Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
STRATEGIC DIAGNOSTICS INC.
AZUR ACQUISITION CORP.
AND
AZUR ENVIRONMENTAL
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Dated as of May 4, 2001
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TABLE OF CONTENTS
ARTICLE 1 THE MERGER 1
1.1. The Merger.....................................................................................1
1.2. Effective Time.................................................................................1
1.3. Closing of the Merger..........................................................................2
1.4. Effects of the Merger..........................................................................2
1.5. Articles of Incorporation and Bylaws...........................................................2
1.6. Directors and Officers.........................................................................2
ARTICLE 2 EFFECT OF MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS..................................2
2.1. Conversion of Shares...........................................................................2
2.2. Stock Options..................................................................................3
2.3. Exchange Fund..................................................................................4
2.4. Exchange Procedures............................................................................4
2.5. Distributions with Respect to Unsurrendered Certificates.......................................5
2.6. No Further Ownership Rights in Company Common Stock............................................5
2.7. No Fractional Shares of Parent Preferred Stock.................................................5
2.8. Termination of Exchange Fund...................................................................6
2.9. No Liability...................................................................................6
2.10. Investment of the Exchange Fund................................................................6
2.11. Lost, Stolen or Destroyed Certificates.........................................................6
2.12. Reserved.......................................................................................7
2.13. Tax Consequences...............................................................................7
2.14. Stock Transfer Books...........................................................................7
2.15. Affiliates.....................................................................................7
2.16. Dissenting Shares..............................................................................7
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB................................................8
3.1. Due Organization...............................................................................8
3.2. Authorization and Effect of Agreement..........................................................8
3.3. No Violations; Consents and Approvals..........................................................9
3.4. Capitalization................................................................................10
3.5. Merger Consideration Shares...................................................................10
3.6. Parent SEC Filings and Financial Statements...................................................10
3.7. No Brokers or Finders.........................................................................11
3.8. Information Furnished.........................................................................11
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................11
4.1. Capitalization; Ownership of Shares; No Liens on Shares.......................................11
4.2. Due Organization..............................................................................12
4.3. Subsidiaries..................................................................................12
4.4. Authority; Absence of Conflicts...............................................................13
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4.5. Financial Statements; Absence of Undisclosed Liabilities......................................14
4.6. Absence of Undisclosed Liabilities............................................................15
4.7. Conduct of Business; Certain Actions..........................................................15
4.8. Real Property.................................................................................17
4.9. Tangible Personal Property....................................................................18
4.10. Accounts Receivable...........................................................................19
4.11. Accounts Payable..............................................................................19
4.12. Inventory.....................................................................................19
4.13. Backlog.......................................................................................20
4.14. Material and Affiliated Contracts.............................................................20
4.15. Compliance with Laws..........................................................................22
4.16. Legal Proceedings.............................................................................22
4.17. Ability to Conduct the Business...............................................................22
4.18. Labor Matters.................................................................................23
4.19. Employee Benefit Plans........................................................................24
4.20. Environmental Matters.........................................................................26
4.21. Warranties; Products Claims...................................................................28
4.22. Tax Matters...................................................................................28
4.23. Insurance.....................................................................................30
4.24. Minute Books; Stock Record Books..............................................................31
4.25. Brokers' or Finders' Fees.....................................................................31
4.26. Material Customers and Suppliers..............................................................31
4.27. Bank Accounts; Powers of Attorney.............................................................32
4.28. Books and Records.............................................................................32
4.29. Intellectual Property Rights..................................................................32
4.30. Sales Representatives and Other Sales Agents/Territory........................................33
4.31. List of Creditors.............................................................................33
4.32. Other Matters Regarding Subsidiary............................................................34
4.33. Information Furnished.........................................................................34
ARTICLE 5 COVENANTS RELATED TO CONDUCT OF BUSINESS..............................................................34
5.1. Inspection....................................................................................34
5.2. Financial Statements..........................................................................34
5.3. Interim Operations of the Company. Except as set forth on Schedule 5.3:......................35
ARTICLE 6 ADDITIONAL AGREEMENTS.................................................................................38
6.1. Fairness Hearing and Permit...................................................................38
6.2. Company Shareholder Meeting...................................................................39
6.3. Compliance by the Company, Parent and Merger Sub..............................................40
6.4. Satisfaction of All Conditions Precedent......................................................40
6.5. Acquisition Proposals.........................................................................40
6.6. Notice of Developments........................................................................41
6.7. Public Announcements..........................................................................41
6.8. Notice of Breach..............................................................................41
6.9. Continuation of Insurance Coverage............................................................42
6.10. Maintenance of Credit Terms...................................................................42
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6.11. Updating Schedules............................................................................42
6.12. Affiliate Letters.............................................................................42
6.13. Third Party Consents..........................................................................42
6.14. Commercially Reasonable Efforts and Certain Filings...........................................43
6.15. Confidentiality...............................................................................43
6.16. Antitakeover Statutes.........................................................................43
6.17. Determination of Working Capital..............................................................43
6.18. Filing of Reports Under the Exchange Act......................................................43
6.19. Distribution Agreement........................................................................44
6.20. Tax-Free Reorganization.......................................................................44
6.21. Subsidiary Income Tax Returns.................................................................44
ARTICLE 7 CONDITIONS TO CONSUMMATION OF THE MERGER..............................................................44
7.1. Conditions to Each Party's Obligation to Effect the Merger....................................44
7.2. Conditions to the Obligations of Parent and Merger Sub........................................45
7.3. Conditions to Obligations of the Company......................................................47
ARTICLE 8 TERMINATION 48
8.1. Termination by Mutual Agreement...............................................................48
8.2. Termination by Either Parent or the Company...................................................48
8.3. Termination by the Company....................................................................49
8.4. Termination by Parent.........................................................................49
8.5. Effect of Termination and Abandonment.........................................................49
8.6. Amendment.....................................................................................49
8.7. Extension; Waiver.............................................................................50
ARTICLE 9 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS; HOLDBACK PROVISIONS................50
9.1. Survival of Representations, Warranties, Covenants and Agreements.............................50
9.2. Holdback Amount...............................................................................50
9.3. Shareholder Agent of the Shareholders; Power of Attorney......................................53
9.4. Third-Party Claims............................................................................54
9.5. Parent Indemnification Obligation.............................................................54
ARTICLE 10 MISCELLANEOUS........................................................................................55
10.1. Collateral Agreements.........................................................................55
10.2. Successors and Assigns........................................................................55
10.3. Expenses......................................................................................55
10.4. Severability..................................................................................55
10.5. Notices.......................................................................................56
10.6. Further Assurances............................................................................56
10.7. Specific Performance..........................................................................56
10.8. Governing Law.................................................................................57
10.9. Remedies Not Exclusive........................................................................57
10.10. Execution in Counterparts.....................................................................57
10.11. Titles and Headings...........................................................................57
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10.12. Certain Interpretive Matters and Definitions..................................................57
10.13. Dispute Resolution; Arbitration...............................................................58
10.14. Disclosure of Terms...........................................................................59
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TABLE OF SCHEDULES
Schedule 3.1 Directors and Officers of Parent and Merger Sub
Schedule 3.6 Parent SEC Filings and Financial Statements
Schedule 3.8 Information Furnished
Schedule 4.1 Capitalization; Ownership of Shares; No Liens on Shares
Schedule 4.3 Subsidiaries
Schedule 4.4(c) Authority; Absence of Conflicts
Schedule 4.6 Absence of Undisclosed Liabilities
Schedule 4.7 Conduct of Business; Certain Action (since June 30, 2000)
Schedule 4.8 Real Property
Schedule 4.9 Tangible Personal Property
Schedule 4.10 Accounts Receivable
Schedule 4.12 Inventory
Schedule 4.13 Backlog
Schedule 4.14 Material and Affiliated Contracts
Schedule 4.15 Compliance with Laws
Schedule 4.16 Legal Proceedings
Schedule 4.18 Labor Matters
Schedule 4.19 Employee Benefits
Schedule 4.20 Environmental Matters
Schedule 4.21 Warranties; Product Claims
Schedule 4.22 Tax Matters
Schedule 4.23 Insurance
Schedule 4.26 Material Customers and Suppliers
Schedule 4.27 Bank Accounts; Powers of Attorney
Schedule 4.28 Location of Records, Data, Information, Databases, Systems
and Controls other than Premises of Company of Subsidiary
Schedule 4.29 Intellectual Property Rights
Schedule 4.30 Sales Agents
Schedule 4.31 List of Creditors
Schedule 4.32 Other Matters regarding Subsidiary
Schedule 5.3 Interim Operations of the Company
Schedule 6.12 Affiliates
Schedule 9.2(b) Indemnifiable Claims
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TABLE OF EXHIBITS
Exhibit A Agreement of Merger
Exhibit B Certificate of Designation
Exhibit C Affiliate Letter
Exhibit D Employment Agreement
Exhibit E Noncompetition Agreement
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Table Of Definitions
For convenience, certain terms used in more than one part of this
Agreement are listed in alphabetical order and defined or referred to below.
Such terms as well as any other terms defined elsewhere in this Agreement are
equally applicable to both the singular and plural forms of the terms defined.
"Accounts Receivable" is defined in Section 4.10.
"Acquisition Proposal" is defined in Section 6.5(a).
"Additional Securities and Property" is defined in Section 9.2(a).
"Affiliate" is defined in Section 10.12.
"Agreement" is defined in the first paragraph of this Agreement.
"Agreement of Merger" is defined in Section 1.2.
"Application" is defined in Section 6.1(a).
"Bank Accounts" is defined in Section 4.27.
"Benefit Plans" is defined in Section 4.19(a).
"Blank Check Preferred Stock" is defined in Section 3.4.
"California Documents" is defined in Section 6.1(b).
"California Law" is defined in Section 1.1.
"CERCLA" is defined in Section 4.20(d).
"Certificates" is defined in Section 2.4.
"Closing" is defined in Section 1.3.
"Closing Date" is defined in Section 1.3.
"Code" is defined in the Recitals.
"Commissioner" is defined in Section 3.3.
"Company" is defined in the first paragraph of this Agreement.
"Company Common Stock" is defined in Section 2.1(b).
"Company Consents" is defined in Section 6.13.
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"Company Material Adverse Effect" means any event, circumstance,
condition, fact, effect, or other matter which has had or could reasonably be
expected to have a material adverse effect (a) on the business, assets,
financial condition, or results of operations of the Company or its Subsidiary
other than any event, circumstance, condition, fact, effect, or other matter
which has had or could reasonably be expected to have a material adverse effect
on the economy generally or (b) on the ability of the Company or its Subsidiary
to perform on a timely basis any material obligation under this Agreement or to
consummate the transactions contemplated hereby.
"Company Option Plan" is defined in Section 2.2.
"Company Options" is defined in Section 4.1.
"Company Requisite Vote" is defined in Section 4.4(b).
"Company Shareholder Meeting" is defined in Section 6.2.
"Confidential Information" is defined in Section 6.5.
"Confidentiality Agreement" is defined in Section 6.5.
"Consulting Agreement" is defined in Section 7.2(m).
"December Balance Sheet" is defined in Section 4.10.
"December Financial Statements" is defined in Section 4.54.5(a).
"Dissenting Shareholders" is defined in Section 2.16.
"Dissenting Shares" is defined in Section 2.16.
"Distribution Agreement" is defined in Section 6.19.
"Dividends and Distributions" is defined in Section 9.2(a)
"Effective Time" is defined in Section 1.2.
"Employee" is defined in Section 4.7(b).
"Employee Arrangements" is defined in Section 4.19(a).
"Encumbrances" is defined in Section 4.8(b).
"Environmental Costs and Liabilities" is defined in Section 4.20(d).
"Environmental Law" is defined in Section 4.20(d).
"Exchange Act" is defined in Section 3.3.
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"Exchange Agent" is defined in Section 2.3.
"Exchange Fund" is defined in Section 2.3.
"Exchange Ratio" is defined in Section 2.1(b).
"Financial Statements" is defined in Section 4.5(a).
"GAAP" is defined in Section 3.6.
"Governmental Entity" is defined in Section 3.3.
"Xxxxx Litigation" means that certain lawsuit styled as Xxxx Xxxxx and
Xxxxx Environmental Laboratory Procedures, Incorporated v. Shell Oil Company,
Shell Exploration and Development Company, Shell International Limited, Azur
Environmental Limited and Chemetrics, Incorporated, Civil Action No. 1100CV-331
filed on May 17, 2000 in the United States District Court for the Easter
District of Texas, Beaumont Division, together with any and all causes of
action, counterclaims and cross-claims related thereto.
"Hazardous Material" is defined in Section 4.20(d).
"Hearing" is defined in Section 6.1(a).
"Hearing Notice" is defined in Section 6.1(a).
"Holdback Amount" is defined in Section 9.2(a).
"Holdback Period" is defined in Section 9.2(c).
"Holdback Shares" is defined in Section 9.2(a).
"Holders" is defined in Section 2.3.
"Indemnifiable Claims" is defined in Section 9.2(b).
"Information Statement" is defined in Section 6.1(a).
"Instrument" and "Instruments" are defined in Section 4.4(c).
"Intellectual Property" means any and all copyrights, patents,
trademarks, technology rights and licenses, logos, trade names, trade secrets,
know-how, inventions, methods, techniques and other intellectual property of the
Company or its Subsidiary that is used, in whole or in part, directly or
indirectly, in the conduct of the Company's or its Subsidiary's business.
"Key Employees" is defined in Section 4.7(b).
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"Knowledge" means with respect to any representation, warranty or
statement of any party in the Agreement that is qualified by such party's
"knowledge," (a) the actual knowledge of such party or of any director or
officer of such party and (b) that knowledge which any director or officer of
such party should have after such director or officer made all reasonable
inquiries with respect to the matter to which such qualification applies. For
purposes of this Agreement and without limitation to the foregoing, Xx. Xxxxxx
X. Xxxxxxxx shall be deemed to be an officer of the Company whose Knowledge is
attributable to the Company.
"Leased Real Property" is defined in Section 4.8(a).
"Liens" is defined in Section 3.3.
"Material Contracts" is defined in Section 4.14(b).
"Material Customer" is defined in Section 4.26(a).
"Material Supplier" is defined in Section 4.26(b).
"Merger" is defined in Section 1.1.
"Merger Consideration" is defined in Section 2.3.
"Merger Sub" is defined in the first paragraph of this Agreement.
"Most Recent Audited Balance Sheet" is defined in Section 4.6.
"Most Recent Audited Financial Statements" is defined in Section
4.5(a).
"Near Relatives" is defined in Section 4.14(b).
"Noncompetition Agreement" is defined in Section 7.2(n).
"NPL" is defined in Section 4.20(a).
"Officer's Certificate" is defined in Section 9.2(e).
"Owned Real Property" is defined in Section 4.8(a).
"Parent" is defined in the first paragraph of this Agreement.
"Parent Instrument" is defined in Section 3.3
"Parent Losses" is defined in Section 9.2(e).
"Parent Material Adverse Effect" means any credit, circumstances,
condition, fact, effect, or other matter which has had or could reasonably be
expected to have a material adverse effect (a) on the business, assets,
financial condition, or results of Parent and its subsidiaries other than any
event, circumstance, condition, fact, effect or other matter which has had or
could reasonably be expected to have a material adverse effect on the economy
generally or (b) on the ability of Parent or Merger Sub to perform on a timely
basis any material obligation under the Agreement or to consummate the
transactions contemplated hereby.
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"Parent Minimum Loss" is defined in Section 9.2(b).
"Parent Preferred Stock" is defined in Section 2.1(b).
"Parent SEC Filings" is defined in Section 3.6.
"Permitted Liens" is defined in Section 4.8(b).
"Person" is defined in Section 4.3.
"RCRA" is defined in Section 4.20(d).
"Real Property" is defined in Section 4.8(a).
"Release" is defined in Section 4.20(d).
"Sales Agent" is defined in Section 4.30.
"Securities Act" is defined in Section 3.3.
"Shareholder Agent" is defined in Section 9.3(a).
"Shareholder Losses" is defined in Section 9.5.
"Shareholder Minimum Losses" is defined in Section 9.5.
"Software" means any computer software of any nature whatsoever,
including all systems software, all applications software, whether for general
business usage (e.g., accounting, finance, word processing, graphics,
spreadsheet analysis, etc.) or specific, unique to the Company's business usage
(e.g., purchase or service order processing, etc.) and all computer operating,
security or programming software, that is owned by or licensed to the Company or
any Subsidiary or used, in whole or in part, directly or indirectly, or has been
developed or designed for or is in the process of being developed or designed
for use, in whole or in part, directly or indirectly, in the conduct of the
business of the Company or its Subsidiary, and any and all documentation and
object and source codes related thereto.
"SONAS Technology" is a method for sensing nucleic acid hybridization
based on changes in AC impedance on rare earth semi-conductor oxide electrode
materials.
"Subsidiary" is defined in Section 4.3.
"Survival Expiration Date" is defined in Section 9.1.
"Surviving Corporation" is defined in Section 1.1.
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"Tangible Personal Property" is defined in Section 4.9(a).
"Tax" and "Taxes" are defined in Section 4.22(n).
"Tax Returns" is defined in Section 4.22(n).
"Termination Date" is defined in Section 8.2(a).
"Termination Event" is defined in Section 8.2.
"Third Party Claim" is defined in Section 9.4.
"Working Capital" is defined in Section 6.18.
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SCHEDULE 9.2(b)
INDEMNIFIABLE CLAIMS
1. Any failure by the Company to timely file any Internal Revenue Service Form
5500's with the appropriate agencies, including without limitation, the United
States of America Internal Revenue Service and the United States of America
Department of Labor.
2. Any failure by the Company to timely file any necessary documents with the
United States Bureau of Economic Analysis on account of ownership of Company
Common Stock by residents of a jurisdiction other than the United States of
America.
3. Any failure by the Company obtain appropriate or necessary permits for
improvements made to the facilities at 0000 Xxxxxxxxxx Xxxx, Xxxxxxxx,
Xxxxxxxxxx.
4. Any financial obligations incurred by the Company because of the Company's
provision of a "comfort letter" as disclosed in Schedule 4.14(a)(v) in
connection with the financial obligations of Subsidiary.
5. Any failure by the Company to timely file quarterly sales tax returns for
sales in Canada as disclosed on Schedule 4.15.
6. Any failure by the Subsidiary to timely file audited financial statements
for the fiscal year ending June 30, 1999 as disclosed on Schedule 4.15.
7. The Xxxxx Litigation.
8. Any claim against the Company for any failure to withhold payments to Dr.
Xxxxxxx Xxxxxxxx as disclosed on Schedule 4.22.
9. Any obligation for any unfunded liability under any pension plan of the
Subsidiary.
10. Any failure by the Company or the Subsidiary to file any income tax returns.
11. Any failure by the Subsidiary to file with the Companies Registry in London
statutory accounts for the year ended June 30, 2000.
12. Any of the matters disclosed on Schedule 4.32(4.1.1).
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is entered into as
of May 4, 2001, by and among Strategic Diagnostics Inc., a Delaware corporation
("Parent"), Azur Acquisition Corp., a California corporation and direct wholly
owned subsidiary of Parent ("Merger Sub"), and Azur Environmental, a California
corporation (the "Company").
RECITALS:
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company
have, in light of and subject to the terms and conditions set forth herein,
approved this Agreement and the transactions contemplated hereby, including the
Merger, and declared the Merger advisable and fair to, and in the best interests
of, their respective shareholders;
WHEREAS, the Board of Directors of the Company has resolved to
recommend to its shareholders the approval and adoption of this Agreement and
the consummation of the transactions contemplated hereby upon the terms and
subject to the conditions set forth herein;
WHEREAS, for Federal income tax purposes, it is intended that the
Merger qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended, and the Treasury Regulations
promulgated thereupon (the "Code"); and
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, and
intending to be legally bound hereby, Parent, Merger Sub and the Company hereby
agree as follows:
ARTICLE 1
THE MERGER
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1.1. The Merger. At the Effective Time and upon the terms and subject
to the conditions of this Agreement and in accordance with the applicable
provisions of the California Corporations Code ("California Law"), Merger Sub
will be merged with and into the Company (the "Merger"). Following the Merger,
the Company will continue as the surviving corporation (the "Surviving
Corporation") and the separate corporate existence of Merger Sub will cease.
1.2. Effective Time. Subject to the provisions of this Agreement,
Parent, Merger Sub and the Company will cause the Merger to be consummated by
filing an Agreement of Merger as set forth on Exhibit A and other appropriate
documents (the "Agreement of Merger") with the Secretary of State of the State
of California in such form as required by, and executed in accordance with, the
relevant provisions of California Law, as soon as practicable on the Closing
Date. The Merger will become effective upon such filings or at such time
thereafter as is provided in the Agreement of Merger (the "Effective Time").
1.3. Closing of the Merger. The closing of the Merger (the "Closing")
will take place at a time and on a date to be specified by the parties (the
"Closing Date"), which may be no later than the second business day after
satisfaction or waiver of the conditions set forth in Article 7 (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the fulfillment or waiver of those conditions), at the offices of
Xxxxxx Xxxxxxxx LLP, 0000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxx, XX 00000, or at
such time, date or place as agreed to in writing by the parties hereto.
1.4. Effects of the Merger. The Merger will have the effects set forth
in this Agreement, the Agreement of Merger and the applicable provisions of
California Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all of the properties, rights, privileges,
powers and franchises of the Company and Merger Sub will vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
will become the debts, liabilities and duties of the Surviving Corporation.
1.5. Articles of Incorporation and Bylaws. Effective immediately
following the Merger, the articles of incorporation of the Merger Sub, as in
effect immediately prior to the Effective Time, will be the articles of
incorporation of the Surviving Corporation except that the name of the Company
will be the name of the Surviving Corporation. Effective immediately following
the Merger, the bylaws of the Merger Sub, as in effect immediately prior to the
Effective Time, will be the bylaws of the Surviving Corporation.
1.6. Directors and Officers. The directors of Merger Sub at the
Effective Time will be the directors of the Surviving Corporation and will hold
office in accordance with the articles of incorporation and bylaws of the
Surviving Corporation until their successors are duly elected or appointed and
qualified or until their earlier resignation or removal. The officers of Merger
Sub at the Effective Time will be the officers of the Surviving Corporation and
will hold office in accordance with the articles of incorporation and bylaws of
the Surviving Corporation until their successors are duly elected or appointed
and qualified or until their earlier resignation or removal.
ARTICLE 2
EFFECT OF MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
-------------------------------
2.1. Conversion of Shares.
(a) At the Effective Time, each outstanding share of common stock
of Merger Sub will, by virtue of the Merger and without any action on the part
of Parent, Merger Sub or the Company, be converted into one fully paid and
non-assessable share of common stock of the Surviving Corporation.
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(b) At the Effective Time, each share of common stock of the
Company (the "Company Common Stock") issued and outstanding immediately prior to
the Effective Time (other than shares of Company Common Stock held by Parent or
Merger Sub or Dissenting Shares) will, by virtue of the Merger and without any
action on the part of Parent, Merger Sub or the Company, be converted into and
exchangeable for the right to receive a number of fully paid and non-assessable
shares of Series C Convertible Preferred Stock, par value $.01 per share, of
Parent ("Parent Preferred Stock"), with those rights, preferences and privileges
set forth in the Certificate of Designation attached to this Agreement as
Exhibit B, equal to a fraction, the numerator of which is 700,000 and the
denominator of which is the total number of shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time (the "Exchange
Ratio"), all as subject to Section 2.7 regarding the issuance of fractional
shares of Parent Preferred Stock and Article 9 regarding the holdback
provisions.
(c) At the Effective Time, each share of Company Common Stock
owned by Parent or Merger Sub immediately prior to the Effective Time will be
canceled and extinguished without any conversion thereof.
(d) If, between the date of this Agreement and the Effective
Time, the outstanding shares of Parent Preferred Stock have been changed into a
different number of shares or a different series or class by reason of any stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares, or any similar event, the calculation of the Exchange Ratio
will be correspondingly adjusted to the extent necessary to reflect such stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares, or such similar event.
2.2. Stock Options. As soon as practicable following the date of this
Agreement, Parent and the Company (or, if appropriate, any committee of the
Board of Directors of the Company administering the Company's 1988 Stock Option
Plan and 1996 Stock Option Plan (together, the "Company Option Plans") shall
take such action as may be required to effect the following provisions of this
Section 2.2. As of the Effective Time, each of the Company Option Plans will be
assumed by Parent and each option to purchase a share of Company Common Stock
pursuant to the Company Option Plans (a "Company Stock Option") which is then
outstanding shall be converted into an option to purchase the number of shares
of Parent Common Stock equal to (a) the number of shares of Company Common Stock
subject to such option multiplied by (b) the Exchange Ratio rounded down to the
nearest whole share, if necessary, at an exercise price per share of Parent
Common Stock (rounded down or, in the case of a Company Stock Option to which
Section 421 of the Code applies, rounded up, to the nearest xxxxx) equal to (i)
the former exercise price per share of Company Common Stock under such option
immediately prior to the Effective Time divided by (ii) the Exchange Ratio.
Except as provided above, each Company Stock Option shall be subject to the same
terms and conditions (including expiration date, vesting and exercise
provisions) as were applicable to such Company Stock Option immediately prior to
the Effective Time.
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2.3. Exchange Fund. Prior to the Effective Time, Parent shall appoint
American Stock & Transfer Trust to act as exchange agent hereunder (the
"Exchange Agent") for the purpose of exchanging shares of Company Common Stock
for the Parent Preferred Stock and cash payment under Section 2.7 ("Merger
Consideration"). At or prior to the Effective Time and subject to Section 2.16,
Parent will deposit with the Exchange Agent, in trust for the benefit of holders
of Company Common Stock ("Holders"), certificates representing Parent Preferred
Stock issuable pursuant to Section 2.1(a) in exchange for outstanding shares of
Company Common Stock less the shares of Parent Preferred Stock to be held back
as Holdback Shares in accordance with Article 9 and an estimated amount of cash
sufficient to pay the cash payable in lieu of fractional shares pursuant to
Section 2.7. Parent agrees to make available to the Exchange Agent from time to
time as needed, cash sufficient to pay cash in lieu of fractional shares
pursuant to Section 2.7 and any dividends and other distributions pursuant to
Section 2.5. Any cash and certificates of Parent Preferred Stock deposited with
the Exchange Agent shall hereinafter be referred to as the "Exchange Fund."
2.4. Exchange Procedures. Promptly and no later than five (5) days
after the Effective Time, Parent will cause the Exchange Agent to mail to each
Holder of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock converted as
provided in Section 2.1(b) above ("Certificates") (i) a letter of transmittal
which will specify that delivery will be effective, and risk of loss and title
to the Certificates will pass only upon delivery of the Certificates (or
Affidavit of Lost Certificate) to the Exchange Agent, and which letter will be
in customary form and have such other provisions as Parent may reasonably
specify; and (ii) instructions for effecting the surrender of such Certificates
in exchange for the Merger Consideration. Upon surrender of a Certificate (or
Affidavit of Lost Certificate) to the Exchange Agent together with the letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, the Holder of that Certificate will be entitled to receive in exchange
therefor (A) shares of Parent Preferred Stock representing, in the aggregate,
the whole number of shares that Holder has the right to receive pursuant to
Section 2.1(b), less that holder's pro rata share of the Holdback Shares (after
taking into account all shares of Company Common Stock then held by that Holder)
and (B) a check in the amount equal to the cash that Holder has the right to
receive pursuant to the provisions of this Article 2, including cash in lieu of
any dividends and other distributions pursuant to Section 2.5 and cash in lieu
of fractional shares pursuant to Section 2.7. No interest will be paid or will
accrue on any cash payable pursuant to Section 2.5 or Section 2.7. In the event
of a transfer of ownership of Company Common Stock which is not registered in
the transfer records of the Company, shares of Parent Preferred Stock
evidencing, in the aggregate, the proper number of shares of Parent Preferred
Stock, a check in the proper amount of cash in lieu of any fractional shares of
Parent Preferred Stock pursuant to Section 2.7 and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.5, may be
issued with respect to such shares of Company Common Stock to such a transferee
if the Certificate representing such shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid. Until
surrendered, each outstanding Certificate owned by Holders that are not eligible
to exercise dissenters' rights under Section 2.16 and California Law will,
subject to Section 2.8, be deemed from and after the Effective Time to represent
ownership of the number of shares of Parent Preferred Stock into which such
shares of Company Common Stock are convertible under Section 2.1(b).
For purposes of this Agreement, a Holder of Company Common Stock's pro
rata share of the Holdback Shares is equal to the number obtained by multiplying
the total number of Holdback Shares by the quotient of (x) the number of shares
of Company Common Stock owned by that holder immediately prior to the Effective
Time divided by (y) the total number of shares of Company Common Stock
outstanding immediately prior to the Effective Time. Any fraction resulting from
this calculation will be rounded up to the next nearest whole number.
-4-
2.5. Distributions with Respect to Unsurrendered Certificates. No
dividends or other distributions declared or made with respect to shares of
Parent Preferred Stock with a record date after the Effective Time may be paid
to the holder of any unsurrendered Certificate with respect to the shares of
Parent Preferred Stock that such Holder would be entitled to receive upon
surrender of such Certificate and no cash payment in lieu of fractional shares
of Parent Preferred Stock shall be paid to any such Holder pursuant to Section
2.7 until the Holder has surrendered such Certificate in accordance with Section
2.4. Subject to the effect of applicable laws, following surrender of any such
Certificate, there will be paid to such Holder of shares of Parent Preferred
Stock issuable in exchange therefor, without interest, (a) promptly after the
time of such surrender, the amount of any cash payable in lieu of fractional
shares of Parent Preferred Stock to which such Holder is entitled pursuant to
Section 2.7 and the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole shares
of Parent Preferred Stock, if any, and (b) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and a payment date subsequent to such
surrender payable with respect to such shares of Parent Preferred Stock, if any.
2.6. No Further Ownership Rights in Company Common Stock. All shares
of Parent Preferred Stock issued and cash paid upon conversion of the shares of
Company Common Stock in accordance with the terms of this Article 2 (including
any cash paid pursuant to Sections 2.5 and 2.7) will be deemed to have been
issued or paid in full satisfaction of all rights pertaining to the shares of
Company Common Stock.
2.7. No Fractional Shares of Parent Preferred Stock.
(a) No certificates or scrip of shares of Parent Preferred Stock
representing fractional shares of Parent Preferred Stock or book-entry credit of
the same may be issued upon the surrender for exchange of Certificates and such
fractional share interests will not entitle the owner thereof to vote or to have
any rights of a stockholder of Parent or a holder of shares of Parent Preferred
Stock.
(b) Notwithstanding any other provision of this Agreement, each
Holder of shares of Company Common Stock exchanged in connection with the Merger
who would otherwise have been entitled to receive a fraction of a share of
Parent Preferred Stock (after taking into account all Certificates delivered by
such Holder) will receive, in lieu thereof, cash (without interest) in an amount
equal to the product of (i) such fractional part of a share of Parent Preferred
Stock multiplied by (ii) $6.00, as such amount may be adjusted due to stock
splits, stock dividends, combinations or other recapitalizations affecting the
shares of Parent Preferred Stock. After the determination of the aggregate
amount of cash to be paid to Holders of fractional interests, the Exchange Agent
will notify Parent and Parent will cause the Surviving Corporation to deposit
that amount with the Exchange Agent and will cause the Exchange Agent to forward
payments to such holders of fractional interests subject to and in accordance
with the terms of this Agreement.
-5-
2.8. Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the Holders of Certificates for one year after
the Effective Time will be delivered to the Parent or otherwise on the
instruction of Parent, and any Holders of the Certificates who have not
theretofore complied with this Article 2 will thereafter look only to Parent for
the Merger Consideration with respect to the shares of Company Common Stock
formerly represented thereby to which such Holders are entitled pursuant to
Section 2.1, any cash in lieu of fractional shares of Parent Preferred Stock to
which such Holders are entitled pursuant to Section 2.7 and any dividends or
distributions with respect to shares of Parent Preferred Stock to which such
Holders are entitled pursuant to Section 2.5. Any portion of the Exchange Fund
remaining unclaimed by holders of shares of Company Common Stock five years
after the Effective Time (or such earlier date immediately prior to such time as
such amounts would otherwise escheat to or become property of any Governmental
Entity) will, to the extent permitted by law, become the property of Parent,
free and clear of any claims or interest of any person previously entitled
thereto.
2.9. No Liability. None of Parent, Merger Sub, the Company, the
Surviving Corporation or the Exchange Agent will be liable to any person in
respect of any Merger Consideration from the Exchange Fund delivered, in good
faith, to a public official pursuant to any applicable abandoned property,
escheat or similar law.
2.10. Investment of the Exchange Fund. The Exchange Agent may invest
any cash included in the Exchange Fund as directed by Parent. Any interest and
other income resulting from such investments will promptly be paid to Parent.
2.11. Lost, Stolen or Destroyed Certificates. If any Certificate is
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and such
person's agreement to indemnify Parent and the Surviving Corporation against any
claim that may be made against Parent or the Surviving Corporation with respect
to such Certificate, the Exchange Agent will deliver in exchange for the lost,
stolen or destroyed Certificate the Merger Consideration with respect to the
shares of Common Stock formerly represented thereby, any cash in lieu of
fractional shares of Parent Preferred Stock and unpaid dividends and
distributions on shares of Parent Preferred Stock deliverable in respect
thereof, pursuant to this Agreement.
2.12. Reserved.
2.13. Tax Consequences. It is intended by the parties hereto that the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code.
2.14. Stock Transfer Books. The stock transfer books of the Company
will be closed immediately upon the Effective Time and there will be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. On or after the Effective Time, any Certificates
presented to the Exchange Agent or Parent for any reason will be converted into
the Merger Consideration with respect to the shares of Company Common Stock
formerly represented thereby, any cash in lieu of fractional shares of Parent
Preferred Stock to which the holders thereof are entitled pursuant to Section
2.7 and any dividends or other distributions to which the holders thereof are
entitled pursuant to Section 2.5.
-6-
2.15. Affiliates. Notwithstanding anything to the contrary herein, no
shares of Parent Preferred Stock or cash shall be delivered to a person who may
be deemed an "affiliate" of the Company for purposes of Rule 145 under the
Securities Act, until such person has executed and delivered to Parent the
written agreement contemplated by Section 6.12.
2.16. Dissenting Shares. Notwithstanding anything in this Agreement to
the contrary, shares of Company Common Stock that are issued and outstanding
immediately prior to the Effective Time and which are held by shareholders who
did not vote in favor of the Merger (the "Dissenting Shares"), which
shareholders comply with all of the relevant provisions of California Law (the
"Dissenting Shareholders"), will not be converted into or be exchangeable for
the right to receive the Merger Consideration, unless and until such
shareholders have failed to perfect or have effectively withdrawn or lost their
rights to appraisal under California Law. If any Dissenting Shareholder has
failed to perfect or has effectively withdrawn or lost such right, such
Dissenting Shareholder's shares of Company Common Stock will thereupon be
converted into and become exchangeable for the right to receive, as of the
Effective Time, the Merger Consideration without any interest thereon. The
Company will give Parent (a) prompt notice of any written demands for appraisal
of any shares of Company Common Stock, attempted withdrawals of such demands and
any other instruments served pursuant to California Law and received by the
Company relating to shareholders' rights of appraisal, and (b) the opportunity
to direct and participate in all negotiations and proceedings with respect to
demands for appraisal under California Law. Neither the Company nor the
Surviving Corporation may, except with the prior written consent of Parent,
voluntarily make any payment with respect to, or settle or offer to settle, any
such demand for payment.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
-------------------------------------------------------
Parent and Merger Sub each represent and warrant to the Company as
follows (with the understanding that the Company is relying materially on each
such representation and warranty in entering into and performing this
Agreement):
3.1. Due Organization.
(a) Each of Parent and Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all requisite corporate power and
authority to own, lease or otherwise hold its properties and assets and to carry
on its business as presently conducted, and is duly qualified to do business as
a foreign corporation where the nature of its activities makes such
qualification necessary, except for where the failure to be so qualified would
not have a Parent Material Adverse Effect. True and complete copies of the
charter document of Parent and Merger Sub, as in effect on the date of this
Agreement, have been delivered to the Company. Schedule 3.1 lists the current
officers and directors of Parent and Merger Sub.
-7-
(b) Merger Sub has no assets, liability or obligations of any
nature other than those incident to its formation and in connection with this
Agreement and the transactions contemplated hereby, and has not and, before the
Effective Time, will not engage in any business activities of any kind
whatsoever or enter into any agreement or arrangements with any Person other
than those which are incident or related to, or in connection with, this
Agreement and the transactions contemplated hereby.
3.2. Authorization and Effect of Agreement.
(a) Each of Parent and Merger Sub has the requisite corporate
power and authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby to be performed by it. This
Agreement has been duly executed and delivered by each of Parent and Merger Sub
and constitutes a valid and binding obligation of each of Parent and Merger Sub,
enforceable against Parent and Merger Sub in accordance with its terms, except
as such enforceability may be subject to (i) bankruptcy, insolvency,
reorganization, or other similar laws, now or hereinafter in effect relating to
or affecting creditors rights generally and (ii) general principles of equity.
(b) Parent's Board of Directors has (i) approved and adopted this
Agreement and the Merger, and has authorized Parent, as Merger Sub's sole
shareholder, to approve and adopt this Agreement and the Merger, and (ii)
determined that in its opinion the Merger is advisable and fair to and in the
best interests of Parent's stockholders. Merger Sub's Board of Director has
approved and adopted this Agreement and the Merger and has determined that in
its opinion the Merger is advisable and fair to and in the best interests of
Merger Sub's sole shareholder. The approvals and adoptions described in this
Section 3.2(b) satisfy all applicable requirements to be satisfied by Parent and
Merger Sub under the Delaware General Corporation Law and the California Law.
3.3. No Violations; Consents and Approvals. The execution and delivery
of this Agreement by each of Parent and Merger Sub does not, and the performance
by each of Parent and Merger Sub of the transactions contemplated hereby to be
performed by it do not and will not (a) conflict with or violate the certificate
of incorporation or bylaws of Parent or the articles of incorporation or bylaws
of Merger Sub, as amended, (b) violate, conflict with or result in a breach of
or default (with or without the lapse of time or the giving of notice, or both)
under, the terms, conditions or provisions of any agreement, understanding,
arrangement, commitment, indenture, contract, lease, sublease, loan agreement,
note, or other material document or instrument to which Parent is a party or by
which it or its assets are subject ("Parent Instrument"), (c) accelerate or give
to others any interests or rights, including rights of acceleration,
termination, modification or cancellation, under any Parent Instrument or in or
with respect to the business or assets of Parent or Merger Sub, (d) result in
the creation of any liens, security interests, encumbrances, or similar claims
or restrictions ("Liens") on the assets, capital stock or properties of Parent
or Merger Sub, or (e) conflict with, violate or result in a breach of or
constitute a default under any law, statute, rule, judgment, order, decree,
injunction, ruling or regulation of any Governmental Entity to which Parent or
Merger Sub or any assets or properties of Parent or Merger Sub. Except for any
filings, permits, authorizations, consents and approvals required under the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), state securities or blue
sky laws or similar laws or other applicable jurisdictions, the filing of the
Agreement of Merger and such other documents required to be filed by California
law with the Secretary of State of the State of California or with the
Commissioner of the California Department of Corporations (the "Commissioner"),
no consent, approval, order or authorization of, or registration, declaration or
filing with any domestic or foreign court, government, governmental agency,
authority, entity or instrumentality (each a "Governmental Entity") is required
to be obtained or made by or with respect to Parent or Merger Sub in connection
with the execution and delivery of this Agreement by each of Parent and Merger
Sub or the performance by it of the transactions contemplated hereby to be
performed by it.
-8-
3.4. Capitalization.
(a) The authorized capital stock of Parent consists of: (i)
35,000,000 shares of Common Stock, par value $0.01 per share, of which
16,713,734 shares are issued and outstanding as of April 30, 2001; (ii)
2,164,362 shares of Series A Convertible Preferred Stock, par value $0.01 per
share, all of which have been converted into shares of Common Stock and canceled
and none of which may be reissued; and (iii) 17,500,000 shares of Preferred
Stock, par value $0.01 per share (the "Blank Check Preferred Stock"), of which
556,286 shares have been designated Series B Convertible Preferred Stock, all of
which have been converted into shares of Common Stock and canceled and none of
which may be reissued. There are no outstanding shares of stock of any class or
any other outstanding options or rights of Parent that are convertible into or
exchangeable for shares of stock that have dividend or liquidation rights senior
or equal to the rights of Parent Preferred Stock.
(b) Immediately before the Effective Time, not less than 700,000
shares of the Blank Check Preferred Stock will be duly designated as Series C
Convertible Preferred Stock, with the rights, preferences and privileges set
forth on Exhibit B.
(c) All of the issued and outstanding shares of capital stock of
Parent are duly authorized, validly issued, fully paid and nonassessable and
free from any preemptive rights.
(d) The authorized capital stock of Merger Sub consists of 100
shares of common stock, par value $0.01 per share, all of which are validly
issued and outstanding as of the date hereof and are owned by Parent. All of
such issued and outstanding shares of capital stock of Merger Sub are duly
authorized, validly issued, fully paid and nonassessable and free from any
preemptive rights and liens.
3.5. Merger Consideration Shares. The shares of Parent Preferred Stock
to be issued as the Merger Consideration under this Agreement will be duly
authorized, validly issued, fully paid and nonassessable and free from any
preemptive rights, and issued in compliance with applicable federal and state
securities laws.
-9-
3.6. Parent SEC Filings and Financial Statements. Except as set forth
in Schedule 3.6, (a) Parent has filed, and before the Effective Time will have
filed, all required forms, reports and documents with the SEC (the "Parent SEC
Filings"), each of which will comply in all material respects with all
applicable requirements of the Securities Act and the Exchange Act and the rules
and regulations promulgated thereunder, each as in effect on the dates Parent
SEC Filings were filed, (b) none of Parent SEC Filings filed and to be filed
before the Effective Time, including any financial statements or schedules
included or incorporated by reference therein, contained, when filed, any untrue
statement of a material fact or omitted to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (c) the consolidated financial statements of Parent
included, or to be included, in Parent SEC filings comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC in respect thereof and fairly present in all
material respects, and are prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
in the notes thereto) ("GAAP"), the consolidated financial position of Parent
and its consolidated subsidiaries as of the dates thereof and their consolidated
results of operations and changes in financial position for the periods then
ended (subject, in the case of any unaudited interim financial statements, to
normal year-end adjustments).
3.7. No Brokers or Finders. No agent, broker, investment broker or
other Person or firm acting on behalf of Parent or Merger Sub, in connection
with the negotiation, execution or performance of this Agreement or the
transactions contemplated by this Agreement, is or will be entitled to any
broker's or finder's fee or any other commission or similar fee as a result of
this Agreement or such transactions.
3.8. Information Furnished. Except as set forth in Schedule 3.8, all
information furnished or caused to be furnished to the Company or its Subsidiary
by Parent or Merger Sub with respect to Parent or Merger Sub and their
respective businesses for purposes of or in connection with this Agreement or
any of the transactions contemplated hereby, including that information with
respect to Parent and Merger Sub in the Information Statement, is true and
complete in all material respects and does not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements herein or therein, as the case may be, not misleading in light of the
circumstances under which they have been made.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to Parent and Merger Sub as
follows (with the understanding that Parent and Merger Sub are relying
materially on each such representation and warranty in entering into and
performing this Agreement).
-10-
4.1. Capitalization; Ownership of Shares; No Liens on Shares. The
authorized capital stock of the Company consists of 20,000,000 shares of Common
Stock of which 7,045,513 shares are issued and outstanding as of the date of
this Agreement. All of such issued and outstanding shares of Company Common
Stock are duly authorized, validly issued, fully paid, nonassessable and free
from any preemptive rights. All of the shares of Company Common Stock are owned
of record and, to the Company's Knowledge, beneficially by Holders as set forth
on Schedule 4.1(a) attached hereto, which sets forth the name, mailing address
and state or country of residence of each such Holder, together with the total
number of shares of Company Common Stock owned by each such Holder. No more than
50 such Holders reside in the United Kingdom. The Holders of shares of Company
Common Stock which reside in the United Kingdom are persons of a kind described
in Article 11(3) of the Financial Services Xxx 0000 (Investment Advertisements)
(Exemptions) Order 1985. None of the shares of Company Common Stock were issued
or will be transferred under this Agreement in violation of any preemptive or
preferential rights of any person. Shares of Company Common Stock are reserved
for issuance and issuable or otherwise deliverable in connection with the
exercise of the Company Stock Options issued pursuant to the Company Option
Plan. Except for those options granted under the Stock Option Plans which remain
outstanding as of the date of this Agreement (collectively, the "Company
Options"), there are no outstanding options, warrants, calls, subscriptions,
conversion or other similar rights, agreements or commitments to acquire from
the Company or the Subsidiary any shares of capital stock or any other
securities convertible into, exchangeable for or evidencing the right to
subscribe for any shares of capital stock of the Company or the Subsidiary.
There are no shareholder agreements, voting trusts or other agreements to which
the Company is a party or to which it is bound relating to the voting of any
shares of capital stock of the Company. To the Company's Knowledge, there are no
shareholder agreements, voting trusts or other agreements to which any Holder of
Company Common Stock is bound relating to the voting of any shares of capital
stock of the Company. The Company has not issued any stock appreciation rights
or other rights related to equity participation, and the Company has no debt
securities outstanding. Schedule 4.1(b) sets forth true and complete information
regarding each of the Company Options outstanding as of the date of this
Agreement, including the name of the holder thereof, current exercise price, the
date of grant, expiration date, and the number of Company Options granted to
such holder and identifies with respect to each Company Option whether such
Company Option is a qualified or a non-qualified option. Following the Effective
Time no holder of Company Options will have any right to receive shares of
common stock of Parent or Surviving Corporation upon exercise of Company Stock
Options.
4.2. Due Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of California
and has all requisite corporate power and authority to own, lease or otherwise
hold its properties and assets and to carry on its business as presently
conducted. The Company is not qualified in any other jurisdiction and the
Company is not required to be so qualified except where the failure to be so
qualified would not have a Company Material Adverse Effect.
4.3. Subsidiaries. Except as set forth on Schedule 4.3, the Company
does not directly or indirectly have (or possess any options or other rights to
acquire) any subsidiaries or any direct or indirect equity ownership interests
in any business, corporation, partnership, association, limited liability
company, joint venture, business enterprise, trust or other entity of any nature
whatsoever (together with natural persons, each a "Person"). Each Person
required to be identified on Schedule 4.3, (each a "Subsidiary") is an entity of
the type described in Schedule 4.3 and is duly organized, validly existing, and
in good standing under the laws of the jurisdiction in which it was organized
and has all requisite power and authority to own, lease or otherwise hold its
properties and assets and to carry on its business as presently conducted.
-11-
4.4. Authority; Absence of Conflicts.
(a) The Company has requisite corporate power and authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly approved by
the Board of Directors of the Company, and no other corporate action on the part
of the Company is necessary to authorize and approve the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby
(other than, in respect of the Merger and this Agreement, the Company Requisite
Vote). This Agreement has been duly and validly executed and delivered by the
Company and constitutes the valid and binding obligation of the Company,
enforceable against the Company and Merger Sub in accordance with its terms,
except as such enforceability may be subject to (i) bankruptcy, insolvency,
reorganization, or other similar laws, now or hereinafter in effect relating to
or affecting creditors rights generally and (ii) general principles of equity.
(b) The Board of Directors of the Company has, by unanimous vote
of all directors in office at the time of the vote or by unanimous written
consent, duly and validly authorized the execution and delivery of this
Agreement and approved the consummation of the transactions contemplated hereby,
and taken all corporate actions required to be taken by the Board of Directors
of the Company for the consummation of the transactions, including the Merger,
contemplated hereby and has resolved (i) that this Agreement and the
transactions contemplated hereby, including the Merger, taken together, are
advisable and fair to, and in the best interests of, the Company and its
shareholders and (ii) to recommend that the shareholders of the Company approve
and adopt this Agreement. The Board of Directors of the Company has directed,
subject to the procedures set forth in Section 6.1, that this Agreement be
submitted to the shareholders of the Company for their approval. The affirmative
approval of the Holders of shares of Company Common Stock representing at least
sixty-seven percent (67%) of the votes that may be cast by the Holders of all
outstanding shares of Common Stock voting as a single class (the "Company
Requisite Vote"), are the only votes of the holders of any class or series of
capital stock of the Company necessary to adopt this Agreement and approve the
transactions contemplated hereby, including the Merger.
(c) The execution and delivery of this Agreement by the Company
does not and the performance by the Company and its shareholders of the
transactions contemplated hereby to be so performed do not and will not conflict
with or violate the articles of incorporation or bylaws, both as amended, of the
Company, or the organizing, constituting or governing documents of its
Subsidiary. In addition, except as set forth on Schedule 4.4(c) hereto, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby (other than the Distribution Agreement) and
compliance with the terms hereof do not and will not (i) violate, conflict with
or result in a breach of or default (with or without the lapse of time or the
giving of notice or both) under any of the terms, conditions or provisions of
any agreement, understanding, arrangement, commitment, indenture, contract,
lease, sublease, loan agreement, note, or other material document or instrument
to which the Company or its Subsidiary is a party or by which it is bound or to
which it or its assets are subject (individually, an "Instrument" and
collectively, the "Instruments"), or (ii) accelerate or give to others any
interests or rights, including rights of acceleration, termination, modification
or cancellation, under any Instrument or in or with respect to the business or
assets of the Company or its Subsidiary, or (iii) result in the creation of any
Liens on the assets, capital stock or properties of the Company or its
Subsidiary, or (iv) conflict with, violate or result in a breach of or
constitute a default under any law, statute, rule, judgment, order, decree,
injunction, ruling or regulation of any Governmental Entity to which the Company
or its Subsidiary or any assets or properties of the Company or any Subsidiary
are subject, or (v) require the Company or its Subsidiary to give any notice to,
or obtain an authorization, approval, order, license, franchise, declaration or
consent of, or make a filing with, any third party, including, without
limitation, any foreign, federal, state, county, local or other governmental or
regulatory body, other than such filings or permits as may be required under the
Securities Act, state securities or blue sky laws, or similar laws of any other
jurisdiction, and the filing of the Agreement of Merger with the Secretary of
State of the State of California.
-12-
4.5. Financial Statements; Absence of Undisclosed Liabilities.
(a) The Company has delivered to Parent true and correct copies
of (i) the audited balance sheet and related statements of operations and
retained earnings, and cash flows of the Company and its Subsidiary, as of and
for the fiscal years ended June 30, 2000, together with the notes thereto and
the report of KPMG Peat Marwick, LLP (the "Most Recent Audited Financial
Statements"), and as of and for the fiscal years ended June 30, 1999, June 30,
1998, and June 30, 1997, together with notes thereto and the reports of Xxxxxx
Xxxxxxxx, LLP, or Price Waterhouse, as applicable, with respect thereto
(collectively, the "1997-1999 Audited Financial Statements"), and (ii) the
unaudited balance sheet and the related statements of income of the Company and
its Subsidiary as of and for the month and six (6) month period ended December
31, 2000 (the "December Financial Statements," and collectively with the
1997-1998 Audited Financial Statements and the Most Recent Audited Financial
Statements, the "Financial Statements").
(b) The Financial Statements (i) fairly present in all material
respects the consolidated and consolidating financial position, results of
operations and cash flows of the Company and its Subsidiary for the respective
periods stated therein, (ii) have been prepared from and are consistent with the
books and records of the Company and its Subsidiary, and (iii) have been
prepared in accordance with GAAP throughout the relevant periods (except, in the
case of the December Financial Statements, for the absence of notes therefrom
and subject to the further exception that the December Financial Statements are
subject to normal, recurring, year-end adjustments, none of which such
adjustments will be material).
-13-
(c) The books and records of the Company and its Subsidiary
accurately and fairly reflect in reasonable scope and detail and in accordance
with good business practice, the transactions and assets and liabilities of the
Company and its Subsidiary and such other information as is contained therein.
4.6. Absence of Undisclosed Liabilities. Except to the extent
reflected on, or fully reserved against in, the balance sheet comprising a part
of the Most Recent Audited Financial Statements (the "Most Recent Audited
Balance Sheet") or otherwise identified on Schedule 4.6, neither the Company,
nor any of its Subsidiaries, has any liabilities or obligations of any nature,
whether accrued, absolute, contingent, unliquidated or otherwise other than
those liabilities or obligations incurred in the ordinary course of business and
consistent with the past practices of the Company and its Subsidiaries.
4.7. Conduct of Business; Certain Actions. Since June 30, 2000, the
Company and its Subsidiary have conducted their business and operations in the
ordinary course and consistent with past practices. Without limiting the
foregoing, except as set forth on Schedule 4.7, neither the Company nor its
Subsidiary has since June 30, 2000:
(a) paid or declared any dividend or distribution or purchased or
retired any indebtedness from any of its securityholders, or directly or
indirectly purchased, retired or redeemed any of its capital stock;
(b) increased the compensation of any of its directors, officers
or key employees (each a "Key Employee") or consultants or, except for wage and
salary increases made in the ordinary course of business and consistent with
past practices, increased the compensation of any of its other employees
(together with the Key Employees, each an "Employee");
(c) made any capital expenditures in excess of $150,000 in the
aggregate;
(d) sold any asset (or any group of related assets) to any
securityholder, employee, officer or director of the Company or its Subsidiary;
(e) sold any assets in any one or more related or unrelated
transactions which, in the aggregate, had a fair market value of $15,000 or more
to any person or entity, other than an employee, officer or director of the
Company or its Subsidiary;
(f) leased, licensed, loaned or granted to any Person any rights
in any of its assets or properties except in the ordinary course of business;
(g) revalued any of its assets;
(h) discharged or satisfied any Lien or paid any obligation or
liability, absolute or contingent, other than current liabilities incurred;
-14-
(i) failed to pay any of its accounts payable in accordance with
their terms;
(j) accelerated the collection of, or sold or otherwise
transferred, any of its Accounts Receivable;
(k) made or guaranteed any loans or advances to any party
whatsoever;
(l) canceled, waived, released or forgiven any debts or
obligations of, or rights or claims against, third parties;
(m) amended the articles of incorporation or bylaws of the
Company or any of the organizing, constituting or governing documents of any
Subsidiary;
(n) made or paid any severance or termination payment to any
Employee or consultants;
(o) made any change in its financial or Tax accounting principles
or methods;
(p) made any investment or otherwise acquired an interest in any
Person;
(q) made, entered into, amended or terminated any written
employment or consulting contract, created, made, amended or terminated any
bonus, stock option, pension, retirement, profit sharing or other employee
benefit plan or arrangement, or withdrawn from any "multi-employer plan" (as
defined in Section 414(f) of the Code) so as to create any liability under
Article IV of ERISA to any entity;
(r) amended or experienced a termination of any contract,
agreement, lease, franchise or license required to be listed on Schedule
4.14(a);
(s) declared, set apart assets for, or paid any dividend or made
any other payment or distribution in respect or on account of its capital stock;
(t) issued or sold any of its capital stock, any security,
directly or indirectly, convertible into, or exchangeable for, its capital
stock, or any stock appreciation right or other security or other right or
contractual obligation, the value of which is related to, or determined or
determinable by reference to, the price or value of its capital stock;
(u) entered into any other material transactions except in the
ordinary course of business;
(v) made or revoked any Tax election, or compromised any Tax
liability;
-15-
(w) agreed to do any acts described in the foregoing clauses
(a)-(v) of this Section 4.7;
(x) suffered any material damage, destruction or loss (whether or
not covered by insurance) to any of its assets;
(y) experienced any strike, slowdown or demand for recognition by
a labor organization by or with respect to any of the Employees; or
(z) experienced any event or condition that has had or could
reasonably be expected to result in a Material Adverse Effect.
4.8. Real Property.
(a) Schedule 4.8(a) hereto sets forth a complete list and summary
description of (i) all real property owned in fee by the Company and its
Subsidiary (the "Owned Real Property") and (ii) all real property leased by the
Company and its Subsidiaries (the "Leased Real Property" and, together with the
Owned Real Property, the "Real Property"). The Company has delivered to Parent
and Merger Sub true and correct copies of all leases, subleases, abstracts of
title, surveys, title opinions and title insurance policies in the Company's and
Subsidiary's possession or control relating to all of the Real Property. None of
the Real Property reflected in the Most Recent Audited Balance Sheet has been
disposed of and no Real Property has been acquired by the Company or its
Subsidiary since the date of the Most Recent Audited Balance Sheet, except as
disclosed on Schedule 4.8(a).
(b) Except as set forth on Schedule 4.8(b), the Company or its
Subsidiary, as applicable, has good and marketable title in fee simple to all
Owned Real Property, and a valid leasehold interest in all Leased Real Property,
free and clear of any mortgage, pledge, security interest, Lien (other than
Liens for current Taxes not yet due and payable), claim, charge, conditional
sales contract, restriction, reservation, option, right of first refusal, or
other encumbrance of any nature whatsoever (collectively, "Encumbrances").
Except as set forth on Schedule 4.8(b), the Company or the Subsidiary, as
applicable, has good and marketable title to all structures, plants, leasehold
improvements, systems, fixtures and other property located on or about any of
the Leased Real Property which are owned by the Company or the Subsidiary, as
reflected in the Most Recent Audited Balance Sheet, free and clear of any
Encumbrances and Liens except for (i) Liens for current Taxes not yet due and
payable, and (ii)any mechanic's, workmen's, repairmen's, materialmen's,
contractor's, warehousemen's, carrier's, supplier's or vendor's lien, if payment
is not yet due on the underlying obligation ("Permitted Liens"), and none of
such assets is subject to any agreement, arrangement or understanding for its
use by any Person other than the Company or the Subsidiary.
(c) Except as set forth in Schedule 4.8(c) hereto, each of the
leases relating to the Leased Real Property is in full force and effect and
neither the Company nor its Subsidiary, nor, to the Company's Knowledge, the
lessor, is in default under any such lease or sublease, and each such lease and
sublease will remain in full force and effect following the Closing without any
modification in the rights or obligations of the parties under any such lease.
-16-
(d) No work has been performed on or with respect to or in
connection with any of the Real Property that would cause such Real Property to
become subject to any mechanic's, materialmen's, workmen's, repairmen's,
carrier's or similar lien aggregating in excess of $25,000.
(e) The structures, plants, improvements, systems and fixtures
located on each parcel of Real Property comply with all applicable laws,
ordinances, rules, regulations and similar governmental and regulatory
requirements applicable thereto, and are in good operating condition and repair
in light of their respective ages, ordinary wear and tear excepted, except as
set forth on Schedule 4.8(e). Except as set forth on Schedule 4.8(e), each such
parcel of Real Property (in view of the purposes for which it is currently used)
conforms with all covenants or restrictions of record and conforms with all
applicable building codes and zoning requirements and there is not, to the
Knowledge of the Company, any proposed change in any such governmental or
regulatory requirements or in any such zoning requirements. All existing
electrical, plumbing, fire sprinkler, lighting, air conditioning, heating,
ventilation, elevator and other mechanical systems located in or about the Real
Property are in good operating condition and repair in light of their respective
ages, ordinary wear and tear excepted, except as set forth on Schedule 4.8(e).
4.9. Tangible Personal Property.
(a) Schedule 4.9 contains a true and complete copy of the
Company's Fixed Asset List, which sets forth a complete list of all equipment,
machinery, tools, spare and maintenance parts, vehicles and furniture
(collectively, the "Tangible Personal Property") owned or leased by the Company
or its Subsidiary as of the date noted on such schedule and having an individual
fair market value of $1,000.00 or more. Except as set forth on Schedule 4.9: (i)
the Company or its Subsidiary, as applicable, has good and marketable title to
all Tangible Personal Property owned by it, free and clear of any Liens of any
kind or nature whatsoever, except for Permitted Liens; (ii) the Company or its
Subsidiary, as applicable, has a valid leasehold interest in all Tangible
Personal Property leased by it; (iii) each such lease is in full force and
effect and neither the Company nor its Subsidiary nor, to the Company's
Knowledge, the lessor, is in default under any such lease, and each lease will
remain in full force and effect following the Closing without modification in
the rights or obligations of the parties under any such lease; (iv) all items of
Tangible Personal Property currently owned or used by the Company or any
Subsidiary are in good operating condition and repair in light of their
respective ages, ordinary wear and tear excepted, are physically located at or
about the Company's or a Subsidiary's place of business; (v) the owned and
leased Tangible Personal Property consists of all tangible personal property
necessary for the operation of the business of the Company and the Subsidiaries
as currently conducted; (vi) none of the Tangible Personal Property is subject
to any agreement, arrangement or understanding for its use by any Person other
than the Company or the applicable Subsidiary; (vii) the maintenance and
operation of the Tangible Personal Property complies with all applicable laws,
regulations, ordinances, contractual commitments and obligations; and (viii) no
item of Tangible Personal Property owned or used by the Company or any
Subsidiary is subject to any conditional sale agreement, installment sale
agreement or title retention or security agreement or arrangement of any kind.
-17-
(b) Schedule 4.9 hereto sets forth a complete and correct list
and summary description of the Tangible Personal Property leases to which the
Company or any Subsidiary is a party, together with a brief description of the
property leased. The Company has provided to Parent complete and correct copies
of each lease (and any amendments thereto) listed on Schedule 4.9. Except as set
forth on Schedule 4.9: (i) each such lease is in full force and effect; (ii) all
lease payments due to date on any such lease have been paid, and neither the
Company, nor its Subsidiary, nor any other party is in default under any such
lease, and no event has occurred which constitutes, or with the lapse of time or
the giving of notice or both would constitute, a default by the Company or its
Subsidiary or, to the Knowledge of the Company, any other party under such
lease; and (iii) there are no disputes or disagreements between the Company or
its Subsidiary and any other party with respect to any such lease.
4.10. Accounts Receivable. The accounts receivable and notes receivable
of the Company and its Subsidiary (collectively, the "Accounts Receivable")
reflected on the balance sheet comprising a part of the December Financial
Statements (the "December Balance Sheet") are, and the Accounts Receivable of
the Company and the Subsidiaries created from and after the date of the December
Balance Sheet to the Closing Date will be, owned by the Company and its
Subsidiary, free and clear of any Liens. All Accounts Receivable (a) arose from
bona fide sales of goods or services in the ordinary course of business and
consistent with past practice, (b) are accurately and fairly reflected on the
Most Recent Audited Balance Sheet or, with respect to Accounts Receivable
created after the date thereof are accurately and fairly reflected in the books
and records of the Company and its Subsidiary, and (c) except for the Accounts
Receivable owing to Parent from the Subsidiary, are valid and collectible, net
of the reserve for uncollectible accounts reflected on the Most Recent Audited
Balance Sheet. There is no contest, claim or right of set-off contained in any
agreement with any maker of any such Account Receivable relating to the amount
or validity thereof. Schedule 4.10 sets forth a list of all Accounts Receivable
more than 30 days past due or with a term of payment greater than 45 days.
4.11. Accounts Payable. All accounts payable of the Company and its
Subsidiary (a) arose from bona fide purchases in the ordinary course of business
and consistent with past practice, and (b) are accurately and fairly reflected
on the Most Recent Audited Balance Sheet or, with respect to accounts payable of
the Company and the Subsidiaries created after the date thereof, are accurately
and fairly reflected in the books and records of the Company.
4.12. Inventory. The inventory of the Company and its Subsidiary,
including, without limitation, raw materials, work in progress and finished
goods, consists only of items of a quality and quantity useful or saleable in
the ordinary course of business consistent with past practice and is owned by
the Company and the applicable Subsidiary, free and clear of all Liens, except
as set forth on Schedule 4.12. The inventories as reflected on the Most Recent
Audited Balance Sheet and on the books and records of the Company and its
Subsidiary are valued at the lower of cost (determined by the FIFO method of
accounting) or market value. The inventory of the Company and its Subsidiary was
purchased at prices and in quantities consistent with the Company's and its
Subsidiary's custom in the ordinary course of business. Schedule 4.12 hereto
sets forth a list of each location of inventory of the Company and its
Subsidiary, and a list and summary description of any agreements, including
processing agreements and consignment agreements, applicable to such inventory.
-18-
4.13. Backlog. All outstanding customer purchase orders for products of
the Company and its Subsidiary are identified on Schedule 4.13 hereto, have been
entered at prices and upon terms and conditions consistent with the normal
practices of the Company or the Subsidiary, as applicable, and the completion of
such orders will not, to the Knowledge of the Company, have a Company Material
Adverse Effect. Neither the Company nor its Subsidiary has been informed by any
customer that any order included in the Company's or such Subsidiary's backlog
is likely to be canceled or terminated prior to its completion.
4.14. Material and Affiliated Contracts.
(a) Schedule 4.14(a) sets forth all of the following contracts,
arrangements or understandings to which either the Company, its Subsidiary or
both are a party, bound or subject as of the date of this Agreement:
(i) any contract, arrangement or understanding, or series
of related contracts, arrangements or understandings, which involves annual
expenditures or receipts by the Company and its Subsidiary of more than
$50,000.00 or which provides for performance, regardless of amounts, over a
period in excess of six months after the date of such contract, arrangement or
commitment;
(ii) any license agreement, whether as licensor or
licensee;
(iii) any agreement with customers for discounts or
allowances in excess of twenty percent (20%) off of U.S. list price in the case
of Company or Subsidiary sales of reagents or fifty percent (50%) off of U.S.
list price in the case of Company or Subsidiary sales of instruments;
(iv) any note, bond, indenture, credit facility, mortgage,
security agreement or other instrument or document relating to or evidencing
indebtedness for money borrowed or a security interest in or mortgage on the
assets of the Company or its Subsidiary;
(v) any warranty, indemnity or guaranty issued by the
Company or its Subsidiary (other than customary product warranties provided by
the Company or any Subsidiary in the ordinary course of business, true and
complete copies of which have been provided to Parent pursuant to Section 4.21
hereof);
(vi) any contract, arrangement or understanding granting to
any Person the right to use any property or property right of the Company or its
Subsidiary, including any lease;
(vii) any contract, arrangement or understanding restricting
the right of the Company or its Subsidiary to engage in any business activity or
to compete with any business;
-19-
(viii) any joint venture contract;
(ix) any agreement granting to others the right to
manufacture or distribute products of the Company or its Subsidiary;
(x) any contract, arrangement or understanding granting to
any Person any right to any royalty, profit sharing, management fee or any other
similar contract, arrangement or understanding;
(xi) any other material contract, arrangement or
understanding not made in the ordinary course of business and consistent with
past practice; or
(xii) any outstanding offer or commitment to enter into any
contract or arrangement of the nature described in subsections (i) through (xi)
of this Section 4.14(a).
(b) Schedule 4.14(b) hereto contains an accurate and complete
list and description of all agreements, arrangements and understandings
(including outstanding indebtedness) which are currently in effect between the
Company or its Subsidiary and any of the following: (i) each director and
officer of the Company or any Subsidiary; (ii) the spouses, children,
grandchildren, siblings, parents, grandparents, uncles, aunts, nieces, nephews
or first cousins of any director or officer of the Company or its Subsidiary or
their spouses (collectively, "near relatives"); (iii) any trust for the benefit
of any director or officer of the Company or its Subsidiary or any of their
respective near relatives; and (iv) any corporation, partnership, joint venture
or other entity owned or controlled by any director or officer of the Company or
its Subsidiary or any of their respective near relatives. (The contracts,
arrangements and understandings required to be disclosed in Schedule 4.14(a) and
Schedule 4.14(b) are collectively referred to herein as "Material Contracts").
(c) The Company has delivered to Parent and Merger Sub complete
and correct copies of each written Material Contract (and all amendments
thereto), and Schedule 4.14(a) and Schedule 4.14(b) contain accurate summary
descriptions of all oral Material Contracts. Except as set forth on Schedule
4.14(c) hereto: (i) each Material Contract is in full force and effect; (ii)
neither the Company nor its Subsidiary, as applicable, nor, to the Knowledge of
the Company, any other party is in default under any such contract, and no event
has occurred which constitutes, or which with the lapse of time or the giving of
notice or both would constitute, a default by the Company or its Subsidiary, as
applicable, or, to the Knowledge of the Company, by any other party under such
contract; and (iii) there are no disputes or disagreements between the Company
or its Subsidiary, as applicable, and any other party with respect to any such
contract.
-20-
4.15. Compliance with Laws. Except as set forth on Schedule 4.15: (i)
each of the Company and its Subsidiary is complying and has complied with all
laws, statutes, rules, regulations, codes and ordinances applicable to their
respective businesses, properties and operations; (ii) each of the Company and
its Subsidiary has secured all necessary permits, licenses, exemptions,
consents, authorizations and approvals issued by federal, state, local and
foreign agencies and authorities, applicable to their respective businesses,
properties and operations; (iii) such permits, licenses, exemptions, consents,
authorizations and approvals will not be adversely affected by the consummation
of the transactions contemplated hereby; (iv) except with respect to incidents
of noncompliance that have been corrected, neither the Company nor any
Subsidiary has received any notice alleging a failure to so comply or to secure
such a permit, authorization or license nor, to the Knowledge of the Company, is
there any inquiry, investigation or proceeding relating thereto; and (v) neither
the Company nor its Subsidiary has received any notice of, and to the Knowledge
of the Company, there is no intention on the part of any appropriate authority
to cancel, revoke or modify, or any inquiries, proceedings or investigations the
purpose or possible outcome of which is the cancellation, revocation or
modification of, any such permit, license, exemption, consent, authorization or
approval.
4.16. Legal Proceedings. Except as set forth on Schedule 4.16 hereto,
there are no suits, actions, proceedings (including, without limitation,
arbitral and administrative proceedings), claims or governmental investigations
or audits pending or, to the Company's Knowledge, threatened against the Company
or its Subsidiary or any of their respective properties, assets or businesses,
or pending or, to the Company's Knowledge, threatened against, relating to or
involving any of the officers, directors, Employees or agents of the Company or
its Subsidiary in connection with the business of the Company or its Subsidiary.
There are no such suits, actions, proceedings, claims, or investigations pending
or, to the Company's Knowledge, threatened challenging the validity or propriety
of, or otherwise relating to or involving, this Agreement or the transactions
contemplated hereby. Except as set forth on Schedule 4.16, there is no judgment,
order, writ, injunction, decree or award (whether issued by a court, an
arbitrator, a governmental body or agency thereof or otherwise) to which the
Company or its Subsidiary is a party, or involving the property, assets or
business of the Company or its Subsidiary, which is unsatisfied or which
requires continuing compliance therewith by the Company or its Subsidiary.
4.17. Ability to Conduct the Business. Except for this Agreement and
the transactions contemplated hereby, there is no agreement, arrangement or
understanding to which the Company or its Subsidiary is a party that prevents
the use by the Company or such Subsidiary of its properties and assets or the
conduct by the Company or its Subsidiary of its business as conducted on the
date hereof.
4.18. Labor Matters.
(a) Neither the Company, nor any Subsidiary, is a party to any
labor or collective bargaining agreement, and no Employees are represented by
any labor organization. Within the preceding three years, there have been no
representation or certification proceedings, or petitions seeking a
representation proceeding, pending or threatened in writing to be brought or
filed with the National Labor Relations Board or any other labor relations
tribunal or authority or any demand for recognition. Within the preceding three
years, to the Company's Knowledge, there have been no organizing activities
involving Company or any Subsidiary with respect to any group of employees of
the Company or any Subsidiary.
-21-
(b) There are no strikes, work stoppages, slowdowns, lockouts,
arbitrations or grievances or other labor disputes pending or, to the Company's
Knowledge, threatened in writing against or involving the Company or any
Subsidiary. There are no unfair labor practice charges, grievances or complaints
pending or, to the Company's Knowledge, threatened in writing by or on behalf of
any Employee or group of Employees.
(c) There are no complaints, charges or claims against the
Company or any Subsidiary pending or, to the Company's Knowledge, threatened to
be brought or filed with any Governmental Entity, arbitrator or court based on,
arising out of, in connection with, or otherwise relating to the employment or
termination of employment of any individual by the Company or any Subsidiary.
(d) The Company and each Subsidiary are in compliance with all
applicable laws, regulations and orders relating to the employment of labor,
including all such laws, regulations and orders relating to wages, hours, WARN,
collective bargaining, discrimination, civil rights, safety and health, workers'
compensation and the collection and payment of withholding and/or social
security taxes and any similar tax, except as set forth on Schedule 4.18(d).
(e) There has been no "mass layoff" or "plant closing" as defined
by WARN with respect to the Company or any Subsidiary within the 6 years prior
to Closing.
(f) Schedule 4.18(f) hereto sets forth (i) the names of all
directors and officers of the Company and its Subsidiary (whether or not such
persons are Key Employees or former Employees), together with the respective
date of employment, term of office, if any, and titles for each such person, the
current salary and commission terms of such person, the date and amount of such
person's most recent salary increase, the amount of any bonuses or other cash
compensation (other than regular salary or commissions) paid since June 30, 1998
to such person and a description of all compensation arrangements currently
applicable to such person, and (ii) with respect to all other Employees, their
respective date of employment, current title and compensation for the years
ended June 30, 1999 and June 30, 2000, and their current salary.
4.19. Employee Benefit Plans.
(a) List of Benefit Plans and Employee Arrangements. Schedule
4.19(a) sets forth a complete and correct list of:
(i) all "employee benefit plans", as defined in Section
3(3) of ERISA, which the Company has any obligation or liability, contingent or
otherwise ("Benefit Plans"); and
(ii) all employment or consulting agreements, bonus or
other incentive compensation, deferred compensation, salary continuation during
any absence from active employment for disability or other reasons, severance,
sick days, stock award, stock option, stock purchase, tuition assistance, club
membership, employee discount, employee loan, or vacation pay agreements,
policies or arrangements which the Company or its Subsidiary maintains or has
any obligation or liability (contingent or otherwise) with respect to any
current or former officer, director or employee of the Company or of Subsidiary
(the "Employee Arrangements").
-22-
(b) Documents. With respect to each Benefit Plan and Employee
Arrangement, a complete and correct copy of each of the following documents, if
applicable, has been provided to Purchaser:
(i) the most recent plan and related trust documents, and
all amendments thereto;
(ii) the most recent summary plan description, and all
related summaries of modifications thereto;
(iii) the most recent Form 5500 (including schedules and
attachments);
(iv) the most recent Internal Revenue Service determination
letter;
(v) the most recent actuarial reports (including for
purposes of Financial Accounting Standards Board report no. 87, 106 and 112);
and
(vi) each written employment, consulting or individual
severance or other compensation agreement, and all amendments thereto.
(c) Multiemployer or Foreign Plans. The Company has not during
the preceding six (6) years had any obligation or liability (contingent or
otherwise) with respect to a Benefit Plan which is described in Section 3(37),
4(b)(4), 4063 or 4064 of ERISA.
(d) Tax Qualification. The Benefit Plans and their related trusts
intended to qualify under Sections 401 and 501(a) of the Code, respectively,
have been identified as such on Schedule 4.19(a), and so qualify. The Company
has not taken nor failed to take nor has it caused to be taken or failed to take
any action that would and to the Knowledge of the Company, there are no other
circumstances likely to result in the disqualification or loss of tax exempt
status of any such Benefit Plan or trust under Sections 401 and 501(a) of the
Code.
(e) Contributions. All contributions or other payments required
to have been made by the Company or its Subsidiary to or under any Benefit Plan
or Employee Arrangement by applicable law or the terms of such Benefit Plan or
Employee Arrangement (or any agreement relating thereto) have been timely and
properly made.
(f) Compliance with Laws. The Benefit Plans and Employee
Arrangements have been maintained and administered in accordance with their
terms and applicable laws, except as set forth on Schedule 4.19(f).
-23-
(g) Claims. Except as disclosed in Schedule 4.19(g), there are no
pending or, to the Company's Knowledge, threatened actions, claims or
proceedings against or relating to any Benefit Plan or Employee Arrangement
other than routine benefit claims by persons entitled to benefits thereunder.
(h) Retiree Medical. Except as disclosed in Schedule 4.19(h),
neither the Company, nor its Subsidiary, maintains or has an obligation to
contribute to retiree life or retiree health plans which provide for continuing
benefits or coverage for current or former officers, directors or employees of
the Company or its Subsidiary except (i) as may be required under Part 6 of
Title I of ERISA and at the sole expense of the participant or the participant's
beneficiary or (ii) a medical expense reimbursement account plan pursuant to
Section 125 of the Code.
(i) Employer Securities. Except as disclosed in Schedule 4.19(i),
none of the assets of any Benefit Plan is stock of the Company or any of its
affiliates, or property leased to or jointly owned by the Company or any of its
affiliates.
(j) Change in Control. Except as disclosed in Schedule 4.19(j),
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment becoming due to
any employee (current, former or retired) of the Company or its Subsidiary, (ii)
increase any benefits under any Benefit Plan or Employee Arrangement or (iii)
result in the acceleration of the time of payment of, vesting of or other rights
with respect to any such benefits.
(k) Underfunded Pension Plans. Neither the Company nor its
Subsidiary has any liability (contingent or otherwise) under Section 4069 of
ERISA by reason of a transfer of an underfunded pension plan.
4.20. Environmental Matters.
(a) Except as disclosed on Schedule 4.20 hereto:
(i) The Company and its Subsidiary and their respective
operations have been and are, and the Real Property during the period that it is
or was owned, operated or leased by or for the Company or any Subsidiary is or
was in compliance with all Environmental Laws and the Company and each
Subsidiary have obtained, currently maintain and are in compliance with any
permit, authorization, license or similar approval required by Environmental
Laws and the Company has no Knowledge of any facts, circumstances or conditions
that could interfere with such continued compliance or require capital
expenditures to maintain such compliance;
-24-
(ii) no judicial or administrative proceeding is pending
or, to the Company's Knowledge, threatened against the Company, its Subsidiary
or the Real Property currently or formerly owned, operated or leased by or on
behalf of the Company or its Subsidiary, alleging the violation of or seeking to
impose liability under or pursuant to any Environmental Law, and there is no
investigation pending or, to the Company's Knowledge, threatened under or
pursuant to Environmental Laws against the Company, its Subsidiary or the Real
Property currently or formerly owned, operated or leased by or on behalf of the
Company or its Subsidiary;
(iii) except with respect to costs associated with ongoing
environmental management of the Company's and its Subsidiaries' operations with
respect to the Owned Real Property and the Leased Real Property in the ordinary
course of business, neither the Company nor its Subsidiary has received any
notice or other communication alleging that the Company or its Subsidiary is or
could be liable for the cost of investigating, remediating or otherwise
addressing Hazardous Material under Environmental Laws at any property,
regardless of ownership;
(iv) except with respect to costs associated with ongoing
environmental management of the Company's and its Subsidiary's operations with
respect to the Owned Real Property and the Leased Real Property in the ordinary
course of business, neither the Company nor its Subsidiary is subject to any
outstanding Environmental Costs and Liabilities and, there are not any facts,
circumstances or conditions relating to, arising from, associated with or
attributable to the operations of the Company, its Subsidiary or any Real
Property currently or formerly owned, operated or leased by or on behalf of the
Company or its Subsidiary, including any release of Hazardous Material, that
could result in the Company or its Subsidiary incurring Environmental Costs and
Liabilities other than the costs associated with ongoing environmental
management of the Company and its Subsidiary in the ordinary course of business;
(v) there is not now, nor has there been in the past, on,
in or under any Real Property at the time owned, leased or operated by the
Company or its Subsidiary (x) any underground storage tanks, above-ground
storage tanks, dikes or impoundments containing Hazardous Material, (y) any
asbestos-containing materials, or (z) any polychlorinated biphenyls; and
(vi) neither the Company nor its Subsidiary has filed or
been required to file any notice under Environmental Laws indicating past or
present treatment, storage or disposal of hazardous wastes as defined under 40
C.F.R. Parts 260-270 or any state or foreign equivalent or reported a Release of
Hazardous Material; and
(vii) neither the Company nor any Subsidiary has received
notice, or is otherwise aware that any off-site disposal facility to which any
Hazardous Material was sent, or arranged to be sent, by the Company or any
Subsidiary: (x) is currently listed on the National Priorities List ("NPL"), or
any state or foreign equivalent; (y) has been scored in anticipation of, or
nominated for, inclusion on the NPL, or any state equivalent; or (z) is being,
or has been investigated by any person(s) or by any state or federal agency
pursuant to any Environmental Law.
(b) The Company has provided Parent and Merger Sub with copies of
all environmentally related audits, assessments, studies, reports, analyses, and
results of investigations in the Company's or its Subsidiary's possession,
custody or control involving the Company, its Subsidiary, or any Real Property
currently or formerly owned, operated or leased by the Company or its
Subsidiary.
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(c) The transactions contemplated under this Agreement do not
require the filing of any notice with or the approval of any Governmental Entity
with jurisdiction over environmental or health or safety matters, including, but
not limited to, the provision of notice of change of control under environmental
permits.
(d) For purposes of this Agreement, the following terms have the
following definitions:
(i) "Environmental Costs and Liabilities" means any and
all losses, liabilities, obligations, damages, fines, penalties, judgments,
actions, claims, costs and expenses (including, without limitation, fees,
disbursements and expenses of legal counsel, experts, engineers and consultants
and the costs of investigation and feasibility studies and remedial action)
arising from or under any Environmental Law or any agreement with any
Governmental Entity or other Person thereunder or pursuant thereto.
(ii) "Environmental Law" means any applicable federal,
state, local, or foreign law (including common law), statute, code, ordinance,
rule, regulation or other requirement relating to the environment, natural
resources, or public or employee health and safety and includes, but is not
limited to, the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), 42 X.X.X.xx. 9601 et seq., the Hazardous Materials
Transportation Act, 49 X.X.X.xx. 1801 et seq., the Resource Conservation and
Recovery Act ("RCRA"), 42 X.X.X.xx. 6901 et seq., the Clean Water Act, 33 U.S.C.
ss. 1251 et seq., the Clean Air Act, 33 X.X.X.xx. 2601 et seq., the Toxic
Substances Control Act, 15 X.X.X.xx. 2601 et seq., the Federal Insecticide,
Fungicide, and Rodenticide Act, 7 X.X.X.xx. 136 et seq., the Oil Pollution Act
of 1990, 33 U.S.C ss. 2701 et seq. and the Occupational Safety and Health Act,
29 X.X.X.xx. 651 et seq., as such laws have been amended or supplemented, and
the regulations promulgated pursuant thereto, and all analogous state or local
statutes.
(iii) "Hazardous Material" means any substance, material,
chemical or waste (including any mixture thereof) that is regulated by any
Governmental Entity or by any Environmental Law as a hazardous or toxic
substance, a hazardous or toxic material, a hazardous or toxic waste, a
pollutant, contaminant or words of similar meaning or effect, including, but not
limited to, petroleum products, asbestos or asbestos containing materials, urea
formaldehyde and polychlorinated biphenyls.
(iv) "Release" means any release, spill, emission,
migration, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
or leaching into the indoor or outdoor environment.
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4.21. Warranties; Products Claims. During the three year period prior
to the date hereof, neither the Company nor its Subsidiary has experienced any
material return or warranty claims, nor are there any pending, or to the
Company's Knowledge, threatened, material return or warranty claims with respect
to products sold by the Company or any Subsidiary and for which the Company or
its Subsidiary may have continuing liability or obligations as of the date
hereof nor to the Company's Knowledge is there any basis for any material
returns or warranty claims. Except as set forth on Schedule 4.21, neither the
Company or its Subsidiary has any obligation or liability arising out of injury
to or damage to any Person or property as the result of the ownership,
possession or use of any product. A description of all warranties given by the
Company and its Subsidiary is included in Schedule 4.21.
4.22. Tax Matters. Except as disclosed on Schedule 4.22 hereto:
(a) All Tax Returns required to be filed by or with respect to
the Company and its Subsidiaries have been timely filed (including any
extensions), and each such Tax Return is true, correct and complete. The Company
and its Subsidiaries have timely paid or accrued all Taxes that are due, or
claimed or asserted by any taxing authority to be due. The Company and its
Subsidiary will file all Tax Returns that they may become required to file on or
after the date of this Agreement and on or before the Closing Date. All Tax
Returns that the Company or its Subsidiary files on or after the date of this
Agreement and prior to the Closing Date will be correct and complete, and all
Taxes due in connection with such Tax Returns will be paid when due. With
respect to any period for which Tax returns have not yet been filed, or for
which Taxes are not yet due, the Company and its Subsidiary have made sufficient
current accruals for all such Taxes in its financial statements. The Company and
its Subsidiary have made all required estimated Tax payments sufficient to avoid
any underpayment penalties. The Company and its Subsidiary have withheld and
paid when due all Taxes required by all applicable laws to be withheld or paid
in connection with any amounts paid or owing to any Employee, creditor,
independent contractor or other third party.
(b) There are no outstanding agreements, waivers, or arrangements
extending the statutory period of limitations applicable to any claim for, or
the period for the collection or assessment of, Taxes due from or with respect
to the Company or its Subsidiary for any taxable period, and no power of
attorney granted by or with respect to the Company or its Subsidiary relating to
Taxes is currently in force. No closing agreement pursuant to Section 7121 of
the Code (or any predecessor provision) or any similar provision of any state,
local, or foreign law has been entered into by or with respect to the Company or
its Subsidiary. All deficiencies asserted or assessments made as a result of any
examination by any taxing authority of the Tax Returns of, covering or including
the Company or its Subsidiary have been fully paid and no audit or other
proceeding by any court, governmental or regulatory authority, or similar Person
is pending or, to the Company's Knowledge, threatened, in regard to any Taxes
due from or with respect to the Company or its Subsidiary or any Tax Return
filed by or with respect to the Company or any Subsidiary. The Company has not
received any proposed assessment for Taxes against the Company or any Subsidiary
or any of their respective assets. The Company has not received any notice from
any taxing authority which could result in a proposed deficiency for any
subsequent taxable period. Neither the Company, nor its Subsidiary, is subject
to any private letter ruling of the Internal Revenue Service or comparable
ruling of other taxing authorities.
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(c) No consent to the application of Section 341(f)(2) of the
Code (or any predecessor provision) has been made or filed by or with respect to
the Company or its Subsidiary or any of their respective assets. Neither the
Company nor its Subsidiary has agreed to make any adjustment pursuant to Section
481(a) of the Code (or any predecessor provision) by reason of any change in any
accounting method, there is no application pending with any taxing authority
requesting permission for any changes in any accounting method of the Company or
its Subsidiary, nor has the IRS proposed any such changes in accounting method.
None of the assets of the Company or its Subsidiary is or will be required to be
treated as being owned by any Person (other than the Company or its Subsidiary)
pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code of
1954, as amended and in effect immediately before the enactment of the Tax
Reform Act of 1986.
(d) Neither the Company nor its Subsidiary is party to, is bound
by, or has any obligation under, any Tax sharing agreement, Tax allocation
agreement, Tax indemnity agreement, or any other similar contract.
(e) There is no contract, agreement, plan or arrangement,
including any stock option, covering any Person that, individually or
collectively, could give rise to the payment of any amount that would not be
deductible by Parent or the Company by reason of Section 280G of the Code.
(f) Neither the Company nor its Subsidiary has any liability for
Taxes of any other corporation pursuant to Treasury Regulation Section 1.1502-6
or any similar or analogous state, local or foreign law.
(g) No election under any of Sections 108, 168, 338, 441, 472,
1017, 1033 or 4977 of the Code (or any predecessor provisions) or any similar
provisions of domestic or foreign, state or local law is in effect with respect
to the Company or its Subsidiary.
(h) Parent has received complete copies of (i) all filed federal
and state, Income Tax Returns of the Company relating to the taxable periods
since June 30, 1996, (ii) all audit reports issued within the last three years
relating to Taxes due from or with respect to the Company or its income, assets
or operations, and (iii) any extensions of the statute of limitations with
respect to any Taxes due from or with respect to the Company or its Subsidiary,
or either's respective income, assets or operations.
(i) No claim has been received from a taxing authority in a
jurisdiction where neither the Company nor its Subsidiary files Tax Returns
asserting that the Company or its Subsidiary is or may be subject to taxation in
that jurisdiction.
(j) There are no Liens as a result of any unpaid Taxes upon any
of the assets of the Company or its Subsidiary, except for Liens arising as a
matter of law relating to current Taxes not yet due.
(k) Neither the Company nor its Subsidiary has been a member of
any consolidated, combined, unitary or affiliated group of corporations for any
Tax purposes.
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(l) Neither the Company nor its Subsidiary, is currently, has
been within the last five (5) years, or anticipates becoming a "United States
real property holding company" within the meaning of Section 897(c) of the Code.
(m) Neither the Company nor its Subsidiary has constituted either
a "distributing corporation" or a "controlled corporation" within the meaning of
section 355(a)(1)(A) of the Code in a distribution of stock qualifying for
tax-free treatment under Section 355 of the Code (i) in the two (2) years prior
to the date of this Agreement or (ii) in a distribution which could otherwise
constitute part of a "plan" or "series of related transactions" within the
meaning of Section 355(e) of the Code in conjunction with the Merger.
(n) "Taxes" means all federal, state, provincial, local,
municipal or foreign taxes, charges, fees, levies, duties and other similar
assessment or liability, including, without limitation, income, gross receipts,
ad valorem, premium, excise, real property, personal property, sales, use,
transfer, withholding, employment, payroll, medicare, franchise, social
security, unemployment, stamp, value-added, estimated or other taxes, including
any interest, fines, penalties, assessments, reassessments, or additions to
Taxes resulting from, attributable to, or incurred in connection with any Tax or
any contest, dispute, or refund thereof whether imposed by reason of contract,
Tax sharing agreement, Tax reimbursement agreement, assumption, transferee
liability, operation of law, Treasury Regulation Section 1.1502-6(a) (or any
other predecessor or successor thereof or any analogous or similar provision
under state, local or foreign law) or otherwise. "Tax Returns" means reports,
returns, including information returns, statements or other documents, including
any attachments thereto and any amendment thereof, required to be supplied to a
taxing authority in connection with Taxes.
4.23. Insurance. Schedule 4.23 hereto sets forth a complete and correct
list and brief summary description of all insurance policies carried by, or
covering, the Company or its Subsidiary with respect to their respective
businesses or in which the Company or its Subsidiary is named as a beneficiary.
Complete and correct copies of each such policy will be delivered to Parent by
Closing. All such policies are in full force and effect, and no notice of
cancellation has been given with respect to any such policy. All premiums due
thereon have been paid in a timely manner. Except as set forth on Schedule 4.23,
there are no pending claims or, to the Company's Knowledge, threatened claims,
under any of the Company's or its Subsidiary's insurance policies. The liability
insurance maintained by the Company and its Subsidiary is and has since the
policy periods beginning in 1998 been on an "occurrence" basis.
4.24. Minute Books; Stock Record Books. True and complete copies of the
Company's and its Subsidiary's minutes of meetings of board of directors and
shareholders of the Company and its Subsidiary have been provided to Parent and
Merger Sub. True and complete copies of the Company's and its Subsidiary's stock
record books have been provided to Parent. The copies of the minutes provided
are true and complete copies of all minutes of meetings of and actions by the
shareholders, Board of Directors and all committees of the Board of Directors of
the Company or its Subsidiary, and accurately reflect all corporate actions of
the Company or its Subsidiary passed upon by the Board of Directors or
shareholders of the Company or its Subsidiary. The stock record books accurately
reflect all transactions in shares of the Company's or its Subsidiary's capital
stock.
-29-
4.25. Brokers' or Finders' Fees. No agent, broker, investment banker,
or other Person or firm acting on behalf of the Company or its Subsidiary is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee directly or indirectly from the Company or its Subsidiary in
connection with any of the transactions contemplated by this Agreement.
4.26. Material Customers and Suppliers.
(a) Schedule 4.26(a) hereto sets forth a complete and correct
list of the ten largest customers of the Company and its Subsidiary in terms of
amounts invoiced to such customers during the fiscal year of the Company and the
Subsidiaries ended June 30, 2000 (each, a "Material Customer"), showing the
total amount invoiced to each such Material Customer for each such period.
Except as set forth and described on Schedule 4.26(a), no Material Customer has
given the Company or its Subsidiary notice terminating, suspending or reducing
or specifying an intention to terminate, suspend or reduce in the future, or
otherwise reflecting an adverse change in, the business relationship between
such customer and the Company or its Subsidiary. Except as set forth and
described on Schedule 4.26(a), there has not been any adverse change in the
business relationship of the Company or its Subsidiary with any Material
Customer.
(b) Schedule 4.26(b) hereto sets forth a complete and correct
list of the ten largest suppliers of the Company and its Subsidiary in terms of
amounts purchased from such suppliers during the fiscal year of the Company and
the Subsidiaries ended June 30, 2000 (each, a "Material Supplier"), showing the
total amount purchased from each such Material Supplier for each such period.
Schedule 4.26(b) correctly identifies all current outstanding purchase orders of
the Company and its Subsidiary for goods or services with an aggregate value of
$25,000 or more. Except as set forth and described on Schedule 4.26(b)(iii), no
Material Supplier has given the Company or its Subsidiary any notice
terminating, suspending or reducing or specifying an intention to terminate,
suspend or reduce in the future, or otherwise reflecting an adverse change in,
the business relationship between a Material Supplier and the Company or its
Subsidiary. Except as set forth and described on Schedule 4.26(b)(iii), there
has not been any adverse change in the business relationship of the Company or
any Subsidiary with any Material Supplier inconsistent with historical
experience.
4.27. Bank Accounts; Powers of Attorney. Schedule 4.27 hereto sets
forth a complete and correct list showing: (a) all banks in which the Company or
its Subsidiary maintains a bank account or safe deposit box (collectively, "Bank
Accounts"), together with, as to each such Bank Account, the account number, the
names of all signatories thereof and the authorized powers of each such
signatory and, with respect to each such safe deposit box, the number thereof
and the names of all persons having access thereto; and (b) the names of all
persons holding powers of attorney from the Company or its Subsidiary, true and
correct copies thereof which have been delivered to Parent and Merger Sub.
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4.28. Books and Records. Except as disclosed on Schedule 4.28, all of
the records, data, information, databases, systems and controls maintained,
operated or used by the Company and its Subsidiaries in connection with the
conduct or administration of their respective businesses (including all means of
access thereto and therefrom) are located on the premises of the Company or its
Subsidiary and are under the exclusive ownership or direct control of the
Company or its Subsidiary.
4.29. Intellectual Property Rights.
(a) Schedule 4.29(a) hereto sets forth a correct and complete
list and description of all Intellectual Property and all Software owned by or
licensed to the Company or its Subsidiary and indicates whether such
Intellectual Property and Software is owned or licensed by the Company or is
owned or licensed by its Subsidiary, together with, in the case of any
registered patents, trademarks, and copyrights and any applications to register
any patents, trademarks, and copyrights (i) all applicable filing, registration,
or issue numbers, (ii) all applicable filing, registration, issue and
application dates, (iii) the applicable country or jurisdiction, (iv) the record
owner, and (iv) the remaining life thereof.
(b) Except as disclosed in Schedule 4.29(b):
(i) The Company and its Subsidiary own or possess adequate
licenses or other valid rights to use (without the making of any payment to
others or the obligation to grant rights to others in exchange) all of the
Intellectual Property and Software listed on Schedule 4.29(a), free and clear of
all Liens;
(ii) Neither the Company nor its Subsidiary has permitted
the registration or recordation of any Intellectual Property to lapse since
January 1, 1997;
(iii) Neither the Company nor its Subsidiary is in default
under any contract, agreement, license, understanding or any other arrangement
with respect to any of the Intellectual Property or Software;
(iv) The validity of the Intellectual Property and the
rights of the Company or its Subsidiary therein and to the Software have not
been questioned in any litigation to which the Company or its Subsidiary is a
party or in any other written claim to the Company or its Subsidiary nor, to the
Company's Knowledge, is any such litigation or claim threatened;
(v) Neither the Company nor its Subsidiary is infringing
upon the patent rights, trademark rights, copyrights, or other intellectual
property rights of others;
(vi) To the Company's Knowledge, no unauthorized use of any
Intellectual Property or Software owned or used by or licensed to the Company
has heretofore been, or is now being, made by any other Person;
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(vii) No Employee or former Employee or consultant or former
consultant to the Company or its Subsidiary has any interest, direct or
indirect, in any of the Intellectual Property or Software; and
(viii) None of the Company's or its Subsidiary's confidential
information has been used, divulged or appropriated for the benefit of any
Person or otherwise to the detriment of the Company or its Subsidiary and no
Employee or former Employee or consultant or former consultant of the Company or
its Subsidiary is, or is currently expected to be, in default under any term of
any employment contract, agreement or arrangement relating to the Intellectual
Property, or any confidentiality agreement or any other contract or any
restrictive covenant relating to the Intellectual Property, or the development
or exploitation thereof.
4.30. Sales Representatives and Other Sales Agents/Territory. Schedule
4.30 hereto sets forth a complete and correct list of the names of each sales
representative or other sales agent currently engaged by the Company or its
Subsidiary who is not an Employee (each a "Sales Agent"), and a summary
description of the territory assigned to each such Sales Agent (noting whether
such territory is exclusive or non-exclusive). Schedule 4.30 also sets forth a
list of all agreements between the Company or its Subsidiary and any such Sales
Agent, complete and correct copies of which agreements have been delivered to
Parent and Merger Sub.
4.31. List of Creditors. Except as set forth on Schedule 4.31, neither
the Company nor the Subsidiary has any obligation to pay for goods purchased by,
or services rendered to, the Company or the Subsidiary for any period prior to
March 31, 2001, which Schedule 4.31 will be updated to cover periods prior to
the Closing.
4.32. Other Matters Regarding Subsidiary. Without limitation to any of
the representations and warranties regarding the Company's Subsidiary contained
in this Article 4, the Company hereby represents and warrants to Parent and
Merger Sub as to the matters contained on Schedule 4.32 hereto with respect to
its Subsidiary.
4.33. Information Furnished. All information furnished or caused to be
furnished to Parent or Merger Sub by the Company or its Subsidiary with respect
to the Company or its Subsidiary and their respective businesses for purposes of
or in connection with this Agreement or any of the transactions contemplated
hereby, including that information with respect to the Company and its
Subsidiary in the Information Statement, is true and complete in all material
respects and does not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements herein or therein, as
the case may be, not misleading in light of the circumstances under which made.
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ARTICLE 5
COVENANTS RELATED TO CONDUCT OF BUSINESS
----------------------------------------
5.1. Inspection. From and after the date hereof and until the Closing,
the Company will, upon reasonable notice and request from Parent or Merger Sub,
at the sole expense of Parent: (a) give to each of Parent and Merger Sub and
their officers, attorneys, accountants and representatives, including, but not
limited to, environmental professionals, free, full and complete access to all
books, records, Tax Returns, files, correspondence, personnel, facilities and
properties of the Company and its Subsidiary; (b) provide each of Parent and
Merger Sub and their officers, attorneys, accountants and representatives all
information and material pertaining to the business and affairs of the Company
and its Subsidiary as Parent and Merger Sub may deem reasonably necessary or
appropriate; (c) without limiting the generality of the foregoing, cause the
Company and its Subsidiary to permit Parent's and Merger Sub's accountants to
examine the Company's and its Subsidiary's financial statements for any fiscal
period; and (d) use its reasonable efforts to afford each of Parent and Merger
Sub and its officers, attorneys, accountants and representatives the opportunity
to meet with the customers, employees and vendors of the Company and its
Subsidiary to discuss the business, condition (financial or otherwise),
operations and prospects of the Company and its Subsidiary. All such review and
disclosures will be subject to the confidentiality provisions of the
Confidentiality Agreement.
5.2. Financial Statements. From and after the date of this Agreement
and continuing until the Closing, as soon as available, and in any event within
thirty (30) days after the end of each calendar month, the Company shall furnish
to Parent an unaudited balance sheet as of the last day of the month during such
period and the related statements of income and cash flows of the Company and
its Subsidiary for such month ("Interim Financial Statements"). Such Interim
Financial Statements shall fairly present the financial position, results of
operations and changes in financial position of the Company and its Subsidiary
as of the indicated dates and for the indicated periods and shall be prepared in
accordance with GAAP, except for the absence of notes and subject to normal,
recurring, year-end adjustments, none of which such adjustments shall be
material.
5.3. Interim Operations of the Company. Except as set forth on
Schedule 5.3:
(a) From the date hereof to the Closing, the Company will, and
will cause its Subsidiary to, conduct its business only in the ordinary course
consistent with past practices, and the Company will not, and will not cause or
permit its Subsidiary to, engage in any practice, take or fail to take any
action or enter into any transaction which would otherwise cause any of the
representations and warranties contained in Article 4 to become untrue, unless
Parent and Merger Sub gives their prior written approval. In addition, except as
set forth on Schedule 5.3, neither the Company nor its Subsidiary may do or
cause to be done any of the following without the prior written approval of
Parent and Merger Sub:
(i) amend or otherwise change its articles of
incorporation or bylaws, or other constituting or governing documents, after the
date hereof;
(ii) issue or sell, or authorize for issuance or sale,
additional shares of any class of capital stock or issue, grant or enter into
any subscription, option, warrant, right, convertible security or other
agreement or commitment of any character obligating the Company or its
Subsidiary to issue securities, other than shares issued pursuant to the
exercise of stock options outstanding as of the date of this Agreement;
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(iii) declare, set aside, make or pay any dividend or other
distribution with respect to its securities;
(iv) redeem, purchase or otherwise acquire, directly or
indirectly, any of its securities;
(v) authorize any capital expenditures or sell, pledge,
dispose of or encumber, or agree to sell, pledge, dispose of or encumber, any
assets of the Company or any Subsidiary except for sales of inventory in the
ordinary course of business;
(vi) acquire (by merger, share exchange, consolidation,
combination or acquisition of stock or assets) all or any part of another Person
or enter into any contract, agreement, commitment or arrangement with respect to
any of the foregoing;
(vii) incur any indebtedness for borrowed money, issue any
debt securities or enter into or modify any contract, agreement, lease,
commitment or arrangement with respect thereto;
(viii) except for transactions contemplated to be performed
under this Agreement, enter into any contract, agreement, lease or commitment
which if entered into before the date of this Agreement would be a Material
Contract, or amend or terminate any existing Material Contract, or any other
contract, agreement, lease or commitment entered into after the date of this
Agreement which if entered into before the date of this Agreement would be a
Material Contract;
(ix) enter into, amend or terminate any employment or
consulting agreement with any director, officer, consultant or Key Employee of
the Company or its Subsidiary, or enter into, amend or terminate any employment
agreement or arrangement with any other person other than in the ordinary course
of business consistent with past practice, or take any action with respect to
the grant or payment of any severance or termination pay other than pursuant to
policies or agreements of the Company and its Subsidiary in effect on the date
hereof and described in Schedule 4.19(a);
(x) enter into, extend or renew any lease for equipment,
office space or other space or any other lease;
(xi) fail to pay any accounts payable of the Company or its
Subsidiary in accordance with their terms;
(xii) accelerate the collection of, or sell or otherwise
transfer, any Accounts Receivable;
(xiii) except as required by law, adopt, amend or terminate
any bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan, agreement,
trust, fund or arrangement for the benefit or welfare of any Employee or any
Officer of the Company or its Subsidiary, or withdraw from any multi-employer
plan so as to create any liability under Article IV of ERISA to any entity;
-34-
(xiv) pay (except for salary under existing employment
arrangements, advances to salesmen in the ordinary course of business, and
directors' fees under standard terms in effect prior to the date hereof), loan
or advance any amount to, or sell, transfer or lease any properties or assets
to, or enter into any agreement or arrangement with, any of their officers or
directors or any affiliate, associate or near relative of any of their officers
or directors;
(xv) write down (or write up) the value of any inventory or
write off as uncollectible any Accounts Receivable;
(xvi) cancel any debts or waive any claims or rights or
cancel or terminate any Material Contract;
(xvii) dispose of or permit to lapse any rights to the use of
any patent, trademark, trade name, copyright or other intangible asset, or
dispose of or disclose to any Person any trade secret, formula, process or
know-how not theretofore a matter of public Knowledge;
(xviii) change any of the banking or safe deposit
arrangements described in Schedule 4.27 hereto;
(xix) grant or extend any power of attorney or act as
guarantor, surety, co-signer, endorser, co-maker, indemnitor or otherwise, in
respect of the obligation of any Person;
(xx) make any change in financial or tax accounting
methods, principles or practices or make or cause to be made any elections on
Tax Returns of the Company or its Subsidiary, unless required by GAAP or
applicable law;
(xxi) take any action that could reasonably be expected to
prevent or impede the Merger from qualifying as a reorganization under Section
368(a) of the Code;
(xxii) extend credit in the sale of products, collection of
receivables or otherwise, other than in the ordinary course of business
consistent with past practice;
(xxiii) fail to maintain its books, accounts and records in
the usual, regular and ordinary manner on a basis consistent with prior years;
(xxiv) adopt or amend in any material respect any collective
bargaining agreement or Benefit Plan or Employee Arrangement other than as
required by law;
-35-
(xxv) grant any increase in compensation, or grant or make
any bonus or other compensatory payments, to any director, officer, Key Employee
or consultant of the Company or its Subsidiary;
(xxvi) grant any increase in compensation to any other
employee of the Company or its Subsidiary, except in the ordinary course of
business consistent with past practice;
(xxvii) make or revoke any Tax election that could
reasonably be expected to have a Company Material Adverse Effect, or compromise
any Tax liability;
(xxviii) sell, license, exchange, mortgage, pledge,
hypothecate, transfer or otherwise dispose of any of its assets, other than the
sale of inventory in the ordinary course of business consistent with past
practices; or
(xxix) agree, whether or not in writing, to do any of the
foregoing.
(b) From the date hereof to the Closing, the Company will, and,
except to the extent provided for by any transaction contemplated to be
performed under this Agreement, will cause its Subsidiary to, use its best
efforts to:
(i) preserve intact the business organization of the
Company and its Subsidiary;
(ii) to keep available the services of their present
officers and employees;
(iii) to preserve intact their banking relationships and
credit facilities;
(iv) to preserve intact their relationships with their
customers and vendors and to preserve the goodwill of those having business
relationships with them;
(v) to comply with all applicable laws;
(vi) preserve its assets, properties and rights necessary
or advisable to the conduct of its business;
(vii) pay when due all Taxes lawfully levied or assessed
against it before any penalty or interest accrues on any unpaid portion thereof
and to file all Tax Returns when due;
(viii) perform all of its obligations under all contracts,
agreements or commitments to which it is a party or subject or by which it is
bound; and
(ix) keep in full force and effect all of those insurance
policies listed on Schedule 4.23 or, if any of those insurance policies expire
or terminate, obtain, and maintain policies of insurance substantially similar
to those expired or terminated policies (both in terms of coverage and amount of
coverage).
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ARTICLE 6
ADDITIONAL AGREEMENTS
---------------------
6.1. Fairness Hearing and Permit.
(a) As promptly as practicable after the execution of this
Agreement, at Parent's expense, Parent will prepare (i) the notice to be sent to
shareholders of the Company pursuant to, and meeting the requirements of,
Article 2 of Subchapter 1 of the California Administrative Code, Title 10,
Chapter 3, Subchapter 2, as amended (the "Hearing Notice"), concerning the
hearing to be held by the Commissioner to consider the terms, conditions and
fairness of the transactions contemplated hereby pursuant to Section 25142 of
the California Corporate Securities Law of 1968, as amended (the "Hearing"),
(ii) the application for permit to be filed with the Commissioner in connection
with the Hearing (the "Application"), and (iii) the information statement to be
mailed to shareholders of the Company in connection with the transactions
contemplated hereby (the "Information Statement"). Notwithstanding the
foregoing, the Company will assist in preparing the Information Statement to be
included in the materials to be submitted to the Commissioner and distributed to
the Company's shareholders in connection with the Company Shareholder Meeting.
As soon as permitted by the Commissioner, Parent will mail the Hearing Notice to
all shareholders of the Company, at Parent's expense, entitled to receive such
notice under California Law. Parent and the Company will notify each other
promptly of the receipt of any comments from the Commissioner or its staff and
of any request by the Commissioner or its staff or any other governmental
officials for amendments or supplements to any of the documents filed therewith
or any other filing or for additional information and will supply each other
with copies of all correspondence between such party or any of its
representatives, on the one hand, and the Commissioner, its staff or any other
governmental officials, on the other hand, with respect to the filing. Whenever
any event occurs that is required to be set forth in an amendment or supplement
to the Information Statement or any other filing, the Company will promptly
inform Parent of such occurrence and cooperate in filing with the Commissioner
or its staff or any other government officials, or mailing to the shareholders
of the Company, such amendment or supplement, at Parent's expense. The
Information Statement will include the recommendation of the Board of Directors
of the Company in favor of this Agreement and the consummation of the Merger.
(b) The Company and Parent will each review each of the Hearing
Notice, the Application and the Information Statement (the "California
Documents") and advise the other of any changes required so that each will not,
at the time the Hearing notice is mailed to the shareholders of the Company, at
the time the Application is filed with the Commissioner and at the time the
Information Statement is mailed to the shareholders of the Company and at all
times subsequent thereto (through and including the Effective Time), contain any
untrue statement of a material fact pertaining to the Company or Parent, as the
case may be, or omit to state any material fact required to be stated therein or
necessary in order to make the statements contained therein pertaining to the
Company or Parent, as the case may be, in light of the circumstances under which
they were made, not misleading. If, at any time prior to the Effective Time, any
event or information is discovered by the Company or Parent which should be set
forth in an amendment to any of the California Documents, the that party will
inform the other of such event or information.
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6.2. Company Shareholder Meeting. The Company will take all lawful
action to (a) call a special meeting of its shareholders (the "Company
Shareholder Meeting") within three (3) business days after the issuance of the
permit by the Commissioner for the purpose of voting on the approval and
adoption of this Agreement, including, without limitation, the grant of
authority to the Company's Board of Directors to waive any one or more of the
conditions to the obligations of the Company set forth in Article 7 and (b)
solicit proxies from its shareholders to obtain the Company Requisite Vote for
the approval and adoption of this Agreement. The Board of Directors of the
Company will recommend approval and adoption of this Agreement and the Merger by
the Company's shareholders and, regardless of whether the Board of Directors of
the Company has withdrawn or modified its recommendation that its shareholders
approve and adopt this Agreement, unless this Agreement has been terminated
pursuant to the provisions of Article 8, the Company will be required to hold
the Company Shareholder Meeting.
6.3. Compliance by the Company, Parent and Merger Sub. From the date
hereof to the Closing, none of the Company, Parent or Merger Sub will take or
fail to take any action, which action or failure to take such action would cause
the representations and warranties made by such party herein to be untrue or
incorrect as of the Closing.
6.4. Satisfaction of All Conditions Precedent. From the date hereof to
the Closing, the Company, Parent and Merger Sub will use such party's
commercially reasonable efforts to cause all conditions precedent to the
obligations of Parent and Merger Sub, in the case of the Company, and the
Company, in the case of Parent and Merger Sub, hereunder to be satisfied by the
Closing.
6.5. Acquisition Proposals.
(a) The Company will not, nor will it authorize or permit any
officer, director or employee or any investment banker, attorney, accountant or
other advisor or representative of the Company, its Subsidiary or any affiliate
of the Company or its Subsidiary, to, directly or indirectly, (i) solicit,
initiate or encourage the submission of any Acquisition Proposal or (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any information in respect of, or take any other action to facilitate,
any Acquisition Proposal or any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal.
The Company will notify Parent of any Acquisition Proposal (including the
material terms and conditions thereof and the identity of the person making it)
as promptly as practicable after its receipt thereof, and will provide Parent
with a copy of any written Acquisition Proposal or amendments or supplements
thereto and any material changes to the terms and conditions of such Acquisition
Proposal, and must promptly give Parent a copy, of any information delivered to
such person which has not previously been reviewed by Parent. Parent shall treat
all information regarding any Acquisition Proposal provided by the Company to
Parent as "Confidential Information" within the meaning of, and in accordance
with, that certain Confidentiality Agreement between the Company and Parent
dated August 24, 2000 (the "Confidentiality Agreement"). Immediately after the
execution and delivery of this Agreement, the Company will, and will use its
reasonable best efforts to cause its affiliates, and their respective officers,
directors, employees, investment bankers, attorneys, accountants and other
agents and representatives to, cease and terminate any existing activities,
discussions or negotiations with any parties conducted heretofore in respect of
any possible Acquisition Proposal and will notify each party that it, or any
officer, director, investment advisor, financial advisor, attorney or other
agent or representative retained by it, has had discussions prior to the date of
this Agreement that the Board of Directors of the Company no longer seeks the
making of any Acquisition Proposal. The Company will take all necessary steps to
promptly inform the individuals or entities referred to in the first sentence of
this Section 6.5 of the obligations undertaken in this Section 6.5. "Acquisition
Proposal" means an inquiry, offer or proposal regarding any of the following
(other than the transactions contemplated by this Agreement) involving the
Company or its Subsidiary: (w) any merger, consolidation, share exchange,
recapitalization, business combination or other similar transaction; (x) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition of all or
substantially all the assets of the Company or its Subsidiary in a single
transaction or series of related transactions; (y) any tender offer or exchange
offer for 10% or more of the outstanding shares of Company Common Stock or the
filing of a registration statement under the Securities Act in connection
therewith; or (z) any public announcement of a proposal, plan or intention to do
any of the foregoing or any agreement to engage in any of the foregoing.
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(b) The Board of Directors of the Company will not withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent or
Merger Sub, its approval or recommendation of approval of this Agreement or the
Merger (or announce publicly its intention to do so) or directly or indirectly
take any other action which is adverse to Parent or is likely to influence a
Holder of the Company Common Stock to vote against the Merger at the Company
Shareholder Meeting and will not approve or recommend, or propose to approve or
recommend, an Acquisition Proposal.
6.6. Notice of Developments. From the date hereof to the Closing, the
Company will notify Parent and Merger Sub of any changes or developments with
respect to the business, operations or prospects of the Company or its
Subsidiary which has had, or could result in, a Company Material Adverse Effect.
Parent will provide the Company with a copy of all press releases issued after
the execution of this Agreement and before the Effective Time and will promptly
notify Company upon the filing of any documents with the SEC.
6.7. Public Announcements. Each of Parent, Merger Sub and the Company
will consult with one another and provide the other with the opportunity to
review the complete proposed press release or statement before issuing any press
release or otherwise making any public statements in respect of the transactions
contemplated by this Agreement, including, the Merger, and will not issue any
such press release or make any such public statement prior to such consultation
and review, except as Parent, Merger Sub or Company may be required by
applicable law or by obligations pursuant to any listing agreement with the
Nasdaq National Market or the Nasdaq SmallCap Market, as determined by Parent,
Merger Sub or the Company, as the case may be in consultation with the
applicable party's legal counsel.
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6.8. Notice of Breach. From the date hereof to the Closing, each party
hereto will, immediately upon becoming aware thereof, give detailed written
notice to the other parties hereto of the occurrence of, or the impending or
threatened occurrence of, any event which would cause or constitute a breach, or
would have caused or constituted a breach had such event occurred or been known
to such party prior to the date of this Agreement, of any of such party's
covenants, agreements, representations or warranties contained or referred to
herein or in any document delivered in accordance with the terms hereof.
6.9. Continuation of Insurance Coverage. From the date hereof to the
Closing, the Company will, and, except to the extent provided for by any
transaction contemplated to be performed under this Agreement, will cause its
Subsidiary to, keep in full force and effect insurance coverage for the Company
and its Subsidiary and their respective assets and operations comparable in
amount and scope to the coverage now maintained covering the Company and its
Subsidiary and their respective assets and operations.
6.10. Maintenance of Credit Terms. From the date hereof to the Closing,
the Company will, and will cause its Subsidiary to, continue to effect sales of
its products and services only on the terms that have historically been offered
by the Company or its Subsidiary or on such other terms as market conditions may
dictate consistent with commercially reasonable practices, except as
contemplated by the Distribution Agreement.
6.11. Updating Schedules. From the date hereof until the Closing Date,
the Company will disclose to Parent and Merger Sub any variances from the
representations and warranties contained in Article 4 promptly upon discovery
thereof. The Company will promptly provide Parent and Merger Sub with any
supplemental information regarding such disclosure that is reasonably requested.
Notwithstanding the forgoing, no supplemental information provided in accordance
with this Section will modify, amend or supplement the representations and
warranties made in Article 4 or the schedules thereto unless Parent consents
thereto in writing. Nothing contained in this Section constitutes a reduction to
or impairment of the conditions contained in Section 7.2(e) that the Company's
representations and warranties contained in this Agreement must be true and
correct as of the Closing Date.
6.12. Affiliate Letters. Schedule 6.12 attached hereto sets forth a
list of all persons who are, and all persons who to the Company's Knowledge will
be at the Closing Date, "affiliates" of the Company for purposes of Rule 145
under the Securities Act and shareholders of the Company. The Company will cause
such list to be updated promptly through the Closing Date. As soon as
practicable after the date hereof, but prior to the date of the Company
Shareholder Meeting, the Company shall cause all "affiliates" identified on
Schedule 6.12 to deliver to Parent a written agreement substantially in the form
attached as Exhibit C.
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6.13. Third Party Consents. The Company will use its best efforts to
obtain at the earliest practicable date all consents of third parties
(including, but not limited to, such Consents as are listed on Schedule 4.4(c))
necessary to the consummation of the transactions contemplated hereby (the
"Company Consents") and will provide to Parent and Merger Sub copies of each
such Company Consent promptly after it is obtained. Parent and Merger Sub agree
to cooperate reasonably with the Company in connection with the obtaining of the
Company Consents; provided, however, that Parent and Merger Sub will not be
required, directly or indirectly, to pay any additional sums to secure such
Company Consents.
6.14. Commercially Reasonable Efforts and Certain Filings. Subject to
the terms and conditions of this Agreement, the Company, Parent and Merger Sub
will use their respective commercially reasonable efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary or
desirable to consummate the transactions contemplated by this Agreement
including, without limitation, obtaining duly executed counterparts of the
Consulting Agreement and Noncompetition Agreement from each of the individuals
identified on Schedule 7.2(m) and Schedule 7.2(n), respectively. None of the
Company, Parent or Merger Sub will take, agree to take or permit to be taken any
action or do or permit to be done anything in the conduct of the business of the
companies, or otherwise, which would be contrary to or in breach of any of the
terms or provisions of this Agreement.
6.15. Confidentiality. The Company and Parent will continue to observe
and comply with all of their respective obligations under the Confidentiality
Agreement, except that upon the Closing, Parent's obligations under the
Confidentiality Agreement will thereby terminate.
6.16. Antitakeover Statutes. If any takeover statute becomes applicable
to the Merger, each of Parent and the Company will take such actions as are
commercially reasonable so that the transactions contemplated by this Agreement
may be consummated as promptly as practicable on the terms contemplated hereby
and otherwise act to eliminate or minimize the effects of any takeover statute
on the Merger.
6.17. Determination of Working Capital. Parent and the Company will
conduct a review of all current assets and current liabilities included within
the Company's Working Capital by the close of business the day before the
Closing Date. Such review may be observed by representatives of Parent and the
Company and their accountants. "Working Capital" means the aggregate dollar
value, all as determined in accordance with GAAP, of (a) the Company's
consolidated total current assets, less (b) the Company's total consolidated
current liabilities (which current liabilities do not include the severance
amounts disclosed in part 4.7(b) of Schedule 4.7).
6.18. Filing of Reports Under the Exchange Act. From and after the
Effective Time, Parent will comply with public information reporting
requirements of the SEC as a condition to the availability of an exemption from
the Securities Act under Rule 144 for the sale of the Parent common stock into
which the Parent Preferred Stock is convertible by the shareholders of the
Company entitled to receive Parent Preferred Stock in the Merger.
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6.19. Distribution Agreement. Parent and the Company will continue to
negotiate in good faith the terms of a distribution agreement (the "Distribution
Agreement") whereby Parent will become a distributor of certain of the Company's
products.
6.20. Tax-Free Reorganization. None of the Company, Parent or Merger
Sub shall knowingly take any action, or knowingly fail to take any action, if
such action or failure to take action would cause the Merger not to qualify as a
reorganization within the meaning of Section 368(a) of the Code.
6.21. Subsidiary Income Tax Returns. As promptly as practicable after
the date of this Agreement, the Company will deliver to Parent complete copies
of (i) all filed income Tax Returns of the Subsidiary relating to taxable
periods since June 30, 1996 and (ii) all audit reports issued within the past
three years relating to Taxes from or with respect to the Subsidiary or its
income, assets or operations.
ARTICLE 7
CONDITIONS TO CONSUMMATION OF THE MERGER
----------------------------------------
7.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to consummate the transactions contemplated
by this Agreement are subject to the fulfillment at or prior to the Effective
Time of each of the following conditions, any or all of which may be waived in
whole or in part by board of directors of the party being benefited thereby, to
the extent permitted by applicable law:
(a) The Agreement must have been approved and adopted by the
Company Requisite Vote.
(b) The Company, Parent and Merger Sub must have timely obtained
from each Governmental Entity all approvals, waivers and consents, if any,
necessary under applicable federal, state, local, and foreign laws for
consummation of or in connection with the transactions contemplated hereby.
(c) There may not be in effect any law of any Governmental Entity
of competent jurisdiction restraining, enjoining or otherwise preventing
consummation of the transactions contemplated by this Agreement.
(d) The Commissioner must have issued a permit for the issuance
of the Parent Preferred Stock as contemplated in Section 6.1(a).
(e) All applications, notices, filings, and registrations
required to be made with, and all waivers, approvals, authorizations, permits
and exemptions required to be obtained from any Governmental Entity, in each of
the foregoing cases, that are required for the issuance of the Merger
Consideration to the shareholders of the Company pursuant to the Merger under
all applicable state, federal and foreign securities laws shall have been made
or obtained.
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7.2. Conditions to the Obligations of Parent and Merger Sub. The
respective obligations of Parent and Merger Sub to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at or prior to the
Closing Date of each of the following additional conditions, any or all of which
may be waived in whole or part by the board of directors of Parent and Merger
Sub, as the case may be, to the extent permitted by applicable law:
(a) The representations and warranties of the Company contained
in this Agreement must be true and correct in all material respects at and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of the Closing Date and Parent and Merger Sub
must have received a certificate, dated as of the Closing Date, signed by a duly
elected officer of the Company to the foregoing effect.
(b) Parent and Merger Sub must have received a certificate, dated
as of the Closing Date, from a duly elected officer of the Company certifying
that immediately prior to, and upon consummation of, the Closing, the Company's
Working Capital is at least One Million One Hundred Thousand Dollars
($1,100,000.00).
(c) The Company must have performed or complied with all
agreements and covenants required by this Agreement to be performed or complied
with by it on or prior to the Closing Date and Parent and Merger Sub must have
received a certificate, dated as of the Closing Date, signed by a duly elected
officer of the Company to the foregoing effect.
(d) Prior to the Closing, there may not have occurred any Company
Material Adverse Effect or any material casualty or damage (whether or not
insured) to any facility, property or equipment owned or used by the Company or
its Subsidiary and the businesses of the Company and its Subsidiary must have
been conducted only in the ordinary course consistent with past practices.
(e) At least eighty-five percent (85%) of the Company Common
Stock outstanding at the time of the vote for the Company Requisite Vote voted
in favor of the transactions contemplated by this Agreement.
(f) The Company must deliver to Parent copies of the minute books
and stock transfer records of the Company.
(g) The Company must have validly obtained all of the outstanding
capital stock of its Subsidiary so that its Subsidiary becomes a wholly-owned
subsidiary of the Company.
(h) The Company's Subsidiary must have filed with the Companies
Registry in London statutory accounts for the years ended June 30, 2000 in
accordance with all applicable legal requirements and without liability on the
part of the Company, Parent, Merger Sub or any of their respective directors and
officers after the Closing.
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(i) All consents and approvals of any Governmental Entity (other
than the filing and recordation of the Agreement of Merger and such other
documents as may be required under California law) or third party required in
connection with the execution, delivery and performance of this Agreement
(including, without limitation, the consents listed on Schedule 4.4(c)) must
have been obtained.
(j) The Company must have delivered to Parent and Merger Sub a
certificate issued by the Secretary of State or other appropriate officials of
the Company's and its Subsidiary's jurisdiction of incorporation or organization
and of all states in which the Company is qualified as a foreign entity as to
the good standing of the Company and its Subsidiary in such jurisdictions and
states as of a date no earlier than 5 days before the Closing Date.
(k) Prior to the Company Shareholder Meeting, Parent must have
received from each of the Company's "affiliates" identified on Schedule 6.12 a
written agreement substantially in the form attached as Exhibit C.
(l) The Company and its Subsidiary must have obtained duly
executed assignments of interest sufficient in Parent's judgment to transfer to
and vest in the Company or its Subsidiary, as the case may be, an undivided
ownership interest in and to the SONAS Technology.
(m) Parent must have received from Xxxxxxx Xxxxxx his duly
executed counterpart of an Employment Agreement in substantially the form as
attached hereto as Exhibit D (the "Employment Agreement").
(n) Parent must have received from Xxxxxxx Xxxxxx his duly
executed counterpart of a Noncompetition Agreement in substantially the form as
attached hereto as Exhibit E (the "Noncompetition Agreement").
(o) The Company must have delivered to Parent and Merger Sub a
certificate from the Secretary or Assistant Secretary of the Company and of its
Subsidiary, dated the Closing Date, certifying that: (i) a true and complete
copy of the Company's and its Subsidiary's, as applicable, articles of
incorporation and charter documents as in effect on the Closing Date is attached
thereto; (ii) a true and complete copy of the bylaws or other similar document
of the Company and its Subsidiary, as applicable, as in effect on the Closing
Date is attached thereto; (iii) a true and complete copy of the resolutions of
the Company's Board of Directors adopted in accordance with the California Law
approving the transactions contemplated by this Agreement, including the Merger,
is attached thereto; (iv) the number and percentage of the shares of Company
Common Stock held by shareholders of the Company entitled to vote with respect
to the Merger that have voted in favor of the transactions contemplated by this
Agreement, including the Merger, and that a true and complete copy of the
resolutions adopted by the shareholders in accordance with the California Law
approving the transactions contemplated by this Agreement, including Merger, is
attached thereto; and (v) the Company's incumbent officers and their respective
specimen signatures are set forth thereon.
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7.3. Conditions to Obligations of the Company. The obligations of the
Company to consummate the transactions contemplated by this Agreement are
subject to the fulfillment at or prior to the Closing Date of each of the
following additional conditions, any or all of which may be waived in whole or
part by the board of directors of Company to the extent permitted by applicable
law:
(a) The representations and warranties of Parent and Merger Sub
contained in this Agreement must be true and correct in all material respects at
and as of the Closing Date with the same effect as though such representations
and warranties had been made on and as of the Closing Date and the Company must
have received a certificate, dated as of the Closing Date, signed by a duly
elected officer of Parent to that effect;
(b) Parent and Merger Sub must have performed or complied with
all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Closing Date, including Section 3.4(b),
and the Company must have received a certificate, dated as of the Closing Date,
signed by a duly elected officer of Parent to the foregoing effect.
(c) Except to the extent that Parent has waived the condition set
forth in Section 7.2(m), Parent must have delivered to Xxxxxxx Xxxxxx a duly
executed counterpart of the Employment Agreement.
(d) Except to the extent that Parent has waived the condition set
forth in Section 7.2(n) with respect to any particular individual, Parent must
have delivered to Xxxxxxx Xxxxxx a duly executed counter part of the
Noncompetition Agreement.
(e) Parent must have delivered to the Company a certificate
issued by the Secretary of State of the State of Delaware and of the State of
California as to the good standing of Parent and Merger Sub, respectively, as of
a date no earlier than 5 days before the Closing Date.
(f) Each of Parent and Merger Sub must have delivered to Company
a certificate from the Secretary or Assistant Secretary of Parent and Merger
Sub, dated the Closing Date, certifying that: (i) a true and complete copy of
Parent's and Merger Sub's, as applicable, certificate or articles of
incorporation as in effect on the Closing Date is attached thereto; (ii) a true
and complete copy of the bylaws of Parent and Merger Sub, as applicable, as in
effect on the Closing Date is attached thereto; (iii) a true and complete copy
of the resolutions of Parent's and Merger Sub's, as applicable, Board of
Directors adopted in accordance with the Delaware General Corporation Law and
the California Law, respectively, approving the transactions contemplated by
this Agreement, including the Merger, is attached thereto; (iv) a true and
complete copy of the resolutions adopted by Parent, as the sole stockholder of
Merger Sub in accordance with the California Law approving the transactions
contemplated by this Agreement, including Merger, is attached thereto; and (v)
Parent's and Merger Sub's incumbent officers and their respective specimen
signatures are set forth thereon.
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ARTICLE 8
TERMINATION
8.1. Termination by Mutual Agreement. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval of the Merger by the Company Requisite Vote, by
mutual written consent of the Company and Parent by action of their respective
Boards of Directors.
8.2. Termination by Either Parent or the Company. This Agreement may
be terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the Board of Directors of either Parent or the Company upon
the occurrence of a Termination Event, except that the right to terminate this
Agreement pursuant to this Section 8.2 will not be available to any party that
has breached in any material respect its obligations under this Agreement in any
manner that has proximately contributed to the occurrence of the failure of the
Merger to be consummated. For the purposes of this Agreement, a "Termination
Event" is deemed to occur if:
(a) the Merger is not consummated by September 30, 2001 whether
such date is before or after the date of approval of the Merger by the Company
Requisite Vote (the "Termination Date"); provided, however, that if any
condition of Closing set forth in Section 7.1 that remains reasonably capable of
satisfaction has not been fulfilled or waived prior to September 30, 2001, the
Termination Date will be automatically extended to October 31, 2001; provided
further that if any such condition has not been fulfilled or waived prior to the
Termination Date, as so extended, the Company and Parent will negotiate in good
faith for a period of ten (10) days for an additional extension of the
Termination Date, taking into consideration all relevant factors, but shall be
under no obligation to agree upon such an extension;
(b) the Company Requisite Vote is not obtained at the Company
Shareholder Meeting or at any adjournment or postponement thereof; or
(c) any law permanently restraining, enjoining or otherwise
prohibiting consummation of the Merger becomes final and non-appealable (whether
before or after the approval of the Merger by the Company Requisite Vote).
8.3. Termination by the Company. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the approval of the Merger by the Company Requisite Vote, by
action of the Board of Directors of the Company if there is a breach by Parent
or Merger Sub of any representation, warranty, covenant or agreement contained
in this Agreement that cannot be cured and would cause a condition set forth in
Section 7.3(a) to be incapable of being satisfied as of the Termination Date.
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8.4. Termination by Parent. This Agreement may be terminated and the
Merger may be abandoned by action of the Board of Directors of Parent at any
time prior to the Effective Time, whether before or after the approval of the
Merger by the Company Requisite Vote, if:
(a) there is a breach by the Company of any representation,
warranty, covenant or agreement contained in this Agreement that cannot be cured
and would cause a condition set forth in either Section 7.1 or Section 7.2 to be
incapable of being satisfied as of the Termination Date;
(b) the Board of Directors of the Company withdraws or modifies
its recommendation of this Agreement or the Merger in a manner adverse to Parent
or resolves to do the foregoing, or directly or indirectly takes any other
action which is adverse to Parent or is likely to influence a Holder of the
Company Common Stock to vote against the Merger at the Company Shareholder
Meeting;
(c) the Company fails to call the Company Shareholder Meeting
within three days after the issuance of the permit by the Commissioner.
8.5. Effect of Termination and Abandonment. In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article 8, this Agreement (other than this Section 8.5, Section 6.5 as it
relates to the parties confidentiality obligations, and Article 10) will become
void and of no effect, with no liability on the part of any party hereto (or of
any of its directors, officers, employees, agents, legal and financial advisors,
or other representatives); provided, however, that except as otherwise provided
herein, no such termination will relieve any party hereto of any liability or
damages resulting from any willful breach of this Agreement.
8.6. Amendment. This Agreement may be amended by action taken by the
Company, Parent and Merger Sub at any time before or after approval of the
Merger by the Company Requisite Vote but, after any such approval, no amendment
may be made which changes the amount or form of the Merger Consideration. This
Agreement may not be amended except by an instrument in writing signed on behalf
of the parties hereto.
8.7. Extension; Waiver. At any time prior to the Effective Time, each
party hereto (for these purposes, Parent and Merger Sub are together deemed one
party and the Company is deemed the other party) may (a) extend the time for the
performance of any of the obligations or other acts of the other party, (b)
waive any inaccuracies in the representations and warranties of the other party
contained herein or in any document, certificate or writing delivered pursuant
hereto, or (c) waive compliance by the other party with any of the agreements or
conditions contained herein. Any agreement on the part of either party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of such rights.
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ARTICLE 9
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS; HOLDBACK PROVISIONS
-------------------------------
9.1. Survival of Representations, Warranties, Covenants and
Agreements. The representations and warranties of the Company, Parent and Merger
Sub herein, and all certifications made in any document delivered at the Closing
will survive the Merger and continue until the date 18 months after the Closing
Date (the "Survival Expiration Date"). Notwithstanding any right of Parent,
Merger Sub or the Company (whether or not exercised) to investigate the affairs
of Parent, Merger Sub or the Company, and notwithstanding the results of such
investigation or any Knowledge obtained thereby, each party has the right to
rely fully upon the representations, warranties, covenants and agreements of the
other party contained in this Agreement or in any instrument required to be
delivered pursuant to Article 7 of this Agreement. The covenants and agreements
of the Company, Parent and Merger Sub contained in this Agreement or in any
instrument delivered pursuant to this Agreement that by their terms apply or are
to be performed in whole or in part after the Effective Time will survive the
Effective Time until such covenants and agreements are performed in accordance
with their respective terms. The inclusion of any entry on the disclosure
schedules attached hereto will not constitute an admission by, or agreement of,
the Company that such matter is material to the Company.
9.2. Holdback Amount.
(a) Establishment of the Holdback Amount. "Holdback Shares" means
shares of Parent Preferred Stock authorized by Parent to be delivered to the
Company shareholders as Merger Consideration, but which will be held by Parent
upon the terms set forth in this Section 9.2. The number of Holdback Shares will
be determined by multiplying five percent (5.00%) by the 700,000 shares of
Parent Preferred Stock (which amount equals 35,000 shares of Parent Preferred
Stock). The number of Holdback Shares will be subject to adjustment for stock
splits, stock dividends or similar recapitalizations affecting the Holdback
Shares effected by Parent following the Effective Time. The "Holdback Amount"
means the Holdback Shares and all dividends and distributions (whether in cash,
property, securities or any combination thereof) paid or payable in respect of
the Holdback Shares (collectively, the "Dividends and Distributions") and all
securities, cash or other property into which or for which the Holdback Shares
may be converted, exchanged or exercised (collectively, the "Additional
Securities and Property").
(b) Recourse to the Holdback Shares. The Holdback Amount will be
held to compensate Parent and the Surviving Corporation, and their respective
officers, directors, employees, agents and affiliates, for any Parent Losses
(whether or not involving a Third Party Claim), incurred or sustained by Parent
or the Surviving Corporation, their respective officers, directors, employees,
agents or affiliates as a result of (i) any breach of any representation,
warranty, covenant or agreement of the Company contained herein or of any
certification contained in any document executed and delivered by the Company at
the Closing which survived the Effective Time in accordance with this Agreement
or (ii) any of those matters described on Schedule 9.2(b) (which matters are
referred to herein as the "Indemnifiable Claims"); provided, however, that
Parent and the Surviving Corporation may not make any claims against the
Holdback Amount for breaches of the Company's representations and warranties
unless the aggregate Parent Losses incurred or sustained as a result of any such
breach(es) and on account of the Indemnfiable Claims exceed $40,000 (the "Parent
Minimum Loss") (at which time claims may be made for all Parent Losses in excess
of Parent Minimum Loss as a result of such breaches). The foregoing Parent
Minimum Loss threshold and limitations shall not apply for claims against the
Holdback Amount on account of any of the Indemnifiable Claims. No shareholder of
the Company will have any liability under this Agreement in excess of the
shareholder's pro rata share of the Holdback Amount. Parent's and the Surviving
Corporation's rights under this Article 9 shall be Parent's and the Surviving
Corporation's sole and exclusive remedy to recover Parent Losses after the
Effective Time.
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(c) Holdback Period; Issuance of Holdback Amount. Subject to the
following requirements, Parent will disburse the portion of the Holdback Amount
not used to compensate any amounts that may be required to be paid by the
Surviving Corporation on account of any Parent Losses on or before the
termination of the Holdback Period on the business day immediately following the
date on which the Holdback Period expires. "Holdback Period" means the period
beginning on the Closing Date and ending on Survival Expiration Date; provided,
however, that the Holdback Period will not terminate with respect to such amount
(or some portion thereof) that is necessary in the reasonable judgment of
Parent, subject to the rights of the Shareholder Agent to object and the
subsequent resolution of the matter in the manner as provided in Section 9.2(g)
hereof, to satisfy any unsatisfied written claims under this Section 9.2
concerning facts and circumstances existing prior to the termination of such
Holdback Period and evidence of which amount is presented in writing to the
Company before the date thirty (30) days after the termination of such Holdback
Period. As soon as practicable after all such claims, if any, have been
resolved, Parent will use commercially reasonable efforts to deliver to the
shareholders entitled thereto the remaining portion of the Holdback Amount not
required to satisfy such claims. Deliveries of shares from the Holdback Amount
to the shareholders pursuant to this Section 9.2(c) will be made based upon that
shareholder's pro rata share of the Holdback Shares as described in Section 2.4.
(d) Voting Rights and Dividends and Distributions. Each
shareholder will have voting rights with respect to his pro rata share of the
Holdback Shares (and on any voting securities comprising a part of the
Additional Securities and Property) and, subject to the holdback thereof as part
of the Holdback Amount, shall have the right to receive all Dividends and
Distributions and all Additional Property and Securities.
(e) Claims Upon Holdback Amount.
(i) At any time during the Holdback Period, Parent may
deliver to the Shareholder Agent a certificate signed by any officer of Parent
(an "Officer's Certificate"): (A) stating that Parent has paid or properly
accrued Parent Losses and (B) specifying in reasonable detail the nature of the
Parent Losses included in the amount so stated, the date each such item or cost
incurred was paid or properly accrued and, if applicable, the nature of the
breach of representation, warranty, agreement or covenant to which such Parent
Loss is related and that Parent will, subject to the provisions of Section
9.2(f) hereof, either cancel such number of Holdback Shares and retain such
portion of the Dividends and Distributions and any Additional Securities and
Property, or some combination thereof, as is sufficient to compensate Parent for
such Parent Losses that exceed the Parent Minimum Loss.
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(ii) For purposes of this Agreement, "Parent Losses" means
all losses, expenses (including reasonable attorneys' fees and expenses),
damages, liabilities, fines, penalties, judgments, actions, claims and costs
imposed on the Surviving Corporation or Parent, their respective officers,
directors, employees, agents or affiliates as a result of any inaccuracy or
breach of any representation, warranty, covenant or agreement of the Company
contained herein with this Agreement or as a result of any of the Indemnfiable
Claims, but shall not include Surviving Corporation's or Parent's own
consequential or special damages.
(iii) For the purposes of determining the number of Holdback
Shares to be canceled by Parent pursuant to Section 9.2(e)(i), the Holdback
Shares shall be valued at a per share price of $6.00, as adjusted for stock
splits, stock dividends, combinations or other recapitalizations affecting such
shares. The shareholders will be deemed to contribute Holdback Shares to the
satisfaction of a claim on account of Parent Losses based upon such
Shareholder's pro rata share of the Holdback Shares.
(f) Objections to Claims. For fifteen days after the delivery of
any Officer's Certificate to the Shareholder Agent, Parent will make no
disposition of any of the Holdback Amount pursuant to Section 9.2(e) hereof
unless Parent has received written authorization from the Shareholder Agent to
make such disposition in the manner contemplated by the Officer's Certificate.
If the Shareholder Agent objects to Parent's claim by delivering a written
notice of objection to Parent within such fifteen day period, then the dispute
will be resolved in the manner set forth in Section 9.2(g). If no written
objection is delivered to Parent within the fifteen day period, then Parent will
have the right to dispose of the Holdback Amount to the extent and in the manner
contemplated by the Officer's Certificate.
(g) Resolution of Conflicts. In case the Shareholder Agent timely
objects in writing to any claim or claims made in any Officer's Certificate, the
Shareholder Agent and Parent will attempt in good faith to agree upon the rights
of the respective parties with respect to each of such claims. If the
Shareholder Agent and Parent so agree, then Parent will take such actions as
have been agreed upon. If no such agreement can be reached within thirty days
after Parent's receipt of the Shareholder Agent's timely written notice of
objection in accordance with Section 9.2(f) after good faith negotiation, then
either Parent or the Shareholder Agent may seek binding arbitration to resolve
the dispute.
(h) No Contribution. No Holder entitled to receive Parent
Preferred Stock in the Merger shall be entitled to make any claim for indemnity
or contribution or any other similar claim against Parent or Surviving
Corporation or any of their respective officers, directors, employees, agents or
affiliates with respect to any Parent Losses for which Parent, Surviving
Corporation or any of their respective officers, directors, employees, agents or
affiliates are entitled to compensation from the Holdback Amount. To the extent
that any of such Holders may now or in the future have the right to assert any
such claim against Parent, Surviving Corporation or any of their respective
officers, directors, employees, agents or affiliates, each Holder, by virtue of
the consummation of the Merger and effective at the Effective Time, hereby
irrevocably waives any such right and hereby releases and forever discharges
Parent, Surviving Corporation and each of their respective officers, directors,
employees, agents and affiliates from any such claim.
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9.3. Shareholder Agent of the Shareholders; Power of Attorney.
(a) Shareholder Agent. In the event that the Merger is approved
by the Requisite Vote, effective upon such vote, and without further act of any
shareholder entitled to receive Parent Preferred Stock in the Merger, Xxxxxxx
Xxxxxx or, if he is not available due to disability or death, Xxxxxx Xxxxxx,
will be appointed as agents and attorneys-in-fact (the "Shareholder Agent"), to
take actions as Shareholder Agent without the joinder of the other, for each
shareholder of the Company (except such shareholders, if any, as will have
perfected their dissenters' rights under California Law), for and on behalf of
shareholders of the Company, to give and receive notices and communications, to
authorize disposition to Parent of all or any portion of the Holdback Amount in
satisfaction of claims by Parent, to object to such disposition, to agree to,
negotiate, enter into settlements and compromises of, and commence litigation or
agree to arbitration and comply with orders and awards of courts and arbitrators
with respect to such claims, and to take all actions necessary or appropriate in
the judgment of the Shareholder Agent for the accomplishment of the foregoing.
Such agency may be changed by the shareholders of the Company from time to time
upon not less than thirty days prior written notice to Parent; provided,
however, that the Shareholder Agent may not be removed unless holders of a
two-thirds interest in Parent Preferred Stock comprising a part of the Holdback
Amount agree to such removal and to the identity of the substituted shareholder
agent. Any vacancy in the position of Shareholder Agent may be filled by
approval of the holders of a majority in interest of Parent Preferred Shares
comprising a part of the Holdback Amount. No bond will be required of the
Shareholder Agent, and the Shareholder Agent will not receive compensation for
his services. Notices or communications to or from the Shareholder Agent will
constitute notice to or from each of the shareholders of the Company.
(b) Exculpation. The Shareholder Agent will not be liable for any
act done or omitted hereunder as Shareholder Agent while acting in good faith
and in the exercise of reasonable judgment.
(c) Actions of the Shareholder Agent. A decision, act, consent or
instruction of the Shareholder Agent will constitute a decision for all of the
shareholders for whom a portion of Parent Preferred Stock otherwise issuable to
them are held as Holdback Shares, and will be final, binding and conclusive upon
each of such shareholders, and Parent may rely upon any such decision, act,
consent or instruction of the Shareholder Agent as being the decision, act,
consent or instruction of every such shareholder of the Company. Parent is
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 Shareholder
Agent.
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9.4. Third-Party Claims. In the event Parent or the Surviving
Corporation receives written notice of a third-party claim (a "Third Party
Claim") which Parent reasonably expects may result in a demand against the
Holdback Amount, Parent will provide the Shareholder Agent with reasonably
prompt written notice thereof. The Shareholder Agent, as representative for the
shareholders of the Company, will have the right to participate in the defense
of any Third Party Claim at the expense of the Company shareholders receiving
Parent Common Stock in the Merger and by counsel selected by the Shareholder
Agent (which counsel must be reasonably satisfactory to Parent).
9.5. Parent Indemnification Obligation. From and after the Effective
Time, if any shareholder or group of shareholders of the Company who received
Parent Preferred Stock under this Agreement suffers any losses, expenses
(including reasonable attorneys' fees and expenses), damages, liabilities,
fines, penalties, judgments, actions, claims and costs (collectively,
"Shareholder Losses"), as a result of any breach of any representation,
warranty, covenant or agreement of Parent or Merger Sub contained herein which
survives the Effective Time in accordance with this Agreement, then Parent and
the Surviving Corporation will indemnify and hold harmless any such shareholder
from any such Shareholder Losses in excess of the Shareholder Minimum Losses;
provided, however, that Parent and the Surviving Corporation will have no
obligation to any shareholder or group of shareholders of the Company who
received Parent Preferred Stock under this Section 9.5 unless the aggregate
Shareholder Losses incurred or sustained by all holders of Company Common Stock
who received Parent Preferred Stock in accordance with Section 2.1(b) exceed
$40,000 (the "Shareholder Minimum Losses"), at which time Parent and the
Surviving Corporation will be obligated to pay, indemnify and hold harmless the
injured shareholders for all Shareholder Losses in excess of the Shareholder
Minimum Losses as a result of such breaches. Parent and the Surviving
Corporation conjunctively will not have any liability under this Agreement to
any individual shareholder of the Company in excess of the value of the Parent
Preferred Stock delivered to that shareholder under this Agreement. For the
purposes of determining the value of the Parent Preferred Stock delivered to any
Shareholder under this Agreement, the Parent Preferred Stock shall be valued at
a per share price of $6.00, as adjusted for stock splits, stock dividends,
combinations or other recapitalizations affecting such shares.
ARTICLE 10
MISCELLANEOUS
-------------
10.1. Collateral Agreements. This Agreement (together with the attached
Schedules and Exhibits delivered pursuant hereto) supersedes all prior
documents, understandings and agreements, oral or written, relating to this
transaction and constitutes the entire understanding among the parties with
respect to the subject matter hereof.
10.2. Successors and Assigns. Neither the rights nor obligations of the
Company, Parent or Merger Sub under this Agreement may be assigned without the
written consent of the other parties hereto. Any assignment in violation of the
foregoing will be null and void. Subject to the preceding sentences of this
Section 10.2, the provisions of this Agreement (and, unless otherwise expressly
provided therein, of any document delivered pursuant to this Agreement) will be
binding upon and inure solely to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and assigns, and nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
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10.3. Expenses. The Company will be solely responsible for the legal,
accounting and other fees and expenses incurred by the Company in connection
with the execution of this Agreement and the consummation of the transactions
contemplated hereby, and Parent and Merger Sub will be solely responsible for
the legal, accounting and other fees and expenses incurred by Parent and Merger
Sub in connection with execution of this Agreement and the consummation of the
transactions contemplated hereby.
10.4. Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, the legality,
validity and enforceability of all of the remaining provisions of this Agreement
shall not be affected thereby and the provision which is held to be illegal,
invalid or unenforceable shall be deemed amended so as to make it legal, valid
and enforceable to the maximum extent compatible with the applicable law.
10.5. Notices. Any notices required or permitted to be given under this
Agreement (and, unless otherwise expressly provided therein, under any document
delivered pursuant to this Agreement) will be given in writing and will be
deemed received (a) when personally delivered to the relevant party at such
party's address as set forth below, (b) if sent by mail (which must be certified
or registered mail, postage prepaid) or overnight courier, when received or
rejected by the relevant party at such party's address indicated below, or (c)
if sent by facsimile transmission, when confirmation of delivery is received by
the sending party:
Parent: Strategic Diagnostics Inc.
000 Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
FAX: (000) 000-0000
Attention: President and Chief Executive Officer
With a copy to: Xxxxxx Xxxxxxxx LLP
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxxxx 00000
FAX: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxxx, Esq.
The Company: Azur Environmental
0000 Xxxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
FAX:
Attention: Chief Executive Officer
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With a copy to: Pillsbury Winthrop LLP
000 Xxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
FAX: (000) 000-0000
Attention: Xxxx Xxxxxxxxxx, Esq.
Each party may change its address for purposes of this Section 10.5 by
proper notice to the other parties.
10.6. Further Assurances. Each party to this Agreement agrees (a) to
furnish upon request to the other parties such further information, (b) to
execute and deliver to the other parties such other documents and (c) to do such
other acts and things as the other parties reasonably request for the purpose of
carrying out the intent of this Agreement and the documents and instruments
referred to herein.
10.7. Specific Performance. The parties recognize that if either party
refuses to perform under the provisions of this Agreement, monetary damages
alone will not be adequate to compensate such party for its injury. Such party
will therefore be entitled, in addition to any other remedies that may be
available, to obtain specific performance of the terms of this Agreement. If any
action is brought by a party to enforce this Agreement, the other party hereby
waives the defense that there is an adequate remedy at law. In the event of
litigation pertaining to any controversy, claim or dispute between the parties
hereto arising out of or relating to this Agreement or the breach of any
provision thereof, the prevailing party will be entitled to recover from the
losing party reasonable expenses, attorneys' fees and costs.
10.8. Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the State of California.
10.9. Remedies Not Exclusive. Except to the extent expressly provided
otherwise herein, the rights and remedies herein provided will be cumulative and
not exclusive of any rights or remedies provided by law or equity.
10.10. Execution in Counterparts. This Agreement may be executed in two
or more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same agreement.
10.11. Titles and Headings. Titles and headings to sections herein are
inserted for convenience of reference only, and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
10.12. Certain Interpretive Matters and Definitions.
(a) Unless the context otherwise requires, (i) all references to
Sections, Articles or Schedules are to Sections, Articles or Schedules of or to
this Agreement, (ii) each term defined in this Agreement has the meaning
assigned to it, (iii) "or" is disjunctive but not necessarily exclusive, (iv)
words in the singular include the plural and vice versa, and (v) the term
"affiliate" has the meaning given to it in Rule 12b-2 of Regulation 12B under
the Exchange Act. All references to "$" or dollar amounts will be to lawful
currency of the United States of America.
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(b) No provision of this Agreement will be interpreted in favor
of, or against, either of the parties hereto by reason of the extent to which
either such party or its counsel participated in the drafting thereof or by
reason of the extent to which any such provision is inconsistent with any prior
draft hereof or thereof.
(c) The Exhibits and Schedules attached hereto are incorporated
herein by reference as though fully set forth herein.
10.13. Dispute Resolution; Arbitration. In the case of a dispute or
claim arising out of this Agreement (either, a "Dispute"), the parties to such
Dispute shall, except as provided in Section (e), use the procedures set forth
in this Section 10.13 in lieu of pursuing other available remedies and as their
sole remedy, to resolve the Dispute.
(a) Submission to Arbitration. Except as provided in 10.13(e),
any Dispute shall be settled by binding arbitration before three arbitrators, at
least two of whom must be attorneys, in accordance with the Rules of the
American Arbitration Association (the "AAA") then in effect and as modified by
this 10.13 or by further agreement of the parties. Any such arbitration will be
conducted in New Castle County, Delaware. The arbitrators selected shall be
persons knowledgeable in the specific areas which may be relevant to the claim.
Judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction.
(b) Authority of Arbitrators. The arbitrators shall have no
authority to award punitive damages nor any other damages not measured by the
prevailing party's actual damages, and may not, in any event, make any ruling,
finding or award that does not conform to applicable law and to the terms and
conditions of this Agreement.
(c) Confidentiality. Neither the parties to the Dispute nor the
arbitrators may disclose to any Person the existence or results of any
arbitration under this Agreement or any evidence presented during the course of
the arbitration without the prior written consent of all parties to the
arbitration. Moreover, the arbitrators to a Dispute shall not disclose to any
third party the terms of this Agreement or any of the documents and agreements
executed or to be executed in connection with this Agreement.
(d) Cost of Arbitration. Each party shall bear its own costs of
arbitration unless the arbitrators expressly assign costs as a part of the
arbitration decision and except that the prevailing party in such Dispute will
be entitled to recover its attorneys fees and costs in connection with the
Dispute. Except as provided in 10.13(e), if any party refuses to submit to
arbitration any Dispute required to be submitted to arbitration pursuant to this
10.13, and instead commences any other proceeding, including, without
limitation, litigation, then the party who seeks enforcement of the obligation
to arbitrate shall be entitled to its attorneys' fees and costs incurred in any
such enforcement proceeding.
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(e) Equitable Relief. Nothing contained in this 10.13 shall limit
or restrict in any way the right or power of a party at any time to seek
injunctive relief in any court of competent jurisdiction and to litigate all
issues relevant to such request for injunctive relief before such court (i) to
restrain the other party from breaching or continuing to breach this Agreement
or (ii) for specific enforcement of this 10.13. The parties agree that any legal
remedy available to a party with respect to a breach of this 10.13 will not be
adequate and that, in addition to all other legal remedies, each party is
entitled to an order specifically enforcing this 10.13.
10.14. Disclosure of Terms. No party to this Agreement shall disclose
(whether by means of a public statement, press release or otherwise) any of the
terms of this Agreement or any of the documents and agreements executed or to be
executed in connection with this Agreement except (a) to the extent necessary to
perform its obligations or enforce its rights under this Agreement, (b) as
counsel to Parent believes is necessary to comply with Parent's obligations, or
as counsel to the Company believes is necessary to comply with the Company's
obligations, under applicable federal, state, and foreign securities laws, and
(c) as mutually agreed by Parent and Company, such agreement not to be
unreasonably withheld, delayed or conditioned.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year set forth above.
PARENT:
STRATEGIC DIAGNOSTICS INC.
/S/
-------------------------------------
Xxxxxxx X. Xxxxxxxxx
President and Chief Executive Officer
MERGER SUB:
AZUR ACQUISITION CORP.
/S/
-------------------------------------
Xxxxxxx X. Xxxxxxxxx
President
COMPANY:
AZUR ENVIRONMENTAL
/S/
-------------------------------------
Xxxxxxx Xxxxxx
Chief Executive Officer
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