Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
YDI WIRELESS, INC.
STUN ACQUISITION CORPORATION
AND
PHAZAR CORP.
DATED AS OF OCTOBER 30, 2003
2.1-1
AGREEMENT AND PLAN OF MERGER
----------------------------
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
---------
entered into as of October 30, 2003 among YDI WIRELESS, Inc., a Delaware
corporation ("Parent"), STUN ACQUISITION CORPORATION, a Delaware corporation and
------
a wholly owned subsidiary of Parent ("Merger Sub"), and PHAZAR CORP., a Delaware
----------
corporation (collectively with its subsidiaries including Antenna Products
Corporation, Phazar Antenna Corp., and Thirco, Inc., the "Company").
-------
RECITALS
--------
A. Upon the terms and subject to the conditions of this Agreement and
in accordance with the General Corporation Law of the State of Delaware (the
"DGCL"), Parent and the Company will enter into a business combination
transaction pursuant to which Merger Sub will merge with and into the Company
(the "Merger").
B. The Board of Directors of each of the Company, Parent, and Merger
Sub (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.
C. The Company, Parent, and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. 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").
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
----------
1.1 The Merger. 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
2.1-2
provisions of the DGCL, 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." The name of the Surviving Corporation shall be Antenna
Products Inc. At the Effective Time, the purpose of the Surviving Corporation
shall be to conduct and engage in all lawful activities and business to the
maximum extent permitted by the DGCL.
1.2 Effective Time. Subject to the provisions of this Agreement, the parties
--------------
hereto shall cause the Merger to be consummated by filing a Certificate of
Merger (the "Certificate of Merger") with the Secretary of State of the State of
Delaware in accordance with the relevant provisions of the DGCL (the time of
such filing or such subsequent date or time as the parties shall agree and
specify in the Certificate of Merger being the "Effective Time") as soon as
practicable on or after the Closing Date (as herein defined). The closing of the
Merger (the "Closing") shall take place at the offices of the Parent at a time
and date to be specified by the parties, which shall be no later than the second
business day after the satisfaction or waiver of the conditions set forth in
Sections 6.1 and 6.3(e) or at such other time, date, and location as the parties
hereto agree (the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
--------------------
shall be as provided in this Agreement and the applicable provisions of the
DGCL. 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 Certificate of Incorporation; By-laws.
-------------------------------------
(a) Unless otherwise determined by Parent prior to the Effective Time, at
the Effective Time, the Certificate of Incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation; provided, however, that Article I
of the Certificate of Incorporation of the Surviving Corporation shall be
amended to read as follows: "The name of the corporation is Antenna Products
Inc." At the Effective Time, the authorized capital stock of the Surviving
Corporation shall be 3,000 shares of common stock, par value $0.01 per share.
(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.
1.5 Directors and Officers. 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.
2.1-3
1.6 Effect on Capital Stock. 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:
(a) Conversion of Company Common Stock. Each share of Common Stock, par
value $.01 per share, of the Company (the "Company Common Stock") 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) and Company
Dissenting Shares (as defined in Section 1.6(c) below)) will be canceled and
extinguished and be automatically converted (subject to Sections 1.6(f) and (g))
into the right to receive 1.20 (the "Exchange Ratio") shares of Common Stock,
par value $.01 per share, of Parent (the "Parent Common Stock") (collectively,
the "Merger Consideration") upon surrender of the certificate representing such
share 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
Stock held in the treasury of the Company or owned by Merger Sub, Parent, or any
direct or indirect wholly owned subsidiary of Parent or of the Company
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
(c) Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of Company Common Stock that have not been voted for adoption
of this Agreement and with respect to which appraisal rights shall have been
properly perfected in accordance with Section 262 of the DGCL (the "Company
Dissenting Shares") shall not be converted into the right to receive the Merger
Consideration in accordance with this Agreement, at or after the Effective Time,
unless and until the holder of such Company Dissenting Shares withdraws its
demand for such appraisal in accordance with the DGCL or becomes ineligible for
such appraisal. If a holder of Company Dissenting Shares shall withdraw its
demand for such appraisal in accordance with the DGCL or shall become ineligible
for such appraisal, then, as of the later of the Effective Time or the
occurrence of such event, such holder's Company Dissenting Shares shall cease to
be Company Dissenting Shares and shall be deemed to have converted as of the
Effective Time into the right to receive the Merger Consideration into which its
Company Common Stock would otherwise have converted as of the Effective Time
pursuant to this Agreement. The Company shall give prompt notice to Parent of
any demands received by the Company for appraisal of any shares of capital stock
of the Company, and Parent shall have the right to participate in all
negotiations, proceedings, and settlements with respect to such demands. Before
the Effective Time, the Company shall not, without the prior written consent of
Parent, which consent shall not be unreasonably withheld, make any payment with
respect to, or settle or offer to settle, any such demands or agree to do any of
the foregoing.
(d) Stock Options. All options to purchase Company Common Stock currently
outstanding shall be treated in accordance with Section 5.11 hereof.
(e) Capital Stock of Merger Sub. Each share of Common Stock, par value
$.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,
2.1-4
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.
(f) Adjustments to Exchange Ratio. If between the date hereof and the
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, 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, or dividend.
(g) Fractional Shares. No fraction of a share of Parent Common Stock 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 such additional
fraction of a share of Parent Common Stock as may be necessary to issue to the
stockholder the next whole share of Parent Common Stock.
1.7 Surrender of Certificates.
-------------------------
(a) Exchange Agent. Registrar and Transfer Company, or another similar
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,
Parent shall make available to the Exchange Agent for exchange in accordance
with this Article I, through such reasonable procedures as Parent may adopt, the
shares of Parent Common Stock issuable pursuant to Section 1.6 in exchange for
outstanding shares of Company Common Stock.
(c) Exchange Procedures. Promptly after the Effective Time, the Surviving
Corporation shall cause to be mailed to each holder of record of a certificate
or certificates (the "Certificates") which immediately prior 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 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. 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 which such holder has the right to receive
2.1-5
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 in accordance with Section 1.6.
(d) Distributions With Respect to Unexchanged Shares. No dividends or
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 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
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
Section 1.7, none of the Exchange Agent, the Surviving Corporation, or 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. 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. 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
2.1-6
Stock such shares of Parent Common Stock 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. 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. 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
---------------------------------------------
The Company represents and warrants to Parent and Merger Sub, subject
to the exceptions specifically disclosed 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. 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. Except as set forth in the
Company SEC Reports (as defined below in Section 2.5) filed with the SEC prior
to the date of this Agreement, 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
2.1-7
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 Certificate 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 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) 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. The authorized capital stock of the Company
-------------------------
consists of 6,000,000 shares of Company Common Stock, of which 2,185,928 shares
were issued and outstanding as of October 29, 2003, and 2,000,000 shares of
Preferred Stock, $.01 par value, 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 October 29, 2003, the Company had
reserved 130,000 shares of Company Common Stock for issuance upon exercise of
outstanding options. 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, will be duly authorized,
validly issued, fully paid, and nonassessable. Since August 1, 2003, there have
been no amendments of any Company stock options or warrants and no changes in
the capital structure of the Company other than issuances of Company Common
Stock upon the exercise of outstanding options and to Board and audit committee
members for meeting attendance. The outstanding options to purchase shares of
Company Common Stock were validly issued in transactions exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act") and in accordance with any applicable state securities laws.
All Company Common Stock issued to Board and audit committee members for meeting
attendance was validly issued in transactions exempt from the registration
requirements of the Securities Act and in accordance with any applicable state
securities laws.
2.1-8
2.3 Obligations With Respect to Capital Stock.
-----------------------------------------
(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 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.
---------
(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, subject only to the approval of the
Merger by the vote of the holders of a majority of the Company Common Stock.
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 by the Company 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 Certificate of Incorporation or By-laws of the Company or similar governing
2.1-9
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 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
Certificate of Merger with the Delaware Secretary of State, (ii) the filing of
the Proxy Statement (as defined in Section 2.19) with the Securities and
Exchange Commission ("SEC") in accordance with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), (iii) the filing of a Form 8-K with the
SEC, (iv) 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, and (v) 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.
-----------------------------------------
(a) The Company has filed all forms, reports and documents required to be
filed with the SEC since January 1, 1999 and has made available to Parent, in
the form filed with the SEC, (i) its Annual Reports on Form 10-K for the fiscal
years ended May 31, 2001, 2002, and 2003, (ii) its Quarterly Report on Form 10-Q
for the period ended August 31, 2003, (iii) all proxy statements relating to the
Company's meetings of stockholders (whether annual or special) held since
January 1, 2000, (iv) all information statements relating to stockholder actions
since January 1, 2000, (v) all other reports or registration statements filed by
the Company with the SEC since January 1, 2000, and (vi) all amendments and
supplements to all such reports, proxy statements, information statements, and
registration statements filed by the Company with the SEC; and the Company will
make available to Parent in the form filed with the SEC, as soon as practicable,
its Quarterly Report on Form 10-Q for the period ended November 30, 2003. All
such required forms, reports and documents (including those enumerated in
clauses (i) through (vi) of the preceding sentence and the Company's November
30, 2003 Form 10-Q, when filed) are referred to herein as the "Company SEC
Reports." As of their respective dates, the Company SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act, or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Company 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 the Company'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 Company SEC Reports (the
2.1-10
"Company Financials"), including any Company 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 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 or will fairly present 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 or are subject to normal and recurring
year-end adjustments which were not, or are not expected to be, material in
amount. The unaudited balance sheet of the Company as of August 31, 2003
contained in the Company SEC Reports is hereinafter referred to as the "Company
Balance Sheet."
(c) The Company has heretofore furnished to Parent 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 the Company with the SEC pursuant
to the Securities Act or the Exchange Act.
2.6 Absence of Certain Changes or Events. Except with respect to the actions
------------------------------------
contemplated by this Agreement or disclosed in the Company SEC Reports filed
with the SEC prior to the date of 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.
-----
(a) Definition of Taxes. For the purposes of this Agreement, "Tax" or
"Taxes" refers to any and all federal, state, local and foreign taxes,
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
2.1-11
each of its subsidiaries, except such Returns which are not material to the
Company and for its Returns for its fiscal year ended May 31, 2003 for which an
extension of time exists. All such Returns were correct and complete in all
material respects. Each of the 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 except as
indicated in this Section 2.7(b)(i).
(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.
2.1-12
(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.
2.8 Absence of Liens and Encumbrances. Each of 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 Financials 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 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
2.1-13
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.
(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. Except as disclosed in the
-------------------------------------
Company SEC Reports filed with the SEC prior to the date of this Agreement,
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;
(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;
(e) except for a purchase order issued by the Company to Phillystran Inc.
and a purchase order issued by the Company to Integris Metals, any agreement,
contract or commitment (excluding real and personal property leases) which
involves payment by the Company of $200,000 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; or
2.1-14
(f) 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.
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 required to be filed as an
exhibit to the Company SEC Reports 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. Except as disclosed in the Company SEC Reports filed with
the SEC prior to the date of this Agreement, 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.
2.13 Litigation. Except as disclosed in the Company SEC Reports filed with
----------
the SEC prior to the date of this Agreement, 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
2.1-15
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, nor will it
--------------------------
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.
(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
2.1-16
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").
(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
2.1-17
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 Registration Statement; Proxy Statement/Prospectus. The written
--------------------------------------------------
information supplied by the Company specifically for inclusion in the
Registration Statement (as defined in Section 3.19) shall not, at the time the
Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. The written
information supplied by the Company specifically for inclusion in the proxy
statement/prospectus to be sent to the stockholders of the Company in connection
with the meeting of the Company's stockholders to consider the Merger (the
"Company Stockholders' Meeting") (such proxy statement/prospectus as amended or
supplemented is referred to herein as the "Proxy Statement") shall not, on the
date the Proxy Statement is first mailed to the Company's stockholders, at the
time of the Company Stockholders' Meeting, or at the Effective Time (in each
case as supplemented or amended through such time), contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Stockholders' Meeting which has become false or misleading. If at any time prior
to the Effective Time any information relating to the Company or any of its
affiliates, officers or directors shall be discovered by the Company which
should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement, the Company shall promptly inform Parent.
Notwithstanding the foregoing, the Company makes no representation or warranty
2.1-18
with respect to any information supplied by Parent or Merger Sub which is
contained in any of the foregoing documents.
2.20 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 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
submitted for consideration by the Company's stockholders at the Company
Stockholders' Meeting.
2.21 Fairness Opinion. The Company has received a written opinion from Xxxxxx
----------------
Xxxxx, Business Appraiser dated on or about the date hereof, that the Merger is
fair to the Company's stockholders from a financial point of view, and has
delivered to Parent a copy of such opinion.
2.22 Antitakeover Laws Not Applicable. To the Company's knowledge, no "fair
--------------------------------
price," "business combination," "moratorium," "control share acquisition" or
other form of antitakeover statute or regulation (a "Takeover Statute"), other
than Section 203 of the DGCL, 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.
2.23 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 with respect to the
Company 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.
2.24 FIRPTA. The Company Common Stock is not a "U.S. Real Property Interest"
------
as defined in Treasury Regulation Section 1.897-2(h)(2).
Article III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
-------------------------------------------------------
Parent and Merger Sub represent and warrant 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:
2.1-19
3.1 Organization of Parent and Merger Sub. Each of Parent, its material
-------------------------------------
subsidiaries, and Merger Sub 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 below in Section 3.5) filed with the SEC prior to the date of this
Agreement, 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 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 Certificate of Incorporation and By-laws of Parent and Merger Sub, 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 13,620,292 shares were issued and outstanding
as of October 29, 2003, and 4,500,000 shares of Preferred Stock, $.01 par value,
none of which is issued or outstanding. The authorized capital stock of Merger
Sub consists of 3,000 shares of Common Stock, $.01 par value, 100 shares of
which, as of the date hereof, are issued and outstanding and are held by Parent.
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 October 29, 2003, Parent had reserved
1,464,525 shares of Parent Common Stock for issuance pursuant to Parent's 1986
Stock Plan, 1987 Stock Plan, 1996 Stock Plan, 1997 Stock Plan, 1999 Stock Plan,
2001 Nonqualified Stock Option Plan, and 2002 Stock Incentive Plan
(collectively, the "Parent Stock Option Plan"), under which options were
outstanding for 832,445 shares, and 395,715 shares of Parent Common Stock for
issuance upon the exercise of outstanding warrants (which as of October 29, 2003
are outstanding for an aggregate of 395,715 shares of Parent Common Stock). 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, will be duly authorized, validly issued, fully paid, and
nonassessable. Since August 1, 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 upon the exercise of options granted
under the Parent Stock Option Plan or the exercise of outstanding warrants. All
outstanding shares of Parent Common Stock that were issued pursuant to the
exercise of options granted under the Parent Stock Option Plan were validly
issued in transactions either exempt from the registration requirements of the
Securities Act or pursuant to registration statements filed under the Securities
Act and in accordance with any applicable state securities laws.
2.1-20
(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
non-assessable.
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 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, 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
and Merger Sub, the performance by Parent and Merger Sub of their obligations
hereunder, and consummation by Parent and Merger Sub 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 Merger Sub 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 or Merger Sub.
3.4 Authority.
---------
(a) Parent and Merger Sub have 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 and Merger Sub. This
Agreement has been duly executed and delivered by Parent and Merger Sub and
constitutes the valid and binding obligations of Parent and Merger Sub,
enforceable against Parent and Merger Sub 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 and Merger Sub does not, and the consummation of the transactions
2.1-21
contemplated hereby by Parent and Merger Sub 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
Certificate of Incorporation or By-laws of Parent, the Certificate of
Incorporation or By-laws of Merger Sub, 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 and Merger Sub in connection with the execution and delivery
of this Agreement by Parent and Merger Sub or the consummation by Parent and
Merger Sub of the transactions contemplated hereby, except for (i) the filing of
the Registration Statement (as defined in Section 3.19 below) with the SEC in
accordance with the Securities Act, (ii) the filing of the Certificate of Merger
with the Delaware Secretary of State, (iii) the filing of the Proxy Statement
with the SEC in accordance with the Exchange Act, (iv) the filing of a Form 8-K
with the SEC, (v) 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, and (vi)
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, 2000, 2001 and 2002, (ii) its Quarterly Reports
on Form 10-Q for the periods ended March 31 and June 30, 2003, (iii) all proxy
statements relating to Parent's meetings of stockholders (whether annual or
special) held since January 1, 2000, (iv) all information statements relating to
stockholder actions since January 1, 2000, (v) all other reports or registration
statements filed by Parent with the SEC since January 1, 2000 (including the
Form 8-K filed by Parent on October 21, 2003), and (vi) all amendments and
supplements to all such reports, proxy statements, information statements, and
registration statements filed by Parent with the SEC; and Parent will make
available to the Company in the form filed with the SEC, as soon as practicable,
its Quarterly Report on Form 10-Q for the period ended September 30, 2003. All
such required forms, reports and documents (including those enumerated in
clauses (i) through (vi) of the preceding sentence and Parent's September 30,
2003 Form 10-Q, when filed) 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 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
2.1-22
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 Financials"), 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 unaudited balance sheet of Parent as of
September 30, 2003 contained in the Parent SEC Reports is hereinafter referred
to as the "Parent Balance Sheet."
(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 filed with
the SEC prior to the date of this Agreement, 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 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.
2.1-23
(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.
(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.
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 Financials and except
2.1-24
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.
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.
3.10 Agreements, Contracts and Commitments. Except as disclosed in the Parent
-------------------------------------
SEC Reports filed with the SEC prior to the date of this Agreement, neither
Parent nor any of its subsidiaries has, nor is it a party to nor is it bound by:
2.1-25
(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;
(e) any agreement, contract or commitment (excluding real and personal
property leases) which involves payment by Parent of $200,000 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; or
(f) 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.
3.11 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 with the SEC prior
to 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
2.1-26
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 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 filed with the
----------
SEC prior to the date of this Agreement, 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 Broker's and Finders' Fees. Parent has not incurred, and 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
reports and insurance contracts, (ii) accurate and complete detailed summaries
of all unwritten Benefit Plans, (iii) accurate and complete copies of the most
2.1-27
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
2.1-28
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 Registration Statement; Proxy Statement/Prospectus. Subject to the
--------------------------------------------------
accuracy of the representations of the Company made in Section 2.19, the
registration statement on Form S-4 (or such other or successor form as shall be
appropriate), (including any amendments or supplements thereto, the
"Registration Statement"), pursuant to which the shares of Parent Common Stock
to be issued in the Merger will be registered with the SEC shall not, at the
time the Registration Statement is filed with the SEC, at the time it becomes
effective under the Securities Act, or at the time of the Company Stockholders'
Meeting (in each case as supplemented or amended through such time), contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements included therein not misleading. The written
information supplied by Parent specifically for inclusion in the Proxy Statement
shall not, on the date the Proxy Statement is first mailed to the Company's
stockholders, at the time of the Company Stockholders' Meeting, or at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not false or misleading; or omit to state any material fact necessary to correct
any statement in any earlier communication with respect to the solicitation of
2.1-29
proxies for the Company Stockholders' Meeting which has become false or
misleading. If at any time prior to the Effective Time any information relating
to Parent, Merger Sub, or any of their respective affiliates, officers, or
directors shall be discovered by Parent or Merger Sub which should be set forth
in an amendment to the Registration Statement or a supplement to the Proxy
Statement, Parent or Merger Sub will promptly inform the Company.
Notwithstanding the foregoing, Parent and Merger Sub make no representation or
warranty with respect to any information supplied by the Company which is
contained in any of the foregoing documents.
3.20 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 and determined that the execution, delivery and performance of this
Agreement is advisable.
3.21 Antitakeover Laws Not Applicable. To the knowledge of the Parent, no
--------------------------------
Takeover Statute, other than Section 203 of the DGCL, 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 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 with respect to Parent
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 or permitted 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 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
2.1-30
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 or in compliance with Section 5.4(a), 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 shall 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;
(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;
(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;
2.1-31
(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, (iii) shares of Company Common Stock issuable upon the
exercise of the options referred to in clause (ii); and (iv) to Board and audit
committee members for attending meetings in amounts consistent with past
practice and in the aggregate not to exceed 6,000 shares;
(i) Cause, permit, or propose any amendments to the Company's Certificate
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;
2.1-32
(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 practice 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 a 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 other
than the Return for the fiscal year ending May 31, 2003 (which the Company may
file) 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 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 except in the
ordinary course of business;
(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
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 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
2.1-33
(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 Sections 6.1 or 6.3 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 or permitted 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 5.4(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 shall 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 previously
disclosed in writing to the Company;
(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
2.1-34
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 or conversion of Parent stock options or
warrants outstanding as of the date of this Agreement, (ii) options to purchase
shares of Parent Common Stock granted pursuant to the Parent Stock Option Plan,
and (iii) shares of Parent Common Stock issuable upon the exercise of the
options referred to in clause (ii);
(i) Cause, permit, or propose any amendments to Parent's Certificate of
Incorporation or By-laws;
(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;
(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"
2.1-35
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 in excess of the amount accrued on the Parent Balance Sheet, 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 practice 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 a 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 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 except in the ordinary
course of business;
(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 Parent Intellectual Property Rights
other than such agreements entered into in the ordinary course of business
consistent with past practices;
2.1-36
(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 Parent or Merger Sub 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 Merger Sub; 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
(x) Take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.2(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 Sections 6.1 or 6.2 not to be satisfied.
Article V
ADDITIONAL AGREEMENTS
---------------------
5.1 Proxy Statement/Prospectus; Registration Statement.
--------------------------------------------------
(a) As promptly as practicable after the execution of this Agreement,
Parent and the Company shall prepare and file with the SEC the Proxy Statement
and the Registration Statement in which the Proxy Statement will be included as
a prospectus. Each of Parent and Company shall use its reasonable best efforts
to (i) cause the Registration Statement and the Proxy Statement to comply as to
form in all material respects with the Securities Act, the Exchange Act, and the
rules and regulations thereunder, (ii) respond promptly to any comments of the
SEC or its staff with respect to the Registration Statement, the Proxy
Statement, or any other report, statement, or other document it may have filed
with the SEC, (iii) cause the Registration Statement to be declared effective
under the Securities Act as soon thereafter as practicable, (iv) as soon as
practicable after the Registration Statement shall have been declared effective,
cause the Proxy Statement and forms of proxy to be mailed to the Company's
stockholders, and (v) notify the other party promptly of any stop order or
threatened stop order of which it becomes aware with respect to the Registration
Statement or similar proceeding with respect to the Proxy Statement. Each of
Parent and the Company shall afford the other party a reasonable opportunity to
review and comment upon the Registration Statement, the Proxy Statement, any
amendment or supplement to either document, or any other document filed with the
SEC prior to its filing. The Proxy Statement shall include the fairness opinion
of Xxxxxx Xxxxx, Business Appraiser referred to in Section 2.21. The Proxy
Statement shall also include the recommendation of the Board of Directors of the
Company in favor of the Merger which shall not be withdrawn, modified, or
withheld except in compliance with Section 5.4(a).
2.1-37
(b) Each of Parent and the Company shall notify the other party promptly
upon the receipt of any comments from the SEC or its staff or any other
government official in connection with any filing made pursuant hereto and of
any request by the SEC or its staff or any other government official for any
amendment or supplement to the Registration Statement, the Proxy Statement, or
any other filing with the SEC or for additional information and shall provide to
the other party copies of all correspondence between such party or any of its
representatives, on the one hand, and the SEC or its staff or any other
government official, on the other hand, with respect to the Registration
Statement, the Proxy Statement, or any other such filing.
(c) Promptly after Parent or the Company shall notify the other party of
the discovery of information required to be disclosed to the other party
pursuant to Section 2.19 or Section 3.19, as the case may be, the parties shall
prepare and file appropriate amendments or supplements to the Registration
Statement and the Proxy Statement, as the case may be, and, to the extent
required by law, disseminate such amendment or supplement to the stockholders of
the Company.
5.2 Meeting of Stockholders. Promptly after the date hereof, the Company
-----------------------
shall take all action necessary in accordance with the DGCL and its Certificate
of Incorporation and By-laws to convene the Company Stockholders' Meeting to be
held as promptly as practicable for the purpose of voting upon this Agreement
and the Merger. The Company shall consult with Parent concerning the timing and
other details relating to the Company Stockholders' Meeting.
5.3 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 its
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
5.3 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 April 15, 2002 (the "Confidentiality
Agreement"), which Confidentiality Agreement shall continue in full force and
effect in accordance with its terms.
5.4 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
2.1-38
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 5.4(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, substantially
all, or any material portion of the assets of the Company, or otherwise. In
addition, subject to the other provisions of this Section 5.4, 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 approval of this Agreement and the Merger by the stockholders of the Company
at the Company Stockholders' Meeting, 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 5.4(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 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
2.1-39
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 an Acquisition 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 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 5.4 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, enter into any agreement or understanding with any
person, entity, or group which would preclude or prevent the Merger or other
transactions contemplated by this Agreement other than in connection with a
Superior Proposal.
(ii) For the purposes of Sections 5.4(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 could reasonably be expected to result in a transaction
that, without the Merger, is more favorable to the stockholders of Parent from a
financial point of view than either the Merger or such transaction after the
Merger (if doing the transaction after the Merger would be permitted or
possible) and for which financing, to the extent required, is then committed or
which, in the good faith reasonable judgment of the Board of Directors, is
reasonably capable of being obtained by such person, entity, or group and which
is likely to be consummated. For the purposes of Section 5.4(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.
(iii) 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
2.1-40
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.
(iv) Parent will (i) notify the Company immediately if any inquiry or
proposal is made or any information or access is requested in connection with a
Superior Proposal or potential Superior Proposal and (ii) immediately
communicate to the Company the terms and conditions of any such Superior
Proposal or potential Superior 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.
(v) Nothing contained in this Section 5.4 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.
5.5 Expenses.
--------
(a) Except as set forth in this Section 5.5, 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, provided that Parent and the Company shall share equally all fees
and expenses, other than attorneys, accountants and financial advisor's fees,
incurred in connection with the printing and filing of the Registration
Statement and Proxy Statement (including financial statements and exhibits) and
any amendments or supplements thereto. If the Merger is consummated, all fees
and expenses, including attorneys, accountants and financial advisor's fees (but
excluding the printing and filing fees referenced in the preceding sentence),
incurred by or for the benefit of the Company or its stockholders shall be paid
by the Surviving Corporation. Parent shall choose the financial printer to use
for the Registration Statement, the Proxy Statement, and any amendments or
supplements thereto.
(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 $300,000 by
wire transfer of immediately available funds to an account designated by Parent.
(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 $300,000 by wire
transfer of immediately available funds to an account designated by the Company.
2.1-41
5.6 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 or approved 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 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 issued
press release 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 or approved 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 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 issued press release 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.
5.7 Auditors' Letters. The Company shall use its reasonable best efforts to
-----------------
cause to be delivered to Parent a letter of Xxxxxx and Xxxxxxx, L.L.P.,
independent auditors to the Company, dated a date within two business days
before the date on which the Registration Statement becomes effective, and
addressed to Parent, in form and substance reasonably satisfactory to Parent and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement. The Parent shall use its reasonable best efforts to be
delivered to the Company a letter of BDO Xxxxxxx, LLP, and Hoffman, Fitzgerald,
& Xxxxxx, P.C., independent auditors to the Parent, dated a date within two
business days before the date on which the Registration Statement becomes
effective, and addressed to the Company, in form and substance reasonably
2.1-42
satisfactory to the Company and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Registration Statement.
5.8 Legal Requirements. Each of Parent, Merger Sub, 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.
5.9 Blue Sky Laws. Parent shall take such steps as may be necessary to comply
-------------
with the securities and blue sky laws of all United States jurisdictions which
are applicable to the issuance of Parent Common Stock pursuant hereto. 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 best efforts to assist Parent as may be
necessary to comply with the securities and blue sky laws of all United States
jurisdictions which are applicable in connection with the issuance of Parent
Common Stock pursuant hereto.
5.10 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 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.
5.11 Stock Options. The Company shall provide a notice to each holder of an
-------------
outstanding option to purchase shares of Company Common Stock (each, a "Company
Stock Option"), promptly after execution of this Agreement and at least thirty
(30) days prior to the Effective Time, stating that the Company has entered into
this Agreement and that the Company is requiring the holder of the Company Stock
Option to exercise all of the unexercised portion of the Company Stock Option
prior to the Effective Time or suffer the forfeiture of the unexercised portion
of the Company Stock Option and take such additional actions, reasonably
requested by Parent, to cause the Company Stock Options to terminate prior to
the Effective Time.
2.1-43
5.12 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 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
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 5.12(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
2.1-44
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.
5.13 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).
5.14 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:
(a) to cause the number of directors comprising the full Board of
Directors of Parent to be five persons, and
(b) to appoint Xxxxx X. Xxxxxxx to the Board of Directors of Parent in
addition to four incumbent directors of Parent.
5.15 Employment Agreement. Parent will use its commercially reasonable
--------------------
efforts to negotiate and execute before the Effective Time an employment
agreement (which would become effective upon the Effective Time) with Xxxxx
Xxxxxxx pursuant to terms and conditions mutually acceptable to the parties
thereto and Parent (provided that any existing employment agreement with the
Company is contemporaneously terminated); provided, however, that in no event
will the failure to enter into any such employment agreement 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 its employment. This Section
5.16 shall not prohibit the advertisement in any publication of general
circulation of positions available at such party.
5.17 Takeover Statutes. 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
2.1-45
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 Certificate 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 Certificate of Incorporation, By-laws, or indemnification
agreement. 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.
(b) 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.
2.1-46
Article VI
CONDITIONS TO THE MERGER
------------------------
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of the Company
under applicable law.
(b) Registration Statement Effective. The SEC shall have declared the
Registration Statement effective. No stop order suspending the effectiveness of
the Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose, and no similar proceeding in respect of the Proxy
Statement, shall have been initiated or threatened by the SEC; and all requests
by the SEC for additional information shall have been complied with to the
reasonable satisfaction of the parties hereto.
(c) 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 shall be in effect.
(d) Dissenters' Rights. Following the Company Stockholders' Meeting, no
more than ten percent (10%) of the Company's outstanding shares shall be in a
position to exercise dissenters' rights under the DGCL.
(e) Approvals. Other than the filing provided for under Section 1.2, 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, the Company, or any of their
subsidiaries to consummate this Agreement, the Merger, the issuance of Parent
Common Stock contemplated by this Agreement, or any other transaction
contemplated hereby, the failure of which to be obtained or made (i) is
reasonably expected to have a Material Adverse Effect on Parent or 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 and the
Company.
6.2 Additional Conditions to Obligations of Company. 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 and Merger Sub 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
2.1-47
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 and Merger Sub 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 them at or prior to the
Effective Time.
(c) Bringdown. The Company shall have received a certificate, dated the
Closing Date, to the effect of Sections 6.2(a), 6.2(b), and 6.2(d) signed by the
Chief Executive Officer 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 Director. Prior to the Effective Time, one of
the members of the Board of Directors of Parent shall have submitted a written
resignation, effective as of the Effective Time, to Parent in accordance with
Section 5.14, and a copy of such resignation shall have been delivered to the
Company.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub. The
-----------------------------------------------------------------
obligations of Parent and Merger Sub 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 and Merger Sub shall have received a certificate,
dated the Closing Date, to the effect of Sections 6.3(a), 6.3(b), and 6.3(d),
signed by the Chief Executive Officer 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.
2.1-48
(e) Satisfactory Environmental Due Diligence Investigation. Parent shall
have received a Phase II Environmental Site Assessment report from Environmental
Managers, Inc., which provides no reason to believe the existence of any adverse
environmental situation involving any of the Company's properties.
(f) Resignation of Company Directors and Officers. Parent shall have
received the resignations of such directors and officers of the Company and its
subsidiaries as Parent may request with such resignations effective at such
dates and times as Parent may request.
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 on the part of the Company contained in this Agreement
and such breach has not been cured within thirty 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 6.3(a) or Section 6.3(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 (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 on the part of Parent or Merger Sub contained in this
Agreement and such breach has not been cured within thirty 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 6.2(a) or Section 6.2(b), as the case may be,
will not be satisfied;
(ii) the Board of Directors of Parent amends, withholds, or withdraws
its approval 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; (ii) there shall be any final action taken, or any statute, rule,
2.1-49
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; or (iii) if the Company's
stockholders do not approve the Merger and this Agreement at the Company
Stockholders' Meeting (provided that the Company may not terminate in these
circumstances if it is in material breach of the terms of this Agreement);
(e) by any party hereto if the Merger shall not have been consummated by
April 1, 2004; 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 (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 (as applicable) 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 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 5.3(b),
5.5 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. 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
2.1-50
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:
0000 Xxx Xxxxxxx
Xxxxx Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxxxx
00 Xxxxxxxxxx Xxxxx Xxxx
Xxxxx Xxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
000 X.X. 00xx Xxxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
2.1-51
with a copy to:
Xxxx X. Xxxxxxx
P O Box 121969
Xxxx Xxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxx X. Xxxxxxx, Esq.
0000 Xxxx Xxxxxx Xxxx
Xxxxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
8.3 Interpretation. The words "include," "includes" and "including" when used
--------------
herein shall be deemed in each case to be followed by the words "without
limitation." Any table of contents and the 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
2.1-52
purposes of such void or 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 State of Delaware, 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 or Merger
Sub) in the state or federal courts whose local geographic jurisdiction includes
Falls Church, Virginia, or exclusively (as to court proceedings initiated by
Parent or Merger Sub, including any counterclaims or crossclaims later brought
by the Company) in the state or federal courts whose local geographic
jurisdiction includes Mineral Wells, Texas. 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 State of Texas or the Commonwealth
of Virginia, 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:
-------------------
(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 Delaware;
2.1-53
(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,
(ii) Xxxxxx X. Xxxxxxxxxx, Xxxxxxx X. Xxxxx, and Xxxxxxx X. Xxxxxx, if used in
reference to Parent or Merger Sub, or (iii) Xxxx X. Xxxxxxx or Xxxxx Xxxxxxx, if
used in reference to the Company.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2.1-54
IN WITNESS WHEREOF, Parent, Merger Sub, 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] YDI WIRELESS, INC.
By:
--------------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
-----------------------------------
Chief Executive Officer
[Seal] PHAZAR CORP.
By:
--------------------------------------
Name: Xxxx X. Xxxxxxx
-----------------------------------
President
[Seal] STUN ACQUISITION CORPORATION
By:
--------------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
-----------------------------------
Chief Executive Officer
2.1-55
