EXHIBIT 2.1
MERGER AGREEMENT
BY AND AMONG
GASONICS INTERNATIONAL CORPORATION
GPT ACQUISITION CORP.,
AND
GAMMA PRECISION TECHNOLOGY, INC.
Dated as of August 30, 2000
TABLE OF CONTENTS
Page
ARTICLE 1 THE MERGER..................................................................... 2
1.1 The Merger.................................................................... 2
1.2 Effective Time................................................................ 2
1.3 Effect of the Merger on Constituent Corporations.............................. 2
1.4 Certificate of Incorporation and By-Laws of Surviving Corporation............. 2
1.5 Directors and Officers of Surviving Corporation............................... 3
1.6 Maximum Number of Shares of Parent Common Stock to be Issued; Payment
of Cash; Effect on Outstanding Securities of the Company, Merger Sub.......... 3
1.7 Dissenting Shares............................................................. 5
1.8 Exchange Procedures........................................................... 5
1.9 No Further Ownership Rights in Company Capital Stock.......................... 7
1.10 Lost, Stolen or Destroyed Certificates........................................ 7
1.11 Taking of Necessary Action; Further Action.................................... 7
1.12 Exemption from Registration................................................... 8
1.13 Retention Escrow.............................................................. 8
1.14 Retention Option Pool......................................................... 9
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................. 9
2.1 Organization, Standing and Power.............................................. 9
2.2 Capital Structure............................................................. 10
2.3 No Subsidiaries............................................................... 11
2.4 Authority..................................................................... 11
2.5 Financial Statements.......................................................... 12
2.6 Payables; Receivables......................................................... 12
2.7 Compliance with Laws.......................................................... 12
2.8 No Defaults................................................................... 13
2.9 Litigation.................................................................... 13
2.10 Conduct in the Ordinary Course................................................ 13
2.11 Absence of Undisclosed Liabilities............................................ 14
2.12 Complete Disclosure........................................................... 15
2.13 Certain Agreements............................................................ 15
2.14 Employee Benefit Plans........................................................ 15
2.15 Employee Matters.............................................................. 17
2.16 Major Contracts............................................................... 18
2.17 Taxes......................................................................... 19
2.18 Intellectual Property......................................................... 21
2.19 Service Provider Agreements................................................... 23
2.20 Restrictions on Business Activities........................................... 24
2.21 Title to Properties........................................................... 24
2.22 Environmental Matters......................................................... 25
TABLE OF CONTENTS Page
2.23 Insurance..................................................................... 26
2.24 Personnel..................................................................... 26
2.25 Third-Party Consents.......................................................... 26
2.26 Product Warranties; Defects; Liabilities...................................... 26
2.27 Year 2000 Compliance.......................................................... 27
2.28 Related Party Transactions.................................................... 27
2.29 Brokers or Finders; Professional Fees......................................... 27
2.30 Export Control Laws........................................................... 27
2.31 Foreign Corrupt Practices Act................................................. 28
2.32 Compliance with Regulation D; Shareholders.................................... 28
2.33 Information Statement......................................................... 28
2.34 Representations Complete...................................................... 29
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........................ 29
3.1 Organization, Standing and Power.............................................. 29
3.2 Authority..................................................................... 29
3.3 SEC Documents; Financial Statements........................................... 30
3.4 Litigation.................................................................... 30
ARTICLE 4 CONDUCT PRIOR TO THE EFFECTIVE TIME............................................ 30
4.1 Conduct of Business of the Company............................................ 30
4.2 No Solicitation............................................................... 33
ARTICLE 5 ADDITIONAL AGREEMENTS.......................................................... 34
5.1 Sale of Shares; Registration.................................................. 34
5.2 Information Statement......................................................... 34
5.3 Stockholder Approval.......................................................... 35
5.4 Access to Information......................................................... 35
5.5 Confidentiality............................................................... 35
5.6 Expenses...................................................................... 36
5.7 Public Disclosure............................................................. 36
5.8 Approvals..................................................................... 36
5.9 Notification of Certain Matters............................................... 36
5.10 Shareholder Representation Agreement.......................................... 36
5.11 Voting Agreement/Irrevocable Proxies.......................................... 37
5.12 Waivers and Releases of Options and Warrants.................................. 37
5.13 Employees..................................................................... 37
5.14 Reasonable Efforts and Further Assurances..................................... 37
5.15 Forms S-3 and S-8............................................................. 38
5.16 Listing of Additional Shares.................................................. 38
5.17 Notices....................................................................... 38
TABLE OF CONTENTS Page
5.18 Blue Sky Laws................................................................. 38
5.19 Shareholder Representative. The Company shall deliver or cause to
be delivered to Parent at or prior to the Effective Time from
each of the "non-accredited" shareholders of the Company, an
executed Shareholder Representation Agreement (the "Shareholder
Representation Agreement") in the form attached hereto as Exhibit H........... 38
ARTICLE 6 CONDITIONS TO THE MERGER....................................................... 38
6.1 Conditions to Obligations of Each Party to Effect the Merger.................. 38
6.2 Additional Conditions to Obligations of the Company........................... 39
6.3 Additional Conditions to the Obligations of Parent and Merger Sub............. 39
ARTICLE 7 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS; INDEMNIFICATION; ESCROW PROVISIONS................................. 42
7.1 Survival of Representations, Warranties, Covenants and Agreements............. 42
7.2 Indemnification............................................................... 42
7.3 Escrow Provisions............................................................. 42
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER.............................................. 48
8.1 Termination................................................................... 48
8.2 Effect of Termination......................................................... 49
8.3 Amendment..................................................................... 49
8.4 Extension; Waiver............................................................. 49
ARTICLE 9 MISCELLANEOUS PROVISIONS....................................................... 50
9.1 Notices....................................................................... 50
9.2 Entire Agreement.............................................................. 51
9.3 Further Assurances; Post-Closing Cooperation.................................. 51
9.4 Third Party Beneficiaries..................................................... 51
9.5 No Assignment; Binding Effect................................................. 51
9.6 Headings...................................................................... 51
9.7 Invalid Provisions............................................................ 51
9.8 Governing Law................................................................. 52
9.9 Construction.................................................................. 52
9.10 Counterparts.................................................................. 52
9.11 Specific Performance; Remedies Cumulative..................................... 52
9.12 Withholding................................................................... 52
TABLE OF CONTENTS Page
ARTICLE 10 DEFINITIONS................................................................... 52
10.1 Definitions................................................................... 52
LIST OF EXHIBITS
Exhibit A Voting Agreement
Exhibit B Agreement of Merger
Exhibit C Option Assumption Agreement
Exhibit D Shareholder Certificate
Exhibit E Form of Employee Confidentiality and Inventions Agreement
Exhibit F Form of Non-Competition Agreement
Exhibit G List of Surviving Corporation Employees
Exhibit H Form of Shareholder Representation Agreement
Exhibit I Statement of Non-U.S. Real Property Holding Company Status
Exhibit J-1 Officer's Certificates for Parent and Merger Sub
Exhibit J-2 Secretary's Certificate for Parent and Merger Sub
Exhibit K-1 Officer's Certificate for Company
Exhibit K-2 Secretary's Certificate for Company
Exhibit L Legal Opinion of Company Counsel
LIST OF SCHEDULES
Schedule 1 Company Disclosure Schedule
Schedule 2 List of Company Security Holders
Schedule 3 Parent Disclosure Schedule
Schedule 6.3(g) List of Key Employees
MERGER AGREEMENT
THIS MERGER AGREEMENT (the "Agreement") is made and entered into as of
August 30, 2000, by and among GaSonics International Corporation, a Delaware
corporation ("Parent"), GPT Acquisition Corp., a California corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), Gamma Precision Technology,
Inc., a California corporation (the "Company") and, with respect to Article 7
hereof only, Xxxxx Xxxx as Shareholder Agent. Capitalized terms used and not
otherwise defined herein have the meanings set forth in Article 10.
RECITALS
A. The respective Boards of Directors of each of Parent, Merger Sub and
the Company believe it is in the best interests of Parent, Merger Sub and the
Company and their respective stockholders that Parent acquire the Company
through the merger of Merger Sub with and into the Company (the "Merger").
B. The Boards of Directors of each of Parent, Merger Sub and the Company
have approved the Merger, this Agreement and the transactions contemplated
hereby.
C. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, all of the issued and outstanding shares of
capital stock of the Company, including without limitation, the Common Stock,
Series A Preferred Stock and Series B Preferred Stock of the Company
(collectively, "Company Capital Stock"), shall be converted into the right to
receive shares of Common Stock of Parent, with a par value of $0.001 per share
("Parent Common Stock") and cash as specified herein.
D. As an inducement to Parent and Merger Sub to enter into this
Agreement, certain stockholders of the Company have concurrently herewith
entered into Voting Agreements with Parent in substantially the form attached
hereto as Exhibit A ("Voting Agreements") pursuant to which, among other things,
such shareholders will agree to vote the shares of Company Capital Stock owned
by them in favor of the Merger
E. The Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
F. A portion of the Aggregate Consideration otherwise payable by Parent
in connection with the Merger shall be placed in escrow by Parent, the release
of which amount shall be contingent upon certain events and conditions, all as
set forth in Article 7 herein.
NOW, THEREFORE, in consideration of the covenants, promises,
representations and warranties set forth herein, and for other good and valuable
consideration, intending to be legally bound hereby the parties agree as
follows:
ARTICLE 1
THE MERGER
1.1 The Merger. At the Effective Time and subject to and upon the terms
and conditions of this Agreement and the applicable provisions of the California
Code and the Delaware General Corporation Law, Merger Sub shall be merged with
and into the Company, the separate corporate existence of Merger Sub shall
cease, the Company shall continue as the surviving corporation and a wholly-
owned subsidiary of Parent. The Company, following the Merger, is sometimes
referred to herein as the "Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
to Section 8.1, the closing of the Merger (the "Closing") will take place as
promptly as practicable, but no later than two (2) Business Days following
satisfaction or waiver of the conditions set forth in Article 6, at the offices
of Xxxxxxx, Phleger & Xxxxxxxx LLP, Two Embarcadero Place, 2200 Geng Road, Palo
Alto, California, unless another place or time is agreed to by Parent and the
Company. The date upon which the Closing actually occurs is herein referred to
as the "Closing Date." On the Closing Date, the parties hereto shall cause the
Merger to be consummated by filing an Agreement of Merger (or like instrument)
in substantially the form attached hereto as Exhibit B (the "Agreement of
Merger") with the Secretary of State of California in accordance with the
relevant provisions of applicable Law (the time of acceptance by the Secretary
of State of the State of California or such later time agreed to in writing by
the parties being referred to herein as the "Effective Time").
1.3 Effect of the Merger on Constituent Corporations. At the Effective
Time, the effect of the Merger shall be as provided in the applicable provisions
of the California Code, this Agreement and the Agreement of Merger. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights, privileges, powers and franchises of Merger Sub
and the Company shall vest in the Surviving Corporation, and all debts,
liabilities, obligations, restrictions, disabilities and duties of Merger Sub
and the Company shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation and By-Laws of Surviving Corporation.
(a) At the Effective Time, the articles of incorporation of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the articles
of incorporation of the Surviving Corporation until thereafter amended as
provided by law and such articles of incorporation and by-laws of the Surviving
Corporation except that Article I thereof shall be amended to read in its
entirety as follows: "The name of the Corporation is Gamma Precision Technology,
Inc.".
(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 as provided by such by-laws, the articles of incorporation
and applicable law.
1.5 Directors and Officers of Surviving Corporation. The directors of
Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, each to hold office in accordance with the articles of
incorporation and by-laws of the Surviving
-2-
Corporation. The directors of the Company shall each resign effective
immediately prior to the Effective Time. The officers of Merger Sub immediately
prior to the Effective Time shall be the officers of the Surviving Corporation,
each to hold office in accordance with the by-laws of the Surviving Corporation.
The officers of the Company shall each resign effective immediately prior to the
Effective Time.
1.6 Maximum Number of Shares of Parent Common Stock to be Issued; Payment
of Cash; Effect on Outstanding Securities of the Company, Merger Sub. The
consideration to be paid by Parent in connection with the Merger shall be the
Aggregate Consideration. On the terms and subject to the conditions of this
Agreement, as of the Effective Time, by virtue of the Merger and without any
action on the part of Parent or Merger Sub, the Company or the holder of any
shares of the Company Capital Stock and Company Options or Company Warrants, the
following shall occur:
(a) Conversion of Company Capital Stock; Cash Consideration. At the
Effective Time, each share of Company Capital Stock issued and outstanding
immediately prior to the Effective Time (other than any shares of Company
Capital Stock to be canceled pursuant to Section 1.6(c) and any Dissenting
Shares (as provided in Section 1.7)) will be canceled and extinguished and be
converted automatically into the right to receive that number of shares of
Parent Common Stock equal to the Exchange Ratio plus the Cash Amount.
(b) Fractional Shares. No fractional shares of Parent Common Stock
shall be issued pursuant to the Merger. In lieu of the issuance of any such
fractional share of Parent Common Stock, cash adjustments will be paid to
holders in respect of any fractional share of Parent Common Stock that would
otherwise be issuable. The amount of such adjustment shall be the product of
such fraction of a share of Parent Common Stock multiplied by the Parent Stock
Price (the "Fractional Share Cash Amount"). No fractional cent shall be payable
to any holder of Company Capital Stock, and the cash payable to any such holder
shall be rounded down to the nearest cent.
(c) Cancellation of Parent-Owned and Company-Owned Stock. Each share
of Company Capital Stock owned by Parent or the Company or any Subsidiary of
Parent or the Company immediately prior to the Effective Time shall be
automatically canceled and extinguished without any conversion thereof and
without any further action on the part of Parent, Merger Sub or the Company.
(d) Capital Stock of Merger Sub. Each share of Merger Sub Common
Stock, par value $0.001 per share, that is issued and outstanding immediately
prior to the Effective Time shall be converted into and exchanged for one
validly issued, fully paid and nonassessable share of Common Stock, par value
$0.001 per share of the Surviving Corporation. From and after the Effective
Time, each share certificate of Merger Sub theretofore evidencing ownership of
any such shares shall continue to evidence ownership of such shares of Common
Stock of the Surviving Corporation.
(e) Company Stock Options. At the Effective Time, the Company's 1998
Stock Option Plan (the "Company Stock Option Plan") and all Company Options
which are outstanding as of the Effective Time (including such Company Options
then outstanding under
-3-
the Company Stock Option Plan) shall be assumed by Parent (each such Company
Option an "Assumed Option" and collectively the "Assumed Options"), provided,
however that the aggregate number of shares of Company Common Stock issuable
upon the exercise of all Company Options so assumed shall not exceed 35,081,757
less the Aggregate Stock Number. Each Assumed Option shall continue to have, and
be subject to, the same terms and conditions set forth in the Company Stock
Option Plan (if applicable) and the applicable stock option agreement or warrant
agreement as in effect immediately prior to the Effective Time, except that (i)
each Assumed Option will be exercisable for the Option Exchange Amount; and (ii)
the per share exercise price for the shares of Parent Common Stock issuable upon
exercise of each Assumed Option will be equal to the quotient obtained by
dividing (x) the product of (i) the exercise price per share of Company Capital
Stock at which such Assumed Option was exercisable immediately prior to the
Effective Time, multiplied by (ii) the number of shares of Company Capital Stock
issuable upon the exercise of such Assumed Option immediately prior to the
Effective Time by (y) the Option Exchange Amount, rounded up to the nearest
whole cent. No Cash Amount shall be payable with respect with any Assumed
Option. It is the intention of the parties that the Assumed Options qualify, to
the maximum extent applicable, following the Effective Time as incentive stock
options as defined in Section 422 of the Internal Revenue Code to the extent
such options qualified as incentive options prior to the Effective Time, it
being understood and acknowledged, however, that some or all Company Options may
not qualify as incentive stock options and may instead be treated as
nonqualified options. To evidence the assumption of the Assumed Options by
Parent, Parent will issue to each holder of an Assumed Option a document in
substantially the form of Exhibit C hereto.
(f) Unvested Company Common Stock. If any shares of Company Common
Stock outstanding immediately prior to the Effective Time are unvested or are
subject to a repurchase option, risk of forfeiture or other condition under the
Company Stock Option Plan, any applicable restricted stock purchase agreement,
or other agreement with Company or under which Company has any rights, then the
shares of Parent Common Stock issued in exchange for such shares of Company
Common Stock will also be unvested and subject to the same repurchase option,
risk of forfeiture or other condition, and the certificates representing such
shares of Parent Common Stock may accordingly bear any appropriate legends. In
addition, the Cash Amount paid on those unvested shares in the Merger shall be
held in escrow by Parent and shall be paid out (together with interest thereon)
as those shares subsequently vest in accordance with the vesting schedule in
effect for those shares immediately prior to the Effective Time. Any cash held
in escrow on unvested shares repurchased by Parent pursuant to such repurchase
options or otherwise forfeited by the holders of those unvested shares shall
revert to the Parent. The Company shall take all action that may be necessary to
ensure that, from and after the Effective Time, Parent is entitled to exercise
any such repurchase option or other right set forth in any such restricted stock
purchase agreement or other agreement.
(g) Assignment of Repurchase Options. All outstanding rights of the
Company which it may hold immediately prior to the Effective Time to repurchase
unvested shares of Company Capital Stock (the "Repurchase Options") shall be
assigned to Parent in the Merger and shall thereafter be exercisable by Parent
upon the same terms and conditions in effect immediately prior to the Effective
Time, except that the shares purchasable pursuant to the Repurchase Options and
the purchase price per shall be adjusted to reflect the Exchange Ratio
-4-
(h) Adjustments to Exchange Ratio and Option Exchange Amounts. The
Exchange Ratio and the Option Exchange Amounts shall be equitably adjusted to
reflect fully the effect of any stock split, reverse split, stock combination,
stock dividend (including any dividend or distribution of securities convertible
into Parent Common Stock or Company Capital Stock), reorganization,
reclassification, recapitalization or other like change with respect to Parent
Common Stock or Company Capital Stock occurring after the date hereof and prior
to the Effective Time.
1.7 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Capital Stock held by a holder who has demanded and
perfected dissenters' rights for such shares in accordance with the California
Code and who, as of the Effective Time, has not effectively withdrawn or lost
such dissenters' rights ("Dissenting Shares") shall not be converted into or
represent a right to receive Parent Common Stock, the Cash Amount or the
Fractional Share Cash Amount pursuant to Section 1.6, but the holder thereof
shall only be entitled to such rights as are granted by the California Code.
(b) Notwithstanding the provisions of subsection (a) above, if any
holder of Dissenting Shares shall effectively withdraw or lose (through failure
to perfect or otherwise) such holder's dissenters' rights, then, as of the later
of (i) the Effective Time or (ii) the occurrence of such event, such holder's
shares shall automatically be converted into and represent only the right to
receive Parent Common Stock, the Cash Amount and the Fractional Share Cash
Amount as provided in Section 1.6, without interest thereon, upon surrender to
the Company of the certificate representing such shares in accordance with
Section 1.8 of this Agreement.
(c) The Company shall give Parent (i) prompt notice of its receipt of
any demands for purchase of any Dissenting Shares, withdrawals of such demands,
and any other instruments relating to the Merger served pursuant to the
California Code and received by the Company and (ii) the opportunity to
participate in all negotiations and proceedings with respect to demands for the
purchase of Dissenting Shares under the California Code. The Company shall not,
except with the prior written consent of Parent or as may be required under
applicable law, voluntarily make any payment with respect to any demands for
purchase of Dissenting Shares or offer to settle or settle any such demands.
1.8 Exchange Procedures.
(a) Parent Common Stock; Cash. On the Closing Date, Parent shall
deposit with the Exchange Agent for exchange in accordance with this Article 1:
(i) the Aggregate Stock Consideration less the Escrow Shares and the Retention
Stock, (ii) the Aggregate Fractional Share Cash Amount, and (iii) the Aggregate
Cash Consideration, less the Retention Cash Amount.
(b) Exchange Procedures. As soon as practicable after the Effective
Time, the Surviving Corporation shall cause to be mailed to each holder of
record of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of
-5-
Company Capital Stock (the "Certificates") and which shares were converted into
shares of Parent Common Stock and the right to receive cash pursuant to Section
1.6, (i) a letter of transmittal in customary form (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock and the
right to receive cash as provided herein. 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 (less the amount
of the Escrow Shares to be deposited in the Escrow Fund on such holder's behalf
pursuant to Article 7 hereof and, if applicable, the amount of Retention Stock
to be deposited in the Retention Escrow Fund on such holder's behalf pursuant to
Section 1.13), and any respective Fractional Share Cash Amount and such holder's
portion of the Aggregate Cash Consideration pursuant to Section 1.6 to which
such holder is entitled pursuant to Section 1.6 (less the amount of the
Retention Cash to be deposited in the Retention Escrow Fund on such holder's
behalf pursuant to Section 1.13), and the Certificate so surrendered shall be
canceled. Until surrendered, each outstanding Certificate that, prior to the
Effective Time, represented shares of Company Capital Stock will be deemed from
and after the Effective Time, for all corporate purposes, other than the payment
of dividends, to evidence the ownership of the amount of cash and the number of
full shares of Parent Common Stock into which such shares of Company Capital
Stock shall have been so converted.
(c) Escrows.
(i) Escrow Fund. In addition, at the Effective Time, subject to and
in accordance with the provisions of Article 7 hereof, Parent shall retain and
hold the Escrow Fund in escrow. The portion of the Escrow Fund contributed on
behalf of each holder of Company Capital Stock shall be in proportion to the
portion of the Aggregate Consideration which such holder is entitled to receive
by virtue of ownership of outstanding shares of Company Capital Stock. The
Escrow Fund shall be beneficially owned by the holders on whose behalf the
Escrow Fund was deposited and shall be available to compensate Parent as
provided in Article 7.
(ii) Retention Escrow Fund. At the Effective Time, subject to and in
accordance with the provisions of Section 1.13 hereof, Parent shall retain and
hold the Retention Escrow Fund in escrow. The portion of the Retention Escrow
Fund contributed on behalf of each Key Employee shall be the amount of such Key
Employee's Retention Stock plus such Key Employee's Retention Cash Amount. The
Retention Escrow Fund shall be beneficially owned by the Key Employees and shall
be subject to forfeiture as provided in Section 1.13.
(d) Distributions With Respect to Unexchanged Shares of Company Capital
Stock. No dividends or other distributions with respect to Parent Common Stock
declared or made after the Effective Time and 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 to the
Exchange Agent in accordance with Section 1.8(b). Subject to applicable Law,
following
-6-
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
theretofore 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 pursuant to the Merger 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.
1.9 No Further Ownership Rights in Company Capital Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Capital 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 Capital Stock, and there shall be no
further registration of transfers on the records of the Company of shares of
Company Capital 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 1.
1.10 Lost, Stolen or Destroyed Certificates. In the event any Certificates
shall have been lost, stolen or destroyed, the Exchange Agent shall issue
certificates representing such shares of Parent Common Stock in exchange for
such lost, stolen or destroyed Certificates, upon the making of an affidavit of
that fact by the holder thereof; provided, however, that Parent or the Exchange
Agent may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
provide an indemnity or deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Parent or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
1.11 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full right,
title and possession to all assets, property, rights, privileges, powers and
franchises of the Company, the officers and directors of the Surviving
Corporation shall be fully authorized to take, and shall take all such lawful
and necessary action.
1.12 Exemption from Registration. The shares of Parent Common Stock to be
issued in connection with the Merger will be issued in a transaction exempt from
registration under the Securities Act and applicable state Law pursuant to
Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated
under the Securities Act, and as such will constitute "restricted securities"
within the meaning of the Securities Act.
-7-
1.13 Retention Escrow.
(a) Establishment of Retention Escrow Fund. As soon as practicable
after the Closing Date, Parent will deposit, on behalf of each Key Employee,
such Key Employee's Retention Cash Amount and Retention Stock in an account to
be maintained by Parent, such deposit to constitute the "Retention Escrow Fund"
to b e governed by the terms set forth herein.
(b) Retention Escrow Period. Subject to Section 1.13(c), Parent shall
release to each Key Employee such Key Employee's portion of the Retention Escrow
Fund upon the completion of eighteen (18) continuous months of employment with
Parent or the Surviving Corporation by such Key Employee (the "Retention
Period") . If Parent terminates a Key Employee's employment prior to the end of
the Retention Period without Cause or such Key Employee terminates his
employment prior to the end of the Retention Period with Good Reason, Parent
shall promptly release such key Employee's portion of the Retention Escrow Fund
to such Key Employee. If Parent terminates a Key Employee for Cause prior to the
end of the Retention Period or such Key Employee terminates his employment prior
to the end of the Retention Period without Good Reason, the entire portion of
the Retention Escrow Fund contributed on behalf of such Key Employee shall be
forfeited by such Key Employee and shall be retained by Parent.
(c) Release for Taxes Due and Payable. Parent shall release to each
Key Employee a portion of such Key Employee's Retention Cash Amount equal to, up
to an aggregate for all releases, twenty percent (20%) of such Key Employee's
portion of the Retention Escrow Fund upon the receipt of written notice from
such Key Employee certifying that a Tax payment with respect to such portion of
the Escrow Fund is due and owing to a Tax Authority.
(d) Guarantee of Retention Stock Amount. At the time any portion of
Retention Stock is distributed to a Key Employee, in the event that the Release
Date Stock Price is less than the Parent Stock Price, Parent shall issue to such
Key Employee additional shares of Parent common stock having a value (based on
the Release Date Stock Price) equal to the difference between (A) the value of
the Retention Stock so released based on the Parent Stock Price minus (B) the
value of the Retention Stock so released based on that Release Date Stock Price.
The additional shares issued under this Section 1.13(c) shall be subject to
Parent's collection of all applicable federal and state income and employment
withholding taxes, and no such additional shares shall be issued to the Key
Employee until the applicable taxes are collected from such Key Employee.
(e) Protection of Retention Escrow Fund. Parent shall hold and
safeguard the Retention Escrow Fund during the Retention Period, shall treat
such fund as a trust fund in accordance with the terms of this Agreement and not
as the property of Parent and shall hold and dispose of the Retention Escrow
Fund only in accordance with the terms hereof. Interest, if any, and dividends
earned on the Retention Escrow Fund during the Retention period shall be paid to
Key Employees in proportion to their respective interests in the Retention
Escrow Fund as set out in Section 1.13(c) hereof, upon the release to such Key
Employee of their Retention Stock. The shares of Retention Stock shall be voted
in accordance with the instructions received from the beneficial owners of such
shares. In the absence of such instructions, Parent shall be under
-8-
no obligation to vote such shares. Parent shall forward proxy information,
annual or other reports or other information with respect to the Retention
Stock.
1.14 Retention Option Pool. As soon as practicable after the Closing Date,
Parent shall grant to the employees of the Company listed on Exhibit G who
become employees of the Parent of the Surviving Corporation after the Effective
Time, options to purchase shares of Parent Common Stock (totaling 150,000 shares
in the aggregate) pursuant to the Parent's 1994 Stock Option Plan at a per share
exercise price equal to the closing bid price for shares of Parent Common Stock
on the last trading day prior to the date of the grant as quoted on the NASDAQ
National Market automated quotation system (the "Retention Parent Stock
Options"). The allocation of options among the Employees listed on Exhibit G
shall be determined by GaSonics after the Closing Date.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
Except as specifically set forth in the disclosure schedule attached as
Schedule 1 hereto (the "Company Disclosure Schedule"), the Company represents
and warrants to Parent and Merger Sub that the representations and warranties
set forth in this Article 2 are true and correct as of the date hereof and as of
the Closing Date. All disclosures set forth in such Company Disclosure Schedule
shall be deemed representations and warranties of the Company.
2.1 Organization, Standing and Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and authority to own,
operate and lease its properties and to carry on its business as now conducted
and as proposed to be conducted. The Company is not required to qualify as a
foreign corporation in any jurisdiction. The Company has delivered to Parent
complete and correct copies of its (i) Articles of Incorporation and Bylaws,
which Articles of Incorporation and Bylaws are in full force and effect and have
not been amended, corrected, restated or superseded in any way, (ii) minutes of
all directors' and shareholders' meetings, all of which are complete and
accurate as of the date hereof, (iii) stock certificate books and all other
records of the Company, which collectively correctly set forth the record
ownership of all outstanding shares of capital stock and all rights to purchase
capital stock of the Company and (iv) form of stock certificates, option plans
and agreements and rights to purchase shares of capital stock of the Company.
The Company is not in violation, and has not taken any action in violation, of
any provisions of its Articles of Incorporation or Bylaws.
2.2 Capital Structure.
(a) The authorized and issued capital stock of the Company consists
of:
(i) Preferred Stock. 25,000,000 shares of preferred stock, with
no par value, 3,715,170 of which have been designated Series A Preferred
Stock (the "Company Series A Preferred Stock"), and 8,732,200 of which have
been designated as Series B Preferred Stock (the "Company Series B
Preferred Stock", and together with the Company Series A Preferred Stock,
the "Company Preferred Stock"). There are issued and outstanding 3,715,170
shares of
-9-
Company Series A Preferred Stock and 8,732,200 shares of Company Series B
Preferred Stock. Each outstanding share of Company Series A Preferred Stock and
Company Series B Preferred Stock is convertible into one share of Company Common
Stock.
(ii) Common Stock. 75,000,000 shares of Company Common Stock, with no
par value (the "Company Common Stock"), of which 20,837,487 shares are issued
and outstanding.
(iii) Options. There are outstanding Company Options to acquire
1,796,900 shares of Company Common Stock.
(iv) Warrants. There are no outstanding Company Warrants to acquire
shares of Company Common Stock, Company Series A Preferred Stock or Company
Series B Preferred Stock or any other Company Capital Stock.
(v) Other Rights. There are no other outstanding shares of Company
Capital Stock or any other right to receive or purchase equity securities or
securities convertible, exercisable or exchangeable for equity securities of the
Company
(b) All outstanding shares of Company Capital Stock are, and any shares of
Company Capital Stock issuable upon the exercise of any Company Options (subject
to receipt of the exercise price as provided therein) will be, validly issued,
fully paid and nonassessable and not subject to preemptive rights created by
statute, the Company's Articles of Incorporation or Bylaws or any agreement to
which the Company is a party or by which the Company may be bound. All
outstanding Company securities have been issued in compliance with applicable
federal and state securities laws. Other than as described herein, there are no
options, warrants, calls, conversion rights, commitments or agreements of any
character to which the Company is a party or by which the Company may be bound
that do or may obligate the Company to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of the Company's Capital Stock or
that do or may obligate the Company to grant, extend or enter into any such
option, warrant, call, conversion right, commitment or agreement.
(c) Schedule 2 contains a complete and accurate list of, and the number of
shares owned of record by, the holders of outstanding Company Common Stock,
Company Series A Preferred Stock, Company Series B Preferred Stock, Company
Warrants, Company Options and any other security or right to acquire any
security of the Company, including the addresses of such holders. Such Schedule
2 identifies the vesting schedule, applicable legends, and repurchase rights or
other risks of forfeiture of any outstanding security.
(d) All Company Options have been issued in accordance with all federal
and state securities laws. The Company does not have in effect any stock
appreciation rights plan and no stock appreciation rights are outstanding. None
of the outstanding Company Options permit any accelerated vesting or
exercisability of those options or the shares of Company Common Stock subject to
those options by reason of the Merger or any other transactions contemplated by
this Agreement, and the terms of the Company Stock Option Plan and the
outstanding agreements for the Company Options each permit the Parent's
assumption of those options as options to purchase Parent Common Stock as
provided in Section 1.6(d) of this
-10-
Agreement (including the substitution of additional shares of Parent Common
Stock for the PreMerger Cash Value), without the consent or approval of the
holders of those options (to the extent waivers are not obtained from such
holders pursuant to Section 5.13 of this Agreement), the Company's shareholders,
or otherwise, and without any accelerated vesting of those Company Options or
the underlying shares. True and complete copies of the Company Stock Option Plan
and all agreements and instruments relating to the Company Options been provided
to Parent, and such agreements and instruments have not been amended, modified
or supplemented, and there are no agreements to amend, modify or supplement such
agreements or instruments in any case from the form provided to Parent. No
unvested shares of Company Capital Stock shall vest on an accelerated basis by
reason of the Merger or any transactions contemplated by this Agreement.
(e) Except for any restrictions imposed by applicable state and
federal securities laws, there is no right of first refusal, co-sale right,
right of participation, right of first offer, registration right option or other
restriction on transfer applicable to any shares of Company Capital Stock.
(f) The Company is not a party or subject to any agreement or
understanding, and, to the best of the Company's knowledge, there is no
agreement or understanding between or among any persons that affects or relates
to the voting or giving of written consent with respect to any outstanding
security of the Company.
2.3 No Subsidiaries. The Company does not own or control, directly or
indirectly, any corporation, partnership, business, trust or other entity.
2.4 Authority.
(a) Subject only to the requisite approval of the Merger and this
Agreement by the stockholders of the Company, the Company has all requisite
corporate power and authority to enter into this Agreement, to execute, deliver
and perform its obligations hereunder, and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, the
performance by the Company of its obligations hereunder and the consummation of
the transactions contemplated hereby, have been duly and validly authorized by
all necessary corporate action on the part of the Company's Board of Directors,
and no other action on the part of the Board of Directors of the Company is
required to authorize the execution, delivery and performance of this Agreement
and the consummation by the Company of the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by the Company,
and assuming the due authorization, execution and delivery hereof by Parent and
Merger Sub, constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, or other similar laws
affecting the enforcement of creditors' rights generally, and except that the
availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefor may be brought.
(b) The execution, delivery and performance of this Agreement does
not and the performance and consummation of the transactions contemplated hereby
will not, conflict with or result in any material violation of any Law
applicable to the Company or its Assets and
-11-
Properties, or conflict with or result in any conflict with, breach or violation
of or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation, forfeiture or acceleration of any
obligation or the loss of a material benefit under, or result in the creation of
a Lien on any of the Assets and Properties of the Company pursuant to (i) any
provision of the Articles of Incorporation or Bylaws of the Company or (ii) any
Contract to which the Company is a party or by which the Company or any of its
Assets and Properties may be bound or affected.
(c) No Approval is required by or with respect to the Company in
connection with the execution, delivery and performance of this Agreement by the
Company or the consummation by the Company of the transactions contemplated
hereby, except (i) for such Approvals as may be required under state securities
or Blue Sky laws in connection with the transactions set forth herein [and (ii)
any filings as may be required under the HSR Act.]
2.5 Financial Statements. The Company has furnished to Parent its
unaudited financial statements (balance sheet, statement of operations and
statement of cash flow) as of and for the years ending December 31, 1997,
December 31, 1998 and December 31, 1999 and as of and for the seven-month period
ending July 31, 2000 (the "Company Financial Statements"). The Company Financial
Statements are complete and correct in all respects and fairly present the
financial position of the Company as and at the dates thereof and the Company's
results of operations for the periods then ended; provided the financial
statements for the period ended July 31, 2000 are subject to normal year-end
adjustments.
2.6 Payables; Receivables.
(a) Section 2.6(a) of the Company Disclosure Schedule sets forth an
aging of accounts payable of the Company in the aggregate and by creditor (for
the periods 0-30 days, 30-90 days and greater than 90 days, if applicable) as of
June 30, 2000.
(b) Section 2.6 (b) of the Company Disclosure Schedule sets forth an
aging of accounts receivable of the Company in the aggregate and by debtor (for
the periods 0-30 days, 30-90 days and greater than 90 days as of June 30);
provided however, that disclosure of debts owed by any single debtor that, in
the aggregate, do not exceed $1,000 need not be included. All accounts and notes
receivable (the "Accounts") reflected on the Company Unaudited Financial
Statements are (i) valid, genuine and existing, (ii) subject to no defenses,
setoffs or counterclaims, (iii) current (not more than ninety (90) days past
due) and collectable in the ordinary course of business, net of reserves less
any applicable trade discounts. No Person has any lien on such Accounts or any
part thereof; no agreement for deduction, free goods, discount or other deferred
price or quantity adjustment has been made with respect to any of such Accounts;
and to the best of the Company's knowledge no customer of the Company with an
Account balance is involved in voluntary or involuntary bankruptcy proceedings
or is otherwise insolvent or has notified the Company that such customer will
not pay its Account.
2.7 Compliance with Laws. The Company is in compliance and has conducted
its business and operations so as to comply with all applicable Laws. There are
no Orders (whether rendered by a court or administrative agency or by
arbitration) and, to the Company's knowledge, no basis currently exists for any
Orders against the Company or against any of its
-12-
Assets and Properties, and none are pending or, to the best knowledge of the
Company, threatened. The Company has not received any notice from any
Governmental Entity of any violation of Laws. The Company has all permits,
licenses, orders, authorizations, registrations, concessions, certificates,
approvals and other instruments of any Governmental Entity (the "Government
Licenses") (each of which is in full force and effect) necessary for the conduct
of its business. The Company is in compliance with the terms, conditions,
limitations, restrictions, standards, prohibitions, requirements and obligations
of such Government Licenses. The Company has made all filings and registrations
and the like necessary or required by law to conduct its business. There is not
now pending, nor, to the best of the Company's knowledge, is there threatened,
any Action or Proceeding and, to the Company's knowledge, there is no basis for
any Action or Proceeding against the Company before any Governmental Entity with
respect to the Government Licenses, nor is there any issued or outstanding
notice, order or complaint with respect to the violation by the Company of the
terms of any Government License or any rule or regulation applicable thereto.
2.8 No Defaults. The Company is not and has not been at any time, and it
has not received notice that it is or would be with the passage of time (x) in
violation of any provision of its Articles of Incorporation or Bylaws or (y) in
default or violation of (a) any term, condition or provision of any Order
applicable to the Company, or (b) any term or condition of any agreement, note,
mortgage, indenture, contract, lease, instrument, Law or Permit to which the
Company is a party or by which the Company or its properties or assets may be
bound and there does not exist any facts which constitute an event of default on
the part of the Company under any of the above.
2.9 Litigation. There is no Action or Proceeding pending or, to the best
of the Company's knowledge, threatened against the Company or any of its
officers, employees or directors which could have an adverse effect on the
Company's Business or Condition of the Company. To the best of the Company's
knowledge, there is no basis for any Action or Proceeding against the Company or
any of its officers, employees or directors which could have an adverse effect
on the Company's Business or Condition of the Company. There is no Action or
Proceeding by the Company pending or which it intends to initiate. To the best
of the Company's knowledge, there is no basis for any Action or Proceeding by
the Company.
2.10 Conduct in the Ordinary Course. Since June 30, 2000, the Company has
conducted its business in the ordinary course and there has not occurred:
(a) Any material and adverse change in the Business or Condition of
the Company or operating results from that are not reflected in the Company
Financial Statements, including any Liabilities or obligations, other than
changes in the ordinary course of business;
(b) Any damage, destruction or loss, whether covered by insurance or
not, that individually or in the aggregate would have a material and adverse
effect on the Business or Condition of the Company;
(c) Any declaration, setting aside or payment or other distribution
in respect of any Company Capital Stock, or any direct or indirect redemption,
purchase or other acquisition of any Company Capital Stock by the Company;
-13-
(d) Any approval or action to put into effect any general increase in
any compensation or benefits payable to any class or group of employees of the
Company, any increase in the compensation or benefits payable or to become
payable by the Company to any of its directors, officers or employees or any
bonus, service award, percentage compensation or other benefit paid, granted or
accrued to or for the benefit of any employee, the adoption of any amendment to
the exercisability or vesting of any employee stock options (including any of
the Company Options) or the vesting of any unvested shares of Company Common
Stock or the authorization of any cash payments in exchange for such options or
unvested shares, or the adoption of any other amendment in any employee benefit
plan or compensation commitment or any severance agreement or employment
contract to which any employee is a party.
(e) Any Lien created or suffered by the Company with respect to any
of its Assets and Properties, except Liens for taxes not yet due or payable;
(f) Any (A) incurrence, assumption or guarantee by the Company of any
debt for borrowed money other than trade indebtedness incurred in the ordinary
course of business consistent with past practice; (B) waiver or compromise by it
of a valuable right or of a debt owed to it except that which is not material to
its Business or Condition; (C) satisfaction or discharge of any Lien or payment
of any obligation by it, except that which is not material to its Business
Condition; (D) issuance or sale of any securities convertible into or
exchangeable for debt securities of the Company; or (E) issuance or sale of
options or other rights to acquire from the Company, directly or indirectly,
debt securities of the Company or any securities convertible into or
exchangeable for any such debt securities;
(g) Any entry into, amendment of, relinquishment, termination or
nonrenewal by the Company of any contract, lease, commitment or other right or
obligation other than in the ordinary course of business consistent with past
practice;
(h) Any transfer or grant of a right under the Intellectual Property
Rights other than non-exclusive licenses granted in the ordinary course of
business consistent with past practice;
(i) Any resignation or termination of employment of any employee; and
the Company does not know of the impending resignation or termination of
employment of any such employee;
(j) Any making of any loan, advance or capital contribution to, or
investment in, any person other than advances made in the ordinary course of
business of the Company; or
(k) Any agreement or arrangement made by the Company to take any
action which, if taken prior to the date hereof, would have made any
representation or warranty set forth in this Section 2.10 untrue or incorrect as
of the date when made.
2.11 Absence of Undisclosed Liabilities. Except as disclosed or reflected
in the Company Unaudited Financial Statements, the Company has no Liabilities or
obligations (whether absolute, accrued or contingent).
-14-
2.12 Complete Disclosure. The copies of all instruments, agreements,
other documents and written information delivered by the Company or its
professional advisors to Parent or its counsel and accountants are and will be
complete and correct as of the date of delivery thereof.
2.13 Certain Agreements. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
result in any payment (including, without limitation, severance, unemployment
compensation, golden parachute, bonus or otherwise) becoming due to any
employee, former employee or service provider of the Company under any Company
Employee Plans or otherwise, (b) materially increase any compensation or other
benefits payable under any Company Employee Plans or (c) result in the
acceleration of the time of payment or vesting of any such benefits including
the Company Options and any other instrument evidencing capital stock issued to
any service provider of the Company. No payment or benefit that will be made by
the Company to any employee prior to, at time of, or after Closing, will be
characterized as an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code.
2.14 Employee Benefit Plans.
(a) Section 2.14(a) of the Company Disclosure Schedule lists, with
respect to the Company, any Subsidiary of the Company and any trade or business
(whether or not incorporated) which is treated as a single employer with the
Company (an "ERISA Affiliate") within the meaning of Section 414(b), (c), (m) or
(o) of the Code, (i) all employee benefit plans (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), (ii)
each loan to a non-officer employee, loans to officers and directors, (iii) any
stock option, stock purchase, phantom stock, stock appreciation right,
supplemental retirement, severance or termination pay, medical, dental, vision
care, disability, sick pay, vacation, holiday or sabbatical pay, employee
relocation, cafeteria benefit (Code Section 125) or dependent care (Code Section
129), life insurance or accident insurance plans, programs or arrangements, (iv)
all bonus, pension, profit sharing, savings, deferred compensation or incentive
plans, programs or arrangements, (v) other fringe or employee benefit plans,
programs or arrangements that apply to senior management of the Company and that
do not generally apply to all employees, and (v) any current or former
employment or executive compensation or severance agreements, written or
otherwise, as to which unsatisfied obligations of the Company of greater than
$5,000 remain for the benefit of, or relating to, any present or former
employee, consultant or director of the Company (collectively, the "Company
Employee Plans").
(b) The Company has furnished to Parent a copy of each of the Company
Employee Plans and related plan documents (including trust documents, insurance
policies or contracts, employee booklets, summary plan descriptions and other
authorizing documents, and any material employee communications relating
thereto) and has, with respect to each Company Employee Plan which is subject to
ERISA reporting requirements, provided copies of the Form 5500 reports filed for
the last three plan years. Any Company Employee Plan intended to be qualified
under Section 401(a) of the Code has either obtained from the IRS a favorable
determination letter as to its qualified status under the Code, including all
amendments to the Code effected by the Tax Reform Act of 1986 and subsequent
legislation, or has applied (or still has a remaining period of time under
applicable Treasury Regulations or IRS Pronouncements in
-15-
which to apply) to the IRS for such a determination letter prior to the
expiration of the requisite period under applicable Treasury Regulations or IRS
pronouncements in which to apply for such determination letter and to make any
amendments necessary to obtain a favorable determination. The Company has also
furnished Parent with the most recent IRS determination letter issued with
respect to each such Company Employee Plan, and nothing has occurred since the
issuance of each such letter which would reasonably be expected to cause the
loss of the tax-qualified status of any Company Employee Plan subject to Code
Section 401(a). The Company has also furnished Parent with all registration
statements and prospectuses prepared in connection with each Company Employee
Plan.
(c) (i) None of the Company Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person, except as
required by applicable Law; (ii) there has been no "prohibited transaction," as
such term is defined in Section 406 of ERISA and Section 4975 of the Code, with
respect to any Company Employee Plan, which would reasonably be expected to
have, either individually or in the aggregate, a material and adverse effect on
the Company; (iii) each Company Employee Plan has been administered in
accordance with its terms and in compliance with the requirements prescribed by
any and all statutes, rules and regulations (including ERISA and the Code),
except as would not have, either individually or in the aggregate, a material
and adverse effect on the Company, and the Company and each subsidiary or ERISA
Affiliate have performed all obligations required to be performed by them under,
are not in any material respect in default under or violation of, and have no
knowledge of any default or violation by any other party to, any of the Company
Employee Plans; (iv) neither the Company nor any subsidiary or ERISA Affiliate
is subject to any material liability or material penalty under Sections 4976
through 4980 of the Code or Title I of ERISA with respect to any of the Company
Employee Plans; (v) all material contributions required to be made by the
Company or any subsidiary or ERISA Affiliate to any Company Employee Plan have
been made on or before their due dates and a reasonable amount has been accrued
for contributions to each Company Employee Plan for the current plan years; (vi)
with respect to each Company Employee Plan, no "reportable event" within the
meaning of Section 4043 of ERISA (excluding any such event for which the thirty
(30) day notice requirement has been waived under the regulations to Section
4043 of ERISA) nor any event described in Section 4062, 4063 or 4041 or ERISA
has occurred; (vii) no Company Employee Plan is covered by, and neither the
Company nor any subsidiary or ERISA Affiliate has incurred or expects to incur
any liability under Title IV of ERISA or Section 412 of the Code; and (viii)
each Company Employee Plan can be amended, terminated or otherwise discontinued
after the Closing in accordance with its terms, without liability to Parent
(other than for benefits accrued through the date of termination and ordinary
administrative expenses typically incurred in a termination event). With respect
to each Company Employee Plan subject to ERISA as either an employee pension
plan within the meaning of Section 3(2) of ERISA or an employee welfare benefit
plan within the meaning of Section 3(1) of ERISA, the Company has prepared in
good faith and timely filed all requisite governmental reports (which were true
and correct as of the date filed) and has properly and timely filed and
distributed or posted all notices and reports to employees required to be filed,
distributed or posted with respect to each such Company Employee Plan, except
where the failure to do so would not have a material and adverse effect. No
suit, administrative proceeding, action or other litigation has been brought, or
to the knowledge of the Company is threatened, against or with respect to any
such Company Employee Plan, including any audit or inquiry by the IRS or United
States Department of Labor.
-16-
(d) With respect to each Company Employee Plan, the Company and each
of its United States subsidiaries have complied with (i) the applicable health
care continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") and the regulations (including proposed
regulations) thereunder, (ii) the applicable requirements of the Family Medical
and Leave Act of 1993 and the regulations thereunder, and (iii) the applicable
requirements of the Health Insurance Portability and Accountability Act of 1996
and the regulations (including proposed regulations) thereunder.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other service
provider of the Company, any Company subsidiary or any other ERISA Affiliate to
severance benefits or any other payment, except as expressly provided in this
Agreement, or (ii) accelerate the time of payment or vesting (including any
Company Option), or increase the amount of compensation due any such employee or
service provider. No payment or benefit which will or may be made or provided by
the Company or any current or former employee or other service provider of the
Company will constitute an "excess parachute payment" within the meaning of
Section 280G(b)(1) of the Code.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by the Company, any Company Subsidiary or
other ERISA Affiliate relating to, or change in participation or coverage under,
any Company Employee Plan which would materially increase the expense of
maintaining such Plan above the level of expense incurred with respect to that
Plan for the most recent fiscal year included in the Company's financial
statements.
(g) The Company does not currently maintain, sponsor, participate in
or contribute to, nor has it ever maintained, established, sponsored,
participated in, or contributed to, any pension plan (within the meaning of
Section 3(2) of ERISA) which is subject to Part 3 of Subtitle B of Title I of
ERISA, Title IV of ERISA or Section 4.12 of the Code.
(h) Neither the Company nor any Company Subsidiary or other ERISA
Affiliate is a party to, or has made any contribution to or otherwise incurred
any obligation under, any "multiemployer plan" as defined in Section 3(37) of
ERISA.
2.15 Employee Matters. The Company is in compliance with all applicable
Laws respecting employment, discrimination in employment, terms and conditions
of employment, wages, hours and occupational safety and health and employment
practices, and is not engaged in any unfair labor practice. The Company has
withheld all amounts required by Law or by agreement to be withheld from the
wages, salaries, and other payments to employees; and is not liable for any
arrears of wages or any taxes or any penalty for failure to comply with any of
the foregoing. The Company is not liable for any payment to any trust or other
fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for employees (other than routine payments to be made in the normal
course of business and consistent with past practice). There are no pending
claims against the Company or any of its Subsidiaries for any amounts under any
workers compensation plan or policy or for long term disability. Neither the
Company nor any of its Subsidiaries has any obligations under COBRA with respect
to any former employees or qualifying beneficiaries thereunder. There are no
strikes or labor disputes or controversies
-17-
pending or, to the knowledge of the Company or any of its Subsidiaries,
threatened, between the Company or any of its Subsidiaries and any of their
respective employees, which controversies have or would reasonably be expected
to result in an Action or Proceeding before any agency, court or tribunal,
foreign or domestic. Neither the Company nor any of its Subsidiaries is a party
to any collective bargaining agreement or other labor union contract nor does
the Company nor any of its Subsidiaries know of any activities or proceedings of
any labor union to organize any such employees. No employees of the Company have
given notice to the Company, nor is the Company otherwise aware, that any such
employee intends to terminate his or her employment with the Company.
2.16 Major Contracts. Except for the contracts described in Section 2.16
of the Company Disclosure Schedule (collectively, the "Contracts"), the Company
is not a party to or subject to:
(a) Any union contract or any employment or consulting contract or
arrangement other than stock option or stock purchase agreements or proprietary
information agreements, written or oral, with any director, officer or
affiliate;
(b) Any OEM agreement, distribution agreement, volume purchase
agreement, customer consulting agreement or other similar agreement, or joint
venture contract or arrangement or any other agreement which has involved or is
expected to involve a sharing of profits with other persons or provides for
payments of more than $1,000 per annum;
(c) Any distributor, sales, advertising, agency or manufacturer's
representative contract;
(d) Any lease for real or personal property;
(e) Except for trade indebtedness incurred in the ordinary course of
business, any instrument evidencing or related in any way to Indebtedness
incurred in the acquisition of companies or other entities or Indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee, leasehold obligations or otherwise;
(f) Any license agreement, either as licensor or licensee, other than
standard off-the-shelf license agreements entered into in the ordinary course of
business;
(g) Any contract containing covenants purporting to limit the freedom
of the Company to compete in any line of business in any geographic area;
(h) Any agreement of guarantee, support, indemnification, assumption
or endorsement of, or any similar commitment with respect to, the obligations,
Liabilities (whether accrued, absolute, contingent or otherwise) or Indebtedness
of any other Person.
(i) Any agreement, contract or commitment relating to capital
expenditures in excess of $5,000;
-18-
(j) Any continuing contract for the purchase of materials, supplies,
equipment or services involving in the case of any such contact more than $5,000
over the life of the contract;
(k) Any agreement, contract or commitment relating to the disposition
or acquisition by the Company of any assets in excess of $5,000 or any
Intellectual Property Rights (as defined below);
(l) Any agreement providing for minimum payment or resale
obligations, ongoing support or research and development obligations, or
warranty obligations on the part of the Company, except arrangements entered
into in the ordinary course of business;
(m) Any agreement for the provision of products or services to any
Governmental Entity, except customer agreements entered into in the ordinary
course of business;
(n) Any agreement requiring a commitment of Company resources or
personnel to market, distribute or license third-party products or technology,
whether on a best-efforts basis or otherwise;
(o) Any contract that expires or may be renewed at the option of any
Person other than the Company so as to expire more than one year after the date
of this Agreement;
(p) Any contract limiting the freedom of the Company to engage in any
line of business or to compete with any other Person as that term is defined in
the Exchange Act or any confidentiality, secrecy or non-disclosure contract;
(q) Any contract with any person with whom the Company does not deal
at arm's length; or
(r) Any other agreement, contract, letter of intent, memorandum of
understanding or commitment which is material to the Company.
Each Contract to which the Company is a party or by which it is bound
(i) is valid and binding on the Company and each other party thereto, (ii) is in
full force and effect, (iii) has not been breached by the Company or any other
party thereto, and (iv) contains no liquidated damages, penalty or similar
provision. The Company has not been notified that any party to any such
Contract intends to cancel, withdraw, modify or amend such Contract. The
Company and each other party thereto has performed all obligations required to
be performed by it on or prior to the date hereof under each Contract or
undertaking referred to in this Agreement, and is not aware of any facts from
which it could reasonably conclude that it or any other party thereto will not
be able to perform all obligations required to be performed by it or such other
party subsequent to the date hereof under each such Contract or undertaking.
2.17 Taxes. All Tax returns, statements, reports and forms (including
without limitation estimated Tax returns and reports and information returns and
reports) required to be filed with any Tax authority with respect to any Taxable
period ending on or before the Closing Date, by or on behalf of the Company
(collectively, the "Company Returns"), have been or will
-19-
be properly completed and filed when due (including any extensions of such due
date), and all amounts shown to be due thereon on or before the Closing Date
have been or will be paid on or before such date. The Company Financial
Statements fully accrue all actual and contingent liabilities for all unpaid
Taxes with respect to all periods (or portions of such periods) through June 30,
2000 and the Company has not and will not incur any Tax liability in excess of
the amount reflected on the Company Financial Statements (whether or not
reflected as payable on any Tax return that has been filed) with respect to such
periods (or portions of such periods). The Company has not and will not incur
any Tax liability for periods (or portions of periods) after June 30, 2000
through the Closing Date other than in the ordinary course of business. The
Company has withheld and paid to the applicable financial institution or Tax
authority all amounts required to be withheld. The Company has not been granted
any extension or waiver of the limitation period applicable to any Company
Returns. There is no claim, audit, action, suit, proceeding, or investigation
now pending or, or to the best of the Company's knowledge, threatened against or
with respect to the Company in respect of any Tax or assessment. No notice of
deficiency or similar document of any Tax authority has been received by the
Company, and there are no liabilities for Taxes (including liabilities for
interest, additions to Tax and penalties thereon and related expenses) with
respect to the issues that have been raised (and are currently pending) by any
Tax authority that could, if determined adversely to the Company, adversely
affect the liability of the Company for Taxes. Neither the Company nor any
person on behalf of the Company has entered into or will enter into any
agreement or consent pursuant to Section 341(f) of the Code. The Company is not
party to any joint venture, partnership, or other arrangement or contract which
could be treated as a partnership for federal income tax purposes. There is no
agreement, contract or arrangement to which the Company is a party that could,
individually or collectively, result in the payment of any amount or the
provision of any benefit that would not be deductible by reason of Sections 280G
or 404 of the Code. The Company is not a party to or bound by any Tax indemnity,
Tax sharing or Tax allocation agreement (whether written or unwritten or arising
under operation of federal law as a result of being a member of a group filing
consolidated Tax returns, under operation of certain state laws as a result of
being a member of a unitary group, or under comparable laws of other states or
foreign jurisdictions) which includes a party other than the Company nor does
the Company owe any amount under any such agreement. The Company has previously
provided or made available to Parent true and correct copies of all the Company
Returns filed through the date of this Agreement. The Company will make
available to Parent all Company Returns filed after the date of this Agreement,
all work papers with respect to Company Returns, all Tax opinions and memoranda
with respect to Taxes owed or potentially owed by the Company, all other Tax
data and documents reasonably requested by Parent. The Company is not, and has
not been, a United States real property holding corporation (as defined in
Section 897(c)(2) of the Code) during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. Except as may be required as a result of the
consummation of the transactions set forth herein, the Company has not been and
will not be required to include any material adjustment in Taxable income for
any Tax period (or portion thereof) pursuant to Section 481 or 263A of the Code
or any comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the consummation of
the transactions set forth herein. For purposes of this Agreement, the following
terms have the following meanings: "Tax" (and, with correlative meaning, "Taxes"
and "Taxable") means any and all taxes including, without limitation, (i) any
net income, alternative or add-on minimum tax, gross income, gross receipts,
-20-
sales, use, ad valorem, transfer, franchise, profits, value added, net worth,
license, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, environmental or windfall profit tax, custom, duty or other
tax governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Governmental Entity (a "Tax Authority") responsible for the
imposition of any such tax (domestic or foreign), (ii) any liability for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any Taxable
period or as the result of being a transferee or successor and (iii) any
liability for the payment of any amounts of the type described in (i) or (ii) as
a result of any express or implied obligation to indemnify any other person.
2.18 Intellectual Property.
(a) The Company owns or is licensed or is otherwise entitled to
exercise, without restriction, all rights to all patents, trademarks, trade
names, service marks, copyrights, mask works, trade secrets and other
intellectual property rights, and any applications or registrations therefor,
and all inventions, mask work layouts, net lists, schematics, technical
drawings, technology, know-how, processes, formulas, algorithms, computer
software programs, documentation, and all other tangible and intangible
information or material in any form, used or currently proposed to be used in
the business of the Company as currently conducted or as proposed to be
conducted, without any conflict with or infringement of the rights of others
(collectively, the "Intellectual Property Rights").
(b) Section 2.18(b) of the Company Disclosure Schedule lists: (A) all
copyrights, patents, patent applications, trademarks, service marks, tradenames
and other company, product or service identifiers owned by or licensed to the
Company with respect to any Intellectual Property Rights (other than shrinkwrap
licenses and other software licenses available to the general public); (B) the
jurisdiction(s) in which an application for patent or application for
registration, if any, of each such Intellectual Property Right has been made,
including the respective application numbers and dates; (C) the jurisdiction(s),
if any, in which each such Intellectual Property Right has been patented or
registered, including the respective patent or registration numbers and dates;
(D) all licenses, sublicenses and other agreements to which the Company is a
party and pursuant to which any other party is authorized to use, exercise, or
receive any benefit from the Intellectual Property Rights; and (E) all parties
to whom the Company has delivered copies of or disclosed the Company's source
code, whether pursuant to an escrow arrangement or otherwise, and all parties
who have the right to receive such source code. The Company has delivered to
Parent copies of all licenses, sublicenses, and other agreements identified
pursuant to clause (D) above.
(c) The Company is the owner or exclusive licensee of, with all
right, title and interest in and to (free and clear of any liens, encumbrances
or security interests), the Intellectual Property Rights (other than shrinkwrap
licenses and other software licenses available to the general public) and has
the rights to use, sell, license, assign, transfer, convey or dispose thereof or
the products, processes and materials covered thereby. The Company has taken all
steps that it has reasonably deemed necessary or appropriate, including without
limitation the filing and prosecution of patent and trademark applications to
perfect and protect its interest in the Intellectual Property Rights in all
countries in which the Company does business to the extent
-21-
reasonably deemed necessary and appropriate; and the Company has the exclusive
right to file, prosecute, and maintain such applications and the patents and
registrations that issue therefrom.
(d) All patents and registered trademarks, service marks, and other
company, product or service identifiers and registered copyrights held by the
Company are valid and enforceable.
(e) The Company has secured valid written assignments from all
consultants and employees who contributed to the creation or development of the
Intellectual Property Rights of the rights to such contributions that the
Company does not already own by operation of law.
(f) To the best of the Company's knowledge, there has not been and
there is not now any unauthorized use, infringement or misappropriation of any
of the Intellectual Property Rights by any third party, including, without
limitation, any service provider of the Company.
(g) The Company has not brought any actions or lawsuits alleging (i)
infringement of any of the Intellectual Property Rights or (ii) breach of any
license, sublicense or other agreement authorizing another party to use the
Intellectual Property Rights, and, to the best of the Company's knowledge, there
does not exist any facts which could form the basis of any such action or
lawsuit. The Company has not entered into any agreement granting any third party
the right to bring infringement actions with respect to, or otherwise to enforce
rights with respect to, any of the Intellectual Property Rights.
(h) No person has asserted or threatened to assert any claims with
respect to the Intellectual Property Rights (i) contesting the right of the
Company to use, exercise, sell, license, transfer or dispose of any of the
Intellectual Property Rights or any products, processes or materials covered
thereby or (ii) challenging the ownership, validity or enforceability of any of
the Intellectual Property Rights. No Intellectual Property Right is subject to
any outstanding order, judgment, decree, stipulation or agreement related to or
restricting in any manner the licensing, assignment, transfer, use or conveyance
thereof by the Company.
(i) The Company Disclosure Schedule separately lists (i) all
copyrights, patents, patent applications, trademarks, service marks, tradenames
and other company, product or service identifiers licensed to the Company ("In-
Licensed Intellectual Property Rights") (other than shrinkwrap licenses or other
software licenses available to the general public), and (ii) all licenses,
sublicenses and other agreements to which the Company is a party and pursuant to
which the Company is authorized to use, exercise, or receive any benefit from
any In-Licensed Intellectual Property Rights. The Company has delivered to
Parent copies of all licenses, sublicenses and other agreements identified
above. The Company is in compliance with all material terms and conditions of
all such licenses, sublicenses, and other agreements. The Company has no
knowledge of any assertion, claim or threatened claim that the Company has
breached any terms or conditions of such licenses, sublicenses, or other
agreements.
(j) The Company has the right to sell, assign, transfer, and convey
all of its right, title and interest in and to the Intellectual Property Rights
and In-Licensed Intellectual
-22-
Property Rights to Parent. The Company is not, nor will be as a result of the
execution and delivery of this Agreement or the performance of the Company's
obligations hereunder, in violation of, or lose or in any way impair any
material rights pursuant to any license, sublicense or agreement described in
Section 2.18 of the Company Disclosure Schedule.
(k) The manufacture, marketing, license, sale or use of any product
or service as now used or offered or proposed for use or sale by the Company
does not infringe any copyright, patent, trade secret, or other intellectual
property right of any third party or violate any license or agreement with any
third party. The Company has not received service of process or been charged in
writing as a defendant in any claim, suit, action or proceeding which involves a
claim of infringement of any patents, trademarks, service marks, trade secret
rights, copyrights or other intellectual property rights and which has not been
finally terminated prior to the date hereof; there are no such charges or claims
outstanding; and the Company does not have any outstanding restrictions or
infringement liability with respect to any patent, trade secret, trademark,
service xxxx, copyright or other intellectual property right of another.
(l) The Company has not entered into any agreement to indemnify any
other person against any charge of infringement of any third party intellectual
property right, the Intellectual Property Rights or In-Licensed Intellectual
Property Rights.
(m) The Company has taken all commercially reasonable and appropriate
steps to protect and preserve the confidentiality of all inventions, algorithms,
formulas, schematics, technical drawings, ideas, know-how, processes not
otherwise protected by patents or patent applications, source code, program
listings, and trade secrets that the Company has reasonably deemed to be
confidential and material to its business ("Confidential Information"),
including without limitation the marking of all such Confidential Information
with appropriate "Proprietary" or "Confidential" legends, the establishment of
policies for the handling, disclosure, and use of Confidential Information, and
the acquisition of valid written nondisclosure agreements from any party
receiving Confidential Information. All Confidential Information is presently
and as of the Closing will be located at the Company's address as set forth in
this Agreement. No person other than the Company has used, divulged or
appropriated Confidential Information except for the benefit of the Company. No
person has used, divulged or appropriated Confidential Information to the
detriment of the Company other than pursuant to the terms of written agreements
between the Company and such other persons. The Company has delivered to Parent
copies of all nondisclosure agreements or other agreements relating to the
handling, disclosure, and use of Confidential Information.
2.19 Service Provider Agreements. No service provider of the Company is in
violation of any term of any employment agreement (whether written or verbal),
patent or trademark disclosure agreement, proprietary inventions or non-
disclosure agreement or any other contract or agreement relating to the
relationship of any such service provider with the Company or any other party
(including prior employers) or any term of any judgment, decree, or order,
because of the nature of the business now conducted or proposed to be conducted
by the Company. Each current and former service provider of the Company has
executed a proprietary information and inventions agreement (or similar
agreement) with the Company in the form then being used by the Company, all of
which forms have been previously delivered to Parent by the Company. Each
employee or consultant-inventor has executed a written agreement validly
-23-
assigning his or her rights to the Company in all inventions, pending patent
applications, all patents issued, copyrights, trademarks, trade secrets and all
other intellectual property rights developed by such service provider while
working for or on behalf of the Company. To the extent the Company has ever
utilized consultants or independent contractors, each consultant or independent
contractor has executed a written agreement, validly assigning to the Company
his or her rights in and to all patents, copyrights, trademarks, trade secrets
and works of authorship relating to products, services or technology designed,
developed, manufactured, licensed, sold, marketed or serviced by the Company and
its business, that the consultant or independent contractor created or
developed, either in whole or in part, for the Company. The Company is not aware
that any of its service providers is in violation thereof and has used and will
use all efforts to prevent any such violation. The Company is not aware that any
of its service providers are obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of his or her best efforts to promote the interests of
the Company or that would conflict with the Company's business as conducted or
as proposed to be conducted or that would prevent any such service provider from
assigning inventions to the Company. The Company does not believe that it is or
will be necessary for the Company to utilize any inventions of any of its
service providers (or people it currently intends to hire) made prior to their
employment by or relationship with the Company and, to the best of the Company's
knowledge, no service provider is in violation of any agreements with past
employers.
2.20 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon the Company or which has or
could reasonably be expected to have the effect of prohibiting or impairing any
business practice of the Company, any acquisition of property by the Company, or
the continuation of the business of the Company as currently conducted or as
currently proposed to be conducted.
2.21 Title to Properties.
(a) Real Property. The Company does not own any real property.
(b) Leases Schedule. All of the existing real and personal
property leases of the Company are listed in Section 2.21(b) of the Company
Disclosure Schedule and have been delivered previously to Parent.
(c) Title to Assets. Except for title to Intellectual Property
Rights, which is covered by Section 2.19 above, the Company has good and
marketable title to all of its properties, interests in properties and assets,
real and personal, reflected in the Company Financial Statements or acquired
after the date of the Company Unaudited Financial Statements (the "Financial
Statement Date") (except properties, interests in properties and assets sold or
otherwise disposed of since the Financial Statement Date in the ordinary course
of business consistent with past practice), or with respect to leased Assets and
Properties, free and clear of all Liens of any kind or character, except (a) the
Lien of current Taxes not yet due and payable, (b) such imperfections of title
and Liens as do not and will not (i) materially detract from or interfere with
the use of the Assets and Properties subject thereto or affected thereby, or
(ii) otherwise materially impair business operations involving such Assets and
Properties and (c) Liens securing debt which is reflected on the Company
Financial Statements. The plants,
-24-
property and equipment of the Company that are used in the operations of its
business are in good operating condition and repair, subject to normal wear and
tear.
(d) Tangible Personal Property. The Company is in possession of
and has good and marketable title to, or has valid leasehold interests in or
valid rights under Contract to use, all tangible personal Assets and Property
used in the conduct of its business, including all tangible personal Assets and
Property reflected on the Company Financial Statements and tangible personal
Assets and Property acquired since the Financial Statement Date, other than
Assets and Property disposed of since such date in the ordinary course of
business consistent with past practice. All such tangible personal Assets and
Property is free and clear of all Liens and is adequate and suitable in all
material respects for the conduct by the Company of its business as presently
conducted, and is in good working order and condition in all material respects,
ordinary wear and tear excepted, and its use complies in all material respects
with all applicable Laws.
2.22 Environmental Matters. The Company (i) has obtained all applicable
Government Licenses which are required under foreign, federal, state or local
Laws relating to pollution or protection of the environment, including Laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials or wastes into ambient
air, surface water, ground water, or land or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials or wastes by the Company (or its agents); (ii) is in compliance with
all terms and conditions of such required Government Licenses, and also is in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
such Laws or contained in any regulation, code, plan, order, decree, judgement,
notice or demand letter issued, entered, promulgated or approved thereunder,
(iii) is not aware of nor has received notice of any event, condition,
circumstance, activity, practice, incident, action or plan which is reasonably
likely to interfere with or prevent continued compliance or which could give
rise to any common law or statutory liability, or otherwise form the basis of
any claim, action, suit or proceeding, based on or resulting from the Company's
(or any of its agents') manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling, or the emission, discharge, or
release into the environment, of any pollutant, contaminant, or hazardous or
toxic material, waste or substance or otherwise occurring on property leased or
previously leased by the Company; (iv) has taken all actions necessary under
applicable requirements of federal, state or local Laws to register any products
or materials required to be registered by the Company (or any of its agents)
thereunder; and (v) is not aware of any contaminated soil or groundwater at or
under any of the properties owned or operated, leased or previously owned or
leased by the Company. With respect to facilities owned, leased, operated or
used by the Company, there has been no use, presence, disposal, storage,
generation or release of Hazardous Materials on, from or under any such facility
by the Company or to its knowledge any other Person nor does the Company ship or
transport Hazardous Materials. The Company has disclosed to Parent in Section
2.22 of the Company Disclosure Schedule (i) all Government Licenses relating to
pollution or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or land or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of
-25-
pollutants, contaminants or hazardous or toxic materials or wastes by the
Company (or its agents) its holds as of the date hereof, and (ii) all documents
relating to tests previously conducted or to be conducted in the future for
potential contamination at any of the Company's facilities, whether owned or
leased, including soil and water tests.
2.23 Insurance.
Section 2.23 of the Company Disclosure Schedule lists all insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company,
including the amounts of coverage under each such policy and bond of the
Company. Each policy listed in Section 2.23 of the Company Disclosure Schedule
is valid and binding and in full force and effect. The insurance policies listed
in Section 2.23 of the Company Disclosure Schedule, (i) in light of the
business, operations and Assets and Properties of the Company are, in the
reasonable opinion of the Company, in amounts and have coverage that are
reasonable and customary for Persons engaged in similar businesses and
operations and having similar Assets and Properties and (ii) are in amounts and
have coverages as required by any Contract to which the Company is a party or by
which any of its Assets and Properties is bound. The Company has not been
refused any requested coverage and no material claim made by the Company has
been denied by the underwriters of such policies or bonds. All premiums payable
under all such policies and bonds have been paid, and the Company is otherwise
in full compliance with the terms of such policies and bonds (or other policies
and bonds providing substantially similar insurance coverage). There is no claim
pending or, to the knowledge of the Company, threatened under any such policies
or bonds. The Company does not know of any threatened termination of, the
invalidation of any coverage of or material premium increase with respect to,
any of such policies. The Company shall continue to be entitled to the benefit
or each insurance policy or bond upon the consummation of the transactions
contemplated hereby.
2.24 Personnel. Section 2.24 of the Company Disclosure Schedule lists
the names of all current directors, officers, employees, independent contractors
and consultants of the Company, setting forth the job title of, and salary
(including bonuses and commissions) payable to each such person. The employment
of each of the Company's employees is "at will." The Company does not have any
obligation (i) to provide any particular form or period of notice prior to
termination, or (ii) to pay any of such employees any severance benefits in
connection with their termination of employment or service. In addition, no
severance pay will become due to any the Company employees under any the Company
agreement, plan or program as a result of the transactions set forth in this
Agreement.
2.25 Third-Party Consents. Except as set forth under Section 2.25 of
the Company Disclosure Schedule, no Approval is needed from any third party in
order to effect the Merger or any of the other transactions contemplated hereby
or to ensure that the Company's rights under any contract, license, agreement,
permit, approval or other rights remain in full force and effect after the
consummation of the transactions contemplated hereby.
2.26 Product Warranties; Defects; Liabilities. Each product
manufactured, sold, licensed, leased, or delivered by the Company has been in
conformity with all applicable contractual commitments and all express and
implied warranties. The Company has no Liability,
-26-
and to the knowledge of the Company, there is no current reasonable basis for
any action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand giving rise to any Liability, for replacement or repair thereof or
other damages in connection therewith. No product manufactured, sold, licensed,
leased or delivered by the Company is subject to any guaranty, lease or warranty
beyond that implied or imposed by applicable law.
2.27 Year 2000 Compliance. There has been no adverse change to the
Company's business or electronic systems or material interruptions in the
delivery of the Company's products and services by reason of the advent of the
year 2000. The Company has taken all actions necessary and appropriate to ensure
that the IT systems and non-IT systems used by the Company in its internal
operations will function properly beyond 1999 (and the Company has no knowledge
of any material issues that have arisen in connection therewith).
2.28 Related Party Transactions. No employee, officer or director of
the Company or member of his or her immediate family is indebted to the Company,
nor is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them (other than for accrued but unpaid salary, bonus or
travel expenses incurred in the ordinary course of business and consistent with
past practice). To the best of the Company's knowledge, none of such persons has
any direct or indirect ownership interest in any firm or corporation with which
the Company is affiliated or with which the Company has a business relationship,
or any firm or corporation that competes with the Company, except that the
employees, officers or directors of the Company and members of their immediate
families may own stock in publicly traded companies that may compete with the
Company. No member of the immediate family of any officer or director of the
Company is directly interested in any material contract or agreement with the
Company.
2.29 Brokers or Finders; Professional Fees. No agent, broker,
investment banker or other firm or person is, or will be, entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement.
2.30 Export Control Laws. The Company has conducted its export
transactions in accordance with applicable provisions of United States export
control Laws, including but not limited to the U.S. Export Administration Act
and implementing U.S. Export Administration Regulations. Without limiting the
foregoing, the Company represents and warrants that:
(a) The Company has obtained all export licenses and other
Approvals required for its exports of products, software and technologies from
the United States;
(b) The Company is in compliance with the terms of all applicable
export licenses or other Approvals;
(c) There are no pending or threatened claims against the Company
with respect to such export licenses or other Approvals;
(d) There are no actions, conditions or circumstances pertaining to
the Company's export transactions that may give rise to any future claims; and
-27-
(e) No Approvals for the transfer of export licenses to Parent are
required, or such Approvals can be obtained expeditiously without material cost.
2.31 Foreign Corrupt Practices Act. None of the activities or types of
conduct below have been or may have been engaged in by the Company, either
directly or indirectly:
(a) Any bribes or kickbacks to government officials or their
relatives, or any other payments to such persons, whether or not legal, to
obtain or retain business or to receive favorable treatment with regard to
business; or
(b) Any bribes or kickbacks to persons other than government
officials, or to relatives of such persons, or any other payments to such
persons or their relatives, whether or not legal, to obtain or retain business
or to receive benefits under any contract or other arrangement or to receive
favorable treatment with regard to business or any contract or other benefit; or
(c) Any illegal contributions made to any political party,
political candidate or holder of governmental office; or
(d) Any bank accounts, funds or pools of funds created or
maintained without being reflected on the corporate books of account, or as to
which the receipts and disbursements therefrom have not been reflected on such
books; or
(e) Any receipts or disbursements, the actual nature of which has
been "disguised" or intentionally misrecorded on the corporate books of account;
or
(f) Fees paid to consultants or commercial agents which exceeded
the reasonable value of the services purported to have been rendered; or
(g) Any payments or reimbursements made to personnel of the Company
for the purposes of enabling them to expend time or to make contributions or
payments of the kind or for the purpose referred to in subparagraphs (a)-(f)
above. In addition, the Company has not violated the United States
Corrupt Foreign Practices Act or any other similar Laws of any country.
2.32 Compliance with Regulation D; Shareholders. The Company is, and
prior to the Closing, each holder of Company Capital Stock will be, aware that
the Parent Common Stock to be issued pursuant to the Merger will constitute
"restricted securities" within the meaning of Securities Act. The Company agrees
that the at no time was the Company or any holder of Company Capital Stock
presented with or solicited by or through any leaflet, public promotional
meeting. television advertisement or any other form of general advertising or
solicitation in connection and concurrently with the Merger and the other
transactions contemplated by this Agreement. Except as described in Schedule
2.32, to the Company's knowledge, each holder of Company Capital Stock or
options to purchase Company Capital Stock is an "accredited investor" as defined
in Regulation D under the Securities Act.
2.33 Information Statement. The information relating to the Company
included in the information statement mailed to stockholders of the Company in
connection with the transactions contemplated hereby (the "Information
Statement") pursuant to Section 5.2 shall
-28-
not, at the time the Information Statement is mailed to stockholders of the
Company and at any time subsequent thereto (through and including 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 were made,
not misleading. If, at any time prior to the Effective Time, any event or
information should be discovered by the Company which should be set forth in an
amendment to the Information Statement, the Company shall promptly inform
Parent.
2.34 Representations Complete. None of the representations or
warranties made by the Company or any stockholder of the Company in this
Agreement or the agreements contemplated hereby, nor any document, written
information, statement, financial statement, schedule (including the Company
Disclosure Schedule), certificate (including any Shareholder Certificate) or
exhibit prepared and furnished or to be prepared and furnished by the Company or
its representatives to Parent or Merger Sub pursuant hereto or thereto in
connection with the transactions contemplated hereby or thereby, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements or facts contained herein
or therein not misleading. There is no presently existing event, fact or
condition that adversely affects the Company's Business or Condition, or that
could reasonably be expected to do so, which has not been set forth in this
Agreement or the agreements contemplated hereby or otherwise disclosed by the
Company to Parent in writing.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to the Company that, as
of the date of this Agreement, except as set forth in the Parent Disclosure
Schedule attached as Schedule 3 ("Parent Disclosure Schedule"), which exceptions
shall be deemed to be representations and warranties as if made hereunder:
3.1 Organization, Standing and Power. Each of Parent and Merger Sub is
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation. Each of Parent and Merger Sub has the
corporate power to own its properties and to carry on its business as now being
conducted and as proposed to be conducted and is duly qualified to do business
and is in good standing in each jurisdiction in which the failure to be so
qualified and in good standing would have a material adverse effect on the
Business or Condition of Parent. Neither Parent nor Merger Sub is in violation
of any of the provisions of its Certificate of Incorporation or Articles of
Incorporation, as applicable, or Bylaws or equivalent organizational documents.
3.2 Authority. 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 obligation of Parent and Merger Sub.
-29-
3.3 SEC Documents; Financial Statements. Parent has made available to
Company each statement, report, registration statement (with the prospectus in
the form filed pursuant to Rule 424(b) of the Securities Act), definitive proxy
statement, and other filings filed with the SEC by Parent since September 30,
1999 and, prior to the Effective Time, Parent will have furnished or made
available to Company true and complete copies of any additional documents filed
with the SEC by Parent after the date hereof and prior to the Effective Time
(collectively, the "Parent SEC Documents"). As of their respective filing dates,
the Parent SEC Documents complied in all material respects with the requirements
of the Exchange Act and the Securities Act. The financial statements of Parent,
including the notes thereto, included in the Parent SEC Documents (the "Parent
Financial Statements") were complete and correct in all material respects as of
their respective dates, complied as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto as of their respective dates, and have been
prepared in accordance with GAAP applied on a basis consistent throughout the
periods indicated and consistent with each other (except as may be indicated in
the notes thereto or, in the case of unaudited statements included in Quarterly
Reports on Form 10-Q, as permitted by Form 10-Q of the SEC). The Parent
Financial Statements fairly present the consolidated financial condition and
operating results of Parent and its subsidiaries at the dates and during the
periods indicated therein (subject, in the case of unaudited statements, to
normal, recurring year-end adjustments).
3.4 Litigation. There is no litigation pending against Parent or any of
its subsidiaries or, to the knowledge of Parent, threatened against Parent or
any of its subsidiaries that would prevent, enjoin, alter or materially delay
any of the transactions contemplated by this Agreement, or that would have a
material adverse effect on the ability of Parent to consummate the transactions
contemplated by this Agreement. There is no judgment, decree or order against
Parent or any of its Subsidiaries, or, to the knowledge of Parent, any of their
respective directors or officers (in their capacities as such), that would
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement, or that would have a material adverse effect on the ability
of Parent to consummate the transactions contemplated by this Agreement.
ARTICLE 4
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 and the Closing, the Company agrees (unless Parent shall give its
prior consent in writing) to carry on its business in the ordinary course
consistent with past practice, to pay its Liabilities and Taxes consistent with
the Company's past practices (and in any event when due), to pay or perform
other obligations when due consistent with the Company's past practices (other
than Liabilities, Taxes and other obligations, if any, contested in good faith
through appropriate proceedings), and, to use its best efforts and institute all
policies to preserve intact its present business organization, keep available
the services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, licensors, licensees,
independent contractors and other Persons having business dealings with it, all
with the express purpose and intent of preserving unimpaired its goodwill and
ongoing businesses at the Effective Time. Except as
-30-
expressly contemplated by this Agreement, the Company shall not, without the
prior written consent of Parent, take, or agree in writing or otherwise to take,
any of the following actions:
(a) Charter Documents: Cause or permit any amendments to its
Articles of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock: Declare or pay any
dividends on or make any other distributions (whether in cash, stock 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 its
capital stock, or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of shares
in connection with any termination of service to it;
(c) Stock Option Plans: Grant any options or other rights to
acquire Company Capital Stock, accelerate, amend or change the exercisability or
vesting of outstanding options (including the Company Options) or other rights
granted under its stock plans or the vesting of any outstanding unvested shares
of Company Common Stock or authorize any cash payments in exchange for such
options, rights or unvested shares, except as expressly provided for hereunder;
(d) Material Contracts: Enter into any material contract or
commitment, or violate, amend or otherwise modify or waive any of the terms of
any of its material contracts, other than in the ordinary course of business
consistent with past practice;
(e) Issuance of Securities: Issue, deliver or sell or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock or
securities convertible into, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of any character obligating it to
issue any such shares or other convertible securities, other than the issuance
of shares of Company Capital Stock pursuant to the exercise of stock options,
warrants or other rights therefor outstanding as of the date of this Agreement;
(f) Intellectual Property: Transfer to any person or entity any of
its Intellectual Property Rights other than non-exclusive licenses in the
ordinary course of business consistent with past practice;
(g) Exclusive Rights: Enter into or amend any agreement pursuant
to which any other party is granted exclusive marketing or other exclusive
rights of any type or scope with respect to any of the Company's products,
services or technology;
(h) Dispositions: Sell, lease, license or otherwise dispose of or
encumber any of its properties or assets which are material, individually or in
the aggregate, to the Company's business, except for sales of products in the
ordinary course;
(i) Indebtedness: Incur any Indebtedness for borrowed money or
guarantee any such Indebtedness or issue or sell any debt securities or
guarantee any debt securities of others;
-31-
(j) Leases: Enter into any operating lease;
(k) Payment of Obligations: Pay, discharge or satisfy in an amount
in excess of five thousand dollars ($5,000) in any one case or ten thousand
dollars ($10,000) in the aggregate, any claim, Liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise) arising
other than in the ordinary course of business, other than the payment, discharge
or satisfaction of Liabilities reflected or reserved against in the Company
Unaudited Financial Statements and reasonable expenses incurred in connection
with the transactions contemplated by this Agreement;
(l) Capital Expenditures: Make any capital expenditures, capital
additions or capital improvements except in the ordinary course of business and
consistent with past practice, provided that such capital expenditures shall not
exceed, in the aggregate, five thousand dollars ($5,000);
(m) Insurance: Materially reduce the amount of any insurance
coverage provided by existing insurance policies;
(n) Termination or Waiver: Terminate or waive any right of
substantial value, other than in the ordinary course of business;
(o) Employee Benefit Plans; New Hires; Pay Increases: Adopt or
amend any employee benefit or stock purchase or option plan, or hire any new
director or officer level employee or any consultant, pay any special bonus or
special remuneration to any employee, consultant or director or, other than in
the ordinary course consistent with past practice, increase the salaries, wage
rates or compensation of any employee or consultant;
(p) Severance Arrangements: Grant any severance or termination pay
(i) to any director or officer or consultant or (ii) to any other employee or
consultant except payments made pursuant to standard written agreements
outstanding on the date hereof;
(q) Lawsuits: Commence a lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with Parent prior to the
filing of such a suit, or (iii) for a breach of this Agreement;
(r) Acquisitions: Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial 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 its business, taken as a whole;
(s) Taxes: Make or change any election in respect of Taxes, adopt
or change any accounting method in respect of Taxes, file any Tax Return or any
amendment to a Tax Return, enter into any closing agreement, settle any claim or
assessment in respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes;
-32-
(t) Revaluation: Revalue any of its assets, including writing down
the value of inventory or writing off notes or accounts receivable other than in
the ordinary course of business; or
(u) Other: Take or agree in writing or otherwise to take, any of
the actions described in Sections 4.1(a) through (t) above, or any action which
would make any of its representations or warranties contained in this Agreement
untrue or incorrect or prevent it from performing or cause it not to perform its
covenants hereunder.
4.2 No Solicitation.
(a) No Solicitation by the Company. Until the earlier of the
Effective Time or the date of termination of this Agreement pursuant to the
provisions of Section 8.1 hereof, the Company will not (nor will the Company
permit any of the Company's officers, directors, stockholders, attorneys,
investment advisors, agents, representatives, Affiliates or Associates to)
directly or indirectly, take any of the following actions with any Person other
than Parent and its designees: (a) solicit, initiate, entertain, review, or
encourage any proposals or offers from, or conduct discussions with or engage in
negotiations with, any Person relating to an investment in or any possible
Business Combination with the Company or any of its Subsidiaries (whether such
Subsidiaries are in existence on the date hereof or are hereafter organized),
(b) provide information with respect to the Company to any Person, other than
Parent, relating to, or otherwise cooperate with, facilitate or encourage any
effort or attempt by any such Person with regard to, any possible investment in
or any Business Combination with the Company or any Subsidiaries (whether such
Subsidiaries are in existence on the date hereof or are hereafter organized),
(c) enter into any contract, arrangement or understanding with any Person, other
than Parent, looking toward an investment in or any Business Combination with
the Company or any of its Subsidiaries (whether such Subsidiaries are in
existence on the date hereof or are hereafter organized), or (d) make or
authorize any statement, recommendation or solicitation in support of any
possible investment in or Business Combination involving the Company or any of
its Subsidiaries (whether such Subsidiaries are in existence on the date hereof
or are hereafter organized) other than the Business Combination with Parent
contemplated by this Agreement. The Company shall immediately cease and cause to
be terminated any such contacts or negotiations with any Person relating to any
such transaction or Business Combination. In addition to the foregoing, if the
Company receives prior to the Effective Time or the termination of this
Agreement any offer or proposal (formal or informal) relating to any of the
above, the Company shall immediately notify Parent thereof and provide Parent
with the details thereof including the identity of the Person or Persons making
such offer or proposal, and copies of any written communication relating thereto
and will keep Parent fully informed of the status and details of any such offer
of proposal. Each of the Company and Parent acknowledge that this Section 4.2
was a significant inducement for Parent to enter into this Agreement and the
absence of such provision would have resulted in either (i) a material reduction
in the merger consideration to be paid to the stockholders of the Company or
(ii) a failure to induce Parent to enter into this Agreement.
(b) No Solicitation by Parent. Until the earlier of the Effective
Time or the date of termination of this Agreement pursuant to the provisions of
Section 8.1 hereof, Parent will not (nor will Parent permit any of Parent's
officers, directors, stockholders, attorneys,
-33-
investment advisors, agents, representatives, Affiliates or Associates to)
directly or indirectly, take any of the following actions with any Person other
than the Company and its designees: (a) solicit, initiate, entertain, review, or
encourage any proposals or offers from, or conduct discussions with or engage in
negotiations with, any Person relating to an investment in or any possible
Business Combination with any Person that is a competitor of the Company or any
of its Subsidiaries as of the date hereof or (b) enter into any contract,
arrangement or understanding with any Person, other than the Company, looking
toward an investment in or any Business Combination with any Person that is a
competitor of the Company or any of its Subsidiaries as of the date hereof.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Sale of Shares; Registration. The parties hereto acknowledge and
agree that the shares of Parent Common Stock to be issued pursuant to Section
1.6 will not be registered under the Securities Act and therefore shall
constitute "restricted securities" within the meaning of the Securities Act and
therefore may not be resold or otherwise transferred unless a valid registration
statement relating thereto is in effect or an exemption from such requirement is
available. The certificates representing the shares of Parent Common Stock shall
bear appropriate legends to identify such privately placed shares as being
restricted under the Securities Act, to comply with applicable state securities
laws and, if applicable, to notice the restrictions on transfer of such shares.
It is acknowledged and understood that Parent is relying upon the
representations made by each stockholder of the Company in the Shareholder
Certificate in connection with the issuance of Parent Common Stock to such
stockholders. Parent will prepare and file at its expense, as promptly as
practicable and, in any event, within 20 days following the Closing Date, a
registration statement with the SEC covering the resale of such shares of Parent
Common Stock issued in connection with the Merger and Parent shall use
commercially reasonable efforts to cause such registration statement to become
effective as promptly as practicable after filing and to keep such registration
statement effective until one (1) year after the Effective Time. Any such
registration shall be subject to the normal, reasonable and customary terms and
conditions used in connection with resale prospectuses.
5.2 Information Statement. As promptly as practicable after the
execution of this Agreement, the Company shall prepare, with the cooperation of
Parent, the Information Statement. The Information Statement shall comply with
all applicable requirements of Law and, shall include without limitation, the
information regarding the Company, the terms of the Merger and this Agreement,
the unanimous recommendation of the Board of Directors of the Company in favor
of the Merger, a waiver by such shareholders of any claims they may have against
the Company or Parent, this Agreement and the transactions contemplated hereby
and such other documents (including but not limited to the Shareholder
Certificate) in order to satisfy the requirements of Regulation D promulgated
under the Securities Act in connection with the issuance and sale of Parent
Common Stock in the Merger and otherwise shall be in form and substance
satisfactory to Parent. Promptly after the preparation thereof, the Company
shall mail the Information Statement to all shareholders of the Company entitled
to receive such notice under the California Code. The Information Statement
shall constitute a disclosure document for the offer and issuance of the shares
of Parent Common Stock to be received by the holders of
-34-
Company Capital Stock in the Merger and a proxy statement for solicitation of
shareholder approval of the Merger. Whenever any event occurs that is required
to be set forth in an amendment or supplement to the Information Statement, the
Company shall promptly inform Parent of such occurrence and cooperate in mailing
to shareholders of the Company, such amendment or supplement. The Information
Statement shall include the recommendation of the Board of Directors of the
Company in favor of this Agreement and the Merger and the conclusion of the
Board of Directors that the terms and conditions of the Merger are fair and
reasonable to the shareholders of the Company. Anything to the contrary
contained herein notwithstanding, the Company shall not include in the
Information Statement any information with respect to Parent or its Affiliates
or Associates, the form and content of which information shall not have been
approved by Parent prior to such inclusion.
5.3 Stockholder Approval. The Company shall immediately after the date
hereof take all action necessary in accordance with the California Code and its
articles of incorporation and bylaws to convene a special meeting of the
Company's shareholders to consider the approval of this Agreement and the Merger
(the "Company Stockholders Meeting") or to secure the written consent of its
shareholders with respect thereof within no more than thirty (30) days of the
date of this Agreement. The Company shall consult with Parent regarding the date
of the Company Stockholders Meeting and use all reasonable efforts to hold and
shall not postpone without the consent of Parent or adjourn (other than for the
absence of a quorum), the Company Stockholders Meeting. The Company shall use
all commercially reasonable efforts required to solicit and obtain from its
stockholders proxies in favor of the Merger and shall take all other action
necessary or advisable to secure the vote or consent of shareholders required to
effect the Merger.
5.4 Access to Information. Between the date of this Agreement and the
earlier of the Effective Time or the termination of this Agreement, upon
reasonable notice, the Company shall (i) give Parent, Merger Sub and their
respective officers, employees, accountants, counsel, financing sources and
other agents and representatives full access, during business hours, to all
buildings, offices, and other facilities and to all Books and Records of the
Company, whether located on the premises of the Company or at another location;
(ii) permit Parent and Merger Sub to make such inspections as they may require;
(iii) cause its officers to furnish Parent and Merger Sub such financial,
operating, technical and product data and other information with respect to the
business and Assets and Properties of the Company as Parent and Merger Sub from
time to time may request, including financial statements and schedules; (iv)
allow Parent and Merger Sub the opportunity to interview such employees and
other personnel and Affiliates of the Company with the Company's prior written
consent, which consent shall not be unreasonably withheld or delayed; and (v)
assist and cooperate with Parent and Merger Sub in the development of
integration plans for implementation by Parent and the Surviving Corporation
following the Effective Time; provided, however, that no investigation pursuant
to this Section 5.4 shall affect or be deemed to modify any representation or
warranty made by the Company herein. Materials furnished to Parent pursuant to
this Section 5.4 may be used by Parent for strategic and integration planning
purposes relating to accomplishing the transactions contemplated hereby.
5.5 Confidentiality. The parties acknowledge that Parent and Company have
previously executed a letter of intent containing a non-disclosure agreement
dated November 22,
-35-
1999 (the "Confidentiality Agreement"), which Confidentiality Agreement shall
continue in full force and effect in accordance with its terms.
5.6 Expenses. Subject to Section 8.2(b) of this Agreement, whether or not
the Merger is consummated, all fees and expenses incurred in connection with the
Merger including all legal, accounting, financial, advisory, consulting and all
other fees and expenses of third parties ("Third Party Expenses") incurred by a
party in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby, shall be
the obligation of the respective party incurring such fees; provided, however,
that, if the Merger is consummated, Parent shall have full recourse to the
Escrow Fund for payment of Third Party Expenses of the Company in excess of
$100,000 (excluding the costs, fees and expenses of an audit of the Company to
be performed at or about the same time as the Closing), whether such Third Party
Expenses have been paid or accrued by the Company or have been incurred (and not
accrued and paid) by the Company.
5.7 Public Disclosure. Unless otherwise required by applicable Law
(including federal and state securities Laws) prior to the Effective Time, no
disclosure (whether or not in response to any inquiry) of the existence of any
subject matter of, or the terms and conditions of, this Agreement shall be made
by the Company or the Stockholder's Agent unless approved by Parent prior to
release; provided, however, that the Company shall be permitted to disclose to
its customers those terms and conditions that have been previously disclosed by
Parent in any public announcement or press release.
5.8 Approvals. Each of Parent and the Company shall use all commercially
reasonable efforts required to obtain all Approvals required of it from
Governmental Entities to consummate the Merger, and the Company shall use all
commercially reasonable efforts required to obtain Approvals from or under any
of the Contracts or other agreements as may be required in connection with the
Merger (all of which Approvals with respect to the Company are set forth in the
Company Disclosure Schedule), so as to preserve all rights of and benefits to
the Company thereunder and Parent shall provide the Company with such assistance
and information as is reasonably required to obtain such Approvals.
5.9 Notification of Certain Matters. The Company shall give prompt notice
to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company, Parent
or Merger Sub, respectively, contained in this Agreement to be untrue or
inaccurate at or prior to the Closing Date and (ii) any failure of the Company,
Parent or Merger Sub, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.9 shall not limit or otherwise affect any remedies available to the
party receiving such notice.
5.10 Shareholder Representation Agreement. The Company shall use its best
efforts to deliver or cause to be delivered to Parent, prior to the Closing,
from each of the shareholders of the Company an executed Shareholder Certificate
and Release in the form attached hereto as Exhibit D (the "Shareholder
Certificate").
-36-
5.11 Voting Agreement/Irrevocable Proxies. The Company shall cause Xxxxx
Xxxx and Masato Toshima, the holders of no less than one-half of the shares of
Company Common Stock, and Xxxx Xxxxxx and Xxxxx Xxx Xxxx, the holders of no less
than one-half of the shares of the Company Preferred Stock, to execute and
deliver to Parent a Voting Agreement (including Irrevocable Proxy) in the form
of Exhibit A hereto concurrently with the execution of this Agreement. The
Company hereby represents and warrants to Parent that such persons collectively
hold a majority of the shares of Company Common Stock issued and outstanding and
a majority of the shares of Company Preferred Stock issued and outstanding. The
Company further hereby represents and warrants to Parent that approval by such
shareholders is sufficient to obtain the necessary Company shareholder approval
of the Merger, this Agreement and the related transactions contemplated hereby.
5.12 Waivers and Releases of Options and Warrants. Prior to the Closing,
the Company shall use its best efforts to obtain from all holders of Company
Options, a written waiver and release acknowledging and agreeing to the
treatment of Company Options provided by this Agreement and waiving and
releasing any and all claims in connection with the Company Options, in
substantially the form of Exhibit C (or other form reasonably acceptable to
Parent and the Company).
5.13 Employees.
(a) Parent will make an offer of employment to and negotiate in good
faith to hire, and the Company shall use its best efforts to assist Parent in
hiring, the employees and contractors listed in Section 2.24 of the Company
Disclosure Schedule who are employed by the Company immediately prior to the
Closing with compensation and benefits equal to those provided to employees of
Parent of comparable employment level and experience. Each of the Key Employees
and each of those employees and contractors of the Company listed in Section
2.24 of the Company Disclosure Schedule that accept an offer of employment with
Parent shall execute an Employee Confidentiality and Inventions Agreement in the
form attached hereto as Exhibit E. Each of the Key Employees shall execute a
Non-Competition Agreement in the form attached hereto as Exhibit F.
(b) If, within the ninety (90) days of the Closing, Parent terminates
the employment of any former employee of the Company who was hired by Parent
pursuant to paragraph (a) above without Cause, Parent may offer such an employee
a Termination Package. A "Termination Package" may include a cash bonus,
acceleration of Assumed Options, and/or other benefits. The value and content of
Termination Packages, if any, shall be determined in good faith by Messrs. Xxxxx
Xxxx and Xxxxx Xxxxxxxx after taking into consideration the individual's
contribution to Parent and the Company. Notwithstanding the foregoing, no
employee shall be entitled to any Termination Package. Notwithstanding the
foregoing, in no event shall a Termination Package offered or paid to any former
employee constitute an "excess parachute payment" within the meaning of Section
280G(b)(i) of the Code.
5.14 Reasonable Efforts and Further Assurances. Each of the parties to
this Agreement shall use its commercially reasonable efforts to effectuate the
transactions contemplated hereby and to fulfill and cause to be fulfilled the
conditions to closing under this Agreement; provided, however, that Parent shall
not be obligated to consent to or accept any
-37-
divestiture or operational limitation in connection with the Merger or to make
any payment or commercial concession to any third party as a condition to
obtaining any required consent or approval of any third party. 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 this
Agreement and the transactions contemplated hereby.
5.15 Forms S-3 and S-8. Parent agrees to file, promptly after the Closing
(provided that Parent has received within 10 business days after the Closing all
option documentation it requires relating to the outstanding options), (i) a
registration statement on Form S-8 under the Securities Act covering the shares
of Parent Common Stock issuable pursuant to the Assumed Options for which a Form
S-8 registration statement is available and (ii) a registration statement on
Form S-3 under the Securities Act covering the shares of Parent Common Stock
issuable pursuant to Assumed Options for which a Form S-8 registration statement
is not available, which Form S-3 shall remain current for one year from the
Effective Time. Company shall cooperate with and assist Parent in the
preparation of such registration statements.
5.16 Listing of Additional Shares. Prior to the Effective Time, Parent
shall file with the Nasdaq Stock Market a Notification Form for Listing of
Additional Shares with respect to the shares of Parent Common Stock issuable
upon conversion of the Company Capital Stock in the Merger and upon exercise of
the Assumed Options and Assumed Warrants.
5.17 Notices. The Company shall give all notices and other information
required to be given to the employees of the Company, any collective bargaining
unit representing any group of employees of the Company, and any applicable
Government Entity under the WARN Act, the National Labor Relations Act, the
Code, the Consolidated Omnibus Budget Reconciliation Act, and other applicable
Law in connection with the transactions provided for in this Agreement.
5.18 Blue Sky Laws. Parent shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Parent Common Stock in connection with the
Merger. The Company shall use its best efforts to assist Parent as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable in connection with the issuance of Parent Common Stock.
5.19 Shareholder Representative. The Company shall deliver or cause to be
delivered to Parent at or prior to the Effective Time from each of the "non-
accredited" shareholders of the Company, an executed Shareholder Representation
Agreement (the "Shareholder Representation Agreement") in the form attached
hereto as Exhibit H.
ARTICLE 6
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 Closing of the following
conditions:
-38-
(a) Governmental and Regulatory Approvals. Approvals from any
Governmental Entity (if any) necessary for the consummation of the Merger shall
have been obtained, and any waiting period applicable to the consummation of the
Merger under the HSR Act (if any) (including with respect to the receipt of
Parent Common Stock by a stockholder of the Company) shall have expired or been
terminated.
(b) No Injunctions or Regulatory Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other Order
issued by any court of competent jurisdiction or Governmental Entity or other
legal or regulatory restraint or prohibition preventing the consummation of the
Merger shall be in effect; nor shall there be any action taken, or any Law or
Order enacted, entered, enforced or deemed applicable to the Merger or the other
transactions contemplated by the terms of this Agreement that would prohibit the
consummation of the Merger or which would permit consummation of the Merger only
if certain divestitures were made by Parent or if Parent were to agree to
limitations on its business activities or operations.
(c) Shareholder Approval. The Merger shall have been approved by the
requisite vote of the Company's shareholders in accordance with the California
Code and the Company's Certificate of Incorporation and Bylaws.
6.2 Additional Conditions to Obligations of the Company. The obligations
of the Company to consummate the Merger and the other transactions contemplated
by this Agreement shall be subject to the satisfaction at or prior to the
Closing of each of the following conditions, any of which may be waived, in
writing, exclusively by the Company:
(a) Representations and Warranties. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement shall be true and
correct in all material respects (if not qualified by materiality) and in all
respects (if qualified by materiality) when made and on and as of the Closing
Date as though such representation or warranty was made on and as of the Closing
Date, and any representation or warranty made as of a specified date earlier
than the Closing Date shall also have been true and correct in all material
respects (if not qualified by materiality) and in all respects (if qualified by
materiality) on and as of such earlier date.
(b) Performance. Parent and Merger Sub shall have performed and
complied in all material respects with each material agreement, covenant and
obligation required by this Agreement to be so performed or complied with by the
Parent or Merger Sub at or before the Closing.
(c) Officers' Certificates. Parent and Merger Sub shall have
delivered to the Company certificates, dated the Closing Date and executed by
their respective President and/or Chief Financial Officers, substantially in the
forms set forth in Exhibit J-1 hereto, and certificates, dated the Closing Date
and executed by the Secretary of Parent and Merger Sub, substantially in the
forms set forth in Exhibit J-2 hereto.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate the Merger and the other
transactions
-39-
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, exclusively by Parent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Company in this Agreement shall be true and correct in
all material respects (if not qualified by materiality) and in all respects (if
qualified by materiality) when made and on and as of the Closing Date as though
such representation or warranty was made on and as of the Closing Date, without
regard to any updated disclosure set forth on the Company Disclosure Schedule
after date hereof; provided, however, that any representation or warranty made
as of a specified date earlier than the Closing Date shall also have been true
and correct in all material respects (if not qualified by materiality) and in
all respects (if qualified by materiality) on and as of such earlier date.
(b) Performance. The Company shall have performed and complied with
in all material respects each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by the Company on or before
the Closing Date.
(c) Officers' Certificates. The Company shall have delivered to
Parent a certificate, dated the Closing Date and executed by its President and
Chief Executive Officer of the Company, substantially in the form set forth in
Exhibit K-1 hereto, and a certificate, dated the Closing Date and executed by
the Secretary of the Company, substantially in the form set forth in Exhibit K-2
hereto.
(d) Shareholder Certificate. Parent shall have received from each
holder of Company Capital Stock a complete and executed Shareholder Certificate
substantially in the form attached hereto as Exhibit D.
(e) Third Party Consents. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained the Approvals listed
in Section 2.25 of the Disclosure Schedule except for those Approvals which
Parent has identified in writing to the Company that it will not require to be
received, and such other Approvals which, if not received, could result in the
loss or forfeiture (with or without notice or the passing of time) by the
Company of any material right under any Material Contract or result in a
material adverse effect on the Business or Condition of the Surviving
Corporation except for those Approvals which Parent has identified in writing to
the Company that it will not require to be received.
(f) Legal Opinion. Parent shall have received a legal opinion from
Xxxxxx X. Xxxxxxx, legal counsel to the Company, as to the matters set forth on
Exhibit L hereto.
(g) Non-Competition Agreements, Employment Agreements and
Intellectual Property Agreements. Each of the persons listed on Schedule 6.3(g)
(the "Key Employees") shall have agreed in writing to and returned to Parent a
Non-Competition Agreement in the form attached as Exhibit F and an Employee
Confidentiality and Inventions Agreement in the form attached as Exhibit E.
(h) Limitation on Dissent. Holders of no more than 8% of the
outstanding shares of Company Capital Stock shall have exercised, nor shall they
have any continued right to
-40-
exercise, appraisal, dissenters' or similar rights under the California Code or
other applicable Law with respect to their shares by virtue of the Merger.
(i) FIRPTA Compliance. The executed statement in the form of Exhibit
I hereto for purposes of satisfying Parent's obligations under Treasury
Regulation Section 1.1445-2(c)(3) shall have been delivered by the Company to
Parent and shall continue to be in full force and effect.
(j) No Material Adverse Change; Absence of Claims. There shall have
occurred no material adverse change in the Business or Condition of the Company
since the date of the Company Unaudited Financial Statements, and there shall
not have occurred any claims (whether or not asserted in litigation) which may
materially and adversely affect the consummation of the transactions
contemplated hereby or the Business or Condition of the Company.
(k) Legal Proceedings. No Governmental Entity shall have notified
either party to this Agreement that it intends to commence proceedings to
restrain or prohibit the transactions contemplated hereby or force rescission,
unless such Governmental Entity shall have withdrawn such notice and abandoned
any such proceedings prior to the time which otherwise would have been the
Closing Date.
(l) Closing Financial Statements. Parent shall have received, at
least three (3) days prior to the Closing, the most recent monthly financial
statements of the Company showing no material adverse change in the Business or
Condition of the Company from the date of this Agreement.
(m) Employee Confidentiality and Inventions Agreements. Each
employee or consultant of the Company shall have entered into an Confidentiality
and Proprietary Rights Agreement with the Company in substantially such form as
the Company customarily utilizes for its employees and each of the Surviving
Corporation Employees listed on Exhibit G shall have entered into an Employee
Confidentiality and Inventions Agreement with Parent in the form attached as
Exhibit E.
(n) Assumption of Options; Waivers. Each holder of Company Options
outstanding immediately prior to the Effective Time shall have executed and
delivered to Parent an assumption agreement and waiver in the form set out on
Exhibit C.
(o) Non-accredited Shareholders. There shall be no more than 35
"non-accredited" shareholders of the Company on the date of Closing for purposes
of Regulation D promulgated under the Securities Act and each such "non-
accredited" shareholder shall have appointed a shareholder representative and
delivered to Parent an executed Shareholder Representative Agreement in the form
attached hereto as Exhibit H.
(p) Section 280G Payments. Any agreements, contracts or arrangements
that may result, separately or in the aggregate, in the payment of any amount or
the provision of any benefit that would not be deductible by reason of Section
280G of the Code shall have been approved by such number of shareholders of
Company as is required by the terms of Section 280G(b)(5)(B) in order for such
payments and benefits not to be deemed parachute
-41-
payments under Code Section 280G and shall be obtained in a manner which
satisfies all applicable requirements of such Code Section 280G(b)(5)(B) and the
proposed Treasury Regulations thereunder, including (without limitation) Q-7 of
Section 1.280G-1 of such proposed regulations.
ARTICLE 7
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS; INDEMNIFICATION; ESCROW PROVISIONS
7.1 Survival of Representations, Warranties, Covenants and Agreements.
Notwithstanding any right of Parent, Merger Sub or the Company (whether or not
exercised) to investigate the affairs of Parent, Merger Sub or the Company
(whether pursuant to Section 5.4 or otherwise) or a waiver by Parent or the
Company of any condition to Closing set forth in Article 6, each party shall
have the right to rely fully upon the representations, warranties, covenants and
agreements of the other party contained in this Agreement or in any instrument
delivered pursuant to this Agreement. Unless earlier terminated pursuant to
Article 8, all of the representations, warranties, covenants and agreements of
the Company, Parent and of Merger Sub contained in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Merger and
continue until the first anniversary of the Closing.
7.2 Indemnification. Subject to the limitations set forth in this Article
7 (including the limitations of the indemnity obligations of the stockholders of
the Company set forth in Section 7.3), the shareholders of the Company shall
jointly and severally indemnify and hold harmless Parent and Merger Sub and each
other Subsidiary of Parent and each of their officers, directors, agents and
employees, and each person, if any, who controls or may control Parent or Merger
Sub or any other Subsidiary of Parent within the meaning of the Securities Act
(collectively the "Indemnified Parties" and individually an "Indemnified Party")
from and against any and all Losses arising out of any breach of or
misrepresentation or default in connection with any of the representations,
warranties, covenants and agreements given or made by the Company or any
shareholder of the Company in this Agreement, the Company Disclosure Schedules,
or any certificate, instrument or document delivered by the Company pursuant to
this Agreement and any of the representations, warranties, covenants or
agreements given or made by any shareholder of the Company in such shareholder's
Shareholder Certificate.
7.3 Escrow Provisions.
(a) Establishment of the Escrow Fund. As soon as practicable after
the Closing Date, Parent will deposit the Escrow Shares in an account to be
maintained by Parent, such deposit to constitute the "Escrow Fund" to be
governed by the terms set forth herein. The portion of the Escrow Fund
contributed on behalf of each shareholder of the Company shall be in proportion
to the ratio that the number of shares of the Aggregate Stock Consideration to
which such shareholder would otherwise be entitled under Section 1.6 bears to
the Aggregate Stock Consideration less the Aggregate Stock Consideration that
would otherwise be distributed to the holders of Dissenting Shares under Section
1.6, but for Section 1.7. Notwithstanding anything to the contrary in this
Agreement, the voting rights with respect to the Escrow Shares shall at all
-42-
times remain vested in the shareholders on whose behalf such Escrow Shares were
deposited in the Escrow Fund.
(b) Recourse to the Escrow Fund.
(i) The Escrow Fund shall be available as a source for payment
of the indemnification obligations of the shareholders of the Company set forth
in Section 7.2 hereof; provided, that, the indemnification provided in Section
7.2 hereof shall not be limited in amount or type of remedy to the Escrow Fund.
Parent, Merger Sub and the Company each acknowledge that Losses, if any,
incurred by an Indemnified Party would relate to unresolved contingencies
existing at the Effective Time, which if resolved at the Effective Time would
have led to a reduction in the Aggregate Consideration to be paid to the
shareholders of the Company. Except as set forth in Section 7.3(c), nothing in
this Agreement shall limit the liability (i) of the Company for any breach of
any representation, warranty or covenant contained in this Agreement or any
certificate, instrument or document delivered by the Company pursuant hereto, or
(ii) of any Company shareholder for its indemnification obligations under this
Article VII.
(c) Limitation of Shareholder Liability.
(i) Maximum Liability. Notwithstanding anything in this
Agreement to the contrary, no shareholder of the Company shall have any
liability for indemnity obligations under this Article VII in excess of the
portion of the Escrow Shares contributed to the Escrow Fund on behalf of such
shareholder pursuant to Section 7.3(a); provided, however, that the foregoing
limitation on shareholder liability shall not apply to any individual
shareholder in the case of fraud or willful misconduct on the part of such
shareholder.
(ii) Threshold. The shareholders of the Company shall not have
any liability for indemnity obligations under this Article VII until the
Indemnified Parties' Losses exceed $25,000 in the aggregate for all claims, and
then the shareholders of the Company shall indemnify the Indemnified Parties
pursuant to this Article VII to the full amount, and from the first dollar, of
all Losses.
(d) Escrow Period; Final Distribution of Escrow Fund upon
Termination of Escrow Period. Subject to the following requirements and the
Primary Distribution (as defined below), the Escrow Fund shall be in existence
immediately following the Effective Time and shall terminate at 11:59 p.m.,
Pacific Time, three hundred and sixty-five (365) days after the Closing Date
(the "Expiration Date") (the period of time from the Effective Time through and
including the Expiration Date is referred to herein as the "Escrow Period"); and
any portion of the assets remaining in the Escrow Fund after the termination of
the Escrow Period shall be distributed as set forth in the last sentence of this
Section 7.3(d); provided, however, that the Escrow Period shall not terminate
with respect to such amount (or some portion thereof) that is necessary in the
reasonable judgment of Parent, subject to the objection of the Shareholder Agent
and the subsequent arbitration of the matter in the manner as provided in
Section 7.3(j) hereof, to satisfy any unsatisfied claims under this Section 7.3
concerning facts and circumstances existing prior to the termination of the
Escrow Period which claims are specified in any Officer's Certificate delivered
by Parent to the Shareholder Agent prior to termination of the Escrow
-43-
Period or any claims which the Parent or an Indemnified Party reasonably
anticipates that it may have to pay or accrue as Losses, directly or indirectly,
for which it has a right to indemnification hereunder and for which it has
specified in writing to the Shareholder Agent prior to the termination of the
Escrow Period. As soon as all such claims, if any, have been resolved, Parent
shall deliver, within ten (10) Business Days of such resolution, to the
shareholders of the Company, pro rata and in proportion to their respective
contributions to the Escrow Fund, the remaining portion of the Escrow Fund not
required to pay Losses resulting from such claims.
(e) Primary Distribution of the Escrow Fund. The amount of the
Escrow Shares remaining in the Escrow Fund having a value in excess of Two
Million One Hundred and Fifty Thousand Dollars ($2,150,000) on the day which is
one hundred and eighty (180) days after the Closing Date (the "Primary
Distribution Date") shall be distributed to the shareholders of the Company, pro
rata and in proportion to their respective contributions to the Escrow Fund (the
"Primary Distribution"); provided, however, that the amount of the Escrow Fund
to be distributed to stockholders of the Company pursuant to the Primary
Distribution (the "Primary Distribution Amount") shall be reduced by such amount
that is necessary in the reasonable judgment of Parent, subject to the objection
of the Shareholder Agent and the subsequent arbitration of the matter in the
manner as provided in Section 7.3(j) hereof, to satisfy any unsatisfied claims
under this Section 7.3 concerning facts and circumstances as are specified in
any Officer's Certificate delivered by any Indemnified Party to the Shareholder
Agent prior to the Primary Distribution Date or any claims which the Parent or
an Indemnified Party reasonably anticipates that it may have to pay or accrue as
Losses, directly or indirectly, for which it has a right to indemnification
hereunder and for which it has specified in writing to the Shareholder Agent
prior to the termination of the Escrow Period. As soon as all such claims, if
any, have been resolved, Parent shall deliver, within five (5) Business Days of
such resolution, to the shareholders of the Company, pro rata and in proportion
to their respective contributions to the Escrow Fund, the remaining portion of
the Primary Distribution Amount not required to pay Losses resulting from such
claims. For purposes of determining the number of shares of Parent Common Stock
to be delivered to the shareholders of the Company out of the Escrow Fund
pursuant to this Section 7.3(e), the shares of Parent Common Stock shall be
valued at the Parent Stock Price.
(f) Protection of Escrow Fund. Parent shall hold and safeguard the
Escrow Fund during the Escrow Period, shall treat such fund as a trust fund in
accordance with the terms of this Agreement and not as the property of Parent
and shall hold and dispose of the Escrow Fund only in accordance with the terms
hereof. Interest, if any, and dividends (other than stock dividends) earned on
the Escrow Fund during the Escrow Period shall be paid to the shareholders of
the Company in proportion to their respective interests in the Escrow Fund as
set out in Section 7.3(a) hereof, on the Expiration Date. The Escrow Shares
shall be voted in accordance with the instructions received from the beneficial
owners of such shares. In the absence of such instructions, Parent shall be
under no obligation to vote such shares. Parent shall forward proxy information,
annual or other reports or other information with respect to the Escrow Shares.
(g) Claims Upon Escrow Fund. Upon receipt by the Shareholder Agent
at any time on or before the last day of the Escrow Period of a certificate
signed by any officer of Parent or by any Indemnified Party (an "Officer's
Certificate"): (A) stating that Parent or such other Indemnified Party has paid
or properly accrued Losses, directly or indirectly, for which it
-44-
has a right to indemnification hereunder and (B) specifying in reasonable detail
the individual items of Losses included in the amount so stated, the date each
such item was paid or properly accrued and the nature of the misrepresentation,
breach of or default in connection with such representation, warranty, agreement
or covenant to which such item is related, Parent may, subject to the provisions
of Section 7.3(i) hereof, withdraw from the Escrow Fund, as promptly as
practicable, Parent Common Stock or other assets held in the Escrow Fund in an
amount equal to such Losses.
(h) Valuation of Escrow Shares. For purposes of determining the
number of shares of Parent Common Stock to be delivered to Parent out of the
Escrow Fund pursuant to Section 7.3(g) or to be retained in the Escrow Fund
pursuant to Section 7.3(d) or 7.3(e), the shares of Parent Common Stock shall be
valued at the Parent Stock Price.
(i) Objections to Claims. At the time of delivery of any Officer's
Certificate to the Shareholder Agent and for a period of twenty (20) days after
such delivery, Parent shall not withdraw any portion of the Escrow Fund pursuant
to Section 7.3(g) hereof unless Parent shall have received written authorization
from the Shareholder Agent to make such withdrawal. After the expiration of such
20 day period, Parent may withdraw assets from the Escrow Fund in accordance
with Section 7.3(g) hereof, provided that no such withdrawal may be made if the
Shareholder Agent shall object in a written statement to the claim made in the
Officer's Certificate, and such statement shall have been delivered to Parent
and any other Indemnified Party prior to the expiration of such 20 day period.
(j) Resolution of Conflicts; Arbitration.
(i) In case the Shareholder Agent shall object in writing to any
claim or claims made in any Officer's Certificate, the Shareholder Agent
and Parent or other Indemnified Party shall attempt in good faith to agree
upon the rights of the respective parties with respect to each of such
claims.
(ii) If no such agreement can be reached after good faith
negotiation for a period of fifteen (15) days, either Parent or other
Indemnified Party or the Shareholder Agent may demand arbitration of the
dispute unless the amount of the damage or loss is at issue in a pending
Action or Proceeding involving a Third Party Claim, in which event
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either event the matter shall be
settled by arbitration conducted by three arbitrators, one selected by
Parent or other Indemnified Party and one selected by the Shareholder
Agent, and one selected by the two arbitrators selected by Parent or other
Indemnified Party and the Shareholder Agent. The arbitrators shall set a
limited time period and establish procedures designed to reduce the cost
and time for discovery of information relating to any dispute while
allowing the parties an opportunity, adequate as determined in the sole
judgment of the arbitrators, to discover relevant information from the
opposing parties about the subject matter of the dispute. The arbitrators
shall rule upon motions to compel, limit or allow discovery as they shall
deem appropriate given the nature and extent of the disputed claim. The
arbitrators shall also have the authority to impose sanctions, including
attorneys' fees and other costs incurred by the parties, to the same extent
as a court of law or equity, should the arbitrators determine that
discovery was sought without substantial justification or that discovery
was refused or objected to by a party
-45-
without substantial justification. The decision of a majority of the three
arbitrators as to the validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties to this Agreement,
and notwithstanding anything in Section 7.3(i) hereof, Parent shall be entitled
to act in accordance with such decision and make withdrawals from the Escrow
Fund in accordance therewith. Such decision shall be written and shall be
supported by written findings of fact and conclusions regarding the dispute
which shall set forth the award, judgment, decree or order awarded by the
arbitrators.
(iii) Judgment upon any award rendered by the arbitrators may be
entered in any court having competent jurisdiction. Any such arbitration shall
be held in the City and County of San Francisco, California under the commercial
rules of arbitration then in effect of the American Arbitration Association. For
purposes of this Section 7.3(j), in any arbitration hereunder in which any claim
or the amount thereof stated in the Officer's Certificate is at issue, Parent
and all other Indemnified Parties shall be deemed to be the Non-Prevailing Party
in the event that the arbitrators award Parent and all other Indemnified Parties
less than the sum of one-half (1/2) of the disputed amount of any Losses plus
any amounts not in dispute; otherwise, the stockholders of the Company as
represented by the Shareholder Agent shall be deemed to be the Non-Prevailing
Party. The Non-Prevailing Party to an arbitration shall pay its own expenses,
the fees of each arbitrator, the administrative costs of the arbitration and the
expenses, including without limitation, reasonable attorneys' fees and costs,
incurred by the other party to the arbitration. If the Shareholder Agent fails
to pay an expense payable by the stockholders hereunder of the Company, Parent
may withdraw the amount of such expense from the Escrow Funds.
(k) Shareholder Agent of the Stockholders; Power of Attorney.
(i) In the event that the Merger is approved by the stockholders
of the Company, effective upon such vote, and without further act of any
stockholder, Xxxxx Xxxx shall be appointed as agent and attorney-in-fact
(the "Shareholder Agent") for each stockholder of the Company (except such
stockholders, if any, as shall have perfected their appraisal or
dissenters' rights under the California Code), for and on behalf of
stockholders of the Company, to give and receive notices and
communications, to authorize withdrawal by Parent of assets from the Escrow
Fund in satisfaction of claims by Parent, to object to such withdrawals, to
agree to, negotiate, enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of arbitrators with
respect to such claims, and to take all actions necessary or appropriate in
the judgment of the Shareholder Agent for the accomplishment of the
foregoing. Such agency may be changed by the shareholders of the Company
from time to time upon not less than 30 days prior written notice to
Parent; provided, however, that the Shareholder Agent may not be removed
unless holders of a two-thirds interest in the Escrow Fund agree to such
removal and to the identity of the substituted Shareholder Agent. Any
vacancy in the position of Shareholder Agent may be filled by approval of
the holders of a majority in interest of the Escrow Fund. In the event that
a vacancy in the position of Shareholder Agent is not filled by a majority
in interest of the Escrow Fund, Parent may petition a court of competent
jurisdiction to appoint a successor to such position. No bond shall be
required of the Shareholder Agent, and the Shareholder Agent shall not
receive compensation for his services. Notices or communications to or from
the Shareholder Agent shall constitute notice to or from each of the
stockholders of the Company.
-46-
(ii) The Shareholder Agent shall not be liable for any act done
or omitted hereunder as Shareholder Agent while acting in good faith and in the
exercise of reasonable judgment.
(l) Actions of the Shareholder Agent. A decision, act, consent or
instruction of the Shareholder Agent shall constitute a decision of all the
stockholders for whom a portion of the Escrow Cash and the Escrow Shares
otherwise payable to them are deposited in the Escrow Fund and shall be final,
binding and conclusive upon each of such shareholders, and Parent and any other
Indemnified Party may rely upon any such decision, act, consent or instruction
of the Shareholder Agent as being the decision, act, consent or instruction of
every such shareholder of the Company. Parent is hereby relieved from any
liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of the Shareholder Agent.
(m) Third-Party Claims. In the event Parent becomes aware of a
third-party claim (a "Third Party Claim") which Parent or any other Indemnified
Party reasonably expects may result in a demand against the Escrow Fund, Parent
or such other Indemnified Party shall give written notice to the Shareholder
Agent within forty-five (45) days of Parent or such other Indemnified Party
becoming aware of such claim; the notice shall set forth such material
information with respect thereto as is then reasonably available to Parent or
such other Indemnified Party; provided, however, that such written notice shall
be effective only if delivered to the Shareholder Agent before the termination,
pursuant to Section 7.3(d) hereof, of the Escrow Period. In case any such
liability is asserted against Parent or other Indemnified Party, and Parent or
such other Indemnified Party notifies the Shareholder Agent thereof, the
Shareholder Agent will be entitled, if it so elects by written notice delivered
to Parent or such other Indemnified Party within twenty (20) days after
receiving Parent or such other Indemnified Party's notice, to assume the defense
thereof with counsel satisfactory to Parent or other Indemnified Party.
Notwithstanding the foregoing, (i) Parent shall also have the right to employ
its own counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of Parent unless Parent shall reasonably determine that
there is a conflict of interest between Parent and the Shareholder Agent (or the
stockholders of the Company) with respect to such Third Party Claim or there are
or may be legal defenses available to Shareholder Agent (or the stockholders of
the Company) which are different from or additional to those available to Parent
or a difference of position or potential difference of position exists between
the Shareholder Agent (or the shareholders of the Company) and Parent that would
make such separate representation advisable in the reasonable opinion of counsel
to Parent, in which case the reasonable fees and expenses of such counsel will
be borne by the shareholders of the Company, (ii) Parent shall not have any
obligation to give any notice of any assertion of liability by a third party
unless such assertion is in writing, and (iii) the rights of Parent to be
indemnified hereunder in respect of Third Party Claims resulting from the
assertion of liability by third parties shall not be adversely affected by its
failure to give notice pursuant to the foregoing unless, and, if so, only to the
extent that, the shareholders of the Company are materially prejudiced thereby.
With respect to any assertion of liability by a third party that results in a
Third Party Claim, the parties hereto shall make available to each other all
relevant information in their possession material to any such assertion.
(n) In the event that the Shareholder Agent, within twenty (20) days
after receipt of the aforesaid notice of a Third Party Claim, fails to assume
the defense of Parent
-47-
against such Third Party Claim, Parent shall have the right to undertake the
defense, compromise, or settlement of such action on behalf of and for the
account, expenses and risk of the shareholders of the Company.
(o) Notwithstanding anything in this Article 7 to the contrary, Parent
shall have the right to participate, at its own cost and expense, in such
defense, compromise, or settlement and, if there is a reasonable probability
that a Third Party Claim may materially and adversely affect Parent, the
Shareholder Agent shall not, without Parent's written consent (which consent
shall not be unreasonably withheld), settle or compromise any Third Party Claim
or consent to entry of any judgment in respect thereof unless such settlement,
compromise, or consent includes as an unconditional term thereof the giving by
the claimant or the plaintiff to Parent a release from all liability in respect
of such Third Party Claim.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 below, this Agreement
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual agreement of the Company, Parent and Merger Sub;
(b) by Parent, Merger Sub or the Company if: (i) the Effective Time
has not occurred before 5:00 p.m. (Pacific Time) on November 30, 2000 (provided,
however, that the right to terminate this Agreement under this clause 8.1(b)(i)
shall not be available to any party whose failure to fulfill any obligation
hereunder has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date) or if such party is otherwise in breach of
this Agreement or any other condition contemplated hereby; (ii) there shall be a
final nonappealable Order of any Governmental Entity in effect preventing
consummation of the Merger; or (iii) there shall be any Law or Order enacted,
promulgated or issued or deemed applicable to the Merger by any Governmental
Entity that would make consummation of the Merger illegal;
(c) by Parent and Merger Sub if there shall be any action taken, or
any Law or Order enacted, promulgated or issued or deemed applicable to the
Merger, by any Governmental Entity or regulatory authority, which would: (i)
prohibit Parent's or the Merger Sub's ownership or operation of all or any
portion of the business of the Company or (ii) compel Parent or Merger Sub to
dispose of or hold separate all or a portion of the Assets and Properties of the
Company as a result of the Merger;
(d) by Parent if there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of the Company and the Company has not cured such breach within five
(5) business days after notice of such breach is delivered to the Company
(provided, however, that, no cure period shall be required for a breach which by
its nature cannot be cured);
(e) by the Company if there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Parent or Merger
-48-
Sub and Parent has not cured such breach within five (5) business days after
notice of such breach is delivered to the Parent (provided, however, that no
cure period shall be required for a breach which by its nature cannot be cured);
or
(f) by Parent, if the Company Stockholders Meeting has not been held
or written consents have not been received on or prior to September 27, 2000 or
the Merger shall not have been approved by the requisite votes of the Company's
shareholders in accordance with the California Code at the Company Shareholder
Meeting or by written consent.
8.2 Effect of Termination.
(a) In the event of a valid termination of this Agreement as provided
in Section 8.1, this Agreement shall forthwith become void and, subject to
paragraph (b) hereof, there shall be no liability or obligation on the part of
Parent, Merger Sub, the Company, or their respective officers, directors or
stockholders or Affiliates or Associates; provided, however, that each party
shall remain liable for any breaches of this Agreement prior to its termination;
and provided further that, the provisions of Sections 5.5, 5.6, and 8.2 and of
Article 9 shall remain in full force and effect and survive any termination of
this Agreement.
(b) In the event of a termination of this Agreement by Parent
pursuant to Section 8.1(d) or 8.1(f), the Company shall pay to Parent all
reasonable costs and expenses (including attorneys fees and expenses) incurred
by Parent in connection with this Agreement and the transactions contemplated
hereby plus a termination fee in the amount of One Million Dollars ($1,000,000).
In the event of a termination of this Agreement by the Company pursuant to
Section 8.1(e), Parent shall pay to the Company all reasonable costs and
expenses (including attorneys fees and expenses) incurred by the Company in
connection with this Agreement and the transactions contemplated hereby plus a
termination fee in the amount of One Million Dollars ($1,000,000).
8.3 Amendment. Except as is otherwise required by applicable Law after
the stockholders of the Company approve the Merger and this Agreement, this
Agreement may be amended by the parties hereto at any time by execution of an
instrument in writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, Parent,
Merger Sub and the Company may, to the extent legally allowed, (i) extend the
time for the performance of any of the obligations of the other party 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.
-49-
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission against
facsimile confirmation or mailed by prepaid first class certified mail, return
receipt requested, or mailed by overnight courier prepaid, to the parties at the
following addresses or facsimile numbers:
If to Parent or Merger Sub to:
Parent
GaSonics International Corporation
0000 Xxxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000-0000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attn: President
with a copy to:
Xxxxxxx, Phleger & Xxxxxxxx, LLP
Two Embarcadero Place
0000 Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxx Xxxxx, Esq.
If to the Company to:
Gamma Precision Technology, Inc.
00000 Xxxxxxx Xxxx.
Xxxxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: President
with a copy to:
Xxxxxx X. Xxxxxxx
Telephone No.: (000) 000-0000
0000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile
-50-
transmission to the facsimile number as provided for in this Section, be deemed
given upon facsimile confirmation, (iii) if delivered by mail in the manner
described above to the address as provided for in this Section, be deemed given
on the earlier of the third Business Day following mailing or upon receipt and
(iv) if delivered by overnight courier to the address as provided in this
Section, be deemed given on the earlier of the first Business Day following the
date sent by such overnight courier or upon receipt (in each case regardless of
whether such notice, request or other communication is received by any other
Person to whom a copy of such notice is to be delivered pursuant to this
Section). Any party from time to time may change its address, facsimile number
or other information for the purpose of notices to that party by giving notice
specifying such change to the other party hereto.
9.2 Entire Agreement. This Agreement supersedes all prior discussions and
agreements between the parties with respect to the subject matter hereof and
thereof and contains the sole and entire agreement between the parties hereto
with respect to the subject matter hereof and thereof.
9.3 Further Assurances; Post-Closing Cooperation. At any time or from
time to time after the Closing, the parties shall execute and deliver to the
other party such other documents and instruments, provide such materials and
information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and
otherwise to cause the other party to fulfill its obligations under this
Agreement and the transactions contemplated hereby. Each party agrees to use
commercially reasonable efforts to cause the conditions to its and the other
party's obligations to consummate the Merger to be satisfied.
9.4 Third Party Beneficiaries. The terms and provisions of this Agreement
are intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and it is not the intention of the parties to
confer third-party beneficiary rights, and this Agreement does not confer any
such rights, upon any other Person other than any Person entitled to indemnity
under Article 7.
9.5 No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned (by operation of Law or
otherwise) by any party without the prior written consent of the other party and
any attempt to do so will be void. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
9.6 Headings. The headings and table of contents used in this Agreement
have been inserted for convenience of reference only and do not define or limit
the provisions hereof.
9.7 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such
-51-
illegal, invalid or unenforceable provision, there will be added automatically
as a part of this Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible.
9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of California or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of California.
9.9 Construction. The parties hereto agree that this Agreement is the
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
preferentum.
9.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
9.11 Specific Performance; Remedies Cumulative. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. Except where this Agreement specifically provides for
arbitration, it is agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity. All remedies, either under this Agreement or
by Law or otherwise afforded, will be cumulative and not alternative.
9.12 Withholding. Notwithstanding anything to the contrary in this
Agreement, the Exchange Agent and Parent shall be entitled to take any steps
necessary to withhold any amounts required by Law to be withheld from the
transfer and distribution of shares and cash pursuant to this Agreement.
ARTICLE 10
DEFINITIONS
10.1 Definitions.
(a) As used in this Agreement, the following defined terms shall have
the meanings indicated below:
"Action or Proceeding" means any action, suit, complaint, petition,
claim, investigation, proceeding, arbitration, litigation or Governmental Entity
investigation, audit or
-52-
other proceeding, whether civil or criminal, in law or in equity, or before any
arbitrator or Governmental Entity.
"Affiliate" means, as applied to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, (b) any other Person that owns or controls (i) 10% or more of any
class of equity securities of that Person or any of its Affiliates or (ii) 10%
or more of any class of equity securities (including any equity securities
issuable upon the exercise of any option or convertible security) of that Person
or any of its Affiliates, or (c) any director, partner, officer, manager, agent,
employee or relative of such Person. For the purposes of this definition,
"control" (including with correlative meanings, the terms "controlling",
"controlled by", and "under common control with") as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person, whether through
ownership of voting securities or by contract or otherwise.
"Aggregate Fractional Share Cash Amount" shall mean the total amount
of cash payable by Parent to all stockholders of the Company in lieu of
fractional shares of Parent Common Stock.
"Aggregate Cash Consideration" means the aggregate amount of cash
payable to the holders of Company Capital Stock pursuant to Section 1.6(a) at
the Effective Time of the Merger, which shall not exceed the sum determined by
multiplying the Cash Amount by the Aggregate Stock Number.
"Aggregate Consideration" means the sum of the Aggregate Cash
Consideration plus the Aggregate Stock Consideration.
"Aggregate Stock Consideration" means the aggregate number of shares
of Parent Common Stock isssuable to the holders of the Company Capital Stock
pursuant to Section 1.6(a) at the Effective Time of the Merger, which shall not
exceed the sum determined by multiplying the Exchange Ratio by the Aggregate
Stock Number. The additional shares of Parent Common Stock to be purchasable
under the Assumed Options and the Assumed Warrants in substitution of the
PreMerger Cash Value of those options and warrants pursuant to clause (B) of the
Option Exchange Amount (and in lieu of any Aggregate Cash Consideration paid to
the holders of those Assumed Options and Assumed Warrants) shall be in addition
to the Aggregate Stock Consideration.
"Aggregate Stock Number" means the number of shares of Company Common
Stock issued and outstanding immediately prior to the Effective Time plus the
number of shares of Company Common Stock issuable upon exercise, conversion or
exchange of all Company Series A Preferred Stock, Company Series B Preferred
Stock, Company Options, Company Warrants and any other calls, rights, promissory
notes, securities, commitments or agreements of any character to which the
Company is a party or by which it is bound, immediately prior to the Effective
Time, obligating the Company to issue, deliver or sell any shares of Company
Common Stock, excluding the Assumed Options. The Aggregate Stock Number shall
not exceed 35,081,757 less the number of shares of Company Common Stock issuable
upon the exercise of Company Options issued and outstanding immediately prior to
the Effective Time.
-53-
"Agreement" means this Merger Agreement and Plan of Reorganization,
the Exhibits, the Company Disclosure Schedule and the Parent Disclosure
Schedule, as the same may be amended or supplemented from time to time in
accordance with the terms hereof.
"Agreement of Merger" has the meaning ascribed to it in Section 1.2.
"Approval" means any approval, authorization, consent, permit,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from or made with, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental Entity
or any other Person.
"Assets and Properties" of any Person means all assets and properties
of every kind, nature, character and description (whether real, personal or
mixed, whether tangible or intangible, whether absolute, accrued, contingent,
fixed or otherwise and wherever situated), including the goodwill related
thereto, operated, owned, licensed or leased by such Person, including cash,
cash equivalents, Investment Assets, accounts and notes receivable, chattel
paper, documents, instruments, general intangibles, real estate, equipment,
inventory, goods and Intellectual Property.
"Associate" means, with respect to any Person, any corporation or
other business organization of which such Person is an officer or partner or is
the beneficial owner, directly or indirectly, of 10% or more of any class of
equity securities, any trust or estate in which such Person has a substantial
beneficial interest or as to which such Person serves as a trustee or in a
similar capacity and any relative or spouse of such Person, or any relative of
such spouse, who has the same home as such Person.
"Books and Records" means all files, documents, instruments, papers,
books and records relating to the Business or Condition of the Company,
including financial statements, internal reports, Tax returns and related work
papers and letters from accountants, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock certificates and books,
stock transfer ledgers, Contracts, Licenses, customer lists, computer files and
programs (including data processing files and records), retrieval programs,
operating data and plans and environmental studies and plans.
"Business Combination" means, with respect to any Person, (i) any
merger, consolidation or other business combination to which such Person is a
party, (ii) any sale, dividend, split or other disposition of any capital stock
or other equity interests of such Person whether outstanding or newly issued,
(iii) any tender offer (including a self tender), exchange offer,
recapitalization, restructuring, liquidation, dissolution or similar or
extraordinary transaction, (iv) any sale, dividend or other disposition of all
or a material portion of the Assets and Properties of such Person or (v) the
entering into of any agreement or understanding, the granting of any rights or
options, or the acquiescence of the Company, with respect to any of the
foregoing.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the State of California are authorized or obligated to
close.
-54-
"Business or Condition of Parent" means the business, condition
(financial or otherwise), results of operations, prospects or Assets and
Properties of the Parent and each of its Subsidiaries, taking Parent together
with such Subsidiaries as a whole.
"Business or Condition of the Company" means the business, condition
(financial or otherwise), results of operations, prospects or Assets and
Properties of the Company and each of its Subsidiaries, taking the Company
together with such Subsidiaries as a whole.
"California Code" means the California Corporations Code and all
amendments and additions thereto.
"Cash Amount" means $0.6459 per share of Company Capital Stock.
"Cause" means the relevant employee's (i) neglect, failure or refusal,
to use good faith efforts to perform the reasonable and material duties of his
employment in a reasonably timely matter (other than by reason of a physical or
mental illness or impairment or other event or condition beyond the reasonable
control of the employee), which neglect, failure or refusal continues after the
employee's receipt from parent of written notice that the employee has been
guilty of such conduct, specifying in reasonable detail the relevant
circumstances or events, (ii) the employee's unexcused absence (other than by
reason of a physical or mental illness or impairment or other event or condition
beyond reasonable control of the employee) for more than an aggregate of five
(5) business days, after the employee's receipt from Parent of written notice
that the employee has been guilty of one or more instances of unexcused absences
in the past, specifying the applicable date(s) or (iii) material breach of any
agreements, covenants and representations made in any noncompete agreement with
Parent or any of its Subsidiaries.
"Certificate of Merger" has the meaning ascribed to it in Section 1.2.
"Certificates" has the meaning ascribed to it in Section 1.8(b).
"Closing" means the closing of the transactions contemplated by
Section 1.2.
"Closing Date" has the meaning ascribed to it in Section 1.2.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Company" has the meaning ascribed to it in the forepart of this
Agreement.
"Company Capital Stock" means the Company Common Stock, the Company
Series A Preferred Stock, the Company Series B Preferred Stock and any other
class or series of capital stock of the Company.
"Company Common Stock" has the meaning ascribed to it in Section 2.2.
"Company Option(s)" means any Option to purchase Company Capital
Stock, excluding the Company Warrants.
-55-
"Company Stockholders Meeting" has the meaning ascribed to it in
Section 5.2.
"Company Warrants" means all warrants to purchase Company Capital
Stock listed on Schedule 2.
"Delaware General Corporation Law" means the Delaware General
Corporation Law and all amendments and additions thereto.
"Dissenting Shares" has the meaning ascribed to it in Section 1.7(a).
"Effective Time" has the meaning ascribed to it in Section 1.2.
"Escrow Fund" has the meaning ascribed to it in Section 7.3(a)
"Escrow Period" has the meaning ascribed to it in Section 7.3(d).
"Escrow Shares" means 130,548 shares of Aggregate Stock Consideration.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder.
"Exchange Agent" means Parent's transfer agent for its common stock or
such other institution as designated by Parent.
"Exchange Ratio" means .0196 shares of Parent Common Stock per share
of Company Capital Stock.
"Expiration Date" has the meaning ascribed to it in Section 7.1.
"Fractional Share Cash Amount" has the meaning ascribed to it in
Section 1.6(b).
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time.
"Good Reason" means with respect to a relevant employee (i) a material
reduction in such employee's compensation (other than in connection with a
company-wide or department-wide reduction), duties or responsibility, or (ii)
being relocated more than fifty (50) miles from the Parent's current
headquarters in San Jose, California.
"Governmental Entity" means any court, tribunal, arbitrator,
authority, agency, bureau, board, commission, department, official or other
instrumentality of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision, and shall include
any stock exchange, quotation service and the NASD.
"Hazardous Materials" means any substance: (i) the presence of which
requires investigation or remediation under any federal, state or local statute,
regulation, ordinance, order, action, policy or common law; (ii) which is or
becomes defined as "hazardous waste," "hazardous substance," pollutant or
contaminant under any federal, state or local statute, regulation, ordinance,
rule, directive or order or any amendments thereto including, without
-56-
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. Section 9601 et seq.) and/or the Resource Conservation and
Recovery Act (41 U.S.C. Section 6901 et seq.); (iii) which is toxic, explosive,
corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or
otherwise hazardous and is or becomes regulated by any governmental authority,
agency, department, commission, board or instrumentality of the United States,
the State of California or any political subdivision thereof; (iv) which
contains gasoline, diesel fuel or other petroleum hydrocarbons; (v) which
contains polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde foam
insulation; or (vi) radon gas.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Indebtedness" of any Person means all obligations of such Person (a)
for borrowed money, (b) evidenced by notes, bonds, debentures or similar
instruments, (c) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(d) under capital leases and (e) in the nature of guarantees of the obligations
described in clauses (a) through (d) above of any other Person.
"Investment Assets" means all debentures, notes and other evidences of
Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company.
"IRS" means the United States Internal Revenue Service or any
successor entity.
"Key Employees" has the meaning ascribed to it in Section 6.3(g).
"Law" or "Laws" means any law, statute, order, decree, consent decree,
judgment, rule, regulation, ordinance or other pronouncement having the effect
of law whether in the United States, any foreign country, or any domestic or
foreign state, county, city or other political subdivision or of any
Governmental Entity.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person, whether absolute, accrued, contingent (or based upon
any contingency), known or unknown, fixed or otherwise, or whether due or to
become due.
"License" means any Contract that grants a Person the right to use or
otherwise enjoy the benefits of any Intellectual Property (including without
limitation any covenants not to xxx with respect to any Intellectual Property).
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, easement, license, covenant, condition, restriction, adverse claim,
levy, charge, option, equity, adverse claim or restriction or other encumbrance
of any kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing, except for any restrictions on transfer
generally arising under any applicable federal or state securities law.
-57-
"Loss(es)" means any and all damages, fines, fees, Taxes, penalties,
deficiencies, losses and expenses, including interest, reasonable expenses of
investigation, court costs, reasonable fees and expenses of attorneys,
accountants and other experts or other expenses of litigation or other
proceedings, or settlement thereof, including any license fees imposed as a
result of such settlement, or of any claim, default or assessment (such fees and
expenses to include all fees and expenses, including fees and expenses of
attorneys, incurred in connection with (i) the investigation or defense of any
Third Party Claims or (ii) asserting or disputing any rights under this
Agreement against any party hereto or otherwise). Notwithstanding the
foregoing, in the event of the Successful Defense of a Patent Suit, the
calculation of "Losses" shall not include the fees or expenses of attorneys or
other expenses of litigation (or similar proceeding); provided, that in the
event of a Patent Suit in which the outcome of the litigation or similar
proceeding is not a Successful Defense, the amount of attorneys' fees and
expenses and other direct expenses of litigation (or similar proceeding) to be
included in the calculation of "Losses" shall be limited to $1,000,000, for each
such Patent Suit.
"Merger" has the meaning ascribed to it in the recitals to this
Agreement.
"Merger Sub" has the meaning ascribed to it in the forepart of this
Agreement
"NASD" means the National Association of Securities Dealers, Inc.
"Non-Prevailing Party" has the meaning ascribed to it in Section
7.3(j).
"Officer's Certificate" has the meaning ascribed to it in Section
7.3(f).
"Option" means, with respect to the Company, any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of the Company or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of the Company or (ii) receive any benefits or
rights similar to any rights enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of the Company, including any rights to
participate in the equity, income or election of directors or officers of the
Company.
"Option Exchange Amount" means, with respect to any Assumed Option or
Assumed Warrant, the sum, rounded down to the nearest whole number, of (A) the
number of whole shares of Parent Common Stock equal to the product of (x) the
number of shares of Company Capital Stock that were issuable upon exercise of
such Assumed Option or Assumed Warrant immediately prior to the Effective Time
multiplied by (y) the Exchange Ratio, plus (B) the number of shares of Parent
Common Stock equal to the quotient of (x) the Pre Merger Cash Value divided by
(y) the greater of (i) the Parent Closing Stock Price or (ii) the Parent Stock
Price.
"Order" means any writ, judgment, decree, injunction or similar order
of any Governmental Entity or regulatory authority (in each such case whether
preliminary or final).
"Parent" has the meaning ascribed to it in the forepart of this
Agreement.
-58-
"Parent Closing Stock Price" means the average closing trading price
of Parent's Common Stock for the five (5) trading days ending one (1) day prior
to the Closing Date, as reported on the Nasdaq Stock Exchange.
"Parent Common Stock" has the meaning ascribed to it in Recital C.
"Parent Stock Price" means $32.938.
"Patent Suit" means a Third Party Claim alleging direct infringement
of a patent.
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA.
"Permit" means any license, permit, franchise or authorization.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company or partnership, proprietorship,
other business organization, trust, union, association or Governmental Entity.
"Pre Merger Cash Value" means, with respect to any Assumed Option or
Assumed Warrant, the product of (A) the number of shares of Company Capital
Stock that were issuable upon exercise of such Assumed Option or Assumed Warrant
immediately prior to the Effective Time multiplied by (B) the Cash Amount.
"Release Date Stock Price" means the average closing trading price of
Parent's Common Stock as reported on the Nasdaq Stock Exchange for the ten (10)
trading days ending one (1) day prior to the day the portion in question of the
Retention Stock Amount is released from the Retention Escrow Fund.
"Retention Cash Amount" means, with respect to any Key Employee, cash
(to be taken from the cash amount that would otherwise be paid to such Key
Employee) equal to twelve percent (12%) of the sum of (A) the portion of the
Aggregate Cash Consideration payable to such Key Employee pursuant to the
provisions of Section 1.6 plus (B) the product of (x) the Parent Stock Price
multiplied by (y) the number of shares of Parent Common Stock issuable to such
Key Employee pursuant to the provisions of Section 1.6.
"Retention Stock" means, with respect to any Key Employee, shares of
Parent Common Stock (to be taken from the shares of Parent Common Stock that
would otherwise be paid to such Key Employee as part of the Aggregate Stock
Consideration) having a value (based on the Parent Stock Price) equal to eight
percent (8%) of the sum of (A) the portion of the Aggregate Cash Consideration
payable to such Key Employee pursuant to the provisions of Section 1.6 plus (B)
the product of (x) the Parent Stock Price multiplied by (y) the number of shares
of Parent Common Stock issuable to such Key Employee pursuant to the provisions
of Section 1.6.
"SEC" means the Securities and Exchange Commission or any successor
entity.
-59-
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Subsidiary" means any Person in which the Company or Parent, as the
context requires, directly or indirectly through Subsidiaries or otherwise,
beneficially owns at least 50% of either the equity interest in, or the voting
control of, such Person, whether or not existing on the date hereof.
"Successful Defense" means, with respect to a Patent Suit, the final
resolution and entry of judgement, after the exhaustion of all remedies and
appeals, in favor of the defendant in such Patent Suit in which the amount of
damages, fines, penalties, deficiencies, assessment or other similar plaintiff
award is zero.
"Surviving Corporation" has the meaning ascribed to it in Section 1.1.
"Third Party Claim" has the meaning ascribed to it in Section 7.3(m).
"Voting Agreement" has the meaning ascribed to it in Recital E.
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender, (ii) words using the singular or
plural number also include the plural or singular number, respectively, (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement as a whole and not to any particular Article, Section or
other subdivision, (iv) the terms "Article" or "Section" or other subdivision
refer to the specified Article, Section or other subdivision of the body of this
Agreement, (v) the phrases "ordinary course of business" and "ordinary course of
business consistent with past practice" refer to the business and practice of
the Company, (vi) the words "include," "includes" and "including" shall be
deemed to be followed by the phrase "without limitation," and (vii) when a
reference is made in this Agreement to Exhibits, such reference shall be to an
Exhibit to this Agreement unless otherwise indicated. All accounting terms used
herein and not expressly defined herein shall have the meanings given to them
under GAAP. The term "party" or "parties" when used herein refer to Parent and
Merger Sub, on the one hand, and the Company, on the other.
(c) When used herein, the phrase "to the knowledge of" any Person,
"to the best knowledge of" any Person, "known to" any Person or any similar
phrase, means (i) with respect to any Person who is an individual, the actual
knowledge of such Person, (ii) with respect to any other Person, the actual
knowledge of the directors and officers of such Person and other individuals
that have a similar position or have similar powers and duties as the officers
and directors of such Person, and (iii) in the case of each of (i) and (ii), the
knowledge of facts that such individuals should have after inquiry reasonable
under the circumstances to ascertain the relevant facts..
[SIGNATURE PAGE FOLLOWS]
-60-
IN WITNESS WHEREOF, Parent, Merger Sub and Company, and with respect to
Article 7 only, the Shareholder Agent, have caused this Agreement to be signed
by their duly authorized representatives, all as of the date first written
above.
GASONICS INTERNATIONAL GAMMA PRECISION TECHNOLOGY,
CORPORATION INC.
By: /s/ Asuri X. Xxxxxxxx By: /s/ Xxxxx X. X. Xxxx
-------------------------- ---------------------------
Name: Asuri X. Xxxxxxxx Name: Xxxxx X. X. Xxxx
------------------------ -------------------------
Title: President/CEO Title: President
----------------------- ------------------------
GPT ACQUISITION CORP. SHAREHOLDER AGENT
By: /s/ Asuri X. Xxxxxxxx
--------------------------
Name: Asuri X. Xxxxxxxx
------------------------
Title: President /s/ Xxxxx X. X. Xxxx
----------------------- ------------------------------
[SIGNATURE PAGE TO MERGER AGREEMENT AND PLAN OF REORGANIZATION]
-61-
