Exhibit 2.1
AGREEMENT AND PLAN OF CONTRIBUTION AND MERGER
BY AND AMONG
PROTON ENERGY SYSTEMS, INC.,
PES NEW PARENT, INC.,
PES-1 MERGER SUB, INC.,
PES-2 MERGER SUB, INC.,
AND
NORTHERN POWER SYSTEMS, INC.
May 22, 2003
AGREEMENT AND PLAN OF CONTRIBUTION AND MERGER
Agreement entered into as of May 22, 2003 by and among Proton Energy
Systems, Inc., a Delaware corporation ("Parent"), PES New Parent, Inc., a
Delaware corporation and a wholly-owned subsidiary of Parent ("New Parent"),
PES-1 Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of
New Parent ("Merger Sub I"), PES-2 Merger Sub, Inc., a Delaware corporation and
a wholly-owned subsidiary of New Parent ("Merger Sub II") and Northern Power
Systems, Inc., a Delaware corporation (the "Company"). All terms not otherwise
defined herein shall have the meanings ascribed to them in Article VIII hereof.
A. The respective Boards of Directors of the Company and Merger Sub I have
each duly approved the merger of Merger Sub I and the Company on the terms and
subject to the conditions of this Agreement (the "Company Merger"), as a result
of which the Company will become a wholly owned subsidiary of New Parent. New
Parent, as the sole stockholder of Merger Sub I, has duly approved the Company
Merger and the board of directors of the Company has duly resolved to recommend
approval of the Company Merger by its stockholders.
B. The respective Boards of Directors of Parent and Merger Sub II have
each duly approved the merger of Merger Sub II and Parent on the terms and
subject to the conditions of this Agreement (the "Parent Merger"), as a result
of which Parent will become a wholly-owned subsidiary of New Parent. New Parent,
as the sole stockholder of Merger Sub II, has duly approved the Parent Merger
and the Board of Directors of Parent has duly resolved to recommend approval of
the Parent Merger by its stockholders.
C. For United States federal income tax purposes, it is intended that the
formation of New Parent and the Mergers to effectuate the contribution of all of
the outstanding shares of Common Stock of the Company and Parent to New Parent
constitute an exchange under Section 351 of the Internal Revenue Code of 1986,
as amended (the "Code"), and that Parent Merger also constitute a reorganization
within the meaning of Section 368 of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, Parent, New Parent, Merger Sub I,
Merger Sub II and the Company hereby agree as follows:
ARTICLE I
THE MERGERS
1.1 The Mergers. Subject to and upon the terms and conditions of this
Agreement, at the Effective Time (as hereinafter defined) (i) Merger Sub I shall
be merged with and into the Company in accordance with this Agreement and the
applicable provisions of the Delaware General Corporation Law, the separate
corporate existence of Merger Sub I shall cease and the Company shall continue
as the surviving corporation and as a wholly-owned subsidiary of New Parent, and
(ii) Merger Sub II shall be merged with and into Parent in accordance with this
Agreement and the applicable provisions of the Delaware General Corporation Law,
the separate corporate existence of Merger Sub II shall cease and Parent shall
continue as the surviving corporation and as a wholly-owned subsidiary of New
Parent. The Company Merger and the
Parent Merger are herein collectively referred to as the "Mergers" and each
individually as a "Merger." The Company and Parent, as the surviving
corporations after the Mergers, are herein sometimes collectively referred to as
the "Surviving Corporations" and each individually as a "Surviving Corporation."
Merger Sub I and Merger Sub II are herein sometimes collectively referred to as
the "Merger Subsidiaries" and each individually as a "Merger Subsidiary."
Parent, New Parent, the Company, Merger Sub I and Merger Sub II are herein
referred to collectively as the "Parties" and each individually as a "Party."
1.2 Effective Time. As promptly as practicable after the satisfaction or
waiver of the conditions set forth in Article VI hereof, the Parties shall cause
the Mergers to be consummated concurrently by filing Certificates of Merger with
the Secretary of State of the State of Delaware with respect to the Mergers, in
such form as required by, and executed in accordance with, the relevant
provisions of the Delaware General Corporation Law (the time of the later of
such filings to occur being the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, each of the Company and
Parent shall continue its corporate existence under the laws of the State of
Delaware and the Mergers shall have the effects set forth in Section 259 of the
Delaware Law.
1.4 Further Actions. If, at any time after the Effective Time, either of
the Surviving Corporations shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to continue in, vest, perfect or confirm of record or otherwise in
such Surviving Corporation its right, title or interest in, to or under any of
the rights, properties, privileges, franchises or assets of either of its
constituent corporations or otherwise to carry out this Agreement, the officers
and directors of such Surviving Corporation shall be directed and authorized to
execute and deliver, in the name and on behalf of any of such constituent
corporations or the Merger Subsidiaries, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of each
of such corporations or otherwise, all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties, privileges, franchises or
assets in such Surviving Corporation or otherwise to carry out this Agreement.
1.5 Certificate of Incorporation; Bylaws; Directors and Officers. Unless
otherwise agreed by Parent and the Company before the Effective Time, at the
Effective Time:
(i) The respective Certificates of Incorporation of each of the
Company and Parent as in effect immediately prior to the Effective Time shall be
the Certificates of Incorporation of the Company and Parent as Surviving
Corporations (except that the Certificate of Incorporation of Parent shall be
amended by virtue of Parent Merger to change the name of Parent, in each case
until thereafter amended as provided by law and such Certificates of
Incorporation.
(ii) The respective Bylaws of each of the Merger Subsidiaries in each
case as in effect immediately prior to the Effective Time, shall be the Bylaws
of the Company and Parent, respectively, as a Surviving Corporation in each case
until thereafter amended as provided by law and the Certificate of Incorporation
of such Surviving Corporation and such Bylaws; and
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(iii) (x) The directors of Merger Sub I and Merger Sub II immediately
prior to the Effective Time shall be the directors of the Company and Parent,
respectively, as the respective Surviving Corporations from and after the
Effective Time, in each case until their successors are elected or appointed and
qualified or until their resignation or removal; and (y) the officers of Parent
and Company immediately prior to the Effective Time shall be the officers of
Parent and the Company, respectively, as the respective Surviving Corporations
from and after the Effective Time, in each case until their successors are
elected or appointed and qualified or until their resignation or removal.
1.6 Corporate Identity. The Company and Parent agree that immediately after
the Effective Time, the corporate name of New Parent shall be changed (and the
Company and Parent agree that they shall take such actions in connection with
the consummation of the transactions contemplated by this Agreement as may be
necessary to ensure that such name change may be effected without further action
by the stockholders of New Parent immediately following the consummation of the
Mergers).
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Securities - The Company Merger.
(a) At the Effective Time, by virtue of the Company Merger and
without any action on the part of Merger Sub I, the Company, the Surviving
Corporation of the Company Merger or the holder of any of the following
securities:
(i) subject to Section 2.1(c), each Common Share or Common Share
Equivalent issued and outstanding immediately prior to the Effective Time (other
than Series D Shares held by Electing Series D Holders (as defined below),
Common Shares to be cancelled pursuant to clause (iii) below and any Dissenting
Shares (as defined below)) shall be cancelled and extinguished and be converted
into and become a right to receive (without interest thereon) (x) an amount of
cash equal to the quotient obtained by dividing (1) $15,128,000 by (2) the
aggregate number of Common Shares and Common Share Equivalents then outstanding
(the "Common Cash Consideration"), (y) the number of shares of New Parent Common
Stock, $.01 par value per share ("New Parent Common Stock") equal to the Share
Exchange Ratio (as defined below), and (z) cash in lieu of fractional shares as
contemplated by Section 2.1(i). In addition, each holder of such Common Shares
and Common Share Equivalents being converted pursuant to this Section 2.1(a)(i)
shall receive a Warrant ("Warrant") in the form of Exhibit A to purchase a
number of shares of New Parent Common Stock equal to the product of the Warrants
Per Share multiplied by such holder's Common Shares and Common Share Equivalents
being so converted.
The term "Share Exchange Ratio" means the quotient obtained by dividing (A)
the quotient of (1) the difference between (a) $27,500,000 minus (b) the
aggregate Cash Consideration minus (c) the product of the Series D Cash and
Warrant and Option Consideration multiplied by the number of Common Shares
issuable upon the exercise of then outstanding Options, divided by (2) the
Average Closing Price, by (B) the difference between (1) the aggregate number of
Common Shares and Common Share Equivalents then outstanding minus
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(2) the aggregate Series D Cash and Warrant Election Shares minus (3) the
aggregate Series D Cash Election Shares.
The term "Average Closing Price" means the average of the closing prices of
Parent Common Stock on the Nasdaq National Market (as reported in The Wall
Street Journal or, if not reported thereby, any other authoritative source)
during the ten most recent trading days on which shares of Parent Common Stock
actually traded ending three trading days prior to the Closing Date; provided,
that if the average so computed is $1.50 or less, the Average Closing Price
shall be $1.50 and if the average so computed is $3.00 or more, the Average
Closing Price shall be $3.00;
(ii) each Series D Share held by an Electing Series D Holder
shall be converted into and become a right to receive (without interest thereon)
$5.84 in cash (the "Series D Cash Consideration") or, at the election of the
holder as provided in and subject to the limitations set forth in this Agreement
(without interest thereon), (x) the Series D Cash and Warrant and Option
Consideration, and (y) a Warrant in the form of Exhibit A to purchase a number
of shares of New Parent Common Stock equal to the product of the Warrants Per
Share for Series D Cash and Warrant Electors multiplied by such holder's Series
D Shares being so converted (the Common Cash Consideration, the Series D Cash
Consideration and the Series D Cash and Warrant and Option Consideration are
referred to collectively herein as the "Cash Consideration;" the consideration
referred to in Section 2.1(a)(i)(w)-(z) and this Section 2.1(a)(ii) and the
Warrants referred to in Section 2.1(e) are referred to collectively herein as
the "Company Merger Consideration").
(iii) each Company Share that is issued and outstanding
immediately prior to the Effective Time and owned by New Parent, either Merger
Subsidiary or the Company shall be cancelled and retired, and no payment shall
be made with respect thereto; and
(iv) each share of Merger Sub I's capital stock issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation of the Company Merger.
(b) The Company Stockholders shall be entitled to receive as of the
Closing 85% of the Cash Consideration into which their Common Shares, Common
Share Equivalents or Series D Shares were converted pursuant to Section 2.1(a)
and 85% of the shares of New Parent Common Stock into which their Common Shares,
Common Share Equivalents or Series D Shares were converted pursuant to 2.1(a);
the remaining 15% of the Cash Consideration (the "Escrow Cash") and 15% of the
shares of New Parent Common Stock into which such Common Shares, Common Share
Equivalents or Series D Shares were converted pursuant to Section 2.1(a),
rounded to the nearest whole number (the "Escrow Shares"), shall be deposited in
escrow pursuant to Section 2.4 and shall be held and disposed of in accordance
with the terms of the Escrow Agreement.
(c) Notwithstanding Section 2.1(a), Company Shares outstanding
immediately prior to the Effective Time and held by a holder who, acting in
accordance with Section 262 of the Delaware General Corporation Law, (i) prior
to the special meeting at which the Company's
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stockholders vote to approve the Company Merger has delivered to the Company
written notice of such holder's intention to demand payment for his Company
Shares if the Company Merger is effectuated and (ii) has not voted in favor of
the Merger ("Dissenting Shares"), shall not be converted into a right to receive
the Company Merger Consideration, unless such holder withdraws or otherwise
loses his right to demand payment for his Company Shares. If after the Effective
Time such holder withdraws or loses his right to demand payment for his Company
Shares, such Company Shares shall be treated as if they had been converted as of
the Effective Time into the right to receive the Company Merger Consideration
payable in respect of such Company Shares pursuant to Section 2.1(a) and 2.1(b).
(d) The Company shall give New Parent and Merger Sub I prompt notice of any
demands for payment, or notices of intent to demand payment, received by the
Company with respect to Company Shares, and New Parent and Merger Sub I shall
have the right to participate in (and control) all negotiations and proceedings
with respect to such demands. The Company shall not, except with the prior
written consent of New Parent or as otherwise required by law, make any payment
with respect to, or settle, or offer to settle, any such demands.
(e) As of the Effective Time, all Options, whether vested or unvested, and
the Option Plan, insofar as it relates to Options outstanding under such Option
Plan as of the Closing, shall be assumed by New Parent. Immediately after the
Effective Time, each Option outstanding immediately prior to the Effective Time
shall be deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such Option at the Effective Time (except
insofar as such terms and conditions are modified to reflect the adjustments
described in this Section 2.1(e)), such number of shares of New Parent Common
Stock as is equal to the number of Common Shares subject to the unexercised
portion of such Option multiplied by the Option Conversion Ratio (with any
fraction resulting from such multiplication to be rounded down to the nearest
whole number). The exercise price per share of each such assumed Option shall be
equal to the exercise price of such Option immediately prior to the Effective
Time, divided by the Option Conversion Ratio (rounded up to the nearest whole
cent). The term, exercisability, vesting schedule, status as an "incentive stock
option" under Section 422 of the Code, if applicable, and all of the other terms
of the Options shall otherwise remain unchanged. The "Option Conversion Ratio"
shall be the quotient obtained by dividing the Series D Cash and Warrant and
Option Consideration by the Average Closing Price. Each holder of an Option will
also receive a Warrant in the form of Exhibit A to purchase a number of shares
of New Parent Common Stock equal to the product of the Warrants Per Share
multiplied by the number of Common Shares subject to such holder's Option. The
lesser of (a) all of the Warrants to be received by a holder of an Option or (b)
Warrants with an aggregate Warrant Value equal to 15% of the Total Option
Consideration to be received by the holder of an Option shall be deposited into
escrow at the closing pursuant to Section 2.4 and shall be held and disposed of
in accordance with the terms of the Escrow Agreement. Such Warrants placed in
escrow shall be referred to herein as the "Escrow Warrants."
(f) As soon as practicable after the Effective Time, New Parent shall
deliver to the holders of Options appropriate notices setting forth such
holders' rights pursuant to such Options, as amended by this Section 2.1, and
the agreements evidencing such Options shall continue in effect on the same
terms and conditions (subject to the amendments provided for in this Section 2.1
and such notice). No such holder shall have the right to receive any shares of
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New Parent Common Stock in respect of such Option except to the extent such
Option is exercised.
(g) New Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of New Parent Common Stock for delivery
upon exercise of the Warrants and the Options assumed in accordance with this
Section 2.1. At the Effective Time, New Parent shall file a Registration
Statement on Form S-8 (or any successor form) under the Securities Act with
respect to all shares of New Parent Common Stock subject to such Options that
may be registered on a Form S-8, and shall use its Reasonable Best Efforts to
maintain the effectiveness of such Registration Statement for so long as such
Options remain outstanding.
(h) The Company shall terminate all Company Stock Plans other than the
Option Plan as of the Effective Time.
(i) No fractional shares of New Parent Common Stock shall be issued upon
the surrender for exchange of Certificates, no dividend or distribution of the
New Parent Common Stock shall relate to such fractional share interests and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a stockholder of New Parent. As promptly as practicable following the
Effective Time, New Parent shall pay to each record holder of Company Shares an
amount in cash, if any, equal to the product obtained by multiplying (i) the
fractional share interest to which such holder (after taking into account all
Company Shares held at the Effective Time by such holder) would otherwise be
entitled by (ii) the Average Closing Price.
(j) From and after the Effective Time, no Company Shares shall be deemed to
be outstanding, and holders of Certificates shall cease to have any rights with
respect thereto, except as provided herein or by law.
(k) At the Effective Time, the stock transfer books of the Company shall be
closed and no transfer of Company Shares shall thereafter be made. If, after the
Effective Time, certificates are presented to New Parent or the Surviving
Corporation of the Company Merger, they shall be cancelled and exchanged for
Company Merger Consideration, subject to applicable law in the case of
Dissenting Shares.
(l) If New Parent is required by applicable withholding tax requirements to
withhold amounts from the Company Merger Consideration, it shall do so and such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the Common Shares, Common Share Equivalents or Series
D Shares in respect of which such deductions and withholdings were made.
(m) For purposes of this Agreement, if, after the date of this Agreement
and on or prior to the Closing Date, the outstanding shares of New Parent Common
Stock or Company Common Stock shall be changed into a different number of shares
by reason of any reclassification, recapitalization, stock split, reverse stock
split, combination or exchange of shares or any dividend within such period, or
any similar event shall occur, the Share Exchange Ratio and Option Conversion
Ratio shall be adjusted accordingly to provide to the shareholders
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of the Company in the aggregate the same economic effect as contemplated by this
Agreement absent such reclassification, recapitalization, stock split, reverse
stock split, combination, exchange, dividend or similar event.
2.2 Conversion of Securities - Parent Merger. At the Effective Time, by
virtue of the Parent Merger and without any action on the part of Merger Sub II,
Parent, the Surviving Corporation of Parent Merger or the holder of any of the
following securities:
(a) each share of Parent Common Stock ("Parent Shares"), issued and
outstanding immediately prior to the Effective Time (other than Parent Shares to
be cancelled pursuant to clause (ii) below) shall be converted into and become
one fully paid and nonassessable share of New Parent Common Stock (the "Parent
Merger Consideration");
(b) each Parent Share that is issued and outstanding and owned by
Parent, New Parent or Merger Sub II shall be cancelled and retired, and no
shares of New Parent Common Stock shall be issued with respect thereto; and
(c) each share of Merger Sub II's capital stock issued and outstanding
immediately prior to the Effective Time shall be converted into and become one
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation of the Parent Merger.
2.3 Cancellation of Certain New Parent Stock; Other Matters Affecting New
Parent Common Stock.
(a) At the Effective Time, the shares of New Parent Common Stock held
by Parent shall be redeemed, cancelled and retired and all consideration paid by
Parent in respect thereof shall be returned. No shares of stock or other
securities of New Parent or any other corporation shall be issuable, and no
other payment or consideration shall be made, with respect to such shares of New
Parent Common Stock.
(b) At the Effective Time, New Parent shall assume all stock options
and warrants of Parent issued and outstanding immediately prior to the Effective
Time and such assumed options and warrants will be exercisable for the same
exercise price and for the same number of shares of New Parent Common Stock as
previously applied to Parent Common Stock. The adjustments provided herein with
respect to any options which are "incentive stock options" (as defined in
Section 422 of the Code) shall be effected in a manner consistent with Section
424(a) of the Code.
2.4 Escrow.
(a) On the Closing Date, New Parent shall (i) deposit with the Escrow
Agent an amount equal to 15% (rounded to the nearest $.01) of the aggregate Cash
Consideration payable pursuant to Section 2.1(a), (ii) deliver to the Escrow
Agent a certificate (issued in the name of the Escrow Agent or its nominee)
representing the Escrow Shares issuable pursuant to Section 2.1(b), and (iii)
deliver to the Escrow Agent a Warrant (issued in the name of the Escrow Agent or
its nominee) representing the Escrow Warrants issuable pursuant to Section
2.1(e), for the purpose of securing the indemnification obligations of the
Company Stockholders and
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Company Optionholders set forth in this Agreement. The Escrow Cash, Escrow
Shares and Escrow Warrants shall be held by the Escrow Agent under the Escrow
Agreement pursuant to the terms thereof. The Escrow Shares shall be held as a
trust fund and shall not be subject to any lien, attachment, trustee process or
any other judicial process of any creditor of any party, and shall be held and
disbursed solely for the purposes and in accordance with the terms of the Escrow
Agreement.
(b) The adoption of this Agreement and the approval of the Company
Merger by the stockholders of the Company shall constitute approval of the
Escrow Agreement and of all of the arrangements relating thereto, including the
placement of the Escrow Cash, Escrow Shares and Escrow Warrants in escrow and
the appointment of the Indemnification Representatives.
2.5 Election and Exchange Procedures.
(a) Appropriate and customary transmittal materials, which shall
specify that delivery shall be effected and risk of loss and title to the
Certificates shall pass only upon proper delivery of such Certificates to New
Parent, in such form as Company and Parent shall mutually agree shall be mailed
on the Mailing Date (as defined below) to each holder of record of Company
Shares as of a record date which shall be the same date as the record date for
eligibility to vote on the Company Merger. In addition, each Series D Holder
shall receive a Series D Election Form (the "Election Form"). The "Mailing Date"
shall be the date on which proxy materials relating to the Company Merger are
mailed to holders of shares of Company Shares.
(b) Each Election Form shall entitle the holder of Series D Shares to
elect to receive payment for such shares pursuant to Section 2.1(a)(ii) in lieu
of Section 2.1(a)(i). Any holder of Series D Shares who elects to receive
payment for such shares pursuant to Section 2.1(a)(ii) is referred to in this
Agreement as an "Electing Series D Holder." Each Electing Series D Holder shall
elect to receive either Series D Cash Consideration (a "Series D Cash Election")
or Series D Cash and Warrant and Option Consideration and Warrants (a "Series D
Cash and Warrant Election") for such holder's Series D Shares. Series D Shares
as to which a Series D Cash Election is made are referred to herein as "Series D
Cash Election Shares." Series D Shares as to which a Series D Cash and Warrant
Election is made are referred to herein as "Series D Cash and Warrant Election
Shares."
(c) To be effective, a properly completed Election Form shall be
submitted to New Parent or the Company no later than the date scheduled for the
Requisite Stockholder Approval (or such other time and date as the Company and
New Parent may mutually agree) (the "Election Deadline"). An election shall have
been properly made only if New Parent shall have actually received a properly
completed Election Form by the Election Deadline. An Election Form shall be
deemed properly completed only if accompanied by one or more Certificates (or
customary affidavits and indemnification regarding the loss or destruction of
such Certificates or the guaranteed delivery of such Certificates) representing
all Company Shares covered by such Election Form, together with duly executed
transmittal materials included with the Election Form. Any Series D Holder may
at any time prior to the Election Deadline change his or its election by written
notice received by New Parent prior to the Election Deadline accompanied by a
properly completed and signed revised Election Form. Any Series D Holder may, at
any time
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prior to the Election Deadline, revoke his or its election by written notice
received by New Parent prior to the Election Deadline or by withdrawal prior to
the Election Deadline of his or its Certificates, or of the guarantee of
delivery of such Certificates, previously deposited with New Parent. All
elections shall be revoked automatically if this Agreement is terminated. If a
Series D Holder either (i) does not submit a properly completed Election Form by
the Election Deadline, or (ii) revokes his or its Election Form prior to the
Election Deadline and does not submit a new properly executed Election Form
prior to the Election Deadline, such Company Stockholder shall not be deemed to
be an Electing Series D Holder. New Parent shall cause the Certificates
representing Company Shares described in clause (ii) of the preceding sentence
to be promptly returned without charge to the person submitting the Election
Form upon written request to that effect from the person who submitted the
Election Form.
(d) Appropriate transmittal materials (the "Letter of Transmittal") in
a form satisfactory to New Parent and the Company shall be mailed within three
(3) business days after the Effective Time to each holder of record of Company
Shares as of the Effective Time who did not previously submit such materials. A
Letter of Transmittal will be deemed properly completed only if accompanied by
Certificates or customary affidavits and indemnifications regarding the loss or
destruction of such Certificates or customary affidavits and indemnifications
regarding the loss or destruction of such Certificates representing all Company
Shares to be converted thereby.
(e) The Letter of Transmittal shall (i) specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to New Parent, (ii) be in a form and contain any
other provisions as New Parent and the Company may reasonably determine, (iii)
include a completed Investor Representation Letter in the form attached hereto
as Exhibit B, and (iv) include instructions for use in effecting the surrender
of the Certificates in exchange for the Merger Consideration. Upon the proper
surrender of the Certificates to New Parent, together with a properly completed
and duly executed Letter of Transmittal, the holder of such Certificates shall
be entitled to receive in exchange therefor (x) a Certificate representing that
number of whole shares of New Parent Common Stock that such holder has the right
to receive pursuant to Section 2.1, if any, (y) a check in the amount equal to
the cash that such holder has the right to receive pursuant to Section 2.1, if
any (including any cash in lieu of fractional shares, if any, that such holder
has the right to receive pursuant to Section 2.1(i)), and (z) a Warrant covering
the number of Warrant Shares allocable to such holder under this Agreement. As
soon as practicable following receipt of the properly completed Letter of
Transmittal and any necessary accompanying documentation, New Parent shall
distribute New Parent Common Stock, cash and Warrants, as provided herein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the Disclosure Schedule, the Company represents
and warrants to Parent, New Parent and the Merger Subsidiaries as set forth in
this Article III. All items disclosed in any one section of the Disclosure
Schedule are deemed to be disclosed for purposes of any other section of the
Disclosure Schedule contained herein. For purposes of this Agreement, the phrase
"to the knowledge of the Company" or any phrase of similar import shall be
deemed to refer to the actual knowledge of the executive officers of the
Company, as well as
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any other knowledge which such executive officers would have possessed had they
made reasonable inquiry of appropriate employees and agents of the Company with
respect to the matter in question.
3.1 Organization, Qualification and Corporate Power. The Company is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of Delaware. The Company is duly qualified
to conduct business and is in corporate and tax good standing under the laws of
each jurisdiction listed in Section 3.1 of the Disclosure Schedule, which
jurisdictions constitute the only jurisdictions in which the nature of the
Company's businesses or the ownership or leasing of its properties requires such
qualification, except where the failure to be so qualified or in good standing
would not reasonably be expected to have a Company Material Adverse Effect. The
Company has all requisite corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. The Company has provided or made available to Parent at the
Company's principal place of business complete and accurate copies of its
Certificate of Incorporation and Bylaws. The Company is not in default under or
in violation of any material provision of its Certificate of Incorporation or
Bylaws.
3.2 Capitalization.
(a) The authorized capital stock of the Company consists of (i)
10,000,000 Common Shares, of which, as of the date of this Agreement, 97,200
shares were issued and outstanding and no shares were held in the treasury of
the Company, and (ii) 4,000,000 Preferred Shares, of which (A) 129,643 shares
have been designated as Series A-1 Nonvoting Convertible Preferred Stock, all of
which, as of the date of this Agreement, were issued and outstanding, (B)
758,850 shares have been designated as Series B Convertible Preferred Stock, all
of which as of the date of this Agreement, were issued and outstanding, (C)
1,060,000 shares have been designated as Series C Convertible Preferred Stock,
all of which, as of the date of this Agreement, were issued and outstanding, and
(D) 2,000,000 shares have been designated as Series D Convertible Stock, all of
which, as of the date of this Agreement, were issued and outstanding.
(b) Section 3.2 of the Disclosure Schedule sets forth a complete and
accurate list, as of the date of the Agreement, of the holders of capital stock
of the Company, showing the number of shares of capital stock, and the class or
series of such shares, held by each stockholder and (for shares other than
Common Stock) the number of Common Shares (if any) into which such shares are
convertible. No Common Shares are subject to repurchase under any stock
restriction agreement. All of the issued and outstanding shares of capital stock
of the Company have been duly authorized and validly issued and are fully paid
and nonassessable. All of the issued and outstanding shares of capital stock of
the Company have been offered, issued and sold by the Company in compliance with
all applicable federal and state securities laws.
(c) Section 3.2 of the Disclosure Schedule sets forth a complete and
accurate list, as of the date of this Agreement of: (i) all Company Stock Plans,
indicating for each Company Stock Plan the number of Common Shares issued to
date under such Plan, the number of Common Shares subject to outstanding options
under such Plan and the number of Common Shares reserved for future issuance
under such Plan; and (ii) all holders of outstanding Options,
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indicating with respect to each Option the Company Stock Plan under which it was
granted, the number of Common Shares subject to such Option, the exercise price,
the date of grant, and the vesting schedule (including any acceleration
provisions with respect thereto). The Company has provided or made available to
Parent at the Company's principal place of business complete and accurate copies
of all Company Stock Plans and forms of all stock option agreements evidencing
Options. All of the shares of capital stock of the Company subject to Options
will be, upon issuance pursuant to the exercise of such instruments, duly
authorized, validly issued, fully paid and nonassessable. The Company has no
outstanding warrants.
(d) Except as set forth in the Certificate of Incorporation of the
Company, this Section 3.2 or in Section 3.2 of the Disclosure Schedule, (i) no
subscription, warrant, option, convertible security or other right (contingent
or otherwise) to purchase or acquire any shares of capital stock of the Company
is authorized or outstanding, (ii) the Company has no obligation (contingent or
otherwise) to issue any subscription, warrant, option, convertible security or
other such right, or to issue or distribute to holders of any shares of its
capital stock any evidences of indebtedness or assets of the Company, (iii) the
Company has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any shares of its capital stock or any interest therein or to
pay any dividend or to make any other distribution in respect thereof, and (iv)
there are no outstanding or authorized stock appreciation, phantom stock or
similar rights with respect to the Company.
(e) Except as set forth in Section 3.2 of the Disclosure Schedule,
there is no agreement, written or oral, between the Company and any holder of
its securities, relating to the sale or transfer (including agreements relating
to rights of first refusal, co-sale rights or "drag-along" rights), registration
under the Securities Act, or voting, of the capital stock of the Company.
3.3 Authorization of Transaction. The Company has all requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery by the Company of this Agreement and,
subject to obtaining the Requisite Stockholder Approval, the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Company. Without
limiting the generality of the foregoing, the Board of Directors of the Company,
at a meeting duly called and held, by the affirmative vote of the directors (i)
determined that as of the date of this Agreement, the Company Merger is fair and
in the best interests of the Company and its stockholders, (ii) adopted this
Agreement in accordance with the provisions of the Delaware General Corporation
Law, and (iii) directed that, as of the date of this Agreement, this Agreement
and the Company Merger be submitted to the stockholders of the Company for their
adoption and approval and as of the date of this Agreement, resolved to
recommend that the stockholders of the Company vote in favor of the adoption of
this Agreement and the approval of the Company Merger. This Agreement has been
duly and validly executed and delivered by the Company and constitutes a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except to the extent that enforcement of the rights
and remedies created thereby is subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general application
affecting the rights and remedies of creditors and to general principles of
equity (regardless of whether enforceability is considered in a proceeding in
equity or at law).
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3.4 Noncontravention. Subject to the filing of the Certificate of Merger
with respect to the Company Merger as required by the Delaware General
Corporation Law, except as set forth in Section 3.4 of the Disclosure Schedule,
neither the execution and delivery by the Company of this Agreement, nor the
consummation by the Company of the transactions contemplated hereby, will (a)
conflict with or violate any provision of the Certificate of Incorporation or
Bylaws of the Company, (b) require on the part of the Company any notice to or
filing with, or any permit, authorization, consent or approval of, any
Governmental Entity, (c) conflict with, result in a breach of, constitute (with
or without due notice or lapse of time or both) a default under, result in the
acceleration of obligations under, create in any party the right to terminate,
modify or cancel, or require any notice, consent or waiver under, any contract
or instrument to which the Company is a party or by which the Company is bound
or to which any of its assets is subject, (d) result in the imposition of any
material Security Interest upon any assets of the Company or (e) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of its properties or assets.
3.5 Subsidiaries. The Company has no Subsidiaries and does not, directly or
indirectly, own any capital stock, equity interest or investment in or control,
directly or indirectly, any other corporation, association or business entity.
3.6 Financial Statements. The financial statements set forth in Section 3.6
of the Disclosure Schedule (the "Unaudited Financial Statements") have been
prepared in accordance with GAAP, fairly present the consolidated financial
condition and results of operations of the Company as of the date thereof in all
material respects and for the period referred to therein, and are consistent
with the books and records of the Company, provided, however, that the Unaudited
Financial Statements contain only a balance sheet and income statement and do
not contain a statement of cash flows, statement of changes in stockholder or
equity or footnotes. Section 5.4 contains provisions that affect this
representation which become effective upon the delivery of the Financial
Statements pursuant to Section 5.18.
3.7 Absence of Certain Changes. Except as set forth in Section 3.7 of the
Disclosure Schedule, since the Most Recent Balance Sheet Date, (a) there has
occurred no event or development which, individually or in the aggregate, has
had, or would reasonably be expected to have, a Company Material Adverse Effect,
and (b) the Company has not taken any of the actions set forth in paragraphs (a)
through (m) of Section 5.4.
3.8 Undisclosed Liabilities. To the Company's knowledge, the Company has no
liability (whether absolute or contingent, whether liquidated or unliquidated
and whether due or to become due), except for (a) liabilities shown on the Most
Recent Balance Sheet, (b) liabilities which have arisen since the Most Recent
Balance Sheet Date in the Ordinary Course of Business, (c) contractual and other
liabilities incurred in the Ordinary Course of Business which are not required
by GAAP to be reflected on a balance sheet and (d) liabilities that individually
or in the aggregate would not reasonably be likely to have a Company Material
Adverse Effect.
3.9 Tax Matters.
(a) The Company has filed on a timely basis all material Tax Returns
that it was required to file (except for Tax Returns for which the Company has
presently effective
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extensions) and all such Tax Returns were complete and accurate in all material
respects. The Company is not and has not since December 31, 1997 been a member
of a group of corporations with which it has filed (or been required to file)
consolidated, combined or unitary Tax Returns. The Company has paid on a timely
basis all material Taxes that were due and payable, except for Taxes the Company
has contested in good faith and for which the Company has established a proper
reserve on the Most Recent Balance Sheet. The unpaid Taxes of the Company for
tax periods through the Most Recent Balance Sheet Date do not materially exceed
the accruals and reserves for Taxes (excluding accruals and reserves for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the Most Recent Balance Sheet and will not materially
exceed such accruals and reserves as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of the Company
in filing its Tax Returns. Since the Most Recent Balance Sheet Date, the Company
has not incurred any liability for Taxes arising from extraordinary gains or
losses, as that term is used in GAAP, outside of the Ordinary Course of Business
consistent with past custom and practice. The Company has no actual or potential
liability for any material Tax obligation of any taxpayer (including any
affiliated group of corporations or other entities that included the Company
during a prior period) other than the Company under Treasury Regulation 1.1502-6
(or any similar provision of federal, state, local or foreign law), or as a
transferee or successor, by contract or otherwise. All material Taxes that the
Company is or was required by law to withhold or collect have been duly withheld
or collected and, to the extent required, have been paid to the proper
Governmental Entity, except for those Taxes the Company has contested in good
faith and for which the Company has established a proper reserve on the Most
Recent Balance Sheet. The Company has complied in all material respects with all
information reporting and the backup withholding requirements including
maintenance of the required records with respect thereto in connection with
amounts paid to any employee, independent contractor, creditor or other third
party.
(b) The Company has provided or made available to Parent at the
Company's principal place of business complete and accurate copies of all
federal income Tax Returns, examination reports and statements of deficiencies
assessed against or agreed to by the Company since December 31, 1997. The
federal income Tax Returns of the Company have been audited by the Internal
Revenue Service or are closed by the applicable statute of limitations for all
taxable years through December 31, 1997. The Company has not received written
notice of an examination or audit of any Tax Return of the Company by any
Governmental Entity and, to the knowledge of the Company, no such examination or
audit is threatened or contemplated. The Company has not been informed by any
jurisdiction that the jurisdiction believes that the Company was required to
file any Tax Return that was not filed. The Company has not waived any statute
of limitations with respect to Taxes or agreed to an extension of time with
respect to a Tax assessment or deficiency.
(c) The Company (i) is not a "consenting corporation" within the
meaning of Section 341(f) of the Code, and none of the assets of the Company is
subject to an election under Section 341(f) of the Code; and (ii) has not made
any payment, is not obligated to make any payments and is not a party to any
agreement that could obligate it to make any payments that may be treated as an
"excess parachute payment" under Section 280G of the Code.
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(d) To the Company's knowledge, there is no basis for the assertion of
any claim relating or attributable to Taxes, which, if adversely determined,
would result in any Security Interest on the assets of the Company that could
reasonably be expected to have a Company Material Adverse Effect.
(e) The Company has not participated in or cooperated with, nor will
it, prior to the Closing Date, participate in or cooperate with, an
international boycott within the meaning of Section 999 of the Code.
(f) The Company has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Code Section 6662.
(g) The Company has not distributed stock of another corporation nor
has its stock been distributed by another corporation in a transaction that
would have purported or intended to be governed in whole or in part by Section
355 or Section 361 of the Code.
3.10 Assets. Except as disclosed in Section 3.10 of the Disclosure Schedule,
the Company is the true and lawful owner, and has good title to, all of the
assets (tangible or intangible) purported to be owned by the Company as reported
on the Most Recent Balance Sheet, free and clear of all Security Interests. The
Company owns or leases all tangible assets sufficient for the conduct of its
businesses as presently conducted. Each such tangible asset is free from
material defects, has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear and
tear) and is suitable for the purposes for which it presently is used.
3.11 Owned Real Property. Section 3.11 of the Disclosure Schedule lists the
property address of all Owned Real Property. With respect to each piece of Owned
Real Property, except as set forth in Section 3.11 of the Disclosure Schedule:
(a) the Company has good and clear record and marketable title to such
Owned Real Property, free and clear of any Security Interest, easement,
environmental lien, environmental use restriction, covenant or other
restriction, except for recorded easements, covenants and other
non-environmental restrictions which do not impair the uses, occupancy or value
of such Owned Real Property for its present uses;
(b) there are no (i) pending or, to the knowledge of the Company,
threatened condemnation proceedings relating to such Owned Real Property or (ii)
pending or, to the knowledge of the Company, threatened litigation or
administrative actions relating to such Owned Real Property;
(c) there are no leases, subleases, licenses or agreements, written or
oral, granting to any party or parties (other than the Company) the right of use
or occupancy of any portion of such Owned Real Property;
(d) there are no outstanding options or rights of first refusal to
purchase such Owned Real Property, or any portion thereof or interest therein;
and
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(e) the Company has received no notice of, and to the knowledge of the
Company, there is no proposed or pending proceeding to change or redefine the
zoning classification of all or any portion of such Owned Real Property.
3.12 Real Property Leases. Section 3.12 of the Disclosure Schedule lists all
Leases and lists the term of such Lease, any extension and expansion options,
and the rent payable thereunder. The Company has provided or made available to
Parent at the Company's principal place of business complete and accurate copies
of the Leases. With respect to each Lease:
(a) such Lease is legal, valid, binding, enforceable (except to the
extent that enforcement of the rights and remedies created thereby is subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws of
general application affecting the rights and remedies of creditors and to
general principles of equity (regardless of whether enforceability is considered
in a proceeding in equity or at law)) and in full force and effect;
(b) neither the Company nor, to the knowledge of the Company, any other
party, is in breach or violation of, or default under, any such Lease, and to
the knowledge of the Company, no event has occurred, is pending or, to the
knowledge of the Company, is threatened, which, after the giving of notice, with
lapse of time, or otherwise, would constitute a breach or default by the Company
or, to the knowledge of the Company, any other party under such Lease;
3.13 Intellectual Property.
(a) Section 3.13(a) of the Disclosure Schedule lists (i) each material
patent, patent application, copyright registration or application therefor, mask
work registration or application therefor, and trademark, service xxxx and
domain name registration or application therefor of the Company and (ii) each
material Customer Deliverable of the Company.
(b) The Company owns or has the right to use all Intellectual Property
necessary (i) to use, manufacture, have manufactured, market and distribute the
Customer Deliverables and (ii) to operate the Internal Systems. Each material
item of Company Intellectual Property will be owned or available for use by the
Company immediately following the Closing on substantially identical terms and
conditions as it was immediately prior to the Closing. The Company has taken
reasonable measures to protect the proprietary nature of each material item of
Company Intellectual Property, and to maintain in confidence all material trade
secrets and confidential information, that it owns or uses. No other person or
entity has any rights to any of the Company Intellectual Property owned by the
Company (except pursuant to agreements or licenses specified in Section 3.13(d)
of the Disclosure Schedule), and, to the knowledge of the Company, no other
person or entity is infringing, violating or misappropriating any of the Company
Intellectual Property.
(c) To the knowledge of the Company, none of the Customer Deliverables,
or the marketing, distribution, provision or use thereof, infringes or violates,
or constitutes a misappropriation of, any Intellectual Property rights of any
person or entity. To the knowledge of the Company, none of the Internal Systems,
or the use thereof, infringes or violates, or constitutes a misappropriation of,
any Intellectual Property rights of any person or entity. Section 3.13(c) of the
Disclosure Schedule lists any written complaint, claim, notice or threat
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received by the Company in the last three (3) years alleging any such
infringement, violation or misappropriation; and the Company has provided or
made available to Parent at the Company's principal place of business complete
and accurate copies of all written documentation in the possession of the
Company relating to any such complaint, claim, notice or threat. The Company has
provided or made available to Parent at the Company's principal place of
business complete and accurate copies of all written documentation in the
Company's possession relating to material claims or disputes known to the
Company concerning any Company Intellectual Property.
(d) Section 3.13(d) of the Disclosure Schedule identifies each license
or other agreement pursuant to which the Company has licensed, distributed or
otherwise granted any rights to any third party with respect to, any Company
Intellectual Property. Except as described in Section 3.13(d) of the Disclosure
Schedule, the Company has not agreed to indemnify any person or entity against
any infringement, violation or misappropriation of any Intellectual Property
rights with respect to any Customer Deliverables.
(e) Section 3.13(e) of the Disclosure Schedule identifies each material
item of Company Intellectual Property that is owned by a party other than the
Company, and the license or agreement pursuant to which the Company uses it
(excluding off-the-shelf software programs licensed by the Company pursuant to
"shrink wrap" licenses).
(f) All of the material copyrightable materials incorporated in or
bundled with the Customer Deliverables have been created by employees of the
Company within the scope of their employment by the Company or by independent
contractors of the Company who have executed agreements expressly assigning all
right, title and interest in such copyrightable materials to the Company. No
portion of such copyrightable materials was jointly developed with any third
party.
(g) To the knowledge of the Company, the Customer Deliverables and the
Internal Systems are free from significant defects or programming errors and
conform in all material respects to the written documentation and specifications
therefor.
3.14 Contracts.
(a) Section 3.14 of the Disclosure Schedule lists the following
agreements (written or oral) to which the Company is a party as of the date of
this Agreement:
(i) any agreement (or group of related agreements) involving more
than $50,000 for the lease of personal property from or to third parties;
(ii) any agreement (or group of related agreements) in which the
Company has granted manufacturing rights, "most favored nation" pricing
provisions or marketing or distribution rights relating to any products or
territory or has agreed to purchase a minimum quantity of goods or services or
has agreed to purchase goods or services exclusively from a certain party;
(iii) any agreement concerning the establishment or operation of a
partnership, joint venture or limited liability company;
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(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed or guaranteed (or may create, incur, assume or
guarantee) indebtedness (including capitalized lease obligations) involving more
than $50,000 or under which it has imposed (or may impose) a Security Interest
on any of its assets, tangible or intangible;
(v) any agreement for the disposition of any significant portion
of the assets or business of the Company (other than sales of products in the
Ordinary Course of Business) or any agreement for the acquisition of the assets
or business of any other entity (other than purchases of inventory or components
in the Ordinary Course of Business);
(vi) any agreement concerning confidentiality or noncompetition;
(vii) any employment or consulting agreement;
(viii) any agreement under which the consequences of a default or
termination would reasonably be expected to have a Company Material Adverse
Effect;
(ix) any agreement which contains any provisions requiring the
Company to indemnify any other party (excluding indemnities contained in
agreements for the purchase, sale or license of products or provision of
services or the agreements entered into in the Ordinary Course of Business);
(x) any agreement involving any current or former officer,
director or stockholder of the Company or an Affiliate thereof; and
(xi) any other agreement (or group of related agreements) either
involving more than $250,000 or not entered into in the Ordinary Course of
Business.
(b) The Company has provided or made available to Parent at the
Company's principal place of business a complete and accurate copy of each
agreement listed in Section 3.14 of the Disclosure Schedule. With respect to
each agreement so listed: (i) the agreement is legal, valid, binding and
enforceable (except to the extent that enforcement of the rights and remedies
created thereby is subject to bankruptcy, insolvency, reorganization, moratorium
and other similar laws of general application affecting the rights and remedies
of creditors and to general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law)) and in full
force and effect; and (ii) neither the Company nor, to the knowledge of the
Company, any other party, is in breach or violation of, or default under, any
such agreement, and no event has occurred, is pending or, to the knowledge of
the Company, is threatened, which, after the giving of notice, with lapse of
time, or otherwise, would constitute a breach or default by the Company or, to
the knowledge of the Company, any other party under such agreement.
3.15 Insurance. Section 3.15 of the Disclosure Schedule lists each insurance
policy (including fire, theft, casualty, comprehensive general liability,
workers compensation, business interruption, environmental, product liability
and automobile insurance policies and bond and surety arrangements) to which the
Company is a party, all of which are in full force and effect.
-17-
3.16 Litigation. There is no Legal Proceeding which is pending or has been
threatened in writing against the Company which (a) seeks either damages in
excess of $50,000 or equitable relief or (b) in any manner challenges or seeks
to prevent, enjoin, alter or delay the transactions contemplated by this
Agreement. There are no judgments, orders or decrees outstanding against the
Company.
3.17 Warranties. No product or service manufactured, sold, leased, licensed
or delivered by the Company is subject to any guaranty, warranty, right of
return, right of credit or other indemnity other than (i) the applicable
standard terms and conditions of sale or lease of the Company, which are set
forth in Section 3.17 of the Disclosure Schedule and (ii) manufacturers'
warranties for which the Company has no liability. Section 3.17 of the
Disclosure Schedule sets forth the estimated aggregate expenses incurred by the
Company in fulfilling its obligations under its guaranty, warranty, right of
return and indemnity provisions during the fiscal year covered by the Financial
Statements; and the Company does not anticipate that such expenses will
significantly increase as a percentage of sales in the future.
3.18 Employees.
(a) Section 3.18 of the Disclosure Schedule contains a list of all
employees of the Company whose annual rate of compensation exceeds $50,000 per
year, along with the position and the annual rate of compensation of each such
person. Each current or past employee of the Company has entered into a
confidentiality/assignment of inventions agreement with the Company, a copy or
form of which has previously been provided or made available to Parent at its
principal place of business. Section 3.18 of the Disclosure Schedule contains a
list of all employees of the Company who are a party to a non-competition
agreement with the Company; copies of such agreements have previously been
provided to or made available to Parent at the Company's principal place of
business. All of the agreements referenced in the two preceding sentences will
continue to be legal, valid, binding and enforceable (except to the extent that
enforcement of the rights and remedies created thereby is subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws of general
application affecting the rights and remedies of creditors and to general
principles of equity (regardless of whether enforceability is considered in a
proceeding in equity or at law)) and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect
immediately prior to the Closing.
(b) The Company is not a party to or bound by any collective bargaining
agreement, nor has it experienced any strikes, grievances, claims of unfair
labor practices or other collective bargaining disputes. The Company has no
knowledge of any organizational effort made or threatened, either currently or
within the past two years, by or on behalf of any labor union with respect to
employees of the Company.
3.19 Employee Benefits.
(a) Section 3.19(a) of the Disclosure Schedule contains a complete and
accurate list of all Company Plans. Complete and accurate copies of (i) all
Company Plans which have been reduced to writing, (ii) written summaries of all
unwritten Company Plans, (iii) all related trust agreements, insurance contracts
and summary plan descriptions, and (iv) all
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annual reports filed on IRS Form 5500, 5500C or 5500R and (for all funded plans)
all plan financial statements for the last three plan years for each Company
Plan, have been provided or made available to Parent at the Company's principal
place of business.
(b) Each Company Plan has been administered in all material
respects in accordance with its terms and each of the Company and the ERISA
Affiliates of the Company has in all material respects met its obligations with
respect to each Company Plan and has made all required contributions thereto.
Each Company Plan and, with respect to such Company Plan, the Company and each
ERISA Affiliate of the Company are in compliance in all material respects with
the provisions of ERISA and the Code and the regulations thereunder (including
Section 4980 B of the Code, Subtitle K, Chapter 100 of the Code and Sections 601
through 608 and Section 701 et seq. of ERISA) currently applicable to such
Company Plan. All filings and reports as to each Company Plan required to have
been submitted to the Internal Revenue Service or to the United States
Department of Labor have been duly submitted. No Company Plan has assets that
include securities issued by the Company or any ERISA Affiliate of the Company.
(c) There are no Legal Proceedings (except claims for benefits
payable in the normal operation of the Company Plans and proceedings with
respect to qualified domestic relations orders) against or involving any Company
Plan or asserting any rights or claims to benefits under any Company Plan that
could give rise to any material liability.
(d) All the Company Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Company Plans are qualified and
the plans and the trusts related thereto are exempt from federal income taxes
under Sections 401(a) and 501(a), respectively, of the Code, no such
determination letter has been revoked and to the Company's knowledge, revocation
has not been threatened, and no such Company Plan has been amended since the
date of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would adversely affect its
qualification.
(e) Neither the Company nor any ERISA Affiliate of the Company
has ever maintained an Employee Benefit Plan subject to Section 412 of the Code
or Title IV of ERISA.
(f) At no time has the Company or any ERISA Affiliate of the
Company been obligated to contribute to any "multiemployer plan" (as defined in
Section 4001(a)(3) of ERISA).
(g) No act or omission has occurred and no condition exists
with respect to any Company Plan that would subject the Company or any ERISA
Affiliate of the Company to (i) any material fine, penalty, tax or liability of
any kind imposed under ERISA or the Code or (ii) any contractual indemnification
or contribution obligation protecting any fiduciary, insurer or service provider
with respect to any Company Plan.
(h) No Company Plan is funded by, associated with or related to
a "voluntary employee's beneficiary association" within the meaning of Section
501(c)(9) of the Code.
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(i) Except for such limitations as are imposed by ERISA, the
Code or other applicable law (including regulations) each Company Plan is
amendable and terminable unilaterally by the Company at any time without
liability or expense to the Company or such Company Plan as a result thereof
(other than for benefits accrued through the date of termination or amendment
and reasonable administrative expenses related thereto) and no Company Plan,
plan documentation or agreement, summary plan description or other written
communication distributed generally to employees by its terms prohibits the
Company from amending or terminating any such Company Plan.
(j) Section 3.19(j) of the Disclosure Schedule discloses each:
(i) agreement with any stockholder, director, executive officer or other key
employee of the Company (A) the benefits of which are contingent, or the terms
of which are altered, upon the occurrence of a transaction involving the Company
of the nature of any of the transactions contemplated by this Agreement, (B)
providing any term of employment or compensation guarantee or (C) providing
severance benefits or other benefits after the termination of employment of such
director, executive officer or key employee and (ii) agreement or plan binding
the Company, including any stock option plan, stock appreciation right plan,
restricted stock plan, stock purchase plan, severance benefit plan or Company
Plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.
(k) Section 3.19(k) of the Disclosure Schedule sets forth the
policy of the Company with respect to accrued vacation, accrued sick time and
earned time off.
3.20 Environmental Matters.
(a) The Company has complied with all applicable Environmental
Laws in all material respects. There is no pending or, to the knowledge of the
Company, threatened civil or criminal litigation, written notice of violation,
formal administrative proceeding, or investigation, inquiry or information
request by any Governmental Entity, relating to any Environmental Law involving
the Company.
(b) The Company has no material liabilities or obligations
arising from the release of any Materials of Environmental Concern by the
Company into the environment.
(c) The Company is not a party to or bound by any court order,
administrative order, consent order or other agreement between the Company and
any Governmental Entity entered into in connection with any legal obligation or
liability arising under any Environmental Law.
(d) A complete and accurate copy of all environmental reports,
investigations and audits relating to premises currently or previously owned or
operated by the Company (whether conducted by or on behalf of the Company or a
third party, and whether done at the initiative of the Company or directed by a
Governmental Entity or other third party) which the Company has possession of or
access to have been provided or made available to Parent at the Company's
principal place of business.
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(e) The Company is not aware of any material environmental
liability of any solid or hazardous waste transporter or treatment, storage or
disposal facility that has been used by the Company.
3.21 Legal Compliance. The Company is currently conducting, and has at
all times since December 31, 2000 conducted, its business in compliance with
each applicable law (including rules and regulations thereunder) of any federal,
state, local or foreign government, or any Governmental Entity, except for any
violations or defaults that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Company Material Adverse Effect. The
Company has not received any notice or communication from any Governmental
Entity alleging noncompliance with any applicable law, rule or regulation.
3.22 Certain Business Relationships With Affiliates. No Affiliate of
the Company (a) owns any property or right, tangible or intangible, which is
used in the business of the Company, (b) to the knowledge of the Company, has
any claim or cause of action against the Company, or (c) owes any money to, or
is owed any money by, the Company. Any transactions or relationships between the
Company and any Affiliate thereof which occurred or have existed since the
beginning of the time period covered by the Financial Statements are described
in the Disclosure Schedule.
3.23 Customers and Suppliers. Section 3.23 of the Disclosure Schedule
sets forth a list of (a) each customer that accounted for more than 5% of the
consolidated revenues of the Company during the last full fiscal year or the
interim period through the Most Recent Balance Sheet Date and the amount of
revenues accounted for by such customer during each such period and (b) each
supplier that is the sole supplier of any significant product or service to the
Company. No such customer or supplier has indicated within the past year that it
will stop, or decrease the rate of, buying products or supplying products, as
applicable, to the Company.
3.24 Permits. The Company has all material Permits that are required
for the 0Company to conduct its business as presently conducted or as proposed
to be conducted.
3.25 Brokers' Fees. The Company has no any liability or obligation to
pay any fees or commissions to any broker, financial advisor, finder or agent
with respect to the transactions contemplated by this Agreement.
3.26 Books and Records. The minute books and other similar records of
the Company contain materially complete and accurate records of all actions
taken at any meetings of the Company's stockholders, Board of Directors or any
committee thereof and of all written consents executed in lieu of the holding of
any such meeting. The books and records of the Company have been maintained in
accordance with good business and bookkeeping practices.
3.27 Government Contracts.
(a) The Company has not been suspended or debarred from bidding
on contracts or subcontracts with any Governmental Entity; to the Company's
knowledge, no such suspension or debarment has been threatened or initiated; and
to the Company's knowledge, the consummation of the transactions contemplated by
this Agreement will not result in any such suspension or debarment of the
Company or the New Parent (assuming that no such suspension
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or debarment will result solely from the identity of the New Parent). The
Company has not been nor is it now being audited or investigated by the United
States Government Accounting Office, the United States Department of Defense or
any of its agencies, the Defense Contract Audit Agency, the contracting or
auditing function of any Governmental Entity with which it is contracting, the
United States Department of Justice, the Inspector General of the United States
Governmental Entity, or any prime contractor with a Governmental Entity; nor, to
the knowledge of the Company, has any such audit or investigation been
threatened. To the knowledge of the Company, there is no valid basis for (i) the
suspension or debarment of the Company from bidding on contracts or subcontracts
with any Governmental Entity or (ii) any claim (including any claim for return
of funds to the Government) pursuant to an audit or investigation by any of the
entities named in the foregoing sentence. The Company has no agreements,
contracts or commitments which require it to obtain or maintain a security
clearance with any Governmental Entity.
(b) To the knowledge of the Company, no basis exists for any of
the following with respect to any of its contracts or subcontracts with any
Governmental Entity: (i) a Termination for Default (as provided in 48 C.F.R.
Ch.1 ss.52.249-8, 52.249-9 or similar sections), (ii) a Termination for
Convenience (as provided in 48 C.F.R. Ch.1 ss.52.241-1, 52.249-2 or similar
sections), or a Stop Work Order (as provided in 48 C.F.R. Ch.1 ss.52.212-13 or
similar sections); and the Company has no reason to believe that funding may not
be provided under any contract or subcontract with any Governmental Entity in
the upcoming federal fiscal year.
3.28 Disclosure. No representation or warranty by the Company contained
in this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered or to be delivered by
or on behalf of the Company pursuant to this Agreement, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
The Company has provided or made available to Parent at the Company's principal
place of business all material information relating to the business of the
Company or the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT, NEW PARENT AND THE MERGER SUBSIDIARIES
Except as disclosed in the Parent Disclosure Schedule or the Annual
Report of Parent on Form 10-K for the year ended December 31, 2002 (including
all information incorporated by reference therein), the Quarterly Report of
Parent for the quarter ended March 31, 2003 and any Current Report on Form 8-K
filed by Parent after March 31, 2003 but before the date hereof (the "2003
Reports"), each of Parent, New Parent, Merger Sub I and Merger Sub II represents
and warrants to the Company as set forth in this Article IV. All items disclosed
in any one section of the Parent Disclosure Schedule or in the 2003 Reports are
deemed to be disclosed for purposes of any other section of this Article IV. For
purposes of this Agreement, the phrase "to the knowledge of Parent" or any
phrase of similar import shall be deemed to refer to the actual knowledge of the
executive officers of Parent, as well as any other knowledge which such
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executive officers would have possessed had they made reasonable inquiry of
appropriate employees and agents of Parent with respect to the matter in
question.
4.1 Organization, Qualification and Corporate Power. Each of Parent,
New Parent, Merger Sub I and Merger Sub II is a corporation duly organized,
validly existing and in corporate and tax good standing under the laws of the
State of Delaware. Each of Parent, New Parent, Merger Sub I and Merger Sub II is
duly qualified to conduct business and is in corporate and tax good standing
under the laws of each jurisdiction listed in Section 4.1 of Parent Disclosure
Schedule, which jurisdictions constitute the only jurisdictions in which the
nature of such corporation's businesses or the ownership or leasing of its
properties requires such qualification, except where the failure to be so
qualified or in good standing would not reasonably be expected to have a Parent
Material Adverse Effect. Each of Parent, New Parent, Merger Sub I and Merger Sub
II has all requisite corporate power and authority to carry on the businesses in
which it is engaged and to own and use the properties owned and used by it. Each
of Parent, New Parent, Merger Sub I and Merger Sub II has made available to the
Company complete and accurate copies of its respective Certificate of
Incorporation and Bylaws. None of Parent, New Parent, Merger Sub I and Merger
Sub II is in default under or in violation of any material provision of its
Certificate of Incorporation or Bylaws. Parent has no Subsidiaries other than
the Merger Subsidiaries and Technology Drive LLC, a Connecticut limited
liability company. The Merger Subsidiaries and Technology Drive LLC are referred
to collectively herein as the "Parent Subsidiaries."
4.2 Capitalization.
(a) The authorized capital stock of Parent consists of (i)
100,000,000 shares of Parent Common Stock, of which 33,477,318 shares were
issued and outstanding as of May 2, 2003, and (ii) 5,000,000 shares of Preferred
Stock, $.01 par value per share, of which no shares are issued or outstanding.
The rights and privileges of each class of Parent's capital stock are set forth
in Parent's Certificate of Incorporation. All of the issued and outstanding
shares of Parent Common Stock have been duly authorized and validly issued and
are fully paid and nonassessable and have been issued or sold by Parent in
compliance with all applicable federal and state securities laws.
(b) The authorized capital stock of New Parent consists of (i)
3,000 shares of New Parent Common Stock, of which 1,000 shares were issued and
outstanding as of the date of this Agreement. The rights and privileges of each
class of New Parent's capital stock are set forth in New Parent's Certificate of
Incorporation. All of the issued and outstanding shares of New Parent Common
Stock have been duly authorized and validly issued and are fully paid and
nonassessable and have been issued or sold by New Parent in compliance with all
applicable federal and state securities laws. All of the Merger Shares will be,
when issued on the terms and conditions of this Agreement, duly authorized,
validly issued, fully paid and nonassessable and not subject to or issued in
violation of any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision of
New Parent's Certificate of Incorporation or Bylaws or any agreement to which
New Parent is a party or is otherwise bound or in violation of any applicable
federal or state securities laws.
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(c) Section 4.2 of the Parent Disclosure Schedule sets forth a
complete and accurate list, as of the date of this Agreement of: all Parent
Stock Plans, indicating for each Parent Stock Plan the number of shares of
Parent Common Stock issued to date under such Parent Stock Plan, the number of
shares of Parent Common Stock subject to outstanding options under such Plan and
the number of shares of Parent Common Stock reserved for future issuance under
such Plan. All of the shares of capital stock of Parent subject to options will
be, upon issuance pursuant to the exercise of such instruments, duly authorized,
validly issued, fully paid and nonassessable.
(d) Except for the Dividend referred to in Section 5.5(a), or
as set forth in the Certificate of Incorporation of Parent, the 2003 Reports,
this Section 4.2 or in Section 4.2 of the Parent Disclosure Schedule, (i) no
subscription, warrant, option, convertible security or other right (contingent
or otherwise) to purchase or acquire from Parent or any Parent Subsidiary any
shares of capital stock of Parent or any Parent Subsidiary is authorized or
outstanding, (ii) neither Parent nor any Parent Subsidiary has any obligation
(contingent or otherwise) to issue any subscription, warrant, option,
convertible security or other such right, or to issue or distribute to holders
of any shares of its capital stock any evidences of indebtedness or assets of
Parent or any Parent Subsidiary, (iii) neither Parent nor any Parent Subsidiary
has any obligation (contingent or otherwise) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest therein or to pay any
dividend or to make any other distribution in respect thereof, and (iv) there
are no outstanding or authorized stock appreciation, phantom stock or similar
rights with respect to Parent or any Parent Subsidiary. Parent owns 100% of the
equity interests in each Parent Subsidiary.
(e) Except as set forth in the 2003 Reports or Section 4.2 of
the Parent Disclosure Schedule, there is no agreement, written or oral, between
Parent or New Parent and any holder of its securities, relating to the sale or
transfer (including agreements relating to rights of first refusal, co-sale
rights or "drag-along" rights), registration under the Securities Act, or
voting, of the capital stock of Parent or any Parent Subsidiary. Parent owns
100% of the equity interests in each Parent Subsidiary.
4.3 Authorization of Transaction. Each of Parent, New Parent, Merger
Sub I and Merger Sub II has all requisite power and authority to execute and
deliver this Agreement and (in the case of New Parent) the Warrants and the
Escrow Agreement and to perform its obligations hereunder and thereunder.
Subject to approval of the Transaction Issues by the stockholders of Parent, the
execution and delivery by Parent, New Parent, Merger Sub I and Merger Sub II of
this Agreement and (in the case of New Parent) the Warrants and the Escrow
Agreement and the consummation by Parent, New Parent, Merger Sub I and Merger
Sub II of the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action on the part of Parent, New
Parent, Merger Sub I and Merger Sub II, respectively. Without limiting the
generality of the foregoing, the Board of Directors of Parent, at a meeting duly
called and held, by the affirmative vote of the directors (i) determined that,
as of the date of this Agreement, the Mergers are fair and in the best interests
of Parent and its stockholders, (ii) adopted this Agreement in accordance with
the provisions of the Delaware General Corporation Law, and (iii) directed that,
as of the date of this Agreement, this Agreement and the Transaction Issues be
submitted to the stockholders of Parent for their adoption and approval and, as
of the date of this Agreement, resolved to recommend that the
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stockholders of Parent vote in favor of the adoption of this Agreement and the
Transaction Issues. This Agreement has been duly and validly executed and
delivered by Parent, New Parent, Merger Sub I and Merger Sub II and constitutes
a valid and binding obligation of Parent, New Parent, Merger Sub I and Merger
Sub II, enforceable against each of them in accordance with its terms, except to
the extent that enforcement of the rights and remedies created thereby is
subject to bankruptcy, insolvency, reorganization, moratorium and other similar
laws of general application affecting the rights and remedies of creditors and
to general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
4.4 Noncontravention. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
Exchange Act and the filing of the Certificates of Merger as required by the
Delaware General Corporation Law, neither the execution and delivery by Parent,
New Parent, Merger Sub I or Merger Sub II of this Agreement or (in the case of
New Parent) the Warrants or the Escrow Agreement, nor the consummation by
Parent, New Parent, Merger Sub I or Merger Sub II of the transactions
contemplated hereby or thereby, will (a) conflict with or violate any provision
of the charter or Bylaws of Parent, New Parent, Merger Sub I or Merger Sub II,
(b) require on the part of Parent, New Parent, Merger Sub I or Merger Sub II any
notice to or filing with, or any permit, authorization, consent or approval of,
any Governmental Entity, (c) conflict with, result in breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of obligations under, create in any party any right to
terminate, modify or cancel, or require any notice, consent or waiver under, any
contract or instrument to which Parent, New Parent, Merger Sub I or Merger Sub
II is a party or by which either is bound or to which any of their respective
assets are subject, (d) result in the imposition of any material Security
Interest upon any assets of Parent or New Parent, or (e) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Parent, New
Parent, Merger Sub I or Merger Sub II or any of their properties or assets.
4.5 Reports and Financial Statements. Parent has previously furnished or
made available to the Company complete and accurate copies, as amended or
supplemented, of the Parent Reports. The Parent Reports constitute all of the
documents required to be filed by Parent with the SEC from December 31, 1999
through the date of this Agreement. The Parent Reports complied in all material
respects with the requirements of the Exchange Act and/or the Securities Act, as
the case may be and the rules and regulations thereunder applicable to such
Parent Report when filed. As of their respective dates, the Parent Reports did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
audited financial statements and unaudited interim financial statements of
Parent included in the Parent Reports (i) complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto when filed, (ii) were prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby (except as may be indicated therein or in the notes thereto, and
in the case of quarterly financial statements, as permitted by Form 10-Q under
the Exchange Act), and (iii) fairly present the consolidated financial
condition, results of operations and cash flows of Parent as of the respective
dates thereof and for the periods referred to therein.
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4.6 Interim Operations of the Merger Subsidiaries. Each of the Merger
Subsidiaries was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement and has engaged in no business activities other
than as contemplated by this Agreement.
4.7 Absence of Certain Changes. Except as set forth in Section 4.7 of the
Parent Disclosure Schedule, since the Most Recent Balance Sheet Date, (a) there
has occurred no event or development which, individually or in the aggregate,
has had, or would reasonably be expected to have, a Parent Material Adverse
Effect, and (b) Parent has not taken any of the actions set forth in paragraphs
(a) through (d) of Section 5.5.
4.8 Assets. Except as set forth in Section 4.8 of the Parent Disclosure
Schedule, Parent is the true and lawful owner, and has good title to, all of the
assets (tangible or intangible) purported to be owned by Parent as reported on
the Most Recent Balance Sheet, free and clear of all Security Interests. Parent
owns or leases all tangible assets sufficient for the conduct of its businesses
as presently conducted. Each such tangible asset is free from material defects,
has been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear) and is suitable
for the purposes for which it presently is used.
4.9 Intellectual Property.
(a) Parent owns or has the right to use all Intellectual Property
necessary (i) to use, manufacture, have manufactured, market and distribute the
Parent Customer Deliverables and (ii) to operate the Parent Internal Systems.
Each item of the Parent Intellectual Property will be owned or available for use
by Parent immediately following the Closing on substantially identical terms and
conditions as it was immediately prior to the Closing. Parent has taken
reasonable measures to protect the proprietary nature of each material item of
Parent Intellectual Property, and to maintain in confidence all material trade
secrets and confidential information, that it owns or uses. No other person or
entity has any rights to any of the Parent Intellectual Property owned by
Parent, and, to the knowledge of Parent, no other person or entity is
infringing, violating or misappropriating any of the Parent Intellectual
Property.
(b) To the knowledge of Parent, none of the Parent Customer
Deliverables, or the marketing, distribution, provision or use thereof,
infringes or violates, or constitutes a misappropriation of, any Intellectual
Property rights of any person or entity. To the knowledge of Parent, none of the
Parent Internal Systems, or the use thereof, infringes or violates, or
constitutes a misappropriation of, any Intellectual Property rights of any
person or entity. Parent has made available to the Company any written
complaint, claim, notice or threat received by the Parent in the last three (3)
years alleging any such infringement, violation or misappropriation.
(c) Section 4.9(c) of the Parent Disclosure Schedule identifies each
license or other agreement pursuant to which Parent has licensed, distributed or
otherwise granted any rights to any third party with respect to, any Parent
Intellectual Property. Except as described in Section 4.9(c) of the Parent
Disclosure Schedule, Parent has not agreed to indemnify any person or entity
against any infringement, violation or misappropriation of any Intellectual
Property rights with respect to any Customer Deliverables.
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(d) Section 4.9(d) of the Parent Disclosure Schedule identifies each
material item of Parent Intellectual Property that is owned by a party other
than Parent, and the license or agreement pursuant to which Parent uses it
(excluding off-the-shelf software programs licensed by Parent pursuant to
"shrink wrap" licenses).
(e) All of the material copyrightable materials incorporated in or
bundled with the Parent Customer Deliverables have been created by employees of
Parent within the scope of their employment by Parent or by independent
contractors of Parent who have executed agreements expressly assigning all
right, title and interest in such copyrightable materials to Parent. No portion
of such copyrightable materials was jointly developed with any third party.
4.10 Litigation. Except as set forth in Section 4.10 of the Parent
Disclosure Schedule, there is no Legal Proceeding which is pending or has been
threatened in writing against Parent, New Parent or any Merger Subsidiary which
(a) seeks either damages in excess of $50,000 or equitable relief or (b) in any
manner challenges or seeks to prevent, enjoin, alter or delay the transactions
contemplated by this Agreement. There are no judgments, orders or decrees
outstanding against Parent, New Parent or any Merger Subsidiary.
4.11 Employee Benefits.
(a) Except as otherwise included or incorporated by reference as an
Exhibit to the 2003 Reports, Section 4.11(a) of the Parent Disclosure Schedule
contains a complete and accurate list of all Parent Plans. Complete and accurate
copies of (i) all Parent Plans which have been reduced to writing, (ii) written
summaries of all unwritten Parent Plans, (iii) all related trust agreements,
insurance contracts and summary plan descriptions, and (iv) all annual reports
filed on IRS Form 5500, 5500C or 5500R and (for all funded plans) all plan
financial statements for the last five plan years for each Parent Plan, have
been delivered to the Company.
(b) Each Parent Plan has been administered in all material respects
in accordance with its terms and each of Parent and the ERISA Affiliates has in
all material respects met its obligations with respect to each Parent Plan and
has made all required contributions thereto. Parent, each ERISA Affiliate of
Parent and each Parent Plan are in compliance in all material respects with the
currently applicable provisions of ERISA and the Code and the regulations
thereunder (including Section 4980 B of the Code, Subtitle K, Chapter 100 of the
Code and Sections 601 through 608 and Section 701 et seq. of ERISA). All filings
and reports as to each Parent Plan required to have been submitted to the
Internal Revenue Service or to the United States Department of Labor have been
duly submitted. No Parent Plan has assets that include securities issued by
Parent or any ERISA Affiliate of Parent.
(c) There are no Legal Proceedings (except claims for benefits
payable in the normal operation of Parent Plans and proceedings with respect to
qualified domestic relations orders) against or involving any Parent Plan or
asserting any rights or claims to benefits under any Parent Plan that could give
rise to any material liability.
(d) All Parent Plans that are intended to be qualified under Section
401(a) of the Code have received determination letters from the Internal Revenue
Service to the effect that such Parent Plans are qualified and the plans and the
trusts related thereto are exempt from
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federal income taxes under Sections 401(a) and 501(a), respectively, of the
Code, no such determination letter has been revoked and revocation has not been
threatened, and no such Parent Plan has been amended since the date of its most
recent determination letter or application therefor in any respect, and no act
or omission has occurred, that would adversely affect its qualification or
materially increase its cost. Each Parent Plan which is required to satisfy
Section 401(k)(3) or Section 401(m)(2) of the Code has been tested for
compliance with, and satisfies the requirements of Section 401(k)(3) and Section
401(m)(2) of the Code for each plan year ending prior to the Closing Date.
(e) Neither Parent nor any ERISA Affiliate of Parent has ever
maintained an Employee Benefit Plan subject to Section 412 of the Code or Title
IV of ERISA.
(f) At no time has Parent or any ERISA Affiliate of Parent been
obligated to contribute to any "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA).
(g) There are no unfunded obligations under any Parent Plan providing
benefits after termination of employment to any employee of Parent (or to any
beneficiary of any such employee), including but not limited to retiree health
coverage and deferred compensation, but excluding continuation of health
coverage required to be continued under Section 4980B of the Code or other
applicable law and insurance conversion privileges under state law. The assets
of each Parent Plan which is funded are reported at their fair market value on
the books and records of such Parent Plan.
(h) No act or omission has occurred and no condition exists with
respect to any Parent Plan that would subject Parent or any ERISA Affiliate of
Parent to (i) any material fine, penalty, tax or liability of any kind imposed
under ERISA or the Code or (ii) any contractual indemnification or contribution
obligation protecting any fiduciary, insurer or service provider with respect to
any Parent Plan.
(i) No Parent Plan is funded by, associated with or related to a
"voluntary employee's beneficiary association" within the meaning of Section
501(c)(9) of the Code.
(j) Each Parent Plan is amendable and terminable unilaterally by
Parent at any time without liability or expense to Parent or such Parent Plan as
a result thereof (other than for benefits accrued through the date of
termination or amendment and reasonable administrative expenses related thereto)
and no Parent Plan, plan documentation or agreement, summary plan description or
other written communication distributed generally to employees by its terms
prohibits Parent from amending or terminating any such Parent Plan.
(k) Section 4.11(k) of the Parent Disclosure Schedule discloses each:
(i) agreement with any stockholder, director, executive officer or other key
employee of Parent (A) the benefits of which are contingent, or the terms of
which are altered, upon the occurrence of a transaction involving Parent of the
nature of any of the transactions contemplated by this Agreement, (B) providing
any term of employment or compensation guarantee or (C) providing severance
benefits or other benefits after the termination of employment of such director,
executive officer or key employee; (ii) agreement, plan or arrangement under
which any person may receive payments from Parent that may be subject to the tax
imposed by Section 4999 of the
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Code or included in the determination of such person's "parachute payment" under
Section 280G of the Code; and (iii) agreement or plan binding Parent, including
any stock option plan, stock appreciation right plan, restricted stock plan,
stock purchase plan, severance benefit plan or Parent Plan, any of the benefits
of which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement.
(l) Section 4.11(l) of the Parent Disclosure Schedule sets forth the
policy of Parent with respect to accrued vacation, accrued sick time and earned
time off.
4.12 Environmental Matters.
(a) Parent and New Parent have complied with all applicable
Environmental Laws in all material respects. There is no pending or, to the
knowledge of Parent, threatened civil or criminal litigation, written notice of
violation, formal administrative proceeding, or investigation, inquiry or
information request by any Governmental Entity, relating to any Environmental
Law involving Parent or New Parent.
(b) Neither Parent nor New Parent has any material liabilities or
obligations arising from the release of any Materials of Environmental Concern
into the environment.
(c) Neither Parent nor New Parent is a party to or bound by any court
order, administrative order, consent order or other agreement with any
Governmental Entity entered into in connection with any legal obligation or
liability arising under any Environmental Law.
(d) A complete and accurate copy of all environmental reports,
investigations and audits relating to premises currently or previously owned or
operated by Parent (whether conducted by or on behalf of Parent or a third
party, and whether done at the initiative of Parent or directed by a
Governmental Entity or other third party) which Parent has possession of or
access to have been provided to the Company.
(e) Parent is not aware of any material environmental liability of
any solid or hazardous waste transporter or treatment, storage or disposal
facility that has been used by Parent.
4.13 Legal Compliance. Each of Parent and New Parent is currently
conducting, and has at all times since December 31, 2000 conducted, its business
in compliance with each applicable law (including rules and regulations
thereunder) of any federal, state, local or foreign government, or any
Governmental Entity, except for any violations or defaults that, individually or
in the aggregate, have not had and would not reasonably be expected to have a
Parent Material Adverse Effect. Neither Parent nor New Parent has received any
notice or communication from any Governmental Entity alleging noncompliance with
any applicable law, rule or regulation.
4.14 Certain Business Relationships With Affiliates. No Affiliate of Parent
(a) owns any property or right, tangible or intangible, which is used in the
business of Parent or New Parent, (b) has any claim or cause of action against
Parent or New Parent, or (c) owes any money to, or is owed any money by, Parent
or New Parent. Section 4.14 of the Parent Disclosure
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Schedule describes any material transactions or relationships between Parent or
New Parent and any Affiliate thereof which occurred or have existed since the
beginning of the time period covered by the Financial Statements.
4.15 Brokers' Fees. Neither Parent nor New Parent has any liability or
obligation to pay any fees or commissions to any broker, financial advisor,
finder or agent, other than Xxxxx, Xxxxxxxx & Xxxx, Inc., with respect to the
transactions contemplated by this Agreement.
4.16 Books and Records. The minute books and other similar records of
Parent contain complete and accurate records of all actions taken at any
meetings of Parent's stockholders, Board of Directors or any committee thereof
and of all written consents executed in lieu of the holding of any such meeting.
The books and records of Parent have been maintained in accordance with good
business and bookkeeping practices.
4.17 Investment Company. Parent is not an "investment company" or a
"company" controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
4.18 Undisclosed Liabilities. Except as disclosed on Schedule 4.18 of the
Parent Disclosure Schedule, to the Parent's knowledge, the Parent has no
liability (whether absolute or contingent, whether liquidated or unliquidated
and whether due or to become due), except for (a) liabilities shown on the
balance sheet included in Parent's Quarterly Report on Form 10-Q for the quarter
ended Xxxxx 00, 0000, (x) liabilities which have arisen since March 31, 2003 in
the Ordinary Course of Business, (c) contractual and other liabilities incurred
in the Ordinary Course of Business which are not required by GAAP to be
reflected on a balance sheet and (d) liabilities that individually or in the
aggregate would not reasonably be likely to have a Parent Material Adverse
Effect.
4.19 Warranties. No product or service manufactured, sold, leased, licensed
or delivered by the Parent is subject to any guaranty, warranty, right of
return, right of credit or other indemnity other than (i) the applicable
standard terms and conditions of sale or lease of the Parent, which are set
forth in Section 4.19 of the Parent Disclosure Schedule and (ii) manufacturers'
warranties for which the Parent has no liability. Section 4.19 of the Parent
Disclosure Schedule sets forth the aggregate expenses incurred by the Parent in
fulfilling its obligations under its guaranty, warranty, right of return and
indemnity provisions during the fiscal year and the interim period covered by
the 2003 Reports.
4.20 Disclosure. No representation or warranty by Parent contained in this
Agreement, and no statement contained in any document, certificate or other
instrument delivered or to be delivered by or on behalf of Parent pursuant to
this Agreement, contains or will contain any untrue statement of a material fact
or omits or will omit to state any material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading. Parent has made available to
Company all material information relating to the business of the Company or the
transactions contemplated by this Agreement.
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ARTICLE V
COVENANTS
5.1 Closing Efforts. Each of the Parties shall use its Reasonable Best
Efforts to take all actions and to do all things necessary, proper or advisable
to consummate the transactions contemplated by this Agreement, including using
its Reasonable Best Efforts to ensure that (i) its representations and
warranties remain true and correct in all material respects through the Closing
Date and (ii) the conditions to the obligations of the other Parties to
consummate the Merger are satisfied.
5.2 Governmental and Third Party Notices and Consents.
(a) Each Party shall use its Reasonable Best Efforts to obtain, at
its expense, all waivers, permits, consents, approvals or other authorizations
from Governmental Entities, and to effect all registrations, filings and notices
with or to Governmental Entities, as may be required for such Party to
consummate the transactions contemplated by this Agreement and to otherwise
comply with all applicable laws and regulations in connection with the
consummation of the transactions contemplated by this Agreement.
(b) The Company shall use its Reasonable Best Efforts to obtain, at
its expense, all such waivers, consents or approvals from third parties, and to
give all such notices to third parties, as are required to be listed in the
Disclosure Schedule. Parent shall use its Reasonable Best Efforts to obtain, at
its expense, all such waivers, consents or approvals from third parties, and to
give all such notices to third parties, as are required to be listed in the
Parent Disclosure Schedule.
5.3 Special Meeting, S-4 Registration Statement and Proxy
Statement/Prospectus.
(a) The Company shall use its Reasonable Best Efforts to obtain, as
promptly as practicable, the Requisite Stockholder Approval, either at a special
meeting of stockholders or pursuant to a written stockholder consent, all in
accordance with the applicable requirements of the Delaware General Corporation
Law. Parent shall use its Reasonable Best Efforts to obtain as promptly as
practicable, the approval of the Transaction Issues at a meeting of the
stockholders of Parent, in accordance with the applicable requirements of the
Delaware General Corporation Law and the rules of the NASDAQ National Market. In
connection therewith, Parent and New Parent shall prepare, with the assistance
and cooperation of the Company, the S-4 Registration Statement and the Proxy
Statement/Prospectus. The summary of the Merger in the Proxy
Statement/Prospectus shall include a summary of the terms relating to the
indemnification obligations of the Company Stockholders and the Company
Optionholders, the escrow arrangements and the authority of the Indemnification
Representatives, and a statement that the adoption of this Agreement by the
stockholders of the Company shall constitute approval of such terms. Parent and
New Parent shall file the S-4 Registration Statement and the Proxy
Statement/Prospectus with the SEC and shall, with the assistance of the Company,
promptly respond to any SEC comments on the S-4 Registration Statement and the
Proxy Statement/Prospectus and shall otherwise use their Reasonable Best Efforts
to have the S-4 Registration Statement declared effective under the Securities
Act and the Proxy Statement/Prospectus cleared for distribution as promptly as
practicable. Promptly following
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such time as the S-4 Registration Statement is declared effective and the Proxy
Statement/Prospectus cleared for distribution, the Company shall distribute the
Proxy Statement/Prospectus to its stockholders and Parent shall distribute the
Proxy Statement/Prospectus to its stockholders. If the Requisite Stockholder
Approval is obtained by means of a written consent, the Company shall send,
pursuant to Sections 228 and 262(d) of the Delaware General Corporation Law, a
written notice to all stockholders of the Company that did not execute such
written consent informing them that this Agreement and the Company Merger were
adopted and approved by the stockholders of the Company and that appraisal
rights are available for their Company Shares pursuant to Section 262 of the
Delaware General Corporation Law (which notice shall include a copy of such
Section 262), and shall promptly inform Parent of the date on which such notice
was sent.
(b) There shall be included in the Proxy Statement/Prospectus the
recommendation of the Company's Board of Directors that the stockholders of the
Company vote in favor of the adoption of this Agreement and the approval of the
Merger. Notwithstanding the foregoing, the obligation set forth in the foregoing
sentence shall not apply (and the Board of Directors shall be permitted to
modify or withdraw any such recommendation previously made) if:
(i) the Company receives a Superior Offer; and
(ii) the Board of Directors of the Company reasonably concludes,
after consultation with its outside legal counsel, that the fiduciary duties of
the Board of Directors under applicable law prohibit it from fulfilling the
obligations in the foregoing sentence or require it to modify or withdraw such
recommendation.
(c) Parent, acting through its Board of Directors, shall include in
the Proxy Statement/Prospectus the recommendation of its Board of Directors that
the stockholders of Parent vote in favor of the approval of the Transaction
Issues.
(d) Parent shall ensure that the S-4 Registration Statement does not,
at the time the S-4 Registration Statement is declared effective, contain any
untrue statement of material fact or omit to state any material fact required to
be stated therein or necessary to make the statements thereon not misleading
(provided that Parent shall not be responsible for the accuracy or completeness
of any information supplied by the Company in writing specifically for inclusion
therein). Parent shall ensure that the Proxy Statement/Prospectus, (i) on the
date it is first mailed to the stockholders of the Parent, (ii) on the date it
is first mailed to the stockholders of the Company, (iii) at the time of the
meeting of the stockholders of Parent, (iv) at the time of the Requisite
Stockholder Approval, and (v) at the Effective Time does not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading (provided that
Parent shall not be responsible for the accuracy or completeness of any
information supplied by the Company in writing specifically for inclusion
therein). Parent shall ensure that the S-4 Registration Statement and the Proxy
Statement/Prospectus comply as to form in all material respects with the
requirements of the Exchange Act and the Securities Act and the rules and
regulations thereunder.
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(e) The Company shall ensure that any information supplied by the
Company in writing specifically for inclusion in the S-4 Registration Statement,
at the time the S-4 Registration Statement is declared effective, does not
contain any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary to make the statements, thereon not
misleading. The Company shall ensure that any information supplied by the
Company in writing specifically for inclusion in the Proxy Statement/Prospectus,
(i) on the date it is first mailed to the stockholders of the Parent, (ii) on
the date it is first mailed to the stockholders of the Company, (iii) at the
time of the meeting of the stockholders of Parent, (iv) at the time of the
Requisite Stockholder Approval, and (v) at the Effective Time does not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(f) Xxxx X. Xxxxxx, Xxxxx Xxxxxxx, Bomoseen Associates, L.P., Perseus
2000, L.L.C. and Nth Power Technologies Fund II, L.P. (collectively, the "Major
Stockholders") each agree (i) to vote all Company Shares that are beneficially
owned by him or it in favor of the adoption of this Agreement and the approval
of the Company Merger, (ii) not to vote any Company Shares in favor of any other
acquisition (whether by way of merger, consolidation, share, exchange, stock
purchase or asset purchase) of all or a majority of the outstanding capital
stock or assets of the Company and (iii) otherwise to use his or its Reasonable
Best Efforts to obtain the Requisite Stockholder Approval.
(g) Parent shall not file the S-4 Registration Statement or the Proxy
Statement/Prospectus, and shall not amend or supplement the S-4 Registration
Statement or the Proxy Statement/Prospectus without the approval of the Company
(such approval not to be unreasonably withheld or delayed). Parent will advise
the Company, promptly after it receives notice thereof, of the time at which the
S-4 Registration Statement has become effective or any supplement or amendment
has been filed, of the issuance of any stop order, of the suspension of the
qualification of the Merger Shares for offering or sale in any jurisdiction, or
of any request by the SEC for amendment of the Proxy Statement/Prospectus or the
S-4 Registration Statement or comments thereon and responses thereto or requests
by the SEC for additional information.
(h) Parent shall call and hold a meeting of Parent's stockholders as
promptly as practicable for the purpose of voting upon the approval of the
Transaction Issues, and Parent shall use its Reasonable Best Efforts to hold
such meeting as soon as practicable after the date on which the S-4 Registration
Statement becomes effective. Parent shall, (i) use its Reasonable Best Efforts
to solicit from its stockholders proxies in favor of the approval of the
Transaction Issues, and (ii) shall take all other action necessary or advisable
to secure the vote or consent of stockholders required by the rules of the
NASDAQ National Market to obtain such approvals.
5.4 Operation of Business of the Company. Except as contemplated by this
Agreement, during the period from the date of this Agreement to the Closing, the
Company shall conduct its operations in the Ordinary Course of Business and in
compliance with all applicable laws and regulations and, to the extent
consistent therewith, use its Reasonable Best Efforts to preserve intact its
current business organization, keep its physical assets in good working
condition, keep available the services of its current officers and employees and
preserve its relationships with customers, suppliers and others having business
dealings with it. Without
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limiting the generality of the foregoing, prior to the Closing, the Company
shall not, without the written consent of Parent:
(a) issue or sell any stock or other securities of the Company or any
options, warrants or rights to acquire any such stock or other securities
(except pursuant to the conversion of Preferred Shares or the exercise of
Options outstanding on the date hereof or the grant of Options to purchase not
more than 50,000 Common Shares), or amend, except as contemplated hereby, any of
the terms of (including the vesting of) any Options or restricted stock
agreements, or repurchase or redeem any stock or other securities of the Company
(except from former employees, directors or consultants in accordance with
agreements providing for the repurchase of shares at their original issuance
price in connection with any termination of employment with or services to the
Company);
(b) split, combine or reclassify any shares of its capital stock; or
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock;
(c) create, incur or assume any indebtedness in excess of $100,000
(including obligations in respect of capital leases); assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person or entity; or make any loans,
advances or capital contributions to, or investments in, any other person or
entity except, in each case, in the Ordinary Course of Business;
(d) enter into, adopt or amend any Employee Benefit Plan or any
employment or severance agreement or arrangement of the type described in
Section 3.19(j) or (except for normal increases in the Ordinary Course of
Business for employees who are not Affiliates) increase in any manner the
compensation or fringe benefits of, or materially modify the employment terms
of, its directors, officers or employees, generally or individually, or pay any
bonus or other benefit to its directors, officers or employees (except for
existing payment obligations in the Ordinary Course of Business) or hire any
officers or (except in the Ordinary Course of Business) any employees;
(e) acquire, sell, lease, license or dispose of any assets or
property (including any shares or other equity interests in or securities of any
Subsidiary or any corporation, partnership, association or other business
organization or division thereof) in excess of $50,000, other than purchases and
sales of assets in the Ordinary Course of Business;
(f) mortgage or pledge any of its property or assets or subject any
such property or assets to any Security Interest except in the Ordinary Course
of Business;
(g) discharge or satisfy any Security Interest or pay any obligation
or liability other than in the Ordinary Course of Business;
(h) amend its charter, Bylaws or other organizational documents;
(i) change its accounting methods, principles or practices, except
insofar as such may be required by a generally applicable change in GAAP, be
recommended by
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PricewaterhouseCoopers LLP or be requested by Parent, or make any elections, or
changes to any current elections, with respect to Taxes other than in the
Ordinary Course of Business;
(j) except as described in Section 3.7 of the Disclosure Schedule,
enter into, amend, terminate, take or omit to take any action that would
constitute a violation of or default under, or waive any rights under, any
contract or agreement of a nature required to be listed in Sections 3.12, 3.13
or 3.14 of the Disclosure Schedule;
(k) make or commit to make any capital expenditures in excess of
those disclosed in the 2003 Budget of the Company previously furnished to
Parent;
(l) institute or settle any Legal Proceeding; or
(m) agree in writing or otherwise to take any of the foregoing
actions.
5.5 Operation of Business of Parent, New Parent and the Merger
Subsidiaries. Except as contemplated by this Agreement, during the period from
the date of this Agreement to the Closing, Parent shall conduct its operations
in the Ordinary Course of Business, New Parent and the Merger Subsidiaries shall
not conduct any business, and neither Parent nor any of its Subsidiaries shall,
except as contemplated by this Agreement, without the written consent of the
Company:
(a) create, incur or assume any indebtedness in excess of $1,000,000
in the aggregate (including obligations in respect of capital leases); assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person or entity in
excess of $1,000,000 in the aggregate; or make any loans, advances or capital
contributions to, or investments in, any other person or entity except, in each
case, in the Ordinary Course of Business;
(b) mortgage or pledge any of its property or assets or subject any
such property or assets to any Security Interest except in the Ordinary Course
of Business;
(c) acquire, sell, lease, license or dispose of any assets or
property (including any shares or other equity interests in or securities of any
Parent Subsidiary or any corporation, partnership, association or other business
organization or division thereof) in excess of $1,000,000 in the aggregate,
other than purchases and sales of assets in the Ordinary Course of Business; or
(d) agree in writing or otherwise to take any of the foregoing
actions.
The foregoing shall not preclude Parent from establishing a shareholder
rights plan or declaring and paying a cash dividend to its stockholders in the
amount of up to $1.00 per share, as the same may be adjusted for stock splits,
stock dividends or similar events (the "Dividend").
5.6 Parent and New Parent Board of Directors. Neither Parent nor New
Parent shall, prior to the Closing, increase the size of its Board of Directors
or cause any vacancy on its Board of Directors resulting from the resignation or
removal of any of its directors to be filled.
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5.7 Access to Information.
(a) Each of the Company and Parent shall permit representatives of
the other Party to have full access (at all reasonable times, and in a manner so
as not to interfere with the normal business operations of the accessed Party)
to all premises, properties, financial, tax and accounting records (including
the work papers of the accessed Party's independent accountants), contracts,
other records and documents, and personnel, of or pertaining to the accessed
Party.
(b) Parent agrees to provide the Company with prompt written notice
of any determination of its Board of Directors described in Section 8.1(e)(i).
5.8 Exclusivity.
(a) The Company shall not, and the Company shall require each of its
officers, directors, employees, representatives and agents not to, directly or
indirectly (i) initiate, solicit, encourage or otherwise facilitate any inquiry,
proposal, offer or discussion with any party (other than Parent) concerning any
merger, reorganization, consolidation, recapitalization, business combination,
liquidation, dissolution, share exchange, sale of stock, sale of material assets
or similar business transaction involving the Company or any division of the
Company, or (ii) engage in discussions or negotiations with any party (other
than Parent) concerning any such transaction. Notwithstanding the foregoing,
prior to the obtaining of the Requisite Stockholder Approval, the Company may
furnish non-public information concerning the business, properties or assets of
the Company to another party and may engage in discussions or negotiations with
such party, if (x) the Company receives a Superior Offer from such party, (y)
the Company first executes with such party a confidentiality agreement with
terms no less favorable to the Company than those contained in the
Confidentiality Agreement between Parent and the Company dated July 19, 2001
(the "Confidentiality Agreement"), and (z) the Board of Directors of the Company
concludes, after consultation with its outside legal counsel, that the fiduciary
duties of the Board of Directors under applicable law require the Company to do
so.
(b) The Company shall immediately notify any party with which
discussions or negotiations of the nature described in paragraph (a) above were
pending that the Company is terminating such discussions or negotiations. If the
Company receives any inquiry, proposal or offer of the nature described in
paragraph (a) above, the Company shall, within one business day after such
receipt, notify Parent of such inquiry, proposal or offer, including the
identity of other party and the terms of such inquiry, proposal or offer. If the
Company makes a determination under the final sentence of paragraph (a) above
that it is permitted to furnish non-public information and/or engage in
discussions or negotiations with another party, the Company shall, within one
business day after such determination, notify Parent in writing of such
determination and the basis therefor, and shall keep Parent informed, on a
current basis, of the status of such discussions or negotiations and the terms
being discussed or negotiated.
(c) If Parent solicits or receives an Acquisition Proposal, Parent
shall keep the Company informed, on a current basis, of the status of such
discussions or negotiations and the terms being discussed or negotiated.
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5.9 Expenses. Except as otherwise set forth in this Agreement, including
without limitation Article VIII, and the Escrow Agreement, each of the Parties
shall bear its own costs and expenses (including legal and accounting fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
5.10 Indemnification.
(a) New Parent shall not, for a period of six years after the
Closing, take any action to alter or impair any exculpatory or indemnification
provisions now existing in the Certificate of Incorporation or Bylaws of the
Company for the benefit of any individual who served as a director or officer of
the Company at any time prior to the Closing, except for any changes which may
be required to conform with changes in applicable law and any changes which do
not affect the application of such provisions to acts or omissions of such
individuals prior to the Closing.
(b) From and after the Closing, New Parent agrees that it will, and
will cause the Surviving Corporation of the Company Merger to, indemnify and
hold harmless each Indemnified Executive against any costs or expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities or amounts paid in settlement incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Closing, whether asserted or claimed
prior to, at or after the Closing, to the fullest extent permitted under
Delaware law (and New Parent and the Surviving Corporation of the Company Merger
shall also advance expenses as incurred to the fullest extent permitted under
Delaware law, provided the Indemnified Executive to whom expenses are advanced
provides an undertaking to repay such advances if it is ultimately determined
that such Indemnified Executive is not entitled to indemnification).
(c) For a period of six years after the Closing, New Parent shall
cause the Surviving Corporation of the Company Merger to maintain (to the extent
available in the market) in effect a directors' and officers' liability
insurance policy covering those persons who are currently covered by the
Company's directors' and officers' liability insurance policy (a copy of which
has been heretofore delivered to Parent) with coverage in amount and scope at
least as favorable to such persons as the Company's existing coverage; provided,
that in no event shall New Parent or the Surviving Corporation of the Company
Merger be required to expend in excess of 150% the annual premium currently paid
by the Company for such coverage.
5.11 Affiliate Legends. Section 5.11 of the Disclosure Schedule sets forth
a list of those persons who are, in the Company's reasonable judgment, Rule 145
Affiliates. The Company shall notify Parent in writing of any change in the
identity of its Rule 145 Affiliates prior to the Closing Date. New Parent shall
be entitled to place appropriate legends on the certificates evidencing any
shares of New Parent Common Stock to be received by Rule 145 Affiliates of the
Company in the Company Merger reflecting the restrictions set forth in Rule 145
promulgated under the Securities Act and to issue appropriate stop transfer
instructions to the transfer agent for New Parent Common Stock (provided that
such legends or stop transfer instructions shall be removed upon the request of
any holder of shares of New Parent Common Stock issued in the Company Merger one
year after the effective time or earlier if such holder
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otherwise complies with the provisions of Rule 145 under the Securities Act
regarding resale of securities acquired in transactions described by Rule 145).
5.12 Listing of Merger Shares. New Parent shall, if required by the rules
of the NASDAQ National Market for the Merger Shares to be traded on such market,
file with the NASDAQ National Market a Notification Form for Listing Additional
Shares with respect to the Merger Shares and pursuant to Options assumed in
accordance with Sections 2.1 and 2.2 and take all steps necessary or desirable
to cause such shares to be approved for listing.
5.13 Management Committee; Capital Expenditures. Prior to the Closing, and
to be effective immediately following the Closing, the New Parent's Board of
Directors shall form a management committee, consisting of the chief executives
of the New Parent and the Company, and any other representatives to whom the New
Parent and the Company shall have mutually agreed, which shall report to the
Board of Directors of the New Parent and shall be responsible for preparing
recommendations to such Board of Directors on strategic initiatives, budgets,
personnel policies and other functions to be agreed upon with respect to New
Parent and the Surviving Corporations.
5.14 Company's Place of Business. The New Parent shall not move the
Company's principal place of business from Vermont for a period of three years
after the Closing.
5.15 Certain Employee Benefits Matters. For a period of two years following
the Effective Time and effective upon the Company Merger, New Parent shall, or
shall cause the Surviving Corporation of the Company Merger to provide medical,
401(k), life and disability benefits, cash compensation and other benefits to
employees of such Surviving Corporation that, in the aggregate, are comparable
to the medical, 401(k), life and disability benefits cash compensation and other
benefits that were provided to each such employee under the employee benefit
plans, programs, contracts and arrangements of the Company as in effect
immediately prior to the Effective Time.
5.16 Notification of Certain Matters. Parent shall give prompt notice to
the Company, and the Company shall give prompt notice to Parent, of the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause (A) any representation or warranty made by any
Party in this Agreement to be materially untrue or inaccurate at the Effective
Time or (B) any covenant, condition or agreement contained in this Agreement not
to be complied with or satisfied in all material respects.
5.17 Reorganization. It is intended by the parties hereto that the Parent
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code and that the Mergers shall effect an exchange under Section 351 of the
Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the Treasury
Regulations. Each of the parties hereto will use its best efforts (i) to cause
the Parent Merger to be treated as a reorganization within the meaning of
Section 368 of the Code, and (ii) to cause the contribution of all of the
outstanding shares of Common Stock of the Company and the Parent pursuant to the
Merges to be treated as an exchange under Section 351 of the Code. Neither party
will take any action that would cause the Mergers to fail to be treated for tax
purposes as described in this Section 5.17. Each of the parties hereto shall
report the Mergers for
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federal income tax purposes and any comparable state or local tax statute as
described in this Section 5.17.
5.18 Financial Statements. The Company covenants and agrees to use its
Reasonable Best Efforts to prepare and deliver to Parent as soon as practicable
the Financial Statements. Parent covenants and agrees to use its Reasonable Best
Efforts to cooperate with the Company in the preparation of the Financial
Statements, including without limitation using its Reasonable Best Efforts to
cause PricewaterhouseCoopers LLP to complete its audit of the Financial
Statements as soon as practicable. Upon delivery of the Financial Statements in
accordance with this Section 5.18, Section 3.6 of this Agreement shall be
deleted in its entirety and replaced with the following for all purposes
hereunder:
"3.6 Financial Statements. The Financial Statements have been prepared in
accordance with GAAP, fairly present the consolidated financial condition,
results of operations and cash flows of the Company as of the date thereof in
all material respects and for the period referred to therein, and are consistent
with the books and records of the Company."
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
6.1 Conditions to Each Party's Obligations. The respective obligations of
each Party to consummate the Mergers are subject to the satisfaction of the
following conditions:
(a) Registration Statement Effective. The S-4 Registration Statement
shall have been declared effective by the SEC under the Securities Act and no
stop order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceeding for that purpose shall have been
initiated by the SEC;
(b) Listing of Shares. The Merger Shares and the shares of New Parent
Common Stock to be issued pursuant to the exercise of Options assumed in
accordance with Section 2.1 shall have been approved for listing on the NASDAQ
National Market;
(c) Company Stockholder Approval. The Requisite Stockholder Approval
shall have been obtained;
(d) Parent Stockholder Approval. The approval of the Transaction
Issues by the holders of a majority of the outstanding shares of Parent Common
Stock shall have been obtained; and
(e) No Order. No Governmental Entity or court of competent
jurisdiction shall have enacted, threatened, issued, promulgated, or entered any
law, rule, regulation, judgment, decree, injunction, executive order or award
that is then in effect, pending or threatened and has, or would have, the effect
of making the Mergers illegal or otherwise prohibiting consummation of the
Mergers.
6.2 Conditions to Obligations of Parent, New Parent and the Merger
Subsidiaries. The obligation of each of Parent, New Parent and the Merger
Subsidiaries to consummate the
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Mergers is subject to the satisfaction (or waiver by Parent) of the following
additional conditions:
(a) the number of Dissenting Shares shall not exceed 10% of the
number of outstanding Common Shares and Common Share Equivalents as of the
Effective Time (calculated after giving effect to the conversion into Common
Shares of all outstanding Preferred Shares);
(b) the Company shall have obtained at its own expense (and shall
have provided copies thereof to Parent) all of the waivers, permits, consents,
approvals or other authorizations, and effected all of the registrations,
filings and notices, referred to in Section 5.2 which are required on the part
of the Company, except for any failure of which to obtain or effect would not,
individually or in the aggregate, have a Company Material Adverse Effect or a
material adverse effect on the ability of the Parties to consummate the
transactions contemplated by this Agreement;
(c) the representations and warranties of the Company set forth in
this Agreement that are qualified as to materiality shall be true and correct in
all respects, and all other representations and warranties of the Company set
forth in this Agreement shall be true and correct in all material respects, in
each case as of the date of this Agreement and as of the Closing as though made
as of the Closing, except to the extent such representations and warranties are
specifically made as of a particular date (in which case such representations
and warranties shall be true and correct as of such date);
(d) the Company shall have performed or complied with in all material
respects its agreements and covenants required to be performed or complied with
under this Agreement as of or prior to the Closing;
(e) no Legal Proceeding other than as disclosed in the Disclosure
Schedule shall be pending or threatened wherein an unfavorable judgment, order,
decree, stipulation or injunction would (i) prevent consummation of the
transactions contemplated by this Agreement, or (ii) cause the transactions
contemplated by this Agreement to be rescinded following consummation and no
such judgment, order, decree, stipulation or injunction shall be in effect or
(iii) have individually or in the aggregate a Company Material Adverse Effect;
(f) the Company shall have delivered to Parent, New Parent and Merger
Sub I the Company Certificate;
(g) Xxxxx Xxxxxxx, Xxxxxxx Xxxxxxx, Xxxx Xxxxxx, Xxxxxxxx Xxxxx, Xxx
Xxxxxxx and Xxxxxxx Xxxxxx shall have indicated, in a manner reasonably
satisfactory to New Parent, their intention to join New Parent as employees
following the Closing;
(h) Parent, New Parent and Merger Sub I shall have received from
counsel to the Company an opinion covering the matters set forth on Exhibit C
hereto, dated as of the Closing Date;
(i) Parent and New Parent shall have received an opinion of their
counsel, Xxxx and Xxxx LLP, dated as of the Effective Time, substantially to the
effect that the Parent
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Merger will qualify as an exchange within the meaning of Section 351 of the Code
and a reorganization within the meaning of Section 368(a) of the Code. The
issuance of such opinion shall be conditioned upon the receipt by such counsel
of reasonable and customary representation letters from each of the Parties in
each case in form and substance reasonably satisfactory to tax counsel, and each
such representation letter shall be dated on or before the date of such opinions
and shall not have been withdrawn or modified in any material effect;
(j) Parent and New Parent shall have received at their expense a
"comfort letter" dated as of a date not more than two days prior to the date
that the S-4 Registration Statement is declared effective and shall have
received a similar letter dated as of a date not more than two days prior to the
Effective Time;
(k) each holder of Preferred Shares shall have entered into a lockup
agreement in the form attached hereto as Exhibit D and each person listed in
Section 6.2(g) shall have entered into a lockup agreement in the form attached
hereto as Exhibit D.
(l) the Company shall have provided to Parent and New Parent a duly
executed statement that satisfies the requirements of Treasury Regulation
Section 1.1445-2(c), certifying that the Company Shares are not U.S. real
property interests; and
(m) Parent and New Parent shall have received such other certificates
and instruments (including certificates of good standing of the Company in its
jurisdiction of organization and the various foreign jurisdictions in which it
is qualified, certified charter documents, certificates as to the incumbency of
officers and the adoption of authorizing resolutions) as it shall reasonably
request in connection with the Closing.
6.3 Conditions to Obligations of the Company. The obligation of the
Company to consummate the Company Merger is subject to the satisfaction of the
following additional conditions:
(a) New Parent shall have filed with the NASDAQ National Market a
Notification Form for listing of Additional Shares with respect to the Merger
Shares and are shares of New Parent Common Stock to be issued pursuant to the
exercise of Options assumed in accordance with Section 2.1 and a registration
statement on Form S-8 registering the New Parent Common Stock issuable upon
exercise of such Options shall be effective;
(b) Parent and New Parent shall have obtained at their own expense
(and shall have provided copies thereof to the Company) all of the waivers,
permits, consents, approvals or other authorizations, and effected all of the
registrations, filings and notices, referred to in Section 5.2 which are
required on the part of Parent or New Parent, except for any failure of which to
obtain or effect would not have a material adverse effect on the ability of the
Parties to consummate the transactions contemplated by this Agreement;
(c) Xxxxx Xxxxxxx, Xxxx Xxxxxx and Xxxxxxxx Xxxxx shall have been
designated as directors of New Parent, effective immediately following the
Closing, and the number of directors which shall comprise the entire Board of
Directors of New Parent (giving effect to such designation) shall not be more
than 11;
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(d) any representations and warranties of Parent, New Parent and the
Merger Subsidiaries set forth in this Agreement that are qualified as to
materiality shall be true and correct in all respects, and all other
representations and warranties of Parent, New Parent and the Merger Subsidiaries
set forth in this Agreement shall be true and correct in all material respects,
in each case as of the date of this Agreement and as of the Closing as though
made as of the Closing, except to the extent such representations and warranties
are specifically made as of a particular date (in which case such
representations and warranties shall be true and correct as of such date);
(e) each of Parent, New Parent and the Merger Subsidiaries shall have
performed or complied with in all material respects its agreements and covenants
required to be performed or complied with under this Agreement as of or prior to
the Closing;
(f) no Legal Proceeding, other than as disclosed in Parent Disclosure
Schedule or the 2003 Reports, shall be pending or threatened wherein an
unfavorable judgment, order, decree, stipulation or injunction would (i) prevent
consummation of the transactions contemplated by this Agreement, or (ii) cause
the transactions contemplated by this Agreement to be rescinded following
consummation, and no such judgment, order, decree, stipulation or injunction
shall be in effect or (iii) have individually or in the aggregate a Parent
Material Adverse Effect;
(g) Parent and New Parent shall have delivered to the Company the
Parent Certificate;
(h) the Company shall have received from counsel to Parent and New
Parent an opinion covering the matters set forth on Exhibit E hereto, addressed
to the Company and dated as of the Closing Date;
(i) the Company shall have received a written opinion from its
counsel, Ropes & Xxxx, in form and substance reasonably satisfactory to it, to
the effect that the Merger will qualify as an exchange within the meaning of
Section 351 of the Code. The issuance of such opinion shall be conditioned upon
the receipt by such counsel of reasonable and customary representation letters
from each of the Parties in each case in form and substance reasonably
satisfactory to such counsel, and each such representation letter shall be dated
on or before the date of such opinions and shall not have been withdrawn or
modified in any material effect; and
(j) the Company shall have received such other certificates and
instruments (including certificates of good standing of Parent, New Parent and
the Merger Subsidiaries in their jurisdiction of organization, certified charter
documents, certificates as to the incumbency of officers and the adoption of
authorizing resolutions) as it shall reasonably request in connection with the
Closing.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification by the Company Stockholders. Subject to the
limitations set forth in this Article VII, the Company Stockholders and Company
Optionholders shall indemnify Parent, New Parent and Merger Sub I in respect of,
and hold them harmless against, any and all
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Damages incurred or suffered by the Surviving Corporation of the Company Merger
or Parent, New Parent, Merger Sub I or any Affiliate thereof resulting from,
relating to or constituting:
(a) any breach, of any representation or warranty of the Company
contained in this Agreement or any other agreement or instrument furnished by
the Company to Parent, New Parent or the Merger Subsidiaries pursuant to this
Agreement;
(b) any failure to perform any covenant or agreement of the Company
contained in this Agreement or any agreement or instrument furnished by the
Company to Parent, New Parent or Merger Subsidiaries pursuant to this Agreement;
(c) any failure of any Company Stockholder to have good, valid and
marketable title to the issued and outstanding Company Shares issued in the name
of such Company Stockholder, free and clear of all Security Interests; or
(d) fraud relating to the execution and delivery of this Agreement or
the transactions contemplated hereby,
it being understood and agreed that each Company Stockholder and Company
Optionholder is only responsible for its share of any Damages (as set forth in
the Escrow Agreement), and that no Company Stockholder or Company Optionholder
shall have any liability pursuant to clause (c) above with respect to Company
Shares not registered in the name of such Company Stockholder or Company
Optionholder.
7.2 Indemnification by Parent and New Parent. Subject to the limitations
set forth in this Article VII, Parent and New Parent shall indemnify the Company
Stockholders in respect of, and hold them harmless against, any and all Damages
incurred or suffered by the Company Stockholders resulting from, relating to or
constituting:
(a) any breach, of any representation or warranty of Parent, New
Parent or the Merger Subsidiaries contained in this Agreement or any other
agreement or instrument furnished by Parent, New Parent or the Merger
Subsidiaries to the Company pursuant to this Agreement;
(b) any failure to perform any covenant or agreement of Parent, New
Parent or the Merger Subsidiaries contained in this Agreement or any agreement
or instrument furnished by Parent, New Parent or the Merger Subsidiaries to the
Company pursuant to this Agreement; or
(c) fraud relating to the execution and delivery of this Agreement or
the transactions contemplated hereby.
7.3 Indemnification Claims.
(a) An Indemnified Party shall give written notification to the
Indemnifying Party of the commencement of any Third Party Action. Such
notification shall be given within 20 days after receipt by the Indemnified
Party of notice of such Third Party Action, and shall describe in reasonable
detail (to the extent known by the Indemnified Party) the facts constituting the
basis for such Third Party Action and the amount of the claimed damages;
provided,
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however, that no delay or failure on the part of the Indemnified Party in so
notifying the Indemnifying Party shall relieve the Indemnifying Party of any
liability or obligation hereunder except to the extent of any damage or
liability caused by or arising out of such failure. Within 20 days after
delivery of such notification, the Indemnifying Party may, upon written notice
thereof to the Indemnified Party, assume control of the defense of such Third
Party Action with counsel reasonably satisfactory to the Indemnified Party;
provided that (i) the Indemnifying Party may only assume control of such defense
if (A) it acknowledges in writing to the Indemnified Party that, subject to its
reasonable investigation of such Damages, any damages, fines, costs or other
liabilities that may be assessed against the Indemnified Party in connection
with such Third Party Action constitute Damages for which the Indemnified Party
shall be indemnified pursuant to this Article VII and (B) the ad damnum is less
than or equal to the amount of Damages for which the Indemnifying Party is
liable under this Article VII and (ii) the Indemnifying Party may not assume
control of the defense of Third Party Action involving criminal liability or in
which equitable relief is sought against the Indemnified Party. If the
Indemnifying Party does not, or is not permitted under the terms hereof to, so
assume control of the defense of a Third Party Action, the Indemnified Party
shall control such defense. The Non-controlling Party may participate in such
defense at its own expense. The Controlling Party shall keep the Non-controlling
Party advised of the status of such Third Party Action and the defense thereof
and shall consider in good faith recommendations made by the Non-controlling
Party with respect thereto. The Non-controlling Party shall furnish the
Controlling Party with such information as it may have with respect to such
Third Party Action (including copies of any summons, complaint or other pleading
which may have been served on such party and any written claim, demand, invoice,
billing or other document evidencing or asserting the same) and shall otherwise
cooperate with and assist the Controlling Party in the defense of such Third
Party Action. The fees and expenses of counsel to the Indemnified Party with
respect to a Third Party Action shall be considered Damages for purposes of this
Agreement if the Indemnified Party controls the defense of such Third Party
Action pursuant to the terms of this Section 7.3(a). The Indemnifying Party
shall not agree to any settlement of, or the entry of any judgment arising from,
any Third Party Action without the prior written consent of the Indemnified
Party, which shall not be unreasonably withheld, conditioned or delayed. The
Indemnified Party shall not agree to any settlement of, or the entry of any
judgment arising from, any such Third Party Action without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld,
conditioned or delayed.
(b) In order to seek indemnification under this Article VII, an
Indemnified Party shall deliver to the Indemnifying Party a Claim Notice stating
the basis for such claim, the specific nature of the breach and the calculation
of the damages suffered in reasonable detail. Such Claim Notice shall be
delivered by the Indemnified Party within thirty (30) days after the Indemnified
Party learns of the claim (disregarding for this purpose the limitations on
indemnification set forth in Section 7.5); provided, that failure to deliver the
Claim Notice within such time period shall not relieve the Indemnifying Party of
its obligations under this Article VII except to the extent the Indemnifying
Party is materially prejudiced by such failure. If the Indemnified Party is
Parent or New Parent and is seeking to enforce such claim pursuant to the Escrow
Agreement, the Indemnifying Party shall deliver a copy of the Claim Notice to
the Escrow Agent.
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(c) Within 20 days after delivery of a Claim Notice, the Indemnifying
Party shall deliver to the Indemnified Party a Response, in which the
Indemnifying Party shall: (i) agree that the Indemnified Party is entitled to
receive all of the Claimed Amount (in which case the Response shall be
accompanied by a payment by the Indemnifying Party to the Indemnified Party of
the Claimed Amount, by check or by wire transfer; provided that if the
Indemnified Party is Parent or New Parent and is seeking to enforce such claim
pursuant to the Escrow Agreement, the Indemnifying Party and the Indemnified
Party shall deliver to the Escrow Agent, within three days following the
delivery of the Response, a written notice executed by both parties instructing
the Escrow Agent to distribute to Parent or New Parent Escrow Cash, Escrow
Shares and Escrow Warrants (in accordance with the Escrow Agreement) as have an
aggregate cash value, Value and Warrant Value equal to the Claimed Amount), (ii)
agree that the Indemnified Party is entitled to receive the Agreed Amount (in
which case the Response shall be accompanied by a payment by the Indemnifying
Party to the Indemnified Party of the Agreed Amount, by check or by wire
transfer; provided that if the Indemnified Party is Parent or New Parent and is
seeking to enforce such claim pursuant to the Escrow Agreement, the Indemnifying
Party and the Indemnified Party shall deliver to the Escrow Agent, within three
days following the delivery of the Response, a written notice executed by both
parties instructing the Escrow Agent to distribute to Parent or New Parent
Escrow Cash, Escrow Shares and Escrow Warrants in accordance with the Escrow
Agreement, as have an aggregate cash value, Value and Warrant Value equal to the
Agreed Amount), or (iii) dispute that the Indemnified Party is entitled to
receive any of the Claimed Amount.
(d) During the 30-day period following the delivery of a Response
that reflects a Dispute, the Indemnifying Party and the Indemnified Party shall
use good faith efforts to resolve the Dispute. If the Dispute is not resolved
within such 30-day period, the Indemnifying Party and the Indemnified Party
shall submit the Dispute to binding arbitration. If the Indemnified Party is
Parent or New Parent and is seeking to enforce the claim that is the subject of
the Dispute pursuant to the Escrow Agreement, the Indemnifying Party and the
Indemnified Party shall deliver to the Escrow Agent, promptly following the
resolution of the Dispute (whether by mutual agreement, arbitration, final
nonappealable judicial decision or otherwise), a written notice executed by both
parties instructing the Escrow Agent as to what (if any) portion of the Escrow
Cash, Escrow Shares and Escrow Warrants shall be distributed to Parent and New
Parent any Stockholders (which notice shall be consistent with the terms of the
resolution of the Dispute).
(e) If, as set forth in Section 7.3(d), any Dispute is submitted to
binding arbitration, the arbitration shall be conducted by a single arbitrator
(the "Arbitrator") in accordance with the Commercial Rules in effect from time
to time and the following provisions:
(i) In the event of any conflict between the Commercial Rules in
effect from time to time and the provisions of this Agreement, the provisions of
this Agreement shall prevail and be controlling.
(ii) The parties shall commence the arbitration by jointly filing
a written submission with the Boston, Massachusetts office of the AAA in
accordance with Commercial Rule 5 (or any successor provision).
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(iii) Not later than 30 days after the conclusion of the
arbitration hearing, the Arbitrator shall prepare and distribute to the parties
a writing setting forth the arbitral award and the Arbitrator's reasons
therefor. Any award rendered by the Arbitrator shall be final, conclusive and
binding upon the parties, and judgment thereon may be entered and enforced in
any court of competent jurisdiction, provided that the Arbitrator shall have no
power or authority to grant injunctive relief, specific performance or other
equitable relief.
(iv) The Arbitrator shall have no power or authority, under the
Commercial Rules or otherwise, to (x) modify or disregard any provision of this
Agreement, including the provisions of this Section 7.3(e), or (y) address or
resolve any issue not submitted by the parties.
(v) In connection with any arbitration proceeding pursuant to
this Agreement, each party shall bear its own costs and expenses, except that
the fees and costs of the AAA and the Arbitrator, the costs and expenses of
obtaining the facility where the arbitration hearing is held, and such other
costs and expenses as the Arbitrator may determine to be directly related to the
conduct of the arbitration and appropriately borne jointly by the parties (which
shall not include any party's attorneys' fees or costs, witness fees (if any),
costs of investigation and similar expenses) shall be shared equally by the
Indemnified Party and the Indemnifying Party; provided, that the Arbitrator, in
its sole discretion, shall have the right to assess costs and expenses against
either the Indemnifying Party or the Indemnified Party if it determines that
such party has acted frivolously.
(f) For purposes of this Section 7.3 and the second and third
sentences of Section 7.4, (i) if the Company Stockholders and Company
Optionholders comprise the Indemnifying Party, any references to the
Indemnifying Party (except provisions relating to an obligation to make any
payments) shall be deemed to refer to the Indemnification Representatives, and
(ii) if the Company Stockholders comprise the Indemnified Party, any references
to the Indemnified Party (except provisions relating to an obligation to make or
a right to receive any payments) shall be deemed to refer to the Indemnification
Representatives. The Indemnification Representatives shall have full power and
authority on behalf of each Company Stockholder and Company Optionholder to take
any and all actions on behalf of, execute any and all instruments on behalf of,
and execute or waive any and all rights of, the Company Stockholders under this
Article VII. The Indemnification Representatives will not be liable to any
Company Stockholder or Company Optionholder for any action taken by either of
them in good faith pursuant to this Article VII, and the Company Stockholders
and Company Optionholders will jointly and severally indemnify the
Indemnification Representatives from any Damages arising out of their serving as
the Indemnification Representatives hereunder. The Indemnification
Representatives are serving in that capacity solely for purposes of
administrative convenience, and are not personally liable in such capacity for
any of the obligations of the Company Stockholders and Company Optionholders
hereunder, and each of Parent and New Parent agrees that it will not look to the
personal assets of the Indemnification Representatives, acting in such capacity,
for the satisfaction of any obligations to be performed by the Company
Stockholders and Company Optionholders or the Company hereunder.
7.4 Survival of Representations and Warranties. All representations and
warranties that are covered by the indemnification agreements in Section 7.1(a)
and Section 7.2(a) shall
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(a) survive the Closing and (b) shall expire on the date one year following the
Closing Date except that the representations and warranties set forth in
Sections 3.9, 3.19 and 3.20 shall expire on the date two years following the
Closing Date. If an Indemnified Party delivers to an Indemnifying Party, before
expiration of a representation or warranty, either a Claim Notice based upon a
breach of such representation or warranty, or an Expected Claim Notice based
upon a breach of such representation or warranty, then the applicable
representation or warranty shall survive until, but only for purposes of, the
resolution of the matter covered by such notice. If the legal proceeding or
written claim with respect to which an Expected Claim Notice has been given is
definitively withdrawn or resolved in favor of the Indemnified Party, the
Indemnified Party shall promptly so notify the Indemnifying Party; and if the
Indemnified Party has delivered a copy of the Expected Claim Notice to the
Escrow Agent and Escrow Cash, Escrow Shares and Escrow Warrants have been
retained in escrow after the Termination Date (as defined in the Escrow
Agreement) with respect to such Expected Claim Notice, the Indemnifying Party
and the Indemnified Party shall promptly deliver to the Escrow Agent a written
notice executed by both parties instructing the Escrow Agent to distribute such
retained Escrow Cash, Escrow Shares and Escrow Warrants to the Company
Stockholders and Company Optionholders in accordance with the terms of the
Escrow Agreement.
7.5 Limitations.
(a) Notwithstanding anything to the contrary herein, (i) the aggregate
liability of the Company Stockholders and Company Optionholders for Damages
under this Article VII shall be limited to the Escrow Cash, Escrow Shares and
Escrow Warrants, (ii) the Company Stockholders and Company Optionholders shall
not be liable under this Article VII unless and until the aggregate Damages for
which they would otherwise be liable under this Article VII exceed $500,000 (at
which point the Company Stockholders and Company Optionholders shall become
liable for the Damages under this Article VII in excess of $500,000), (iii) the
Company Stockholders and Company Optionholders shall not be liable under this
Article VII with respect to any Damages arising out of or related to matters
within the knowledge of Parent at the Effective Time, and (iv) each Company
Stockholder and Company Optionholder shall only be liable for his, her or its
share of Damages in accordance with the Escrow Agreement); provided, that the
limitation set forth in clause (ii) of this sentence shall not apply to a claim
pursuant to Section 7.1(a) relating to a breach of the representations and
warranties set forth in Sections 3.1, 3.2 or 3.3 or to a claim pursuant to
Section 7.1(d). For purposes solely of this Article VII, all representations and
warranties of the Company in Article III (other than Sections 3.7 and 3.29 shall
be construed as if the term "material" and any reference to "Company Material
Adverse Effect" (and variations thereof) were omitted from such representations
and warranties.
(b) Notwithstanding anything to the contrary, (i) the aggregate
liability of Parent and New Parent for Damages under this Article VII shall not
exceed $4,125,000, (ii) Parent and New Parent shall not be liable under this
Article VII unless and until the aggregate Damages for which they would
otherwise be liable under this Article VII exceed $500,000 (at which point
Parent and New Parent shall become liable for the Damages under this Article VII
in excess of $500,000), and (iii) Parent and New Parent shall not be liable
under this Article VII with respect to any Damages arising out of or related to
matters within the knowledge of the Company at the Effective Time; provided,
that the limitation set forth in clause (ii) of this sentence shall not apply to
a claim pursuant to Section 7.2(a) relating to a breach of the
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representations and warranties set forth in Sections 4.1, 4.2 or 4.3 or to a
claim pursuant to Section 7.2(c). For purposes solely of this Article VII, all
representations and warranties of Parent, New Parent and the Merger Subsidiaries
in Article IV (other than Sections 4.7 and 4.20) shall be construed as if the
term "material" and any reference to "Parent Material Adverse Effect" (and
variations thereof) were omitted from such representations and warranties.
(c) Except with respect to common law or statutory claims against any
Company Stockholder or Company Optionholder, Parent, New Parent or a Merger
Subsidiary relating to fraud after the Closing, the rights of the Indemnified
Parties under this Article VII and the Escrow Agreement shall be the sole and
exclusive remedy of the Parties with respect to any and all disputes, claims,
actions, litigation, suits, cause of action or proceeding arising out of or
related to this Agreement or the transactions contemplated thereby.
(d) No Company Stockholder or Company Optionholder shall have any
right of contribution against the Company or the Surviving Corporation with
respect to any breach by the Company of any of its representations, warranties,
covenants or agreements.
ARTICLE VIII
TERMINATION
8.1 Termination of Agreement. The Parties may terminate this Agreement
prior to the Closing (whether before or after Requisite Stockholder Approval),
as provided below:
(a) the Parties may terminate this Agreement by mutual written
consent;
(b) Parent may terminate this Agreement by giving written notice to
the Company in the event the Company is in breach of any representation,
warranty or covenant contained in this Agreement, and such breach, individually
or in combination with any other such breach, (i) would cause the conditions set
forth in clauses (c) or (d) of Section 6.2 not to be satisfied and (ii) is not
cured within 20 days following delivery by Parent to the Company of written
notice of such breach;
(c) the Company may terminate this Agreement by giving written notice
to Parent in the event Parent or New Parent is in breach of any representation,
warranty or covenant contained in this Agreement, and such breach, individually
or in combination with any other such breach, (i) would cause the conditions set
forth in clauses (d) or (e) of Section 6.3 not to be satisfied and (ii) is not
cured within 20 days following delivery by the Company to Parent of written
notice of such breach;
(d) any Party may terminate this Agreement by giving written notice
to the other Parties at any time after (i) the stockholders of the Company have
voted on whether to approve this Agreement and the Company Merger if this
Agreement and the Company Merger failed to receive the Requisite Stockholder
Approval or (ii) the stockholders of Parent have voted on whether to approve the
Transaction Issues if the requisite vote of the stockholders of Parent in favor
of approving the Transaction Issues shall not have been obtained; provided, that
the right of either Party to terminate this Agreement under this Section 8.1(d)
shall not be available (x) to any Party seeking termination if at such time such
Party is in breach of or has failed to fulfill its
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obligations under this Agreement or (y) to the Company prior to December 31,
2003, if the failure to obtain the Requisite Stockholder Approval has been
caused by any Major Stockholder;
(e) the Company may terminate this Agreement by giving written notice
to the Parent if (i) Parent's Board of Directors shall have approved or
recommended to the stockholders of Parent an Acquisition Proposal or (ii) a
tender offer or exchange offer for outstanding shares of Parent Common Stock is
commenced (other than by Parent or an Affiliate of Parent) and Parent's Board of
Directors fails to recommend against acceptance of such offer, recommends that
the stockholders of Parent tender their shares in such tender or exchange offer
or such tender offer is consummated;
(f) Parent may terminate this Agreement by giving written notice to the
Company if the Closing shall not have occurred on or before October 31, 2003 by
reason of the failure of any condition precedent under Section 6.1 or 6.2
(unless the failure results primarily from a breach by Parent or New Parent of
any representation, warranty or covenant contained in this Agreement);
(g) the Company may terminate this Agreement by giving written notice
to Parent if the Closing shall not have occurred on or before October 31, 2003
by reason of the failure of any condition precedent under Section 6.1 or 6.3
(unless the failure results primarily from a breach by the Company of any
representation, warranty or covenant contained in this Agreement); or
(h) Parent may terminate this Agreement by giving written notice to the
Company within three days of receipt of the Financial Statements if as a whole
the balance sheet and income statement included within the Financial Statements
are materially and adversely different from the Unaudited Financial Statements,
provided, however, that in determining whether the balance sheet and income
statement included within the Financial Statements are materially and adversely
different from the Unaudited Financial Statements, all adverse differences
related to the disclosures set forth on Section 3.6 of the Disclosure Schedule
shall be disregarded.
8.2 Effect of Termination. If any Party terminates this Agreement pursuant
to Section 8.1, all obligations of the Parties hereunder shall terminate without
any liability of any Party to any other Party, provided that (i) any such
termination shall not relieve any party from liability for any willful breach of
this Agreement (which includes without limitation the making of any
representation or warranty by a party in this Agreement that the party knew was
not true and accurate when made) and (ii) the provisions of Section 8.3 of this
Agreement and the Confidentiality Agreement shall remain in full force and
effect and survive any termination of this Agreement.
8.3 Termination Fees.
(a) The Company agrees to pay to Parent a non-refundable fee equal to
$100,000 plus all reasonable out-of-pocket expenses of Parent incurred in
connection with this Agreement and the transactions contemplated hereby,
including without limitation attorneys' fees, accountants' fees, appraisers'
fees and other similar expenses, if either Party terminates this
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Agreement pursuant to Section 8.1(d)(i) as a result of the failure to receive
the Requisite Stockholder Approval, if, at or prior to the time of such failure,
there shall have been announced an Acquisition Proposal relating to the Company
which shall not have been absolutely and unconditionally withdrawn or abandoned.
(b) Parent agrees to pay to the Company a non-refundable fee equal to
$100,000 plus all reasonable out-of-pocket expenses of the Company incurred in
connection with this Agreement and the transactions contemplated hereby,
including without limitation attorneys' fees, accountants' fees, appraisers'
fees, fees and expenses associated with obtaining title insurance and other
similar expenses, (i) if Company terminates this Agreement pursuant to Section
8.1(e) or (ii) if either Party terminates this Agreement pursuant to Section
8(d)(ii) as a result of the failure to receive the requisite vote in favor of
approval of the Transaction Issues by the stockholders of Parent if, at or prior
to the time of such failure, there shall have been announced an Acquisition
Proposal relating to Parent, which shall not have been absolutely and
unconditionally withdrawn or abandoned.
ARTICLE IX
DEFINITIONS
For purposes of this Agreement, each of the following terms shall have the
meaning set forth below.
"AAA" shall mean the American Arbitration Association.
"Acquisition Proposal" shall mean, with respect to any Party, (i) any
inquiry, proposal or offer for a merger, consolidation, dissolution, acquisition
or sale of substantial stock or assets, tender offer, recapitalization, share
exchange or other business combination involving such Party or any Subsidiary of
such Party, (ii) any proposal for the issuance by such Party or any Subsidiary
of such Party of over 10% of its equity securities or (iii) any proposal or
offer to acquire in any manner, directly or indirectly, over 10% of the equity
securities or consolidated total assets of such Party or any Subsidiary of such
Party, in each case other than the Mergers contemplated by this Agreement.
"Affiliate" shall mean any affiliate, as defined in Rule 12b-2 under the
Exchange Act.
"Aggregate Warrant Shares" shall mean the product of (a) 2,500,000
multiplied by (b) the difference between (i) one (1) minus (ii) the quotient
obtained by dividing (A) the difference between the aggregate Cash Consideration
minus $15,128,000, by (B) $27,500,000.
"Agreed Amount" shall mean part, but not all, of the Claimed Amount.
"Arbitrator" shall have the meaning set forth in Section 7.3(e).
"Average Closing Price" shall have the meaning set forth in Section 2.1(a).
"Business Day" shall mean any weekday other than a weekday on which banks
in the city of Boston, Massachusetts are authorized or required to be closed.
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"Cash Consideration" shall have the meaning set forth in Section
2.1(a)(ii).
"CERCLA" shall mean the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"Certificate of Merger" shall mean the certificate of merger or other
appropriate documents prepared and executed in accordance with Section 251(c) of
the Delaware General Corporation Law.
"Certificates" shall mean stock certificates that, immediately prior to the
Effective Time, represented Company Shares converted into Cash Consideration and
Merger Shares pursuant to Section 2.1.
"Claim Notice" shall mean written notification which contains (i) a
description of the Damages incurred or reasonably expected to be incurred by the
Indemnified Party and the Claimed Amount of such Damages, (ii) a statement that
the Indemnified Party is entitled to indemnification under Article VII for such
Damages and a reasonable explanation of the basis therefor, and (iii) a demand
for payment in the amount of such Damages.
"Claimed Amount" shall mean the amount of any Damages incurred or
reasonably expected to be incurred by the Indemnified Party.
"Closing" shall mean the closing of the transactions contemplated by this
Agreement.
"Closing Date" shall mean the date two business days after the satisfaction
or waiver of all of the conditions to the obligations of the Parties to
consummate the transactions contemplated hereby (excluding the delivery at the
Closing of any of the documents set forth in Article VI), or such other date as
may be mutually agreeable to the Parties.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commercial Rules" shall mean the Commercial Arbitration Rules of the AAA.
"Common Cash Consideration" shall have the meaning set forth in Section
2.1(a)(i).
"Common Share Equivalents" shall mean the Common Shares that would be
receivable upon conversion of the Preferred Shares if the Preferred Shares were
to be converted to Common Shares immediately prior to the Effective Time.
"Common Shares" shall mean the shares of common stock, $.01 par value per
share, of the Company.
"Company" shall have the meaning set forth in the first paragraph of this
Agreement.
"Company Certificate" shall mean a certificate to the effect that each of
the conditions specified in clause (c) of Section 6.1 and clauses (a) through
(e) (insofar as clause (e) relates to Legal Proceedings involving the Company)
of Section 6.2 is satisfied in all respects.
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"Company Intellectual Property" shall mean the Intellectual Property owned
by or licensed to the Company and covering, incorporated in, underlying or used
in connection with the Customer Deliverables or the Internal Systems.
"Company Material Adverse Effect" shall mean any material adverse change,
event, circumstance or development with respect to, or material adverse effect
on, the business, assets, liabilities, capitalization, condition (financial or
other), or results of operations of the Company; provided, however, that none of
the following shall be deemed in themselves, either alone or in combination, to
constitute, and none of the following shall be taken into account in determining
whether there has been or will be a Material Adverse Effect: (a) any adverse
change, effect, event occurrence, state of facts or development to the extent
attributable to the announcement or pendency of the transactions contemplated
hereby (including any cancellations of or delays in customer orders, any
reduction in sales, any disruption in supplier, distributor, partner or similar
relationships or any loss of employees); (b) any adverse change, effect, event,
occurrence, state of facts or development attributable to conditions affecting
the industries in which the Company participates, the economy of the United
States as a whole or foreign economies in any locations where the Company has
material operations or sales, (c) any adverse change, effect, event, occurrence,
state of facts or development arising from or relating to any change in
accounting requirements or principles or any change in applicable laws, rules or
regulations or the interpretation thereof, (d) any adverse change, effect,
event, occurrence, state of facts or development arising from or relating to
compliance with the terms of, or the taking of any action required by, this
Agreement, or (e) any adverse change, effect, event, occurrence, state of facts
of development arising from any action taken by Parent, the Merger Subsidiaries
or any of their respective directors, officers, employees, agents or Affiliates.
For the avoidance of doubt, the parties agree that the terms "material",
"materially" or "materiality" as used in this Agreement with an initial lower
case "m" shall have their respective customary and ordinary meanings, without
regard to the meaning ascribed to Company Material Adverse Effect.
"Company Merger" shall have the meaning set forth in Recital A.
"Company Merger Consideration" shall have the meaning set forth in Section
2.1(a)(ii).
"Company Optionholders" shall mean the holders of Options at the Effective
Time.
"Company Plan" shall mean any material Employee Benefit Plan maintained, or
contributed to, by the Company or any ERISA Affiliates of the Company.
"Company Shares" shall mean the Common Shares and the Preferred Shares
together.
"Company Stock Consideration" shall have the meaning set forth in Section
2.1(a)(i).
"Company Stock Plan" shall mean any stock option plan or other stock or
equity-related plan of the Company providing for awards of or based on the stock
of the Company.
"Company Stockholders" shall mean the stockholders of record of the Company
immediately prior to the Effective Time.
"Confidentiality Agreement" shall have the meaning set forth in Section
5.8(a).
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"Controlling Party" shall mean the party controlling the defense of any
Third Party Action.
"Customer Deliverables" shall mean (a) the products that the Company
currently manufactures, markets, sells or licenses, and (b) the services that
the Company currently provides.
"Damages" shall mean any and all debts, obligations and other liabilities
(whether absolute, accrued, contingent, fixed or otherwise, or whether known or
unknown, or due or to become due or otherwise), diminution in value, monetary
damages, fines, fees, penalties, interest obligations, deficiencies, losses and
expenses (including amounts paid in settlement, interest, court costs, costs of
investigators, fees and expenses of attorneys, accountants, financial advisors
and other experts, and other expenses of litigation), other than those costs and
expenses of arbitration of a Dispute which are to be shared by the Indemnified
Party and the Indemnifying Party as set forth in Section 7.3(e)(vi). Damages
shall not include any punitive, consequential or special damages or damages for
lost profits. The calculation of any Damages will reflect the amount of any
insurance proceeds received or reasonably expected to be received by the
Indemnified Party in respect of such Damages, net of all costs and expenses
incurred by any Indemnified Party in recovering such proceeds from its insurers.
"Disclosure Schedule" shall mean the disclosure schedule provided by the
Company to Parent on the date hereof and accepted in writing by Parent.
"Dispute" shall mean the dispute resulting if the Indemnifying Party in a
Response disputes its liability for all or part of the Claimed Amount.
"Dissenting Shares" shall have the meaning set forth in Section 2.1(c).
"Dividend" shall have the meaning set forth in Section 5.5(h).
"Effective Time" shall mean the time at which the Company files the
Certificate of Merger with the Secretary of State of the State of Delaware.
"Electing Series D Holders" shall mean those holders of Series D Preferred
Stock of the Company that elect to receive Series D Cash Consideration or Series
D Cash and Warrant and Option Consideration.
"Election Deadline" shall have the meaning set forth in Section 2.5.
"Election Form" shall have the meaning set forth in Section 2.5.
"Employee Benefit Plan" shall mean any "employee pension benefit plan" (as
defined in Section 3(2) of ERISA), any "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA), and any other written or oral plan, agreement
or arrangement involving direct or indirect compensation, including insurance
coverage, severance benefits, disability benefits, deferred compensation,
bonuses, stock options, stock purchase, phantom stock, stock appreciation or
other forms of incentive compensation or post-retirement compensation, in each
case that benefits employees or former employees of the Company or their
beneficiaries.
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"Environmental Law" shall mean any federal, state or local law, statute,
rule, order, judgment, Permit or regulation or the common law relating to the
environment, occupational health and safety, or exposure of persons or property
to Materials of Environmental Concern, including any statute, regulation,
administrative decision or order pertaining to: (i) the presence of or the
treatment, storage, disposal, generation, transportation, handling,
distribution, manufacture, processing, use, import, export, labeling, recycling,
registration, investigation or remediation of Materials of Environmental Concern
or documentation related to the foregoing; (ii) air, water and noise pollution;
(iii) groundwater and soil contamination; (iv) the release, threatened release,
or accidental release into the environment, the workplace or other areas of
Materials of Environmental Concern, including emissions, discharges, injections,
spills, escapes or dumping of Materials of Environmental Concern; (v) transfer
of interests in or control of real property which may be contaminated; (vi)
community or worker right-to-know disclosures with respect to Materials of
Environmental Concern; (vii) the protection of wild life, marine life and
wetlands, and endangered and threatened species; (viii) storage tanks, vessels,
containers, abandoned or discarded barrels and other closed receptacles; and
(ix) health and safety of employees and other persons. As used above, the term
"release" shall have the meaning set forth in CERCLA.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean any entity which is, or at any applicable time
was, a member of (1) a controlled group of corporations (as defined in Section
414(b) of the Code), (2) a group of trades or businesses under common control
(as defined in Section 414(c) of the Code), or (3) an affiliated service group
(as defined under Section 414(m) of the Code or the regulations under Section
414(o) of the Code), any of which includes or included the Company or the
Parent, as applicable.
"Escrow Agreement" shall mean an escrow agreement in substantially the form
attached hereto as Exhibit F.
"Escrow Agent" shall mean Wachovia Bank or another major commercial bank
mutually acceptable to Parent and the Company.
"Escrow Cash" shall mean the cash held in escrow under the Escrow
Agreement, including the portion of the Cash Consideration deposited therein and
any interest earned on the escrowed funds.
"Escrow Shares" shall have the meaning set forth in Section 2.1(b).
"Escrow Warrants" shall have the meaning set forth in Section 2.1(e).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Expected Claim Notice" shall mean a notice that, as a result of a legal
proceeding instituted by or written claim made by a third party, an Indemnified
Party reasonably expects to incur Damages for which it is entitled to
indemnification under Article VII.
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"Financial Statements" shall mean the audited consolidated balance sheets
and statements of income, changes in stockholders' equity and cash flows of the
Company as of the end of and for the fiscal year ended December 31, 2002.
"GAAP" shall mean United States generally accepted accounting principles
as in effect from time to time, consistently applied.
"Governmental Entity" shall mean any court, arbitrational tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency.
"Indemnification Representatives" shall mean Xxxx Xxxxxx and Xxxxxx
Xxxxxx.
"Indemnified Executive" shall mean each present and former director and
officer of the Company.
"Indemnified Party" shall mean a party seeking indemnification under
Article VII.
"Indemnifying Party" shall mean the party from whom indemnification is
sought by the Indemnified Party.
"Intellectual Property" shall mean all:
(a) patents, patent applications, patent disclosures and all
related continuation, continuation-in-part, divisional, reissue, reexamination,
utility model, certificate of invention and design patents, patent applications,
registrations and applications for registrations;
(b) trademarks, service marks, trade dress, Internet domain
names, logos, trade names and corporate names and registrations and applications
for registration thereof;
(c) copyrights and registrations and applications for
registration thereof;
(d) mask works and registrations and applications for
registration thereof;
(e) computer software, data and documentation;
(f) inventions, trade secrets and confidential business
information, whether patentable or nonpatentable and whether or not reduced to
practice, know-how, manufacturing and product processes and techniques, research
and development information, copyrightable works, financial, marketing and
business data, pricing and cost information, business and marketing plans and
customer and supplier lists and information;
(g) other proprietary rights relating to any of the foregoing
(including remedies against infringements thereof and rights of protection of
interest therein under the laws of all jurisdictions); and
(h) copies and tangible embodiments thereof.
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"Internal Systems" shall mean the internal computer systems of the
Company that are used in its business or operations, including computer hardware
systems, software applications and embedded systems.
"Lease" shall mean any lease or sublease pursuant to which the Company
leases or subleases from another party any real property.
"Legal Proceeding" shall mean any action, suit, proceeding, claim,
arbitration or investigation before any Governmental Entity or before any
arbitrator.
"Letter of Transmittal" shall have the meaning set forth in Section 2.5.
"Mailing Date" shall have the meaning set forth in Section 2.5.
"Major Stockholders" shall have the meaning set forth in Section 5.3(f).
"Materials of Environmental Concern" shall mean any: pollutants,
contaminants or hazardous substances (as such terms are defined under CERCLA),
pesticides (as such term is defined under the Federal Insecticide, Fungicide and
Rodenticide Act), hazardous wastes (as such terms are defined under the Resource
Conservation and Recovery Act), chemicals, other hazardous, radioactive or toxic
materials, oil, petroleum and petroleum products (and fractions thereof), or any
other material listed or subject to regulation under any Environmental Law.
"Mergers" shall mean the Company Merger and Parent Merger.
"Merger Shares" shall mean (i) the shares of New Parent Common Stock
issued pursuant to Section 2.1(a) and (ii) the Warrant Shares.
"Merger Sub I" shall have the meaning set forth in the first paragraph of
this Agreement.
"Merger Sub II" shall have the meaning set forth in the first paragraph
of this Agreement.
"Merger Subsidiary" shall have the meaning set forth in Section 1.1.
"Most Recent Balance Sheet" shall mean the balance sheet contained within
the Unaudited Financial Statements (subject to and adjusted for any items noted
in Section 3.6 of the Disclosure Schedule) until such point as the Financial
Statements are delivered to Parent, whereupon, in lieu of the balance sheet
contained within the Unaudited Financial Statements, the term "Most Recent
Balance Sheet" shall mean for all purposes hereunder the balance sheet contained
within the Financial Statements.
"Most Recent Balance Sheet Date" shall mean December 31, 2002.
"New Parent" shall have the meaning set forth in the first paragraph of
this Agreement.
"Non-controlling Party" shall mean the party not controlling the defense
of any Third Party Action.
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"Option" shall mean each option to purchase or acquire Common Shares,
whether issued by the Company pursuant to the Option Plan or otherwise.
"Option Conversion Ratio" shall have the meaning set forth in Section
2.1(e).
"Option Plan" shall mean the Company's 1998 Stock Option Plan.
"Ordinary Course of Business" shall mean the ordinary course of business
consistent with past custom and practice (including with respect to frequency
and amount).
"Owned Real Property" shall mean each item of real property owned by the
Company.
"Parent" shall have the meaning set forth in the first paragraph of this
Agreement.
"Parent Certificate" shall mean a certificate to the effect that each of
the conditions specified in clauses (a) and (c) of Section 6.1 and clauses (a)
through (f) (insofar as clause (f) relates to Legal Proceedings involving
Parent, New Parent or the Merger Subsidiaries of Section 6.3 is satisfied in all
respects.
"Parent Common Stock" shall mean the shares of common stock, $.01 par
value per share, of Parent.
"Parent Customer Deliverables" shall mean the products that Parent
currently manufactures, markets, sells and licenses.
"Parent Disclosure Schedule" shall mean the disclosure schedule provided
by Parent to the Company on the date hereof and accepted in writing by the
Company.
"Parent Intellectual Property" shall mean the Intellectual Property owned
or licensed to Parent and covering, incorporated in, underlying or used in
connection with the Parent Customer Deliverables and the Parent Internal
Systems.
"Parent Internal Systems" shall mean internal computer systems of Parent
that are used in its business or operations, including computer hardware
systems, software applications and embedded systems.
"Parent Material Adverse Effect" shall mean any material adverse change,
event, circumstance or development with respect to, or material adverse effect
on, the business, assets, liabilities, capitalization, condition (financial or
other), or results of operations of Parent; provided, however, that none of the
following shall be deemed in themselves, either alone or in combination, to
constitute, and none of the following shall be taken into account in determining
whether there has been or will be a Material Adverse Effect: (a) any adverse
change, effect, event occurrence, state of facts or development to the extent
attributable to the announcement or pendency of the transactions contemplated
hereby (including any cancellations of or delays in customer orders, any
reduction in sales, any disruption in supplier, distributor, partner or similar
relationships or any loss of employees); (b) any adverse change, effect, event,
occurrence, state of facts or development attributable to conditions affecting
the industries in which Parent participates, the economy of the United States as
a whole or foreign economies in any locations
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where Parent has material operations or sales, (c) any adverse change, effect,
event, occurrence, state of facts or development arising from or relating to any
change in accounting requirements or principles or any change in applicable
laws, rules or regulations or the interpretation thereof, (d) any adverse
change, effect, event, occurrence, state of facts or development arising from or
relating to compliance with the terms of, or the taking of any action required
by, this Agreement, or (e) any adverse change, effect, event, occurrence, state
of facts of development arising from any action taken by the Company or any of
the Company's respective directors, officers, employees, agents or Affiliates.
For the avoidance of doubt, the parties agree that the terms "material",
"materially" or "materiality" as used in this Agreement with an initial lower
case "m" shall have their respective customary and ordinary meanings, without
regard to the meaning ascribed to Parent Material Adverse Effect.
"Parent Merger" shall have the meaning set forth in Recital B.
"Parent Merger Consideration" shall have the meaning set forth in Section
2.2(a).
"Parent Plans" shall mean any material Employee Benefit Plan maintained,
or contributed to, by Parent or a Parent Subsidiary.
"Parent Reports" shall mean all reports filed by Parent with the SEC
since December 31, 1999 and prior to the date hereof.
"Parent Shares" shall have the meaning set forth in Section 2.2(a).
"Parent Stock Plans" shall mean Parent's 1996 Stock Option Plan, 2000
Stock Incentive Plan and 2000 Employee Stock Purchase Plan.
"Parent Subsidiaries" shall mean the Merger Subsidiaries and Technology
Drive LLC.
"Parties" shall mean Parent, New Parent, the Merger Subsidiaries and the
Company.
"Permits" shall mean all material permits, licenses, registrations,
certificates, orders, approvals, franchises, variances and similar rights issued
by or obtained from any Governmental Entity (including those issued or required
under Environmental Laws and those relating to the occupancy or use of owned or
leased real property).
"Preferred Shares" shall mean the shares of preferred stock, $.01 par
value per share, of the Company.
"Proxy Statement/Prospectus" shall mean a proxy statement/prospectus
prepared and distributed by Parent for the purpose of soliciting proxies from
the stockholders of Parent for the approval by the stockholders of Parent of the
Transaction Issues.
"Reasonable Best Efforts" shall mean best efforts, to the extent
commercially reasonable.
"Requisite Stockholder Approval" shall mean the adoption of this
Agreement and the approval of the Company Merger by the holders of the number of
Company Shares required for
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such adoption and approval under the General Corporation Law of Delaware, the
Company's Certificate of Incorporation and applicable contractual provisions.
"Response" shall mean a written response containing the information
provided for in Section 7.3(c).
"Rule 145 Affiliates" shall mean affiliates of the Company within the
meaning of Rule 145 promulgated under the Securities Act.
"S-4 Registration Statement" shall mean a registration statement on Form
S-4 of Parent for the purposes of (1) registering the Merger Shares under the
Securities Act, (2) soliciting proxies or written consents from stockholders of
the Company for the purpose of obtaining the Requisite Stockholder Approval, and
(3) soliciting proxies from the stockholders of Parent for the purpose of
obtaining the approval by the stockholders of Parent of the issuance of shares
of Parent Common Stock in the Mergers.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Security Interest" shall mean any mortgage, pledge, security interest,
encumbrance, charge or other lien (whether arising by contract or by operation
of law), other than (a) statutory liens for current Taxes, special assessments
or other governmental charges not yet due and payable or the amount or validity
of which is being contested in good faith by appropriate proceedings and for
which appropriate reserves have been established in accordance with GAAP, (b)
mechanics', materialmen's, carriers', workers', repairers' and similar statutory
liens arising or incurred in the Ordinary Course of Business, (c) zoning,
entitlement, building and other land use regulations imposed by governmental
agencies having jurisdiction over any Owned Real Property which are not violated
in any material respect by the current use and operation of the Owned Real
Property, (d) deposits or pledges made in connection with, or to secure payment
of, worker's compensation, unemployment insurance, old age pension programs
mandated under applicable laws and legal requirements or other social security,
(e) covenants, conditions, restrictions, easements, encumbrances and other
similar matters of record affecting title to but not adversely affecting current
occupancy or use of the Owned Real Property in any material respect, (f)
restrictions on the transfer of securities arising under federal and state
securities laws and (g) liens that would not reasonably likely have a Company
Material Adverse Effect or Parent Material Adverse Effect, as applicable.
"Series D Cash and Warrant and Option Consideration" shall mean the
quotient obtained by dividing (a) the difference between $27,500,000 minus the
aggregate Series D Cash Consideration by (b) the difference between (i) the
aggregate number of Common Shares and Common Share Equivalents then outstanding
plus the number of Common Shares issuable upon exercise of then outstanding
Options, minus (ii) the aggregate Series D Cash Election Shares.
"Series D Cash and Warrant Election" shall have the meaning set forth in
Section 2.5.
"Series D Cash and Warrant Election Shares" shall have the meaning set
forth in Section 2.5.
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"Series D Cash Consideration" shall have the meaning set forth in Section
2.1(a)(ii).
"Series D Cash Election" shall have the meaning set forth in Section 2.5.
"Series D Cash Election Shares" shall have the meaning set forth in
Section 2.5.
"Series D Shares" shall mean the Company's Series D Preferred Stock.
"Share Exchange Ratio" shall have the meaning set forth in Section
2.1(a)(i).
"Subsidiary" shall mean any corporation, partnership, trust, limited
liability company or other non-corporate business enterprise in which the
Company holds stock or other ownership interests representing (a) more than 50%
of the voting power of all outstanding stock or ownership interests of such
entity or (b) the right to receive more than 50% of the net assets of such
entity available for distribution to the holders of outstanding stock or
ownership interests upon a liquidation or dissolution of such entity.
"Superior Offer" shall mean an unsolicited bona fide written offer to
acquire (whether by way of merger, consolidation, share exchange, stock purchase
or asset purchase) all of the outstanding capital stock or all or substantially
all of the assets of the Company, which satisfies each of the following
conditions: (A) such offer is subject only to customary conditions (which may
include the termination of this Agreement, but which may not include any
financing condition), (B) the Board of Directors of the Company reasonably
concludes, after consultation with its outside legal counsel and its financial
advisors, that such offer would likely be consummated if the Company were to
accept it, and (C) the Board of Directors of the Company reasonably concludes,
after consultation with its financial advisors, that such offer would, if
consummated, constitute a transaction which is more favorable, from a financial
point of view, to the stockholders of the Company than the Company Merger.
"Surviving Corporation" shall have the meaning set forth in Section 1.1.
"Taxes" (including with correlative meaning, the terms "Tax" and
"Taxable") shall mean all taxes or other similar assessments or liabilities,
including without limitation, income, gross receipts, ad valorem, premium,
value-added, excise, real property, personal property, assets, sales, use,
transfer, withholding, employment, unemployment, insurance, social security,
business license, business organization, environmental, workers compensation,
payroll, profits, license, lease, service, service use, severance, stamp,
occupation, windfall profits, customs, duties, franchise, net worth, capital
stock, gains and other taxes imposed by the United States of America or any
state, local or foreign government, or any agency thereof, or other political
subdivision of the United States or any such government, and any interest,
fines, penalties, assessments or additions to tax resulting from, attributable
to or incurred in connection with any tax or any contest or dispute thereof.
"Tax Returns" shall mean all reports, returns, declarations, statements
or other information required to be filed with a taxing authority in connection
with Taxes.
"Third Party Action" shall mean any suit or proceeding by a person or
entity other than a Party for which indemnification may be sought by a Party
under Article VII.
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"Total Option Consideration" means the value of the total consideration to
be received by a holder of an Option pursuant to this Agreement. The Total
Option Consideration shall be the sum of (a) the aggregate Warrant Value of the
Warrants a holder of an Option is entitled to receive (including Warrants to be
placed in escrow) and (b) the product of the Series D Cash and Warrant and
Option Consideration and the number of Options held by such holder.
"Transaction Issues" shall mean approval of this Agreement and the Mergers.
"2003 Reports" shall have the meaning set forth in the first paragraph of
Article IV.
"Unaudited Financial Statements" shall have the meaning set forth in
Section 3.6.
"Value" of Escrow Shares shall have the meaning set forth in the Escrow
Agreement.
"Warrants" shall have the meaning set forth in Section 2.1(a).
"Warrant Baseline Per Share" shall mean a fraction, the numerator of which
is 2,500,000 and the denominator of which is the sum of (a) Common Shares
issuable upon exercise of Options and (b) outstanding Common Shares and Common
Share Equivalents.
"Warrant Excess Per Share" shall mean the difference between the Warrant
Post-Reduction Per Share and the Warrant Baseline Per Share.
"Warrants Per Share" shall mean the Warrant Post-Reduction Per Share plus,
if the Warrant Post-Reduction Per Share is greater than the Warrant Baseline Per
Share, the Warrant Excess Per Share.
"Warrant Per Share for Series D Cash and Warrant Electors" shall mean the
lesser of the Warrant Baseline Per Share or the Warrant Post-Reduction Per
Share.
"Warrant Post-Reduction Per Share" shall mean a fraction, the numerator of
which is the Aggregate Warrant Shares and the denominator of which is the sum of
(a) Common Shares issuable upon exercise of Options and (b) outstanding Common
Shares and Common Share Equivalents (other than Series D Cash Election Shares).
"Warrant Shares" shall mean the shares of the New Parent Common Stock
issuable upon exercise of the Warrants.
"Warrant Value" means, with respect to a Warrant, the value of such Warrant
calculated in accordance with the Black Scholes calculation spreadsheet provided
to Parent by the Company prior to the date hereof and to be provided to the
Escrow Agent at the Effective Time, using the following assumptions:
Risk Free Rate of Return: 3%
Expiration Date of Warrant: Third Anniversary of the Closing Date
Expected Volatility: 100%
Current Price: The average of the closing prices of Parent
Common Stock on the NASDAQ National Market
(as reported in the Wall
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Street Journal or, if not reported thereby,
any other authoritative source) during the ten
most recent trading days on which shares of
Parent Common Stock actually traded ending
three days prior to the date such Warrant is
valued.
ARTICLE X
MISCELLANEOUS
10.1 Press Releases and Announcements. No Party shall issue any press
release or public announcement relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided, however, that
any Party may make any public disclosure it believes in good faith is required
by applicable law, regulation or stock market rule (in which case the disclosing
Party shall use Reasonable Best Efforts to advise the other Parties and provide
them with a copy of the proposed disclosure and an opportunity to comment on
such disclosure prior to making the disclosure. Notwithstanding anything to the
contrary in this Agreement or the Confidentiality Agreement, and except as
reasonably necessary to comply with applicable securities laws, the parties (and
each employee, shareholder, representative, or other agent of the parties) may
disclose to any and all persons, without any limitation of any kind, the tax
treatment and tax structure of the transaction contemplated by this Agreement
and all materials of any kind (including tax opinions or analyses) that are
provided to the parties related to such tax treatment and tax structure,
provided, however, that this provision shall not permit disclosure until the
earliest of the date of the public announcement of discussions relating to the
transaction, the date of the public announcement of the transaction or the date
of the execution of this Agreement. For this purpose, "tax structure" is limited
to any facts relevant to the federal income tax treatment of the transaction
contemplated by this Agreement and does not include information relating to the
identity of the parties.
10.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns; provided, however, that (a) the provisions in
Article I concerning issuance of the Merger Shares are intended for the benefit
of the Company Stockholders, (b) the provisions of Article VII concerning
indemnification are intended for the benefit of the Company Stockholders, (c)
the provisions of Section 5.15 are intended for the benefit of the employees of
the Company, and (d) the provisions in Section 5.10 are intended for the benefit
of the directors and officers of the Company.
10.3 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, with respect to the subject matter hereof; provided that the
Confidentiality Agreement shall remain in effect in accordance with its terms.
10.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns, each of which successors or permitted assigns will be
deemed to be a Party hereto for all
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purposes hereof. No Party may assign either this Agreement or any of its rights,
interests or obligations hereof under without the prior written approval of the
other Parties.
10.5 Counterparts and Facsimile Signature. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument. This Agreement
may be executed by facsimile signature.
10.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered four Business
Days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, one Business Day after it is sent for next business day
delivery via a reputable nationwide overnight courier service, or upon receipt
of confirmation of good transmission in the case of facsimile transmission, in
each case to the intended recipient as set forth below:
If to the Company: Copy to:
----------------- -------
Northern Power Systems, Inc. Xxxxx X. Fine
182 Mad River Park Ropes & Xxxx
P.O. Box 999 One International Place
Waitsfield, VT 05673 Xxxxxx, XX 00000
Attention: President Fax: (000) 000-0000
Fax: (000) 000-0000
If to Parent, New Parent or a Merger Subsidiary: Copy to:
----------------------------------------------- -------
Proton Energy Systems, Inc. Xxxxxxx X. Xxxxxxx
00 Xxxxxxxxxx Xxxxx Xxxx and Xxxx XXX
Xxxxxxxxxxx, XX 00000 0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Attention: President Suite 1000
Fax: (000) 000-0000 Xxxxxxxxxx, X.X. 00000
Fax: (000) 000-0000
Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telex, ordinary mail or electronic mail), but no such notice,
request, demand, claim or other communication shall be deemed to have been duly
given unless and until it actually is received by the party for whom it is
intended. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
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10.8 Governing Law. This Agreement (including the rights of the Parties
and the validity and applicability of the arbitration provisions of this
Agreement, the conduct of any arbitration of a Dispute, the enforcement of any
arbitral award made hereunder and any other questions of arbitration law or
procedure arising hereunder) shall be governed by and construed in accordance
with the internal laws of the State of Delaware without giving effect to any
choice or conflict of law provision or rule (whether of the State of Delaware or
any other jurisdiction) that would cause the application of laws of any
jurisdictions other than those of the State of Delaware.
10.9 Amendments and Waivers. The Parties may mutually amend any provision
of this Agreement at any time prior to the Closing; provided, however, that any
amendment effected subsequent to the Requisite Stockholder Approval shall be
subject to any restrictions contained in the Delaware General Corporation Law.
No amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by all of the Parties. No waiver of any right or
remedy hereunder shall be valid unless the same shall be in writing and signed
by the Party giving such waiver. No waiver by any Party with respect to any
default, misrepresentation or breach of warranty or covenant hereunder shall be
deemed to extend to any prior or subsequent default, misrepresentation or breach
of warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence. No delay or omission on the
part of any parts in exercising any right, power or remedy under this Agreement
will so execute as a waiver thereof.
10.10 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
10.11 Specific Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached or violated. Accordingly, each of the Parties
agrees that, without posting bond or other undertaking, the other Parties will
be entitled to an injunction or injunctions to prevent breaches or violations of
the provisions of this Agreement and to enforce specifically this Agreement and
the terms and provisions hereof in any claim, action, cause of action or suit
(whether in contract or tort or otherwise), litigation (whether at law or in
equity, whether civil or criminal), controversy, assessment, arbitration,
investigation, hearing, charge, complaint, demand, notice or proceeding to,
from, by or before any Governmental Authority instituted in any court of the
United States or any state thereof having jurisdiction over the parties and the
matter in addition to any other remedy to which it may be entitled, at law or in
equity. Each Party further agrees that, in the event of any action for specific
performance in respect of such breach or violation, it will not assert that the
defense that a remedy at law would be adequate.
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10.12 Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
THAT CANNOT BE WAIVED, THE PARTIES HEREBY WAIVE, AND COVENANT THAT THEY WILL NOT
ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY
JURY IN ANY ACTION ARISING IN WHOLE OR IN PART UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE CONTEMPLATED TRANSACTIONS, WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. THE
PARTIES AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT
AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG
THE PARTIES IRREVOCABLY TO WAIVE ITS RIGHT TO TRIAL BY JURY IN ANY PROCEEDING
WHATSOEVER BETWEEN THEM RELATING TO THIS AGREEMENT OR ANY OF THE CONTEMPLATED
TRANSACTIONS WILL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A
JUDGE SITTING WITHOUT A JURY.
10.13 Construction.
(a) The language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent, and no rule of
strict construction shall be applied against any Party.
(b) Any reference to any federal, state, local or foreign statute or
law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.
(c) Any reference herein to "including" shall be interpreted as
"including without limitation."
(d) Any reference to any Article, Section or paragraph shall be
deemed to refer to an Article, Section or paragraph of this Agreement, unless
the context clearly indicates otherwise.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
PROTON ENERGY SYSTEMS, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
PES NEW PARENT, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
PES-1 MERGER SUB, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
PES-2 MERGER SUB, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------------
Title: President and Chief Executive Officer
--------------------------------------
NORTHERN POWER SYSTEMS, INC.
By: /s/ Xxxxx Xxxxxxx
-----------------------------------------
Title: President
--------------------------------------
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The undersigned, being the duly elected Secretary or Assistant Secretary of each
Merger Subsidiary, hereby certifies that this Agreement has been adopted by the
holders of shares representing a majority of the votes represented by the
outstanding shares of capital stock of the Merger Subsidiaries entitled to vote
on this Agreement.
/s/ Xxxx X. Xxxxxxx
--------------------------------------
Secretary or Assistant Secretary
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The following stockholders of the Company hereby execute this Agreement for the
limited purpose of agreeing to and becoming bound by the provisions of Section
5.3(f).
/s/ Xxxx X. Xxxxxx
-----------------------------------
Xxxx X. Xxxxxx
/s/ Xxxxx Xxxxxxx
-----------------------------------
Xxxxx Xxxxxxx
BOMOSEEN ASSOCIATES, L.P.
By: /s/ Xxxxxxxx Xxxxx
------------------------------
Xxxxxxxx Xxxxx
General Partner
PERSEUS 2000, L.L.C.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
NTH POWER TECHNOLOGIES II, L.P.
By: /s/ Xxxxx Xxxxx
------------------------------
Name: Xxxxx Xxxxx
Title: Managing Director
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SCHEDULES AND EXHIBITS
Disclosure Schedule
Parent Disclosure Schedule
Exhibit A -- Form of Warrant
Exhibit B -- Form of Investment Representation Letter
Exhibit C -- Opinion of Counsel to the Company
Exhibit D -- Form of Lockup Agreement
Exhibit E -- Opinion of Counsel to Parent and the Merger Subsidiaries
Exhibit F -- Escrow Agreement
