EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER EXECUTION COPY
BY AND AMONG
XXXXXX CORPORATION,
SUNSHINE MERGER CORP.,
AND
ENCODA SYSTEMS HOLDINGS, INC.
Dated as of October 6, 2004
TABLE OF CONTENTS
PAGE
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Article I - DEFINITIONS...........................................................................1
1.1 Certain Definitions...................................................................1
Article II - THE MERGER...........................................................................11
2.1 The Merger...........................................................................11
2.2 Effective Time.......................................................................11
2.3 Effects of the Merger................................................................11
2.4 Certificate of Incorporation and By-laws.............................................11
2.5 Directors............................................................................11
2.6 Officers.............................................................................11
Article III - EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES; PAYMENT OF AGGREGATE MERGER CONSIDERATION..............................12
3.1 Effect on Capital Stock..............................................................12
3.2 Exchange Fund; Exchange of Certificates; Payment of Merger Consideration.............13
3.3 No Further Ownership Rights in Company Common Stock..................................15
3.4 Termination of Exchange Fund.........................................................15
3.5 Investment of Exchange Fund..........................................................15
3.6 Lost Certificates....................................................................15
3.7 Withholding Rights...................................................................16
3.8 Fractional Shares....................................................................16
Article IV - DETERMINATION OF AGGREGATE MERGER CONSIDERATION; OPTIONS; ESCROW; PURCHASE PRICE
ADJUSTMENT...........................................................................16
4.1 Determination of Aggregate Merger Consideration and Total Per Share Merger
Consideration........................................................................16
4.2 Options..............................................................................17
4.3 Escrow Deposits......................................................................17
4.4 Purchase Price Adjustment............................................................19
Article V - CLOSING AND TERMINATION..............................................................22
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TABLE OF CONTENTS
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5.1 Closing Date.........................................................................22
5.2 Termination of Agreement.............................................................22
5.3 Procedure Upon Termination...........................................................23
5.4 Effect of Termination................................................................23
Article VI - REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................23
6.1 Organization and Good Standing.......................................................24
6.2 Authorization of Agreement...........................................................24
6.3 Conflicts; Consents of Third Parties.................................................25
6.4 Capitalization.......................................................................25
6.5 Subsidiaries.........................................................................26
6.6 Financial Statements.................................................................26
6.7 No Undisclosed Liabilities...........................................................27
6.8 Absence of Certain Developments......................................................27
6.9 Taxes................................................................................30
6.10 Real and Personal Property...........................................................30
6.11 Intellectual Property................................................................31
6.12 Material Contracts...................................................................34
6.13 Employee Benefits Plans..............................................................35
6.14 Labor................................................................................39
6.15 Litigation...........................................................................39
6.16 Compliance with Laws; Permits........................................................40
6.17 Environmental Matters................................................................40
6.18 Financial Advisors...................................................................41
6.19 Insurance............................................................................41
6.20 Transactions with Affiliates.........................................................41
6.21 Board Approval; State Takeover Statutes..............................................41
6.22 Disclosure...........................................................................42
6.23 No Other Representations or Warranties; Disclosure Schedules.........................42
Article VII - REPRESENTATIONS AND WARRANTIES OF PARENT.............................................42
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7.1 Organization and Good Standing.......................................................42
7.2 Authorization of Agreement...........................................................43
7.3 Conflicts; Consents of Third Parties.................................................43
7.4 Litigation...........................................................................44
7.5 Investment Intention.................................................................44
7.6 Financial Advisors...................................................................44
7.7 Financing............................................................................44
7.8 Creditors............................................................................44
7.9 Condition of the Business............................................................44
Article VIII - COVENANTS............................................................................45
8.1 Access to Information................................................................45
8.2 Conduct of the Business Pending the Closing..........................................45
8.3 Consents.............................................................................48
8.4 Regulatory Approvals.................................................................48
8.5 Further Assurances; Closing Payoff Amount............................................50
8.6 Confidentiality......................................................................50
8.7 Indemnification, Exculpation and Insurance...........................................50
8.8 Publicity............................................................................52
8.9 Employment and Employee Benefits.....................................................53
8.10 Shareholder Consent..................................................................53
8.11 Supplementation and Amendment of Schedules...........................................53
8.12 No Solicitation......................................................................55
8.13 Delivery of Revised Draft Financial Statements.......................................55
8.14 Closing Date Operations..............................................................55
8.15 Tax Matters..........................................................................55
Article IX - CONDITIONS TO CLOSING................................................................55
9.1 Conditions Precedent to Obligations of Parent........................................55
9.2 Conditions Precedent to Obligations of the Company...................................57
9.3 Frustration of Closing Conditions....................................................57
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Article X - SURVIVAL; INDEMNIFICATION............................................................57
10.1 Survival Past Closing................................................................57
10.2 Indemnification for Parent, Merger Sub and Surviving Corporation.....................58
10.3 Limitation on Indemnification........................................................59
10.4 Exclusive Remedy.....................................................................59
10.5 Indemnification Procedures...........................................................60
10.6 Tax Treatment of Indemnity Payments..................................................62
10.7 No Consequential Damages; No Contribution or Subrogation.............................62
Article XI - MISCELLANEOUS........................................................................63
11.1 Payment of Sales, Use or Similar Taxes...............................................63
11.2 Expenses.............................................................................63
11.3 Stockholder Representative...........................................................63
11.4 Submission to Jurisdiction; Consent to Service of Process............................64
11.5 Entire Agreement; Amendments and Waivers.............................................64
11.6 Governing Law........................................................................65
11.7 Notices..............................................................................65
11.8 Severability.........................................................................66
11.9 Binding Effect; Assignment; Third Party Beneficiaries................................66
11.10 Counterparts.........................................................................66
11.11 Waiver of Jury Trial.................................................................67
11.12 Performance..........................................................................67
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TABLE OF CONTENTS
(CONTINUED)
Exhibits
--------
Exhibit A - Form of Support Agreement
Exhibit 1.1(a) - Form of Indemnity Escrow Agreement
Exhibit 3.2(b) - Letter of Transmittal
Exhibit 4.4(1) - Calculation of Net Assets as of June 30, 2004
Exhibit 4.4(2) - Transaction Tax Benefits
Exhibit 8.11(b) - Parent's Knowledge
MERGER AGREEMENT
This
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as
of October 6, 2004 is among XXXXXX CORPORATION, a
Delaware corporation
("Parent"), SUNSHINE MERGER CORP., a
Delaware corporation and a direct,
wholly-owned Subsidiary of Parent ("Merger Sub"), and Encoda Systems Holdings,
Inc., a
Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Merger
Sub and the Company have approved and declared advisable this Agreement and the
merger of Merger Sub with and into the Company (the "Merger"), upon the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, simultaneously with the execution and delivery of
this Agreement and as a condition and inducement to the willingness of Parent
and Merger Sub to enter into this Agreement, Parent and certain stockholders of
the Company listed on Schedule A hereto (each a "Principal Stockholder" and,
collectively, the "Principal Stockholders") are entering into a support
agreement in the form attached as Exhibit A, pursuant to which, among other
things, such Principal Stockholders have agreed to vote to adopt this Agreement
and to take certain other actions in furtherance of the Merger and the
transactions contemplated hereby, in each case upon the terms and subject to the
conditions set forth therein; and
WHEREAS, Parent, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter contained, the parties hereby agree
as follows:
ARTICLE I - DEFINITIONS
1.1 Certain Definitions.
(a) For purposes of this Agreement, the following terms shall
have the meanings specified in this Section 1.1:
"Affiliate" means, with respect to any Person, any other
Person that, directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such Person, and
the term "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through ownership of voting securities, by Contract or otherwise.
"Aggregate Option Consideration" means the total amount of
consideration due to all holders of Vested Options pursuant to Section 4.2,
prior to any applicable withholding Taxes.
"Aggregate Option Exercise Amount" means the aggregate amount
of the per share exercise prices of all of the Vested Options.
"Banker's Percentage" means, with respect to any amount paid
into the Escrow Deposits, the percentage that would be payable under the
Engagement Letters with respect to such amount if such amount were payable at
Closing as "Consideration" (as that term is defined in the Engagement Letters).
"Bankers" means Bear, Xxxxxxx & Co. Inc. and X.X. Xxxxxx
Securities Inc.
"Business Day" means any day of the year on which national
banking institutions in New York are open to the public for conducting business
and are not required or authorized to close.
"Cash" means the amount of cash and cash equivalents required
to be reflected on the balance sheet of the Company and its Subsidiaries, on a
consolidated basis, as determined in accordance with GAAP.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Company Cash" means the aggregate amount of Cash immediately
prior to the Effective Time.
"Company Indebtedness" means all Indebtedness of the Company
and its Subsidiaries, on a consolidated basis, immediately prior to the
Effective Time.
"Company IP" means all Intellectual Property owned (in whole
or in part) by the Company or any of its Subsidiaries.
"Company Transaction Expenses" means the costs and expenses
(including legal, accounting, investment banking, advisory and other fees and
expenses) of the Company and its Subsidiaries incurred but not paid prior to the
close of business on the Closing Date in connection with the process of selling
the Company, including with respect to this Agreement and the transactions
contemplated hereby and including (i) employee bonuses or similar payments made
or triggered in connection with the transactions contemplated hereby and (ii)
the Appraisal Excess Amount to the extent required to be part of Company
Transaction Expenses, as set forth in Section 3.1(d), but excluding (A) unpaid
costs incurred in connection with the 2003 Audited Statements to the extent
included in the calculation of Estimated Net Assets or Closing Net Assets and
(B) the costs and expenses to be borne by Parent set forth in Sections 11.1 and
11.2 hereof. Notwithstanding anything to the contrary herein, the Contingent
Expense Amounts shall not be included in Company Transaction Expenses.
"Contingent Expense Amounts" means the portions of the Escrow Deposits
representing contingent fees payable to the Bankers under the terms of the
Engagement Letters and, if applicable, contingent portions of the Proposed
Transaction Bonuses.
2
"Contract" means any contract, indenture, note, bond, lease,
license, commitment, instrument or other agreement.
"Copyrights" means all copyrights, whether in published or
unpublished works; all databases, data collections and rights therein, mask work
rights, software (including Source Code), website content; all rights to
compilations, collective works and derivative works of any of the foregoing and
moral rights in any of the foregoing; and all registrations and applications for
registration for any of the foregoing and any renewals or extensions thereof.
"DGCL" means the General Corporation Law of the State of
Delaware.
"Dissenting Shares" means shares of Company Common Stock held
as of the Effective Time by a stockholder of the Company who has not consented
in writing or voted such shares of Company Common Stock in favor of the adoption
of this Agreement and with respect to which appraisal is duly demanded and
perfected in accordance with Section 262 of the DGCL and not effectively waived,
withdrawn or forfeited.
"Engagement Letters" means, collectively, the engagement
letters between the Company and each of Bear, Xxxxxxx & Co. Inc. and X.X. Xxxxxx
Securities Inc. with respect to their engagement in connection with the
transactions contemplated hereby, true and correct copies of which are attached
to the Disclosure Schedule.
"Environmental Law" means any Law or other legal requirement
currently in effect relating to the protection of human health and safety, the
environment or natural resources, or discharges of Hazardous Materials including
the Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. Section 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. App. Section 1801 et seq.), the Resource Conservation and Recovery Act
(42 U.S.C. Section 6901 et seq.), the Clean Water Act (33 U.S.C. Section 1251 et
seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances
Control Act (15 U.S.C. Section 2601 et seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq.), and the
Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.), as each has
been or may be amended and the regulations promulgated pursuant thereto.
"GAAP" means generally accepted accounting principles in the
United States as of the relevant date.
"Governmental Body" means any government or governmental or
regulatory entity, body thereof, or political subdivision thereof, whether
federal, state, local, foreign, or supranational, or any agency, instrumentality
or authority thereof, or any court or arbitrator (public or private).
"Hazardous Material" means any substance, material or waste
that is regulated, classified, or otherwise characterized under or pursuant to
any Environmental Law as "hazardous," "toxic," "pollutant," "contaminant,"
"radioactive," or words of similar meaning or effect, including petroleum and
its by-products, asbestos, polychlorinated biphenyls, radon, mold and urea
formaldehyde insulation.
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"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
"Indebtedness" of any Person means, without duplication, (i)
all obligations of such Person (A) for the principal of, interest on, and
premium (if any) and breakage costs (if any) in respect of money borrowed or (B)
evidenced by notes, debentures, bonds or other similar instruments for the
payment of which such Person is responsible or liable; (ii) all obligations of
such Person issued or assumed as the deferred purchase price of property, all
conditional sale obligations of such Person and all obligations of such Person
under any title retention agreement (but excluding trade accounts payable and
other accrued current liabilities arising in the Ordinary Course of Business
(other than the current liability portion of any indebtedness for borrowed
money)), including all obligations of such Person for the payment of money
relating to leases that are required to be classified as capitalized lease
obligations in accordance with GAAP; (iii) all obligations of such Person for
the reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction; (iv) all obligations of such Person under interest
rate or currency swap transactions (valued at the termination value thereof);
(v) all obligations of the type referred to in clauses (i) through (iv) of other
Persons for the payment of which such Person is responsible or liable, directly
or indirectly, as obligor, guarantor, surety or otherwise, including guarantees
of such obligations; and (vi) all obligations of the type referred to in clauses
(i) through (iv) of other Persons secured by (or for which the holder of such
obligations has an existing right, contingent or otherwise, to be secured by)
any Lien on any property or asset of such Person (whether or not such obligation
is assumed by such Person).
"Indemnity Escrow Agent" means the escrow agent identified in
the form of Indemnity Escrow Agreement attached hereto as Exhibit 1.1(a), or
such bank or trust company of similar size as may be mutually reasonably
acceptable to Parent and the Company.
"Indemnity Escrow Agreement" means an escrow agreement to be
entered into prior to the Closing in substantially the form attached as Exhibit
1.1(a), together with such changes as may be reasonably requested by the
Indemnity Escrow Agent and mutually reasonably acceptable to Parent and the
Company.
"Intellectual Property" means all Copyrights, Patents,
Trademarks and Trade Secrets.
"IRS" means the Internal Revenue Service.
"Knowledge of the Company" means the actual knowledge of those
Persons identified on Schedule 1.1(a).
"Law" means any foreign, federal, state or local law, statute,
code, ordinance, rule or regulation of any Governmental Body.
4
"Legal Proceeding" means any judicial, administrative,
investigative or arbitral actions, suits or proceedings (public or private) by
or before a Governmental Body.
"Liability" means any debt, liability or obligation (whether
direct or indirect, known or unknown, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, asserted or unasserted, or due or to
become due) and including all costs and expenses relating thereto.
"Lien" means any lien, encumbrance, pledge, mortgage, deed of
trust, security interest, claim, lease, charge, option, right of first refusal,
easement, servitude or transfer restriction.
"Material Adverse Effect" means (i) a change, event,
circumstance or effect that is or is reasonably likely to be materially adverse
to the business, assets, liabilities, properties, results of operations or
financial condition of the Company and its Subsidiaries (taken as a whole) or
(ii) a material adverse effect on the ability of the Company to consummate the
transactions contemplated by this Agreement, other than a change, event,
circumstance or effect to the extent resulting from an Excluded Matter.
"Excluded Matter" means any one or more of the following: (i) the effect of any
change in the United States or foreign economies or securities or financial
markets in general; (ii) the effect of any change that generally affects any
industry in which the Company or any of its Subsidiaries operates; (iii) the
effect of any change arising in connection with earthquakes, hostilities, acts
of war, sabotage or terrorism or military actions or any escalation or material
worsening of any such hostilities, acts of war, sabotage or terrorism or
military actions existing or underway as of the date hereof; (iv) the effect of
any action taken by Parent or its Affiliates with respect to the transactions
contemplated hereby or with respect to the Company or its Subsidiaries; (v) the
effect of any changes in applicable Laws or accounting rules; (vi) any effect
resulting from the public announcement of this Agreement or (vii) compliance
with the terms of this Agreement or the consummation of the transactions
contemplated by this Agreement; provided, that the foregoing clause (vii) shall
not be applicable with respect to the representation set forth in Section 6.3 or
the representation in Section 6.11(b).
"Object Code" means computer software that is substantially or
entirely in binary form and that is intended to be directly executable by a
computer after suitable processing and linking but without any intervening steps
of compilation or assembly.
"Order" means any order, injunction, judgment, decree, ruling,
writ, assessment or arbitration award of a Governmental Body.
"Ordinary Course of Business" means the ordinary and usual
course of business of the Company and its Subsidiaries, consistent with past
practice.
"Patents" means all patents, industrial and utility models,
industrial designs, xxxxx patents, patents of importation, patents of addition,
certificates of invention, and any other indicia of invention ownership issued
or granted by any
5
Governmental Body, including all provisional applications, priority and other
applications, divisionals, continuations (in whole or in part), extensions,
reissues, re-examinations or equivalents or counterparts of any of the
foregoing.
"Permits" means any approvals, authorizations, consents,
licenses, permits or certificates of a Governmental Body.
"Permitted Exceptions" means (i) all defects, exceptions,
restrictions, easements, rights of way and encumbrances disclosed in policies of
title insurance which have been made available to Parent; (ii) statutory liens
for current Taxes, assessments or other governmental charges not yet delinquent
or the amount or validity of which is being contested in good faith by
appropriate proceedings, provided an appropriate reserve is established therefor
as a liability; (iii) mechanics', carriers', workers', repairers' and similar
Liens arising or incurred in the Ordinary Course of Business; (iv) zoning,
entitlement and other similar land use regulations by any Governmental Body; (v)
Liens securing Indebtedness of the Company or any of its Subsidiaries as
disclosed in the Disclosure Schedules; (vi) title of a lessor under a capital or
operating lease; and (vii) such other imperfections in title, charges,
easements, restrictions and encumbrances, if any, that, individually or in the
aggregate, do not materially impair the continued use and operation of the
assets to which they relate.
"Person" means any individual, corporation, partnership, firm,
joint venture, limited liability company, association, joint-stock company,
trust, unincorporated organization, Governmental Body or other entity.
"Release" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, or leaching into
the indoor or outdoor environment, or into or out of any property.
"Remedial Action" means all actions to (i) clean up, remove,
treat or in any other way address any Hazardous Material, (ii) prevent the
Release of any Hazardous Material so it does not endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment, (iii)
perform pre-remedial studies and investigations or post-remedial monitoring and
care and (iv) to correct a condition of noncompliance with Environmental Laws.
"Source Code" means computer software that may be displayed or
printed in human-readable form, including all related programmer comments,
annotations, flowcharts, diagrams, help text, data and data structures,
instructions, procedural, object-oriented or other human-readable code, and that
is not intended to be executed directly by a computer without an intervening
step of compilation or assembly.
"Subsidiary" of any Person means any other Person of which a
majority of the outstanding voting securities or other voting equity interests,
or a majority of any other interests having the power to direct or cause the
direction of the management and policies of such other Person, are owned,
directly or indirectly, by such first Person.
6
"Taxes" means (i) all federal, state, local or foreign taxes,
charges, fees, imposts, levies or other assessments, including all net income,
gross receipts, capital, sales, use, ad valorem, value added, transfer,
franchise, profits, alternative, environmental, inventory, capital stock,
license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property (real or personal) and estimated
taxes, customs duties, fees, assessments and charges of any kind whatsoever,
(ii) all interest, penalties, fines, additions to Tax or additional amounts
imposed by any taxing authority in connection with any item described in clause
(i) and (iii) any transferee liability in respect of any items described in
clauses (i) and/or (ii).
"Tax Return" means all returns, declarations, reports,
estimates, information returns and statements required to be filed in respect of
any Taxes and any amendments thereto.
"Trademarks" means all trademarks, service marks, fictional
business names, trade names, certification marks, collective marks, Internet
domain names, uniform resource locators and alphanumeric designations associated
therewith and other proprietary rights to any words, names, slogans, symbols,
logos, devices or combinations thereof used to identify, distinguish and
indicate the source or origin of goods or services, all registrations, renewals,
applications for registration, equivalents and counterparts of the foregoing,
and the goodwill of the business associated with each of the foregoing.
"Trade Secrets" means all inventions, discoveries, ideas,
designs, models, formulae, patterns, compilations, data collections, drawings,
blueprints, mask works, devices, methods, techniques, processes, know-how,
proprietary information, customer lists, software, technical information, and
anything else that would constitute a "trade secret" under applicable Law,
excluding any of the foregoing that is disclosed in any issued Patent.
"Vested Option" means every option to purchase shares of
Company Common Stock that is outstanding immediately prior to the Effective Time
with an exercise price per share that will be in-the-money, vested and
exercisable immediately prior to the Effective Time based on the exercise prices
set forth in the applicable attachment to Schedule 6.4 (subject to accelerated
vesting, if any, that would apply as a result of the Merger).
"WARN" means the Worker Adjustment and Retraining Notification
Act of 1988, as amended.
(b) Terms Defined Elsewhere in this Agreement. For purposes of
this Agreement, the following terms have meanings set forth in the sections
indicated:
7
Term Section
---- -------
Accounting Referee 4.4(e)
Accumulated Funding Deficiency 6.13(d)
Aggregate Merger Consideration 4.1(a)
Agreement Recitals
Amount At Stake 10.5(b)
Amount Available for Indemnification 10.5(b)
Antitrust Division 8.4(a)
Antitrust Laws 8.4(b)
Appraisal Excess Amount 3.1(d)
Balance Sheet 6.6
Balance Sheet Date 6.6
Buyer Indemnified Parties 10.2(a)
Buying Parties 11.12
Cap 10.3(b)
Certificate 3.1(c)
Certificate of Merger 2.2
Claim 8.7(b)
Closing 5.1
Closing Date 5.1
Closing Merger Consideration 3.2(b)
Closing Net Assets 4.4(c)
Closing Net Indebtedness 4.1(a)
Closing Payoff Amount 8.5
Closing Statement 4.4(c)
COBRA 6.13(l)
Company Recitals
Company Benefit Plan 6.13(a)
Company Common Stock 3.1
Company Documents 6.2
Company Pension Plan 6.13(c)
Confidentiality Agreement 8.6
Continuing Employees 8.9(a)
Controlled Group 6.13(f)
D & O Indemnitees 8.7(a)
Deductible 10.3(a)
Disclosure Schedules 6
Draft 2003 Statements 6.6
Effective Time 2.2
Employee Benefit Plans 6.13(a)
ERISA 6.13(a)
ERISA Affiliate 6.13(f)
Escrow Agents 4.3(b)
Escrow Agreements 4.3(b)
Escrow Deposits 4.3(b)
8
Term Section
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Estimated Net Assets 4.4(a)
Excess Amount 10.2(b)
Exchange Agent 3.2
Exchange Fund 3.2
Final Net Assets 4.4(g)
Financial Statements 6.6
Foreign Employee Benefit Plan 6.13(b)
FTC 8.4(a)
Indemnitee 10.5(a)
Indemnitee Claim 10.5(b)
Indemnitee Straddle Claim 10.5(b)
Indemnity Escrow Deposit 4.3(a)
Leased Real Property 6.10
Losses 10.2(a)
Material Breach Matter 8.11(b)
Material Contract(s) 6.12(a)
Maximum Premium 8.7(e)
Merger Recitals
Merger Sub Recitals
Other Bid 8.12
Net Assets 4.4(a)
Non-Monetary Claim 10.5(b)
Notice of Disagreement 4.4(d)
Parent Recitals
Parent Benefit Plan 8.9(b)
Parent Documents 7.2
Per Share Escrow Contributions 4.3(b)
Per Share Indemnity Escrow Contribution 4.3(a)
Per Share Stockholder Escrow Contribution 4.3(b)
Proposed Transaction Bonuses 4.3(a)
Principal Stockholder Recitals
Relevant Claim 10.5(b)
Revised 2003 Statements 8.13
Securities Act 7.5
Software Products 6.11(a)
Stockholder Escrow Agent 4.3(b)
Stockholder Escrow Agreement 4.3(b)
Stockholder Escrow Deposit 4.3(b)
Stockholder Representative 11.3
Surviving Corporation 2.1
Target Net Assets 4.4(a)
Total Per Share Merger Consideration 4.1(b)
Transaction Bonuses 4.4(a)
Transaction Tax Benefits 4.4(a)
Voting Company Debt 6.4
9
(c) Other Definitional and Interpretive Matters. Unless
otherwise expressly provided, for purposes of this Agreement, the following
rules of interpretation shall apply:
Calculation of Time Period. When calculating the period of
time before which, within which or following which any act is to be done or step
taken pursuant to this Agreement, the date that is the reference date in
calculating such period shall be excluded. If the last day of such period is a
non-Business Day, the period in question shall end on the next succeeding
Business Day.
Dollars. Any reference in this Agreement to $ shall mean U.S.
dollars.
Exhibits/Schedules. The Exhibits and Schedules to this
Agreement are hereby incorporated and made a part hereof and are an integral
part of this Agreement. All Exhibits and Schedules annexed hereto or referred to
herein are hereby incorporated in and made a part of this Agreement as if set
forth in full herein. Any capitalized terms used in any Schedule or Exhibit but
not otherwise defined therein shall be defined as set forth in this Agreement.
Gender and Number. Any reference in this Agreement to gender
shall include all genders, and words imparting the singular number only shall
include the plural and vice versa.
Headings. The provision of a Table of Contents, the division
of this Agreement into Articles, Sections and other subdivisions and the
insertion of headings are for convenience of reference only and shall not affect
or be utilized in construing or interpreting this Agreement. All references in
this Agreement to any "Article" or "Section" are to the corresponding Article or
Section of this Agreement unless otherwise specified.
Herein. The words such as "herein," "hereinafter," "hereof,"
and "hereunder" refer to this Agreement as a whole and not merely to a
subdivision in which such words appear unless the context otherwise requires.
Including. The word "including" or any variation thereof means
"including, without limitation" and shall not be construed to limit any general
statement that it follows to the specific or similar items or matters
immediately following it.
Reflected On or Set Forth In. An item arising with respect to
a specific representation or warranty shall be deemed to be "reflected on" or
"set forth in" a balance sheet or financial statements, to the extent any such
phrase appears in such representation or warranty, if (i) there is a reserve,
accrual or other similar item underlying a number on such balance sheet or
financial statements that related to the subject matter of such representation
and such item and underlying number are specifically set forth on the Disclosure
Schedules hereto, (ii) such item is otherwise specifically set forth on the
balance sheet or financial statements or (iii) such item is reflected on the
balance sheet or financial statements and is specifically set forth in the notes
thereto.
10
No Drafting Presumptions. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement and the other
agreements contemplated hereby and, in the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as jointly
drafted by the parties hereto and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any provision
of this Agreement.
ARTICLE II - THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions set forth
in this Agreement and in accordance with the DGCL, Merger Sub shall be merged
with and into the Company at the Effective Time. Following the Effective Time,
the separate corporate existence of Merger Sub shall cease, and the Company
shall continue as the surviving corporation in the Merger (the "Surviving
Corporation") and shall succeed to and assume all the rights and obligations of
Merger Sub in accordance with the DGCL.
2.2 Effective Time. Subject to the provisions of this Agreement, as
soon as practicable on the Closing Date, the parties shall file with the
Secretary of State of the State of
Delaware a certificate of merger (the
"Certificate of Merger") executed in accordance with the relevant provisions of
the DGCL and, as soon as practicable on or after the Closing Date, shall make
all other filings or recordings required under the DGCL. The Merger shall become
effective at such time as the Certificate of Merger is duly filed with the
Secretary of State of the State of
Delaware, or at such other time as Parent and
the Company shall agree and shall specify in the Certificate of Merger (the date
and time the Merger becomes effective being the "Effective Time").
2.3 Effects of the Merger. The Merger shall have the effects set forth
in this Agreement and the applicable provisions of the DGCL.
2.4 Certificate of Incorporation and By-laws.
(a) The Certificate of Incorporation of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter changed or amended
as provided therein or by applicable Law, except that Article First of the
Certificate of Incorporation of Merger Sub shall be amended to change the name
of Merger Sub as directed by Parent.
(b) The By-laws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable Law.
2.5 Directors. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
2.6 Officers. The officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their
11
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
ARTICLE III - EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES; PAYMENT
OF AGGREGATE MERGER CONSIDERATION
3.1 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger and without any further action on the part of Parent, Merger Sub, the
Company or the holder of any shares of common stock, par value $0.01 per share,
of the Company ("Company Common Stock") or any shares of capital stock of Merger
Sub:
(a) Capital Stock of Merger Sub. Each issued and outstanding
share of capital stock of Merger Sub shall be converted into and become one
validly issued, fully paid and nonassessable share of common stock, par value
$0.01 per share, of the Surviving Corporation and such shares shall constitute
the only outstanding shares of capital stock of the Surviving Corporation as of
the Effective Time.
(b) Cancellation of Treasury Stock and Parent-Owned Stock.
Each share of Company Common Stock that is owned by the Company, Parent or
Merger Sub shall automatically be canceled and retired and shall cease to exist,
and no consideration shall be delivered in exchange therefor.
(c) Capital Stock of Company. Each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time, other than
Dissenting Shares and those shares cancelled pursuant to Section 3.1(b), shall
automatically be converted into the right to receive, upon surrender of the
certificate (a "Certificate") representing such share of Company Common Stock,
an amount in cash equal to the Total Per Share Merger Consideration, without
interest, as provided herein (subject to the Per Share Escrow Contributions with
respect to each such share being deposited with the Escrow Agents and being held
and distributed in accordance with the terms of the Escrow Agreements). At the
Effective Time, all shares of Company Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each holder of a Certificate shall cease to have any rights with
respect thereto, except the right to receive the Total Per Share Merger
Consideration with respect to each share represented by such Certificate in
accordance with the terms of this Agreement (subject to the Per Share Escrow
Contributions with respect to each such share being deposited with the Escrow
Agents and being held and distributed in accordance with the terms of the Escrow
Agreements).
(d) Dissenting Shares. No Dissenting Share shall be converted
into the right to receive any of the Aggregate Merger Consideration unless the
applicable holder of such Dissenting Share shall have forfeited its right to
appraisal under the DGCL, or properly withdrawn its demand for appraisal, with
respect to such Dissenting Share. At the Effective Time, all Dissenting Shares
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of Dissenting Shares shall cease to
have any rights with respect thereto, except the right to
12
receive the fair value of such Dissenting Shares in accordance with the
provisions of Section 262 of the DGCL. If any holder of Dissenting Shares has
forfeited or properly withdrawn its right to appraisal of such Dissenting
Shares, then, (i) as of the occurrence of such event, such Dissenting Shares
shall cease to be Dissenting Shares and shall be converted into and represent
the right to receive the Total Per Share Merger Consideration payable in respect
of each such share of Company Common Stock (subject to the Per Share Escrow
Contributions with respect to each such share being deposited with the Escrow
Agents and being held and distributed in accordance with the terms of the Escrow
Agreements) pursuant to, and in accordance with the provisions of, Section 3.2,
and (ii) promptly following the occurrence of such event, Parent or the
Surviving Corporation shall, or shall cause the Exchange Agent to, deliver to
such holder promptly after receipt from such holder of a duly executed letter of
transmittal and surrendered Certificates, a payment representing the Closing
Merger Consideration to which such holder is entitled pursuant to Section 3.2.
The Company (and after the Effective Time, the Surviving Corporation) shall
serve prompt notice to Parent (and after the Effective Time, the Stockholder
Representative) of any demands received by the Company (or the Surviving
Corporation, as the case may be) for appraisal of any shares of Company Common
Stock. Prior to the Effective Time, the Company (and after the Effective Time,
the Stockholder Representative) shall have the sole right to direct any
negotiations and proceedings with respect to such demands, and to settle or
otherwise reach an agreement with respect to any such demands, with the
applicable holder of Dissenting Shares; provided however that Parent shall have
the right to participate in all negotiations and proceedings with respect to
such demands, and any settlement or agreement with respect to any such demands
shall be subject to the consent of Parent, not to be unreasonably withheld. In
the event any such appraisal of Dissenting Shares in accordance with Section 262
of the DGCL assigns a value to any Dissenting Share in excess of the Total Per
Share Merger Consideration, or the Company or the Stockholder Representative
settles any such demands in excess of the Total Per Share Merger Consideration
with respect to any Dissenting Share, such excess amount (the "Appraisal Excess
Amount") shall (A) to the extent it is paid to the holder of such Dissenting
Share on the Closing Date, form part of Company Transaction Expenses and (B) to
the extent it is paid to the holder of such Dissenting Share after the Closing
Date, be paid solely from the Indemnity Escrow Deposit.
3.2 Exchange Fund; Exchange of Certificates; Payment of Merger
Consideration.
(a) Exchange Agent. As of the Effective Time, Parent shall
deposit with Mellon Investor Services LLC or such other bank or trust company of
similar size as may be designated by Parent and reasonably acceptable to the
Company (the "Exchange Agent"), for exchange in accordance with Articles III and
IV, through the Exchange Agent, an amount in cash (the "Exchange Fund") equal to
the Aggregate Merger Consideration less (i) the Indemnity Escrow Deposit, and
(ii) the Stockholder Escrow Deposit. As of the Effective Time, Parent shall
deposit with the Exchange Agent an amount equal to the Closing Payoff Amount or,
if directed by the Company, make payment of the Closing Payoff Amount to the
Persons entitled to receive the Closing Payoff Amount. If Parent shall deposit
the Closing Payoff Amount with the Exchange
13
Agent, the Exchange Agent shall deposit with the Surviving Corporation on the
Closing Date an amount equal to the Closing Payoff Amount or shall, if directed
by the Surviving Corporation, make payments directly to the Persons entitled to
receive the Closing Payoff Amount.
(b) Exchange Procedures; Right to Receive Merger
Consideration. As soon as reasonably practicable after the date hereof, Parent
shall cause the Exchange Agent to mail or cause to be delivered to each holder
of record of a Certificate, (i) a letter of transmittal (which shall be
substantially in the form of Exhibit 3.2(b), together with changes reasonably
requested by the Exchange Agent) and (ii) instructions for use in surrendering
such Certificate in exchange for the Total Per Share Merger Consideration
payable with respect to each share of Company Common Stock represented by such
Certificate (subject to the Per Share Escrow Contributions with respect to each
such share being deposited with the Escrow Agents and being held and distributed
in accordance with the terms of the Escrow Agreements). At or after the
Effective Time, upon surrender of a Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal, duly completed and validly
executed, and such other documents as may be reasonably required by the Exchange
Agent, the holder of such Certificate shall be entitled to receive in exchange
therefor an amount in cash equal to the Total Per Share Merger Consideration,
less the Per Share Escrow Contributions, with respect to each share of Company
Common Stock then held by such holder under such Certificate so surrendered
(such Total Per Share Merger Consideration, less the Per Share Escrow
Contributions, with respect to all shares represented by such Certificate, the
"Closing Merger Consideration"), and the Certificate so surrendered shall
forthwith be canceled. No interest shall be paid or shall accrue on any cash
payable hereunder to holders of Company Common Stock (except with respect to the
Escrow Deposits in accordance with the terms of the Escrow Agreements). In the
event of a transfer of ownership of shares of Company Common Stock that is not
registered in the transfer records of the Company, the Closing Merger
Consideration with respect to such shares may be issued to a Person other than
the Person in whose name the Certificate so surrendered is registered, if, upon
presentation to the Exchange Agent, such Certificate shall be properly endorsed
or otherwise be in proper form for transfer and the Person requesting such
payment shall pay any transfer or other Taxes required by reason of the payment
of the Closing Merger Consideration to a Person other than the registered holder
of such Certificate or establish to the satisfaction of Parent that such Tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 3.2(b), each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the Closing
Merger Consideration with respect to such Certificate (and the Per Share Escrow
Contributions with respect to each share represented by such Certificate subject
to, and in accordance with, the terms of this Agreement and the Escrow
Agreements).
(c) Payment of Merger Consideration. The applicable Closing
Merger Consideration shall be paid, without interest, to holders of Company
Common Stock promptly following valid tender of Certificates and the
appropriately completed letter of transmittal (and on the Closing Date for
Certificates accompanying appropriately completed letters of transmittal validly
tendered at least two Business Days prior to the
14
Effective Time) by check or, in the case of a holder who receives at least
$25,000 of Closing Merger Consideration, by wire transfer of immediately
available funds to an account designated in writing by such holder.
3.3 No Further Ownership Rights in Company Common Stock. The Aggregate
Merger Consideration paid in accordance with the terms of this Article III and
Article IV (including the deposit of the Escrow Deposits pursuant to Section
4.3) shall be deemed to have been paid in full satisfaction of all rights
pertaining to all shares of Company Common Stock (and all Vested Options), and
after the Effective Time there shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of shares of Company
Common Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, any Certificates that immediately prior to the
Effective Time represented outstanding shares of Company Common Stock are
presented to the Surviving Corporation or the Exchange Agent for any reason,
they shall be cancelled and exchanged as provided in this Article III.
3.4 Termination of Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to the holders of Certificates for one year after the
Effective Time shall be delivered to Parent, upon demand, and any holder of a
Certificate who has not theretofore complied with this Article III shall
thereafter look only to Parent for, and Parent shall remain liable for, payment
of any such holder's claim for the Closing Merger Consideration with respect to
such Certificate, without interest thereon, in accordance with this Article III.
If any Certificate shall not have been surrendered immediately prior to such
date on which any Closing Merger Consideration with respect thereto would
otherwise escheat to or become the property of any Governmental Body, any such
Closing Merger Consideration (and the portion of the Escrow Indemnity Deposit
equal to the aggregate Per Share Indemnity Escrow Contributions with respect to
such Closing Merger Consideration) shall, to the extent permitted by applicable
Law, become the property of Parent, free and clear of all claims or interest of
any Person previously entitled thereto.
3.5 Investment of Exchange Fund. The Exchange Agent shall invest the
then balance of any cash included in the Exchange Fund, as directed by Parent,
on a daily basis in money market funds or securities issued or guarantied by the
United States of America. Any interest and other income resulting from such
investments shall be the property of, and shall be paid to, Parent.
3.6 Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact (and, if required by
Parent, upon the provision of a contractual indemnity against any claims that
may be made against Parent or the Surviving Corporation with respect to such
Certificate), by the Person claiming to be the holder of such lost, stolen or
destroyed Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Closing Merger Consideration to which such
holder would be entitled pursuant to Section 3.2(b) of this Agreement.
15
3.7 Withholding Rights. The Exchange Agent (and to the extent any
portion of the Exchange Fund is distributed to Parent pursuant to Section 3.4,
Parent) shall be entitled to deduct and withhold from the consideration
otherwise payable to any holder of shares of Company Common Stock pursuant to
this Agreement such amounts as may be required to be deducted and withheld with
respect to the making of such payment under the Code and the rules and
regulations promulgated thereunder, or under any provision of any state or
foreign Law with respect to Taxes. To the extent that amounts are so withheld
and paid over to the appropriate taxing authority, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the holder
of the shares of Company Common Stock in respect of which such deduction and
withholding was made by the Exchange Agent (or Parent, as the case may be).
3.8 Fractional Shares. Fractional shares of Company Common Stock shall
be entitled to the Total Per Share Merger Consideration (subject to the Per
Share Escrow Contributions) on the same basis as whole shares of Company Common
Stock except that any amounts payable with respect to such fractional shares
(including the Total Per Share Merger Consideration and the Per Share Escrow
Contributions) shall be the amount otherwise payable with respect to a whole
share of Company Common Stock multiplied by the applicable fraction of a share
of Company Common Stock represented by such fractional share.
ARTICLE IV - DETERMINATION OF AGGREGATE MERGER CONSIDERATION;
OPTIONS; ESCROW; PURCHASE PRICE ADJUSTMENT
4.1 Determination of Aggregate Merger Consideration and Total Per Share
Merger Consideration.
(a) The "Aggregate Merger Consideration" shall be equal to:
(i) $340,000,000;
(ii) minus Company Indebtedness (net of Company Cash)
(such amount, "Closing Net Indebtedness"); and
(iii) minus Company Transaction Expenses.
The Aggregate Merger Consideration shall be subject to adjustment prior
to the Closing as provided in Sections 4.4(a) and (b). The Aggregate Merger
Consideration shall be subject to further adjustment following the Closing
pursuant to Sections 4.4(c) - (h).
(b) The "Total Per Share Merger Consideration" shall be equal
to X, where
X = AMC + AOEA
--------------
CS + VO
and the abbreviations in the equation above have the following
meanings:
16
AMC: Aggregate Merger Consideration;
AOEA: Aggregate Option Exercise Amount;
CS: Number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be canceled in
accordance with Section 3.1(b)); and
VO: Number of shares of Company Common Stock for which the Vested
Options are exercisable.
4.2 Options.
(a) At the Effective Time, upon the terms and subject to the
conditions of this Agreement, (i) upon receipt by the Exchange Agent of the
Exchange Fund pursuant to Section 3.2(a), Parent shall cause the Exchange Agent
to deposit with the Surviving Corporation from the Exchange Fund an amount of
funds equal to the Aggregate Option Consideration, (ii) each Vested Option which
is then outstanding shall be cancelled, (iii) in consideration of such
cancellation, Parent shall cause the Surviving Corporation to pay to the holders
of such cancelled Vested Options within two Business Days of the Closing an
amount in cash in respect of each Vested Option equal to the product of (A) the
number of shares of Company Common Stock for which such Vested Option is
exercisable, and (B) the excess of the Total Per Share Merger Consideration
(subject to any adjustment thereto pursuant to Sections 4.4(a) and (b)) over the
exercise price of such Vested Option (such payment to be net of Taxes required
by Law to be withheld with respect thereto), and (iv) any options to purchase
shares of Company Common Stock which are not Vested Options shall be cancelled
without any right to receive consideration with respect thereto.
(b) Except as provided herein or as otherwise agreed to by the
parties, the Company shall cause the Company's 1999 Amended and Restated Equity
Award Plan to terminate and any options, warrants or rights to purchase shares
of Company Common Stock, and securities convertible into or exchangeable for
shares of Company Common Stock, to be cancelled as of the Effective Time without
any right to acquire any equity securities of Parent, the Surviving Corporation
or any Subsidiary of either of them.
4.3 Escrow Deposits.
(a) At the Effective Time, Parent shall deposit in escrow with
the Indemnity Escrow Agent $18,000,000 of the Aggregate Merger Consideration
(the "Indemnity Escrow Deposit"), which amount shall be held and distributed in
accordance with the terms of the Indemnity Escrow Agreement. The Indemnity
Escrow Deposit represents the aggregate of all of the Per Share Indemnity Escrow
Contributions, where "Per Share Indemnity Escrow Contribution" means an amount
equal to the Indemnity Escrow Deposit divided by the total number of shares of
Company Common Stock issued and outstanding immediately prior to the Effective
Time (other than shares to be canceled in accordance with Section 3.1(b)). An
amount equal to the Banker's Percentage of the Per Share Indemnity Escrow
Contribution shall represent contingent fees
17
owing to the Bankers if the Indemnity Escrow Deposit is not otherwise subject to
claims of Buyer Indemnified Parties under the Indemnity Escrow Agreement and the
remaining Per Share Indemnity Escrow Contribution shall represent part of the
Total Per Share Merger Consideration distributable to the stockholders of the
Company in accordance with the terms of the Indemnity Escrow Agreement;
provided, however, that if the management bonus transactions referred to at item
(b)(v) of Schedule 8.2 (the "Proposed Transaction Bonuses") are adopted and
approved by the stockholders of the Company, then an amount equal to the
Banker's Percentage of the Per Share Indemnity Escrow Contribution shall
represent contingent fees owing to the Bankers if the Indemnity Escrow Deposit
is not otherwise subject to claims of Buyer Indemnified Parties under the
Indemnity Escrow Agreement, 8.5% of the Per Share Indemnity Escrow Contribution
shall represent a contingent portion of Proposed Transaction Bonuses if the
Indemnity Escrow Deposit is not otherwise subject to claims of Buyer Indemnified
Parties under the Indemnity Escrow Agreement and the remainder shall represent
part of the Total Per Share Merger Consideration distributable to the
stockholders of the Company in accordance with the terms of the Indemnity Escrow
Agreement. For the avoidance of doubt, notwithstanding anything to the contrary
contained in this Agreement, Contingent Expense Amounts included in the
Indemnity Per Share Escrow Contribution do not constitute consideration payable
to holders of Company Common Stock and such Contingent Expense Amounts shall
either be paid to the service providers entitled to them under the Engagement
Letters or Proposed Transaction Bonuses, as the case may be, or to Buyer
Indemnified Parties pursuant to the Indemnity Escrow Agreement.
(b) At the Effective Time, Parent shall deposit in escrow with
an escrow agent determined by the Stockholder Representative in its sole
discretion (the "Stockholder Escrow Agent" and, together with the Indemnity
Escrow Agent, the "Escrow Agents") $3,000,000 of the Aggregate Merger
Consideration (the "Stockholder Escrow Deposit" and together with the Indemnity
Escrow Deposit, the "Escrow Deposits"), pursuant to the terms of the escrow
agreement concerning such escrow to be entered into between the Stockholder
Representative and the Stockholder Escrow Agent (the "Stockholder Escrow
Agreement" and, together with the Indemnity Escrow Agreement, the "Escrow
Agreements"). The Stockholder Escrow Deposit represents the aggregate of all of
the Per Share Stockholder Escrow Contributions, where "Per Share Stockholder
Escrow Contribution" (and together with Per Share Indemnity Escrow Contribution,
the "Per Share Escrow Contributions") means an amount equal to the Stockholder
Escrow Deposit divided by the total number of shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares to be canceled in accordance with Section 3.1(b)). An amount equal to the
Banker's Percentage of the Per Share Stockholder Escrow Contribution shall
represent contingent fees potentially owing to the Bankers by the Company and
the remaining Per Share Stockholder Escrow Contribution shall represent part of
the Total Per Share Merger Consideration distributable to the stockholders of
the Company in accordance with the terms of the Stockholder Escrow Agreement;
provided, however, that if the Proposed Transaction Bonuses are adopted and
approved by the stockholders of the Company, then an amount equal to the
Banker's Percentage of the Per Share Stockholder Escrow Contribution shall
represent contingent fees potentially owing to the Bankers by the Company, 8.5%
of the Per Share Stockholder Escrow Contribution shall represent a contingent
portion of Proposed Transaction Bonuses and the remainder shall represent part
of the Total Per Share Merger Consideration distributable to the stockholders of
the Company in accordance with the terms of the Stockholder Escrow Agreement.
18
4.4 Purchase Price Adjustment.
(a) The parties agree that the determination of the amount of
Aggregate Merger Consideration was based on Net Assets as of June 30, 2004 in
the amount of $92,226,000 ("Target Net Assets") which excludes from such
calculation the net assets of XxXxxxx Radio Industries Limited in the amount of
$124,000, as of June 30, 2004. A calculation of such Net Assets is set forth on
Exhibit 4.4(1). No less than three Business Days prior to the Closing Date, the
Company shall prepare and deliver to Parent for Parent's review an estimated
balance sheet including the Company's good faith estimate of (i) Closing Net
Indebtedness, (ii) Company Transaction Expenses, and (iii) Net Assets as of the
close of business on the Closing Date ("Estimated Net Assets").
"Net Assets" means the aggregate book value of assets of the
Company and its Subsidiaries (excluding Cash), less the aggregate book value of
liabilities of the Company (excluding Closing Net Indebtedness and Company
Transaction Expenses), subject to the following: Net Assets as of the close of
business on the Closing Date (including Estimated Net Assets and Closing Net
Assets) shall be calculated in the same way, using the same accounting
principles, practices, methodologies and policies, as the line items comprising
assets and liabilities included in Target Net Assets and set forth on Exhibit
4.4(l) and which are in all material respects consistent with GAAP and all
accounting principles, practices, methodologies and policies used in the
preparation of the Draft 2003 Statements; provided that:
(A) Net Assets as of the close of business on the Closing Date
(including the calculation of Estimated Net Assets and Closing Net Assets) shall
include the Transaction Tax Benefits notwithstanding that such amounts were not
included in Target Net Assets,
(B) in no case shall Net Assets (including Estimated Net
Assets and Closing Net Assets) include any deferred tax asset in respect of net
operating loss carryforwards, tax credits or similar attributes other than the
Transaction Tax Benefits, and
(C) Net Assets as of the close of business on the Closing Date
(including Estimated Net Assets and Closing Net Assets) shall be calculated such
that the line item in Target Net Assets on Exhibit 4.4(1) with respect to
"Capitalized software cost, net" remains unchanged from the amount stated in
Target Net Assets.
"Transaction Tax Benefits" means certain Tax benefits arising
out of payments made or accrued by the Company or its Subsidiaries on or prior
to the Closing Date, calculated in the manner set forth in Exhibit 4.4(2),
consisting exclusively of (A) payments made or owing to the holders of Vested
Options pursuant to Section 4.2 hereof, (B) bonus payments made or owing to
employees in connection with the transactions contemplated hereby, to the extent
there are any such bonus payments (the "Transaction Bonuses"), and (C) other
costs and expenses incurred in connection with the transactions contemplated
hereby which are deductible by the Company as expenses for Federal Tax purposes
(each a "Transaction-Related Tax Deduction" and collectively the
"Transaction-Related Tax Deductions"). The Contingent Expense Amounts shall be
included in Transaction Tax Benefits as if they were fully accrued and paid at
Closing. Any dispute
19
as to the deductibility of any Transaction-Related Tax Deduction to be included
in the calculation of Transaction Tax Benefits shall be referred to and resolved
by the Accounting Referee in connection with the determination of Final Net
Assets.
(b) If Estimated Net Assets is less than Target Net Assets,
then the Aggregate Merger Consideration payable at the Closing will be decreased
on a dollar-for-dollar basis by the amount of such deficiency. If Estimated Net
Assets is greater than Target Net Assets, then the Aggregate Merger
Consideration payable at the Closing will be increased on a dollar-for-dollar
basis by the amount of such excess.
(c) As promptly as practicable, but no later than 60 days
after the Closing Date, Parent shall cause the Surviving Corporation to prepare
and deliver to the Stockholder Representative the Closing Statement and a
certificate based on such Closing Statement setting forth the Surviving
Corporation's calculation of Closing Net Assets. The closing statement (the
"Closing Statement") shall present the Net Assets as of the close of business on
the Closing Date ("Closing Net Assets"). Closing Net Assets shall be determined
using the same accounting principles, practices, methodologies and policies, as
the line items comprising assets and liabilities included in Target Net Assets
and set forth on Exhibit 4.4(l) (except as provided in the definition of "Net
Assets"). The adjustment to the Aggregate Merger Consideration contemplated by
Section 4.4(g) is intended to show the change in Net Assets from June 30, 2004
to the Closing Date, and the parties agree that such change can only be measured
if the calculation is done in the same way, using the same methods, for both
dates, subject to the acknowledgement of the parties that the calculation of
Target Net Assets attached as Exhibit 4.4(l) did not include provision for the
Transaction Tax Benefits.
(d) Upon the Stockholder Representative's review of the
Closing Statement, if the Stockholder Representative disagrees with the
Surviving Corporation's calculation of Closing Net Assets delivered pursuant to
Section 4.4(c), the Stockholder Representative may, within 15 days after
delivery of the Closing Statement, deliver a notice to Parent disagreeing with
such calculation and setting forth the Stockholder Representative's calculation
of such amount (a "Notice of Disagreement"). Any such Notice of Disagreement
shall specify those items or amounts as to which the Stockholder Representative
disagrees.
(e) If a Notice of Disagreement shall be duly delivered
pursuant to Section 4.4(d), the Stockholder Representative and Parent shall,
during the 15 days following such delivery, use their commercially reasonable
efforts to reach agreement on the disputed items or amounts in order to
determine, as may be required, the amount of Closing Net Assets. If during such
period, the Stockholder Representative and Parent are unable to reach such
agreement, they shall promptly thereafter cause PriceWaterhouseCoopers LLP or
another nationally-recognized accounting firm mutually acceptable to Parent and
the Stockholder Representative (the "Accounting Referee") to review this
Agreement and the disputed items or amounts for the purpose of calculating
Closing Net Assets (it being understood that in making such calculation, the
Accounting Referee shall be functioning as an expert and not as an arbitrator).
In making such calculation, the Accounting Referee shall consider only those
items or amounts in the Closing Statement and the
20
Surviving Corporation's calculation of Closing Net Assets as to which
Stockholder Representative has disagreed. The Accounting Referee shall deliver
to the Stockholder Representative and Parent, as promptly as practicable (but in
any case no later than 30 days from the date of engagement of the Accounting
Referee), a report setting forth its reasoned written decision; provided
however, that the Accounting Referee's determination as to any item or amount
disputed by the Stockholder Representative shall not be more beneficial to
Parent than the determination of that item or amount by Parent in the Closing
Statement nor more beneficial to the Stockholder Representative than the
determination of that item or amount in the Notice of Disagreement. Such report
shall be final and binding upon the Stockholder Representative and Parent. The
cost of such review and report shall be borne equally by the Company's
stockholders, on the one hand, and Parent, on the other hand. The portions of
the costs to be borne by the Company's stockholders shall be paid out of the
Indemnity Escrow Deposit.
(f) Parent and the Surviving Corporation shall, and shall
cause their Subsidiaries and respective representatives to, cooperate and assist
in the preparation of the Closing Statement and the calculation of Closing Net
Assets and in the conduct of the review by each of the Stockholder
Representative and, if necessary, the Accounting Referee referred to in Sections
4.4(d) and (e), respectively, including the making available to the extent
necessary or reasonably requested to verify the amounts set forth in the Closing
Statement of books, records, work papers and personnel.
(g) If Final Net Assets is less than Estimated Net Assets by
over $250,000, then the Aggregate Merger Consideration shall be decreased on a
dollar-for-dollar basis by the full amount of such deficiency, and the Company's
stockholders shall pay Parent such amount in accordance with Section 4.4(h). If
Final Net Assets is greater than Estimated Net Assets by more than $250,000,
then the Aggregate Merger Consideration shall be increased on a
dollar-for-dollar basis by the full amount of such excess and Parent shall pay
the Company's stockholders such amount in accordance with Section 4.4(h). In the
event that Final Net Assets differs from Estimated Net Assets by less than
$250,000, there shall not be any adjustment to the Aggregate Merger
Consideration. "Final Net Assets" means Closing Net Assets (i) as shown in the
Surviving Corporation's calculation delivered pursuant to Section 4.4(c) if no
Notice of Disagreement with respect thereto is duly delivered pursuant to
Section 4.4(d); or (ii) if such a Notice of Disagreement is delivered, (A) as
agreed by the Stockholder Representative and Parent pursuant to Section 4.4(e)
or (B) in the absence of such agreement, as shown in the Accounting Referee's
calculation delivered pursuant to Section 4.4(e).
(h) Any payment required to be made pursuant to Section 4.4(g)
shall be made at a mutually convenient time and place within five Business Days
after Final Net Assets has been determined by wire transfer by Parent or the
stockholders of the Company, as the case may be, of immediately available funds
to the account of such other party as may be designated in writing by such other
party. In the event that payments are to be made to the Parent by the
stockholders of the Company pursuant to Section 4.4(g), the Parent may demand
payment therefor from each of the stockholders of the Company and, if any such
stockholder shall not have made such payment within sixty
21
(60) days of the Parent's demand therefor, Parent may at its sole option seek
payment pursuant to Section 3.2(b) of the Indemnity Escrow Agreement. In the
event that payments are to be made to the Company's stockholders by Parent
pursuant to Section 4.4(g), such payments are to be made to the Exchange Agent
for distribution to the Company's stockholders.
(i) The excess of (i) any portion of amounts payable under the
Proposed Transaction Bonuses that is included in Company Transaction Expenses
but not paid to the designated employee over (ii) the amount by which inclusion
of such unpaid amount increased the Transaction Tax Benefits that were included
in Final Net Assets pursuant to this Section 4.4 shall be paid to the Exchange
Agent for distribution to the Company's stockholders and the remaining amount of
unpaid Proposed Transaction Bonuses shall be paid to Parent. Parent and the
Stockholder Representative shall request under the applicable escrow agreement
relating to the Proposed Transaction Bonuses that such amounts be so
distributed.
(j) If a Contingent Expense Amount included in the calculation
of Transaction Tax Benefits is not paid to the relevant service provider because
funds are released from the Indemnity Escrow Account in satisfaction of a claim
made by Parent under the Indemnity Escrow Agreement, the funds released from the
Indemnity Escrow Account to Parent with respect to such claim shall be increased
by the amount by which the inclusion of such unpaid Contingent Expense Amount
increased the Transaction Tax Benefits that were included in Final Net Assets
pursuant to this Section 4.4.
ARTICLE V - CLOSING AND TERMINATION
5.1 Closing Date. Subject to the satisfaction of the conditions set
forth in Sections 9.1 and 9.2 hereof (or the waiver thereof by the party
entitled to waive that condition), the closing of the transactions contemplated
hereby (the "Closing") shall take place at the offices of Weil, Gotshal &
Xxxxxx, LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000 (or at such other place as
Parent and the Company may designate in writing) at 10:00 a.m. (Eastern time) on
a date to be specified by Parent and the Company, which date shall be no later
than the fourth Business Day after the satisfaction or waiver of each condition
to the Closing set forth in Article IX (other than conditions that by their
nature are to be satisfied at the Closing, but subject to the satisfaction or
waiver of such conditions), unless another time or date, or both, are agreed to
in writing by Parent and the Company. The date on which the Closing shall occur
is referred to in this Agreement as the "Closing Date".
5.2 Termination of Agreement. This Agreement may be terminated and the
Merger may be abandoned any time prior to the Effective Time as follows:
(a) at the election of the Company or Parent on or after
December 31, 2004, if the Effective Time shall not have then occurred by the
close of business on such date, provided that neither Company nor Parent shall
be entitled to terminate this Agreement on or after December 31, 2004 if the
principal reason the Merger shall not have been consummated by such time is the
willful, material breach by such party of its obligations under this Agreement,
and provided further that such date shall be automatically extended for 60 days
if only the conditions to Closing set forth in Sections 9.1(d) and 9.2(d) remain
unsatisfied or unwaived at December 31, 2004; or
22
(b) by mutual written consent of the Company and Parent; or
(c) by the Company or Parent if there shall be in effect a
final nonappealable Order of a Governmental Body of competent jurisdiction
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby; it being agreed that the parties hereto shall
promptly appeal any adverse determination which is not nonappealable (and pursue
such appeal with reasonable diligence); or
(d) by Parent if any of the conditions set forth in Sections
9.1(a) or 9.1(b) is incapable of fulfillment, or if the breach giving rise to
the failure of any such conditions to be satisfied is capable of being cured,
such breach shall not have been cured within ten days following receipt by the
Company of notice of such breach from Parent, provided that Parent is not then
in material breach of any of its representations, warranties, covenants or
agreements contained in this Agreement; or
(e) by the Company if any of the conditions set forth in
Sections 9.2(a) or 9.2(b) is incapable of fulfillment, or if the breach giving
rise to the failure of any such conditions to be satisfied is capable of being
cured, such breach shall not have been cured within ten days following receipt
by Parent of notice of such breach from the Company, provided that the Company
is not then in material breach of any of its representations, warranties,
covenants or agreements contained in this Agreement.
5.3 Procedure Upon Termination. In the event of termination of this
Agreement by Parent or the Company, or both, pursuant to Section 5.2 hereof,
written notice thereof shall forthwith be given to the other party, and this
Agreement shall terminate, and the Merger contemplated hereby shall be
abandoned, without further action by Parent or the Company.
5.4 Effect of Termination. In the event that this Agreement is validly
terminated in accordance with Section 5.2, then each of the parties shall be
relieved of their duties and obligations arising under this Agreement after the
date of such termination and such termination shall be without liability to
Parent or the Company; provided, that no such termination shall relieve any
party hereto from liability for any willful breach of this Agreement and,
provided, further, that the obligations of the parties set forth in Article XI
hereof shall survive any such termination and shall be enforceable hereunder and
no termination shall impair the right of any party to compel specific
performance by any other party of its obligations under Article XI (excluding
Section 11.12) of this Agreement.
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in the disclosure schedules (the
"Disclosure Schedules") delivered to Parent and Merger Sub in connection with
this Agreement, with specific reference to the relevant sections or subsections
of the representations and warranties or covenants in this Agreement or
disclosure in such a way to make relevance
23
to the information called for by the representations and warranties or covenants
readily apparent, the Company hereby represents and warrants to Parent and
Merger Sub that:
6.1 Organization and Good Standing. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of organization and has
all requisite corporate or similar power and authority, to own, lease and
operate its properties and assets and to carry on its business as presently
conducted and is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership, lease or operation of its
assets or properties or conduct of its business requires such qualification,
except where the failure to be so qualified or in good standing, individually or
in the aggregate, would not have a Material Adverse Effect. The Company has made
available to Parent a complete and correct copy of the certificate of
incorporation and bylaws or other similar organizational documents of the
Company and each of its Subsidiaries, in each case, as amended to date. Each of
the Company's and its Subsidiaries' certificate of incorporation and bylaws or
other similar organizational documents, as applicable, as so made available are
in full force and effect. Except for the Company's interests in its Subsidiaries
and any such Subsidiary's interest in any other Subsidiary of the Company,
neither the Company nor any of its Subsidiaries owns, directly or indirectly,
any capital stock, membership interest, partnership interest, joint venture
interest, or other equity interest in any Person. Schedule 6.1 lists all
Subsidiaries of the Company and all names (registered or otherwise) under which
the Company or any of its Subsidiaries does business, the name and titles of all
directors and officers of the Company and its Subsidiaries and the jurisdiction
of incorporation of the Company and its Subsidiaries, and the jurisdictions in
which the Company and its Subsidiaries are qualified to do business.
6.2 Authorization of Agreement. The Company has all requisite power and
authority to execute and deliver this Agreement and each other agreement,
document, or instrument or certificate contemplated by this Agreement or to be
executed by the Company in connection with the consummation of the transactions
contemplated by this Agreement (the "Company Documents"), and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Company Documents by the Company and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
requisite corporate action on the part of the Company, except for approval by
the shareholders of the Company of this Agreement and the transactions
contemplated thereby, which approval shall have been obtained prior to the
Effective Time. This Agreement has been, and each of the Company Documents will
be at or prior to the Closing, duly and validly executed and delivered by the
Company and (assuming the due authorization, execution and delivery by the other
parties hereto and thereto) this Agreement constitutes, and each Company
Document when so executed and delivered will constitute, the legal, valid and
binding obligations of the Company, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good
24
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
6.3 Conflicts; Consents of Third Parties.
(a) None of the execution and delivery by the Company of this
Agreement or the Company Documents, the consummation of the transactions
contemplated hereby or thereby, or compliance by the Company with any of the
provisions hereof or thereof will conflict with, or result in any violation of
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of acceleration, termination or cancellation of any obligation
or to loss of a material benefit under, or to increased, additional, accelerated
or guaranteed rights or entitlements of any Person under, or result in the
creation of any Lien upon any of the properties or assets of the Company or any
of its Subsidiaries under, any provision of (i) the certificate of incorporation
and by-laws or comparable organizational documents of the Company or any of its
Subsidiaries; (ii) any Contract or Permit to which the Company or any of its
Subsidiaries is a party or by which any of the properties or assets of the
Company or any of its Subsidiaries are bound; (iii) any Order applicable to the
Company or any of its Subsidiaries or by which any of the properties or assets
of the Company or any of its Subsidiaries are bound; or (iv) any applicable Law,
other than, in the case of clauses (ii), (iii) and (iv), such items, that would
not, individually or in the aggregate, have a Material Adverse Effect.
(b) No consent, waiver, approval, Order, Permit or
authorization of, or declaration or filing with, or notification to, any Person
(under any Contract or otherwise) or Governmental Body is required on the part
of the Company or any of its Subsidiaries in connection with the execution and
delivery of this Agreement or the Company Documents or the compliance by the
Company or any of its Subsidiaries with any of the provisions hereof or thereof,
or the consummation of the transactions contemplated hereby or thereby, except
for (i) compliance with the applicable requirements of the HSR Act and the rules
and regulations promulgated thereunder and any other applicable Antitrust Laws,
(ii) approval by the shareholders of the Company of the Merger in accordance
with the DGCL and (iii) such consents, waivers, approvals, Orders, Permits,
authorizations, declarations or filings, the absence of which, or the failure to
make which, individually or in the aggregate, would not have a Material Adverse
Effect.
6.4 Capitalization.
The authorized capital stock of the Company consists of
1,500,000 shares of Company Common Stock. As of the date hereof, there are
923,577 shares of Company Common Stock issued and outstanding and no shares of
Company Common Stock are held by the Company as treasury stock. Except as set
forth above and set forth in Schedule 6.4(a), there are no shares of capital
stock or other equity securities of the Company issued, reserved for issuance or
outstanding. All outstanding shares of Company Common Stock are duly authorized,
validly issued, fully paid and nonassessable and, except as set forth in
Schedule 6.4(b), not subject to or issued in violation of any purchase option,
call option, right of first refusal, preemptive right,
25
subscription right or any similar right under any provision of the DGCL, the
certificate of incorporation or by-laws of the Company or any Contract to which
the Company is a party or otherwise bound. There are not any bonds, debentures,
notes or other Indebtedness of the Company that have the right to vote (or are
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which holders of Company Common Stock may vote ("Voting Company
Debt"). Except as set forth above and in Schedule 6.4(c), as of the date of this
Agreement, there are not any options, warrants, rights, convertible or
exchangeable securities, "phantom" stock rights, stock appreciation rights,
stock-based performance units, commitments, Contracts, arrangements or
undertakings of any kind to which the Company or any of its Subsidiaries is a
party or by which any of them is bound (i) obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other equity interests in, or any
security convertible or exercisable for or exchangeable into any capital stock
of or other equity interest in, the Company or of any of its Subsidiaries or any
Voting Company Debt, (ii) obligating the Company or any of its Subsidiaries to
issue, grant, extend or enter into any such option, warrant, right, security,
unit, commitment, Contract, arrangement or undertaking or (iii) that give any
Person the right to receive any economic benefit or right similar to or derived
from the economic benefits and rights occurring to holders of Company Common
Stock. As of the date of this Agreement, except as set forth in Schedule 6.4(d),
there are not any outstanding contractual obligations of the Company or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its Subsidiaries. Schedule 6.4(e) sets
forth a true and correct list of all (i) holders of record of any Company Common
Stock and the number of shares held and (ii) outstanding options including
holder, exercise price, expiration date and vesting date.
6.5 Subsidiaries. Schedule 6.5 sets forth with respect to each
Subsidiary of the Company, the number of shares of its authorized capital stock,
the number and class of shares thereof duly issued and outstanding, the names of
all stockholders or other equity owners and the number of shares of stock owned
by each stockholder or the amount of equity owned by each equity owner. The
outstanding shares of capital stock of each Subsidiary of the Company are
validly issued, fully paid and non-assessable, and all such shares or other
equity interests represented as being owned by Company or any of its
Subsidiaries are owned by it free and clear of any and all Liens. No shares of
capital stock are held by any Subsidiary of the Company as treasury stock. There
is no existing option, warrant, right or Contract to which any Subsidiary of the
Company is a party requiring, and there are no convertible securities of any
Subsidiary of the Company outstanding which upon conversion would require, the
issuance of any shares of capital stock or other equity interests of any
Subsidiary of the Company or other securities convertible into shares of capital
stock or other equity interests of any Subsidiary of the Company.
6.6 Financial Statements. Schedule 6.6 sets forth (x) the draft audited
consolidated balance sheet of the Company and its Subsidiaries as at December
31, 2003 and the related draft audited consolidated statements of income,
stockholders' equity and cash flow for the year ended December 31, 2003 (the
"Draft 2003 Statements"), (y) the audited consolidated balance sheet of the
Company and its Subsidiaries as at
26
December 31, 2002 and the related audited consolidated statements of income,
stockholders' equity and cash flow for the year ended December 31, 2002, and (z)
the unaudited consolidated balance sheet of the Company and its Subsidiaries as
at June 30, 2004 and the related unaudited consolidated statements of income,
stockholders' equity and cash flow for the six months then ended. The financial
statements referred to in this Section 6.6, including the notes thereto, as well
as the Revised 2003 Statements (when delivered to Parent pursuant to Section
8.13) (the "Financial Statements") fairly present, in all material respects, the
financial position, the results of operations, retained earnings, changes in
financial position and cash flow, as applicable, of the Company and its
Subsidiaries as of the dates thereof and for the periods then ended, subject to
normal year-end adjustments in the Ordinary Course of Business in the case of
any unaudited interim financial statements (including, capitalization of
software development costs). The Financial Statements have been prepared, in
each case, in accordance with GAAP consistently applied during the periods
involved, and in each case were compiled from the books and records regularly
maintained by the management of the Company used to prepare financial statements
of the Company in accordance with the principles stated therein. The books and
records of the Company and its Subsidiaries fully reflect, in all material
respects, the income, expenses, assets and liabilities of the Company and its
Subsidiaries and provide a fair and accurate basis for the preparation of the
Financial Statements.
For the purposes hereof, the draft audited consolidated
balance sheet of the Company and its Subsidiaries as at December 31, 2003 is
referred to as the "Balance Sheet"; provided, however, that following delivery
of the revised draft consolidated balance sheet of the Company and its
Subsidiaries as at December 31, 2003 pursuant to Section 8.13, references to
"Balance Sheet" shall be references to such revised draft December 31, 2003
balance sheet. December 31, 2003 is referred to as the "Balance Sheet Date".
6.7 No Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any Liabilities of any kind that would have been required to be
reflected in, reserved against or otherwise described on the Balance Sheet or in
the notes thereto in accordance with GAAP and were not so reflected, reserved
against or described, other than (i) Liabilities set forth on Schedule 6.7, (ii)
Liabilities incurred in the Ordinary Course of Business after the Balance Sheet
Date, (iii) Liabilities incurred in connection with the transactions
contemplated hereby and set forth on Schedule 6.7, and (iv) Liabilities that
would not, individually or in the aggregate, exceed $1,000,000.
6.8 Absence of Certain Developments. Except as contemplated by this
Agreement and except as set forth in Schedule 6.8, since the Balance Sheet Date
(i) the Company and its Subsidiaries have conducted their respective businesses
only in the Ordinary Course of Business, and (ii) there has not been:
(a) any Material Adverse Effect;
27
(b) any damage, destruction or other casualty loss with
respect to any material asset or property owned, leased or otherwise used by the
Company or its Subsidiaries, whether or not covered by insurance;
(c) any declaration, setting aside or payment of any dividend
or other distribution in cash, stock or property in respect of the capital stock
of the Company or its Subsidiaries or any direct or indirect redemption,
repurchase or other acquisition of any of its capital stock or any
reclassification or change in any terms or provisions of its capital stock or
capital stock of its Subsidiaries, except for repurchases of shares of Company
Common Stock from former employees in an aggregate amount of less than $100,000;
(d) any payment (except for business payables incurred and
paid in the Ordinary Course of Business), loan or advance by the Company or any
of its Subsidiaries of any amount to or in respect of, or any sale, transfer or
lease of any property or assets (real, personal or mixed, tangible or
intangible) to, or entry into, amendment or waiver of any rights under any
transactions, agreements or arrangements with or for the benefit of, any
Affiliates, associates or family members of the Company's officers or directors
or any of its Subsidiaries' officers or directors or any Affiliates, associates
or family members thereof;
(e) any termination (other than upon expiration in accordance
with its terms) or material adverse amendment, whether by the Company, any of
its Subsidiaries or any other Person, of any Contract pursuant to which the
Company or any of its Subsidiaries would receive from any Person or pay to any
such Person more than $500,000 in any calendar year or any termination or any
lapse of any material Company IP;
(f) any amendment to the certificate of incorporation or
by-laws or comparable organizational documents of the Company or any of its
Subsidiaries;
(g) other than in the Ordinary Course of Business (i) any
material increase in the annual level of compensation of any employee, director
or executive officer of the Company or any of its Subsidiaries, (ii) any
material increase in, or agreement to increase, the salary, wage, bonus or other
compensation payable by the Company or any of its Subsidiaries to any of their
respective employees, directors or executive officers, (iii) any grant of any
unusual or extraordinary bonus, benefit or other direct or indirect compensation
to any employee, director or executive officer, (iv) any material increase in
the coverage or benefits available under any (or the creation of any new)
severance pay, termination pay, vacation pay, company awards, salary
continuation for disability, sick leave, deferred compensation, bonus or other
incentive compensation, insurance, pension or other employee benefit plan or
arrangement made to, for, or with any of the employees, directors or executive
officers of the Company or any of its Subsidiaries or otherwise any modification
or amendment or termination of any such plan or arrangement (v) any entering
into of any employment, deferred compensation, severance, consulting, retention,
change of control, non-competition or similar agreement (or amendment of any
such agreement) to which the Company or any of its Subsidiaries
28
is a party or involving an employee, director or executive officer of the
Company or any of its Subsidiaries, except, in each case, as required by
applicable Law from time to time in effect or by the terms of any Company
Benefit Plans or Foreign Employee Benefit Plan or any employee benefit plan
subject to Title IV of ERISA, or (vi) any termination, establishment, adoption,
entrance into, new grants or awards, amendment or other modification, to, under
or of, or any agreement to terminate, establish, adopt, enter into, make new
grants or awards under, amend or otherwise modify, any Company Benefit Plans or
Foreign Employee Benefit Plan except any such termination, establishment,
adoption, entrance into, grant or award, amendment or modification which was not
material;
(h) any acquisition in any manner of any material properties,
assets or business, or any sale, assignment, license, transfer, conveyance,
lease or other disposition of any of the material properties or assets of the
Company and its Subsidiaries (except pursuant to an existing Contract for fair
consideration in the Ordinary Course of Business or for the purpose of disposing
of obsolete or worthless assets);
(i) other than in the Ordinary Course of Business, any
cancellation or compromise of any material debt or claim or waiver or release of
any material right of the Company or any of its Subsidiaries;
(j) any entering into of or agreement to enter into any merger
or consolidation with any Person, or acquisition of the securities or a
substantial portion of the assets of any other Person;
(k) any entering into or modification of any Contract with any
Principal Stockholder or an Affiliate thereof (excluding (i) any Contract
between the Company and any Subsidiary of the Company and (ii) any Contract
between any portfolio company of any of the Principal Stockholders entered into
(or modified) with the Company or any of its Subsidiaries on an arms-length
basis in the Ordinary Course of Business);
(l) any (i) making or rescission of any election relating to
Taxes, settlement or compromise of any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit controversy relating to Taxes, or
except as required by applicable Law or GAAP, making of any material change to
any of its methods of accounting or methods of reporting income or deductions
for Tax or accounting purposes from those employed in the preparation of its
most recent Tax Return, or (ii) any change or any proposed change by the Company
or any of its Subsidiaries in accounting or Tax principles, practices or methods
(including reserves) except as required by a change in GAAP; or
(m) any incurrence or assumption of any Indebtedness for
borrowed money or guarantee of any such Indebtedness, other than in the Ordinary
Course of Business.
29
6.9 Taxes.
(a) Each of the Company and its Subsidiaries (i) has prepared
in good faith and duly and timely filed (taking into account any extension of
time within which to file) all Tax Returns required to be filed by it (other
than those Tax Returns for which the failure to file would not, individually or
the aggregate, have a Material Adverse Effect) and all such filed Tax Returns
are complete and accurate in all material respects; (ii) has timely paid all
Taxes that are required to be paid by or with respect to it and all Taxes that
it is obligated to withhold from amounts owing to any employee, creditor or
third party, except with respect to matters contested in good faith and
adequately reserved on the Financial Statements in accordance with GAAP or
otherwise set forth on Schedule 6.9; and (iii) has not waived any statute of
limitations with respect to Taxes or agreed to any extension of time with
respect to any Tax assessment or deficiency. As of the date hereof, there are no
pending or, to the Knowledge of the Company, threatened, audits, examinations,
investigations or other proceedings in respect of Taxes or Tax matters. There
are not, to the Knowledge of the Company, any claims concerning the Tax
Liability of the Company or any of its Subsidiaries that, individually or in the
aggregate, have a Material Adverse Effect except with respect to matters
adequately reserved on the Financial Statements in accordance with GAAP or
otherwise set forth on Schedule 6.9. The Company has made adequate provisions in
the Financial Statements for all Taxes that have accrued since December 31,
2003, but are not yet due. No taxation authority has operated or agreed to
operate any special Tax arrangement (being a Tax arrangement which is not based
on relevant legislation, published practice or conversion) in relation to the
affairs of the Company or its Subsidiaries. Neither the Company nor any of its
Subsidiaries has taken any action in respect of which any consent or clearance
from any taxation authority was required, except where such consent or clearance
was validly obtained and where any conditions relating thereto were met. Neither
the Company nor any Subsidiary of the Company has distributed stock of another
Person, or has had its stock distributed by another Person, in a transaction
intended to be governed in whole or in part by Section 355 of the Code.
(b) Each Transaction-Related Tax Deduction, to the extent
included in the calculation of Transaction Tax Benefits used in Final Net
Assets, will be deductible by the Company, the Surviving Corporation, the
Parent, or their Affiliates or their successors for federal income Tax purposes.
Without limiting the generality of the foregoing, no Transaction-Related Tax
Deduction, to the extent included in the calculation of Final Net Assets, will
be disallowed under Section 280G of the Code because it is an "excess parachute
payment" as defined therein.
(c) This Section 6.9 and (as they relate to Taxes) Section
6.6, Section 6.8(l), Section 6.10, Section 6.13 and Section 6.20 represent the
sole and exclusive representations and warranties of the Company regarding Tax
matters.
6.10 Real and Personal Property. (a) Neither the Company nor any of its
Subsidiaries has, since January 1, 2000, owned, nor will own as of the Closing
Date, any real property or any option to acquire any real property. All leases
of real property as to which the Company or any of its Subsidiaries is the
lessee or sublessee (the "Leased Real Property") and all leases of personal
property involving payments in excess of $200,000 per annum to any Person as to
which the Company or any of its Subsidiaries is the lessee
30
or sublessee, are listed in Schedule 6.10(a). All such leases are in full force
and effect, are enforceable by the Company or such Subsidiary, as the case may
be, and, to the Knowledge of the Company, the other parties thereto and have not
been materially modified or amended. There exists no material default by the
Company or such Subsidiary, as the case may be, under any of such leases or, to
the Knowledge of the Company, by any other party thereto, nor any event which,
with the giving of notice or the passage of time or both, would constitute a
material event of default by the Company or such Subsidiary, as the case may be,
or, to the Knowledge of the Company, any other party thereunder.
(b) The Company and its Subsidiaries have good and valid title
to all the assets reflected on the Balance Sheet or thereafter acquired, other
than those set forth in Schedule 6.10(b) or otherwise disposed of since the date
of the Balance Sheet in the Ordinary Course of Business, in each case free and
clear of all Liens, except (i) such Liens as are set forth in Schedule 6.10(b)
and (ii) Permitted Exceptions.
6.11 Intellectual Property.
(a) Schedule 6.11(a) sets forth, with, if not registered, the
application number and application date or, if registered, then the
registration/issue number and registration/issue date, title or xxxx, country or
other jurisdiction and owner(s), as applicable, a complete and correct list of
all the following Company IP:
(i) all computer programs and databases written, created,
developed or purchased by the Company or any of its Subsidiaries that are
material to the business or operations of the Company or its Subsidiaries as
currently conducted or are currently licensed, or are currently under
development by the Company or any of its Subsidiaries and contemplated to be
licensed, to any other Person for revenue (collectively, the "Software
Products"), all of which are listed in Schedule 6.11(a)(i);
(ii) all registered Copyrights, including those applicable to
the computer programs and databases and their associated system and user
documentation described in subparagraph (i) above, all of which are listed in
Schedule 6.11(a)(ii);
(iii) all unexpired Patents, including those applicable to the
computer programs and databases described in subparagraph (i) above, all of
which are listed in Schedule 6.11(a)(iii); and
(iv) all registered Trademarks, and the applications to
register any of them in federal, state, or foreign jurisdictions, all of which
are listed in Schedule 6.11(a)(iv).
Any and all renewal and maintenance fees, annuities or other
relevant governmental fees due on or before Closing in respect of the foregoing
Company IP listed in Schedules 6.11(a)(ii), 6.11(a)(iii) and 6.11(a)(iv) have
been paid.
(b) Schedule 6.11(b)(i), together with Schedule 6.11(b)(ii),
sets forth a list of all material Contracts to which the Company or any of its
Subsidiaries is a party
31
and under which the Company or any of its Subsidiaries is granted rights under
any Intellectual Property of any third party other than commercially available
off-the-shelf software. The termination of any Contract set forth or required to
be set forth in Schedule 6.11(b)(i) will not result in the Company or any of its
Subsidiaries being in breach of any material Contract to which the Company or
any of its Subsidiaries is a party that was entered into prior to such
termination and that relates to the sale or licensing of Software Products. None
of the Company or any of its Subsidiaries is in violation of or has lost, nor as
a result of the execution, delivery and performance of this Agreement or any
Contract related to the performance of its respective obligations under this
Agreement will be in violation of or will lose, any rights pursuant to any
Contract set forth or required to be set forth on Schedule 6.11(b)(i). Except as
set forth on Schedule 6.11(b)(ii), no Person is entitled to any royalty, fee or
other payment with respect to any Contract set forth or required to be set forth
on Schedule 6.11(b)(i) or any Company IP.
(c) Schedule 6.11(c) sets forth a list of all Contracts under
which the Company or any of its Subsidiaries has granted rights to third parties
under any Company IP, except Contracts for the non-exclusive licenses of Object
Code to end users of the Software Products entered into in the Ordinary Course
of Business. Except as set forth on Schedule 6.11(c), all rights granted by the
Company or any of its Subsidiaries with respect to Company IP have been and are
non-exclusive. True, correct and complete copies of all such Contracts have been
made available to Parent.
(d) Except as set forth on Schedule 6.11(d), no claims with
respect to any Company IP have been asserted or, to the Knowledge of the
Company, are threatened by any Person, nor to the Knowledge of the Company are
there any valid grounds for any bona fide claim against the use by the Company
or any of its Subsidiaries of any Company IP. All Copyright registrations listed
on Schedule 6.11(a)(ii), all granted and issued Patents listed on Schedule
6.11(a)(iii) and all Trademarks and all applications to register the same listed
on Schedule 6.11(a)(iv), are valid, enforceable and subsisting. Except as set
forth on Schedule 6.11(d) and except as would constitute lost license fees to
the Company or any of its Subsidiaries in an amount equal to or less than
$20,000 under any Contract between the Company or any of its Subsidiaries and a
customer for any Software Product, to the Knowledge of the Company, there has
not been since October 1, 2001 and there is not any current unauthorized use,
infringement or misappropriation of any of the Company IP by any Person of any
of the Company IP that is used or embodied in any Software Product that the
Company or any of its Subsidiaries is currently actively promoting. To the
Knowledge of the Company, the operation of the Company's and its Subsidiaries'
respective businesses, as currently conducted by them, including the
manufacture, sale, importation, possession, use, disclosure, copying, licensing
or distribution of any Software Products or Company IP, does not infringe,
misappropriate, violate or otherwise conflict with any Patent or Trademark right
of any other Person. The operation of the Company's and its Subsidiaries'
respective businesses, as currently conducted by them, including the
manufacture, use, sale, importation, possession, disclosure, copying, licensing
or distribution of any Software Products or Company IP, does not infringe,
misappropriate, violate or otherwise conflict with any Copyright or Trade Secret
right of any other Person. The Company and its Subsidiaries each currently
32
own or are licensed pursuant to a Contract set forth on Schedule 6.11(b)(i), and
will continue to so own or be licensed immediately after Closing, all
Intellectual Property reasonably necessary to conduct the respective businesses
of the Company and its Subsidiaries as currently conducted.
(e) None of the Company IP is subject to any Order, and, to
the Knowledge of the Company, neither the Company nor any of its Subsidiaries is
subject to an Order in respect of any Intellectual Property of any other Person.
None of the Company or any of its Subsidiaries has entered into any agreement to
indemnify any other Person against any charge of infringement of any third party
Intellectual Property rights, except in the Ordinary Course of Business. None of
the Company or any of its Subsidiaries has entered into any agreement granting
any third party the right to bring infringement actions or otherwise to enforce
rights with respect to any of the Company IP.
(f) Each of the Software Products set forth or required to be
set forth on Schedule 6.11(a) generally conforms to the user documentation for
such Software Product. The Company and its Subsidiaries own and have possession
of the relevant documentation and own (or have the right to use) and have
possession of software tools (including all Source Code, compilers, system
documentation, statements of principles of operation and schematics, as
applicable) for each of such Software Products as may be reasonably necessary
and sufficient for the continued support, further development and maintenance of
the latest version of each such Software Product that the Company or its
Subsidiaries is currently actively promoting and, to the extent that the Company
currently has an ongoing obligation to provide support, further development
and/or maintenance for the latest version or a prior version of such Software
Product, each such latest version or prior version of such Software Product. To
the Knowledge of the Company, neither the Company nor any of its Subsidiaries is
in breach of any express warranty with respect to such Software Products.
(g) Except as set forth on Schedule 6.11(g), (i) none of the
Source Code for the Software Products has been disclosed, delivered or made
available to any Person not an employee of the Company or a Subsidiary of the
Company, and (ii) neither the Company nor any Subsidiary of the Company has
agreed to provide any such Source Code to any Person. The Company and its
Subsidiaries have entered into Contracts having obligations of confidentiality,
non-disclosure and non-use with any Person who has access to, or any Person to
whom the Company or any of its Subsidiaries has an obligation to provide access
to, any Source Code of the Company or a Subsidiary of the Company, and, to the
Knowledge of the Company, no Person is in breach of any such Contract.
(h) No government funding, facilities of any university,
college or other educational institution or non-profit organization was used in
the development of the Software Products or Company IP, and, except as set forth
on Schedule 6.11(h), no government, educational institution or other non-profit
organization has any claim or right in the Software Products or Company IP. No
Person who was involved in the development or creation of the Software Products
or Company IP has performed services
33
for any government, educational institution or other non-profit organization
during a time period when such Person was also involved with the creation or
development of the Software Products or Company IP.
6.12 Material Contracts.
(a) Schedule 6.12 sets forth all of the following Contracts to
which the Company or any of its Subsidiaries is a party or by which any of them
is bound (each a "Material Contract" and, collectively, the "Material
Contracts"):
(i) relating to Indebtedness, or the guaranty of any
liability or obligation of any Person other than a Subsidiary of the Company;
(ii) relating to commitments by the Company or any of
its Subsidiaries to make payments in excess of $500,000 per annum, or $1,000,000
over the life of such Contract, for Contracts between the Company or any of its
Subsidiaries and any Person;
(iii) relating to the employment or compensation of
any former or current director or officer of the Company or any of its
Subsidiaries; provided that, with respect to former directors or officers, only
those Contracts which have continuing obligations of the Company or any of its
Subsidiaries as of the date hereof are required to be set forth on Schedule
6.12;
(iv) relating to the sale or other disposition of any
material assets, properties or rights since December 31, 2003, other than with
respect to obsolete equipment no longer used by the Company or its Subsidiaries;
(v) relating to the lease or similar arrangement of
any machinery, equipment, motor vehicles, furniture, fixture or similar property
relating to commitments in excess of $500,000 per annum, or $1,000,000 over the
life of such lease or similar arrangement, to any Person;
(vi) to which any Governmental Body is a party in
excess of $500,000 per annum or $1,000,000 over the life of such Contract;
(vii) that contains non-competition provisions that
restrict the operation of the Company or any of its Subsidiaries anywhere in the
world;
(viii) pursuant to which the Company or any of its
Subsidiaries is or may be obligated to make payments to any Person, contingent
or otherwise, on account of or arising out of prior acquisitions or sales of
businesses, assets or stock of other Persons;
(ix) providing for indemnification of any Person with
respect to Liabilities arising out of the purchase or sale by the Company or any
of its Subsidiaries of any business;
34
(x) a power of attorney (other than a power of
attorney given in the Ordinary Course of Business with respect to routine Tax
matters);
(xi) relating to currency exchange, interest rate
exchange, commodity exchange or similar transactions;
(xii) relating to any joint venture, partnership or
similar arrangement;
(xiii) providing for the services of any dealer,
distributor, sales representative, franchisee or similar representative
requiring payment or receipt over the life of such Contract in excess of
$200,000 by the Company or any of its Subsidiaries; and
(xiv) that are or are required to be set forth on
Schedule 6.11(b)(i), 6.11(b)(ii) and 6.11(c);
provided, however, that "life of the Contract" when used in
this Section 6.12(a) means the stated term of such Contract contained in such
Contract without regard to any automatic renewal of such Contract.
(b) Except as set forth in Schedule 6.12(b), all Material
Contracts are valid, binding and in full force and effect and are enforceable by
the Company or the applicable Subsidiary of the Company in accordance with their
terms, except for such failures to be valid, binding, in full force and effect
or enforceable that, individually or in the aggregate, would not have a Material
Adverse Effect. Except as set forth in Schedule 6.12(b), the Company or the
applicable Subsidiary of the Company has performed all material obligations
required to be performed by it to date under the Material Contracts, and it is
not (with or without the lapse of time or the giving of notice, or both) in
breach or default in any material respect thereunder and, to the Knowledge of
the Company, no other party to any Material Contract is (with or without the
lapse of time or the giving of notice, or both) in breach or default in any
material respect thereunder, except for such noncompliance, breaches and
defaults that, individually or in the aggregate, would not have a Material
Adverse Effect. Neither the Company nor any of its Subsidiaries has, except as
disclosed in Schedule 6.12(b), received any notice of the intention of any
Person to terminate any Material Contract. Complete and correct copies of all
Material Contracts, together with all modifications and amendments thereto
substantially changing the business terms of such Contracts, have been made
available to Parent.
6.13 Employee Benefits Plans.
(a) Schedule 6.13(a) lists each "employee benefit plan" (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) and any other material employee plan or agreement
maintained, contributed or required to be contributed by the Company or its
Subsidiaries, excluding any Foreign Employee Benefit Plan (each, a "Company
Benefit Plan"). The Company and its Subsidiaries have no material liability with
respect to any plan or agreement of the type
35
described in the preceding sentence other than the Company Benefit Plans. The
Company has made available to Parent correct and complete copies of (i) each
Company Benefit Plan (or, in the case of any such Company Benefit Plan that is
unwritten, descriptions thereof), (ii) the most recent annual reports on Form
5500 required to be filed with the IRS with respect to each Company Benefit Plan
(if any such report was required), (iii) the most recent summary plan
description for each Company Benefit Plan for which such summary plan
description is required and (iv) each trust agreement and insurance or group
annuity contract relating to any Company Benefit Plan. The Company Benefit Plans
are all in compliance with the applicable provisions of ERISA, the Code, all
other applicable Laws, and the terms of such plans, except for any noncompliance
that would not result in material liability with respect to the Company Benefit
Plans and that would not, individually or in the aggregate, have a Material
Adverse Effect. There have been no prohibited transactions or breaches of any
duties imposed on "fiduciaries" (within the meaning of Section 3(21) of ERISA)
by ERISA with respect to the Company Benefit Plans that could result in any
liability or excise tax under ERISA or the Code being imposed on the Company or
its Subsidiaries, except for any liability that would not, individually or in
the aggregate, have a Material Adverse Effect.
(b) Schedule 6.13(b) lists each Foreign Employee Benefit Plan.
There are no material liabilities or obligations of any nature with respect to
any Foreign Employee Benefit Plan that were not shown or provided for on the
balance sheet (including the notes thereto) of the Company and its Subsidiaries,
included in the Financial Statements. The Company has made available to the
Parent with respect to each Foreign Employee Benefit Plan (i) all plan documents
and amendments, trust agreements and insurance and annuity contracts and
policies and other funding arrangements and (ii) the most recently filed
governmental reports, if any. A "Foreign Employee Benefit Plan" is "employee
benefit plan" (as defined in Section 3(3) of ERISA) and any other material
employee plan or agreement maintained, contributed or required to be contributed
by the Company or its Subsidiaries primarily for the benefit of any current or
former employee or director of the Company or any of its Subsidiaries
substantially all of whom reside outside of the United States, and the
beneficiaries and dependents of any such employees or directors, regardless of
whether it is mandated under local Law, voluntary, private, funded, unfunded,
financed by the purchase of insurance, contributory or noncontributory;
provided, however, that governmental plans or programs requiring the mandatory
payment of social insurance taxes or similar contributions to a governmental
fund with respect to the wages of an employee or director shall not be
considered a "Foreign Employee Benefit Plan." Each Foreign Employee Benefit Plan
complies with all applicable Laws (including applicable Laws regarding the form,
funding and operation of the Foreign Employee Benefit Plan) and the respective
requirements of the governing documents for such Foreign Employee Benefit Plan
except for any noncompliance that would not, individually or in the aggregate,
result in material liability with respect to the Foreign Employee Benefit Plans
and that would not, individually or in the aggregate, have a Material Adverse
Effect.
(c) To the Knowledge of the Company, (i) all Company Benefit
Plans that are "employee pension plans" (as defined in Section 3(3) of ERISA)
that are
36
intended to be tax qualified under Section 401(a) of the Code (each, a "Company
Pension Plan") are so qualified and (ii) no event has occurred since the date of
the most recent determination letter or application therefor relating to any
such Company Pension Plan that would adversely affect the qualification of such
Company Pension Plan. The Company has made available to Parent a correct and
complete copy of the most recent determination letter received with respect to
each Company Pension Plan, as well as a correct and complete copy of each
pending application for a determination letter, if any.
(d) All contributions, premiums and benefit payments under or
in connection with the Company Benefit Plans and the Foreign Employee Benefit
Plans that are required to have been made as of the date hereof in accordance
with the terms of the Company Benefit Plans and the Foreign Employee Benefit
Plans have been timely made or have been reflected on the most recent Balance
Sheet in all material respects. No Company Pension Plan has an "accumulated
funding deficiency" (as such term is defined in Section 302 of ERISA or Section
412 of the Code), whether or not waived. To the Knowledge of the Company, each
Foreign Employee Benefit Plan intended to qualify for favorable tax treatment in
the relevant foreign jurisdiction is so qualified. No Foreign Employee Benefit
Plan has a defined benefit element.
(e) None of the ERISA Affiliates maintains or at any time
within the past six years have maintained or contributed to or been required to
contribute to any employee benefit plan subject to Title IV of ERISA (including
any "single-employer plan" within the meaning of Section 4001(a)(15) of ERISA,
any "Multiemployer Plan" and any "multiple employer plan" within the meaning of
Section 413(c) of the Code).
(f) The Subsidiaries are the only ERISA Affiliates of the
Company, and the Company and Subsidiaries are the only ERISA Affiliates with
respect to each Subsidiary. An "ERISA Affiliate" is, with respect to any person,
any trade or business (whether or not incorporated) (i) under common control
within the meaning of Section 4001(b)(1) of ERISA with such person or (ii) which
together with such person is treated as a single employer under Sections 414(b),
(c), (m), (n) and (o) of the Code (a "Controlled Group" member).
(g) With respect to each Company Benefit Plan that is a group
health plan benefiting any current or former employee of the Company or any of
its Subsidiaries, (i) the Company and each member of the Controlled Group has
complied in all material respects with the continuation coverage requirements of
Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA and (ii)
the Company and each member of the Controlled Group has complied in all material
respects with the requirements of the Health Insurance Portability and
Accountability Act of 1996, as amended.
(h) No Company Benefit Plan is or at any time was funded
through a "welfare benefit fund" as defined in Section 419(e) of the Code, and
no benefits under any Company Benefit Plan are or at any time have been provided
through a voluntary employees' beneficiary association (within the meaning of
subsection 501(c)(9) of the Code) or a supplemental unemployment benefit plan
(within the meaning of Section 501(c)(17) of the Code).
37
(i) All contributions, transfers and payments made by the
Company or any of its Subsidiaries in respect of any Company Benefit Plan or any
Foreign Employee Benefit Plan (other than transfers incident to an incentive
stock option plan within the meaning of Section 422 of the Code) have been or
are fully deductible under the Code or under other applicable Law, except where
such non-deductibility would not have, individually or in the aggregate, a
Material Adverse Effect.
(j) There is no pending or, to the Knowledge of the Company,
threatened action, claim or lawsuit of any kind in any court or government
agency with respect to any Company Benefit Plan or Foreign Employee Benefit Plan
(other than routine claims for benefits), nor, to the Company's Knowledge, is
there any basis for one, in each case, if adversely determined, would have,
individually or in the aggregate, a Material Adverse Effect.
(k) With respect to any insurance policy providing funding for
benefits under any Company Benefit Plan, there is no liability of the Company or
a Subsidiary of the Company, in the nature of a retroactive rate adjustment,
loss sharing arrangement, or other actual or contingent liability, nor would
there be any such liability if such insurance was terminated on the date hereof,
in each case that would have, individually or in the aggregate, a Material
Adverse Effect.
(l) No Company Benefit Plans which is a "welfare benefit
plans" within the meaning of Section 3(1) of ERISA and no Foreign Employee
Benefit Plan provide for continuing medical benefits or coverage for any
participant or any beneficiary of a participant post-termination of employment
except as may be required under the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA") or with respect to any Foreign Employee
Benefit Plan, except as may be required by applicable Law.
(m) Schedule 6.13(m) lists all Company Benefit Plans and
Foreign Employee Benefit Plans that provide any payment to any current or former
employee, consultant or director (or their dependents) as a result of a change
of control of the Company or a Subsidiary of the Company or provide
"nonqualified" deferred compensation. Except as listed on Schedule 6.13(m), the
execution and performance of this Agreement will not (i) constitute a stated
triggering event under any Company Benefit Plan or Foreign Employee Benefit Plan
that will result in any payment (whether of severance pay or otherwise) becoming
due from the Company or a Subsidiary of the Company to any such person, or (ii)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any such person.
(n) No Company Benefit Plan or Foreign Employee Benefit Plan
provides benefits to any individual who is not a current or former director,
employee or consultant of the Company, or the dependents or other beneficiaries
of any such current or former director, employee or consultant.
38
(o) Neither the Company nor the Subsidiaries of the Company
will incur any liabilities or obligations under WARN as a result of the
consummation of the transactions contemplated by this Agreement.
(p) This Section 6.13 and (as they relate to employee
benefits) Section 6.6 and Section 6.14 represent the sole and exclusive
representations and warranties of the Company regarding employee benefit
matters.
6.14 Labor.
(a) Neither the Company nor any of its Subsidiaries is a party
to any labor or collective bargaining agreement.
(b) There are no, and during the past two years there have not
been any (i) strikes, work stoppages, work slowdowns or lockouts pending or, to
the Knowledge of the Company, threatened against or involving the Company or any
of its Subsidiaries, (ii) to the Knowledge of the Company, union organization
campaigns with respect to employees of the Company or any of its Subsidiaries
and no disputes concerning representation of such employees exists; (iii) unfair
labor practices in breach of applicable Law engaged in by the Company or any of
its Subsidiaries; (iv) unfair labor practice charges, grievances or complaints
pending or, to the Knowledge of the Company, threatened by or on behalf of any
employee or group of employees of the Company or any of its Subsidiaries, (v)
pending, or to the Knowledge of the Company, threatened, charges against the
Company or any of its Subsidiaries or any of their current or former employees
before the Equal Employment Opportunity Commission or any state or local
Governmental Body responsible for the prevention of unlawful employment
practices; and (vi) written communications received by the Company or any of its
Subsidiaries of the intent of any Governmental Body responsible for the
enforcement of labor or employment Laws to conduct an investigation of or
affecting the Company or any of its Subsidiaries and, to the Knowledge of the
Company, no such investigation is in progress.
(c) Schedule 6.14 attaches a list of all employees of the
Company and its Subsidiaries as of September 27, 2004. The Company has made
available to Parent information as to all officers and other employees of and
consultants to the Company and its Subsidiaries whose current annual salary
(excluding bonus) is $100,000 or more, together with the current job title or
relationship to the Company and its Subsidiaries for each such Person.
6.15 Litigation. There are no, nor have there been since December 31,
2002 any (i) investigations by a Governmental Body pending or, to the Knowledge
of the Company, threatened affecting or potentially affecting the Company or any
of its Subsidiaries; or (ii) Legal Proceedings entered against, involving,
settled, resolved, pending or, to the Knowledge of the Company, threatened in
writing against the Company or any of its Subsidiaries, in either case which, if
adversely determined, would (1) have, individually or in the aggregate, a
Material Adverse Effect or (2) result in a Loss of more than $250,000.
39
6.16 Compliance with Laws; Permits.
(a) The Company and its Subsidiaries are in compliance in all
material respects with all Laws of any Governmental Body applicable to their
respective businesses or operations. Except with respect to immaterial
violations of any Laws, neither the Company nor any of its Subsidiaries has
received any written notice of, has Knowledge of or has been charged with, the
violation of any Laws.
(b) The Company and its Subsidiaries currently have all
Permits which are required for the operation of their respective businesses as
presently conducted, except where the absence of which would not, individually
or in the aggregate, have a Material Adverse Effect. Neither the Company nor any
of its Subsidiaries is in default or violation (and no event has occurred which,
with notice or the lapse of time or both, would constitute a default or
violation) of any term, condition or provision of any Permit to which it is a
party, except where such default or violation would not, individually or in the
aggregate, have a Material Adverse Effect.
6.17 Environmental Matters. The representations and warranties
contained in this Section 6.17 and (as it relates to environmental, health or
safety matters) Section 6.6 are the sole and exclusive representations and
warranties of the Company pertaining or relating to any environmental, health or
safety matters, including any arising under any Environmental Laws. Except in
each case as would not, individually or in the aggregate, have a Material
Adverse Effect:
(a) the operations of the Company and each of its Subsidiaries
are in compliance with all applicable Environmental Laws and all Permits issued
pursuant to Environmental Laws;
(b) the Company and each of its Subsidiaries has obtained all
Permits required under all applicable Environmental Laws necessary to operate
their respective businesses;
(c) neither the Company nor any of its Subsidiaries is the
subject of any outstanding Order or Contract with any Governmental Body
respecting (i) Environmental Laws, (ii) Remedial Action or (iii) any Release or
threatened Release of a Hazardous Material;
(d) neither the Company nor any of its Subsidiaries has
received any written communication alleging that the Company or any of its
Subsidiaries may be in violation of any Environmental Law or any Permit issued
pursuant to Environmental Law, or may have any liability under any Environmental
Law;
(e) to the Knowledge of the Company, there are no
investigations of the businesses of the Company or any of its Subsidiaries, or
currently or previously owned, operated or leased property of the Company or any
of its Subsidiaries pending or threatened which would reasonably be expected to
result in the imposition of any Liability pursuant to any Environmental Law; and
40
(f) there is not located at any of the properties currently
owned, operated or leased by the Company or any of its Subsidiaries, and there
was not located at any of the properties previously owned, operated or leased by
the Company or any of its Subsidiaries during the period during which any such
property was owned, operated or leased by the Company or any of its
Subsidiaries, any (i) underground storage tanks, (ii) asbestos-containing
material or (iii) equipment containing polychlorinated biphenyls.
6.18 Financial Advisors. Except for Bear, Xxxxxxx & Co. Inc. and X.X.
Xxxxxx Securities Inc., no Person has acted, directly or indirectly, as a
broker, finder or financial advisor for the Company in connection with the
transactions contemplated by this Agreement and no Person is entitled to any fee
or commission or like payment from the Company or Parent in respect thereof.
6.19 Insurance. The Company and its Subsidiaries maintain policies of
fire and casualty, liability and other forms of insurance in such amounts, with
such deductibles and against such risks and losses as are, in the Company's
judgment, reasonable for the business and assets of the Company and its
Subsidiaries. The material insurance policies maintained with respect to the
Company and its Subsidiaries and their respective assets and properties are set
forth on Schedule 6.19. All such policies are in full force and effect, all
premiums due and payable thereon have been paid (other than retroactive or
retrospective premium adjustments that are not yet, but may be required to be
paid with respect to any period ending prior to the Closing Date) and no notice
of cancellation or termination has been received with respect to any such policy
which has not been replaced on substantially similar terms prior to the date of
such cancellation.
6.20 Transactions with Affiliates. Except as set forth in Schedule
6.20, no Contract between the Company or any of its Subsidiaries, on the one
hand, and any Principal Stockholder or any of its respective Affiliates, on the
other hand, will continue in effect subsequent to the Closing (excluding any
Contract between any portfolio company of any of the Principal Stockholders
entered into with the Company or any of its Subsidiaries on an arms-length basis
in the Ordinary Course of Business). Except as set forth in Schedule 6.20, after
the Closing none of the Principal Stockholders or any of their respective
Affiliates will have any interest in any property (real or personal, tangible or
intangible) or Contract of the Company or any of its Subsidiaries used in or
pertaining to their businesses (excluding any Contract between any portfolio
company of any of the Principal Stockholders entered into with the Company or
any of its Subsidiaries on an arms-length basis in the Ordinary Course of
Business).
6.21 Board Approval; State Takeover Statutes.
(a) The Board of Directors of the Company, have duly and
unanimously adopted resolutions (i) approving this Agreement, the Merger and the
other transactions contemplated hereby, (ii) determining that the terms of the
Merger and the other transactions contemplated hereby are fair to and in the
best interests of the Company and its stockholders, (iii) recommending that the
Company's stockholders adopt this Agreement and approve the Merger, and (iv)
declaring that this Agreement is advisable. Such resolutions are sufficient to
render inapplicable to Parent and Merger
41
Sub and this Agreement, the Merger and the other transactions contemplated
hereby the provisions of Section 203 of the DGCL. No other state takeover
statute or similar statute or regulation applies or purports to apply to the
Company with respect to this Agreement, the Merger or any other transaction
contemplated hereby.
(b) The only vote of holders of Company Common Stock necessary
to approve and adopt this Agreement, the Merger and the transactions
contemplated by this Agreement is the adoption of this Agreement by the holders
of a majority of the outstanding shares of Company Common Stock.
6.22 Disclosure. No representation or warranty of the Company contained
in this Agreement (as modified by the Disclosure Schedules), and no statement
contained in any certificate furnished or to be furnished by or on behalf of the
Company to 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 made, in order
to make such representation or warranty or statement not misleading.
6.23 No Other Representations or Warranties; Disclosure Schedules.
Except for the representations and warranties contained in this Article VI (as
modified by the Disclosure Schedules hereto as supplemented or amended in
accordance with the terms hereof), neither the Company nor any other Person
makes any other express or implied representation or warranty with respect the
Company, its Subsidiaries or the transactions contemplated by this Agreement,
and the Company disclaims any other representations or warranties, whether made
by the Company or any of its Affiliates, officers, directors, employees, agents
or representatives. Except for the representations and warranties contained in
Article VI hereof (as modified by the Disclosure Schedules hereto as
supplemented or amended in accordance with the terms hereof), the Company hereby
disclaims all liability and responsibility for any representation, warranty,
projection, forecast, statement, or information made, communicated, or furnished
(orally or in writing) to Parent or its Affiliates or representatives (including
any opinion, information, projection, or advice that may have been or may be
provided to Parent by any director, officer, employee, agent, consultant, or
representative of the Company or any of its Affiliates). The disclosure of any
matter or item in any Disclosure Schedule hereto shall not be deemed to
constitute an acknowledgment that any such matter is required to be disclosed.
Article VII - REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to the Company that:
7.1 Organization and Good Standing. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate properties and carry on its business. Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, lease and
operate properties and carry on its business. Merger Sub
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is a newly-formed corporation organized for the sole purpose of being merged
with and into the Company as part of the Merger and has no assets, liabilities
or properties and otherwise does not conduct any business.
7.2 Authorization of Agreement. Parent and Merger Sub each have all
corporate power and authority to execute and deliver this Agreement and each
other agreement, document, instrument or certificate contemplated by this
Agreement or to be executed by Parent or Merger Sub in connection with the
consummation of the transactions contemplated hereby and thereby (the "Parent
Documents"), and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance by Parent and Merger Sub of this
Agreement and each Parent Document have been duly authorized by all necessary
respective corporate action on behalf of Parent and Merger Sub. This Agreement
has been, and each Parent Document will be at or prior to the Closing, duly
executed and delivered by Parent and Merger Sub, and (assuming the due
authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and each Parent Document when so executed and
delivered will constitute, the legal, valid and binding obligations of Parent
and Merger Sub, enforceable against Parent and Merger Sub in accordance with
their terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
7.3 Conflicts; Consents of Third Parties.
(a) Except as set forth on Schedule 7.3(a) hereto, none of the
execution and delivery by Parent or Merger Sub of this Agreement or the Parent
Documents, the consummation of the transactions contemplated hereby or thereby,
or compliance by Parent or Merger Sub with any of the provisions hereof or
thereof will conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination or cancellation under, any provision of (i) the certificate of
incorporation and by-laws of Parent or Merger Sub; (ii) any Contract or Permit
to which Parent or Merger Sub is a party or by which any of the properties or
assets of Parent or Merger Sub are bound; (iii) any Order applicable to Parent
or Merger Sub or by which any of the properties or assets of Parent or Merger
Sub are bound; or (iv) any applicable Law, other than, in the case of clauses
(ii), (iii) and (iv), such items that, individually or in aggregate, would not
have a material adverse effect on the ability of Parent or Merger Sub to
consummate the transactions contemplated by this Agreement.
(b) No consent, waiver, approval, Order, Permit or
authorization of, or declaration or filing with, or notification to, any Person
or Governmental Body is required on the part of Parent in connection with the
execution and delivery of this Agreement or the Parent Documents or the
compliance by Parent with any of the provisions hereof or thereof, except for
compliance with the applicable requirements of the HSR Act and any other
applicable Antitrust Laws.
43
7.4 Litigation. There are no Legal Proceedings pending or, to the
knowledge of Parent, threatened that are reasonably likely to prohibit or
restrain the ability of Parent to enter into this Agreement or consummate the
transactions contemplated hereby.
7.5 Investment Intention. Parent is acquiring through the Merger the
shares of capital stock of the Surviving Corporation for its own account, for
investment purposes only and not with a view to the distribution (as such term
is used in Section 2(11) of the Securities Act of 1933, as amended (the
"Securities Act") thereof. Parent understands that the shares of capital stock
of the Surviving Corporation have not been registered under the Securities Act
and cannot be sold unless subsequently registered under the Securities Act or an
exemption from such registration is available.
7.6 Financial Advisors. Except for Xxxxxx Xxxxxxx & Co. Incorporated,
no Person has acted, directly or indirectly, as a broker, finder or financial
advisor for Parent in connection with the transactions contemplated by this
Agreement and no Person is entitled to any fee or commission or like payment in
respect thereof.
7.7 Financing. Parent (i) has, and at the Closing will have, sufficient
internal funds (without giving effect to any unfunded financing regardless of
whether any such financing is committed) available to pay the Aggregate Merger
Consideration and any expenses incurred by Parent in connection with the
transactions contemplated by this Agreement, and (ii) has not incurred any
obligation, commitment, restriction or Liability of any kind, which would impair
or adversely affect its capability to effect in any material respect the
transactions contemplated by this Agreement.
7.8 Creditors. In completing the transactions contemplated by this
Agreement, neither Parent nor Merger Sub intends to hinder, delay or defraud any
present or future creditors of Parent or the Company or its Subsidiaries.
7.9 Condition of the Business. Notwithstanding anything contained in
this Agreement to the contrary, Parent acknowledges that the Company is not
making any representations or warranties whatsoever, express or implied, beyond
those expressly given by the Company in Article VI (as modified by the
Disclosure Schedules hereto as supplemented or amended in accordance with the
terms hereof), and Parent acknowledges that, except for the representations and
warranties contained therein, the assets and the business of the Company and its
Subsidiaries are being transferred on a "where is" and, as to condition, "as is"
basis. Except with respect to fraud or willful misrepresentation to Parent in
connection with this Agreement, any claims Parent may have for breach of
representation or warranty shall be based solely on the representations and
warranties of the Company set forth in Article VI (as modified by the Disclosure
Schedules hereto as supplemented or amended in accordance with the terms
hereof). Parent further acknowledges that none of the Company, nor any of its
respective Affiliates nor any other Person has made any representation or
warranty, express or implied, as to the accuracy or completeness of any
information regarding the Company or any of its Subsidiaries, or the
transactions contemplated by this Agreement not expressly set forth in this
Agreement, and none of the Company, any of its Affiliates or any other Person
will have or be subject to any liability to Parent or any other Person resulting
from
44
the distribution to Parent or its representatives or Parent's use of, any such
information, including any confidential memoranda distributed on behalf of the
Company relating to the Company or any of its Subsidiaries or other publications
or data room information provided to Parent or its representatives, or any other
document or information in any form provided to Parent or its representatives in
connection with the sale of the Company and it Subsidiaries and the transactions
contemplated hereby. Parent acknowledges that it has conducted, to its
satisfaction, its own independent investigation of the condition, operations and
business of the Company and its Subsidiaries and, in making its determination to
proceed with the transactions contemplated by this Agreement, Parent has relied
on the results of its own independent investigation.
ARTICLE VIII - COVENANTS
8.1 Access to Information. Prior to the Closing Date, upon reasonable
notice to the Company (and, with respect to sensitive information of the Company
or any of its Subsidiaries with respect to their respective operations or
business opportunities directly competitive with Parent or any of Parent's
Subsidiaries, upon the consent of the Company, not to be unreasonably withheld),
Parent shall be entitled, through its officers, employees and representatives
(including its legal advisors and accountants), to make such investigation of
the properties, businesses and operations of the Company and its Subsidiaries
and such examination of the books and records of the Company and its
Subsidiaries as it reasonably requests and, at Parent's cost and expense, to
make extracts and copies of such books and records. Any such investigation and
examination shall be conducted during regular business hours and under
reasonable circumstances and shall be subject to restrictions under applicable
Law. The Company shall cause the officers, employees, consultants, agents,
accountants, attorneys and other representatives of the Company and its
Subsidiaries to cooperate with the Stockholder Representative, Parent and
Parent's representatives in connection with such investigation and examination,
and Parent and its representatives shall cooperate with the Stockholder
Representative, the Company and its representatives and shall use their
reasonable efforts to minimize any disruption to the business. Notwithstanding
anything herein to the contrary, no such investigation or examination shall be
permitted to the extent that it would require the Company or any of its
Subsidiaries to disclose information subject to attorney-client privilege or
conflict with any confidentiality obligations to which the Company or any of its
Subsidiaries is bound. Notwithstanding anything to the contrary contained
herein, prior to the Closing, without the prior written consent of a
representative of the Company (who shall be identified in writing to Parent as
the representative contemplated by this Section 8.1), not to be unreasonably
withheld, (i) Parent shall not contact any suppliers to, or customers of, the
Company in respect of this Agreement or the transactions contemplated hereby and
(ii) Parent shall have no right to perform invasive or subsurface investigations
of the properties or facilities of the Company or any of its Subsidiaries.
8.2 Conduct of the Business Pending the Closing.
(a) Prior to the Closing, except (i) as set forth on Schedule
8.2, (ii) as required by applicable Law, (iii) as otherwise contemplated by this
Agreement or (iv)
45
with the prior written consent of Parent (which consent shall not be
unreasonably withheld), the Company shall, and shall cause its Subsidiaries to:
(i) conduct the respective businesses of the Company and its
Subsidiaries only in the Ordinary Course of Business; and
(ii) use its commercially reasonable efforts to (A) preserve
the present business operations, organization and goodwill of the Company and
its Subsidiaries, and (B) preserve the present relationships with customers,
suppliers, licensors and licensees of the Company and its Subsidiaries.
(b) Without limiting the generality of the foregoing, except (i) as set
forth on Schedule 8.2, (ii) as required by applicable Law, (iii) as otherwise
contemplated by this Agreement or (iv) with the prior written consent of Parent
(which consent shall not be unreasonably withheld), the Company shall not, and
shall not permit its Subsidiaries to:
(i) declare, set aside, make or pay any dividend or other
distribution in respect of the capital stock of the Company or repurchase,
redeem or otherwise acquire any outstanding shares of the capital stock or other
securities of, or other ownership interests in, the Company or any of its
Subsidiaries;
(ii) transfer, issue, sell or dispose of any shares of capital
stock or other securities of the Company or any of its Subsidiaries or grant
options, warrants, calls or other rights to purchase or otherwise acquire shares
of the capital stock or other securities of the Company or any of its
Subsidiaries;
(iii) effect any recapitalization, reclassification or like
change in the capitalization of the Company or any of its Subsidiaries;
(iv) amend the certificate of incorporation or by-laws or
comparable organizational documents of the Company or any of its Subsidiaries;
(v) other than in the Ordinary Course of Business (A)
materially increase the annual level of compensation of any employee, director
or executive officer of the Company or any of its Subsidiaries, (B) materially
increase the annual level of compensation payable, or to become payable, by the
Company or any of its Subsidiaries to any of their respective employees,
directors or executive officers, (C) grant any unusual or extraordinary bonus,
benefit or other direct or indirect compensation to any employee, director or
executive officer, (D) materially increase the coverage or benefits available
under any (or create any new) severance pay, termination pay, vacation pay,
company awards, salary continuation for disability, sick leave, deferred
compensation, bonus or other incentive compensation, insurance, pension or other
employee benefit plan or arrangement made to, for, or with any of the employees,
directors or executive officers of the Company or any of its Subsidiaries or
otherwise modify or amend or terminate any such plan or arrangement or (E) enter
into any employment, deferred compensation, severance, consulting, retention,
change of control, non-competition or similar agreement (or amend any such
agreement) to which the
46
Company or any of its Subsidiaries is a party or involving an employee, director
or executive officer of the Company or any of its Subsidiaries, except, in each
case, as required by applicable Law from time to time in effect or by the terms
of any Company Benefit Plans, any Foreign Employee Benefit Plan, or any employee
benefit plans subject to Title IV of ERISA;
(vi) subject to any Lien, any of the properties or assets
(whether tangible or intangible) of the Company or any of its Subsidiaries,
except for Permitted Exceptions;
(vii) acquire in any manner any material properties or assets
or business or sell, assign, license, transfer, convey, lease or otherwise
dispose of any of the material properties or assets of the Company and its
Subsidiaries (except pursuant to an existing Contract for fair consideration in
the Ordinary Course of Business or for the purpose of disposing of obsolete or
worthless assets);
(viii) other than in the Ordinary Course of Business, cancel
or compromise any material debt or claim or waive or release any material right
of the Company or any of its Subsidiaries;
(ix) enter into any commitment for capital expenditures of the
Company and its Subsidiaries in excess of $250,000 for any individual commitment
and $1,000,000 for all commitments in the aggregate; provided, however that the
Company's practice of capitalizing software expense in the Ordinary Course of
Business at year end shall not be subject to the foregoing limitation;
(x) enter into, modify or terminate any labor or collective
bargaining agreement of the Company or any of its Subsidiaries or, through
negotiations or otherwise, make any commitment or incur any liability to any
labor organizations;
(xi) enter into or agree to enter into any merger or
consolidation with any Person, or acquire the securities or a substantial
portion of the assets of any Person;
(xii) permit the Company or any of its Subsidiaries to enter
into or modify any Contract with any Principal Stockholder or an Affiliate
thereof (excluding (A) any Contract between the Company and any of its
Subsidiaries and (B) any Contract between any portfolio company of any of the
Principal Stockholders entered into (or modified) with the Company or any of its
Subsidiaries on an arms-length basis in the Ordinary Course of Business);
(xiii) other than in the Ordinary Course of Business, settle
or compromise any claim, action, suit, litigation, proceeding, arbitration or
investigation;
(xiv) adopt or amend any Company Benefit Plans, any Foreign
Employee Benefit Plan or any employee benefit plan subject to Title IV of ERISA
(or any plan that would be a Company Benefit Plan, any Foreign Employee Benefit
Plan or an employee benefit plan subject to Title IV of ERISA if adopted);
47
(xv) incur or assume any Indebtedness for borrowed money or
guarantee any such Indebtedness, other than in the Ordinary Course of Business;
provided, however, that in no event shall the Company or any of its Subsidiaries
incur or assume any long-term Indebtedness for borrowed money;
(xvi) loan or advance any amount to, or sell, transfer or
lease any of its assets to, any Principal Stockholder or any of their respective
Affiliates (excluding the Company and any of its Subsidiaries);
(xvii) make any change in any method of accounting or
accounting practices or policies other than those required by a change in GAAP
or make or rescind any election relating to Taxes settle or compromise any
claim, action, suit, litigation, proceeding, arbitration, investigation, or
audit controversy relating to Taxes; or, except as required by applicable Law or
GAAP, make any material change to any of its methods of accounting or methods of
reporting income or deductions for Tax or accounting purposes from those
employed in the preparation of its most recent Tax Return; or
(xviii) authorize any of, or commit or agree to do, anything
prohibited by this Section 8.2.
8.3 Consents. Parent and the Company shall use (and the Company shall
cause its Subsidiaries to use) their commercially reasonable efforts to obtain
at the earliest practicable date all consents and approvals required to
consummate the transactions contemplated by this Agreement, including the
consents and approvals referred to in Sections 6.3(a), 6.3(b), 7.3(a) and (b)
hereof, provided, however, that no party shall be obligated to pay any
consideration to any third party from whom consent or approval is requested.
8.4 Regulatory Approvals.
(a) Each of Parent and the Company shall (i) make or cause to
be made all filings required of each of them or any of their respective
Subsidiaries or Affiliates under the HSR Act or other Antitrust Laws with
respect to the transactions contemplated hereby as promptly as practicable and,
in any event, within five Business Days after the date of this Agreement in the
case of all filings required under the HSR Act and within ten Business Days in
the case of all other filings required by other Antitrust Laws, (ii) comply at
the earliest practicable date with any request under the HSR Act or other
Antitrust Laws for additional information, documents, or other materials
received by each of them or any of their respective Subsidiaries from the
Federal Trade Commission ("FTC"), the Antitrust Division of the Department of
Justice (the "Antitrust Division") or any other Governmental Body in respect of
such filings or such transactions, and (iii) cooperate with each other in
connection with any such filing (including, to the extent permitted by
applicable Law, providing copies of all such documents to the non-filing parties
prior to filing and considering all reasonable additions, deletions or changes
suggested in connection therewith) and in connection with resolving any
investigation or other inquiry of any of the FTC, the Antitrust Division or
48
other Governmental Body under any Antitrust Laws with respect to any such filing
or any such transaction. Each such party shall use its commercially reasonable
efforts to furnish to each other all information required for any application or
other filing to be made pursuant to any applicable Law in connection with the
transactions contemplated by this Agreement. Each such party shall promptly
inform the other parties hereto of any oral communication with, and provide
copies of written communications with, any Governmental Body regarding any such
filings or any such transaction. No party hereto shall independently participate
in any substantive meeting or discussion, either in person or by telephone, with
any Governmental Body in respect of any such filings, investigation, or other
inquiry without giving the other parties hereto prior notice of the meeting and,
to the extent permitted by such Governmental Body, the opportunity to attend
and/or participate. Subject to applicable Law, the parties hereto will consult
and cooperate with one another in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto relating to proceedings under the
HSR Act or other Antitrust Laws. Any party hereto may, as it deems advisable and
necessary, reasonably designate any competitively sensitive material provided to
the other parties under this Section 8.4 as "outside counsel only." Such
materials and the information contained therein shall be given only to the
outside legal counsel of the recipient and will not be disclosed by such outside
counsel to employees, officers, or directors of the recipient, unless express
written permission is obtained in advance from the source of the materials.
(b) Each of Parent and the Company shall use commercially
reasonable efforts to resolve such objections, if any, as may be asserted by any
Governmental Body with respect to the transactions contemplated by this
Agreement under the HSR Act, the Xxxxxxx Act, as amended, the Xxxxxxx Act, as
amended, the Federal Trade Commission Act, as amended, and any other Laws or
Orders that are designed to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade (collectively, the
"Antitrust Laws"). In connection therewith, if any Legal Proceeding is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as in violation of any Antitrust Law, each of
Parent and the Company shall cooperate and use commercially reasonable efforts
to contest and resist any such Legal Proceeding, and to have vacated, lifted,
reversed, or overturned any Order, whether temporary, preliminary or permanent,
that is in effect and that prohibits, prevents, or restricts consummation of the
transactions contemplated by this Agreement, including by pursuing all available
avenues of administrative and judicial appeal and all available legislative
action, unless, by mutual agreement, Parent and the Company decide that
litigation is not in their respective best interests. Each of Parent and the
Company shall use commercially reasonable efforts to take such action as may be
required to cause the expiration of the notice periods under the HSR Act or
other Antitrust Laws with respect to such transactions as promptly as possible
after the execution of this Agreement. In connection with and without limiting
the foregoing, each of Parent and the Company agree to use commercially
reasonable efforts to take promptly any and all steps necessary to avoid or
eliminate each and every impediment under any Antitrust Laws that may be
asserted by any Federal, state and local and non-United States antitrust or
competition authority, so as to enable the parties to close the transactions
contemplated by this Agreement as expeditiously as possible;
49
provided that the foregoing shall not require any of the parties hereto or their
respective Affiliates to hold separate or otherwise dispose of or conduct their
respective businesses in a specified manner, or agree to sell, hold separate or
otherwise dispose of or conduct its business in a specified manner.
8.5 Further Assurances; Closing Payoff Amount. Each of Parent and the
Company shall use (and the Company shall cause each of its Subsidiaries to use)
commercially reasonable efforts to (i) take all actions necessary or appropriate
to consummate the transactions contemplated by this Agreement and (ii) cause the
fulfillment at the earliest practicable date of all of the conditions to their
respective obligations to consummate the transactions contemplated by this
Agreement. Parent, Merger Sub and the Company shall use commercially reasonable
efforts to cause the Closing to occur. Each of Parent, Merger Sub and the
Company shall not, and shall not permit any of their respective Subsidiaries to,
take any action that would, or that would reasonably be expected to, result in
any of the conditions set forth in Article IX not being satisfied. Not later
than three Business Days prior to the Closing, in connection with the Company's
provision, pursuant to Section 4.4(a), of an estimated balance sheet setting
forth the Company's good faith estimate of (i) Closing Net Indebtedness and (ii)
Company Transaction Expenses (the amounts in clauses (i) and (ii), collectively,
the "Closing Payoff Amount"), the Company shall provide to Parent a statement as
to banking arrangements reasonably satisfactory to Parent providing for a flow
of funds that will result in the payment in full at the Closing of the Closing
Payoff Amount.
8.6 Confidentiality. The parties acknowledge that the information
provided to it in connection with this Agreement and the transactions
contemplated hereby is subject to the terms of the nondisclosure agreement
between Parent and the Company dated September 26, 2003 (the "Confidentiality
Agreement"), the terms of which are incorporated herein by reference. Effective
upon, and only upon, the Closing Date, the Confidentiality Agreement shall
terminate.
8.7 Indemnification, Exculpation and Insurance.
(a) From and after the Closing Date, Parent agrees that all
rights of the individuals who on or prior to the Closing Date were directors or
officers of the Company or any of its Subsidiaries (collectively, the "D&O
Indemnitees") to indemnification and exculpation from liabilities for acts or
omissions occurring at or prior to the Closing Date as provided in the
respective certificate of incorporation or by-laws or comparable organizational
documents of the Company or any of its Subsidiaries as now in effect, and any
indemnification agreements or arrangements of the Company or any of its
Subsidiaries with respect to D& O Indemnitees shall survive the Closing Date and
shall continue in full force and effect in accordance with their terms, and
Parent shall cause the Surviving Corporation to comply with the provisions of
such certificate of incorporation, by-laws, comparable organizational documents
or other indemnification agreements or arrangements. Such rights shall not be
amended, or otherwise modified in any manner that would adversely affect the
rights of the D&O Indemnitees, unless such modification is required by Law.
50
(b) Each D&O Indemnitee shall have the right (but not the
obligation) to control the defense of, including the investigation of, any
litigation, claim or proceeding (each, a "Claim") relating to any acts or
omissions covered under this Section 8.7 with counsel selected by such D&O
Indemnitee; provided, however, that (i) Parent shall be permitted to participate
in the defense of such Claim at its own expense and (ii) Parent shall not be
liable for any settlement effected without its written consent, which consent
shall not be unreasonably withheld.
(c) In the event any Claim is asserted or made, any
determination required to be made with respect to whether a D&O Indemnitee's
conduct complies with the standards set forth under applicable Law, the
applicable organizational documents of the Company or any of its Subsidiaries or
any indemnification agreements or arrangements of the Company or any of its
Subsidiaries, as the case may be, shall be made by independent legal counsel
selected by such D&O Indemnitee and reasonably acceptable to Parent.
(d) Each of Parent and the D&O Indemnitee shall cooperate, and
cause their respective Affiliates to cooperate, in the defense of any Claim and
shall provide reasonable access to properties and individuals as reasonably
requested and furnish or cause to be furnished records, information and
testimony, and attend such conferences, discovery proceedings, hearings, trials
or appeals, as may be reasonably requested in connection therewith.
(e) At the option of Parent:
(i) for the six-year period commencing immediately
after the Closing Date, Parent shall maintain in effect the Company's current
directors' and officers' liability insurance covering acts or omissions
occurring prior to the Closing Date with respect to those persons who are
currently covered by the Company's directors' and officers' liability insurance
policy on terms with respect to such coverage and amount no less favorable to
the Company's directors and officers currently covered by such insurance than
those of such policy in effect on the date hereof, provided that (A) Parent may
substitute therefor policies of a reputable insurance company the terms of
which, including coverage and amount, are no less favorable to such directors
and officers than the insurance coverage otherwise required under this Section
8.7(e), (B) Parent shall not be obligated to make annual premium payments for
such insurance to the extent such premiums exceed 200% of the annual premiums
paid as of the date hereof by the Company for such insurance (such 200% amount,
the "Maximum Premium"), and (C) if such insurance coverage cannot be obtained at
all, or can only be obtained at an annual premium in excess of the Maximum
Premium, Parent shall maintain the most advantageous policies of directors' and
officers' insurance obtainable for an annual premium equal to the Maximum
Premium; or
(ii) Parent shall obtain by Closing and thereafter
maintain in effect a six-year "tail" directors' and officers' liability
insurance policy covering acts or omissions occurring prior to the Closing Date
with respect to those persons who are currently covered by the Company's
directors' and officers' liability insurance policy on
51
terms with respect to such coverage and amount no less favorable to the
Company's directors and officers currently covered by such insurance than those
of such policy in effect on the date hereof; provided that such "tail" policy
shall provide such coverage for six years from the Closing Date and shall be
obtained from the Company's current insurance company or another reputable
insurance company.
(f) The provisions of this Section 8.7: (i) are intended to be
for the benefit of, and shall be enforceable by, each D&O Indemnitee, his or her
heirs and his or her representatives; and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by Contract or otherwise.
(g) In the event that Parent or any of its successors or
assigns (i) consolidates with or merges into any other Person and is not the
continuing or surviving corporation or entity of such consolidation or merger;
or (ii) transfers or conveys all or substantially all of its properties and
assets to any Person, then, and in each such case, proper provision shall be
made so that the successors and assigns of Parent shall assume all of the
obligations thereof set forth in this Section 8.7.
(h) The obligations of Parent under this Section 8.7 shall not
be terminated or modified in such a manner as to adversely affect any D&O
Indemnitee to whom this Section 8.7 applies without the consent of the affected
D&O Indemnitee (it being expressly agreed that the D&O Indemnitees to whom this
Section 8.7 applies shall be third party beneficiaries of this Section 8.7).
8.8 Publicity.
(a) Neither the Company nor Parent shall issue any press
release or public announcement concerning this Agreement or the transactions
contemplated hereby without obtaining the prior written approval of the other
party hereto, which approval will not be unreasonably withheld, unless, in the
judgment of the Company or Parent, disclosure is otherwise required by
applicable Law or by the applicable rules of any stock exchange on which Parent
lists securities, provided that, to the extent required by applicable Law, the
party intending to make such release shall use its commercially reasonable
efforts consistent with applicable Law to consult with the other party with
respect to the text thereof. The Company and Parent agree that the initial press
release to be issued in connection with the transactions contemplated hereby
shall be in a form mutually agreed by them.
(b) Each of Parent and the Company agree that the terms of
this Agreement shall not be disclosed or otherwise made available to the public
and that copies of this Agreement shall not be publicly filed or otherwise made
available to the public, except where such disclosure, availability or filing is
in the reasonable judgment of the Company or Parent required by applicable Law
and only to the extent required by such Law; provided that the parties
acknowledge that Parent will be required to file a Current Report on Form 8-K
with the Securities and Exchange Commission in connection with the execution by
Parent of this Agreement.
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8.9 Employment and Employee Benefits.
(a) Employees. Following the Closing, Parent covenants and
agrees to continue the employment of the employees of the Company and its
Subsidiaries who are employed immediately prior to the Closing at the same
salary or hourly wage rate and position as in effect immediately prior to the
Closing. Such individuals who continue their employment with the Surviving
Corporation and its Subsidiaries following the Closing Date are hereinafter
referred to as the "Continuing Employees." Nothing in this Agreement shall be
construed to (i) require Parent to employ the Continuing Employees for any
definite period of time or (ii) prohibit Parent from changing the title,
position, responsibilities, wages or other terms and conditions of employment of
any Continuing Employee at any time after the Closing Date at the discretion of
Parent (to the extent permitted by applicable Law).
(b) Benefits. For a period of 12 months after the Closing
Date, Parent shall make available to the Continuing Employees who remain
employed by Parent, the Surviving Corporation or any of their Subsidiaries,
employee benefit plans, programs, policies and arrangements that, in the
aggregate, are substantially comparable to the Company Benefit Plans in effect
immediately prior to the Closing Date. If and to the extent Continuing Employees
are afforded the opportunity to participate in any Parent benefits plans
("Parent Benefit Plans"), for purposes of eligibility and vesting (but not
benefit accrual), Parent shall credit each Continuing Employee with his or her
years of service with the Company, its Subsidiaries and any predecessor
entities, to the same extent as such Continuing Employee was entitled
immediately prior to the Closing to credit for such service under any similar
Company Benefit Plan or Foreign Employee Benefit Plan; provided, however, that
such service for eligibility and vesting purposes shall not be credited for
Continuing Employees with respect to any Parent Benefit Plan established after
the Closing Date if employees of the Company or its Subsidiaries who are not
Continuing Employees are not credited with service prior to the establishment of
the new Parent Benefit Plan. The Parent Benefit Plans shall not deny Continuing
Employees coverage on the basis of pre-existing conditions except to the extent
such coverage would have been denied by the Company Benefit Plans or Foreign
Employee Benefit Plans and shall credit such Continuing Employees for any
deductibles and out-of-pocket expenses paid in the year of initial participation
in the Parent Benefit Plans. Nothing in this Agreement shall require Parent to
afford any Parent Benefit Plans to any employees of the Company or its
Subsidiaries.
8.10 Shareholder Consent. The Company shall, in accordance with the relevant
provisions of the DGCL, obtain the written consent, in form and substance
reasonably acceptable to Parent, of not less than a majority of the holders of
Company Common Stock, approving and adopting the Merger, this Agreement and the
transactions contemplated thereby (other than the Proposed Transaction Bonuses).
The Company shall mail notice of such approval to all holders of Company Common
Stock who did not execute such approval, in accordance with the relevant
provisions of the DGCL, no later than ten days after the date such consent is
obtained.
8.11 Supplementation and Amendment of Schedules.
53
(a) The Company shall supplement or amend the Disclosure
Schedules as follows:
(i) with respect to any matter hereafter arising or
discovered after the date of this Agreement that, if existing or known on the
date of this Agreement, would have been required to be set forth or described in
the Disclosure Schedules, but which the Company believes would not, individually
or in the aggregate with respect to all such matters, have a Material Adverse
Effect, the Company shall supplement or amend the Disclosure Schedules at any
time after the date hereof after such matter is discovered by the Company,
provided, however, that (subject to the proviso below) there shall at the
Parent's option be at least five Business Days from the date of the last such
supplement or amendment to the Disclosure Schedules to the Closing Date; and
provided further that, if after the parties have scheduled a Closing Date, the
Company supplements or amends the Disclosure Schedules within five Business Days
of such date (which the Company is entitled to do), Parent shall have the right
to extend the scheduled Closing Date to the date that is five or fewer Business
Days after the date that the supplement or amendment was provided to Parent by
the Company, it being understood and agreed by the Company that Section 5.2(a)
shall be inapplicable during any such extension; and
(ii) with respect to any matter hereafter arising or
discovered after the date of this Agreement that, if existing or known on the
date of this Agreement, would have been required to be set forth or described in
the Disclosure Schedules, and which the Company believes would, individually or
in the aggregate with respect to all such matters, have a Material Adverse
Effect, the Company shall supplement or amend the Disclosure Schedule promptly,
and in any event not later than two Business Days, after such matter is
discovered by the Company.
No such supplement or amendment by the Company shall have any
effect on the satisfaction of the condition to closing set forth in Section
9.1(a); provided, however, if the Closing shall occur, then Parent shall be
deemed to have waived any right or claim pursuant to the terms of this Agreement
or otherwise, including pursuant to Article X hereof, with respect to any and
all matters disclosed pursuant to any such supplement or amendment.
(b) Parent shall notify the Company promptly, and in any event
before Closing, if Parent has knowledge of any matter (a "Material Breach
Matter") the existence of which, individually or in the aggregate with respect
to all such matters, constitutes a material breach by the Company of any
representation or warranty in, or of Section 8.2 of, this Agreement. In the
event that Parent does not so notify the Company prior to Closing, if the
Closing shall occur, Parent shall be deemed to have waived any right or claim
pursuant to the terms of this Agreement or otherwise, including pursuant to
Article X hereof, with respect to such Material Breach Matter. For the purposes
of this Section 8.11(b), Parent has "knowledge" of a Material Breach Matter if
any of the Persons identified on Exhibit 8.11(b) has actual knowledge of such
Material Breach Matter.
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8.12 No Solicitation. None of the Company nor any of its Subsidiaries
shall, nor shall any of them authorize or permit any officer, director or
employee of or any investment banker, attorney, accountant or other
representative retained by any of them to, (i) directly or indirectly solicit,
initiate or encourage any Other Bid, (ii) enter into any agreement with respect
to any Other Bid or (iii) participate in any discussions or negotiations
regarding, or furnish to any Person any information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Other Bid. The
Company shall promptly advise Parent orally and in writing of any Other Bid or
any inquiry with respect to or which could lead to any Other Bid and the
identity of the Person making any such Other Bid or inquiry. As used in this
Section 8.12, "Other Bid" shall mean any proposal for a merger, sale of a
majority of the Company's equity securities, sale of substantial assets or
similar transaction involving the Company or any of its Subsidiaries, other than
the transactions contemplated by this Agreement. The Company shall, and shall
cause each of its Subsidiaries to, immediately cease and cause to be terminated
any existing activities, discussions or negotiations by the Company, any of its
Subsidiaries or any officer, director or employee of or any investment banker,
attorney, accountant or other representative retained by any of them, with any
parties conducted heretofore with respect to any Other Bid.
8.13 Delivery of Revised Draft Financial Statements. Prior to the
Closing Date, the Company shall furnish to Parent and Merger Sub a revised draft
of the consolidated balance sheet of the Company and its Subsidiaries as at
December 31, 2003, and the related consolidated statements of income,
stockholders' equity and cash flow for the year ended December 31, 2003 (the
"Revised 2003 Statements"). Other than immaterial differences and a "subsequent
events note," such Revised 2003 Statements shall in all respects be identical to
the Draft 2003 Statements. The Revised 2003 Statements shall be prepared so as
to comply with Regulation S-X promulgated under the Securities Act of 1933 in a
manner mutually and reasonably acceptable to Parent and the Company, except for
the absence of an audit report from Ernst & Young LLP.
8.14 Closing Date Operations. Except for the transactions contemplated
by this Agreement, Parent shall cause the Surviving Corporation to be operated
after the Effective Time for the balance of the day that constitutes the Closing
Date in the Ordinary Course of Business. The provisions of this Section 8.14 are
intended to be for the benefit of, and shall be enforceable by, the Stockholder
Representative.
8.15 Tax Matters. Parent shall cause to be timely filed all Tax Returns
required to be filed by or with respect to the Surviving Corporation that are
due on or after the Closing Date and shall pay or cause to be paid all Taxes due
thereon.
ARTICLE IX - CONDITIONS TO CLOSING
9.1 Conditions Precedent to Obligations of Parent. The obligation of
Parent to consummate the transactions contemplated by this Agreement is subject
to the fulfillment, on or prior to the Closing Date, of each of the following
conditions (any or all
55
of which may be waived by Parent in whole or in part to the extent permitted by
applicable Law):
(a) the representations and warranties of the Company set
forth in this Agreement (i) that are qualified as to materiality shall be true
and correct in all material respects without giving effect to any limitations or
qualifications as to "materiality", "material", or "Material Adverse Effect" set
forth in any such representation or warranty, and (ii) that are not so qualified
shall be true and correct in all material respects, in each case as of the
Closing Date as though made on the Closing Date (except to the extent any such
representations and warranties relate to an earlier date, in which case such
representations and warranties qualified as to materiality shall be true and
correct in all material respects without giving effect to any limitations or
qualifications as to "materiality", "material", or "Material Adverse Effect" set
forth in any such representation and warranty, and those not so qualified shall
be true and correct in all material respects, in each case on and as of such
earlier date), in each case except for such failures to be so true and correct
that would not, individually or in the aggregate, have a Material Adverse
Effect, and Parent shall have received a certificate signed by an authorized
officer of the Company, dated the Closing Date, confirming the foregoing;
(b) the Company shall have performed and complied in all
material respects with all obligations and agreements required by this Agreement
to be performed or complied with by it on or prior to the Closing Date, and
Parent shall have received a certificate signed by an authorized officer of the
Company, dated the Closing Date, confirming the foregoing;
(c) there shall not be in effect any Order by a Governmental
Body of competent jurisdiction restraining, enjoining or otherwise prohibiting
the consummation of the transactions contemplated hereby;
(d) the waiting period applicable to the transactions
contemplated by this Agreement under the HSR Act shall have expired or early
termination shall have been granted;
(e) the Company shall have obtained the consents or approvals
set forth on Schedule 9.1(e);
(f) there shall not have been any Material Adverse Effect
since the date hereof;
(g) holders of at least 90% of the issued and outstanding
shares of Company Common Stock shall have (i) approved the Merger and this
Agreement, or (ii) validly tendered Certificates and appropriately completed
letters of transmittal or (iii) waived their right to appraisal under the DGCL
in connection with the Merger; and
(h) the Company shall have complied with Section 8.13.
56
9.2 Conditions Precedent to Obligations of the Company. The obligations
of the Company to consummate the transactions contemplated by this Agreement are
subject to the fulfillment, prior to or on the Closing Date, of each of the
following conditions (any or all of which may be waived by the Company in whole
or in part to the extent permitted by applicable Law):
(a) the representations and warranties of Parent set forth in
this Agreement qualified as to materiality shall be true and correct in all
material respects without giving effect to any limitations or qualifications as
to "materiality", "material", or "material adverse effect" set forth in any such
representation or warranty, and those not so qualified shall be true and correct
in all material respects, in each case as of the Closing Date as though made on
the Closing Date (except to the extent any such representations and warranties
relate to an earlier date, in which case such representations and warranties
qualified as to materiality shall be true and correct in all material respects
without giving effect to any limitations or qualifications as to "materiality",
"material", or "material adverse effect" set forth in any such representation or
warranty, and those not so qualified shall be true and correct in all material
respects in each case, on and as of such earlier date), and the Company shall
have received a certificate signed by an authorized officer of Parent, dated the
Closing Date, confirming the foregoing;
(b) Parent shall have performed and complied in all material
respects with all obligations and covenants required by this Agreement to be
performed or complied with by Parent on or prior to the Closing Date, and the
Company shall have received a certificate signed by an authorized officer of
Parent, dated the Closing Date, confirming the foregoing;
(c) there shall not be in effect any Order by a Governmental
Body of competent jurisdiction restraining, enjoining or otherwise prohibiting
the consummation of the transactions contemplated hereby;
(d) the waiting period applicable to the transactions
contemplated by this Agreement under the HSR Act shall have expired or early
termination shall have been granted;
(e) Parent shall have delivered, or caused to be delivered, to
the Company evidence of the deposit of the Exchange Fund, the Closing Payoff
Amount and the Escrow Deposits referred to in Sections 3.2(a) and 4.3 hereof.
9.3 Frustration of Closing Conditions. Neither the Company nor Parent
may rely on the failure of any condition set forth in Sections 9.1 or 9.2, as
the case may be, if such failure was caused by such party's failure to comply
with any provision of this Agreement.
ARTICLE X - SURVIVAL; INDEMNIFICATION
10.1 Survival Past Closing. (a) The obligation to indemnify and hold
harmless the Buyer Indemnified Parties hereto pursuant to Sections 10.2(a) and
10.2(b) shall terminate on the date which is one year after the Closing Date;
provided, however, that (i)
57
such obligation to indemnify and hold harmless shall not terminate with respect
to any item as to which a Buyer Indemnified Party shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice of such claim (stating in reasonable detail the basis of such claim) to
the Stockholder Representative in accordance with the terms of this Article X,
and (ii) such limitation on the obligation to indemnify and hold harmless the
Buyer Indemnified Parties shall not apply with respect to claims of, or causes
of action arising from, willful breach by the Company of this Agreement or fraud
committed by the Company on Parent in connection with this Agreement.
(a) Parent's right to indemnification under this Article X
shall not be affected by any investigation conducted with respect to, or any
knowledge acquired (or capable of being acquired) at any time, whether before or
after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with any representation,
warranty, covenant or obligation of the Company except that, in the event that
Parent has knowledge (as knowledge is defined in Section 8.11(b)) of, and does
not notify the Company of, any Material Breach Matter prior to Closing in
accordance with Section 8.11(b), Parent shall be deemed to have waived any right
or claim pursuant to the terms of this Agreement or otherwise, including
pursuant to Article X hereof, with respect to such Material Breach Matter.
10.2 Indemnification for Parent, Merger Sub and Surviving Corporation.
(a) Subject to Section 10.4 below, Parent, Merger Sub, the
Surviving Corporation and their respective officers, directors, employees,
agents, Subsidiaries and Affiliates (collectively, the "Buyer Indemnified
Parties") shall be indemnified, defended, protected and held harmless from and
against any and all Liabilities, losses, damages, diminution in value, claims,
Legal Proceedings, Orders, fines, penalties, costs and expenses, including
reasonable attorneys' and accountants' fees (collectively, "Losses") incurred by
the Buyer Indemnified Parties, arising out of or resulting from:
(i) any breach of any representation or warranty made
by the Company contained in this Agreement (including as modified by the
Disclosure Schedules), any Company Document or other certificate or statement
delivered pursuant hereto ; and
(ii) the nonperformance of any covenant or obligation
to be performed prior to the Closing Date by the Company under this Agreement,
any Company Document or other document delivered pursuant hereto.
(b) Notwithstanding Section 10.03(a), the Surviving
Corporation shall be indemnified on a dollar-for-dollar basis to the extent (i)
(A) the Closing Net Indebtedness or the amount of the Company Transaction
Expenses exceeds the amount of Closing Net Indebtedness or the amount of Company
Transaction Expenses, as applicable, set forth in the estimated balance sheet of
the Company provided to Parent pursuant to Section 4.4(a) (any such excess
amount, an "Excess Amount") or (B) the consideration to be received by any
holder of a Dissenting Share includes the Appraisal
58
Excess Amount with respect to such Dissenting Share and the Appraisal Excess
Amount was not included in Company Transaction Expenses in accordance with
Section 3.1(d), or (C) any Loss results from a breach of Section 6.4 as a result
of the matters disclosed at item 2 of Schedule 6.4(e) (the amount of any such
Loss referred to as a "Capitalization Claim"), and (ii) following the Effective
Time, Parent or the Surviving Corporation pays such Excess Amount or Appraisal
Excess Amount or Capitalization Claim.
(c) Any amounts to be paid to the Buyer Indemnified Parties
pursuant to this Article X shall be made from the Indemnity Escrow Deposit in
accordance with the terms of the Indemnity Escrow Agreement and Parent hereby
waives on its own behalf and on behalf of the other Buyer Indemnified Parties
any right to seek payment from the Company's stockholders or any of the
Company's Affiliates with respect thereto.
10.3 Limitation on Indemnification.
(a) Deductible. The Buyer Indemnified Parties shall not be
entitled to indemnification for any Losses under Section 10.02(a)(i) until the
Buyer Indemnified Parties have incurred aggregate Losses in excess of $1,000,000
(the "Deductible"). At such time as the aggregate Losses incurred by the Buyer
Indemnified Parties shall exceed the Deductible, the Buyer Indemnified Parties
shall be entitled to receive the amount of Losses in excess of the Deductible.
(b) Liability Cap. The Buyer Indemnified Parties shall not be
entitled to indemnification for any Losses (including pursuant to Section
10.2(a) and (b)) in excess of the amount of the Indemnity Escrow Deposit held by
the Indemnity Escrow Agent from time to time pursuant to the Indemnity Escrow
Agreement (the "Cap") provided, however, this Cap shall not apply to claims of,
or causes of action arising from, willful breach by the Company of this
Agreement or fraud committed by the Company on Parent in connection with this
Agreement.
(c) Any claim for indemnification for breach of the
representation in Section 6.9(b) (i) shall be zero with respect to any
Transaction-Related Tax Deduction to the extent that the Company, Parent, the
Surviving Corporation or their Affiliates or successors do not claim, or do not
properly claim, a deduction for it, and (ii) with respect to any particular
Transaction-Related Tax Deduction, shall in no event exceed the excess of (x)
the amount of Transaction Tax Benefits included in Final Net Assets as
originally determined pursuant to Section 4.4 (including the Transaction Tax
Benefit in respect of such Transaction-Related Tax Deduction) over (y) the
amount of Transaction Tax Benefits which would be included in the calculation of
Final Net Assets after excluding such Transaction-Related Tax Deduction (or
portion thereof) for which a Tax deduction was not allowed. Any dispute as to
whether the Company has properly claimed a deduction for a Transaction-Related
Tax Deduction on a Tax Return shall be referred to and resolved by the
Accounting Referee.
10.4 Exclusive Remedy. From and after the Closing Date, the provisions
of this Article X shall be the sole and exclusive remedy for monetary damages
arising out of or resulting from the breach of any representations, warranties
or covenants made by the
59
Company pursuant to this Agreement (other than claims of, or causes of action
arising from, willful breach by the Company of this Agreement or fraud committed
by the Company on Parent in connection with this Agreement) and the Indemnity
Escrow Deposit held by the Indemnity Escrow Agent pursuant to the Indemnity
Escrow Agreement shall be the sole source of funds to satisfy claims under this
Article X.
10.5 Indemnification Procedures.
(a) If any Buyer Indemnified Party shall, after the Closing
Date, become aware of any matter which such party (the "Indemnitee") has
determined has given or could give rise to a right of indemnification under this
Agreement that does not involve a third party claim, the Indemnitee shall
promptly give the Stockholder Representative written notice of such claim,
stating the amount of the Losses, if known, and method of computation thereof,
all with reasonable particularity and including documentary proof, if available,
and containing a reference to the provisions of this Agreement in respect of
which such right of indemnification is claimed or arises; provided, however,
that failure to so notify the Stockholder Representative shall not preclude the
Indemnitee from any indemnification which it may claim, except to the extent
that the Stockholder Representative shall have been actually and materially
prejudiced by such failure. In accordance with Section 10.1(a), all claims for
indemnification under this Article X must be made within one year from the date
hereof.
(b) If an Indemnitee shall receive notice of any claim by a
third party which is or may be subject to indemnification, the following
procedures shall apply:
(i) The Indemnitee shall promptly give the
Stockholder Representative written notice of such claim; provided, however, that
failure to so notify the Stockholder Representative shall not preclude the
Indemnitee from any indemnification which it may claim, except to the extent
that the Stockholder Representative shall have been actually and materially
prejudiced by such failure.
(ii) The Indemnitee shall permit the Stockholder
Representative, at its option and at its cost and expense, to assume control of
the defense of such third-party claim (and the Stockholder Representative shall
have 45 days after the receipt of notice of such third-party claim to elect to
assume such defense and to so notify Parent and the Indemnitee) utilizing
counsel selected by the Stockholder Representative and not reasonably objected
to by Parent; provided, however, that in the event of any such assumption, the
Stockholder Representative shall acknowledge in writing that any Losses to the
Indemnitee that may result from such third-party claim are indemnifiable Losses
pursuant to this Article X (subject, to the extent applicable, to the
Deductible).
(iii) Notwithstanding the foregoing, the Indemnitee
shall have the right to employ separate counsel in any such claim or proceeding
and, to the extent such third-party claim is indemnifiable pursuant to this
Article X (subject, to the extent applicable, to the Deductible), the fees and
expenses of such counsel shall be paid out of the amount of the Indemnity Escrow
Deposit held pursuant to the Indemnity Escrow Agreement, in the event that: (A)
the Stockholder Representative has failed to timely
60
assume the defense and employ counsel, (B) the Stockholder Representative is not
entitled to assume the defense of a third party claim seeking non-monetary
damages as provided below; or (C) there is a conflict of interest with respect
to any legal defense which may be available and such conflict would prevent
counsel engaged by the Stockholder Representative from claiming such legal
defense; provided, however, to the extent that there is an indemnifiable Loss,
the fees and expenses of more than one firm of separate counsel in connection
with any claim or proceeding shall not be paid out of the Indemnity Escrow
Deposit.
(iv) Notwithstanding the foregoing, the Stockholder
Representative shall not be entitled to assume the defense of any third-party
claim if:
(A) the third-party claim seeks an order,
injunction or other equitable relief (such third-party claim, a "Non-Monetary
Claim") for other than monetary damages against the Indemnitee that cannot be
separated from any related claim for monetary damages; provided that (x) the
Stockholder Representative shall subject to (B) below be entitled to assume the
defense of any portion of such Non-Monetary Claim that relates to monetary
damages and can be separated from the Non-Monetary Claim, (y) with respect to
such portion of the Non-Monetary Claim that the Stockholder Representative is
not entitled to assume the defense of, the Stockholder Representative shall
have, at its own cost and expense, the right to have its own counsel participate
in an advisory capacity in the defense, compromise or settlement of such
Non-Monetary Claim, and (z) the Indemnitee acknowledges in writing that the
Stockholder Representative has not acknowledged or otherwise accepted that any
Losses to the Indemnitee that may result from such Non-Monetary Claim being
defended by the Indemnitee are indemnifiable Losses pursuant to this Article X,
or
(B) such third-party claim is an Indemnitee
Straddle Claim or an Indemnitee Claim.
For the purposes of this Section 10.5(b):
"Indemnitee Straddle Claim" means a third party claim which is or may
be subject to indemnification pursuant to this Article X (such a claim, a
"Relevant Claim") and with respect to which, at the time that the Stockholder
Representative would otherwise be entitled to assume the defense of such
Relevant Claim, the Amount Available For Indemnification is less than 50% of the
Amount At Stake.
"Indemnitee Claim" means a Relevant Claim with respect to which, at the
time that the Stockholder Representative would otherwise be entitled to assume
the defense of such Relevant Claim, the Amount Available For Indemnification is
zero.
"Amount Available For Indemnification" means, with respect to a
Relevant Claim, (A) the amount of the Indemnity Escrow Deposit then held
pursuant to the Indemnity Escrow Agreement and not subject to distribution
pursuant to any Joint Instructions, Accounting Referee Joint Instructions or
Dissenting Shares Joint Instructions previously given pursuant to the Indemnity
Escrow Agreement, less (B) the
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amount of Losses that may reasonably be expected to be indemnifiable with
respect to all active unresolved claims for indemnification by Buyer Indemnified
Parties pursuant to this Article X prior to such Relevant Claim; provided that
if the amount in clause (B) of this definition is greater than the amount in
clause (A) of this definition, then the Amount Available For Indemnification is
zero.
"Amount At Stake" means, with respect to a Relevant Claim, the amount
of Losses that may reasonably be expected to be indemnifiable with respect to
such Relevant Claim.
(c) In the event the Stockholder Representative exercises its
right to undertake control of the defense of any claim by a third party, the
Indemnitee shall cooperate with the Stockholder Representative in such defense
and make available to the Stockholder Representative witnesses, pertinent
records, materials and information in its possession or under its control
relating thereto as are reasonably requested by the Stockholder Representative
or its counsel. No claim by a third party which is being defended by the
Stockholder Representative may be settled by the Stockholder Representative, and
no entry of any judgment will be consented to by the Stockholder Representative,
without the prior written consent of the Indemnitee, which consent shall not be
unreasonably withheld; provided, however, that the Stockholder Representative
may settle such claim without the consent of the Indemnitee so long as the
settlement (x) includes an unconditional release of the Indemnitee, in form and
substance reasonably satisfactory to the Indemnitee, from the claim by the
third-party claimant and (y) does not impose any liabilities or obligations on
the Indemnitee or impose any non-monetary penalties. No claim by a third party
which is being defended by the Indemnitee alone, or jointly with the Stockholder
Representative, shall be settled by the Indemnitee, and no entry of any judgment
shall be consented to by the Indemnitee, without the prior written consent of
the Stockholder Representative, which consent shall not be unreasonably
withheld; provided, however, that the Indemnitee may settle such claim without
the consent of the Stockholder Representative so long as the settlement (x)
includes an unconditional release of the Stockholder Representative, in form and
substance reasonably satisfactory to the Stockholder Representative, from the
claim by the Indemnitee and the third-party claimant and (y) does not impose any
liabilities or obligations to be paid from funds held pursuant to the Indemnity
Escrow Agreement.
10.6 Tax Treatment of Indemnity Payments. Any indemnity payment made
pursuant to this Article X shall be treated as an adjustment to the Aggregate
Merger Consideration for Tax purposes.
10.7 No Consequential Damages; No Contribution or Subrogation.
(a) Notwithstanding anything to the contrary elsewhere in this
Agreement, no party shall, in any event, be liable to any other Person for any
consequential, incidental, indirect, special or punitive damages of such other
Person, including loss of future revenue, income or profits, diminution of value
or loss of business reputation or opportunity relating to the breach or alleged
breach hereof (provided that such limitation shall not limit a party's right to
recover contract damages
62
in connection with other party's breach of this Agreement). For purposes of this
Article X, any damages actually paid by any Indemnitee to a third party shall be
considered direct damages rather than indirect, consequential, special or
punitive damages.
(b) In connection with the matters covered by this Article X,
no holder of Company Common Stock shall have (i) any right to indemnity or
contribution from the Company, or (ii) any right of subrogation against the
Company with respect to any Losses or indemnification of an Indemnitee by reason
of any breach of a covenant, representation or warranty of the Company
hereunder, it being agreed and acknowledged that the representations, warranties
and covenants of the Company herein are solely for the benefit of Parent and
Merger Sub.
ARTICLE XI - MISCELLANEOUS
11.1 Payment of Sales, Use or Similar Taxes. Except as set forth in
Section 3.2(b) with respect to a transfer of shares of Company Common Stock not
registered in the records of the Company, all sales, use, transfer, intangible,
recordation, documentary stamp or similar Taxes or charges, of any nature
whatsoever, applicable to, or resulting from, the transactions contemplated by
this Agreement shall be borne by Parent.
11.2 Expenses. Whether or not the transactions contemplated hereby are
consummated, and except as otherwise provided in this Agreement, each of the
Company and Parent shall bear its own expenses incurred in connection with the
negotiation and execution of this Agreement and each other agreement, document
and instrument contemplated by this Agreement and the consummation of the
transactions contemplated hereby and thereby.
11.3 Stockholder Representative.
(a) Xxxxxx X. Xxx Equity Fund IV, L.P. (the "Stockholder
Representative") has been appointed as the representative of the stockholders of
the Company (i) to act in accordance with the terms and provisions of this
Agreement, (ii) to contest claims of Parent or any Buyer Indemnified Party,
including any litigation involving this Agreement and (iii) to do or refrain
from doing all such further acts and things, and to execute all such documents,
as such Stockholder Representative shall deem necessary or appropriate in
conjunction with any of the transactions contemplated by this Agreement,
including, the power to take all actions which under this Agreement may be taken
by the Stockholder Representative and to do or refrain from doing any further
act or deed which the Stockholder Representative deems necessary or appropriate
in his sole discretion relating to the subject matter of this Agreement.
(b) The Stockholder Representative will not be liable for any
act taken or omitted by it as permitted under this Agreement, except if such act
is taken or omitted in bad faith or by willful misconduct. The Stockholder
Representative will also be fully protected in relying upon any written notice,
demand, certificate or document that it in good faith believes to be genuine
(including facsimiles thereof).
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(c) The Stockholder Representative may, at its own cost and
expense, consult with counsel of its own choice and will have full and complete
authorization and protection for any action taken and suffered by it in good
faith and in accordance with the opinion of such counsel.
(d) Subject to Section 11.3(e), the provisions of this Section
11.3 shall in no way impose any obligations on Parent. In particular,
notwithstanding any notice received by the Parent to the contrary, the Parent
shall be fully protected in relying upon and shall be entitled to rely upon, and
shall have no liability to the stockholders of the Company with respect to
actions, decisions or determinations of the Stockholder Representative. Parent
shall be entitled to assume that all actions, decisions and determinations of
the Stockholder Representative are fully authorized.
(e) The parties hereto acknowledge that the Stockholder
Representative can act as provided in this Agreement and any such provisions are
for the benefit of, and shall be enforceable by, the Stockholder Representative.
11.4 Submission to Jurisdiction; Consent to Service of Process.
(a) The parties hereto hereby irrevocably submit to the
non-exclusive jurisdiction of any federal or state court located within the
State of New York over any dispute arising out of or relating to this Agreement
or any of the transactions contemplated hereby and each party hereby irrevocably
agrees that all claims in respect of such dispute or any suit, action proceeding
related thereto may be heard and determined in such courts. The parties hereby
irrevocably waive, to the fullest extent permitted by applicable Law, any
objection which they may now or hereafter have to the laying of venue of any
such dispute brought in such court or any defense of inconvenient forum for the
maintenance of such dispute. Each of the parties hereto agrees that a judgment
in any such dispute may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by Law.
(b) Each of the parties hereto hereby consents to process
being served by any party to this Agreement in any suit, action or proceeding by
delivery of a copy thereof in accordance with the provisions of Section 11.7.
11.5 Entire Agreement; Amendments and Waivers. This Agreement
(including the Disclosure Schedules and exhibits hereto), the Company Documents
and the Confidentiality Agreement represent the entire understanding and
agreement between the parties hereto with respect to the subject matter hereof.
This Agreement can be amended, supplemented or changed, and any provision hereof
can be waived, only by written instrument making specific reference to this
Agreement signed by the party against whom enforcement of any such amendment,
supplement, modification or waiver is sought. No action taken pursuant to this
Agreement, including any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representation, warranty, covenant or agreement contained herein. The waiver
by any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a further or continuing waiver of such breach or as a
waiver of
64
any other or subsequent breach. No failure on the part of any party to exercise,
and no delay in exercising, any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of such right,
power or remedy by such party preclude any other or further exercise thereof or
the exercise of any other right, power or remedy.
11.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of
Delaware applicable to contracts
made and performed in such State.
11.7 Notices. All notices and other communications under this Agreement
shall be in writing and shall be deemed given (i) when delivered personally by
hand (with written confirmation of receipt), (ii) when sent by facsimile (with
written confirmation of transmission) or (iii) one Business Day following the
day sent by overnight courier (with written confirmation of receipt), in each
case at the following addresses and facsimile numbers (or to such other address
or facsimile number as a party may have specified by notice given to the other
party pursuant to this provision):
If to the Company, to:
Encoda Systems Holdings, Inc.
0000 Xxxxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Facsimile: 000-000-0000
Attention: Don Doctor
With a copy to the Stockholder Representative, to:
c/o Xxxxxx X. Xxx Partners
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. XxXxxx/Xxxxx Xxxxx
Facsimile: 000-000-0000
With a further copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Facsimile: 000-000-0000
Attention: Xxxxxx X. Xxxx, Esq.
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If to Parent, to:
Xxxxxx Corporation
0000 X. XXXX Xxxx.
Xxxxxxxxx, Xxxxxxx 00000
Facsimile: 000-000-0000
Attention: Xxxxx X. Xxxxxx
Vice President-Counsel
With a further copy to:
Xxxxx Day
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: 212-755-7306
Attention: Xxxxxx X. Xxxxx
11.8 Severability. If any term or other provision of this Agreement is
invalid, illegal, or incapable of being enforced by any law or public policy,
all other terms or provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal, or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
11.9 Binding Effect; Assignment; Third Party Beneficiaries. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. Nothing in this Agreement
shall create or be deemed to create any third party beneficiary rights in any
person or entity not a party to this Agreement except as contemplated by
Sections 8.7, 8.14 and 11.3. No assignment of this Agreement or of any rights or
obligations hereunder may be made by any party, directly or indirectly (by
operation of Law or otherwise), without the prior written consent of the other
parties hereto and any attempted assignment without the required consents shall
be void; provided, however, Parent may (i) assign any or all of its rights and
interests hereunder to one or more of its wholly-owned Subsidiaries and (ii)
designate one or more of its wholly-owned Subsidiaries to perform its
obligations hereunder; provided, further, however, that in any such case, Parent
shall remain responsible for the performance of all of its obligations
hereunder. No assignment of any obligations hereunder shall relieve the parties
hereto of any such obligations.
11.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
66
11.11 Waiver of Jury Trial. Each party hereto hereby waives to the
fullest extent permitted by applicable Law, any right it may have to a trial by
jury in respect of any Legal Proceeding directly or indirectly arising out of,
under or in connection with this Agreement, any Company Documents or any
transaction contemplated hereby or thereby. Each party hereto (i) certifies that
no representative, agent or attorney of any other party has represented,
expressly or otherwise, that such other party would not, in the event of
litigation, seek to enforce that foregoing waiver and (ii) acknowledges that it
and the other parties hereto have been induced to enter into this Agreement and
the Company Documents, as applicable, by, among other things, the mutual waivers
and certifications in this Section 11.11.
11.12 Performance. Parent and Merger Sub (the "Buying Parties")
acknowledge and agree that the breach of this Agreement by any of the Buying
Parties would cause irreparable damage to the Company and that the Company will
not have an adequate remedy at Law, and the Company acknowledges and agrees that
the breach of this Agreement by the Company would cause irreparable damage to
the Buying Parties and that the Buying Parties will not have an adequate remedy
at Law. Therefore, the obligations of the parties hereto under this Agreement
shall be enforceable by a decree of specific performance issued by any court of
competent jurisdiction, and appropriate injunctive relief may be applied for and
granted in connection therewith. Such remedies shall, however, be cumulative and
not exclusive and shall be in addition to any other remedies which any party may
have under this Agreement or otherwise.
** REMAINDER OF PAGE INTENTIONALLY LEFT BLANK **
67
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first written above.
XXXXXX CORPORATION
By: /s/ XXXXXX X. XXXXX
-------------------------------------
Name: Xxxxxx X. Xxxxx
Title: President and Chief Executive
Officer
SUNSHINE MERGER CORP.
By: /s/ XXXXX X. XXXX
-------------------------------------
Name: Xxxxx X. Xxxx
Title: President
ENCODA SYSTEMS HOLDINGS, INC.
By: /s/ DON DOCTOR
-------------------------------------
Name: Don Doctor
Title: CEO and President
Signature Page To Merger Agreement
Exhibit A to the
Merger Agreement
SUPPORT AGREEMENT
SUPPORT AGREEMENT, dated as of October 6, 2004 (this
"Agreement"), by and among Encoda Systems Holdings, Inc., a
Delaware corporation
(the "Company"), Xxxxxx Corporation, a Delaware corporation ("Parent"), and the
Persons listed on Exhibit A hereto (the "Major Stockholders").
WITNESSETH:
WHEREAS, concurrently herewith, the Company, Parent and Sunshine
Merger Corp., a Delaware corporation ("Merger Sub") are entering into an
Agreement and Plan of Merger (as such agreement may hereafter be amended from
time to time, the "Merger Agreement"; capitalized terms used and not defined
herein have the respective meanings ascribed to them in the Merger Agreement),
pursuant to which Merger Sub will be merged with and into the Company, with the
Company continuing as the Surviving Corporation (the "Merger") and pursuant to
which the Shares (as defined below) shall be converted into the right to receive
the merger consideration set forth in the Merger Agreement at the Effective
Time;
WHEREAS, each of the Major Stockholders owns of record the number
of shares of common stock, par value $0.01 per share (the "Shares") of the
Company set forth opposite such Major Stockholder's name on Exhibit A hereto;
and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement, the Company, Parent and Merger Sub have requested that the
Major Stockholders, and the Major Stockholders have agreed, to enter into this
Agreement strictly in their capacity as record owners of the Shares and not in
any other capacity (including, if applicable, as a director or officer of the
Company).
NOW, THEREFORE, to induce the Company, Parent and Merger Sub to
enter into, and in consideration of their entering into, the Merger Agreement,
and in consideration of the premises and the representations, warranties,
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
1. Provisions Concerning the Shares.
(a) Each Major Stockholder hereby agrees that during the period
commencing on the date hereof and continuing until this provision terminates
pursuant to Section 8 hereof, at any meeting of the stockholders of the Company,
however called, or in connection with any written consent of the stockholders of
the Company, such Major Stockholder shall vote (or cause to be voted) the Shares
owned and held of record by such Major Stockholder, whether heretofore owned or
hereafter acquired, or execute and deliver a consent, (i) in favor of approval
of the Merger Agreement and the transactions contemplated thereby (including the
Merger and any other matter that is on the ballot or
in a written consent related thereto) and any actions required in furtherance
thereof; (ii) against any action or agreement that (A) would result in a breach
in any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or any
agreement executed in connection therewith (without giving effect to any
materiality or similar qualifications contained therein) or (B) which is
reasonably likely to result in any of the conditions in Section 9.1 of the
Merger Agreement not being fulfilled; and (iii) against any "Other Bid" (as
defined below) or any other action which is intended, or could reasonably be
expected, to impede, interfere with, delay, postpone, or adversely affect the
Merger. In the event that any corporate action consistent with this Agreement is
taken by the stockholders of the Company by written consent (including any
action to approve the Merger Agreement and the transactions contemplated
thereby), each Major Stockholder hereby waives any right to receive notice of
the taking of such corporate action without a meeting pursuant to Section 228(e)
of the General Corporation Law of the State of Delaware (the "DGCL") or
otherwise.
(b) In the event of a stock dividend or distribution, or any
change in the capital stock of the Company by reason of any stock dividend,
stock split, recapitalization, reclassification, combination, exchange of
shares, merger or the like, the term "Shares" as used in this Agreement shall be
deemed to refer to and include the Shares as well as all such stock dividends
and distributions and any shares or other securities into which or for which any
or all of the Shares may be converted, changed or exchanged.
2. Waiver of Claims. Each Major Stockholder hereby acknowledges
that the consideration payable under the Merger Agreement constitutes the
consideration to which such Major Stockholder is entitled for such Major
Stockholder's Shares pursuant to the Merger and represents fair value for such
Major Stockholder's Shares and that such Major Stockholder irrevocably waives
any rights to appraisal of the fair value of such Major Stockholder's Shares or
rights to dissent from the Merger that such Major Stockholder may have pursuant
to Section 262 of the DGCL or otherwise.
3. Representations and Warranties. Each Major Stockholder hereby,
severally and not jointly, represents and warrants to Parent and Merger Sub as
follows:
(a) Ownership of Shares. Such Major Stockholder (together with
its trustees if it is a trust) is the record owner of the number of Shares set
forth opposite such Major Stockholder's name on Exhibit A hereto. The Shares set
forth opposite such Major Stockholder's name on Exhibit A hereto constitute all
of the Shares owned of record by such Major Stockholder (together with its
trustees if it is a trust). If such Major Stockholder is married and the Shares
of such Major Stockholder constitute community property or otherwise are owned
or held in a manner that requires spousal or other approval for this Agreement
to be legal, valid and binding, this Agreement has been duly consented to by
such Major Stockholder's spouse or the applicable Person giving such approval.
2
(b) Power; Binding Agreement. Such Major Stockholder (together
with its trustees if it is a trust) has the legal capacity, power and authority
to enter into and perform all of such Major Stockholder's obligations under this
Agreement. This Agreement has been duly and validly authorized, executed and
delivered by such Major Stockholder and constitutes a valid and binding
agreement of such Major Stockholder, enforceable against such Major Stockholder
in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar Laws affecting
creditors' rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at Law or in equity).
(c) No Conflicts. None of the execution, delivery and performance
of this Agreement by such Major Stockholder or compliance by such Major
Stockholder with any of the provisions hereof will (i) require such Major
Stockholder to make a filing with, or obtain any Permit, (ii) result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default, or give to any Person any rights of termination, amendment,
acceleration or cancellation or result in the creation of any Lien on any Shares
of such Major Stockholder, under any of the terms, conditions or provisions of
any declaration of trust or Contract to which such Major Shareholder is a party,
or (iii) violate any Order or Law applicable to such Major Stockholder, except
with respect to items (ii) and (iii) above, for breaches, defaults or violations
that would not materially impair or delay such Major Stockholder's ability to
perform his or its obligations hereunder.
(d) No Encumbrances. Except as applicable in connection with this
Agreement and the transactions contemplated hereby, such Major Stockholder's
Shares and the certificates representing such Shares are now, and will be, at
all times during the term hereof, owned and held of record by such Major
Stockholder, free and clear of all Liens, proxies, voting trusts or Contracts,
understandings or arrangements, except for any such Liens or proxies arising
hereunder in favor of Parent. Each Major Stockholder has the sole power to vote
(or cause to be voted) all of the Shares owned of record by such Major
Stockholder.
(e) No Cause of Action. Such Major Stockholder, by delivering its
Certificates and letter of transmittal pursuant to the Merger Agreement, shall
be deemed to be representing hereunder that such Major Stockholder does not, as
of the Effective Time and after giving effect to the transactions contemplated
by the Merger Agreement, have a claim, action, cause of action or demand of any
kind or character, based upon any fact or circumstance, which presently exists,
or may exist in the future, against the Company or any of its Subsidiaries.
(f) Reliance by the Parent and Merger Sub. Such Major Stockholder
understands and acknowledges that the Parent and Merger Sub are entering into
the Merger Agreement in reliance upon execution and delivery of this Agreement
by such Major Stockholder.
3
(g) Merger Agreement. Such Major Stockholder acknowledges receipt
of the Merger Agreement (including the exhibits and schedules thereto). Such
Major Stockholder has had an opportunity to read and understand the Merger
Agreement and the related exhibits and schedules thereto.
4. No Solicitation. Each Major Stockholder agrees on a several,
not joint and several basis, that such Major Stockholder shall not, nor shall
any of them authorize or permit any officer, director or employee of or any
investment banker, attorney, accountant or other representative retained by any
of them to, (i) directly or indirectly solicit, initiate or encourage any Other
Bid, (ii) enter into any agreement with respect to any Other Bid or (iii)
participate in any discussions or negotiations regarding, or furnish to any
Person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Other Bid. Each Major Stockholder shall promptly
advise Parent orally and in writing of any Other Bid or any inquiry with respect
to or which could lead to any Other Bid and the identity of the Person making
any such Other Bid or inquiry. As used in this Section 4, "Other Bid" shall mean
any proposal for a merger, sale of a majority of the Company's equity
securities, sale of substantial assets or similar transaction involving the
Company or any of its Subsidiaries, other than the transactions contemplated by
the Merger Agreement. Each Major Stockholder shall immediately cease and cause
to be terminated any existing activities, discussions or negotiations by such
Major Stockholder or any officer, director or employee of or any investment
banker, attorney, accountant or other representative retained by such Major
Stockholder, with any parties conducted heretofore with respect to any Other
Bid.
5. Restriction on Transfer; Stop Transfer. Each Major Stockholder
shall not, directly or indirectly, during the period commencing on the date
hereof and continuing until this provision terminates pursuant to Section 8
hereof: (i) except for any deemed sale of Shares as a result of the Merger,
offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise
dispose of, or grant or enter into any contract, option or other arrangement or
understanding with respect to or consent to the offer for sale, sale, transfer,
tender, pledge, encumbrance, assignment or other disposition of, any or all of
such Major Stockholder's Shares or any interest therein; (ii) except as
contemplated by this Agreement, grant any proxies or powers of attorney, deposit
any Shares into a voting trust or enter into a voting agreement with respect to
any Shares; or (iii) take any action that would make any of such Major
Stockholder's representations or warranties contained herein untrue or incorrect
or have the effect of preventing or disabling such Major Stockholder from
performing such Major Stockholder's obligations under this Agreement or that
would prevent or disable the Parent from exercising the proxy granted pursuant
to Section 6 hereof.
6. Grant of Irrevocable Proxy Coupled with an Interest.
(a) Solely in the event of a failure by a Major Stockholder to
act in accordance with its obligations as to voting or executing a written
consent pursuant to Section 1(a) of this Agreement, such Major Stockholder
hereby revokes any and all prior proxies or powers of attorney in respect of any
Shares and agrees that during the period
4
commencing on the date hereof and continuing until this provision terminates
pursuant to Section 8 hereof, such Major Stockholder hereby irrevocably appoints
Parent or any individual designated by Parent as such Major Stockholder's agent,
attorney-in-fact and proxy (with full power of substitution), for in the name,
place and stead of such Major Stockholder, to vote (or cause to be voted) the
Shares held of record by such Major Stockholder, in the manner set forth in
Section 1 hereof, at any meeting of the stockholders of the Company or in
connection with any written consent of the stockholders of the Company.
(b) Each Major Stockholder hereby affirms that the proxy set
forth in this Section 6 is coupled with an interest and is irrevocable until
such time as this Agreement terminates in accordance with its terms. Such
irrevocable proxy is executed and intended to be irrevocable in accordance with
the provisions of Section 212 of the DGCL.
(c) The vote of the proxyholder shall control in any conflict
between the vote by the proxyholder of such Major Stockholder's Shares and a
vote by such Major Stockholder of such Major Stockholder's Shares.
7. Stockholder Representative. Each Major Stockholder hereby
ratifies and confirms all that the Stockholder Representative shall do or cause
to be done by virtue of such Stockholder Representative's appointment as
Stockholder Representative of such shareholder pursuant to the Merger Agreement.
The Stockholder Representative shall be entitled to act with respect to all of
the matters set forth in the Merger Agreement, the Escrow Agreements and any
other agreements entered into in connection with the transactions contemplated
by the Merger Agreement and with respect to all matters contemplated by all such
agreements, in the manner the Stockholder Representative believes to be in the
best interest of the shareholders of the Company prior to the Effective Time,
but the Stockholder Representative shall not be responsible for any loss or
damage any shareholder may suffer by reason of the performance by the
Stockholder Representative of such Stockholder Representative's duties, other
than loss or damage arising from willful misconduct or bad faith in the
performance of such Stockholder Representative's duties. The Major Stockholders
do hereby jointly and severally agree to indemnify and hold the Stockholder
Representative harmless from and against any and all liability, loss, cost,
damage or expense (including without limitation attorneys' fees) reasonably
incurred or suffered as a result of the performance of such Stockholder
Representative's duties except for willful misconduct or bad faith. No suit,
action, proceeding or claim may be brought by any Major Stockholder against
Parent, the Company, or any of their respective directors, officers and
employees with respect to any matter herein, in the Merger Agreement, the Escrow
Agreements or any other agreement entered into by the Stockholder Representative
in connection with the transactions contemplated by the Merger Agreement that is
to be effected by the Stockholder Representative.
8. Termination. The covenants and agreements contained in this
Agreement, other than Section 3 which shall survive for a period of one year
following the Effective Time, Xxxxxxx 0 xxx Xxxxxxxx 0(x), (x), (x), (x), (x),
(x)-(x), (x)-(x) which shall survive indefinitely, shall terminate upon (i)
termination of the Merger Agreement,
5
or (ii) in the event the Merger is consummated, upon the Effective Time;
provided, that no such termination shall relieve any party hereto from any
liability for any willful breach of this Agreement; and provided, further, that
the representations and warranties contained in Section 3 hereof shall not
terminate with respect to any item as to which Parent may have made a claim by
delivering a notice of such claim (stating in reasonable detail the basis of
such claim) before the expiration of one year following the Effective Time to
the applicable Major Stockholder in accordance with this Agreement.
9. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
(b) Certain Events. Each Major Stockholder agrees that this
Agreement and the obligations hereunder shall attach to the Shares and shall be
binding upon any Person to which legal ownership of such Shares shall pass,
whether by operation of Law or otherwise, including, without limitation, such
Major Stockholder's heirs, executors, guardians, administrators, trustees or
successors. Notwithstanding any transfer of Shares, the transferor shall remain
liable for the performance of all obligations of the transferor under this
Agreement.
(c) Assignment. This Agreement shall not be assigned by any party
hereto, by operation of Law or otherwise, without the prior written consent of
the other parties, and any purported assignment without such consent shall be
null and void. All covenants and agreements contained in this Agreement by or on
behalf of the parties hereto shall be binding on and inure to the benefit of the
respective successors, heirs and permitted assigns of the parties hereto.
(d) Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or (except as set forth in
Section 8) terminated except upon the execution and delivery of a written
agreement executed by each of the parties hereto.
(e) Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given (i) when delivered
personally by hand (with written confirmation of receipt), (ii) when sent by
facsimile (with written confirmation of transmission) or (iii) one Business Day
following the day sent by overnight courier (with written confirmation of
receipt). All communications hereunder shall be delivered to the respective
parties at the following addresses: (i) if to the Company or Parent, to its
respective address set forth in the Merger Agreement; and (ii) if to any Major
Stockholder, to such Major Stockholder's address set forth on Exhibit A hereto;
or, in each case, to such other address as the Person to whom notice is given
may have previously furnished to the other parties hereto in writing in the
manner set forth above.
6
(f) Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.
(g) Specific Performance. Each Major Stockholder recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause Parent to sustain irreparable damages for which it
would not have an adequate remedy at Law for money damages, and therefore such
Major Stockholder agrees that in the event of any such breach Parent shall be
entitled to the remedy of specific performance of such covenants and agreements
and injunctive and other equitable relief in addition to any other remedy to
which Parent may be entitled at Law or in equity.
(h) Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at Law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
(i) No Third Party Beneficiaries. This Agreement is not intended
to be for the benefit of, and shall not be enforceable by, any Person who or
which is not a party hereto.
(j) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of Delaware, without giving
effect to the principles of conflicts of Law thereof.
(k) Waiver of Jury Trial. Each party hereto hereby waives to the
fullest extent permitted by applicable Law, any right it may have to a trial by
jury in respect of any Legal Proceeding directly or indirectly arising out of,
under or in connection with this Agreement, any Company Documents or any
transaction contemplated hereby or thereby.
(l) Submission to Jurisdiction. The parties hereto hereby
irrevocably submit to the non-exclusive jurisdiction of any federal or state
court located within the State of New York over any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby and
each party hereby irrevocably agrees that all claims in respect of such dispute
or any suit, action proceeding related thereto may be heard and determined in
such courts. The parties hereby irrevocably waive, to the fullest extent
permitted by applicable Law, any objection which they may now or hereafter have
to the laying of venue of any such dispute brought in such court or any defense
of inconvenient forum for the maintenance of such dispute. Each of the parties
hereto agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by Law.
7
(m) Descriptive Headings. The descriptive headings used herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
(n) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement. Delivery of an executed
counterpart of a signature page to this Agreement by facsimile shall be
effective as delivery of a manually executed counterpart of this Agreement.
(o) Further Assurances. From time to time, as and when reasonably
requested by Parent, each Major Stockholder shall execute and deliver all such
documents and instruments, and shall take all such further or other actions, as
shall be necessary or appropriate to carry out the intent of this Agreement.
(p) Publicity. From the date hereof until the date upon which
this Agreement terminates in accordance with the provisions hereof, no Major
Stockholder shall issue any press release or public announcement concerning this
Agreement, the Merger or the transactions contemplated hereby without obtaining
the prior written approval of Parent, which approval shall not be unreasonably
withheld, unless, in the judgment of such Major Stockholder, disclosure is
otherwise required by applicable Law or by the applicable rules of any stock
exchange on which such Major Stockholder lists securities, provided that, to the
extent required by applicable Law, any Major Stockholder intending to make such
release shall use its commercially reasonable efforts consistent with applicable
Law to consult with Parent with respect to the text thereof.
(q) Confidentiality. Each Major Stockholder shall keep
confidential, shall not use in a manner in competition with or detrimental to
the Company, and shall cause each of its Subsidiaries and instruct each of its
directors, officers, employees and advisors to keep confidential, all
confidential or proprietary information relating to the Company, the Company's
Subsidiaries and their respective businesses, except as required by applicable
Law and except for information which is available to the public on the date
hereof, or thereafter becomes available to the public other than as a result of
a breach of this provision or any other confidentiality agreement governing such
information.
(r) Expenses. Except as set forth in the Merger Agreement, all
fees, costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such fees,
costs and expenses.
(s) Reliance on Counsel and Other Advisors. Each of the parties
hereto has consulted with such legal, financial, technical or other experts as
it deems necessary or desirable before entering into this Agreement. Each of the
parties hereto represents and warrants that it has read, knows, understands and
agrees with the terms and conditions of this Agreement.
(t) Waiver. No failure or delay on the part of any party hereto
in the exercise of any right hereunder will impair such right or be construed to
be a waiver of,
8
or acquiescence in, any breach of any representation, warranty or agreement
herein, nor will any single or partial exercise of any such right preclude any
other or future exercise thereof or of any other right.
(u) Several Nature of Obligations. Notwithstanding any provision
to the contrary in this Agreement, each obligation of a Major Stockholder under
this Agreement shall be the several, and not joint, obligation of such Major
Stockholder only, and each Major Stockholder shall be responsible for, and shall
only be responsible for, such Major Stockholder's actions and not the actions or
omissions of any other Major Stockholder.
(v) Termination of Shareholders Agreements. By their execution
and delivery hereof, the undersigned (other than Parent) hereby amend (i) the
Governance Agreement, dated as of June 28, 2001, among the Company,
Cadogan-Encoda, LLC, LiveWire Media L.L.C., Xxxxxx X. Xxx Equity Fund IV, L.P.,
Evercore Capital Partners L.P., Blackstone Capital Partners III Merchant Banking
Fund, L.P., Xxxxxx Xxxxx and Spire Capital Partners, L.P. and (ii) the Amended
and Restated Shareholders' Agreement, dated as of June 28, 2001 among the
Company and certain shareholders of the Company as set forth therein so as to
provide that such agreements shall terminate and be of no further force or
effect as of the Effective Time. Nothing in this Agreement shall modify the
rights and obligations of the parties to such agreements prior to the Effective
Time.
[signature pages follow]
9
IN WITNESS WHEREOF, the Company, Parent and each Major
Stockholder have executed and delivered this Agreement as of the day and year
first above written.
COMPANY:
Encoda Systems Holdings, Inc.
By:
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Name:
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Title:
---------------------------------
PARENT:
Xxxxxx Corporation
By:
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Name:
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Title:
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MAJOR STOCKHOLDERS:
By:
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Name:
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Title:
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