AGREEMENT AND PLAN OF MERGER
BY AND AMONG
TELAXIS COMMUNICATIONS CORPORATION
AND
YOUNG DESIGN, INC.
DATED AS OF MARCH 17, 2003
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
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into as of March 17, 2003 between TELAXIS COMMUNICATIONS CORPORATION, a
Massachusetts corporation ("Parent"), and YOUNG DESIGN, INC., a Virginia
corporation (the "Company"). --------
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RECITALS
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A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Virginia Stock Corporation Act (the "VSCA"), Parent and the
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Company will enter into a business combination transaction pursuant to which a
to-be-formed Virginia corporation and wholly-owned subsidiary of Parent ("Merger
Sub") will merge with and into the Company (the "Merger"). ------
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D. The Board of Directors of each of the Company and Parent (i) has
determined that the Merger is in the best interests of each company and their
respective stockholders and (ii) has approved this Agreement, the Merger, and
the other transactions contemplated by this Agreement. The stockholders of the
Company have approved this Agreement, the Merger, and the other transactions
contemplated by this Agreement.
E. The Company and Parent desire to make certain representations and
warranties and other agreements in connection with the Merger.
F. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
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NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
Article I
THE MERGER
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1.1 The Merger.
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At the Effective Time (as defined in Section 1.2) and subject to and upon
the terms and conditions of this Agreement and the applicable provisions of the
VSCA, Merger Sub shall be merged with and into the Company, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue as
the surviving corporation. The Company as the surviving corporation after the
Merger is hereinafter sometimes referred to as the "Surviving Corporation." At
the Effective Time, the purpose of the Surviving Corporation shall be to conduct
and engage in all lawful activities and businesses to the maximum extent
permitted by the VSCA.
1.2 Effective Time.
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Subject to the provisions of this Agreement, the parties hereto shall cause
the Merger to be consummated by filing Articles of Merger (the "Articles of
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Merger") with the Clerk of the Virginia State Corporation Commission, in
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accordance with the relevant provisions of the VSCA (the time of such filing or
such subsequent date or time as the parties shall agree and specify in the
Articles of Merger being the "Effective Time"), as soon as practicable on or
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after the Closing Date (as herein defined). The closing of the Merger (the
"Closing") shall take place at the offices of the Company at 10:00 a.m. on April
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1, 2003 or at such other time, date, and location as the parties hereto agree
(the "Closing Date").
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1.3 Effect of the Merger.
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At the Effective Time, the effect of the Merger shall be as provided in
this Agreement and the applicable provisions of the VSCA. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers, and franchises of the Company and Merger
Sub shall vest in the Surviving Corporation, and all debts, liabilities, and
duties of the Company and Merger Sub shall become the debts, liabilities, and
duties of the Surviving Corporation.
1.4 Articles of Incorporation; By-laws.
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(a) Unless otherwise determined by Parent prior to the Effective Time,
at the Effective Time, the Articles of Incorporation of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as
provided by law and such Articles of Incorporation; provided, however, that
Article 1 of the Articles of Incorporation of the Surviving Corporation
shall be amended to read as follows: "The name of the corporation is Young
Design, Inc." At the Effective Time, the authorized capital stock of the
Surviving Corporation shall be 1,000 shares of Common Stock, par value
$0.01 per share unless otherwise agreed by Parent and the Company.
(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 amended unless otherwise agreed by Parent and the Company.
1.5 Directors and Officers.
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The directors of Merger Sub shall be the initial directors of the Surviving
Corporation, until their respective successors are duly elected or appointed and
qualified. The officers of Merger Sub shall be the initial officers of the
Surviving Corporation, until their respective successors are duly elected or
appointed and qualified. Parent and Merger Sub agree that, as of immediately
before the Effective Time, the directors and officers of Merger Sub shall be the
same persons as are intended to be, immediately after the Effective Time, the
directors and officers of Parent as contemplated by this Agreement.
1.6 Effect on Capital Stock.
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At the Effective Time, by virtue of the Merger and without any action on
the part of Merger Sub, the Company, or the holders of any of the following
securities:
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(a) Conversion of Company Common Stock. Each share of Common Stock,
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par value $0.0001 per share, of the Company (the "Company Common Stock")
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issued and outstanding immediately prior to the Effective Time (other than
any shares of Company Common Stock to be canceled pursuant to Section
1.6(b)) will be canceled and extinguished and be automatically converted
(subject to Sections 1.6(e) and (f)) into the right to receive 2.50 (the
"Exchange Ratio") shares of Common Stock, par value $.01 per share, of
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Parent (the "Parent Common Stock") together with cash in lieu of fractional
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shares pursuant to Section 1.6(f) (collectively, the "Merger
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Consideration") upon surrender of the certificate representing such share
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of Company Common Stock in the manner provided in Section 1.7 (or in the
case of a lost, stolen or destroyed certificate, upon delivery of an
affidavit (and bond, if required) in the manner provided in Section 1.9).
(b) Cancellation of Parent-Owned Stock. Each share of Company Common
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Stock held in the treasury of the Company or owned by any direct or
indirect wholly owned subsidiary of the Company immediately prior to the
Effective Time shall be canceled and extinguished without any conversion
thereof.
(c) Stock Options. At the Effective Time, all options to purchase
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Company Common Stock then outstanding under the Company's 2002 Stock
Incentive Plan (the "Company Stock Option Plan") shall be assumed by Parent
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in accordance with Section 5.9 hereof.
(d) Capital Stock of Merger Sub. Each share of Common Stock, par value
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$.01 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into and exchanged for one validly
issued, fully paid, and nonassessable share of Common Stock, par value $.01
per share, of the Surviving Corporation. Each stock certificate of Merger
Sub evidencing ownership of any such shares shall continue to evidence
ownership of such shares of capital stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. If between the date hereof and the
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Effective Time, the outstanding shares of Parent Common Stock or Company
Common Stock shall be changed into a different number of shares by reason
of any reclassification, recapitalization, reorganization, split-up,
combination, or exchange of shares, or if any dividend payable in stock or
other securities shall be declared thereon with a record date within such
period, or if the Parent Rights (as defined in Section 3.22) become
exercisable or are exercised, the Exchange Ratio shall be adjusted
accordingly to provide to the holders of Company Common Stock the same
economic benefit as was contemplated by this Agreement prior to such
reclassification, recapitalization, reorganization, split-up, combination,
exchange, dividend, or other event.
(f) Fractional Shares. No fraction of a share of Parent Common Stock
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will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Common Stock who would otherwise be entitled to a
fraction of a share of Parent Common Stock (after aggregating all
fractional shares of Parent Common Stock to be received by such holder)
shall receive from Parent an amount of cash (rounded to the nearest whole
cent) equal to the product of (i) such fraction, multiplied by (ii) the
average closing price of a share of Parent Common Stock for the ten most
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recent days that Parent Common Stock has traded ending on the trading day
immediately prior to the Effective Time, as reported on Nasdaq.
1.7 Surrender of Certificates.
(a) Exchange Agent. Registrar and Transfer Company, or another similar
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institution selected by Parent, shall act as the exchange agent (the
"Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock. Promptly after the Effective Time,
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Parent shall make available to the Exchange Agent for exchange in
accordance with this Article I, through such reasonable procedures as
Parent and Company may mutually adopt, the shares of Parent Common Stock
issuable pursuant to Section 1.6 in exchange for outstanding shares of
Company Common Stock and cash in an amount sufficient for payment in lieu
of fractional shares pursuant to Section 1.6(f).
(c) Exchange Procedures. Promptly after the Effective Time, the
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Surviving Corporation shall cause to be mailed to each holder of record of
a certificate or certificates (the "Certificates") which immediately prior
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to the Effective Time represented outstanding shares of Company Common
Stock whose shares were converted into the right to receive shares of
Parent Common Stock and cash in lieu of fractional shares pursuant to
Section 1.6, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing
shares of Parent Common Stock and cash in lieu of fractional shares. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to
such other agent or agents as may be appointed by Parent, together with
such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of Parent Common Stock and payment
in lieu of fractional shares which such holder has the right to receive
pursuant to Section 1.6, and the Certificate so surrendered shall forthwith
be canceled. Until so surrendered, each outstanding Certificate that, prior
to the Effective Time, represented shares of Company Common Stock will be
deemed from and after the Effective Time, for all corporate purposes, other
than the payment of dividends, to evidence the right to receive the number
of full shares of Parent Common Stock into which such shares of Company
Common Stock shall have been so converted and the right to receive an
amount in cash in lieu of the issuance of any fractional shares in
accordance with Section 1.6.
(d) Distributions With Respect to Unexchanged Shares. No dividends or
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other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time
will be paid to the holder of any unsurrendered Certificate with respect to
the shares of Parent Common Stock represented thereby until the holder of
record of such Certificate shall surrender such Certificate. Subject to
applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, at the
time of such surrender, the amount of dividends or other distributions with
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a record date after the Effective Time payable with respect to such whole shares
of Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares of Parent
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Common Stock is to be issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the certificate so surrendered will
be properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to Parent or any agent
designated by it any transfer or other taxes required by reason of the
issuance of a certificate for shares of Parent Common Stock in any name
other than that of the registered holder of the certificate surrendered, or
established to the satisfaction of Parent or any agent designated by it
that such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
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Section 1.7, none of the Exchange Agent, the Surviving Corporation, Parent,
and any party hereto shall be liable to a holder of shares of Parent Common
Stock or Company Common Stock for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
1.8 No Further Ownership Rights in Company Common Stock.
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All shares of Parent Common Stock issued upon the surrender for exchange of
shares of Company Common Stock in accordance with the terms hereof (including
any cash paid in respect thereof) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common Stock,
and there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article I.
1.9 Lost, Stolen or Destroyed Certificates.
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In the event any certificates evidencing shares of Company Common Stock
shall have been lost, stolen, or destroyed, the Exchange Agent shall, upon the
making of an affidavit of that fact by the holder thereof, issue in exchange for
such shares of Company Common Stock such shares of Parent Common Stock and cash
in lieu of fractional shares, if any, as may be required pursuant to Section
1.6; provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen, or
destroyed certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Parent, the Surviving
Corporation, or the Exchange Agent with respect to the certificates alleged to
have been lost, stolen or destroyed.
1.10 Tax Consequences.
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It is intended by the parties hereto that the Merger shall constitute a
reorganization within the meaning of Section 368 of the Code.
1.11 Taking of Necessary Actions; Further Action.
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If, at any time after the Effective Time, any other action is necessary or
desirable to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title, and possession to all assets, property,
rights, privileges, powers, and franchises of the Company and Merger Sub, the
officers and directors of the Company and Merger Sub are fully authorized in the
name of their respective corporations or otherwise to take, and will take, all
such lawful and necessary action, so long as such action is consistent with this
Agreement.
Article II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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The Company represents and warrants to Parent, subject to the exceptions
specifically disclosed in writing in the disclosure letter supplied by the
Company to Parent (the "Company Letter") and dated as of the date hereof, as
follows:
2.1 Organization of the Company.
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The Company and each of its material subsidiaries is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power to own, lease, and
operate its property and to carry on its business as now being conducted and as
proposed to be conducted, and is duly qualified to do business and in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a Material Adverse Effect (as defined below) on the
Company. The Company owns, directly or indirectly through one or more
subsidiaries, 100% of the capital stock of each of its subsidiaries and does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for any interest in, any
corporation, partnership, joint venture, or other business association or entity
other than the securities of any publicly traded entity held for investment only
and constituting less than 5% of the outstanding capital stock of any such
entity. For purposes of this Agreement, the term "subsidiary" of the Company or
Parent, as the case may be, means any Person (other than a natural person) of
which the Company or Parent, as the case may be, owns, either directly or
indirectly, a majority of the total combined voting power of all classes of
equity thereof having general voting power under ordinary circumstances to elect
a majority of the board of directors or its equivalent. The Company has made
available to counsel for Parent a true and correct copy of the Articles of
Incorporation and By-laws of the Company and similar governing instruments of
its material subsidiaries, each as amended to date. For purposes of this
Agreement, "Material Adverse Effect" shall mean a material adverse effect on the
business, properties, assets (including intangible assets), financial condition,
or results of operations of a Person (as defined below), taken as a whole, but
shall not include any of the foregoing arising out of, related to, or otherwise
by virtue of (a) conditions affecting the economy or the financial markets
generally (except to the extent that such conditions have a disproportionate
adverse effect on such Person compared to other companies similarly situated as
to size, financial strength, and/or other relevant factors), (b) the
announcement of or pendency of any of the transactions contemplated by this
Agreement, (c) events, circumstances, or conditions generally affecting the
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industry in which such Person operates (except to the extent that such events,
circumstances, or conditions have a disproportionate adverse effect on such
Person compared to other companies similarly situated as to size, financial
strength, and/or other relevant factors), (d) any change in law or generally
accepted accounting principles, or (e) as to Parent, any change in the market
price or trading volume of the securities of such Person (provided, that if such
change in market price or trading volume is caused by an underlying cause or
effect which would otherwise constitute a Material Adverse Effect, such
underlying cause or effect shall nonetheless continue to constitute and qualify
hereunder as a Material Adverse Effect). For purposes of this Agreement,
"Person" shall mean any natural person, corporation, general partnership,
limited partnership, limited liability company, proprietorship, or other
business organization.
2.2 Company Capital Structure.
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The authorized capital stock of the Company consists of 30,000,000 shares
of Company Common Stock, of which 15,000,000 shares were issued and outstanding
as of February 28, 2003 and held of record and beneficially by Concorde Equity,
LLC, a Delaware limited liability company, and Xxxxxxx X. Xxxxx. All such shares
have been duly authorized, and all such issued and outstanding shares have been
validly issued, are fully paid and nonassessable, and are free of any liens or
encumbrances other than any liens or encumbrances created by or imposed upon the
holders thereof. As of February 28, 2003, the Company had reserved 1,500,000
shares of Company Common Stock for issuance pursuant to the Company Stock Option
Plan, under which options are outstanding for 702,500 shares. All shares of
Company Common Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, shall be duly authorized, validly issued, fully paid, and
nonassessable. Since February 28, 2003, there have been no amendments of any
Company stock options and no changes in the capital structure of the Company
other than issuances of Company Common Stock upon the exercise of options
granted under the Company Stock Option Plan. No Person is or will be entitled to
exercise any dissenter's or appraisal rights with respect to or as a result of
the Merger.
2.3 Obligations With Respect to Capital Stock.
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(a) Except as set forth in Section 2.2, there are no equity securities
of any class of the Company, or any security convertible or exchangeable
into or exercisable for such equity securities, issued, reserved for
issuance, or outstanding. Except for securities the Company owns, directly
or indirectly through one or more subsidiaries, there are no equity
securities of any class of any subsidiary of the Company, or any security
convertible or exchangeable into or exercisable for such equity securities,
issued, reserved for issuance, or outstanding. Except as set forth in
Section 2.2, there are no options, warrants, equity securities, calls,
rights, commitments, or agreements of any character to which the Company or
any of its subsidiaries is a party or by which it is bound obligating the
Company or any of its subsidiaries to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of capital stock of the
Company or any of its subsidiaries or obligating the Company or any of its
subsidiaries to grant, extend, accelerate the vesting of, or enter into any
such option, warrant, equity security, call, right, commitment, or
agreement.
(b) There are no registration rights, and there is no voting trust,
proxy, rights agreement, "poison pill" anti-takeover plan, or other
agreement or understanding to which the Company or any of its subsidiaries
is a party or by which it or any of its subsidiaries is bound with respect
to any security of any class of the Company or with respect to any
security, partnership interest, or similar ownership interest of any class
of any of its subsidiaries. The execution and delivery of this Agreement by
the Company, the performance by the Company of its obligations hereunder,
and consummation by the Company of the transactions contemplated by this
Agreement will not, alone or together with any other event, nor has any
event occurred that would, (i) entitle any Person to any payment under any
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security, option, warrant, call, right, commitment, or agreement of the Company
or (ii) result in an acceleration of vesting, a change in post-service
exercisability period, or an adjustment to the exercise price or number of
shares issuable upon exercise of any security, option, warrant, call, right,
commitment, or agreement of the Company.
2.4 Authority.
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(a) The Company has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company, including all
necessary approvals of the stockholders of the Company. This Agreement has
been duly executed and delivered by the Company and constitutes the valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited by
bankruptcy and other similar laws and general principles of equity. The
execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated hereby will not, conflict with, or result in
any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation, or
acceleration of any obligation or loss of any benefit under (i) any
provision of the Articles of Incorporation or By-laws of the Company or
similar governing instruments of any of its subsidiaries or (ii) any
material mortgage, indenture, lease, contract, or other agreement, or any
material permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule, or regulation applicable to the Company or
its properties or assets.
(b) No consent, approval, order, or authorization of, or registration,
declaration, or filing with, any court, administrative agency, or
commission or other governmental authority or instrumentality
("Governmental Entity"), is required by or with respect to the Company in
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connection with the execution and delivery of this Agreement by the Company
or the consummation by the Company of the transactions contemplated hereby,
except for (i) the filing of the Articles of Merger with the Virginia State
Corporation Commission and (ii) such other consents, authorizations,
filings, approvals, and registrations which, if not obtained or made, would
not have a Material Adverse Effect on the Company.
2.5 SEC Filings; Company Financial Statements.
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(a) Neither the Company nor any of the Company's subsidiaries is required
to file any forms, reports or other documents with the Securities and
Exchange Commission (the "SEC").
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(b) The Company has furnished Parent with copies of (i) its audited
consolidated financial statements for the fiscal years ended December 31,
1999, 2000, 2001, and 2002 and (ii) its unaudited consolidated financial
statements for the quarters ended March 31, 2002, June 30, 2002, and
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September 30, 2002 (collectively, including in each case any related notes
thereto, the "Company Financial Statements"). Each of the Company Financial
----------------------------
Statements (y) was prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto) and (z) fairly presented the consolidated financial position of
the Company and its subsidiaries as at the respective dates thereof and the
consolidated results of its operations, cash flows, and changes in
stockholders' equity (if presented) for the periods indicated, except that
the unaudited interim financial statements were subject to normal and
recurring year-end adjustments which were notmaterial in amount. The
audited balance sheet of the Company as of December 31, 2002 provided by
the Company to Parent is hereinafter referred to as the "Company Balance
Sheet."
2.6 Absence of Certain Changes or Events.
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Except with respect to the actions contemplated by this Agreement,
since the date of the Company Balance Sheet, the Company and its
subsidiaries have conducted their businesses only in the ordinary course
and in a manner consistent with past practice and, since such date, there
has not been (a) any Material Adverse Effect on the Company or any
development that reasonably would be expected to have a Material Adverse
Effect on the Company, (b) any material liability (direct or contingent)
which did not arise in the ordinary course of business, or (c) any other
action or event that would have required the consent of Parent pursuant to
Section 4.1 had such action or event occurred after the date of this
Agreement.
2.7 Taxes.
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(a) Definition of Taxes. For the purposes of this Agreement, "Tax" or
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"Taxes" refers to any and all federal, state, local, and foreign taxes,
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assessments, and other government charges, duties, impositions, and
liabilities relating to taxes, including taxes based upon or measured by
gross receipts, net operating losses, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise, and property taxes, together with
all interest, penalties, and additions imposed with respect to such amounts
and any obligations under any agreements or arrangements with any other
person with respect to such amounts and including any liability for taxes
of a predecessor entity.
(b) Tax Returns and Audits.
-----------------------
(i) Each of the Company and its subsidiaries has timely filed
all federal, state, local, and foreign returns, estimates, information
statements, and reports ("Returns") relating to Taxes required to be filed
by the Company and each of its subsidiaries, except such Returns which are
not material to the Company. All such Returns were correct and complete in
all material respects. Each of Company and its subsidiaries has paid all
Taxes due and owing by the Company and its subsidiaries (whether or not
shown on any Tax Return). None of the Company and its subsidiaries
currently is the beneficiary of any extension of time within which to file
any Return.
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(ii) Except as is not material to the Company, each of the
Company and its subsidiaries will have withheld as of the Effective Time
with respect to its employees all income Taxes, FICA, FUTA, and other Taxes
required to be withheld.
(iii) Except as is not material to the Company, neither the
Company nor any of its subsidiaries has been delinquent in the payment of
any Tax nor is there any Tax deficiency outstanding, proposed, or assessed
against the Company or any of its subsidiaries, nor has the Company or any
of its subsidiaries executed any waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax.
(iv) Except as is not material to the Company, no audit or
other examination of any Return of the Company or any of its subsidiaries
is presently in progress, nor has the Company or any of its subsidiaries
been notified of any request for such an audit or other examination.
(v) Neither the Company nor any of its subsidiaries has any
liability for unpaid Taxes which have not been accrued for or reserved
against on the Company Balance Sheet in accordance with GAAP, whether
asserted or unasserted, contingent or otherwise, which is material to the
Company, except liability for unpaid Taxes which have accrued since the
date of the Company Balance Sheet in the ordinary course of business.
(vi) None of the Company's assets is treated as "tax-exempt
use property" within the meaning of Section 168(h) of the Code.
(vii) There is no contract, agreement, plan, or arrangement,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of the Company or any of its subsidiaries that,
individually or collectively, could give rise to the payment of any amount
for which a deduction will be disallowed by reason of Sections 280G, 404,
or 162(b) through (o) of the Code.
(viii) Neither the Company nor any of its subsidiaries has
filed any consent agreement under Section 341(f) of the Code or agreed to
have Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as defined in Section 341(f)(4) of the Code) owned by the
Company or any of is subsidiaries.
(ix) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
(x) None of the Company and its subsidiaries is a party to any
tax allocation or sharing agreement. None of the Company and its
subsidiaries (A) has been a member of an Affiliated Group (within the
meaning of Section 1504(a) of the Code, or any similar group defined under
a similar provision of state, local, or foreign law) filing a consolidated
federal Return (other than a group the common parent of which was the
Company) or (B) has any liability for the taxes of any person (other than
any of the Company and its subsidiaries) under Treas. Reg. ss.1.1502-6 (or
any similar provision of state, local, or foreign law) as a transferee or
successor, by contract, or otherwise.
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(xi) The Company has furnished Parent with a list of all
federal, state, local, and foreign Tax Returns filed with respect to the
Company and its subsidiaries for taxable periods ended on or after October
31, 1999, which list indicates those Tax Returns that have been audited.
The Company has delivered to Parent correct and complete copies of all
federal income Tax Returns, examination reports, and statements of
deficiencies assessed against, or agreed to by the Company and its
Subsidiaries since October 31, 1999.
(xii) To the best of the Company's knowledge, neither the
Company nor any of its subsidiaries will be required to include any item of
income in, or exclude any item of deduction from, taxable income for any
taxable period (or portion thereof) ending after the Closing Date as a
result of any (A) change in method of accounting for a taxable period
ending on or prior to the Closing Date; (B) "closing agreement" as
described in Code ss. 7121 (or any corresponding or similar provision of
state, local or foreign income Tax law) executed on or prior to the Closing
Date; (C) intercompany transactions or any excess loss account described in
Treasury Regulations under Code ss. 1502 (or any corresponding or similar
provision of state, local or foreign income Tax law); (D) installment sale
or open transaction disposition made on or prior to the Closing Date; or
(E) prepaid amount received on or prior to the Closing Date.
2.8 Absence of Liens and Encumbrances.
----------------------------------
Each of the Company and its subsidiaries has good and valid title to,
or, in the case of leased properties and assets, valid leasehold interests
in, all of its material tangible properties and assets, real, personal and
mixed, used in its business, free and clear of any liens or encumbrances
except as reflected in the Company Financial Statements and except for
liens for taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which are not material in character, amount, or
extent and which do not materially detract from the value, or materially
interfere with the present use, of the property subject thereto or affected
thereby.
2.9 Intellectual Property.
----------------------
(a) The Company, directly or indirectly, owns, or is licensed or
otherwise possesses legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights, and any applications
therefor, maskworks, net lists, schematics, technology, know-how, computer
software programs or applications (in both source code and object code
form), and tangible or intangible proprietary information or material
(excluding Commercial Software as defined in Paragraph (c) below) that are
material to the business of the Company as currently conducted or as
proposed to be conducted by the Company (the "Company Intellectual Property
Rights"). -----------------------------
------
(b) The Company is not in violation of any license, sublicense, or
agreement related directly to the Company Intellectual Property Rights
except such violations as do not materially impair the Company's rights
under such license, sublicense, or agreement. The execution and delivery of
this Agreement by the Company, and the consummation of the transactions
contemplated hereby, will neither cause the Company to be in violation or
default under any such license, sublicense, or agreement nor entitle any
other party to any such license, sublicense, or agreement to terminate or
modify such license, sublicense, or agreement except such violations or
defaults as do not materially impair the Company's rights under such
11
license, sublicense, or agreement. No material claims with respect to the
Company Intellectual Property Rights 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
material claims (i) to the effect that the manufacture, sale, licensing, or
use of any of the products of the Company or any of its subsidiaries as now
manufactured, sold, licensed, or used or proposed for manufacture, sale,
licensing, or use by the Company infringes on any copyright, patent, trade
xxxx, service xxxx, or trade secret, (ii) against the use by the Company or
any of its subsidiaries of any trademarks, service marks, trade names,
trade secrets, copyrights, patents, technology, know-how, or computer
software programs and applications used in the Company's business as
currently conducted or as proposed to be conducted, or (iii) challenging
the ownership by the Company, validity, or effectiveness of any of the
Company Intellectual Property Rights. All material registered trademarks,
service marks, and copyrights held by the Company are valid and subsisting.
To the knowledge of the Company, there is no material unauthorized use,
infringement, or misappropriation of any of the Company Intellectual
Property Rights by any third party, including any employee or former
employee of the Company. No Company Intellectual Property Right owned by
the Company or product of the Company or any of its subsidiaries, or, to
the knowledge of the Company, Company Intellectual Property Right licensed
by the Company or its subsidiaries, is subject to any outstanding decree,
order, judgment, or stipulation restricting in any manner the licensing
thereof by the Company or any of its subsidiaries. Neither the Company nor
any of its subsidiaries has entered into any agreement under which the
Company or its subsidiaries is restricted from selling, licensing, or
otherwise distributing any of its products to any class of customers, in
any geographic area, during any period of time, or in any segment of the
market.
(c) "Commercial Software" means packaged commercially available
--------------------
software programs generally available to the public through retail dealers
in computer software which have been licensed to the Company (or, in the
case of Section 3.9, to Parent) pursuant to end-user licenses and which are
used in the Company's business (or in Parent's business in the case of
Section 3.9) but are in no way a component of or incorporated in or
specifically required to develop or support any of the Company's (or of
Parent's in the case of Section 3.9) products and related trademarks,
technology and know-how.
2.10 Agreements, Contracts and Commitments.
--------------------------------------
Neither the Company nor any of its subsidiaries has, nor is it a party
to nor is it bound by:
(a) any collective bargaining agreements;
(b) any bonus, deferred compensation, incentive compensation,
pension, profit-sharing, or retirement plans, or any other employee benefit
plans or arrangements;
(c) any employment or consulting agreement, contract, or
commitment with any officer or director-level employee, not terminable by
the Company on thirty days' notice without liability, except to the extent
general principles of wrongful termination law may limit the Company's
ability to terminate employees at will;
12
(d) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan, or stock purchase plan,
any of the benefits of which will be increased or the vesting of benefits
of which will be accelerated by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement; or
(e) any agreement, contract, or commitment (excluding real and
personal property leases) which involves payment by the Company of $100,000
or more (excluding amounts which are already owing by the Company or such
subsidiary at the date of the Company Balance Sheet) and is not cancelable
without penalty within thirty (30) days.
2.11 No Default.
-----------
Neither the Company nor any of its subsidiaries has breached in any
material respect, or received in writing any claim or threat that it has
breached in any material respect, any of the terms or conditions of any (i)
agreement, contract, or commitment that was or is material to the business
of the Company or (ii) any agreement under which the Company or any of its
subsidiaries licenses from a third party any Company Intellectual Property
Rights included in the Company's products in such a manner as would permit
any other party to cancel or terminate the same or would permit any other
party to seek material damages from the Company thereunder. Each of the
agreements, contracts, and commitments referred to in clauses (i) and (ii)
above that has not expired or been terminated in accordance with its terms
is in full force and effect and, except as otherwise disclosed, is not
subject to any material default thereunder of which the Company is aware by
any party obligated to the Company pursuant thereto.
2.12 Governmental Authorization.
---------------------------
The Company holds all permits, licenses, variances, exemptions,
orders, and approvals of all Governmental Entities which are material to
the operation of the Company's business as currently conducted (the
"Company Permits"). The Company is in material compliance with the terms of
the Company Permits. The business of the Company is not being conducted in
violation of any law, ordinance, or regulation of any Governmental Entity,
except for violations or possible violations which individually or in the
aggregate would not have a Material Adverse Effect on the Company. As of
the date of this Agreement, no investigation or review by any Governmental
Entity with respect to the Company is pending or, to the knowledge of the
Company, threatened, nor to the knowledge of the Company, has any
Governmental Entity indicated an intention to conduct the same, other than,
in each case, those the outcome of which would not have a Material Adverse
Effect on the Company.
13
2.13 Litigation.
-----------
There is no action, suit, proceeding, claim, arbitration, or
investigation pending or as to which the Company or any of its subsidiaries
has received any notice of assertion nor, to the Company's knowledge, is
there a reasonable basis to expect such notice of assertion against the
Company or any of its subsidiaries which it is reasonable to expect that,
if determined adversely to the Company or any of its subsidiaries, would
have a Material Adverse Effect on the Company.
2.14 Environmental Matters.
----------------------
Neither the Company nor any of its subsidiaries has been or is
currently in material violation of any applicable statute, law, or
regulation relating to the environment or occupational health and safety
("Environmental and Occupational Laws"). Each of the Company and its
subsidiaries has all permits and other governmental authorizations
currently required by all applicable statutes, laws, or regulations
relating to the environment or occupational health and safety necessary for
the conduct of its business. Neither the Company nor any of its
subsidiaries has received any communication from a Governmental Entity, or
any written communication from any Person other than a Governmental Entity,
that alleges that it is not in full compliance with Environmental or
Occupational Laws, except for matters alleging items which would not have a
Material Adverse Effect on the Company. There is no claim of a violation of
Environmental and Occupational Laws pending or, to the knowledge of the
Company, threatened against the Company or any of its subsidiaries, except
for matters alleging items which would not have a Material Adverse Effect
on the Company.
2.15 Brokers' and Finders' Fees.
---------------------------
The Company has not incurred, and it will not incur, directly or
indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement, the
Merger, or any transaction contemplated hereby.
2.16 Labor Matters.
--------------
There are no pending or, to the Company's knowledge, threatened
material claims against the Company or any of its subsidiaries under any
workers' compensation plan or policy or for long-term disability. Each of
the Company and its United States subsidiaries has complied in all material
respects with all applicable provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") and has no material obligations with
-----
respect to any former employees or qualifying beneficiaries thereunder.
2.17 Employee Benefit Plans.
-----------------------
(a) The Company has made available to Parent (i) accurate and complete
copies of all Benefit Plan documents and all other material documents
relating thereto, including (if applicable) all summary plan descriptions,
summary annual reports, and insurance contracts, (ii) accurate and complete
detailed summaries of all unwritten Benefit Plans, (iii) accurate and
complete copies of the most recent financial statements and actuarial
reports with respect to all Benefit Plans for which financial statements or
actuarial reports are required or have been prepared, and (iv) accurate and
complete copies of all annual reports for all Benefit Plans (for which
annual reports are required) prepared within the last three years. "Benefit
Plans" means all employee benefit plans within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and any related or separate contracts, plans, trusts, programs,
policies, arrangements, practices, customs, and understandings, in each
case whether formal or informal, that provide benefits of economic value to
any present or former employee of the Company (or, in the case of Section
3.17, Parent) or present or former beneficiary, dependent, or assignee of
any such employee or former employee.
14
(b) All Benefit Plans of the Company conform (and at all times have
conformed) in all material respects to, and are being administered and
operated (and have at all time been administered and operated) in material
compliance with, the requirements of ERISA, the Code, and all other
applicable laws or governmental regulations. All returns, reports, and
disclosure statements required to be made under ERISA and the Code with
respect to all Benefit Plans have been timely filed or delivered. There
have not been any "prohibited transactions," as such term is defined in
Section 4975 of the Code or Section 406 of ERISA involving any of the
Benefit Plans, that could subject the Company to any material penalty or
tax imposed under the Code or ERISA.
(c) Any Benefit Plan that is intended to be qualified under Section
401(a) of the Code and exempt from tax under Section 501(a) of the Code has
been established under a standardized prototype plan for which an Internal
Revenue Service opinion letter has been obtained by the plan sponsor and is
valid as to the Company as an adopting employer or has been determined by
the Internal Revenue Service to be so qualified or an application for such
determination is pending. Any such opinion letter or determination that has
been obtained remains in effect and has not been revoked, and, with respect
to any application that is pending, the Company has no reason to suspect
that such application for determination will be denied. Nothing has
occurred since the date of any such establishment or determination that is
reasonably likely to affect adversely such qualification or exemption or
result in the imposition of excise taxes or income taxes on unrelated
business income under the Code or ERISA with respect to any Benefit Plan.
(d) The Company does not sponsor a defined benefit plan subject to
Title IV of ERISA, nor does it have a current or contingent obligation to
contribute to any multiemployer plan (as defined in Section 3(37) of
ERISA). The Company does not have any material liability with respect to
any employee benefit plan (as defined in Section 3(3) of ERISA) other than
with respect to the Benefit Plans. For purposes of this Section 2.17, the
term "the Company" shall include any corporation that is a member of any
controlled group of corporations (as defined in Section 414(b) of the Code)
that includes the Company, any trade or business (whether or not
incorporated) that is under common control (as defined in Section 414(c) of
the Code) with the Company, any organization (whether or not incorporated)
that is a member of an affiliated service group (as defined in Section
414(m) of the Code) that includes the Company and any other entity required
to be aggregated with the Company pursuant to the regulations issued under
Section 414(o) of the Code.
(e) There are no pending or, to the knowledge of the Company,
threatened claims by or on behalf of any Benefit Plans, or by or on behalf
of any individual participants or beneficiaries of any Benefit Plans,
alleging any breach of fiduciary duty on the part of the Company or any of
its officers, directors, or employees under ERISA or any other applicable
regulations, or claiming benefit payments (other than those made in the
ordinary operation of such plans), nor is there, to the knowledge of the
Company, any basis for such claim, except in any such case as reasonably
would not be expected to have a Material Adverse Effect on the Company. The
Benefit Plans are not the subject of any pending (or to the knowledge of
the Company, any threatened) investigation or audit by the Internal Revenue
Service, the Department of Labor, or the Pension Benefit Guaranty
Corporation ("PBGC").
-----
15
(f) The Company has timely made all required contributions under the
Benefit Plans including the payment of any premiums payable to the PBGC and
other insurance premiums.
(g) With respect to any Benefit Plan that is an employee welfare
benefit plan (within the meaning of Section 3(1) of ERISA) (a "Welfare
-------
Plan"), (i) each Welfare Plan for which contributions are claimed by the
----
Company as deductions under any provision of the Code is in material
compliance with all applicable requirements pertaining to such deduction,
(ii) with respect to any welfare benefit fund (within the meaning of
Section 419 of the Code) related to a Welfare Plan, there is no
disqualified benefit (within the meaning of Section 4976(b) of the Code)
that would result in the imposition of a tax under Section 4976(a) of the
Code, (iii) any Benefit Plan that is a group health plan (within the
meaning of Section 4980B(g)(2) of the Code) complies, and in each and every
case has complied, with all of the applicable material requirements of
Section 4980B of the Code, ERISA, Title XXII of the Public Health Service
Act, and the Social Security Act, and (iv) all Welfare Plans may be amended
or terminated at any time on or after the Closing Date. No Benefit Plan
provides any health, life, or other welfare coverage to employees of the
Company beyond termination of their employment with the Company by reason
or retirement or otherwise, other than coverage as may be required under
Section 4980B of the Code or Part 6 of ERISA, or under the continuation of
coverage provisions of the laws of any state or locality.
2.18 Compliance With Laws.
---------------------
Each of the Company and its subsidiaries has complied in all material
respects with, is not in material violation of, and has not received any notices
of violation with respect to, any federal, state, or local statute, law, or
regulation with respect to the conduct of its business or the ownership or
operation of its business, except in any such case as reasonably would not be
expected to have a Material Adverse Effect on the Company.
2.19 Board Approval.
---------------
On or prior to the date of this Agreement, the Board of Directors of the
Company, by votes duly adopted by unanimous approval of those voting at a
meeting duly called and held and not subsequently rescinded or modified in any
way, has duly (a) determined that this Agreement and the Merger are fair to and
in the best interests of the Company and its stockholders, (b) approved this
Agreement and the Merger and determined that the execution, delivery, and
performance of this Agreement is desirable, and (c) recommended that the
stockholders of the Company approve and adopt this Agreement and directed that
this Agreement and the transactions contemplated hereby be immediately submitted
for consideration by the Company's stockholders.
2.20 Stockholder Approval.
---------------------
On or prior to the date of this Agreement, the stockholders of the Company,
by votes duly adopted by unanimous approval of all holders of all issued and
outstanding shares of Company Common Stock at a meeting duly called and held and
16
not subsequently rescinded or modified in any way, have duly approved and
adopted this Agreement, the Merger, and the other transactions contemplated by
this Agreement.
2.21 "Antitakeover Laws" Not Applicable.
------------------------------------
No "fair price," "business combination," "moratorium," "control share
acquisition" or other form of antitakeover statute or regulation (a "Takeover
Statute"), including Section 13-1-728.1-9 of the VSCA, is or will be applicable
(as to the Company) to the execution, delivery, or performance of this Agreement
or the consummation of the Merger or the other transactions contemplated by this
Agreement.
2.22 Accounting System.
------------------
The Company maintains a system of internal accounting controls sufficient
to provide reasonable assurance that (a) transactions are executed in accordance
with management's general or specific authorizations; (b) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability; (c) access to assets
is permitted only in accordance with management's general or specific
authorization; and (d) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
2.23 Full Disclosure.
----------------
Neither this Agreement nor any written statement, report or other document
furnished by the Company pursuant to this Agreement or in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they are
made, not false or misleading.
Article III
REPRESENTATIONS AND WARRANTIES OF PARENT
----------------------------------------
Parent represents and warrants to the Company, subject to the exceptions
specifically disclosed in the disclosure letter supplied by Parent to the
Company (the "Parent Letter") and dated as of the date hereof, as follows:
3.1 Organization of Parent.
-----------------------
Parent is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power to own, lease, and operate its property, and to carry on its
business as now being conducted and as proposed to be conducted, and is duly
qualified to do business and in good standing as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect on Parent. Except as set forth in the Parent SEC Reports (as
defined in Section 3.5), Parent owns, directly or indirectly through one or more
subsidiaries, 100% of the capital stock of each of its subsidiaries and does not
directly or indirectly own any equity or similar interest in, or any interest
17
convertible into or exchangeable or exercisable for any interest in, any
corporation, partnership, joint venture, or other business association or entity
other than the securities of any publicly-traded entity held for investment only
and constituting less than 5% of the outstanding capital stock of any such
entity. Parent has made available to counsel for the Company a true and correct
copy of the Articles of Organization and By-laws or other charter documents of
Parent, and similar governing instruments of its material subsidiaries, each as
amended to date.
3.2 Capital Structure.
------------------
(a) The authorized capital stock of Parent consists of 100,000,000
shares of Parent Common Stock, of which 16,708,313 shares (together with
the appropriate number of Parent Rights) were issued and outstanding as of
February 28, 2003, and 4,500,000 shares of Preferred Stock, $.01 par value,
of which 1,000,000 shares have been designated as Class One Participating
Cumulative Preferred Stock ("Parent Class One Preferred Stock") and none of
--------------------------------
which is issued or outstanding. All such shares have been duly authorized,
and all such issued and outstanding shares have been validly issued, are
fully paid and nonassessable, and are free of any liens or encumbrances
other than any liens or encumbrances created by or imposed upon the holders
thereof. As of February 28, 2003, Parent had reserved 4,882,370 shares of
Parent Common Stock for issuance pursuant to Parent's 1986 Stock Plan, 1987
Stock Plan, 1988 Stock Plan, 1996 Stock Plan, 1997 Stock Plan, 1999 Stock
Plan, and 2001 Nonqualified Stock Option Plan (collectively, the "Parent
------
Stock Option Plan"), under which options were outstanding for 2,805,574
-------------------
shares, 912,521 shares of Parent Common Stock for issuance upon the
exercise of the Parent Warrants (which as of February 28, 2003 are
outstanding for an aggregate of 912,521 shares of Parent Common Stock), and
1,000,000 shares of Parent Class One Preferred Stock for issuance upon
exercise of Parent Rights from time to time outstanding. All shares of
Parent Common Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they
are issuable, shall be duly authorized, validly issued, fully paid, and
nonassessable. Since February 28, 2003, there have been no amendments of
any Parent stock options or warrants and no changes in the capital
structure of Parent other than issuances of Parent Common Stock and
associated Parent Rights upon the exercise of options granted under the
Parent Stock Option Plan.
(b) The shares of Parent Common Stock to be issued pursuant to the
Merger will, upon issuance, be duly authorized, validly issued, fully paid,
and nonassessable.
3.3 Obligations With Respect to Capital Stock.
------------------------------------------
(a) Except as set forth in Section 3.2, there are no equity securities
of any class of Parent, or any security convertible or exchangeable into or
exercisable for such equity securities, issued, reserved for issuance, or
outstanding. Except for securities Parent owns, directly or indirectly
through one or more subsidiaries, there are no equity securities of any
class of any subsidiary of Parent, or any security convertible or
exchangeable into or exercisable for such equity securities, issued,
reserved for issuance, or outstanding. Except as set forth in Section 3.2,
there are no options, warrants, equity securities, calls, rights,
commitments, or agreements of any character to which Parent or any of its
subsidiaries is a party or by which it is bound obligating Parent or any of
its subsidiaries to issue, deliver, or sell, or cause to be issued,
delivered, or sold, additional shares of capital stock of Parent or any of
18
its subsidiaries or obligating Parent or any of its subsidiaries to grant,
extend, accelerate the vesting of, or enter into any such option, warrant,
equity security, call, right, commitment, or agreement.
(b) Except as contemplated by this Agreement and the Parent Rights
Agreement, there are no registration rights, and there is no voting trust,
proxy, rights agreement, "poison pill" anti-takeover plan, or other
agreement or understanding to which Parent or any of its subsidiaries is a
party or by which it or any of its subsidiaries is bound with respect to
any security of any class of Parent or with respect to any security,
partnership interest, or similar ownership interest of any class of any of
its subsidiaries. The execution and delivery of this Agreement by Parent,
the performance by Parent of its obligations hereunder, and consummation by
Parent of the transactions contemplated by this Agreement will not, alone
or together with any other event, nor has any event occurred that would,
(i) entitle any Person to any payment under any security, option, warrant,
call, right, commitment, or agreement of Parent, or (ii) result in an
acceleration of vesting, a change in post-service exercisability period, or
an adjustment to the exercise price or number of shares issuable upon
exercise of any security, option, warrant, call, right, commitment, or
agreement of Parent.
3.4 Authority.
---------
(a) Parent has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent subject only to the approval of the
change of Parent's corporate name as contemplated by Section 5.14 below by
the vote of a majority of the Parent Common Stock issued and outstanding
and entitled to vote at a duly held meeting of the stockholders of the
Parent. This Agreement has been duly executed and delivered by Parent and
constitutes the valid and binding obligation of Parent, enforceable against
Parent in accordance with its terms, except as enforceability may be
limited by bankruptcy and other similar laws and general principles of
equity. The execution and delivery of this Agreement by Parent does not,
and the consummation of the transactions contemplated hereby by Parent will
not, conflict with, or result in any violation of, or default under (with
or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation, or acceleration of any obligation or loss of a
benefit under (i) any provision of the Articles of Organization or By-laws
of Parent or similar governing instruments of any of its subsidiaries or
(ii) any material mortgage, indenture, lease, contract, or other agreement,
or any material permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule, or regulation applicable to Parent
or its properties or assets.
(b) No consent, approval, order, or authorization of, or registration,
declaration, or filing with, any Governmental Entity is required by or with
respect to Parent in connection with the execution and delivery of this
Agreement by Parent or the consummation by Parent of the transactions
contemplated hereby, except for (i) the filing of the Articles of Merger
with the Virginia State Corporation Commission, (ii) the filing of one or
more Forms 8-K with the SEC, (iii) the filing of a Proxy Statement with the
SEC in accordance with the Securities Exchange Act of 1934, as amended (the
"Exchange Act") relating to the name change contemplated by Section 5.14
below, (iv) the filing of Articles of Amendment with the Secretary of State
of the Commonwealth of Massachusetts relating to the name change
19
contemplated by Section 5.14 below, (v) such consents, approvals, orders,
authorizations, registrations, declarations, and filings as may be required
in connection with Parent's use of the trade name contemplated by Section
5.14, (vi) such consents, approvals, orders, authorizations, registrations,
declarations, and filings as may be required under applicable federal and
state securities laws and the laws of any foreign country, (vii) such
consents, approvals, orders, authorizations, registrations, declarations,
and filings as may be required in connection with the formation and
organization of Merger Sub and the participation of Merger Sub in the
transactions contemplated by this Agreement, and (viii) such other
consents, authorizations, filings, approvals, and registrations which, if
not obtained or made, would not have a Material Adverse Effect on Parent.
3.5 SEC Filings, Parent Financial Statements.
-----------------------------------------
(a) Parent has filed all forms, reports, and documents required to be
filed with the SEC since January 1, 1999 and has made available to the Company,
in the form filed with the SEC, (i) its Annual Reports on Form 10-K for the
fiscal years ended December 31, 1999, 2000, and 2001, (ii) its Quarterly Reports
on Form 10-Q for the periods ended March 31, June 30, and September 30, 2002,
(iii) all proxy statements relating to Parent's meetings of stockholders
(whether annual or special) held since January 1, 2000, (iv) all other reports
or registration statements filed by Parent with the SEC since January 1, 1999,
and (v) all amendments and supplements to all such reports, proxy statements and
registration statements filed by Parent with the SEC. All such required forms,
reports and documents (including those enumerated in clauses (i) through (v) of
the preceding sentence) are referred to herein as the "Parent SEC Reports." As
-------------------
of their respective dates, the Parent SEC Reports (i) were prepared in
accordance with the requirements of the Securities Act of 1933, as amended (the
"Securities Act") or the Exchange Act, as the case may be, and the rules and
-----------------
regulations of the SEC thereunder applicable to such Parent SEC Reports and (ii)
did not at the time they were filed (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. None of Parent's subsidiaries is required to file any forms, reports
or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports (the
"Parent Financial Statements"), including any Parent SEC Reports filed
----------------------------- after the date hereof until the Closing, (x)
complied or will comply as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, (y) was or will be
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto) and (z)
fairly presented or will fairly present the consolidated financial position of
Parent and its subsidiaries as at the respective dates thereof and the
consolidated results of its operations, cash flows and changes in stockholders'
equity (if presented) for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount. The balance sheet of Parent as of December 31, 2002 provided by Parent
to the Company is hereinafter referred to as the "Parent Balance Sheet."
-----------------------
20
(c) Parent has heretofore furnished to the Company a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by Parent with the SEC
pursuant to the Securities Act or the Exchange Act.
3.6 Absence of Certain Changes or Events.
-------------------------------------
Except with respect to the actions contemplated by this Agreement or
disclosed in the Parent SEC Reports, since the date of the Parent Balance Sheet,
Parent and its subsidiaries have conducted their businesses only in the ordinary
course and in a manner consistent with past practice and, since such date, there
has not been (a) any Material Adverse Effect on Parent or any development that
reasonably would be expected to have a Material Adverse Effect on Parent, (b)
any material liability (direct or contingent) which did not arise in the
ordinary course of business, or (c) any other action or event that would have
required the consent of the Company pursuant to Section 4.2 had such action or
event occurred after the date of this Agreement.
3.7 Taxes.
-----
(a) Each of Parent and its subsidiaries has timely filed all Returns
relating to Taxes required to be filed by Parent and each of its subsidiaries,
except such Returns which are not material to Parent. All such Returns were
correct and complete in all material respects. Each of Parent and its
subsidiaries has paid all Taxes due and owing by Parent and its subsidiaries
(whether or not shown on any Tax Return). None of the Parent and its
subsidiaries currently is the beneficiary of any extension of time within which
to file any Return.
(b) Except as is not material to Parent, each of Parent and its
subsidiaries will have withheld as of the Effective Time with respect to its
employees all income Taxes, FICA, FUTA, and other Taxes required to be withheld.
(c) Except as is not material to Parent, neither Parent nor any of its
subsidiaries has been delinquent in the payment of any Tax nor is there any Tax
deficiency outstanding, proposed, or assessed against Parent or any of its
subsidiaries, nor has Parent or any of its subsidiaries executed any waiver of
any statute of limitations on or extending the period for the assessment or
collection of any Tax.
(d) Except as is not material to Parent, no audit or other examination
of any Return of Parent or any of its subsidiaries is presently in progress, nor
has Parent or any of its subsidiaries been notified of any request for such an
audit or other examination.
(e) Neither Parent nor any of its subsidiaries has any liability for
unpaid Taxes which have not been accrued for or reserved against on the Parent
Balance Sheet in accordance with GAAP, whether asserted or unasserted,
contingent or otherwise, which is material to Parent, except liability for
unpaid Taxes which have accrued since the date of the Parent Balance Sheet in
the ordinary course of business.
(f) None of Parent's assets is treated as "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
21
(g) There is no contract, agreement, plan, or arrangement, including
but not limited to the provisions of this Agreement, covering any employee or
former employee of Parent or any of its subsidiaries that, individually or
collectively, could give rise to the payment of any amount for which a deduction
will be disallowed by reason of Sections 280G, 404, or 162(b) through (o) of the
Code.
(h) Neither Parent nor any of its subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by Parent or any of its subsidiaries.
(i) Parent is not, and has not been at any time, a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code.
(j) None of the Parent and its subsidiaries is a party to any tax
allocation or sharing agreement. None of the Parent and its subsidiaries (A) has
been a member of an Affiliated Group (within the meaning of Section 1504(a) of
the Code, or any similar group defined under a similar provision of state,
local, or foreign law) filing a consolidated federal Return (other than a group
the common parent of which was the Parent) or (B) has any liability for the
taxes of any person (other than any of the Parent and its subsidiaries) under
Treas. Reg. ss.1.1502-6 (or any similar provision of state, local, or foreign
law) as a transferee or successor, by contract, or otherwise.
(k) Parent has furnished the Company with a list of all federal,
state, local, and foreign Tax Returns filed with respect to Parent and its
subsidiaries for taxable periods ended on or after October 31, 1999, which list
indicates those Tax Returns that have been audited. Parent has delivered to the
Company correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against, or agreed
to by Parent and its subsidiaries since October 31, 1999.
(l) To the best of Parent's knowledge, neither Parent nor any of its
subsidiaries will be required to include any item of income in, or exclude any
item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of any (A) change in method
of accounting for a taxable period ending on or prior to the Closing Date; (B)
"closing agreement" as described in Code ss. 7121 (or any corresponding or
similar provision of state, local or foreign income Tax law) executed on or
prior to the Closing Date; (C) intercompany transactions or any excess loss
account described in Treasury Regulations under Code ss. 1502 (or any
corresponding or similar provision of state, local or foreign income Tax law);
(D) installment sale or open transaction disposition made on or prior to the
Closing Date; or (E) prepaid amount received on or prior to the Closing Date.
3.8 Absence of Liens and Encumbrances.
----------------------------------
Each of Parent and its subsidiaries has good and valid title to, or, in the
case of leased properties and assets, valid leasehold interests in, all of its
material tangible properties and assets, real, personal and mixed, used in its
business, free and clear of any liens or encumbrances except as reflected in the
Parent Financial Statements and except for liens for taxes not yet due and
22
payable and such imperfections of title and encumbrances, if any, which are not
material in character, amount, or extent and which do not materially detract
from the value, or materially interfere with the present use, of the property
subject thereto or affected thereby.
3.9 Intellectual Property.
----------------------
(a) Parent, directly or indirectly, owns, or is licensed or otherwise
possesses legally enforceable rights to use, all patents, trademarks, trade
names, service marks, copyrights, and any applications therefor, maskworks, net
lists, schematics, technology, know-how, computer software programs or
applications (in both source code and object code form), and tangible or
intangible proprietary information or material (excluding Commercial Software)
that are material to the business of Parent as currently conducted or as
proposed to be conducted by Parent (the "Parent Intellectual Property Rights").
---------------------------------------
(b) Parent is not in violation of any license, sublicense, or
agreement related directly to the Parent Intellectual Property Rights except
such violations as do not materially impair Parent's rights under such license,
sublicense, or agreement. The execution and delivery of this Agreement by
Parent, and the consummation of the transactions contemplated hereby, will
neither cause Parent to be in violation or default under any such license,
sublicense, or agreement, nor entitle any other party to any such license,
sublicense, or agreement to terminate or modify such license, sublicense, or
agreement except such violations or defaults as do not materially impair
Parent's rights under such license, sublicense, or agreement. No material claims
with respect to the Parent Intellectual Property Rights have been asserted or,
to the knowledge of Parent, are threatened by any Person, nor, to the knowledge
of Parent, are there any valid grounds for any bona fide material claims (i) to
the effect that the manufacture, sale, licensing, or use of any of the products
of Parent or any of its subsidiaries as now manufactured, sold, licensed, or
used or proposed for manufacture, sale, licensing, or use by Parent infringes on
any copyright, patent, trade xxxx, service xxxx, or trade secret, (ii) against
the use by Parent or any of its subsidiaries of any trademarks, service marks,
trade names, trade secrets, copyrights, patents, technology, know-how, or
computer software programs and applications used in Parent's business as
currently conducted or as proposed to be conducted, or (iii) challenging the
ownership by Parent, validity, or effectiveness of any of the Parent
Intellectual Property Rights. All material registered trademarks, service marks,
and copyrights held by Parent are valid and subsisting. To the knowledge of
Parent, there is no material unauthorized use, infringement, or misappropriation
of any of the Parent Intellectual Property Rights by any third party, including
any employee or former employee of Parent. No Parent Intellectual Property Right
owned by Parent or product of Parent or any of its subsidiaries, or, to the
knowledge of Parent, Parent Intellectual Property Right licensed by Parent or
its subsidiaries is subject to any outstanding decree, order, judgment, or
stipulation restricting in any manner the licensing thereof by Parent or any of
its subsidiaries. Neither Parent nor any of its subsidiaries has entered into
any agreement under which Parent or its subsidiaries is restricted from selling,
licensing, or otherwise distributing any of its products to any class of
customers, in any geographic area, during any period of time, or in any segment
of the market.
3.10 Agreements, Contracts and Commitments.
--------------------------------------
23
Except as disclosed in the Parent SEC Reports, neither Parent nor any
of its subsidiaries has, nor is it a party to nor is it bound by:
(a) any collective bargaining agreements;
(b) any bonus, deferred compensation, incentive compensation, pension,
profit-sharing or retirement plans, or any other employee benefit plans or
arrangements;
(c) any employment or consulting agreement, contract, or commitment
with any officer or director-level employee, not terminable by Parent on thirty
days notice without liability, except to the extent general principles of
wrongful termination law may limit Parent's ability to terminate employees at
will;
(d) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan, or stock purchase plan, any of the
benefits of which will be increased or the vesting of benefits of which will be
accelerated by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement; or
(e) any agreement, contract, or commitment (excluding real and
personal property leases) which involves payment by Parent of $100,000 or more
(excluding amounts which are already owing by Parent or such subsidiary at the
date of the Parent Balance Sheet) and is not cancelable without penalty within
thirty (30) days.
3.11 No Default.
-----------
Neither Parent nor any of its subsidiaries has breached in any material
respect, or received in writing any claim or threat that it has breached in any
material respect, any of the terms or conditions of any (i) agreement, contract,
or commitment that was or is required to be filed as an exhibit to the Parent
SEC Reports or (ii) any agreement under which Parent or any of its subsidiaries
licenses from a third party any Parent Intellectual Property Rights included in
Parent's products in such a manner as would permit any other party to cancel or
terminate the same or would permit any other party to seek material damages from
Parent thereunder. Each of the agreements, contracts, and commitments referred
to in clauses (i) and (ii) above that has not expired or been terminated in
accordance with its terms is in full force and effect and, except as otherwise
disclosed, is not subject to any material default thereunder of which Parent is
aware by any party obligated to Parent pursuant thereto.
3.12 Governmental Authorization.
---------------------------
Parent holds all permits, licenses, variances, exemptions, orders, and
approvals of all Governmental Entities which are material to the operation of
Parent's business as currently conducted (the "Parent Permits"). Parent is in
material compliance with the terms of the Parent Permits. Except as disclosed in
the Parent SEC Reports filed before the date of this Agreement, the business of
Parent is not being conducted in violation of any law, ordinance, or regulation
of any Governmental Entity, except for violations or possible violations which
individually or in the aggregate would not have a Material Adverse Effect on
Parent. As of the date of this Agreement, no investigation or review by any
Governmental Entity with respect to Parent is pending or, to the knowledge of
24
Parent, threatened, nor to the knowledge of Parent, has any Governmental Entity
indicated an intention to conduct the same, other than, in each case, those the
outcome of which would not have a Material Adverse Effect on Parent.
3.13 Litigation.
-----------
Except as disclosed in the Parent SEC Reports, there is no action, suit,
proceeding, claim, arbitration, or investigation pending, or as to which Parent
or any of its subsidiaries has received any notice of assertion nor, to Parent's
knowledge, is there a reasonable basis to expect such notice of assertion
against Parent or any of its subsidiaries which it is reasonable to expect that,
if determined adversely to Parent or any of its subsidiaries, would have a
Material Adverse Effect on Parent.
3.14 Environmental Matters.
----------------------
Neither Parent nor any of is subsidiaries has been or is currently in
material violation of any applicable Environmental and Occupational Laws. Each
of Parent and its subsidiaries has all permits and other governmental
authorizations currently required by all applicable statutes, laws, or
regulations relating to the environment or occupational health and safety
necessary for the conduct of its business. Neither Parent nor any of its
subsidiaries has received any communication from a Governmental Entity, or any
written communication from any Person other than a Governmental Entity, that
alleges that it is not in full compliance with Environmental or Occupational
Laws, except for matters alleging items which would not have a Material Adverse
Effect on Parent. There is no claim of a violation of Environmental and
Occupational Laws pending or, to the knowledge of Parent, threatened against
Parent, except for matters alleging items which would not have a Material
Adverse Effect on Parent.
3.15 Brokers' and Finders' Fees.
---------------------------
Except for fees payable to Xxxxxx, Xxxxx Xxxxx, Incorporated pursuant to
the engagement letter dated January 27, 2003 (a copy of which has been provided
to the Company), Parent has not incurred, and it will not incur, directly or
indirectly, any liability for brokerage or finders' fees or agents' commissions
or any similar charges in connection with this Agreement, the Merger, or any
transaction contemplated hereby.
3.16 Labor Matters.
--------------
There are no pending or, to Parent's knowledge, threatened material claims
against Parent or any of its subsidiaries under any workers' compensation plan
or policy or for long-term disability. Parent and each of its United States
subsidiaries has complied in all material respects with all applicable
provisions of COBRA and has no material obligations with respect to any former
employees or qualifying beneficiaries thereunder.
3.17 Employee Benefit Plans.
-----------------------
(a) Parent has made available to the Company (i) accurate and complete
copies of all Benefit Plan documents and all other material documents relating
thereto, including (if applicable) all summary plan descriptions, summary annual
25
reports, and insurance contracts, (ii) accurate and complete detailed summaries
of all unwritten Benefit Plans, (iii) accurate and complete copies of the most
recent financial statements and actuarial reports with respect to all Benefit
Plans for which financial statements or actuarial reports are required or have
been prepared, and (iv) accurate and complete copies of all annual reports for
all Benefit Plans (for which annual reports are required) prepared within the
last three years.
(b) All Benefit Plans of Parent conform (and at all times have
conformed) in all material respects to, and are being administered and operated
(and have at all time been administered and operated) in material compliance
with, the requirements of ERISA, the Code, and all other applicable laws or
governmental regulations. All returns, reports, and disclosure statements
required to be made under ERISA and the Code with respect to all Benefit Plans
have been timely filed or delivered. There have not been any "prohibited
transactions," as such term is defined in Section 4975 of the Code or Section
406 of ERISA involving any of the Benefit Plans, that could subject Parent to
any material penalty or tax imposed under the Code or ERISA.
(c) Any Benefit Plan that is intended to be qualified under Section
401(a) of the Code and exempt from tax under Section 501(a) of the Code has been
established under a standardized prototype plan for which an Internal Revenue
Service opinion letter has been obtained by the plan sponsor and is valid as to
Parent as an adopting employer or has been determined by the Internal Revenue
Service to be so qualified or an application for such determination is pending.
Any such opinion letter or determination that has been obtained remains in
effect and has not been revoked, and, with respect to any application that is
pending, Parent has no reason to suspect that such application for determination
will be denied. Nothing has occurred since the date of any such establishment or
determination that is reasonably likely to affect adversely such qualification
or exemption or result in the imposition of excise taxes or income taxes on
unrelated business income under the Code or ERISA with respect to any Benefit
Plan.
(d) Parent does not sponsor a defined benefit plan subject to Title IV
of ERISA, nor does it have a current or contingent obligation to contribute to
any multiemployer plan (as defined in Section 3(37) of ERISA). Parent does not
have any material liability with respect to any employee benefit plan (as
defined in Section 3(3) of ERISA) other than with respect to the Benefit Plans.
For purposes of this Section 3.17, the term "Parent" shall include any
corporation that is a member of any controlled group of corporations (as defined
in Section 414(b) of the Code) that includes Parent, any trade or business
(whether or not incorporated) that is under common control (as defined in
Section 414(c) of the Code) with Parent, any organization (whether or not
incorporated) that is a member of an affiliated service group (as defined in
Section 414(m) of the Code) that includes Parent and any other entity required
to be aggregated with Parent pursuant to the regulations issued under Section
414(o) of the Code.
(e) There are no pending or, to the knowledge of Parent, threatened
claims by or on behalf of any Benefit Plans, or by or on behalf of any
individual participants or beneficiaries of any Benefit Plans, alleging any
breach of fiduciary duty on the part of Parent or any of its officers, directors
or employees under ERISA or any other applicable regulations, or claiming
benefit payments (other than those made in the ordinary operation of such
plans), nor is there, to the knowledge of Parent, any basis for such claim,
except in any such case as reasonably would not be expected to have a Material
26
Adverse Effect on Parent. The Benefit Plans are not the subject of any pending
(or to the knowledge of Parent, any threatened) investigation or audit by the
Internal Revenue Service, the Department of Labor, or the PBGC.
(f) Parent has timely made all required contributions under the
Benefit Plans including the payment of any premiums payable to the PBGC and
other insurance premiums.
(g) With respect to any Benefit Plan that is a Welfare Plan, (i) each
Welfare Plan for which contributions are claimed by Parent as deductions under
any provision of the Code is in material compliance with all applicable
requirements pertaining to such deduction, (ii) with respect to any welfare
benefit fund (within the meaning of Section 419 of the Code) related to a
Welfare Plan, there is no disqualified benefit (within the meaning of Section
4976(b) of the Code) that would result in the imposition of a tax under Section
4976(a) of the Code, (iii) any Benefit Plan that is a group health plan (within
the meaning of Section 4980B(g)(2) of the Code) complies, and in each and every
case has complied, with all of the applicable material requirements of Section
4980B of the Code, ERISA, Title XXII of the Public Health Service Act, and the
Social Security Act, and (iv) all Welfare Plans may be amended or terminated at
any time on or after the Closing Date. No Benefit Plan provides any health,
life, or other welfare coverage to employees of Parent beyond termination of
their employment with Parent by reason or retirement or otherwise, other than
coverage as may be required under Section 4980B of the Code or Part 6 of ERISA,
or under the continuation of coverage provisions of the laws of any state or
locality.
3.18 Compliance With Laws.
---------------------
Each of Parent and its subsidiaries has complied in all material respects
with, is not in material violation of, and has not received any notices of
violation with respect to, any federal, state, or local statute, law, or
regulation with respect to the conduct of its business or the ownership or
operation of its business, except in any such case as reasonably would not be
expected to have a Material Adverse Effect on Parent.
3.19 Board Approval.
---------------
On or prior to the date of this Agreement, the Board of Directors of
Parent, by resolutions duly adopted by unanimous vote of those voting at a
meeting duly called and held and not subsequently rescinded or modified in any
way, has duly (a) determined that this Agreement, the Merger, and the issuance
of Parent Common Stock pursuant to this Agreement are in the best interests of
Parent and its stockholders and (b) approved this Agreement and the Merger.
3.20 Fairness Opinion.
-----------------
Parent has received an opinion from Xxxxxx, Xxxxx Xxxxx, Incorporated that
the Exchange Ratio is fair to Parent from a financial point of view, and has
delivered to the Company a copy of such opinion.
3.21 Antitakeover Laws.
------------------
27
No Takeover Statute, including Chapter 110C of the General Laws of the
Commonwealth of Massachusetts, is or will be applicable (as to Parent) to the
execution, delivery, or performance of this Agreement or the consummation of the
Merger or the other transactions contemplated by this Agreement.
3.22 Rights Agreement.
-----------------
Immediately prior to the execution of this Agreement, Parent has (a) duly
entered into an appropriate amendment to the Parent Rights Plan, which amendment
has been provided to the Company and approved by the Board of Directors of
Parent, and (b) taken all other action necessary or appropriate so that the
entering into of this Agreement by Parent does not and will not result in the
ability of any Person to exercise any Parent Rights under the Parent Rights Plan
or enable or require the Parent Rights issued thereunder to separate from the
shares of Parent Common Stock to which they are attached or to be triggered or
become exercisable. "Parent Rights Plan" means the Rights Agreement dated as of
May 18, 2001 between Parent and Registrar and Transfer Company as rights agent,
as amended to date. "Parent Rights" has the same meaning as the term "Rights"
under the Parent Rights Plan.
3.23 Accounting System.
------------------
Parent maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (a) transactions are executed in accordance
with management's general or specific authorizations; (b) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability; (c) access to assets
is permitted only in accordance with management's general or specific
authorization; and (d) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
3.24 Full Disclosure.
----------------
Neither this Agreement nor any written statement, report or other document
furnished by Parent pursuant to this Agreement or in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein, in light of the circumstances under which they are
made, not false or misleading.
Article IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
-----------------------------------
4.1 Conduct of Business of the Company.
-----------------------------------
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement pursuant to its terms and the
Effective Time, the Company (which for the purposes of this Section 4.1 shall
include the Company and each of its subsidiaries) agrees, except as expressly
contemplated by this Agreement or to the extent that Parent shall otherwise
consent in writing, to carry on its business in the usual, regular, and ordinary
28
course, in substantially the same manner as heretofore conducted, and in
compliance in all material respects with all applicable laws and regulations, to
pay its debts and Taxes when due subject to good faith disputes over such debts
or Taxes, to pay or perform other material obligations when due, and to use all
reasonable efforts consistent with past practices and policies to preserve
intact the Company's present business organizations, keep available the services
of its present officers and employees, and preserve its relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with the Company, to the end that the Company's goodwill and
ongoing businesses shall not be impaired in any material respect at the
Effective Time. The Company shall promptly notify Parent of any event or
occurrence not in the ordinary course of business of the Company and will not
enter into or amend any agreement or take any action which reasonably would be
expected to have a Material Adverse Effect on the Company. Except as expressly
contemplated by this Agreement, the Company shall not prior to the Effective
Time or earlier termination of this Agreement pursuant to its terms, without the
prior written consent of Parent, which consent will not be unreasonably
withheld:
(a) Waive any stock repurchase rights, accelerate, amend, or
change the period of exercisability of options or repurchase of restricted
stock, or reprice options granted under the employee stock plans of the Company
or authorize cash payments in exchange for any options granted under any of such
plans, or by inaction suffer any of the foregoing to occur when unilateral
action by the Company (other than action involving termination of such options)
could have prevented it, all unless otherwise expressly required pursuant to the
terms of the Company Stock Option Plan, or take any such action (or by inaction
suffer such to occur when unilateral action by the Company could have prevented
it) with regard to any warrant or other right to acquire capital stock of the
Company;
b) Enter into partnership arrangements, joint development
agreements, or strategic alliances;
(c) Grant any severance or termination pay (i) to any
executive officer or (ii) to any other employee, except payments made in
connection with the termination of employees who are not executive officers in
amounts consistent with the Company's policies and past practices or pursuant to
written agreements outstanding, or policies existing, on the date hereof and as
previously disclosed in writing to Parent or pursuant to written agreements
consistent with the Company's past practices under similar circumstances;
(d) Transfer or license to any person or entity or otherwise
extend, amend, or modify any rights to the Company's Intellectual Property
Rights or enter into grants of future patent rights, other than non-exclusive
licenses in connection with the sale of goods or services entered into in the
ordinary course of business consistent with past practices;
(e) Commence any litigation other than (i) for the routine
collection of bills, (ii) for software piracy, or (iii) in such cases where the
Company in good faith determines that failure to commence suit would result in
the material impairment of a valuable aspect of the Company's business, provided
that the Company consults with Parent prior to the filing of such a suit;
29
(f) Declare, set aside, or pay any dividends on or make any
other distributions (whether in cash, securities, or property) in respect of any
of its capital stock, or split, combine, or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of, or in substitution for shares of capital stock of the Company;
(g) Purchase, redeem, or otherwise acquire, directly or
indirectly, any shares of its capital stock or its subsidiaries' capital stock
except from former employees, directors, and consultants in accordance with
agreements existing as of the date hereof requiring the repurchase of shares in
connection with any termination of service to the Company;
(h) Issue, deliver, sell, or pledge or authorize or propose
the issuance, delivery, sale, or pledge of any shares of its capital stock of
any class or securities convertible or exchangeable into or exercisable for, or
subscriptions, rights, warrants, or options to acquire, or enter into other
agreements or commitments of any character obligating it to issue, any such
shares or other securities, other than the issuance of (i) shares of Company
Common Stock pursuant to the exercise of Company stock options outstanding as of
the date of this Agreement, (ii) options to purchase shares of Company Common
Stock granted to new employees in the ordinary course of business consistent
with past practice, and (iii) shares of Company Common Stock issuable upon the
exercise of the options referred to in clause (ii);
(i) Cause, permit, or propose any amendments to the Company's
Articles of Incorporation or By-laws or other charter documents or similar
governing instruments of any of its subsidiaries;
(j) Acquire or agree to acquire, by merging or consolidating
with, by purchasing any equity interest in or a material portion of the assets
of, or by any other manner, any business or any corporation, partnership,
association, or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to the business of the Company, or enter into any joint ventures,
strategic partnerships, or alliances or purchase any distributors;
(k) Sell, lease, license, encumber, or otherwise dispose of
any of the Company's properties or assets which are material, individually or in
the aggregate, to the business of the Company;
(l) Incur any indebtedness for borrowed money (other than
ordinary course trade payables or pursuant to existing credit facilities in the
ordinary course of business) or guarantee any such indebtedness or issue or sell
any debt securities or warrants, calls, or other rights to acquire debt
securities of the Company or guarantee any debt securities of others or enter
into any "keep well" or other agreement to maintain any financial statement
condition or enter into any arrangement having the economic effect of the
foregoing;
(m) Adopt or amend any employee benefit or stock purchase or
option plan, or enter into any employment contract or collective bargaining
agreement (other than offer letters and letter agreements entered into in the
ordinary course of business consistent with past practices with employees who
are terminable "at will"), pay any special bonus or special remuneration to any
director or employee, or increase the salaries or wage rates or fringe benefits
(including rights to severance or indemnification) of its directors, officers,
employees, or consultants other than in the ordinary course of business
consistent with past practice, or change in any material respect any management
policies or procedures;
30
(n) Revalue any of the Company's assets, including writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business consistent with past practices or,
except as required by GAAP, make any change in accounting methods, principles,
or practices;
(o) Pay, discharge or satisfy in an amount in excess of
$10,000 (in any one case) or $25,000 (in the aggregate), any claim, liability,
or obligation (absolute, accrued, asserted, or unasserted, contingent or
otherwise), other than the payment, discharge, or satisfaction in the ordinary
course of business;
(p) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, file any material
Return or any amendment to a material Return, enter into any closing agreement,
settle any claim or assessment in respect of Taxes (except settlements effected
solely through payment of immaterial sums of money), or consent to any extension
or waiver of the limitation period applicable to any claim or assessment in
respect of Taxes;
(q) Make any capital expenditures outside the ordinary course
of business or in excess of $100,000 in the aggregate;
(r) Modify, amend, or terminate any material contract or
agreement to which the Company or any of its subsidiaries is a party or enter
into any contract or agreement which provides for the Company to incur or pay
any amounts in excess of $25,000 over the life of such contract or agreement;
(s) Settle any material litigation or waive, release, or
assign any material rights or claims thereunder;
(t) Take any action that would be reasonably likely to
interfere with the treatment of the Merger as a "reorganization" within the
meaning of Section 368 of the Code;
(u) Enter into, modify, amend, or cancel any development
services, licensing, distribution, sales, sales representation, or other similar
agreement or obligation with respect to any material Company Intellectual
Property Rights other than such agreements entered into in the ordinary course
of business consistent with past practices;
(v) Engage in any action with the intent directly or
indirectly to impact adversely any of the transactions contemplated by this
Agreement, including with respect to any "poison pill" or similar plan,
agreement, or arrangement, or any Takeover Statute;
(w) Take any action that would (i) entitle any Person to any
payment under any security, option, warrant, call, right, commitment, or other
agreement relating to any equity securities of the Company or (ii) result in an
adjustment to the exercise price or number of shares issuable upon exercise of
any security, option, warrant, call, right, commitment, or agreement of the
31
Company; or by inaction suffer any of the foregoing to occur when unilateral
action by the Company (other than action involving termination of any options)
could have prevented it; or
(x) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.l(a) through (w) above, or any action which
would cause or would be reasonably likely to cause any of the conditions to the
Merger set forth in Section 6.2 not to be satisfied.
4.2 Conduct of Business of Parent.
------------------------------
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement pursuant to its terms and the
Effective Time, Parent (which for the purposes of this Section 4.2 shall include
Parent and each of its subsidiaries) agrees, except as expressly contemplated by
this Agreement or to the extent that the Company shall otherwise consent in
writing, to carry on its business in the usual, regular, and ordinary course, in
substantially the same manner as heretofore conducted, and in compliance in all
material respects with all applicable laws and regulations, to pay its debts and
Taxes when due subject to good faith disputes over such debts or Taxes, to pay
or perform other material obligations when due, and to use all reasonable
efforts consistent with past practices and policies to preserve intact Parent's
present business organizations, keep available the services of its present
officers and employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with
Parent, to the end that Parent's goodwill and ongoing businesses shall not be
impaired in any material respect at the Effective Time. Parent shall promptly
notify the Company of any event or occurrence not in the ordinary course of
business of Parent and will not enter into or amend any agreement or take any
action which reasonably would be expected to have a Material Adverse Effect on
Parent. Except as expressly contemplated by this Agreement or in compliance with
Section 5.3(b), Parent shall not prior to the Effective Time or earlier
termination of this Agreement pursuant to its terms, without the prior written
consent of the Company, which consent will not be unreasonably withheld:
(a) Waive any stock repurchase rights, accelerate, amend, or
change the period of exercisability of options or repurchase of restricted
stock, or reprice options granted under the employee stock plans of Parent, or
authorize cash payments in exchange for any options granted under any of such
plans, or by inaction suffer any of the foregoing to occur when unilateral
action by Parent (other than action involving termination of such options) could
have prevented it, all unless otherwise expressly required pursuant to the terms
of the Parent Stock Option Plan, or take any such action (or by inaction suffer
such to occur when unilateral action by Parent could have prevented it) with
regard to any warrant or other right to acquire capital stock of Parent;
(b) Enter into partnership arrangements, joint development
agreements, or strategic alliances;
(c) Grant any severance or termination pay (i) to any
executive officer or (ii) to any other employee, except payments made in
connection with the termination of employees who are not executive officers in
amounts consistent with Parent's policies and past practices or pursuant to
written agreements outstanding, or policies existing, on the date hereof and as
32
previously disclosed in writing to the Company or pursuant to written agreements
consistent with Parent's past practices under similar circumstances;
(d) Transfer or license to any person or entity or otherwise
extend, amend, or modify any rights to Parent's Intellectual Property Rights or
enter into grants of future patent rights, other than non-exclusive licenses in
connection with the sale of goods or services entered into in the ordinary
course of business consistent with past practices;
(e) Commence any litigation other than (i) for the routine
collection of bills, (ii) for software piracy, or (iii) in such cases where
Parent in good faith determines that failure to commence suit would result in
the material impairment of a valuable aspect of Parent's business, provided that
Parent consults with the Company prior to the filing of such a suit;
(f) Declare, set aside, or pay any dividends on or make any
other distributions (whether in cash, securities, or property) in respect of any
of its capital stock, or split, combine, or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of, or in substitution for shares of capital stock of Parent;
(g) Purchase, redeem, or otherwise acquire, directly or
indirectly, any shares of its capital stock or its subsidiaries' capital stock
except from former employees, directors, and consultants in accordance with
agreements existing as of the date hereof requiring the repurchase of shares in
connection with any termination of service to Parent;
(h) Issue, deliver, sell, or pledge, or authorize or propose
the issuance, delivery, sale, or pledge of any shares of its capital stock of
any class or securities convertible or exchangeable into or exercisable for, or
subscriptions, rights, warrants, or options to acquire, or enter into other
agreements or commitments of any character obligating it to issue any such
shares or other securities, other than the issuance of (i) shares of Parent
Common Stock pursuant to the exercise of Parent stock options or warrants
outstanding as of the date of this Agreement, (ii) options to purchase shares of
Parent Common Stock granted to new employees in the ordinary course of business
consistent with past practice, (iii) shares of Parent Common Stock issuable upon
the exercise of the options referred to in clause (ii), and (iv) the Parent
Rights (and shares of the Parent's Class One Preferred Stock upon the exercise
thereof) in accordance with the terms of the Parent Rights Plan as in effect on
the date hereof;
(i) Cause, permit, or propose any amendments to Parent's
Articles of Organization or By-laws or other charter documents or similar
governing instruments of any of its subsidiaries;
(j) Acquire or agree to acquire, by merging or consolidating
with, by purchasing any equity interest in or a material portion of the assets
of, or by any other manner, any business or any corporation, partnership,
association, or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to the business of Parent, or enter into any joint ventures,
strategic partnerships, or alliances or purchase any distributors;
(k) Sell, lease, license, encumber, or otherwise dispose of
any of Parent's properties or assets which are material, individually or in the
aggregate, to the business of Parent;
33
(l) Incur any indebtedness for borrowed money (other than
ordinary course trade payables or pursuant to existing credit facilities in the
ordinary course of business) or guarantee any such indebtedness or issue or sell
any debt securities or warrants, calls, or other rights to acquire debt
securities of Parent or guarantee any debt securities of others or enter into
any "keep well" or other agreement to maintain any financial statement condition
or enter into any arrangement having the economic effect of the foregoing;
(m) Adopt or amend any employee benefit or stock purchase or
option plan or enter into any employment contract or collective bargaining
agreement (other than offer letters and letter agreements entered into in the
ordinary course of business consistent with past practices with employees who
are terminable "at will"), pay any special bonus or special remuneration to any
director or employee, or increase the salaries or wage rates or fringe benefits
(including rights to severance or indemnification) of its directors, officers,
employees, or consultants other than in the ordinary course of business
consistent with past practice or change in any material respect any management
policies or procedures;
(n) Revalue any of Parent's assets, including writing down the
value of inventory or writing off notes or accounts receivable other than in the
ordinary course of business consistent with past practices or, except as
required by GAAP, make any change in accounting methods, principles or
practices;
(o) Pay, discharge or satisfy in an amount in excess of
$10,000 (in any one case) or $25,000 (in the aggregate), any claim, liability,
or obligation (absolute, accrued, asserted, or unasserted, contingent or
otherwise), other than (i) the payment, discharge, or satisfaction in the
ordinary course of business and (ii) payments to Agilent and Phoenix relating to
capital leases under the terms and conditions described to the Company by
Parent;
(p) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, file any material
Return or any amendment to a material Return, enter into any closing agreement,
settle any claim or assessment in respect of Taxes (except settlements effected
solely through payment of immaterial sums of money), or consent to any extension
or waiver of the limitation period applicable to any claim or assessment in
respect of Taxes ;
(q) Make any capital expenditures outside the ordinary course
of business or in excess of $100,000 in the aggregate;
(r) Modify, amend, or terminate any material contract or
agreement to which Parent or any of its subsidiaries is a party or enter into
any contract or agreement which provides for Parent to incur or pay any amounts
in excess of $25,000 over the life of such contract or agreement;
(s) Settle any material litigation or waive, release, or
assign any material rights or claims thereunder;
(t) Take any action that would be reasonably likely to
interfere with the treatment of the Merger as a "reorganization" within the
meaning of Section 368 of the Code;
34
(u) Enter into, modify, amend, or cancel any development
services, licensing, distribution, sales, sales representation, or other similar
agreement or obligation with respect to any material Parent Intellectual
Property Rights other than such agreements entered into in the ordinary course
of business consistent with past practices;
(v) Except as otherwise contemplated by Sections 3.22 and
5.17, redeem the Parent Rights or amend or terminate the Parent Rights Plan;
(w) Engage in any action with the intent directly or
indirectly to impact adversely any of the transactions contemplated by this
Agreement, including with respect to the Parent Rights Plan, or with respect to
any other "poison pill" or similar plan, agreement or arrangement, or any
Takeover Statute;
(x) Take any action that would (i) entitle any Person to any
payment under any security, option, warrant, call, right, commitment, or other
agreement relating to any equity securities of Parent, or (ii) result in an
adjustment to the exercise price or number of shares issuable upon exercise of
any security, option, warrant, call, right, commitment, or agreement of Parent;
or by inaction suffer any of the foregoing to occur when unilateral action by
Parent (other than action involving termination of any options) could have
prevented it; or
(y) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.2(a) through (x) above, or any action which
would cause or would be reasonably likely to cause any of the conditions to the
Merger set forth in Section 6.1 not to be satisfied.
Article V
ADDITIONAL AGREEMENTS
---------------------
5.1 Initial Private Placement; Registration Statement.
--------------------------------------------------
(a) Parent and the Company agree that the Parent Common Stock to be
issued to the Company's stockholders pursuant to this Agreement will be issued
pursuant to exemptions from the registration requirements of the Securities Act
and any applicable state securities or "blue sky" laws. Parent and the Company
shall use their reasonable good faith best efforts, and the Company shall cause
its stockholders to use their reasonable good faith best efforts, to enable this
issuance to qualify for such exemptions. In support of these exemptions, Parent
has received agreements from each of the Company's stockholders (the "Investor
Agreements") containing certain representations, warranties, and information
about the stockholders. The Company represents and warrants to Parent that all
such representations, warranties, and information is true, complete, and correct
and acknowledges and agrees that Parent has relied on the accuracy of the
representations, warranties, and information in the Investor Agreements in
making its representations, warranties, and other statements contained in this
Agreement.
(b) Parent shall take such steps as may be necessary to comply with
the securities and blue sky laws of all jurisdictions which are applicable to
the
35
issuance of Parent Common Stock pursuant hereto. In doing so, Parent may rely on
and assume the accuracy of the Investor Agreements. Parent shall pay all fees
and expenses, including filing fees and Parent's attorneys' fees and expenses,
incurred by Parent in connection with such compliance. The Company shall use its
reasonable good faith best efforts, and the Company shall cause its stockholders
to use their reasonable good faith best efforts, to assist Parent as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable in connection with the issuance of Parent Common Stock
pursuant hereto.
(c) At a time in the first half of calendar year 2004, Parent shall
prepare and file with the SEC a registration statement on Form S-3 (or such
other or successor form as shall be appropriate) (including any amendments or
supplements thereto, the "Registration Statement"), with respect to the shares
of Parent Common Stock to be issued in the Merger. Parent and the Company
currently expect that the timing of the Registration Statement will be to
coincide with Parent's annual filing requirements in an effort to mitigate
expenses associated with the filing of the Registration Statement.
5.2 Access to Information, Confidentiality.
---------------------------------------
(a) Each party shall afford the other party and its accountants,
counsel, and other representatives reasonable access during normal business
hours during the period prior to the Effective Time to all information
concerning the business, including the status of product development efforts,
properties, and personnel of such party as the other party may reasonably
request. No information or knowledge obtained in any investigation pursuant to
this Section 5.2 shall affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties to
consummate the Merger.
(b) The parties acknowledge that Parent and the Company have
previously executed a Confidentiality Agreement dated December 17, 2002 (the
"Confidentiality Agreement"), which Confidentiality Agreement shall continue in
-------------------------- full force and effect in accordance with its terms.
5.3 No Solicitation.
----------------
(a) (i) From and after the date of this Agreement until the earlier of
the Effective Time or the termination of this Agreement, the Company and its
subsidiaries will not, and will cause their respective directors, officers,
employees, representatives, investment bankers, agents, and affiliates not to,
directly or indirectly, (i) solicit or encourage submission of any inquiries,
proposals, or offers by any person, entity, or group (other than Parent, Merger
Sub, and their affiliates, agents, and representatives), or (ii) participate in
any discussions or negotiations with, or disclose any information concerning the
Company or any of its subsidiaries to, or afford any access to the properties,
books, or records of the Company or any of its subsidiaries to, or otherwise
assist, facilitate, or encourage, or enter into any agreement or understanding
with, any person, entity, or group (other than Parent, Merger Sub, and their
affiliates, agents, and representatives), in connection with any Acquisition
Proposal with respect to the Company. For the purposes of Section 5.3(a) of this
Agreement, an "Acquisition Proposal" shall mean any proposal
--------------------- relating to the possible acquisition of the Company,
whether by way of merger, purchase of at least 50% of the capital stock of the
Company, purchase of all or
36
substantially all of the assets of the Company, or otherwise. In addition,
subject to the other provisions of this Section 5.3(a), from and after the date
of this Agreement until the earlier of the Effective Time or the termination of
this Agreement, the Company and its subsidiaries will not, and will cause their
respective directors, officers, employees, representatives, investment bankers,
agents, and affiliates not to, directly or indirectly, make or authorize any
statement, recommendation, or solicitation in support of any Acquisition
Proposal with respect to the Company made by any person, entity, or group (other
than Parent, Merger Sub, and their affiliates). The Company will immediately
cease any and all existing activities, discussions, or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
(ii) Notwithstanding the provisions of paragraph (i) above,
prior to the Effective Time, the Company may, to the extent the Board of
Directors of the Company determines, in good faith, after consultation with
outside legal counsel, that the Board's fiduciary duties under applicable law
require it to do so, participate in discussions or negotiations with, and,
subject to the requirements of paragraph (iii) below, furnish information to any
person, entity, or group after such person, entity, or group shall have
delivered to the Company in writing, a Superior Proposal. For the purposes of
Sections 5.3(a) and 7.1(f) of this Agreement, a "Superior Proposal" means an
------------------
unsolicited bona fide Acquisition Proposal which the Board of Directors of the
Company in its good faith reasonable judgment determines, after consultation
with its independent financial advisors, could reasonably be expected to result
in a transaction that is more favorable to the stockholders of the Company from
a financial point of view than the Merger and the other transactions
contemplated by this Agreement and for which financing, to the extent required,
is then committed or which, in the good faith reasonable judgment of the Board
of Directors (after consultation with independent financial advisors), is
reasonably capable of being obtained by such person, entity, or group and which
is likely to be consummated.
(iii) The Company may furnish information to a person, entity,
or group that has made a Superior Proposal only if the Company (a) first
notifies Parent of the information proposed to be disclosed, (b) first complies
with the provisions of paragraph (v) below, and (c) provides such information
pursuant to a confidentiality agreement at least as restrictive as the
Confidentiality Agreement.
(iv) If the Company receives a Superior Proposal, nothing
contained in this Agreement shall prevent the Board of Directors of the Company
from approving such Superior Proposal or recommending such Superior Proposal to
the Company's stockholders, if the Board determines in good faith, after
consultation with outside legal counsel, that such action is required by its
fiduciary duties under applicable law; in such case, the Board may amend or
withdraw its recommendation of the Merger.
(v) The Company will (i) notify Parent immediately if any
inquiry or proposal is made or any information or access is requested in
connection with an Acquisition Proposal or potential Acquisition Proposal and
(ii) immediately communicate to Parent the terms and conditions of any such
Acquisition Proposal or potential Acquisition Proposal or inquiry and the
identity of the offeror or potential offeror. In addition to the foregoing, the
Company shall provide Parent with at least forty-eight (48) hours prior written
notice (or such lesser prior written notice as provided to the members of the
Company's Board of Directors but in no event less than eight (8) hours) of any
meeting of the Company's Board of Directors at which the Company's Board of
Directors is reasonably expected to consider a Superior Proposal and provide
Parent with at least two (2) business days prior written notice (or such lesser
prior notice as provided to the members of the Company's Board of Directors but
37
in no event less than eight (8) hours) of a meeting at which the Company's Board
of Directors is reasonably expected to recommend a Superior Proposal to its
stockholders.
(vi) Nothing contained in this Section 5.3 shall prevent the
Company or its Board of Directors from complying with the provisions of Rules
14e-2 and 14d-9 promulgated under the Exchange Act.
(b) (i) From and after the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, Parent and
its subsidiaries will not, and will cause their respective directors, officers,
employees, representatives, investment bankers, agents, and affiliates not to,
directly or indirectly, (i) solicit or encourage submission of any inquiries,
proposals, or offers by any person, entity, or group (other than the Company and
its affiliates, agents, and representatives), or (ii) participate in any
discussions or negotiations with, or disclose any information concerning Parent
or any of its subsidiaries to, or afford any access to the properties, books, or
records of Parent or any of its subsidiaries to, or otherwise assist,
facilitate, or encourage, or enter into any agreement or understanding with, any
person, entity, or group (other than the Company and its affiliates, agents, and
representatives), in connection with any Acquisition Proposal with respect to
Parent. For the purposes of Section 5.3(b) of this Agreement, an "Acquisition
-----------
Proposal" shall mean any proposal relating to the possible acquisition of
--------
Parent, whether by way of merger, purchase of at least 50% of the capital stock
of Parent, purchase of all or substantially all of the assets of Parent, or
otherwise. In addition, subject to the other provisions of this Section 5.3(b),
from and after the date of this Agreement until the earlier of the Effective
Time or the termination of this Agreement, Parent and its subsidiaries will not,
and will cause their respective directors, officers, employees, representatives,
investment bankers, agents, and affiliates not to, directly or indirectly, make
or authorize any statement, recommendation, or solicitation in support of any
Acquisition Proposal with respect to Parent made by any person, entity, or group
(other than the Company and its affiliates). Parent will immediately cease any
and all existing activities, discussions, or negotiations with any parties
conducted heretofore with respect to any of the foregoing.
(ii) Notwithstanding the provisions of paragraph (i) above,
prior to the Effective Time, Parent may, to the extent the Board of Directors of
Parent determines, in good faith, after consultation with outside legal counsel,
that the Board's fiduciary duties under applicable law require it to do so,
participate in discussions or negotiations with, and, subject to the
requirements of paragraph (iii) below, furnish information to any person,
entity, or group after such person, entity or group shall have delivered to
Parent in writing, a Superior Proposal. For the purposes of Sections 5.3(b) and
7.1(g) of this Agreement, a "Superior Proposal" means an unsolicited bona fide
------------------
Acquisition Proposal which the Board of Directors of Parent in its good faith
reasonable judgment determines, after consultation with its independent
financial advisors, could reasonably be expected to result in a transaction that
is more favorable to the stockholders of Parent from a financial point of view
than the Merger and the other transactions contemplated by this Agreement and
for which financing, to the extent required, is then committed or which, in the
good faith reasonable judgment of the Board of Directors (after consultation
38
with independent financial advisors), is reasonably capable of being obtained by
such person, entity, or group and which is likely to be consummated.
(iii) Parent may furnish information to a person, entity or
group that has made a Superior Proposal only if Parent (a) first notifies the
Company of the information proposed to be disclosed, (b) first complies with the
provisions of paragraph (v) below, and (c) provides such information pursuant to
a confidentiality agreement at least as restrictive as the Confidentiality
Agreement.
(iv) If Parent receives a Superior Proposal, nothing contained
in this Agreement shall prevent the Board of Directors of Parent from approving
such Superior Proposal or recommending such Superior Proposal to Parent's
stockholders, if the Board determines in good faith, after consultation with
outside legal counsel, that such action is required by its fiduciary duties
under applicable law; in such case, the Board may amend or withdraw its approval
of the Merger.
(v) Parent will (i) notify the Company immediately if any
inquiry or proposal is made or any information or access is requested in
connection with an Acquisition Proposal or potential Acquisition Proposal and
(ii) immediately communicate to the Company the terms and conditions of any such
Acquisition Proposal or potential Acquisition Proposal or inquiry and the
identity of the offeror or potential offeror. In addition to the foregoing,
Parent shall provide the Company with at least forty-eight (48) hours prior
written notice (or such lesser prior written notice as provided to the members
of Parent's Board of Directors but in no event less than eight (8) hours) of any
meeting of Parent's Board of Directors at which Parent's Board of Directors is
reasonably expected to consider a Superior Proposal and provide the Company with
at least two (2) business days prior written notice (or such lesser prior notice
as provided to the members of Parent's Board of Directors but in no event less
than eight (8) hours) of a meeting at which Parent's Board of Directors is
reasonably expected to recommend a Superior Proposal to its stockholders.
(vi) Nothing contained in this Section 5.3 shall prevent
Parent or its Board of Directors from complying with the provisions of Rules
14e-2 and 14d-9 promulgated under the Exchange Act.
5.4 Expenses.
--------
(a) Except as set forth in this Section 5.4, if the Merger is not
consummated, all fees and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses. If the Merger is consummated, all fees and expenses, including
attorneys, accountants, and financial advisor's fees incurred by or for the
benefit of the Company or its stockholders shall be paid by the Surviving
Corporation.
(b) If this Agreement is terminated by Parent pursuant to Section
7.1(b)(ii) or by any party pursuant to Section 7.1(f), the Company shall
immediately upon such termination pay to Parent a termination fee of $200,000 by
wire transfer of immediately available funds to an account designated by Parent.
39
(c) If this Agreement is terminated by the Company pursuant to Section
7.1(c)(ii) or by any party pursuant to Section 7.1(g), Parent shall immediately
upon such termination pay to the Company a termination fee of $200,000 by wire
transfer of immediately available funds to an account designated by the Company.
5.5 Public Disclosure.
------------------
(a) Parent and the Company shall consult with each other before
issuing any press release or otherwise making any public statement with respect
to the Merger or this Agreement and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by law or any listing agreement with a national securities exchange or
The Nasdaq Stock Market, Inc. and in any event in accordance with the terms of
the Confidentiality Agreement.
(b) The Company agrees that the information supplied by the Company
for inclusion in any press release (including any information relating to the
Company that is approved by the Company) that is jointly issued by Parent and
the Company shall not, on the date such press release is issued, contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not false or misleading, or omit to state any material fact
necessary to correct any statement in any earlier joint press release which has
become false or misleading. If at any time prior to the Effective Time the
Company shall determine that any information in any joint press release or any
press release issued by the Company was or may have become false or misleading,
the Company shall promptly inform Parent. Notwithstanding the foregoing, the
Company makes no representation or warranty with respect to any information
relating to Parent or Merger Sub which is contained in any of the foregoing
documents.
(c) Parent agrees that the information supplied by Parent for
inclusion in any press release (including any information relating to Parent and
Merger Sub that is approved by Parent) that is jointly issued by Parent and the
Company shall not, on the date such press release is issued, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not false or misleading, or omit to state any material fact
necessary to correct any statement in any earlier joint press release which has
become false or misleading. If at any time prior to the Effective Time Parent
shall determine that any information in any joint press release or any press
release issued by Parent was or may have become false or misleading, Parent
shall promptly inform the Company. Notwithstanding the foregoing, Parent and
Merger Sub make no representation or warranty with respect to any information
relating to the Company which is contained in any of the foregoing documents.
5.6 FIRPTA.
-------
The Company shall deliver to the Internal Revenue Service a notice
that the Company Common Stock is not a "U.S. Real Property Interest" as defined
in and in accordance with the requirements of Treasury Regulation Section
1.897-2(h)(2).
5.7 Legal Requirements.
-------------------
40
Each of Parent and the Company will take all reasonable actions
necessary or desirable to comply promptly with all legal requirements which may
be imposed on them with respect to the consummation of the transactions
contemplated by this Agreement (including furnishing all information required in
connection with approvals of or filings with any Governmental Entity and prompt
resolution of any litigation prompted hereby) and will promptly cooperate with
and furnish information to any party hereto necessary in connection with any
such requirements imposed upon any of them or their respective subsidiaries in
connection with the consummation of the transactions contemplated by this
Agreement, and will take all reasonable actions necessary to obtain (and will
cooperate with the other parties hereto in obtaining) any consent, approval,
order or authorization of, or any registration, declaration, or filing with, any
Governmental Entity or other public or private third party required to be
obtained or made in connection with the Merger or taking of any action
contemplated by this Agreement.
5.8 Reasonable Best Efforts and Further Assurances.
-----------------------------------------------
Each of the parties to this Agreement shall use its reasonable best efforts
to effectuate the transactions contemplated hereby (including the formation of
Merger Sub as contemplated by this Agreement) and to fulfill and cause to be
fulfilled the conditions to closing under this Agreement (including prompt
resolution of any litigation prompted hereby). Each party hereto, at the
reasonable request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of the transactions
contemplated hereby.
5.9 Stock Options.
-------------
(a) At the Effective Time, each outstanding option to purchase shares
of Company Common Stock (each, a "Company Stock Option") under the Company Stock
Option Plan, whether vested or unvested, will be assumed by Parent. Each Company
Stock Option so assumed by Parent under this Agreement shall continue to have,
and be subject to, the same terms and conditions set forth in the Company Stock
Option Plan immediately prior to the Effective Time, except that (i) such
Company Stock Option shall entitle the holder to purchase (subject to the same
vesting provisions set forth in such Company Stock Option) that number of whole
shares of Parent Common Stock equal to the product of the number of shares of
Company Common Stock that were issuable upon exercise of such Company Stock
Option immediately prior to the Effective Time (without regard to vesting)
multiplied by the Exchange Ratio, rounded down to the nearest whole number of
shares of Parent Common Stock, (ii) the per share exercise price for the shares
of Parent Common Stock issuable upon exercise of such assumed Company Stock
Option shall be equal to the quotient determined by dividing the exercise price
per share of Company Common Stock at which such Company Stock Option was
exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded down to the nearest whole cent, and (iii) such Company Stock Option
shall no longer be exercisable for Company Common Stock.
(b) Promptly after the Effective Time, Parent shall issue to each
holder of an outstanding Company Stock Option a document evidencing the
foregoing assumption of such Company Stock Option by Parent.
41
(c) It is the intention of the parties that the Company Stock Options
assumed by Parent qualify following the Effective Time as incentive stock
options as defined in Section 422 of the Code to the extent the Company Stock
Options qualified as incentive stock options immediately prior to the Effective
Time.
(d) For purposes of determining vesting under any Company Stock
Option, employees of the Company or any of its subsidiaries who become employees
of Parent or any of its subsidiaries shall be credited for the full term during
which they were employed by the Company or any of its subsidiaries.
(e) Prior to the Effective Time, Parent shall take all corporate
action necessary to reserve for issuance a sufficient number of shares of Parent
Common Stock for delivery upon exercise of the Company Stock Options assumed
pursuant to this Section 5.9.
5.10 Form S-8.
--------
Parent agrees to file as soon as commercially practicable after the Closing
a registration statement on Form S-8 for the shares of Parent Common Stock
issuable with respect to assumed Company Stock Options.
5.11 Certain Benefit Plans.
----------------------
(a) Parent shall take such reasonable actions as are necessary to
allow eligible employees of the Company to participate in the benefit programs
of Parent, or alternative benefit programs substantially comparable or better in
the aggregate to those applicable to employees of Parent, as soon as practicable
after the Effective Time in accordance with the terms of such programs. Parent
shall assume all of the Company's liability under Section 4980B of the Code and
Part 6 of Title I of ERISA with respect to COBRA participants (other than any
liability of the Company to pay, or reimburse any such participants for, COBRA
premiums) in accordance with Treasury Regulation Section 54-4980B-9 as if the
Company had terminated coverage under its group health plans on the Effective
Date.
(b) Parent shall cause each such benefit program in which employees of
Parent and its subsidiaries are eligible to participate to take into account for
purposes of eligibility and vesting thereunder the service of such employees
with the Company and its subsidiaries to the same extent as such service was
credited for such purpose by the Company; provided, that in no circumstances
shall the crediting of such service create duplicative benefits.
(c) Parent shall honor and continue to be obligated to perform, in
accordance with their terms, all benefit obligations to, and contractual rights
of, current and former employees of the Company existing as of the Effective
Date, as well as all employment or severance agreements of the Company.
(d) If former or active employees of the Company or any of its
subsidiaries become eligible to participate in a medical, dental, or vision plan
of Parent, Parent shall cause each such plan to (i) waive any preexisting
condition limitations to the extent such conditions are covered unconditionally
for such person under the applicable medical, dental, or vision plans of the
Company, (ii) honor under such plans any deductible, co-payment, and
42
out-of-pocket expenses incurred by the employees and their beneficiaries during
the portion of the calendar year prior to such participation, and (iii) waive
any waiting period limitation or evidence of insurability requirement which
would otherwise be applicable to such employee on or after the Effective Time to
the extent such employee had satisfied any similar limitation or requirement
under an analogous Company benefit program prior to the Effective Time.
(e) If the Company is required to terminate its plan which is
qualified under Section 401(k) of the Code (the "Company's 401(k) Plan"), Parent
----------------------
will, with the approval of the plan administrator of the Parent's tax-qualified
401(k) plan (the "Parent's 401(k) Plan"), cause Parent's 401(k) Plan to accept
---------------------
rollovers or direct rollovers of "eligible rollover distributions" within the
meaning of Section 402(c) of the Code made with respect to the Company's
employees pursuant to the Company's 401(k) Plan by reason of the transactions
contemplated by this Agreement. Rollover amounts contributed to Parent's 401(k)
Plan in accordance with this Section 5.11(e) shall at all times be 100% vested
(to the extent they were 100% vested in the Company's 401(k) Plan at the time of
rollover) and shall be invested in accordance with the provisions of the
Parent's 401(k) Plan. In this regard, the Company represents (i) that the
Company's 401(k) Plan has obtained a determination letter from the Internal
Revenue Service to the effect that the Company's 401(k) Plan is qualified under
Section 401(a) of the Code and that the related trust is exempt from federal
income taxes under Section 501(a) of the Code or (ii) that Company's 401(k) Plan
has been established under a standardized prototype plan for which an IRS
opinion letter has been obtained by the plan sponsor and is valid as to the
adopting employer. The Company has furnished to Parent a copy of the most recent
IRS determination or opinion letter with respect to Company's 401(k) Plan, and
nothing has occurred which could reasonably be expected to cause the loss of the
tax-qualified status of the Company's 401(k) Plan. In the case of any Company
employee, the Parent's 401(k) Plan will take into account, for eligibility and
vesting purposes, such employee's pre-Closing service creditable to such
employee for purposes of Company's 401(k) Plan.
5.12 Tax-Free Reorganization.
------------------------
Parent and the Company shall each use all reasonable efforts to cause the
Merger to be treated as a reorganization within the meaning of Section 368 of
the Code. Without limiting the generality of the foregoing, Parent will cause
the Surviving Corporation to continue at least one significant historic business
line of the Company, or use at least a significant portion of the Company's
business assets in a business, in each case within the meaning of Treasury
Regulation Section 1.368-1(d).
5.13 Board Representation.
---------------------
The Board of Directors of Parent shall take appropriate actions (the
effectiveness of which are subject only to the consummation of the Merger) to
effectuate the following. Such actions shall be taken promptly before the
Effective Time:
(a) to cause the number of directors comprising the full Board of
Directors of Parent to be seven persons, and
43
(b) to appoint to the Board of Directors of Parent the following persons
for the following terms:
--------------------------------------------------------------------------------
Term ending upon Persons
--------------------------------------------------------------------------------
Parent's 2003 annual Xxxxx X. Xxxxxxxxxx
meeting of stockholders Xxxxxx Xxxxx
--------------------------------------------------------------------------------
Parent's 2004 annual Xxxxx X. Xxxxxxxx
meeting of stockholders Xxxxxxx X. Xxxxx
--------------------------------------------------------------------------------
Parent's 2005 annual Xxxx X. Xxxxxxxxxx
meeting of stockholders Xxxxxx X. Xxxxxxxxxx
An independent
director designated
by the Company at
least five business
days before the
Closing Date (who
must be reasonably
acceptable to
Parent)
--------------------------------------------------------------------------------
5.14 Change of Name of Parent.
-------------------------
Parent will submit for approval by Parent's stockholders, at the next
meeting of the stockholders of Parent, a proposal to change the corporate name
of Parent to YDI Wireless, Inc. Prior to such formal name change, Parent will
use "YDI Wireless, Inc." as a trade name.
5.15 Employment Agreements.
----------------------
Parent will use its commercially reasonable efforts to negotiate and
execute before the Effective Time (a) an employment agreement (which would
become effective upon the Effective Time) with each of Xxxxxx X. Xxxxxxxxxx (as
Chief Executive Officer and President of Parent), Xxxxxxx Xxxxxx (as Chief
Financial Officer of Parent), and Xxxxxxx X. Xxxxx (as Chief Technical Officer
of Parent) pursuant to terms and conditions mutually acceptable to the parties
thereto and Parent (provided, in the cases of Messrs. Xxxxxxxxxx and Young, that
their existing employment agreements with the Company are contemporaneously
terminated) and (b) amendments (which would become effective upon the Effective
Time) to the existing employment agreements with each of Xxxx X. Xxxxxxxxxx and
Xxxxxxx X. Xxxx upon terms mutually acceptable to the employee, Parent, and the
Company; provided, however, that in no event will the failure to enter into any
such employment agreement or amendment be deemed a breach of this Agreement or
the failure of a closing condition.
5.16 No Solicitation of Employees.
-----------------------------
Each party agrees that for a period of 12 months following termination, if
any, of this Agreement pursuant to the provisions of Article VII hereof, neither
party shall solicit, induce, or recruit any of the other party's employees to
leave their employment. This Section 5.16 shall not prohibit the advertisement
in any publication of general circulation of positions available at such party.
5.17 Rights Agreement; Takeover Statutes.
------------------------------------
44
The Board of Directors of Parent shall take all further action (in addition
to that referred to in Section 3.22) necessary (including, as necessary,
redeeming the Parent Rights immediately prior to the Effective Time or amending
the Parent Rights Plan) in order to render the Parent Rights inapplicable to the
Merger and the other transactions contemplated by this Agreement. If any
Takeover Statute is or may become applicable to the Merger or the other
transactions contemplated by this Agreement, each of Parent and the Company and
their respective Boards of Directors shall grant such approvals and take such
lawful actions as are necessary to ensure that such transactions may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise act to eliminate or minimize the effects of such statute
and any regulations promulgated thereunder on such transactions.
5.18 Indemnification.
----------------
(a) After the Effective Time, to the extent permitted by law Parent
and the Surviving Corporation shall indemnify and hold harmless each person who
has at any time prior to the Effective Time been an officer, director, or
employee of the Company or other person entitled to be indemnified by the
Company pursuant to its Articles of Incorporation or By-laws as they are
currently in effect on the date hereof or any indemnification agreement which is
in effect on the date hereof between the Company and such person to the same
extent as provided in such Articles of Incorporation, By-laws, or
indemnification agreement.
(b) After the Effective Time, Parent and the Surviving Corporation
shall indemnify the persons who immediately prior to the Effective Time were
directors or officers of the Company against (i) all actions, claims, damages,
costs, expenses, liabilities, or judgments or amounts that are paid in
settlement with the approval of the indemnifying party of or in connection with
any claim, action, suit, proceeding, or investigation based in whole or in part
on or arising in whole or in part out of the fact that such person is or was a
director or officer of the Company, in each case to the full extent a
corporation is permitted under Virginia or Massachusetts law to indemnify its
own directors and officers (and Parent and the Surviving Corporation, as the
case may be, will pay expenses in advance of the final disposition of any such
actual proceeding to each indemnified party to the full extent permitted by law
upon receipt of any undertaking contemplated by Section 13.1-699 of the VSCA or
Section 67 of the Massachusetts Business Corporation Law, as the case may be).
In connection with such indemnification, (x) any counsel retained by the
indemnified parties for any period after the Effective Time shall be reasonably
satisfactory to Parent and the Surviving Corporation, (y) after the Effective
Time, the Surviving Corporation and Parent shall to the extent permitted by law
pay the reasonable fees and expenses of such counsel promptly after statements
therefor are received, and (z) the Surviving Corporation and Parent will
cooperate in the defense of any such matter; provided, that neither the
Surviving Corporation nor Parent shall be liable for any settlement effected
without its prior written consent, which consent will not unreasonably be
withheld. Neither the Surviving Corporation nor Parent shall be liable for the
fees and expenses of more than one law firm for all the indemnified parties with
respect to any single action unless there is, under applicable standards of
professional conduct, a conflict on any significant issue between the positions
of any two or more indemnified parties.
45
(c) Director and Officer Liability Insurance. Parent shall retain a
------------------------------------------
commercially reasonable level of insurance for directors' and officers'
liability for current and ongoing officers and directors of Parent.
(d) This Section 5.18 shall survive the consummation of the Merger, is
intended to benefit the indemnified parties, shall be binding on all successors
and assigns of Parent and the Surviving Corporation, and shall be enforceable by
the indemnified parties.
5.19 Section 16 Matters.
-------------------
Before the Effective Time, the Board of Directors of Parent shall adopt
such resolutions, in form and substance reasonably satisfactory to Parent and
the Company, as are necessary to exempt from the application of Section 16(b) of
the Exchange Act the acquisition of any security of Parent pursuant to or in
connection with the Merger by any person who becomes a director or officer of
Parent, as those terms are defined in Rule 16a-1 under the Exchange Act,
pursuant to this Agreement or otherwise in connection with the Merger and the
other transactions contemplated hereby, but only to the extent that Section 16
and the regulations thereunder then enable any resolutions to have such effect.
5.20 Nasdaq Stock Market Listing; Over The Counter Bulletin Board
-------------------------------------------------------------
Qualification.
--------------
Parent will use its commercially reasonable best efforts to (a) cause the
Parent Common Stock to be de-listed from the Nasdaq SmallCap Market prior to the
Effective Time and (b) cause the Parent Common Stock to be qualified for trading
on the Over The Counter Bulletin Board ("OTCBB") on the first business day after
the day in which the Effective Time occurs; provided, however, in no event will
the failure to obtain that OTCBB qualification be deemed a breach of this
Agreement or failure of a closing condition. The Company shall assist Parent in
these efforts as reasonably requested by Parent.
5.21 Activities to Prepare for Public Company Requirements.
------------------------------------------------------
As soon as possible after this Agreement is signed, representatives of the
Company and Parent will meet to agree upon a plan to enable the combined
Parent/Company entity to meet its obligations as a public company. This plan
will include a process and timetable for (a) the retention of an independent
auditing firm with appropriate SEC qualifications and experience to review and
audit the consolidated financial statements and SEC filings of Parent and the
Company for periods on and after the consummation of the Merger, taking into
account cost, experience, qualifications, and other factors as the Company and
Parent shall mutually determine and (b) the implementation of a system of
internal accounting procedures and controls at the Company sufficient to comply
with Exchange Act and the rules and regulations of the SEC promulgated
thereunder. Parent and the Company shall use their commercially reasonable good
faith best efforts to implement that plan, both prior to and after the Effective
Time.
Article VI
CONDITIONS TO THE MERGER
------------------------
6.1 Conditions to Obligations of the Company.
-----------------------------------------
46
The obligations of the Company to consummate and effect the Merger and the
other transactions contemplated hereby shall be subject to the satisfaction at
or prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and warranties
-------------------------------
of Parent contained in this Agreement shall be true and correct in all material
respects both when made and at and as of the Effective Time, except for changes
contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as if
made on and as of the Effective Time.
(b) Agreements and Covenants. Parent shall have performed or complied
------------------------
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time.
(c) Bringdown. The Company shall have received a certificate, dated
----------
the Closing Date, to the effect of Sections 6.1(a), 6.1(b), and 6.1(d), signed
by the President and Chief Financial Officer of Parent.
(d) No Material Adverse Effect on Parent. There shall not have been
---------------------------------------
any Material Adverse Effect on Parent, and there shall not have been any
development that reasonably would be expected to have a Material Adverse Effect
on Parent.
(e) Resignation of Parent Directors. Prior to the Effective Time, the
-------------------------------
necessary members of the Board of Directors of Parent shall have submitted
written resignations, effective as of the Effective Time, to Parent in order to
effect the board composition contemplated by Section 5.13, and copies of such
resignations shall have been delivered to the Company.
(f) De-Listing of Parent Company Shares from the Nasdaq SmallCap
-----------------------------------------------------------------
Market. Parent shall have received approval and/or confirmation from The Nasdaq
-------
Stock Market, Inc. as shall be required under the rules of the Nasdaq Stock
Market that the Parent Common Stock will be de-listed from the Nasdaq SmallCap
Market immediately prior to the Effective Time.
(g) No Injunctions or Restraints; Illegality. No temporary restraining
----------------------------------------
order, preliminary or permanent injunction, or other order issued by any court
of competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Merger or the issuance of Parent Common Stock
contemplated by this Agreement shall be in effect.
(h) Approvals. Other than the filings provided for under Sections 1.2
----------
and 3.4(b) above, all orders, consents, waivers, exemptions, approvals, or
authorizations of, or declarations, filings, or registrations with, or giving of
notice to, any Person or Governmental Entity required of Parent or any of its
subsidiaries to consummate this Agreement, the Merger, the issuance of Parent
Common Stock, or any other transaction contemplated hereby, the failure of which
to be obtained or made (i) could reasonably be expected to have a Material
47
Adverse Effect on Parent or (ii) will result in a material violation of any law,
shall have been obtained or made, all in form and substance reasonably
satisfactory to the Company.
6.2 Conditions to the Obligations of Parent.
----------------------------------------
The obligations of Parent to consummate and effect the Merger and the other
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. The representations and warranties
------------------------------
of the Company contained in this Agreement shall be true and correct in all
material respects both when made and at and as of the Effective Time, except for
changes contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as if
made on and as of the Effective Time.
(b) Agreements and Covenants. The Company shall have performed or
---------------------------
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time.
(c) Bringdown. Parent shall have received a certificate, dated the
---------
Closing Date, to the effect of Sections 6.2(a), 6.2(b), and 6.2(d), signed by
the President and Chief Financial Officer of the Company.
(d) No Material Adverse Effect on the Company. There shall not have
--------------------------------------------
been any Material Adverse Effect on the Company, and there shall not have been
any development that reasonably would be expected to have a Material Adverse
Effect on the Company.
(e) De-Listing of Parent Company Shares from the Nasdaq SmallCap
-----------------------------------------------------------------
Market. Parent shall have received approval and/or confirmation from The Nasdaq
-------
Stock Market, Inc. as shall be required under the rules of the Nasdaq Stock
Market that the Parent Common Stock will be de-listed from the Nasdaq SmallCap
Market immediately prior to the Effective Time.
(f) Private Placement. Parent shall have determined, to the reasonable
-----------------
satisfaction of counsel to Parent, that the Parent Common Stock to be issued to
the Company's stockholders pursuant to this Agreement may be issued pursuant to
exemptions from the registration requirements of the Securities Act and any
applicable state securities or "blue sky" laws.
(g) No Injunctions or Restraints; Illegality. No temporary restraining
----------------------------------------
order, preliminary or permanent injunction, or other order issued by any court
of competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Merger or the issuance of Parent Common Stock
contemplated by this Agreement shall be in effect.
48
(h) Approvals. Other than the filings provided for under Sections 1.2
---------
and 2.4(b) above, all orders, consents, waivers, exemptions, approvals, or
authorizations of, or declarations, filings, or registrations with, or giving of
notice to, any Person or Governmental Entity required of the Company or any of
its subsidiaries to consummate this Agreement, the Merger, the issuance of
Parent Common Stock, or any other transaction contemplated hereby, the failure
of which to be obtained or made (i) could reasonably be expected to have a
Material Adverse Effect on the Company or (ii) will result in a material
violation of any law, shall have been obtained or made, all in form and
substance reasonably satisfactory to Parent.
Article VII
TERMINATION, AMENDMENT AND WAIVER
---------------------------------
7.1 Termination.
-----------
This Agreement may be terminated and the Merger abandoned at any time prior
to the Effective Time:
(a) by mutual written consent of the Company and Parent;
(b) by Parent if:
(i) there has been a material breach of any representation,
warranty, covenant, or agreement contained in this Agreement on the part of the
Company and such breach has not been cured within seven days after written
notice to the Company (provided, that Parent is not in material breach of the
terms of this Agreement; and provided further, that no cure period shall be
required for a breach which by its nature cannot be cured) such that the
conditions set forth in Section 6.2(a) or Section 6.2(b), as the case may be,
will not be satisfied, or
(ii) the Board of Directors of the Company amends, withholds,
or withdraws its recommendation of the Merger or the stockholders of the Company
amend, withhold, or withdraw their approval of the Merger (provided that Parent
is not in material breach of the terms of this Agreement);
(c) by the Company if:
(i) there has been a material breach of any representation,
warranty, covenant, or agreement contained in this Agreement on the part of
Parent and such breach has not been cured within seven days after written notice
to Parent (provided, that the Company is not in material breach of the terms of
this Agreement; and provided further, that no cure period shall be required for
a breach which by its nature cannot be cured) such that the conditions set forth
in Section 6.1(a) or Section 6.1(b), as the case may be, will not be satisfied;
49
(ii) the Board of Directors of Parent amends, withholds, or
withdraws its recommendation of the Merger (provided the Company is not in
material breach of the terms of this Agreement);
(d) by any party hereto if (i) there shall be a final, non-appealable
order of a federal or state court in effect preventing consummation of the
Merger or (ii) there shall be any final action taken, or any statute, rule,
regulation, or order enacted, promulgated, or issued or deemed applicable to the
Merger by any Governmental Entity which would make consummation of the Merger
illegal or which would prohibit Parent's ownership or operation of all or a
material portion of the business of the Company, or compel Parent to dispose of
or hold separate all or a material portion of the business or assets of the
Company or Parent as a result of the Merger;
(e) by any party hereto if the Merger shall not have been consummated
by April 7, 2003; provided, that the right to terminate this Agreement under
this Section 7.1(e) shall not be available to any party whose willful failure to
fulfill any material obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such date;
(f) by any party hereto if the Board of Directors of the Company
accepts or approves a Superior Proposal or recommends a Superior Proposal to the
stockholders of the Company or if the stockholders of the Company approve a
Superior Proposal (provided that the terminating party is not in material breach
of the terms of this Agreement); or
(g) by any party hereto if the Board of Directors of Parent accepts or
approves a Superior Proposal, or recommends a Superior Proposal to the
stockholders of Parent (provided that the terminating party is not in material
breach of the terms of this Agreement).
Where action is taken to terminate this Agreement pursuant to this Section
7.1, it shall be sufficient for such action to be authorized by the Board of
Directors of the party taking such action.
7.2 Effect of Termination.
----------------------
In the event of termination of this Agreement as provided in Section 7.1,
this Agreement shall forthwith become void and there shall be no liability or
obligation hereunder on the part of Parent, Merger Sub, the Company, or their
respective officers, directors, stockholders, or affiliates, except to the
extent that such termination results from the breach by a party hereto of any of
its representations, warranties, covenants, or agreements set forth in this
Agreement, and, provided that the provisions of Sections 5.2(b), 5.4, and 5.16
of this Agreement shall remain in full force and effect and survive any
termination of this Agreement.
7.3 Notice of Termination.
----------------------
Any termination of this Agreement under Section 7.1 above will be effective
immediately upon the delivery of written notice by the terminating party to the
other parties hereto.
7.4 Amendment.
----------
50
This Agreement may be amended by the parties hereto at any time, but only
by execution of an instrument in writing signed on behalf of each of the parties
hereto.
7.5 Extension; Waiver.
------------------
At any time prior to the Effective Time any party hereto may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (iii) waive compliance
with any of the agreements, covenants or conditions for the benefit of such
party contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
Article VIII
GENERAL PROVISIONS
------------------
8.1 Non-Survival of Representations and Warranties.
-----------------------------------------------
The representations and warranties of the Company, Parent, and Merger Sub
contained in this Agreement shall terminate at the Effective Time, and only the
covenants that by their terms survive the Effective Time shall survive the
Effective Time.
8.2 Notices.
--------
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial delivery service,
or mailed by registered or certified mail (return receipt requested), or sent
via telecopy (receipt confirmed) to the parties at the following addresses or
telecopy numbers (or at such other address or telecopy numbers for a party as
the party shall specify by like notice). If so mailed, they shall be deemed
given upon the earlier of actual receipt or three business days after mailing:
(a) if to Parent or Merger Sub, to:
00 Xxxxxxxxxx Xxxxx Xxxx
Xxxxx Xxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxx Xxxx LLP
000 Xxxxxxx Xxxxxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Facsimile No.: (000) 000-0000
51
(b) if to the Company, to:
0000 Xxx Xxxxxxx
Xxxxx Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Facsimile No.: (000) 000-0000
8.3 Interpretation.
---------------
When a reference is made in this Agreement to Exhibits, such reference
shall be to an Exhibit to this Agreement unless otherwise indicated. The words
"include," "includes" and "including" when used herein shall be deemed in each
case to be followed by the words "without limitation." The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. When
reference is made herein to "the business of" an entity, such reference shall be
deemed to include the business of all direct and indirect subsidiaries of such
entity. Reference to the subsidiaries of an entity shall be deemed to include
all direct and indirect subsidiaries of such entity.
8.4 Counterparts.
-------------
This Agreement may be executed in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart. A facsimile or copy of a signature is valid as an original.
8.5 Entire Agreement.
-----------------
This Agreement and the documents and instruments and other agreements among
the parties hereto as contemplated by or referred to herein, including the
Company Letter and the Parent Letter, (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
and contemporaneous agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, it being understood that
the Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement, and (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as specifically set forth in Section 5.18.
8.6 Severability.
-------------
If any provision of this Agreement, or the application thereof, becomes or
is declared by a court of competent jurisdiction to be illegal, void, or
unenforceable, the remainder of this Agreement will continue in full force and
effect and the application of such provision to other persons or circumstances
will be interpreted so as reasonably to effect the intent of the parties hereto.
The parties further agree to replace such void or unenforceable provision of
this Agreement with a valid and enforceable provision that will achieve, to the
extent possible, the economic, business, and other purposes of such void or
52
unenforceable provision; and, if they do not act to replace the provision, the
Agreement will be interpreted as if they had replaced it with such a provision.
8.7 Other Remedies.
---------------
Except as otherwise provided herein, any and all remedies herein expressly
conferred upon a party will be deemed cumulative with and not exclusive of any
other remedy conferred hereby or by law or equity upon such party, and the
exercise by a party of any one remedy will not preclude the exercise of any
other remedy.
8.8 Governing Law and Choice of Forum.
----------------------------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia, regardless of the laws that might
otherwise govern under applicable principles of conflicts of law thereof.
(b) Any dispute or controversy arising out of or relating to this
Agreement, any document or instrument delivered pursuant to or in connection
herewith, or any breach of this Agreement or any such document or instrument
shall be resolved exclusively (as to court proceedings initiated by the Company,
including any counterclaims or crossclaims later brought by Parent) in the state
or federal courts whose local geographic jurisdiction includes South Deerfield,
Massachusetts, or exclusively (as to court proceedings initiated by Parent,
including any counterclaims or crossclaims later brought by the Company) in the
state or federal courts whose local geographic jurisdiction includes Fairfax
County, Virginia. Each of the parties hereto irrevocably consents to the
exclusive jurisdiction of any such state or federal court in connection with any
matter based upon or arising out of this Agreement or the matters contemplated
herein, agrees that process may be served upon them in any manner authorized by
the laws of the Commonwealth of Virginia or the Commonwealth of Massachusetts,
as the case may be, for such persons and waives and covenants not to assert or
plead any objection which they might otherwise have to such forum, such
jurisdiction and such process.
8.9 Rules of Construction.
----------------------
The parties hereto agree that they have been represented by counsel during
the negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding, or rule of construction providing
that ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
8.10 Assignment.
-----------
No party may assign either this Agreement or any of its rights, interests,
or obligations hereunder without the prior written approval of the other
parties.
8.11 Certain Definitions.
--------------------
For purposes of this Agreement, the term:
53
(a) "business day" means any day on which the principal offices of the
SEC in Washington D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day (other than a Saturday or a
Sunday) on which banks are not required or authorized to close in Virginia;
(b) "knowledge" means with respect to any fact, circumstance, event,
or other matter in question, that such fact, circumstance, event, or other
matter was actually known by or upon reasonable inquiry or investigation would
have been actually known by (i) an individual, if used in reference to an
individual, or (ii) Xxxx X. Xxxxxxxxxx, Xxxxxx X. Xxxxxxx, or Xxxxx X. Xxxxxxx,
if used in reference to Parent, or (iii) Xxxxxx X. Xxxxxxxxxx, Xxxxxxx Xxxxxx,
Xxxxxxx X. Xxxxx, or Xxxxxx Xxxxx, if used in reference to the Company.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
54
IN WITNESS WHEREOF, Parent and the Company have caused this Agreement to be
signed by their respective duly authorized officers, all as of the date first
written above.
[Seal] TELAXIS COMMUNICATIONS CORPORATION
By:/s/Xxxx X. Xxxxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxxxx
Title: President
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Treasurer
[Seal] YOUNG DESIGN, INC.
By: /s/ Xxxxxx X. Xxxxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: Chief Executive Officer
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President
