports on Form 5500 Series required to be filed with
any governmental agency for each Pension Plan or Welfare Plan which covers or
has covered employees of the Company (with respect to their relationship with
the Company), (iv) a description of complete age, salary, service and related
data as of the last day of the last plan year for employees and former employees
of the Company, and (v) a description setting forth the amount of any liability
of the Company as of the Closing Date for payments more than thirty (30)
calendar days past due with respect to any Welfare Plan.
(b) PENSION PLANS.
(i) No Employee Plan is or was at any time subject to Title IV or
Part 3 of Title I of ERISA or Section 412 of the Code.
(ii) Each Pension Plan and each related trust agreement, annuity
contract or other funding instrument which covers or has covered employees or
former employees of the Company (with respect to their relationship with the
Company) which has been operated as a qualified plan (1) has received a
favorable determination letter from the Internal Revenue Service stating that
such Pension Plan and each related trust is qualified and tax-exempt under the
provisions of Code Sections 401(a) (or 403(a), as appropriate) and 501(a) and
(2) the knowledge of the Company has been so qualified during the period from
its adoption to date.
(iii) Each Pension Plan and each related trust agreement, annuity
contract or other funding instrument which covers or has covered employees or
former employees of the Company (with respect to their relationship with the
Company) currently complies in all material respects and has been maintained in
compliance in all material respects with its terms and, both as to form and in
operation, with the requirements prescribed by any and all statutes, orders,
rules and regulations which are applicable to such plans, including, without
limitation, ERISA and the Code.
(c) MULTIEMPLOYER PLANS. Neither the Company nor any ERISA Affiliate
has any liability with respect to a Multiemployer Plan, and no liability will
arise or be imposed on the Company or any ERISA Affiliate under, or with respect
to, any Multiemployer Plan.
29
(d) WELFARE PLANS.
(i) Each Welfare Plan which covers or has covered employees or
former employees of the Company (with respect to their relationship with the
Company) currently complies in all material respects and has been maintained in
compliance in all material respects with its terms and, both as to form and
operation, with the requirements prescribed by any and all statutes, orders,
rules and regulations which are applicable to such Welfare Plan, including,
without limitation, ERISA and the Code.
(ii) Except as required by Section 4980B of the Code or Part 6 of
Title 1, Subtitle B of ERISA, none of the Company, any ERISA Affiliate or any
Welfare Plan has any present or future obligation to make any payment to, or
with respect to any present or former employee of the Company or any ERISA
Affiliate pursuant to, any retiree medical benefit plan, or other retiree
Welfare Plan, and no condition exists which would prevent the Company or an
ERISA Affiliate from amending or terminating any such benefit plan or such
Welfare Plan.
(iii) Each Welfare Plan which covers or has covered employees or
former employees of the Company (with respect to their relationship with the
Company) and which is a "group health plan," as defined in Section 607(1) of
ERISA, presently complies in all material respects with and has been operated in
compliance in all material respects with provisions of Part 6 of Title I,
Subtitle B of ERISA and Sections 162(k) and 4980B of the Code at all times.
(iv) Neither the Company nor any ERISA Affiliate has, at any
time, maintained, contributed to or had any obligation to maintain or contribute
to any Welfare Plan that is a "multiemployer plan," as defined in Section 3(37)
of ERISA.
(v) The insurance policies or other funding instruments, if any,
for each Welfare Plan provide coverage for each employee, consultant,
independent contractor or retiree of the Company or any of its Subsidiaries
(and, if applicable, their respective dependents) who has been advised by the
Company, whether through an Employee Plan or otherwise, that he or she is
covered by such Welfare Plan.
(e) BENEFIT ARRANGEMENTS. Each Benefit Arrangement which covers or has
covered employees or former employees of the Company (with respect to their
relationship to the Company) presently complies and has been maintained in
compliance in all material respects with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations which are
applicable to such Benefit Arrangement, including, without limitation, the Code.
Except as provided by law or in any employment agreement set forth on SCHEDULE
3.19, the employment of all persons presently employed or retained by the
Company is terminable at will.
(f) UNRELATED BUSINESS TAXABLE INCOME; UNPAID CONTRIBUTIONS. No
Employee Plan (or trust or other funding vehicle pursuant thereto) has incurred
any liability under Code Section 511. Neither the Company nor any ERISA
Affiliate has any liability for unpaid contributions under Section 515 of ERISA
with respect to any Employee Plan.
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(g) DEDUCTIBILITY OF PAYMENTS. There is no contract, agreement, plan
or arrangement covering any employee or former employee of the Company (with
respect to such employee's relationship with the Company) that, individually or
collectively, requires the payment by the Company of any amount (i) that is not
deductible under Section 162(a)(1) or 404 of the Code or (ii) that is an "excess
parachute payment" pursuant to Section 280G of the Code.
(h) FIDUCIARY DUTIES AND PROHIBITED TRANSACTIONS. Neither the Company
nor any plan fiduciary of any Welfare Plan or Pension Plan which covers or has
covered employees or former employees of the Company or any ERISA affiliate has
engaged in, or has any liability in respect of, any transaction in violation of
Sections 404 or 406 of ERISA or any "prohibited transaction," as defined in
Section 4975(c)(1) of the Code, for which no exemption exists under Section 408
of ERISA or Section 4975(c)(2) or (d) of the Code, or has otherwise violated the
provisions of Part 4 of Title I, Subtitle B of ERISA so as to create any
liability of the Company or any of its Subsidiaries or any Employee Plan. The
Company has not participated in a violation of Part 4 of Title I, Subtitle B of
ERISA by any plan fiduciary of any Welfare Plan or Pension Plan, and the Company
and its Subsidiaries have not been assessed any civil penalty under Section
502(l) of ERISA.
(i) LITIGATION. There is no action, order, writ, injunction, judgment
or decree outstanding or claim (other than routine claims for benefits), suit,
litigation, proceeding, arbitration proceeding, governmental audit or
investigation relating to or seeking benefits under any Employee Plan that is
pending or, to the knowledge of the Company, anticipated or threatened against
the Company, any ERISA Affiliate or any Employee Plan.
(j) NO AMENDMENTS. Neither the Company nor any ERISA Affiliate has
announced to employees, former employees, consultants or directors an intention
to create, or otherwise created, a legally binding commitment to adopt any
additional Employee Plan which is intended to cover employees or former
employees of the Company (with respect to their relationship with the Company)
or to amend or modify any existing Employee Plan which covers or has covered
employees or former employees of the Company or any of its Subsidiaries (with
respect to their relationship with the Company or any of its Subsidiaries).
(k) UNPAID CONTRIBUTIONS. Neither the Company nor any ERISA Affiliate
has any liability for unpaid contributions under Section 515 of ERISA with
respect to any Pension Plan, Multiemployer Plan or Welfare Plan.
(l) INSURANCE CONTRACTS. No Employee Plan holds as an asset of any
Employee Plan any interest in any annuity contract, guaranteed investment
contract or any other investment or insurance contract issued by an insurance
company that is the subject of bankruptcy, conservatorship or rehabilitation
proceedings.
(m) NO ACCELERATION OR CREATION OF RIGHTS. Except as set forth on
SCHEDULE 3.18(c), neither the execution and delivery of this Agreement or the
Ancillary Agreements by the Company nor the consummation of the transactions
contemplated hereby or the related transactions will result in the acceleration
or creation of any rights of any person to benefits under any Employee Plan
(including, without limitation, the acceleration of the vesting or
31
exercisability of any stock options, the acceleration of the vesting of any
restricted stock, the acceleration of the accrual or vesting of any benefits
under any Pension Plan or the acceleration or creation of any rights under any
severance, parachute or change in control agreement).
(n) NO OTHER MATERIAL LIABILITY. To the knowledge of the Company, no
event has occurred in connection with which the Company, any ERISA Affiliate or
any Employee Plan, directly or indirectly, could be subject to any material
liability (other than the payment of benefits under the terms of such Employee
Plan) (A) under any statute, regulation or governmental order relating to any
Employee Plan or (B) pursuant to any obligation of the Company to indemnify any
person against liability incurred under any such statute, regulation or order as
they relate to the Employee Plans.
3.20 TRANSACTIONS WITH RELATED PARTIES. Except for employment agreements
and other compensation arrangements disclosed on SCHEDULE 3.20, no Related Party
has (a) borrowed or loaned money or other property to the Company which has not
been repaid or returned, (b) any contractual relationship or other claims,
express or implied, of any kind whatsoever against the Company or (c) any
interest in any property used by the Company.
3.21 COMPLIANCE WITH LAW. The Company has conducted the Business in
compliance with all applicable Regulations and Court Orders, except as would not
reasonably be expected to cause a Company Material Adverse Effect. The Company
has not received any notice to the effect that, or has otherwise been advised
that, the Company is not in compliance with any such Regulations or Court
Orders, and none of the Company has any reason to anticipate that any existing
circumstances are likely to result in any material violation of any of the
foregoing.
3.22 INTELLECTUAL PROPERTY.
(a) GENERAL. SCHEDULE 3.22(a) sets forth with respect to Proprietary
Rights of the Company: (i) for each trademark, tradename or service xxxx,
whether or not registered, the application serial number or registration number
(if any), and the class of goods covered, the nature of the goods or services,
(ii) for any URL or domain name, the registration date, any renewal date and
name of registry; (iii) for each registered copyrighted works, the number and
date of registration for each country in which a copyright application has been
registered, and (iv) for each mask work (if any), whether or not registered, the
date of first commercial exploitation and if registered, the registration number
and date of registration. True and correct copies of all applications filed and
registration for Proprietary Rights (including all pending applications,
application related documents) owned or controlled by or on behalf of the
Company have been provided or made available to Parent.
(b) ADEQUACY. The Proprietary Rights owned and licensed by the Company
are all those necessary for the normal conduct of the Business as presently
conducted, including the design, manufacture and sale of all products currently
under development or in production.
(c) ROYALTIES AND LICENSES. Except for license and royalty agreements,
which are set forth in SCHEDULE 3.11 or are permitted to be excluded from such
Schedule by the provisions of Section 3.11(a)(ii), the Company has no obligation
to compensate any Person for
32
the use of any of its Proprietary Rights nor has the Company or any of its
Subsidiaries granted to any Person any license, option or other rights to use in
any manner any of its Proprietary Rights, whether requiring the payment of
royalties or not.
(d) OWNERSHIP. The Company owns or has a valid right to use its
Proprietary Rights, and such Proprietary Rights will not cease to be valid
rights of the Company by reason of the execution, delivery and performance of
this Agreement or the Ancillary Agreements or the consummation of the
transactions contemplated hereby or thereby.
(e) ABSENCE OF CLAIMS. The Company (A) has not received any notice
alleging, or otherwise has knowledge of the invalidity with respect to any of
the Proprietary Rights of the Company or (B) has not received any notice of
alleged infringement of any rights of others due to any activity by the Company.
To the knowledge of the Company, the Company's use of its Proprietary Rights in
its past and current products do not infringe upon or otherwise violate the
valid Proprietary Rights of any third party anywhere in the world. No other
Person (i) has notified the Company that it is claiming any ownership of or
right to use any of the Company's Proprietary Rights or (ii) to the knowledge of
the Company, is infringing upon any such Proprietary Rights in any way.
(f) PROTECTION OF PROPRIETARY RIGHTS. All of the pending applications
for the Company's owned Proprietary Rights have been duly filed, prosecution for
such applications has been attended to and all maintenance and related fees have
been paid. The Company has taken reasonable steps necessary or appropriate
(including, entering into appropriate confidentiality and nondisclosure
agreements with officers, directors, subcontractors, Employees, licensees and
customers in connection with the Assets or the Business) to safeguard and
maintain the secrecy and confidentiality of Trade Secrets that are material to
the Business. The Company does not have knowledge of any breach of any such
confidentiality or nondisclosure agreement by any party thereto.
3.23 TAX MATTERS.
(a) FILING OF TAX RETURNS. Each of the Company, any predecessor of the
Company, and any affiliated group of corporations within the meaning of Section
1504(a) of the Code (and any similar state, local or foreign combined,
consolidated or affiliated group) of which the Company or any such predecessor
has been a member (collectively, the "Taxpayers") has duly and timely filed with
the appropriate Taxing or other governmental authorities all Tax Returns
required to be filed in respect of any Taxes on or before the Closing Date. The
Tax Returns filed are complete, correct and accurate in all material respects.
Except as set forth on SECTION 3.23(a), the Taxpayers have not requested any
extension of time within which to file any such Tax Returns. The Company has
delivered to Parent true and correct copies of all Tax Returns for the Tax years
ended September 30, 1998, 1997 and 1996.
(b) PAYMENT OF TAXES. All Taxes of the Taxpayers, in respect of
periods or portions thereof ending on or before the Closing Date, have been
paid, or will have been paid, or an adequate reserve has beSen established
therefor in conformity with generally accepted accounting principles
consistently applied, as set forth on SCHEDULE 3.23(b), and the Company
33
has no liability for Taxes in excess of the amounts so paid or reserves so
established. All Taxes that the Taxpayers have been required to collect or
withhold have been duly collected or withheld and, to the extent required when
due, have been or will be duly paid to the proper Taxing authority.
(c) AUDIT HISTORY; LIENS; ETC. Except as set forth on SCHEDULE
3.23(c), all Tax Returns of the Taxpayers for all periods ended on or prior to
the Closing Date have been either examined by the Internal Revenue Service or
other Tax authorities or relate to closed periods, all deficiencies asserted as
a result of such examinations have been paid or finally settled, and no issue
has been raised by the Internal Revenue Service or other Tax authority in any
such examination which, by application of similar principles, reasonably could
be expected to result in a proposed deficiency for any other period not so
examined. There are no audits pending of any of the Taxpayers' Tax Returns by
any Taxing authority, and there are no claims which have been or may be asserted
relating to any of the Taxpayers' Tax Returns filed for any year which if
determined adversely would result in the assertion by any governmental agency or
Tax authority of any deficiency. There are no Encumbrances on any of the Assets
of the Company that arose in connection with the failure to pay any Tax (other
than for current Taxes not yet due and payable). There have been no waivers or
extensions of statutes of limitations by the Company. The Company has previously
delivered to Parent true and correct copies of any forms, report, protests,
closing agreements or other documents submitted to, or received from, any Tax
authority within the past two years in connection with any audit,S examination,
proceeding or litigation.
(d) TAX ELECTIONS. All elections with respect to Taxes affecting the
Company as of the date hereof are set forth on SCHEDULE 3.23(d). No new
elections with respect to Taxes, or changes in current elections with respect to
Taxes, affecting the Company shall be made after the date of this agreement
without Parent's prior written consent. The Company: (i) has not made or will
make a deemed dividend election under Treasury Regulation Section
1.1502-32(f)(2) or a consent dividend election under Section 565 of the Code;
(ii) has not consented at any time under Section 341(f)(1) of the Code to have
the provisions of Section 341(f)(2) of the Code apply to any disposition of the
Company's assets; (iii) has not agreed, or is required, to make any adjustment
under Section 481(a) of the Code by reason of a change in accounting method or
otherwise; (iv) has not made an election, or is required, to treat any asset of
the Company as owned by another person pursuant to the provisions of Section
168(f) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Reform Act of 1986, or as
Tax-exempt bond financed property or Tax-exempt use property within the meaning
of Section 168 of the Code; or (v) has not made any of the foregoing elections
or is required to apply any of the foregoing rules under any comparable state or
local Tax provision.
(e) PRIOR AFFILIATED GROUPS. The Company has never been a member of an
affiliated group of corporations within the meaning of Section 1504 of the Code.
The Company has no liability for the Taxes of any Person other than the Company
(i) under Treasury Regulations Section 1.1502-6 (or any similar provision of
state, local or foreign law), (ii) as a transferee or successor, (iii) by
contract, or (iv) otherwise.
34
(f) TAX SHARING AGREEMENTS. There are no, and at the Closing Date
there will be no, Tax-sharing agreements or similar arrangements with respect to
or involving the Company, and, after the Closing Date, the Company shall not be
bound by any such Tax-sharing agreements or similar arrangements or have any
liability thereunder for amounts due in respect of periods prior to the Closing
Date.
(g) PARTNERSHIPS AND SINGLE MEMBER LLCS. The Company is not subject to
any joint venture, partnership, or other arrangement or contract which is
treated as a partnership for federal income Tax purposes. The Company does not
own a single member limited liability company that is treated as a disregarded
entity for federal income Tax purposes.
(h) WITHHOLDING. For purposes of withholding under Section 1445 of the
Code, the Stockholders are not "foreign persons" as defined in Section
1445(f)(3) of the Code. The transactions contemplated herein are not subject to
the Tax withholding provisions of Section 3406 of the Code or of Subchapter A of
Chapter 3 of the Code or of any other provision of law.
(i) EXCESS PARACHUTE PAYMENTS. The Company is not a party to any
agreement, contract, arrangement or plan that has resulted or could result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code or which would result
in a disallowed deduction under Section 162(m) of the Code.
(j) TAX RESERVES. The unpaid Taxes of the Company do not exceed the
reserve for Tax liability (excluding any reserve for deferred Taxes established
to reflect temporary differences between book and Tax basis of assets and
liabilities) set forth or included in the Balance Sheet, as adjusted for the
passage of time through the Closing, in accordance with the past custom and
practice of the Company.
(k) MISCELLANEOUS TAX REPRESENTATIONS. None of the assets of the
Company directly or indirectly secures any debt the interest on which is
Tax-exempt under Section 103(a) of the Code. None of the assets of the Company
is "tax-exempt use property" within the meaning of Section 168(h) of the Code.
The Company has not ever participated in and is not participating in an
international boycott within the meaning of Section 999 of the Code. The Company
has not and has not had a permanent establishment in any foreign country, as
defined in any applicable Tax treaty or convention between the United States and
such foreign country.
3.24 INSURANCE. SCHEDULE 3.24 contains a complete and accurate list of all
policies or binders of insurance (showing as to each policy or binder the
carrier, policy number, coverage limits, expiration dates, annual premiums, a
general description of the type of coverage provided and any pending claims
thereunder) of which the Company is the owner, insured or beneficiary. All of
such policies are sufficient for compliance with all Regulations and all of the
Contracts. The Company is not in default under any of such policies or binders,
and has not failed to give any notice or to present any material claim under any
such policy or binder in a due and timely fashion. There are no facts known to
the Company upon which an insurer might be justified in reducing or denying
coverage or increasing premiums on existing policies or binders. There are
35
no outstanding unpaid claims under any such policies or binders. Such policies
and binders are in full force and effect on the date hereof and shall be kept in
full force and effect by the Company through the Closing Date.
3.25 ACCOUNTS RECEIVABLE. Except as set forth on SCHEDULE 3.25, the
accounts and notes receivable reflected in the Balance Sheet, and all accounts
or notes receivable arising since the Balance Sheet Date, represent bona fide
claims against debtors for sales, services performed or other charges arising on
or before the date of recording thereof, and all the goods delivered and
services performed which gave rise to said accounts were delivered or performed
in accordance with the applicable orders, Contracts or customer requirements.
3.26 CUSTOMERS. To the Company's knowledge, since December 31, 1999, there
has been no actual or threatened termination of any material customer account or
group of accounts or actual or threatened material reduction in purchases or
royalties payable by any such customer or occurrence of any event that is likely
to result in any such termination or reduction, except as a direct result of the
announcement of the transactions contemplated hereby.
3.27 SUPPLIERS. SCHEDULE 3.27 sets forth a complete and accurate list of
the names and addresses of the ten (10) suppliers with the greatest dollar
volume of sales to the Company during the last fiscal year and during the last
fiscal quarter, showing the approximate total purchases in dollars by the
Company from each such supplier during such fiscal year and quarter. Since the
Balance Sheet Date, there has been no Company Material Adverse Change in the
business relationship of the Company with any supplier named on SCHEDULE 3.27.
The Company has not received any written communication from any supplier named
on SCHEDULE 3.27 of any intention to return, terminate or materially reduce
services or supplies to the Company.
3.28 BROKERS; TRANSACTION COSTS. Except as set forth on SCHEDULE 3.28, the
Company has not entered into any contract, agreement, arrangement or
understanding with any Person which will result in the obligation of Parent or
the Company to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
3.29 FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor any
predecessor, nor to the knowledge of the Company, any agent, employee or other
Person associated with or acting on behalf of the Company or any predecessor
has, directly or indirectly, used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns
from corporate funds, violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment,
kickback or other similar unlawful payment.
3.30 FINANCIAL PROJECTIONS; OPERATING PLAN. The Company has made available
to Parent certain financial projections with respect to the Business which
projections were prepared for internal use only. The Company makes no
representation or warranty regarding the accuracy of such projections or as to
whether such projections will be achieved, except that the Company represents
and warrants that such projections were prepared in good faith and are based on
assumptions believed by it to be reasonable as of the date of this Agreement.
36
3.31 MATERIAL MISSTATEMENTS OR OMISSIONS. To the knowledge of the Company,
no representations or warranties by the Company in this Agreement or any
Ancillary Agreement to which it is a party or in the schedules or exhibit hereto
or thereto contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact necessary to make the statements
or facts contained therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
As an inducement of the Company to enter into this Agreement, except as
set forth on the Parent Schedule of Exceptions attached to this Agreement,
Parent represents and warrants to the Company as follows, which representations
and warranties are, as of the date hereof, and will be, as of the Closing Date,
true and correct: The Parent Schedules of Exceptions are numbered to correspond
to the various sections of this Article 4 setting forth certain exceptions to
the representations and warranties contained in this Article 4 and certain other
information called for by this Agreement. Unless otherwise specified, no
disclosure made in any particular Parent Schedule of Exceptions shall be deemed
made in any other Schedule unless expressly made therein (by cross-reference or
otherwise) or such Schedules otherwise expressly and completely disclose the
specific exception.
4.1 ORGANIZATION. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Parent
has full corporate power and authority to conduct its business as it is
presently being conducted. Parent is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is necessary under applicable law as a result of the conduct of
its business or the ownership of its properties and where the failure to be so
qualified would, individually or in the aggregate, have a Parent Material
Adverse Effect. Sub is a corporation duly organized, validly existing and in
good standing under the laws of the state of Delaware. Sub has not engaged in
any business (other than in connection with this Agreement and the transactions
contemplated hereby) since the date of its incorporation.
4.2 CAPITALIZATION.
(a) Parent has authorized under its Certificate of Incorporation
99,000,000 shares of Parent Stock and 1,000,000 shares of preferred stock, par
value $1.00 per share of which, as of May 10, 2000, 31,226,500 shares of Parent
Stock and no shares of preferred stock were issued and outstanding. Parent has
no other stock authorized, issued or outstanding.
(b) Except for Parent Options, there are no outstanding options,
warrants, convertible securities or rights of any kind to purchase or otherwise
acquire any shares of capital stock or other securities of Parent.
(c) All outstanding shares of Parent Stock issued or to be issued upon
exercise of any of the Parent Options will be validly issued, fully paid and
non-assessable and not subject to any preemptive rights created by statute,
Parent's Certificate of Incorporation or Bylaws or any Contract.
37
(d) The Merger Shares to be issued pursuant to the terms of this
Agreement have been duly authorized and, when issued in accordance with the
terms hereof, will be validly issued, fully paid and nonassessable.
4.3 AUTHORIZATION. Each of Parent and Sub has all necessary corporate
power and authority to enter into this Agreement and the Ancillary Agreements to
which it is a party and has taken all corporate action necessary to consummate
the transactions contemplated hereby and thereby and to perform its respective
obligations hereunder and thereunder, including approval of the Parent's Board
of Directors. Approval of Parent's stockholders is not required for Parent to
enter into this Agreement and the Ancillary Agreements to which it is a party
and to perform its obligations hereunder and thereunder. This Agreement has been
duly executed and delivered by each Parent and Sub, and this Agreement is, and
upon execution and delivery each of the Ancillary Agreements to which each of
Parent and Sub is a party will be, a valid and binding obligation of each of
Parent and Sub enforceable against each of Parent and Sub in accordance with its
terms, except that enforceability may be limited by the effect of (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors or (b) general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity).
4.4 NO CONFLICT OR VIOLATION; CONSENTS. Except as set forth on SCHEDULE
4.4, none of the execution, delivery or performance of this Agreement or any
Ancillary Agreement, the consummation of the transactions contemplated hereby or
thereby, nor compliance by Parent or Sub with any of the provisions hereof or
thereof, will (a) violate or conflict with any provision of Parent's or Sub's
governing documents to the extent applicable, (b) violate, conflict with, or
result in a breach of or constitute a default (with or without notice of passage
of time) under, or result in the termination of, or accelerate the performance
required by, or result in a right to terminate, accelerate, modify or cancel
under, or require a notice under, or result in the creation of any Encumbrance
upon any of its assets under, any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, security interest or other arrangement to
which Parent or Sub is a party or by which Parent or Sub is bound or to which
any of their respective assets are subject, (c) violate any Regulation or Court
Order applicable to Parent or Sub or (d) impose any Encumbrance on any assets of
Parent or Sub. Except as set forth on SCHEDULE 4.4, no notices to, declaration,
filing or registration with, approvals or Consents of, or assignments by, any
Persons (including any federal, state or local governmental or administrative
authorities) are necessary to be made or obtained by Parent or Sub in connection
with the execution, delivery or performance of this Agreement or any Ancillary
Agreement or the consummation of the transactions contemplated hereby or
thereby.
4.5 REPORTS AND FINANCIAL STATEMENTS. Parent has timely filed all reports
required to be filed with the SEC pursuant to the Exchange Act or the Securities
Act, and has previously provided or made available to the Company true and
complete copies of all reports filed by Parent with the SEC since January 1,
1999 (the "SEC Reports"). Such SEC Reports, as of their respective dates,
complied in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and none of such SEC
Reports, as of its date, contained any untrue statement of a material fact or
omitted to state a material fact required
38
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of Parent, including the notes thereto, included in the SEC Reports
have been prepared in accordance with GAAP consistently applied (except as
otherwise stated in the footnotes to the financial statements) and fairly
present in all material respects the consolidated financial condition of Parent
as at the dates thereof and consolidated results of operations and cash flows
for the periods then ended.
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as otherwise set forth
in the SEC Reports, since March 31, 2000, there has not been any fact, event,
circumstance or change affecting or relating to Parent and its Subsidiaries,
taken as a whole, which has had or is reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Parent, or (B) the likelihood of
Parent to consummate the Merger and the other transactions contemplated by this
Agreement (a "Parent Material Adverse Effect"); provided, however, that a Parent
Material Adverse Effect shall not include any adverse effect following the date
of this Agreement which is solely attributable to cShanges, event or development
in the medical equipment business generally.
ARTICLE 5
ACTIONS BY THE COMPANY AND PARENT PRIOR TO THE CLOSING
The Company, Parent and Sub, each as indicated below, covenant as
follows for the period from the date hereof through the Closing Date:
5.1 CONDUCT OF BUSINESS. From the date hereof through the Closing, the
Company shall, except as set forth on SCHEDULE 5.1, as otherwise expressly
contemplated by this Agreement, or as consented to by Parent in writing,
(i) operate the Business solely in the ordinary course of business and in
accordance with past practice and will maintain its books, records and accounts
in accordance with GAAP, consistent with past practices, (ii) use its
commercially reasonable efforts to maintain the Company's current financial
condition, including working capital, (iii) use its commercially reasonable
efforts to maintain the Business, retain the Employees so that such Employees
will remain available to the Surviving Corporation on and after the Closing
Date, maintain existing relationships with material suppliers and customers and
others having business dealings with the Company and otherwise to preserve the
goodwill of the Business so that such relationships and goodwill will be
preserved on and after the Closing Date and (iv) will not, in any event, take
any action inconsistent with this Agreement, the Ancillary Agreements or the
consummation of the Closing. Without limiting the generality of the foregoing,
the Company shall not, except as set forth on Schedule 5.1, as specifically
contemplated by this Agreement or as consented to by Parent in writing, which
consent shall not be unreasonably withheld:
(a) incur any indebtedness for borrowed money, or assume, guarantee,
endorse (other than endorsements for deposit or collection in the ordinary
course of business), or otherwise become responsible for obligations of any
other Person in excess of $50,000 in the aggregate;
39
(b) issue (except pursuant to Company Options outstanding on the date
of this Agreement and disclosed on SCHEDULE 3.2(b)) or commit to issue any
shares of its capital stock or any other securities or any securities
convertible into shares of its capital stock or any other securities, including,
without limitation, any options to acquire capital stock;
(c) declare, pay or incur any obligation to pay any dividend on its
capital stock or declare, make or incur any obligation to make any distribution
or redemption with respect to capital stock;
(d)make any change to the Company's Articles of Incorporation or
Bylaws;
(e) mortgage, pledge or otherwise encumber any Assets or sell,
transfer, license or otherwise dispose of any Assets except for the sale of
inventory to customers in the ordinary course of business and consistent with
past practice;
(f) cancel, release or assign any indebtedness owed to it or any
claims or rights held by it;
(g) make any investment or commitment of a capital nature either by
purchase of stock or securities, contributions to capital, business or product
line acquisitions, property transfer or otherwise, or by the purchase of any
property or assets of any other Person in excess of $50,000 in the aggregate;
(h) terminate any material Contract or make any change in any material
Contract;
(i) enter into or modify any employment Contract, (ii) pay any
compensation to or for any Employee, officer or director other than in the
ordinary course of business and pursuant to existing employment arrangements,
(iii) pay or agree to pay any bonus, incentive compensation, service award,
severance, "stay bonus" or other like benefit, (iv) enter into or modify any
other Employee Plan, or (v) modify the Company Stock Option Plan;
(j) enter into or modify any Contract or other arrangement with a
Related Party;
(k) make any change in any method of accounting or accounting practice
other than as required by GAAP, law or regulatory authority;
(l) make or change any election in respect of Taxes, adopt or change
any material accounting method in respect of Taxes, enter into any tax
allocation agreement, tax sharing agreement, tax indemnity agreement or closing
agreement, settle or compromise any claim, notice, audit report or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(m) commence any Action or other legal proceeding;
40
(n) do any other act which would cause any representation or warranty
of the Company in this Agreement to be or become untrue in any material respect
or that is not in the ordinary course of business consistent with past practice;
or
(o) directly or indirectly take, agree to take or otherwise permit to
occur any of the actions described in Sections 5.1(a) through 5.1(n).
5.2 ACCESS BY PARENT. Subject to the Confidentiality Agreement, from the
date hereof through the Closing Date, the Company shall, and shall cause the
Company's officers, Employees and Representatives to, afford the Representatives
of the Parent and those of its lenders reasonable access upon reasonable notice
and at all reasonable times to its Business for the purpose of inspecting the
same, and to its officers, Employees and Representatives, properties, Books and
Records, Contracts and other Assets, and shall furnish Parent and its
Representatives and those of its lenders, upon reasonable notice and in a timely
manner, all financial, operating and other data and information as Parent or its
affiliates, through their respective Representatives, may reasonably request.
5.3 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice
to Parent of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty of
the Company contained in this Agreement to be untrue or inaccurate in any
material respect and (ii) any material failure of the Company to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that such disclosure shall not be deemed to
cure any breach of a representation, warranty, covenant or agreement or to
satisfy any condition. The Company shall promptly notify Parent of any Default,
the threat or commencement of any Action, or any development that occurs before
the Closing that could reasonably be expected to result in a Company Material
Adverse Effect or to materially adversely affect the ability of the Company to
consummate any of the transactions contemplated hereby.
5.4 NO MERGERS, CONSOLIDATIONS, SALE OF STOCK, ETC. The Company
represents that since the execution of that certain letter of intent dated as of
May 1, 2000, it has not engaged in any discussions or negotiations with, or
provided any information to or otherwise cooperate with, any party other than
Parent with respect to an Acquisition Transaction. From the date hereof until
termination of this Agreement pursuant to its terms (the "Exclusivity Period"),
none of the Company or any of its shareholders, Subsidiaries or Affiliates, or
any of their respective officers, employees, representatives or agents, will
directly or indirectly, encourage, solicit, initiate, have or continue any
discussions or negotiations with or participate in any discussions or
negotiations with or provide any information to or otherwise cooperate in any
other way with, or enter into any agreement, letter of intent or agreement in
principle with, or facilitate or encourage any effort or attempt by any Person,
other than Parent and its employees, representatives and agents, concerning any
merger, sale of substantial assets, sale of shares of capital stock, investment
or similar transaction involving the Company or any Subsidiary or division of
the Company (all such transactions being referred to herein as "Acquisition
Transactions"). If any indication of interest, letter of intent, agreement in
principle, offer or proposal or request for information either in writing or
verbally with respect to an Acquisition Transaction is received by the Company
or any of its shareholders, Subsidiaries or Affiliates or any of their
respective officers, employees,
41
representatives or agents during the Exclusivity Period, including any
indication of interest, letter of intent, agreement in principle, offer or
proposal or request for information from Siemens or any of its Subsidiaries or
Affiliates, the Company shall notify Parent immediately (orally and in writing)
of such receipt.
5.5 POOLING ACCOUNTING TREATMENT. The Company and Parent shall use
diligent efforts in good faith to take actions within their control to cause the
transactions contemplated by this Agreement to be accounted for as a pooling of
interests under APB 16 and applicable SEC rules and regulations, and to have
such accounting treatment accepted by the Company's independent public
accountants, by Parent's independent public accountants, and by the SEC,
respectively. The Company and the Parent agree that none of them will knowingly
take any action that would cause such accounting treatment not to be obtained.
5.6 COMPANY STOCKHOLDER APPROVAL. The Company agrees that it will use its
best efforts to obtain from Stockholders owning a majority of the Company Stock
and Stockholders owning a majority of the Preferred Stock a written consent in
lieu of a meeting of such Stockholders approving the Merger and adopting this
Agreement (the "Stockholder Consent").
5.7 FAIRNESS HEARING; REGISTRATION OF SHARES. Parent, Sub and the
Company shall each take all steps necessary or desirable, utilize all
commercially reasonable efforts and cooperate with one another in every way to
obtain as promptly as practicable the approval of the Commissioner of the
California Department of Corporations (the "Commissioner") of the fairness (the
"Fairness Approval") of the terms and conditions of the issuance of the Parent
Stock as contemplated by this Agreement after a hearing held pursuant to Section
25142 of the CCC and the rules of the Commissioner thereunder. The Company shall
promptly notify Parent if the Company becomes aware that one of its shareholders
intents to dissent or object to the Merger and the transactions contemplated
hereby at such hearing. If for any reason whatsoever the Commissioner does not
render a Fairness Approval of the terms and conditions of the issuance of the
Parent Stock as contemplated by this Agreement (or if Parent determines in its
reasonable judgment not to pursue such a hearing; provided that Parent shall
consult with the Company prior to making such determination), the parties hereto
agree to take all steps necessary and desirable, utilize all commercially
reasonable efforts and cooperate with one another in every way to have the
issuance of the shares of Parent Stock to be issued in the Merger registered
with the SEC on Form S-4 or a successor registration form (the "Registration
Statement") by filing with the SEC as promptly as practicable after the decision
to utilize the Registration Statement is made, the Registration Statement with
respect to the Parent Stock to be issued in connection with the Merger, which
shall be in form and substance satisfactory to Parent (but with advance copies
provided to the Company for its review and comment, which such comments shall be
promptly conveyed by the Company). Each of Parent and the Company will use all
commercially reasonable efforts to respond to any comments of the SEC. Each of
Parent and the Company will notify the other promptly of the receipt of any
comments from the SEC and of any request by the SEC for amendments or
supplements to the Registration Statement or additional information, and will
supply the other party with copies of all correspondence between such party or
any of its representatives and the SEC with respect to the Registration
Statement. As promptly as practicable after comments are received from the SEC,
Parent shall file with the SEC an amendment to the Registration Statement and
Parent and the Company shall use all commercially
42
reasonable efforts to cause the Registration Statement to become effective as
soon thereafter as practicable. Whenever any event occurs that is required to be
set forth in an amendment or supplement to the Registration Statement, Parent or
the Company, as the case may be, shall promptly inform the other party of such
occurrence and cooperate in filing with the SEC and/or mailing to shareholders
of the Company, such amendment or supplement.
5.8 FIRPTA COMPLIANCE. On or prior to the Closing Date, the Company shall
deliver to Parent a properly executed statement in a form reasonably acceptable
to Parent for purposes of satisfying Parent's obligations under Treasury
Regulation Section 1.1445-2(c)(3).
5.9 NEW YORK STOCK EXCHANGE LISTING OF ADDITIONAL SHARES APPLICATION.
Parent shall use its commercially reasonable efforts to cause the Merger Shares
to be authorized for listing on the New York Stock Exchange, subject to official
notice of issuance.
5.10 TAKEOVER STATUTES. If any Takeover Statute is or may become
applicable to the transactions contemplated hereby, the Board of Directors of
the Company will grant such approvals and take such actions as are necessary so
that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate the
effects of any Takeover Statute on any of the transactions contemplated hereby.
5.11 FURTHER ASSURANCES. Upon the terms and subject to the conditions
contained herein, the parties agree, in each case both before and after the
Closing, (i) to use all commercially reasonable efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective the transactions contemplated by
this Agreement and the Ancillary Agreements, (ii) to use their respective
commercially reasonable efforts to cause the Merger to qualify, and will not
take any actions which to their knowledge could reasonably be expected to
prevent the Merger from qualifying, as a reorganization under the provisions of
Section 368(a) of the Code, (iii) to execute any documents, instruments or
conveyances of any kind which may be reasonably necessary or advisable to carry
out any of the transactions contemplated hereunder and thereunder and (iv) to
cooperate with each other in connection with the foregoing. Without limiting the
foregoing, the parties agree to use their respective reasonable commercial
efforts (A) to obtain any necessary Consents (including, without limitation, all
filings required to be made under the HSR Act with respect to this Agreement and
the transactions contemplated hereby), (B) to give all notices to, and make all
registrations and filings with third parties, including submissions of
information requested by governmental authorities and (C) to fulfill all other
conditions to this Agreement. Notwithstanding the foregoing, (y) no amendment or
modification shall be made to any Contract to obtain any required Consent
without the prior written consent of Parent and (z) no party hereto or any of
their respective Affiliates shall be required to sell, transfer, divest or
otherwise dispose of any of its respective business, assets or properties in
connection with this Agreement or any of the transactions contemplated hereby.
Each party shall deliver customary closing certificates and representations for
the purpose of facilitating delivery of the opinions of counsel and the outside
independent accountants contemplated by this Agreement.
43
5.12 EMPLOYEES. As soon as practicable after the Effective Time (the
"Benefits Date"), Parent shall provide, or cause to be provided, compensation,
vacation and leave, employee benefit plans, programs and arrangements to
employees of the Company that are the same as those made generally available to
similarly situated employees of the Parent; provided that compensation will not
be lower than the current compensation paid by the Company. From the Effective
Time to the Benefits Date (which the parties acknowledge may occur on different
dates with respect to different plans, programs or arrangements of the Company),
the Parent shall provide or cause to be provided, the employee compensation,
vacation and leave, benefit plans, programs and arrangements of the Company
provided to employees of the Company as of the date hereof (other than any
401(k) Plan (as defined in Section 7.15) or any Benefit Arrangement providing
for equity compensation). Each Company employee who continues to be employed by
Parent or any of its Subsidiaries immediately following the Effective Time
shall, to the extent permitted by law and applicable tax qualification
requirements, and subject to any generally applicable break in service or
similar rule, receive credit for all services with the Company for all purposes,
including without limitation, for eligibility to participate and vesting under
any plans of the Parent for years of service with the Company or its
Subsidiaries (or, if applicable, predecessor entities) prior to the Effective
Time. Parent shall cause any and all pre-existing condition (or actively-at-work
or similar) limitations, eligibility waiting periods and evidence of
insurability requirements under any group health plans to be waived with respect
to the Company participants in such plans and their eligible dependents and
shall provide them with credit for any co-payments, deductibles, offsets (or
similar payments) prior to the Effective Time for purposes of satisfying any
applicable deductible, out-of-pocket, or similar requirements under any Parent
plans in which they are eligible to participate after the Effective Time.
Payments under profit sharing plans for the Company and Parent for the fiscal
year ended September 30, 2000 will be determined on a stand-alone basis, as
reasonably determined by the President of the Surviving Corporation and the
Chief Financial Officer of Parent.
5.13 INDEMNIFICATION. The provisions with respect to indemnification that
are set forth in the articles of incorporation and bylaws of the Company, and
any director and officer indemnification agreement with the Company, shall not
be amended, repealed or otherwise modified for a period of four years from the
Effective Time in any manner that would affect adversely the rights thereunder
of individuals who at or at anytime prior to the Effective Time were directors
or officers of the Company. Parent shall cause the Company to fulfill its
obligations under the article of incorporation and bylaws and such
indemnification agreements.
5.14 BOARD MEMBER. Promptly after the Effective Time, Parent and the
Shareholder Representative shall agree upon one individual to be added to the
Board of Directors of Parent, provided that such individual shall not be an
employee or former employee of Parent or the Company. To the extent legally
permitted, the individual shall be added to the class of directors with the
longest term remaining.
5.15 TAX MATTERS. Prior to the Closing, each of Parent, Sub and the
Company shall execute and deliver to Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP and to
Xxxxxx & Xxxxxxx the tax representation letters in substantially the form of
Exhibit C (which shall be used in connection with the legal opinions
contemplated in Sections 6.6 and 7.7).
44
ARTICLE 6
CONDITIONS TO THE COMPANY'S OBLIGATIONS
The obligations of the Company to effect the Merger and complete the
related transactions contemplated by this Agreement are subject, in the
discretion of the Company, to the satisfaction, on or prior to the Closing Date,
of each of the following conditions:
6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
warranties of Parent and Sub contained in this Agreement shall be true and
correct in all material respects, except for representations and warranties
which are qualified as to materiality, which shall be true and correct in all
respects, at and as of the Closing Date as if such representations and
warranties were made at and as of the Closing Date (except for representation
and warranties made as of a certain date, which shall be true and correct as of
such date), and Parent and Sub shall have performed in all material respects all
agreements and covenants required hereby to be performed by it prior to or at
the Closing Date. There shall be delivered to the Company a certificate of
Parent and Sub signed by their President and Chief Financial Officer to the
foregoing effect ("Parent Closing Certificate").
6.2 FAIRNESS APPROVAL; EFFECTIVENESS OF REGISTRATION STATEMENT. The
Fairness Approval shall have been obtained, or, if the Fairness Approval has not
been obtained, then the Registration Statement shall have been declared
effective by the SEC under the Securities Act, and no stop order (or similar
action) suspending the effectiveness of the Registration Statement shall have
been issued by the SEC, as applicable.
6.3 GOVERNMENTAL CONSENTS. The applicable waiting period, including any
extension thereof, under the HSR Act shall have expired or been terminated. All
other Consents, approvals and waivers from governmental authorities necessary to
permit consummation of the Merger, as set forth on Schedule 6.3, shall have been
obtained and all approvals required under any Regulations to permit Parent and
Sub, as set forth on Schedule 7.3, to carry out the transactions contemplated by
this Agreement and the Ancillary Agreements shall have been obtained.
6.4 NO ACTIONS OR COURT ORDERS. No Action by any governmental authority
or Stockholder shall have been instituted which questions the validity or
legality of the transactions contemplated hereby and by the Ancillary
Agreements, and neither the Company nor Parent shall have received notice of any
such Action by any governmental authority. There shall not be any Court Order
that makes the acquisition of the Company stock contemplated hereby illegal or
otherwise prohibited.
6.5 STOCKHOLDER APPROVAL. The Company shall have obtained the Stockholder
Consent.
6.6 OPINION OF COUNSEL. The Company shall have received (i) an
opinion of Xxxxxx & Xxxxxxx, counsel to Parent and Sub, dated as of the Closing,
in customary form and reasonably acceptable to the Company, and (ii) a tax
opinion of Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx, counsel to the Company covering the
items set forth in SCHEDULE 6.6, dated as of the Closing, in customary form and
reasonably acceptable to the Company, to the effect that the Merger will
constitute a
45
reorganization within the meaning of Section 368(a) of the Code, it being
understood that such counsel may rely on the tax representation letters referred
to in Section 5.15.
6.7 MATERIAL ADVERSE CHANGE. Since September 30,1999 there shall not have
been any change, event or development which, individually or in the aggregate,
has had or could reasonably be expect to have a Parent Material Adverse Change.
6.8 POOLING LETTERS. Parent shall have received a letter (a "Pooling
Letter") from each of the Company's independent certified public accountants,
PricewaterhouseCoopers LLP, and Parent's independent certified public
accountants, PricewaterhouseCoopers LLP, dated the Closing Date, satisfactory to
Parent in its sole discretion, concurring in management's assertion that the
business combination contemplated by this Agreement and the Ancillary Agreements
qualifies as a pooling of interests under APB 16 and the applicable rules and
regulations of the SEC.
6.9 LISTING. The Parent Stock to be issued in the Merger have been
authorized for listing on the New York Stock Exchange, subject to official
notice of issuance.
ARTICLE 7
CONDITIONS TO PARENT'S AND SUB'S OBLIGATIONS
The obligations of Parent and Sub to effect the Merger and complete the
related transactions contemplated by this Agreement are subject, in the
discretion of Parent, to the satisfaction, on or prior to the Closing Date, of
each of the following conditions:
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS. All representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects, except for representations and warranties which are
qualified as to materiality, which shall be true and correct in all respects, at
and as of the Closing Date as if such representations and warranties were made
at and as of the Closing Date (except for representations and warranties made as
of a certain date, which shall be true and correct as of such date), and the
Company shall have performed in all material respects all agreements and
covenants required hereby to be performed prior to or at the Closing Date. There
shall be delivered to Parent a certificate of the Company signed by its Chief
Executive Officer and its President (the "Company Closing Certificate").
7.2 FAIRNESS APPROVAL; EFFECTIVENESS OF REGISTRATION STATEMENT. The
Fairness Approval shall have been obtained, or, if the Fairness Approval has not
been obtained, then the Registration Statement shall have been declared
effective by the SEC under the Securities Act, and no stop order (or similar
action) suspending the effectiveness of the Registration Statement shall have
been issued by the SEC, as applicable.
7.3 CONSENTS. The applicable waiting period, including any extension
thereof, under the HSR Act shall have expired or been terminated. All other
Consents, approvals and waivers from governmental authorities and other third
parties necessary to permit consummation of the Merger, as set forth on Schedule
7.3, shall have been obtained and all approvals required under
46
any Regulations to permit the Company, as set forth on Schedule 6.3, to carry
out the transactions contemplated by this Agreement and the Ancillary Agreements
shall have been obtained and copies shall have been provided to Parent.
7.4 NO ACTIONS OR COURT ORDERS. No Action by any governmental authority
or any Stockholder shall have been instituted which questions the validity or
legality of the transactions contemplated hereby and by the Ancillary
Agreements, and neither the Company or Parent shall have received notice of any
such Action by any governmental authority. There shall not be any Court Order
that makes the acquisition of the Company stock contemplated hereby illegal or
otherwise prohibited.
7.5 AGREEMENTS; EMPLOYEES. The Support Agreement, the Parent Affiliate
Letter, the Company Affiliate Letter, the Offer Letter and the Non-Competition
Agreement shall be in full force and effect. Xxxxxx X. Xxxxxxxxxxx and Xxxxx X.
Xxxx shall be employees of the Company and shall have indicated that they intend
to retain their status as employees of the Company on the terms and conditions
set forth in their Offer Letters.
7.6 STOCKHOLDER APPROVAL. The Company shall have obtained the Stockholder
Consent.
7.7 OPINION OF COUNSEL. Parent shall have received (i) an opinion of
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx, LLP, counsel to the Company, dated as of the
Closing, in customary form and reasonably acceptable to Parent covering the
items set forth on SCHEDULE 7.7, and (ii) a tax opinion of Xxxxxx & Xxxxxxx,
counsel to Parent, dated as of Closing, in customary form and reasonably
acceptable to the Company, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code, it being
understood that such counsel may rely on the tax representation letters referred
to in Section 5.15.
7.8 LISTING. The Parent Stock to be issued in the Merger have been
authorized for listing on the New York Stock Exchange, subject to official
notice of issuance.
7.9 AGREEMENTS WITH RELATED PARTIES. All agreements between the Company
and its Affiliates (other than ordinary course agreements relating to employee
compensation and benefits) shall have been terminated, except as set forth on
Schedule 7.9.
7.10 FIRPTA COMPLIANCE. The statement in the form reasonably
acceptable to Parent for purposes of satisfying Parent's obligations under
Treasury Regulation Section 1.1445-2(c)(3) shall be executed and delivered.
7.11 DIRECTORS. The directors of Company shall resign, effective as of
the Effective Time.
7.12 POOLING LETTERS. Parent shall have received a letter (a "Pooling
Letter") from each of the Company's independent certified public accountants,
PricewaterhouseCoopers LLP, and Parent's independent certified public
accountants, PricewaterhouseCoopers LLP, dated the Closing Date, satisfactory to
Parent in its sole discretion, concurring with management's assertion that the
business combination contemplated by this Agreement and the Ancillary
47
Agreements qualifies as a pooling of interests under APB 16 and the applicable
rules and regulations of the SEC, provided that this condition shall be deemed
satisfied if the sole reason such Pooling Letters can not be delivered is due to
actions taken by Parent after the date hereof and prior to the Effective Time.
7.13 MATERIAL ADVERSE CHANGE. There shall not have been any change, event
or development since September 30, 1999, which, individually or in the
aggregate, has had or could reasonably be expect to have a Company Material
Adverse Change.
7.14 DISSENTERS RIGHTS. Stockholders of not more than 5% of the total
outstanding Company Stock and Preferred Stock (on an as converted basis),
combined, shall have demanded dissenters' rights pursuant to the CCC.
7.15 401(K) PLAN TERMINATION. Unless Parent and the Company agree
otherwise in writing, the Board of Directors of the Company shall adopt
resolutions terminating, effective at least two (2) days prior to the Closing
Date, any Employee Plan which is intended to meet the requirements of Section
401(k) of the Code (each such Employee Plan, a "401(k) Plan"). At the Closing,
the Company shall provide Parent (i) executed resolutions of the Board of
Directors of the Company authorizing such termination and (ii) an executed
amendment to each such 401(k) Plan intended to assure compliance with all
applicable requirements of the Code and regulations thereunder. As soon as
practicable following the Closing Date, to the extent consistent with provisions
of the Code, ERISA and other applicable law, Parent agrees to use all reasonable
efforts to permit the direct rollover of amounts distributed from any 401(k)
Plan (including any outstanding participant loan balances distributed from a
401(k) Plan)to a defined contribution plan that Parent or an ERISA affiliate of
Parent maintains that is intended to be tax-qualified.
7.16 CARECORE CREDIT AGREEMENT. CareCore, Inc. shall have entered into a
revolving credit agreement with Xxxxxx X. Xxxxxxxxxxx, Xxxxx X. Xxxx and Xxxxx
Xxxxxxxx, which agreement will provide CareCore, Inc. with sufficient funds to
meet its monthly operating obligations through December 31, 2000.
ARTICLE 8
CLOSING
On the Closing Date at the location of the Closing the Company and
Parent shall execute and deliver all documents and agreements the receipt of
which are conditions to the obligations of the other to consummate the Merger.
ARTICLE 9
INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS, ETC. All statements contained in this
Agreement, any schedule or in any certificate or instrument of conveyance
delivered by or on behalf of the parties pursuant to this Agreement shall be
deemed to be representations and warranties by such party hereunder. The
representations and warranties contained herein shall survive the Closing Date,
and claims based upon or arising out of such representations and warranties, as
well as any
48
claims based upon or arising out of any covenants and agreements herein or made
hereunder, may be asserted at, any time before (i) the earlier of the first
anniversary of the Closing Date or the date of the audit report on the first
financial statements of Parent containing combined operations of the Company and
Parent for those representations and warranties related to matters expected to
be encountered in the audit process, and (ii) the first anniversary of the
Closing Date for all other representations and warranties (the "Claim Expiration
Date"). No investigation made by any of the parties hereto (whether prior to, on
or after the Closing Date) shall in any way limit the representations and
warranties of the parties. The termination of the representations and warranties
provided herein shall not affect the rights of a party in respect of any claim
made by such party in a writing received by the other party prior to the
expiration of the applicable survival period provided herein.
9.2 INDEMNIFICATION.
(a) General.
(i) Subject in all cases to the limits of Section 9.2(c) and
Section 9.4, subsequent to the Closing, the Stockholders (other than holders of
Dissenting Shares) at the Effective Time (the "Indemnifying Parties") shall
indemnify Parent, its Affiliates, and each of their respective, officers,
directors, employees, stockholders and agents ("Parent Indemnified Parties")
against, and hold each of the Parent Indemnified Parties harmless from, any
damage, claim, loss, cost, Tax, Liability or expense, including without
limitation, judgments, settlements, interest, penalties, reasonable attorneys'
fees and expenses of investigation, diminution of value, response action,
removal action or remedial action, each calculated after giving effect to any
tax benefits associated with such item and the tax costs of any indemnification
pursuant to this Section 9.2, (collectively "Damages") incurred by any such
Parent Indemnified Party, that are incident to, arise out of, in connection
with, or related to, the breach of any warranty, representation, covenant or
agreement of the Company or any schedule hereto or in any certificate or
instrument of conveyance delivered by or on behalf of the Company pursuant to
this Agreement or in connection with the transactions contemplated hereby. The
Indemnified Parties shall not be required to make any indemnification payment
unless a Claim is initiated prior to Claim Expiration Date.
(ii) Subject in all cases to the limits of Section 9.2(c), the
Indemnifying Parties shall indemnify the Parent Indemnified Parties against,
and hold each of the Parent Indemnified Parties harmless from fifty percent
(50%) of Damages incurred after the date hereof (including after the date hereof
and prior to the Effective Time) by any such Parent Indemnified Party, that are
incident to, arise out of, in connection with, or related to, any Third Party
Litigation.
(iii)In the event that fewer than four of the individuals set
forth on Schedule 9.2(a) are employees of the Company as of the Effective Time
and have indicated that they intend to retain their status as an employee of the
Company (the "Continuing Employees"), then the Indemnifying Parties shall
indemnify the Parent Indemnified Parties against, and hold each harmless from,
the actual out-of-pocket costs and expenses incurred by such Parent Indemnified
parties in connection with identifying, interviewing and hiring an employee or
49
employees to replace all but one of the individuals on Schedule 9.2(a) who are
not Continuing Employees.
(iv) In the event that the Company's Net Sales Tax Liabilities
exceeds $620,000, then the Indemnifying Parties shall indemnify the Parent
Indemnified Parties against, and shall hold each harmless from, the amount of
Net Sales Tax Liabilities owed by the Company in excess of $620,000.
The term "Damages" as used in this Section 9.2 is not limited to
matters asserted by third parties against Parent Indemnified Parties, but
includes Damages incurred or sustained by such Persons in the absence of third
party claims.
(b) Procedure for Claims.
If a claim for indemnification pursuant to Section 9.2 (a "Claim") is
to be made by a Parent Indemnified Party entitled to indemnification hereunder,
the Parent Indemnified Party claiming such indemnification (the "Indemnified
Party") shall give written notice (a "Claim Notice") to the Shareholder
Representative promptly after the Indemnified Party becomes aware of any fact,
condition or event which may give rise to Damages for which indemnification may
be sought under this Section 9.2. The failure of any Indemnified Party to give
timely notice hereunder shall not affect rights to indemnification hereunder,
except and only to the extent that, the Indemnifying Party demonstrates actual
material damage caused by such failure, and then only to the extent thereof.
In the case of a Claim brought pursuant to Section 9.2(a)(i) (but not 9.2(a)
(ii) or 9.2(a)(iv)) involving the assertion of a claim by a third party (whether
pursuant to a lawsuit, other legal action or otherwise, a "Third-Party Claim"),
if the Indemnifying Party shall acknowledge in writing to the Indemnified Party
that the Indemnifying Party shall be obligated to indemnify the Indemnified
Party under the terms of its indemnity hereunder in connection with such
Third-Party Claim, then (A) the Shareholder Representative shall be entitled
and, if it so elects, shall be obligated at its own cost, risk and expense,
(1) to take control of the defense and investigation of such Third-Party Claim
and (2) to pursue the defense thereof in good faith by appropriate actions or
proceedings promptly taken or instituted and diligently pursued, including,
without limitation, to employ and engage attorneys of its own choice reasonably
acceptable to the Indemnified Party to handle and defend the same, and (B) the
Shareholder Representative shall be entitled (but not obligated), if it so
elects, to compromise or settle such claim, which compromise or settlement shall
be made only with the written consent of the Indemnified Party, such consent not
to be unreasonably withheld. In the event the Shareholder Representative elects
to assume control of the defense and investigation of such lawsuit or other
legal action in accordance with this Section 9.2(b), the Indemnified Party may,
at its own cost and expense, participate in the investigation, trial and defense
of such Third-Party Claim; provided that, if thSe named persons to a lawsuit or
other legal action include both the Indemnifying Party and the Indemnified Party
and the Indemnified Party has been advised in writing by counsel that there may
be one or more legal defenses available to such Indemnified Party that are
different from or additional to those available to the Indemnifying Party, the
Indemnified Party shall be entitled, at the Indemnifying Party's cost, risk and
expense, to retain one firm of separate counsel of its own choosing. If the
Shareholder Representative fails to assume the defense of such Third-Party Claim
in accordance with this Section 9.2(b) within fifteen (15) calendar days after
receipt of the
50
Claim Notice, the Indemnified Party against which such Third-Party Claim has
been asserted shall (upon delivering notice to such effect to the Shareholder
Representative) have the right to undertake, at the Indemnifying Party's cost,
risk and expense, the defense, compromise and settlement of such Third-Party
Claim on behalf of and for the account of the Indemnifying Party; provided that
such Third-Party Claim shall not be compromised or settled without the written
consent of the Shareholder Representative, which consent shall not be
unreasonably withheld. In the event the Shareholder Representative assumes the
defense of the claim, the Shareholder Representative shall keep the Indemnified
Party reasonably informed of the progress of any such defense, compromise or
settlement, and in the event the Indemnified Party assumes the defense of the
claim, the Indemnified Party shall keep the Shareholder Representative
reasonably informed of the progress of any such defense, compromise or
settlement. The Indemnifying Party shall be liable for any settlement of any
Third-Party Claim effected pursuant to and in accordance with this Section
9.2(b) and for any final judgment (subject to any right of appeal).
(c) Exclusive Remedy; Escrow Shares Sole Recourse.
The indemnification pursuant to this Section 9.2 shall be the exclusive
remedy for all Parent Indemnified Persons with respect to matters for which
indemnification may be sought. With respect to each claim for indemnity under
this Section 9.2, the liability of each Indemnified Party shall be limited to
his pro rata portion of the amount claim. In no event shall any Indemnified
Party's obligation to provide indemnification exceed the amount of such
Indemnified Party's interest in the Escrow Shares.
9.3 NO RIGHT OF CONTRIBUTION. After the Closing, the Indemnifying Parties
shall have no right of contribution against the Surviving Corporation for any
breach of any representation, warranty, covenant or agreement of the Company.
9.4 THRESHOLD; LIMITATIONS ON INDEMNITY.
With respect to Claims made pursuant to Sections 9.2(a)(i) and
9.2(a)(ii), the Parent Indemnified Parties shall not be entitled to recover for
any Damages from the Escrow Shares until such time as the Damages claimed by the
Parent Indemnified Parties pursuant to such Sections in the aggregate exceed
$250,000 (the "Damage Threshold"), at which time the Parent Indemnified Parties
shall be entitled to be indemnified against and compensated and reimbursed for
all such Damages, including the initial $250,000 thereof. Notwithstanding the
foregoing, no Parent Indemnified Party shall be entitled to recover Damages with
respect to any Claim pursuant to such Sections 9.2(a)(i) and 9.2(a)(ii) where
the Damages arising out of such Claim (and Claims directly related to such
Claim) do not exceed $15,000.
9.5 STOCKHOLDER REPRESENTATIVE; POWER OF ATTORNEY.
(a) STOCKHOLDER REPRESENTATIVE. In the event that the Merger is
approved by the Stockholders, effective upon such vote, and without further act
of any Stockholder, the Stockholder Representative shall for each Stockholder
(other than shareholders, if any, as shall have perfected their dissenters'
rights under the CCC) enter into the Escrow Agreement, and take
51
all actions required or permitted under the Escrow Agreement or this Agreement
with respect to the interests and rights of the Stockholders with respect to
the indemnity under this Article 9. Such agency may be changed by the
Stockholders from time to time upon not less than thirty (30) days prior written
notice to Parent; provided, however, that the Stockholder Representative may not
be removed unless holders of a majority of the Escrow Shares agree to such
removal and to the identity of the substituted Stockholder Representative. Any
vacancy in the position of Stockholder Representative may be filled by approval
of the holders of a majority of the Escrow Shares. No bond shall be required of
the Stockholder Representative, and the Stockholder Representative shall not
receive compensation for his services. Notices or communications to or from the
Stockholder Representative shall constitute notice to or from each of the
Stockholders.
(b) EXCULPATION. The Stockholder Representative shall not be liable
for any act done or omitted hereunder as Stockholder Representative while acting
in good faith and in the exercise of reasonable judgment, and any act done or
omitted pursuant to the advice of counsel shall be conclusive evidence of such
good faith. The Stockholders (other than shareholders, if any, as shall have
perfected their dissenters' rights under the CCC) shall jointly and severally
indemnify the Stockholder Representative and hold him harmless against any loss,
liability or expense incurred without gross negligence or bad faith on the part
of the Stockholder Representative and arising out of or in connection with the
acceptance or administration of his duties hereunder.
(c) ACTIONS OF THE STOCKHOLDER REPRESENTATIVE. A decision, act,
consent or instruction of the Stockholder Representative shall constitute a
decision for all of the Stockholders for whom a portion of the Escrow Shares
otherwise issuable to them are deposited with the Depositary Agent pursuant to
the Escrow Agreement, and shall be final, binding and conclusive upon each of
such Stockholders, and the Depositary Agent and Parent may rely exclusively upon
any such decision, act, consent or instruction of the Stockholder Representative
as being the decision, act, consent or instruction of every such Stockholder.
The Depositary Agent and Parent are hereby relieved from any liability to any
person for any acts done by them in accordance with such decision, act, consent
or instruction of the Stockholder Representative.
ARTICLE 10
MISCELLANEOUS
10.1 TERMINATION.
(a) This Agreement may be terminated at any time prior to Closing:
(i) By the written agreement of Parent and the Company;
(ii) By Parent or the Company if the Closing shall not have
occurred on or before October 6, 2000, other than due to a breach of this
Agreement by the party seeking to terminate; unless Parent has not received the
Fairness Approval and has filed a Registration Statement, in which case such
date shall be extended to December 6, 2000;
52
(iii) By Parent or the Company if there shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of the Merger,
(b) In the event of termination of this Agreement:
(i) The provisions of this Article X and the Confidentiality
Agreement shall continue in full force and effect; and
(ii) Except as expressly provided herein, no party hereto shall
have any liability to any other party to this Agreement, except for any willful
breach of, or knowing misrepresentation made in, this Agreement occurring prior
to the formal termination of this Agreement.
10.2 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by the Company without the prior written
consent of Parent, or by Parent or Sub without the prior written consent of the
Company.
10.3 NOTICES. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by any party to the other
shall be in writing and delivered in person or by courier, sent by facsimile
transmission, sent via overnight delivery service or mailed by registered or
certified mail (such notice to be effective upon receipt), as follows:
If prior to the Closing, to the Company:
Impac Medical Systems, Inc.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxxxxxx
President and CEO
fax: (000) 000-0000
With a copy to:
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
Old Federal Reserve Bank
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxx Xxxxxxxxxx, Esq.
fax: (000) 000-0000
If to the Stockholder Representative:
Xxxxx Xxxxxxxx
CareCore, Inc.
000 Xxxxxx Xxxxxx
00
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
If to Parent or Sub or, if after the Closing, to the Surviving Corporation:
Varian Medical Systems, Inc.
0000 Xxxxxx Xxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxx, Ph.D.
President and CEO
fax: (000) 000-0000
With a copy to:
Xxxxxx & Xxxxxxx
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Xxxxxx, Esq.
fax: (000) 000-0000
or to such other place and with such other copies as any party may designate as
to itself by written notice to the others.
10.4 CHOICE OF LAW. This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of the State of
California, without giving effect to any choice of law provision or rule that
would cause the application of the laws of any jurisdiction other than the State
of California.
10.5 REPRESENTATION BY COUNSEL. Each party hereto represents and agrees
with each other that it has been represented by or had the opportunity to be
represented by, independent counsel of its own choosing, and that it has had the
full right and opportunity to consult with its respective attorney(s), that to
the extent, if any, that it desired, it availed itself of this right and
opportunity, that it or its authorized officers (as the case may be) have
carefully read and fully understand this Agreement in its entirety and have had
it fully explained to them by such party's respective counsel, that each is
fully aware of the contents thereof and its meaning, intent and legal effect,
and that it or its authorized officer (as the case may be) is competent to
execute this Agreement and has executed this Agreement free from coercion,
duress or undue influence.
10.6 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement, together
with the Ancillary Agreements and all exhibits and schedules hereto, and the
Confidentiality Agreement, constitute the entire agreement among the parties
pertaining to the subject matter hereof and supersede all prior agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties. No supplement, modification or waiver of this Agreement shall be
binding unless executed in writing by the party to be bound thereby. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision
54
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
10.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.8 INVALIDITY. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
10.9 EXPENSES.
(a) Each party will pay for its own legal, accounting and other costs
and expenses incurred with respect to the negotiation and execution of this
Agreement, except that upon the consummation of the Merger, Parent shall assume
all of the Company's legal, accounting, financial advisory and other
professional costs and expenses incurred with respect to the negotiation,
execution and consummation of this Agreement.
(b) If this Agreement is terminated pursuant to its terms and the
Company or its shareholders, Subsidiaries or Affiliates and Siemens or any
Subsidiary or Affiliate of Siemens enters into a definitive agreement with
respect to an Acquisition Transaction within one year of the date hereof which
is then consummated, then the Company shall on the date such Acquisition
Transaction is consummated pay to Parent $5,000,000 in cash in immediately
available funds as compensation for the time spent and expenses incurred by
Parent in connection with the negotiation, execution and evaluation of the
Merger and this Agreement. Except with respect to the Company's breach of this
Agreement, the $5,000,000 payment will be Parent's sole compensation if the
Company enters into such an Acquisition Transaction. If the Company fails to pay
the amounts due pursuant to this 10.9(b) when due, the Company shall pay
interest on such amount at the rate of 10% per annum commencing on the date when
such payment was due. This Section 10.9(b) shall no longer be effective if the
Merger is not consummated due to Parent's breach of this Agreement.
10.10 PUBLICITY. Except as required by law or on advice of counsel, neither
party shall issue any press release or make any public statement regarding the
transactions contemplated hereby without the prior approval of the other
parties, and the parties hereto shall issue a mutually acceptable press release
as soon as practicable after the date hereof and after the Closing Date.
Notwithstanding the foregoing, Parent shall be permitted to make any public
statement without obtaining the consent of the Company if (i) the disclosure is
required by law or the requirements of the New York Stock Exchange and
(ii) Parent has first used its reasonable efforts to consult with (but not to
obtain the consent of) the Company about the form and substance of such
disclosure.
10.11 NO THIRD PARTY BENEFICIARIES. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is
55
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement, including,
without limitation, by way of subrogation, except as specifically set forth in
Article 9 hereof.
10.12 DISPUTE RESOLUTION. The parties hereby agree that, in order to obtain
prompt and expeditious resolution of any disputes under this Agreement, each
claim, dispute or controversy of whatever nature, arising out of, in connection
with, or in relation to the interpretation, performance or breach of this
Agreement or the transactions contemplated hereby, including without limitation
any claim based on contract, tort or statute, or the arbitrability of any claim
hereunder (an "Arbitrable Claim"), shall be settled by final and binding
arbitration conducted in San Francisco, California. All such Arbitrable Claims
shall be settled by three (3) arbitrators in accordance with the Commercial
Arbitration Rules then in effect of the American Arbitration Association
("AAA"). Such arbitrators shall be provided through AAA by mutual agreement of
the parties; provided, that, absent such agreement, the arbitrators shall be
appointed by AAA. In either event, such arbitrators may not have any
preexisting, direct or indirect relationship with any party to the dispute. EACH
PARTY HERETO EXPRESSLY CONSENTS TO, AND WAIVES ANY FUTURE OBJECTION TO, SUCH
FORUM AND ARBITRATION RULES. Judgment upon any award may be entered by any state
or federal court having jurisdiction thereof. Except as required by law
(including, without limitation, the rules and regulations of the SEC and the New
York Stock Exchange if applicable), neither party nor the arbitrators shall
disclose the existence, content, or results of any arbitration hereunder without
the prior written consent of all parties. Adherence to this dispute resolution
process shall not limit the right of the parties hereto to obtain any
provisional remedy, including injunctive or similar relief, from any court of
competent jurisdiction as may be necessary to protect their respective rights
and interests pending arbitration. NOTWITHSTANDING THE FOREGOING SENTENCE, THIS
DISPUTE RESOLUTION PROCEDURE IS INTENDED TO BE THE EXCLUSIVE METHOD OF RESOLVING
ANY ARBITRABLE CLAIMS ARISING OUT OF OR RELATING TO THIS AGREEMENT. The
arbitration procedures shall follow the substantive law of the State of
California, including the provisions of statutory law dealing with arbitration,
as it may exist at the time of the demand for arbitration, insofar as said
provisions are not in conflict with this Agreement and specifically excepting
therefrom sections of any such statute dealing with discovery and sections
requiring notice of the hearing date by registered or certified mail. The
arbitrators shall determine the prevailing party and shall include in their
award that party's reasonable attorneys' fees and costs.
10.13 WAIVER OF JURY TRIAL. Consistent with the intention of Section 10.12,
each signatory to this Agreement hereby waives its respective right to a jury
trial of any permitted claim or cause of action arising out of this Agreement,
any of the transactions contemplated hereby, or any dealings between any of the
signatories hereto relating to the subject matter of this Agreement or any of
the transactions contemplated hereby. The scope of this waiver is intended to be
all encompassing of any and all disputes that may be filed in any court and that
relate to the subject matter of this agreement or any of the transactions
contemplated hereby, including, without limitation, contract claims, tort
claims, and all other common law and statutory claims. This waiver is
irrevocable, meaning that it may not be modified either orally or in writing,
and this waiver shall apply to any subsequent amendments, supplements or other
modifications to this agreement, any of the transactions contemplated hereby or
to any other document or agreement relating to the transactions contemplated
hereby.
56
10.14 SERVICE OF PROCESS; CONSENT TO JURISDICTION.
(a) SERVICE OF PROCESS. EACH OF THE PARTIES HERETO IRREVOCABLY
CONSENTS TO THE SERVICE OF ANY PROCESS, PLEADING, NOTICES OR OTHER PAPERS BY THE
MAILING OF COPIES THEREOF BY REGISTERED, CERTIFIED OR FIRST CLASS MAIL, POSTAGE
PREPAID, TO SUCH PARTY AT SUCH PARTY'S ADDRESS SET FORTH HEREIN, OR BY ANY OTHER
METHOD PROVIDED OR PERMITTED UNDER CALIFORNIA LAW.
(b) CONSENT AND JURISDICTION. EACH PARTY HERETO IRREVOCABLY AND
UNCONDITIONALLY (I) AGREES THAT ANY SUIT, ACTION OR OTHER LEGAL PROCEEDING
ARISING OUT OF THIS AGREEMENT MAY BE BROUGHT IN THE UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF CALIFORNIA OR, IF SUCH COURT DOES NOT HAVE
JURISDICTION OR WILL NOT ACCEPT JURISDICTION, IN ANY COURT OF GENERAL
JURISDICTION IN THE COUNTY OF SANTA CLARA, CALIFORNIA; (II) CONSENTS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING; AND
(III) WAIVES ANY OBJECTION WHICH SUCH PARTY MAY HAVE TO THE LAYING OF VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY SUCH COURT.
10.15 ATTORNEY FEES. If any party to this Agreement brings an action to
enforce its rights under this Agreement in accordance with the provisions
hereof, the prevailing party shall be entitled to recover its actual
out-of-pocket costs and expenses, including without limitation reasonable
attorneys' fees reasonably incurred in connection with such action, including
any appeal of such action.
* * * * * *
57
IN WITNESS WHEREOF, each party hereto has executed this Agreement or
caused this Agreement to be duly executed on its behalf by its officer thereunto
duly authorized, as of the day and year first above written.
VARIAN MEDICAL SYSTEMS, INC.
a Delaware corporation
By: /s/ XXXXXXX XXXX
-----------------------------------------
Name: Xxxxxxx Xxxx
Title: CEO and President
VARIAN MEDICAL SYSTEMS NEW ZEALAND, LTD.
a Delaware corporation
By: /s/ XXXXXX X. XXXXX
-----------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Secretary
IMPAC MEDICAL SYSTEMS, INC.
a California corporation
By: /s/ XXXXXX X. XXXXXXXXXXX
-----------------------------------------
Name: Xxxxxx X. Xxxxxxxxxxx
Title: CEO and President
