Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of January 3, 2006 (this
"Agreement"), is made and entered into by and among WAVE WIRELESS CORPORATION, a
Delaware corporation ("Parent"), WAVE ACQUISITION CORPORATION, a Nevada
corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and
WAVERIDER COMMUNICATIONS INC., a Nevada corporation (the "Company"). Capitalized
terms used and not otherwise defined herein shall have the respective meanings
given to such terms in Article VII hereof.
WHEREAS, the Board of Directors of each of the Company, Parent and
Merger Sub has, by resolutions duly adopted, declared that the merger of Merger
Sub with and into the Company (the "Merger") upon the terms and subject to the
conditions set forth in this Agreement and the other transactions contemplated
by this Agreement are advisable, the Board of Directors of Parent has approved
this Agreement and the Board of Directors of each of the Company and Merger Sub
has adopted this Agreement.
WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements, as set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth in
this Agreement, at the Effective Time (as defined in Section 1.3), Merger Sub
shall be merged with and into the Company and the separate corporate existence
of Merger Sub shall thereupon cease. The Company shall be the surviving
corporation in the Merger (sometimes hereinafter referred to as the "Surviving
Corporation"). At the Effective Time, the Merger shall have the effects
specified in Section 92A.250 of the Nevada Revised Statutes. ("NRS"). Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the property, rights, privileges, powers and franchises of the Company
and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.2 Closing. The closing of the Merger (the "Closing") shall take place (i)
at the principal executive offices of Parent, 0000 Xxxxx Xxxxxx, Xxx Xxxx,
Xxxxxxxxxx at 9:00 A.M. on the fifth business day following the day on which the
last to be satisfied or waived of the conditions set forth in Article V (other
than those conditions that by their terms are to be satisfied at the Closing,
but subject to the satisfaction or waiver of those conditions) shall be
satisfied or waived in accordance with this Agreement or (ii) at such other
place and time or on such other date as the Company and Parent may agree in
writing (the "Closing Date").
1.3 Effective Time. As soon as practicable following the Closing, the
Company and Parent will cause Articles of Merger (the "Articles of Merger") to
be executed and filed with the Secretary of State of the State of Nevada as
provided in Section 92A.200 of the NRS. The Merger shall become effective on the
date on which the Articles of Merger have been filed with the Secretary of State
of the State of Nevada or at such later time as may be agreed by the parties in
writing and specified in the Articles of Merger (the "Effective Time").
1.4 Articles of Incorporation; Bylaws; Directors and Officers.
(a) At the Effective Time, the articles of incorporation of Merger Sub (the
"Charter") shall be the articles of incorporation of the Surviving Corporation
until thereafter duly amended as provided therein or in accordance with
applicable law.
(b) At the Effective Time, the bylaws of Merger Sub in effect at the
Effective Time shall be the bylaws of the Surviving Corporation (the "Bylaws")
until thereafter amended as provided therein or in accordance with applicable
Law.
(c) The sole initial director and sole initial officer of Merger Sub shall
be Xxxxxx X. Xxxxxx. At the Effective Time, the officers and directors of the
Surviving Corporation shall be appointed by Parent to serve in such capacities
until their successors shall have been duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with the
Charter and the Bylaws.
1.5 Effect on Capital Stock.
(a) Conversion of Company Capital Stock. At the Effective Time, by virtue
of the Merger and without any further action on the part of Parent, Merger Sub,
the Company or any stockholder of the Company:
(i) Any shares of common stock, par value $0.001 per share, of the Company
("Company Common Stock") held by any wholly owned Subsidiary of the Company
immediately prior to the Effective Time (or held in the Company's treasury)
shall be canceled and retired and shall cease to exist, and no consideration
shall be delivered in exchange therefor.
(ii) Any shares of Company Common Stock held by Parent, Merger Sub or any
other wholly-owned Subsidiary of Parent immediately prior to the Effective Time
shall be canceled and retired and shall cease to exist, and no consideration
shall be delivered in exchange therefor. Any options, warrants, convertible
securities or other rights to acquire Company Common Stock held by Parent,
Merger Sub or any other wholly-owned Subsidiary of Parent immediately prior to
the Effective Time shall be terminated and be of no further force or effect, and
no consideration shall be delivered in exchange therefor; provided, however, any
issued and outstanding Bridge Notes shall result in a Bridge Note adjustment as
set forth in Section 1.5(c)(iii) below.
(iii) Each share of Company Preferred Stock outstanding and held of record
by Crescent immediately prior to the Effective Time shall be converted into the
right to receive a number of shares of Parent Preferred Stock, which shall be
convertible into a number of shares of Parent Common Stock equal to the number
of shares of Parent Common Stock that would have been issued to Crescent in the
Merger if Crescent had converted all of its shares of Company Preferred Stock
into shares of Company Common Stock immediately prior to the Effective Time.
(iv) Except as provided in clauses (i) and (ii) above and subject to
Sections 1.5(b), (c), (d) and (e), each share of Company Common Stock
outstanding immediately prior to the Effective Time shall be converted into the
right to receive a number of shares of common stock, par value $0.0001 per
share, of Parent (the "Parent Common Stock") equal to the Exchange Ratio (as
defined herein) such that the total number of shares of Parent Common Stock
issued in connection with the Merger, including, without limitation, the shares
of Parent Common Stock issuable upon conversion of the Parent Preferred Stock
issued to Crescent in the Merger (collectively, the "Merger Consideration"),
shall equal fifty-percent (50%) of Parent's Fully Diluted Shares Outstanding
immediately after the Effective Time. By way of example, as of the date hereof
and based upon the Fully Diluted Shares Outstanding of Parent and the Fully
Diluted Shares Outstanding of the Company, each as set forth on Schedule 1.5,
the "Exchange Ratio" shall initially be 1.2179, subject to adjustment at the
Closing as provided in Sections 1.5(b) and (c).
(b) Adjustments to Exchange Ratio. If, during the period from the date of
this Agreement through the Effective Time, (i) the outstanding shares of Company
Common Stock or Parent Common Stock are changed into a different number or class
of shares by reason of any stock split, division or subdivision of shares, stock
dividend, reverse stock split, consolidation of shares, reclassification,
recapitalization or other similar transaction or event, or (ii) the number of
Fully Diluted Shares Outstanding of Parent or the Company is changed from the
number set forth on Schedule 1.5 due to (x) the issuance of additional debt or
equity securities in connection with any financing transaction entered into by
Parent or the Company prior to the Effective Time, (y) the exercise or
conversion of any outstanding convertible securities into shares of Parent
Common Stock or Company Common Stock prior to the Effective Time, including,
without limitation, the conversion of any convertible debentures currently held
by Crescent, or SDS Capital Group or its affiliates, or (z) any variance between
the weighted average closing price of Parent Common Stock as set forth on
Schedule 1.5 and the weighted average closing price of Parent Common Stock
during the 10 trading days immediately preceding the Closing Date (for the
purpose of calculating the Fully Diluted Shares Outstanding for Parent and
Company pursuant to the treasury stock method), then in each such case
(subclauses (i) and (ii) above), the Exchange Ratio shall be equitably adjusted
such that the total Merger Consideration issued by Parent in the Merger equals
50% of Parent's Fully Diluted Shares Outstanding immediately after the Effective
Time.
(c) Further Adjustments to Exchange Ratio. After giving effect to the
Exchange Ratio adjustments provided in Section 1.5(b), the Exchange Ratio shall
be adjusted further as follows:
(i) Parent Net Working Capital Adjustment. If Parent's Closing
Net Working Capital is greater or less than its Required Net Working
Capital, then the Exchange Ratio shall be adjusted on the Closing Date
as follows: in the event of a positive / (negative) variance, the
Exchange Ratio shall be reduced / (increased) by an amount equal to
(x) the difference between Parent's Closing Net Working Capital and
Required Net Working Capital, divided by (y) the weighted average
closing price of Parent Common Stock during the 10 trading days
immediately preceding the Closing Date, and dividing the quotient so
obtained by (z) the Company's Fully Diluted Shares Outstanding on the
Closing Date.
(ii) Company Net Working Capital Adjustment. If the Company's
Closing Net Working Capital is greater or less than its Required Net
Working Capital, then the Exchange Ratio shall be adjusted on the
Closing Date as follows: in the event of a positive / (negative)
variance, the Exchange Ratio shall be increased / (reduced) by an
amount equal to (x) the difference between the Company's Closing Net
Working Capital and Required Net Working Capital, divided by (y) the
weighted average closing price of Parent Common Stock during the 10
trading days immediately preceding the Closing Date, and dividing the
quotient so obtained by (z) the Company's Fully Diluted Shares
Outstanding on the Closing Date. The parties agree and acknowledge
that Bridge Notes shall not be included in the Company Net Working
Capital, since the issuance of such Bridge Notes shall result in a
Bridge Note Adjustment, as set forth below.
(iii) Bridge Note Adjustment. With respect to Bridge Notes issued
by Company prior to the Closing Date, the Exchange Ratio shall be
reduced on the Closing Date by an amount equal to (x) the aggregate
face value of all outstanding or previously converted Bridge Notes
issued prior to the Closing Date plus any accrued and unpaid interest
thereon, divided by (y) the product of (1) eighty-five percent (85%)
of the weighted average closing price of Parent Common Stock during
the 10 trading days immediately prior to the Closing Date, and (2) the
Exchange Ratio (as adjusted pursuant to Section 1.5(b) and Sections
1.5(c)(i) and (ii) above), and dividing the quotient so obtained by
(z) the Company's Fully Diluted Shares Outstanding on the Closing
Date. All Bridge Notes remaining on the Closing Date shall be
cancelled.
(d) Unvested 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 any applicable
restricted stock purchase agreement or other agreement with the Company, then:
(i) 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 (ii) the certificates
representing such shares of Parent Common Stock may accordingly be marked with
appropriate legends. Prior to the Effective Time, the Company shall take all
such action as 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.
(e) No Fractional Shares. No fractional shares of Parent Common Stock shall
be issued in connection with the Merger, and no certificates or scrip for any
such fractional shares shall be issued. Any holder of Company Common Stock who
would otherwise be entitled to receive a fraction of a share of Parent Common
Stock (after aggregating all fractional shares of Parent Common Stock issuable
to such holder) shall, in lieu of such fraction of a share and upon surrender of
such holder's Company Stock Certificate(s) (as defined in Section 1.6), be paid
in cash the dollar amount (rounded to the
nearest whole cent), without interest, determined by multiplying such fraction
by the closing price of a share of Parent Common Stock on the OTC Bulletin Board
of the National Association of Securities Dealers, Inc. (the "OTC Bulletin
Board") on the date the Merger becomes effective.
(f) Stock Options and Warrants. At the Effective Time (i) all options to
purchase Company Common Stock then outstanding (the "Company Options"),
including options issued under the Company's Employee Stock Option (1997) Plan,
the 1999 Incentive and Nonqualified Stock Option Plan, the Employee Stock Option
(2000) Plan and the Employee Stock Option (2002) Plan (collectively, the
"Company Stock Option Plans"), and (ii) all warrants to purchase Company Common
Stock then outstanding (the "Company Warrants"), shall be assumed by Parent in
accordance with Section 4.10.
(g) Capital Stock of Merger Sub. Each share of common stock, par value
$0.0001 per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock, par value $0.0001 per share,
of the Surviving Corporation. Each stock certificate of Merger Sub evidencing
ownership of any such shares shall, as of the Effective Time, evidence ownership
of such shares of common stock of the Surviving Corporation.
1.6 Closing of the Company's Transfer Books. At the Effective Time: (a) all
shares of Company Common Stock outstanding immediately prior to the Effective
Time shall automatically be canceled and retired and shall cease to exist (in
exchange for the right to receive the applicable consideration set forth in, and
subject to, Sections 1.5 and 1.7), and all holders of certificates representing
shares of Company Common Stock that were outstanding immediately prior to the
Effective Time shall cease to have any rights as stockholders of the Company;
and (b) the stock transfer books of the Company shall be closed with respect to
all shares of Company Common Stock outstanding immediately prior to the
Effective Time. No further transfer of any such shares of Company Common Stock
shall be made on such stock transfer books after the Effective Time. If, after
the Effective Time, a valid certificate previously representing any shares of
Company Common Stock outstanding immediately prior to the Effective Time (a
"Company Stock Certificate") is presented to the Exchange Agent (as defined in
Section 1.7) or to the Surviving Corporation or Parent, such Company Stock
Certificate shall be canceled and shall be exchanged as provided in Section 1.7.
1.7 Exchange of Company Stock Certificates.
(a) Exchange Agent; Exchange Fund. Parent's transfer agent shall act as
exchange agent in the Merger (the "Exchange Agent"). As promptly as practicable
after the Effective Time, Parent shall deposit with the Exchange Agent: (i)
certificates representing the shares of Parent Common Stock issuable pursuant to
Section 1.5(a)(iv); and (ii) cash sufficient to make payments in lieu of
fractional shares in accordance with Section 1.5(d). The shares of Parent Common
Stock and cash amounts so deposited with the Exchange Agent, together with any
dividends or distributions received by the Exchange Agent with respect to such
shares of Parent Common Stock, are referred to collectively as the "Exchange
Fund."
(b) Exchange Procedures. As promptly as practicable after the Effective
Time, the Exchange Agent will mail to the Persons who were record holders of
Company Common Stock immediately prior to the Effective Time: (i) a letter of
transmittal in customary form and containing such provisions as Parent may
reasonably specify and the Company shall reasonably approve prior to the
Effective Time (including a provision confirming that delivery of Company Stock
Certificates shall be effected, and risk of loss and title to Company Stock
Certificates shall pass, only upon delivery of such Company Stock Certificates
to the Exchange Agent); and (ii) instructions for use in effecting the surrender
of Company Stock Certificates in exchange for certificates representing Parent
Common Stock. Upon surrender of a Company Stock Certificate to the Exchange
Agent for exchange, together with a duly executed letter of transmittal and such
other documents as may be reasonably required by the Exchange Agent or Parent:
(A) the holder of such Company Stock Certificate shall be entitled to receive in
exchange therefor a certificate representing the number of whole shares of
Parent Common Stock that such holder has the right to receive pursuant to the
provisions of Section 1.5 (and cash in lieu of any fractional share of Parent
Common Stock); and (B) the Company Stock Certificate so surrendered shall be
canceled. Until surrendered as contemplated by this Section 1.7(b), each Company
Stock Certificate shall be deemed, from and after the Effective Time, to
represent only the right to receive shares of Parent Common Stock (and cash in
lieu of any fractional share of Parent Common Stock) as contemplated by Section
1.5. If any Company Stock Certificate shall have been lost, stolen or destroyed,
Parent may, in its reasonable discretion and as a condition to the issuance of
any certificate representing Parent Common Stock, require the owner of such
lost, stolen or destroyed Company Stock Certificate to provide an appropriate
affidavit and to deliver a bond (in such sum as Parent may reasonably direct) as
indemnity against any claim that may be made against the Exchange Agent, Parent
or the Surviving Corporation with respect to such Company Stock Certificate.
(c) Distributions With Respect to Unexchanged Shares. No dividends or other
distributions declared or made with respect to Parent Common Stock with a record
date after the Effective Time shall be paid or otherwise delivered to the holder
of any unsurrendered Company Stock Certificate with respect to the shares of
Parent Common Stock that such holder has the right to receive in the Merger
until such holder surrenders such Company Stock Certificate in accordance with
this Section 1.7. Subject to the requirements of applicable Law (including
applicable abandoned property, escheat or similar laws), following surrender of
any such Company Stock Certificate, the Exchange Agent will deliver to the
record holder thereof, without interest: (i) a certificate representing the
number of whole shares of Parent Common Stock issued in exchange therefor along
with cash in lieu of any fractional share pursuant to Section 1.5(d) and the
amount of any such dividends or other distributions with a record date after the
Effective Time (and with a payment date prior to the date of surrender of such
Company Stock Certificate) payable with respect to such whole shares of Parent
Common Stock; and (ii) on the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time (and with a
payment date on or subsequent to the date of surrender of such Company Stock
Certificate) payable with respect to such whole shares of Parent Common Stock.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund that
remains undistributed to holders of Company Stock Certificates as of the date
180 days after the date on which the Merger becomes effective shall be delivered
to Parent upon demand, and any holders of Company Stock Certificates who have
not theretofore surrendered their Company Stock Certificates in accordance with
this Section 1.7 shall thereafter look only to Parent for satisfaction of their
claims for Parent Common Stock, cash in lieu of fractional shares of Parent
Common Stock and any dividends or distributions with respect to shares of Parent
Common Stock.
(e) Required Withholding. Each of the Exchange Agent, Parent and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Company Common Stock such amounts as may be required
to be deducted or withheld from such consideration under the Internal Revenue
Code of 1986, as amended (the "Code") or any provision of state, local or
foreign tax law or under any other applicable Legal Requirement. To the extent
such amounts are so deducted or withheld, such amounts shall be treated for all
purposes under this Agreement as having been paid to the Person to whom such
amounts would otherwise have been paid.
(f) No Liability. Neither Parent nor the Surviving Corporation shall be
liable to any holder or former holder of Company Common Stock or to any other
Person with respect to any shares of Parent Common Stock (or dividends or
distributions with respect thereto), or for any cash amounts, delivered to any
public official pursuant to any applicable abandoned property law, escheat law
or other similar requirement of applicable Law.
1.8 Affiliates. Notwithstanding anything herein to the contrary, to the
fullest extent permitted by Law, no certificates representing shares of Parent
Common Stock shall be delivered to a Person who may be deemed an "affiliate" of
the Company in accordance with Section 4.13 for purposes of Rule 145 under the
Securities Act, until such Person has executed and delivered an Affiliate
Agreement (as defined in Section 4.13) to Parent.
1.9 Further Action. If, at any time after the Effective Time, any further
action is determined by Parent or the Surviving Corporation to be necessary or
desirable to carry out the purposes of this Agreement or to vest the Surviving
Corporation with full right, title and possession of and to all rights and
property of Merger Sub and the Company, the officers and directors of the
Surviving Corporation and Parent shall be fully authorized (in the name of
Merger Sub, in the name of the Company and otherwise) to take such action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub, as
follows (it being understood that each representation and warranty contained in
this Article II is subject to: (a) the exceptions and disclosures set forth in
the section of the Company Disclosure Schedule corresponding to the particular
Section in this Article II in which such representation and warranty appears;
(b) any exceptions or disclosures explicitly cross-referenced in such section of
the Company Disclosure Schedule by reference to another section of the Company
Disclosure Schedule; and (c) any exception or disclosure set forth in any other
section of the Company Disclosure Schedule to the extent it is reasonably
apparent from the wording of such exception or disclosure that such exception or
disclosure is intended to qualify such representation and warranty):
2.1 Organization and Qualification. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has full
corporate power and authority to conduct its business as and to the extent now
conducted and to own, use and lease its assets and properties. Each of the
Company and its Subsidiaries is duly qualified, licensed or admitted to do
business and is in good standing in each jurisdiction in which the ownership,
use or leasing of its assets and properties, or the conduct or nature of its
business, makes such qualification, licensing or admission necessary, except for
such failures to be so qualified, licensed or admitted and in good standing
which, individually or in the aggregate, do not have and could not be reasonably
expected to have a material adverse effect on the Company and its Subsidiaries
taken as a whole. Section 2.1 of the Company Disclosure Schedule sets forth the
name and jurisdiction of incorporation of each Subsidiary of the Company. The
Company has delivered or made available to Parent and Merger Sub true and
complete copies of the articles of incorporation and bylaws of the Company and
similar governing instruments of each of its Subsidiaries, each as amended to
date, and each such instrument is in full force and effect. Neither the Company
nor any of its Subsidiaries is in violation of any of the provisions of its
articles of incorporation or bylaws or equivalent governing instruments.
2.2 Capitalization.
(a) The authorized capital stock of the Company consists of 400,000,000
shares of Company Common Stock and 5,000,000 shares of preferred stock, par
value $0.001 per share ("Company Preferred Stock"). As of the close of business
on November 30, 2005, 32,007,381 shares of Company Common Stock were issued and
outstanding and no shares of Company Common Stock were held by the Company or
any Subsidiary of the Company. As of the date hereof, no shares of Company
Preferred Stock are issued or outstanding.
(b) As of November 30, 2005, (i) 625,000 shares of Company Common Stock
were reserved for issuance and 252,356 shares were issuable upon exercise of
outstanding stock options granted under the Company's Employee Stock Option
(1997) Plan, (ii) 300,000 shares of Company Common Stock were reserved for
issuance and 280,795 shares were issuable upon exercise of outstanding stock
options granted under the Company's 1999 Incentive and Nonqualified Stock Option
Plan, (iii) 600,000 shares of Company Common Stock were reserved for issuance
and 502,761 shares were issuable upon exercise of outstanding stock options
granted under the Company's Employee Stock Option (2000) Plan, and (iv) 600,000
shares of Company Common Stock were reserved for issuance and 450,000 shares
were issuable upon exercise of outstanding stock options granted under the
Company's Employee Stock Option (2002) Plan. Except as set forth in the
immediately preceding two sentences or on Section 2.2 of the Company Disclosure
schedules, no shares of capital stock or other equity securities of the Company
are issued, reserved for issuance or outstanding. All of the outstanding shares
of the Company's capital stock have been duly authorized and validly issued and
are fully paid and nonassessable. All shares of Company Common Stock issuable
pursuant to the Company ESPP and issuable upon exercise of Company Options and
Company Warrants, when issued in accordance with the terms thereof, will be duly
authorized, validly issued, fully paid and nonassessable.
(c) Section 2.2 of the Company Disclosure Schedule sets forth for each
outstanding Company Stock Option and for each outstanding Company Warrant as of
the date hereof, (i) the name of the holder of such Company Stock Option or
Company Warrant, (ii) the Company Stock Option Plan pursuant to which such
option was issued, if applicable, (iii) the number of shares of Company Common
Stock issuable upon the exercise of such Company Stock Option or Company
Warrant, (iv) the exercise price of such Company Stock Option or Company
Warrant, and (v) the date on which such Company Stock Option or Company Warrant
was granted. Notwithstanding the foregoing, the Company Disclosure Schedule
shall only set forth individually Company Warrants or Company Stock Options with
an exercise price of $1.00 or less. With respect to Company Stock Options or
Company Warrants with an exercise price exceeding $1.00, the Company Disclosure
Schedule shall only set forth the number of shares of Company Common Stock
issuable upon the exercise of such Company Stock Options or Company Warrants.
(d) Except as disclosed in this Section 2.2 or on Section 2.2 of the
Company Disclosure Schedules, there are no options, warrants, equity securities
or similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which the Company or any of its
Subsidiaries is a party or by which it is bound obligating the Company or any of
its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition, of any shares of capital stock of the Company or any
of its Subsidiaries or obligating the Company or any of its Subsidiaries to
grant, extend, accelerate the vesting of or enter into any such option, warrant,
equity security or similar ownership interest, call, right, commitment or
agreement. There are no registration rights and there are no voting trusts,
proxies or other agreements or understandings with respect to the registration
or voting of any equity security of any class of the Company or any of its
Subsidiaries.
2.3 Authority. The Company has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the approval and
adoption of this Agreement and the approval of the Merger by the Company's
stockholders and the filing of the Articles of Merger pursuant to Section
92A.200 of the NRS.
2.4 Binding Effect. This Agreement has been duly executed and delivered by
the Company and, assuming the due authorization, execution and delivery by
Parent and Merger Sub, constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy and other similar laws and general principles of
equity.
2.5 Non-Contravention; Approvals and Consents.
(a) The execution and delivery of this Agreement by the Company do not, and
the performance by the Company of its obligations hereunder and the consummation
of the transactions contemplated hereby will not, (i) conflict with or violate
the articles of incorporation or bylaws of the Company or the equivalent
organizational documents of any of its Subsidiaries, (ii) subject to obtaining
the approval and adoption of this Agreement and the approval of the Merger by
the Company's stockholders as contemplated in Section 4.5 (the "Company
Stockholder Approval") and compliance with the requirements set forth in
paragraph (b) below, conflict with or violate any Law or Order applicable to the
Company or any of its Subsidiaries or by which its or any of their respective
properties is bound or affected, or (iii) result in any breach of or constitute
a default (or an event that with notice or lapse of time or both would become a
default) under, or impair the Company's rights or alter the rights or
obligations of the Company or any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a Lien on any of the properties, including any leased real
property, or assets of the Company or any of its Subsidiaries pursuant to, any
Company Material Contract. Section 2.5(a) of the Company Disclosure Schedule
lists all consents, waivers and approvals under any Company Material Contract
required to be obtained (other than those already obtained) in connection with
the consummation of the transactions contemplated hereby, which, if not
obtained, would have a material adverse effect on the Company or the Surviving
Corporation or have a material adverse effect on the ability of the parties to
consummate the Merger.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the Articles of Merger with
the Secretary of State of the State of Nevada, (ii) the filing of the proxy
statement/prospectus to be sent to the stockholders of the Company in connection
with the meeting of the Company's stockholders to consider the approval and
adoption of this Agreement and approval of the Merger (the "Proxy
Statement/Prospectus") with the United States Securities and Exchange Commission
(the "SEC") in accordance with the Exchange Act, to be included in the
Registration Statement on Form S-4 (the "Registration Statement") to be filed by
Parent with the SEC in accordance with the Securities Act, and the effectiveness
of the Registration Statement, and (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws, the OTC Bulletin Board and the HSR
Act, and the comparable laws of any foreign country reasonably determined by the
parties to be required (such consents, approvals, orders, authorizations,
registrations, declarations and filings described in clauses (i) through (iii)
above being referred to herein as the "Necessary Consents"); and (iv) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings which, if not obtained or made, would not be material to the Company or
Parent or have a material adverse effect on the ability of the parties to
consummate the Merger.
2.6 SEC Filings; Financial Statements.
(a) The Company has delivered (or made available on the SEC website) to Parent
accurate and complete copies of all registration statements, proxy statements
and other statements, reports, schedules, forms and other documents filed by the
Company with, and all Company Certifications (as defined below) filed or
furnished by the Company with or to, the SEC since January 1, 2002, including
all amendments thereto (collectively, the "Company SEC Documents"). All
statements, reports, schedules, forms and other documents required to have been
filed or furnished by the Company with or to the SEC since January 1, 2002 have
been so filed or furnished on a timely basis. None of the Company's Subsidiaries
is required to file or furnish any documents with or to the SEC. As of the time
it was filed with or furnished to the SEC: (i) each of the Company SEC Documents
complied as to form in all material respects with the applicable requirements of
the Securities Act or the Exchange Act (as the case may be); and (ii) none of
the Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, except to the extent corrected: (A) in the
case of Company SEC Documents filed or furnished on or prior to the date of this
Agreement that were amended or superseded on or prior to the date of this
Agreement, by the filing or furnishing of the applicable amending or superseding
Company SEC Document; and (B) in the case of Company SEC Documents filed or
furnished after the date of this Agreement that are amended or superseded prior
to the Effective Time, by the filing or furnishing of the applicable amending or
superseding Company SEC Document. Each of the certifications and statements
relating to the Company SEC Documents required by Rule 13a-14 under the Exchange
Act (collectively, the "Company Certifications") is accurate and complete, and
complied as to form and content with all applicable Laws in effect at the time
each such Company Certification was filed with or furnished to the SEC.
(b) The Company and its Subsidiaries maintain disclosure controls and
procedures required by Rule 13a-15 under the Exchange Act. Such disclosure
controls and procedures are designed to ensure that all material information
concerning the Company and its Subsidiaries required to be disclosed by the
Company in the reports that it is required to file, submit or furnish under the
Exchange Act is recorded, processed, summarized and reported on a timely basis
to the individuals responsible for the preparation of such reports. The Company
has delivered or made available to Parent accurate and complete copies of all
material policies, manuals and other documents promulgating, such disclosure
controls and procedures. The Company is, and has at all times since January 1,
2000 been, in compliance with the applicable listing and other rules and
regulations of the OTC Bulletin Board and has not since January 1, 2000 received
any notice from the OTC Bulletin Board asserting any non-compliance with any of
such rules and regulations.
(c) The financial statements (including any related notes) contained or
incorporated by reference in the Company SEC Documents: (i) complied as to form
in all material respects with the published rules and regulations of the SEC
applicable thereto; (ii) were prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered, and (iii) fairly present in all
material respects the consolidated financial position of the Company and its
Subsidiaries as of the respective dates thereof and the consolidated results of
operations and cash flows of the Company and its Subsidiaries for the periods
covered thereby. No financial statements of any Person other than the Company
and its Subsidiaries are required by GAAP to be included in the consolidated
financial statements of the Company.
(d) The Company has delivered or made available to Parent the unaudited
consolidated balance sheet (including the notes thereto) of the Company and its
Subsidiaries as of September 30, 2005 (the "Company Balance Sheet") and the
unaudited consolidated statement of income (including the notes thereto) of the
Company and its Subsidiaries for the fiscal year then ended (together with the
Company Balance Sheet, the "Company Financial Statements"). The Company
Financial Statements: (i) were prepared in accordance with GAAP applied on a
basis consistent with the basis on which the financial statements contained in
the Company SEC Documents were prepared; and (ii) fairly present in all material
respects the condensed, unaudited consolidated financial position of the Company
and its Subsidiaries as of September 30, 2005 and the condensed, unaudited
consolidated results of operations of the Company and its Subsidiaries for the
fiscal year then ended.
(e) The Company's auditor has, at all times since the date of enactment of
the Xxxxxxxx-Xxxxx Act, been: (i) a registered public accounting firm (as
defined in Section 2(a)(12) of the Xxxxxxxx-Xxxxx Act); (ii) "independent" with
respect to the Company within the meaning of Regulation S-X under the Exchange
Act; and (iii) in compliance with subsections (g) through (l) of Section 10A of
the Exchange Act and the rules and regulations promulgated by the SEC and the
Public Company Accounting Oversight Board thereunder. All non-audit services (as
defined in Section 2(a)(8) of the Xxxxxxxx-Xxxxx Act) performed by the Company's
auditors for the Company and its Subsidiaries were approved as required by
Section 202 of the Xxxxxxxx-Xxxxx Act.
(f) Other than as disclosed in the Company SEC Documents, there are no
securitization transactions or "off-balance sheet arrangements" (as defined in
Item 303(c) of Regulation S-K under the Exchange Act) currently in effect and no
such transactions or arrangements have been effected by the Company or any of
its Subsidiaries since January 1, 2000.
2.7 Absence of Certain Changes or Events.
(a) Since the date of the Company Balance Sheet, there has not been: (i)
any material adverse effect on the Company, (ii) any change by the Company in
its accounting methods, principles or practices, except as required by
concurrent changes in GAAP or the rules and regulations promulgated by the SEC,
(iii) any revaluation by the Company of any of its assets including writing down
the value of capitalized inventory or writing off notes or accounts receivable
other than in the ordinary course of business, or (iv) any split, combination or
reclassification of the capital stock of the Company or any of its Subsidiaries.
(b) From December 31, 2004 until the date of this Agreement, the Company
and its Subsidiaries have not taken or legally committed to take any of the
actions specified in Sections 4.3(a) through (r).
2.8 Absence of Undisclosed Liabilities. Except for matters reflected or
reserved against in the Company Balance Sheet, neither the Company nor any of
its Subsidiaries had as of the date of the Company Balance Sheet, or has
incurred since such date, any liabilities or obligations (whether absolute,
accrued, contingent, fixed or otherwise, or whether due or to become due) of any
nature that would be required by GAAP to be reflected on the Company Balance
Sheet, other than liabilities and obligations that (i) were incurred in the
ordinary course of business consistent with past practice and (ii) have not
been, and could not be reasonably expected to be, individually or in the
aggregate, materially adverse to the Company and its Subsidiaries taken as a
whole.
2.9 Legal Proceedings. Except as disclosed in the Company SEC Documents
filed prior to the date of this Agreement, (a) there are no actions, suits,
arbitrations or proceedings pending or, to the knowledge of the Company or any
of its Subsidiaries, threatened against, relating to or affecting, nor to the
knowledge of the Company or any of its Subsidiaries are there any investigations
or audits by a Governmental Entity pending or threatened against, relating to or
affecting, the Company or any of its Subsidiaries or any of their respective
assets and properties which, if determined adversely to the Company or any of
its Subsidiaries, individually or in the aggregate, could be reasonably expected
to have a material adverse effect on the Company and its Subsidiaries taken as a
whole or on the ability of the Company to consummate the transactions
contemplated by this Agreement, and, to the knowledge of the Company or any of
its Subsidiaries, there are no facts or circumstances known to the Company or
any of its Subsidiaries that could be reasonably expected to give rise to any
such action, suit, arbitration, proceeding, investigation or audit, and (b)
neither the Company nor any of its Subsidiaries is subject to any Order that,
individually or in the aggregate, has or could be reasonably expected to have a
material adverse effect on the Company and its Subsidiaries taken as a whole or
on the ability of the Company to consummate the transactions contemplated by
this Agreement.
2.10 Tangible Property and Assets. Except as disclosed in the Company SEC
Documents filed prior to the date of this Agreement, the Company and its
Subsidiaries have good and marketable title to, or have valid leasehold
interests in or valid rights under contract to use, all tangible property and
assets used in and, individually or in the aggregate, material to the conduct of
the businesses of the Company and its Subsidiaries taken as a whole, free and
clear of all Liens other than (i) any statutory Lien arising in the ordinary
course of business by operation of law with respect to a liability that is not
yet due or delinquent and (ii) any minor imperfection of title or similar Lien
which individually or in the aggregate with all other such Liens does not
materially impair the value of the property or asset subject to such Lien or the
use of such property or asset in the conduct of the business of the Company or
any such Subsidiary. All such property and assets are, in all material respects,
in good working order and condition, ordinary wear and tear excepted, and
adequate and suitable for the purposes for which they are presently being used.
2.11 Intellectual Property Rights. The Company and its Subsidiaries have
all right, title and interest in, or a valid and binding license to use, all
Company IP individually or in the aggregate material to the conduct of the
businesses of the Company and its Subsidiaries taken as a whole. Neither the
Company nor any Subsidiary of the Company is in default (or with the giving of
notice or lapse of time or both, would be in default) in any material respect
under any license to use such Company IP, such Company IP is not being infringed
by any third party, and neither the Company nor any Subsidiary of the Company is
infringing any Intellectual Property Rights of any third party, except for such
defaults and infringements which, individually or in the aggregate, do not have
and could not be reasonably expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole.
2.12 Real Property.
(a) The Company and each of its Subsidiaries has good, marketable and
indefeasible fee title to their respective Owned Real Properties, free and clear
of any Liens, other than Liens for current taxes not yet due and payable and
Liens that have arisen in the ordinary course of business and that do not (in
any case or in the aggregate) materially detract from the value of the assets
subject thereto or materially impair the operations of the Company or any of its
Subsidiaries.
(b) Section 2.12 of the Company Disclosure Schedule sets forth an accurate
and complete list of each lease pursuant to which any real property is being
leased to the Company or any of its Subsidiaries.
(c) Section 2.12 of the Company Disclosure Schedule contains an accurate
and complete list of all subleases, occupancy agreements and other Company
Contracts granting to any Person (other than the Company or any of its
Subsidiaries) a right of use or occupancy of any Owned Real Property and Leased
Real Property of the Company.
2.13 Compliance; Permits.
(a) Neither the Company nor any of its Subsidiaries nor the conduct of
their respective businesses is, in any material respect, in conflict with, or in
default or, to the knowledge of the Company or any of its Subsidiaries,
violation of, any Law applicable to the Company or any of its Subsidiaries or by
which its or any of their respective businesses or properties is bound or
affected. No investigation or review by any Governmental Entity is pending or,
to the knowledge of the Company, threatened against the Company or any of its
Subsidiaries, nor has any Governmental Entity indicated to the Company or any of
its Subsidiaries an intention to conduct the same. There is no Order binding
upon the Company or any of its Subsidiaries which has or could reasonably be
expected to have the effect of prohibiting or materially impairing any business
practice of the Company or any of its Subsidiaries, any acquisition of material
property by the Company or any of its Subsidiaries or the conduct of business by
the Company or any of its Subsidiaries as currently conducted or presently
proposed to be conducted.
(b) The Company and its Subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from Governmental Entities that are material to
the operation of the business of the Company and its Subsidiaries (collectively,
the "Company Permits"). The Company and its Subsidiaries are in compliance in
all material respects with the terms of the Company Permits.
2.14 Company Material Contracts. Neither the Company nor any of its
Subsidiaries, nor, to the Company's knowledge, any other party to a Company
Material Contract, is in material breach, violation or default under, and
neither the Company nor any of its Subsidiaries has received written notice that
it has breached, violated or defaulted under, any of the material terms or
conditions of any Company Material Contract in such a manner as would permit any
other party to cancel or terminate any such Company Material Contract, or would
permit any other party to seek material damages or other material remedies (for
any or all of such breaches, violations or defaults, in the aggregate).
2.15 Taxes.
(a) The Company and each of its Subsidiaries has filed all tax returns and
reports required to be filed by it through the date hereof and will timely file
any such returns or reports required to be filed on or prior to the Closing
Date, and such returns and reports accurately reflect all taxes, charges and
assessments owed by the Company and its Subsidiaries. Section 2.15(a) of the
Company Disclosure Schedule (i) lists every federal, state, local and foreign
jurisdiction in which the Company and its Subsidiaries are subject to Tax, and
indicates those Tax Returns that have been examined or audited and indicates
those Tax Returns that currently are the subject of examination or audit.
(b) No extension or waiver of any statute of limitations has been requested
of or granted by the Company or any of its Subsidiaries with respect to any Tax
for any period, and no extension or waiver of time within which to file any Tax
Return has been requested by or granted to the Company or any of its
Subsidiaries.
(c) No deficiency, delinquency, or default for any Taxes relating to the
Company or any its Subsidiaries or its receipts, income, sales transactions or
other business activities has been claimed, proposed or assessed against the
Company or any of its Subsidiaries nor has the Company or any of its
Subsidiaries received notice of any such deficiency, delinquency, or default;
and there is no audit, examination, investigation, claim, assessment, action,
suit, proceeding, lien or encumbrance in effect, pending or proposed by any tax
authority with respect to any such Taxes or with respect to any Tax Return of
the Company or any of its Subsidiaries. There are no Liens for Taxes (other than
for current Taxes not yet due and payable) on any of the assets and properties
of the Company and its Subsidiaries.
(d) The Company and each of its Subsidiaries has withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or third
party.
(e) There is no tax ruling, request for ruling, or settlement, compromise,
closing or Tax collection agreement in effect or pending which does or could
affect the liability of the Company or any of its Subsidiaries for Taxes for any
period after the Closing Date.
(f) Neither the Company nor any of its Subsidiaries has (i) been a member
of an Affiliated Group filing a consolidated federal Tax Return or (ii) incurred
any liability for the Taxes of any Person under Section 1.1502-6 of the Treasury
Regulations, under any provision of state, local or foreign law similar to
Section 1.1502-6 of the Treasury Regulations, as a transferee or successor, by
contract, or otherwise.
(g) Neither the Company nor any of its Subsidiaries is obligated to make
any payments, or is a party to any agreement that under any circumstances could
obligate the Company or any of its Subsidiaries to make any payments, that are
not or would not be deductible under Section 162(m) or Section 280G of the Code.
(h) None of the assets of the Company and its Subsidiaries (i) consists of
or secures any indebtedness, the interest on which is exempt from Tax; (ii) is
"tax exempt use property" within the meaning of Section 168(h) of the Code; or
(iii) will as of the Closing Date be subject to any "safe harbor lease" within
the meaning of former Section 168(f)(8) of the Internal Revenue Code of 1954.
2.16 Labor and Employment Matters.
(a) The Company and each of its Subsidiaries (i) has withheld and paid to
the appropriate Governmental Entities, or is withholding for payment not yet due
to such entities, all amounts required to be withheld from its employees; (ii)
is not liable for any arrears of wages, Taxes, penalties or other sums for
failure to comply with any of the foregoing; and (iii) has complied in all
material respects with all applicable Laws relating to the employment of labor,
including Title VII of the Federal Civil Rights Act of 1964, as amended, the
Occupational Safety and Health Act, and those relating to hours, wages,
collective bargaining and the payment and withholding of Taxes and other sums as
required by appropriate authorities.
(b) Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or other labor contract applicable to the
employees of the Company or any of its Subsidiaries. Neither the Company nor any
of its Subsidiaries is subject to any (i) unfair labor practice complaint
pending before the National Labor Relations Board or any other federal, state,
local or foreign agency, (ii) pending or threatened labor strike, slowdown, work
stoppage, lockout, or other organized labor disturbance, or threat thereof,
(iii) pending grievance proceeding, (iv) pending representation question
respecting the employees of the Company or any of its Subsidiaries, (v) pending
arbitration proceeding arising out of or under any collective bargaining
agreement or (vi) attempt by any union to represent employees of the Company or
any of its Subsidiaries as a collective bargaining agent.
(c) None of the current or former independent contractors of the Company or
any of its Subsidiaries could be reclassified as an employee, except as would
not have and would not reasonably be expected to have or result in a material
adverse effect on the Company and its Subsidiaries.
2.17 Employees. Section 2.17 of the Company Disclosure Schedule sets forth
a list of the names of all employees of the Company and its Subsidiaries
currently employed in connection with its and their respective businesses
(collectively, the "Employees") and indicates the current salary or wage rate of
each such Employee. All of such salaries, wages and benefits will be paid by the
Company and its Subsidiaries when due for all periods through the Closing Date.
Section 2.17 of the Company Disclosure Schedule sets forth a list of all
Employees terminated by the Company and its Subsidiaries since the date 90 days
prior to the date hereof. The employment of each Employee is terminable at will.
2.18 Employee Benefit Plans.
(a) Section 2.18(a) of the Company Disclosure Schedule sets forth a true
and complete list of all Company Benefit Plans and identifies each such Company
Benefit Plan as either an "employee welfare benefit plan," as defined in ERISA
Section 3(1) (a "Welfare Plan") or an "employee pension benefit plan", as
defined in ERISA Section 3(2) (a "Pension Plan"); provided, however, that the
term "Pension Plan" shall not include any Company Benefit Plan that is a
"multiemployer plan" within the meaning of ERISA Section 3(37) (a "Multiemployer
Plan").
(b) The Company has delivered or made available to Parent true and complete
copies of: (i) all plan texts, agreements and material employee communications
relating to each Company Benefit Plan; (ii) all summary plan descriptions
(whether or not required to be furnished pursuant to ERISA), the most recent
annual report (including all schedules thereto) and the most recent annual and
periodic accounting and financial statements of related plan assets with respect
to each Pension Plan and Welfare Plan; and (iii) the most recent determination
letter received from the Internal Revenue Service with respect to each Pension
Plan.
(c) To the knowledge of the Company or any of its Subsidiaries, no event
has occurred (and there exists no condition or set of circumstances) in
connection with any Company Benefit Plan that could subject Parent, Merger Sub,
the Company, the Surviving Corporation or any Company Benefit Plan, directly or
indirectly, to any liability under ERISA, the Code or any other law, regulation
or governmental order applicable to any Company Benefit Plan.
(d) Each Company Benefit Plan (other than any Multiemployer Plan) conforms
to, and its administration is in compliance with, all applicable laws and
regulations, including but not limited to, ERISA and the Code, and no fiduciary
of any Company Benefit Plan has taken any action that could result in such
fiduciary being liable for the payment of damages under ERISA Section 409 and
that would result in any liability for Parent, Merger Sub, the Company or the
Surviving Corporation.
(e) Each Pension Plan that is intended to qualify under Section 401(a) or
403(a) of the Code is so qualified and has received a favorable determination
letter from the Internal Revenue Service with respect to such qualification, its
related trust has been determined to be exempt from taxation under Section
501(a) of the Code, and nothing has occurred since the date of such letter that
could adversely affect such qualification or exemption.
(f) Each Company Benefit Plan (other than any Multiemployer Plan) has been
maintained in accordance with its terms, and there are no pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened claims, lawsuits
or arbitrations (other than routine claims for benefits) that have been asserted
or instituted against or with respect to any such Company Benefit Plan or the
assets of any of the trusts under any such Company Benefit Plan.
(g) There has been no failure to comply with applicable ERISA or other
requirements as to the filing of reports, documents and notices with the
Secretary of Labor, the Secretary of the Treasury and the Pension Benefit
Guaranty Corporation ("PBGC") that could subject any Company Benefit Plan (other
than any Multiemployer Plan), any fiduciary thereof, Parent, Merger Sub, the
Company or the Surviving Corporation to a penalty, and any requirement of the
furnishing of such documents to participants or beneficiaries, due before the
Closing Date, has been or will be complied with by all of the Company Benefit
Plans prior to the Closing.
(h) No "prohibited transaction," as such term is defined in Code Section
4975 and ERISA Section 406, has occurred with respect to any Company Benefit
Plan (other than a Multiemployer Plan) that could subject such Company Benefit
Plan, any fiduciary thereof, Parent, Merger Sub, the Company or the Surviving
Corporation to a penalty for such prohibited transaction imposed by ERISA
Section 502 or a material tax imposed by Code Section 4975.
(i) Any bond required by applicable provisions of ERISA with respect to any
Company Benefit Plan (other than a Multiemployer Plan) has been obtained and is
in full force and effect.
(j) No "reportable event," as such term is defined in ERISA Section 4043,
has occurred or is continuing with respect to any Pension Plan.
(k) No Pension Plan that is or was subject to Title IV of ERISA has been
terminated; no proceeding has been initiated to terminate any such Plan; and
neither the Company nor any of its Subsidiaries has incurred, and does not
reasonably expect to incur, any liability, whether to the PBGC or otherwise,
except for required premium payments, which payments have been made when due,
with respect to the termination of any Pension Plan. No event has occurred (and
there exists no condition or set of circumstances) that presents a material risk
of the partial termination of any Pension Plan.
(l) No Company Benefit Plan provides medical or death benefits (whether or
not insured) with respect to current or former employees of the Company or any
of its Subsidiaries beyond their retirement or other termination of service
(other than (i) coverage mandated by law or (ii) death benefits under any
Pension Plan).
(m) There are no unfunded benefit obligations arising in any jurisdiction.
(n) The consummation of the transactions contemplated hereby will not (i)
entitle any current or former employee of the Company or any of its Subsidiaries
to severance pay, unemployment compensation or any similar payment, or (ii)
accelerate the time of payment or vesting, or increase the amount of any
compensation due to any such employee or former employee.
(o) The Company has provided (or has caused the applicable Company Benefit
Plans to provide) and will continue to provide (or cause the applicable Company
Benefit Plans to provide) for "continuation coverage" to or for the benefit of
each "covered employee" and each "qualified beneficiary" entitled thereto (as
such terms are defined in Code Section 4980B) and shall otherwise comply in all
respects with the requirements (including, but not limited to, notice
requirements) of Code Section 4980B as to each such covered employee and each
such qualified beneficiary with respect to whom a "qualifying event" (as defined
in Code Section 4980B) has occurred (or will occur) through the Closing.
(p) Section 2.18(p) of the Company Disclosure Schedule sets forth a true
and correct list of all Multiemployer Plans to which the Company has
contributed, or is required to contribute, since January 1, 2003. To the
Company's knowledge, each such Multiemployer Plan has been maintained in
substantial compliance with the requirements prescribed by any and all
applicable statutes, orders, rules and regulations, including, but not limited
to, ERISA and the Code. To the Company's knowledge, no "prohibited transaction,"
as defined in ERISA Section 406 or Code Section 4975, has occurred in connection
with any such Multiemployer Plan. The Company shall have made, on or prior to
the Closing, all contributions required to be made to each such Multiemployer
Plan.
(q) Section 2.18(q) of the Company Disclosure Schedule sets forth
accurately, for each Multiemployer Plan, (i) the amount of contributions by the
Company and its Subsidiaries to such plan for the prior two plan years and (ii)
the amount of withdrawal liability as determined under Section 4201 of ERISA
that the Company and its Subsidiaries would incur if any of them withdrew from
such plan in a complete withdrawal as of the date listed in Section 2.18(q) of
the Company Disclosure Schedule. With respect to any Multiemployer Plan, neither
the Company nor any of its Subsidiaries has incurred or otherwise become liable
for, or is reasonably expected to incur or become liable for, a "complete
withdrawal" or "partial withdrawal," as such terms are defined in Sections 4203
and 4205 of ERISA, respectively, with respect to events that have occurred
before or as of the Closing.
(r) Except as set forth in Section 2.18(a) of the Company Disclosure
Schedule, the Company and its Subsidiaries do not have any medical, dental,
disability or life insurance programs, or stock option, incentive or deferred
compensation plans or other similar fringe or employee benefit plans, programs
or arrangements for the benefit of their respective employees.
2.19 Environmental Matters.
(a) Hazardous Material. No underground storage tanks and no amount of any
substance that has been designated by any Governmental Entity or by applicable
federal, state or local law to be radioactive, toxic, hazardous or otherwise a
danger to health or the environment, including PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office and janitorial supplies
("Hazardous Materials"), are present, as a result of the actions of the Company,
or its Subsidiaries or any affiliate of the Company, or, to the knowledge of the
Company, as a result of any actions of any third party or otherwise, in, on or
under any property, including the land and the improvements, ground water and
surface water thereof, that the Company or any of its Subsidiaries has at any
time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Neither the Company nor any of its
Subsidiaries has transported, stored, used, manufactured, disposed of, released
or exposed its employees or others to any Hazardous Materials in violation of
any law in effect on or before the Closing Date, and neither the Company nor any
of its Subsidiaries has disposed of, transported, sold, used, released, exposed
its employees or others to or manufactured any product containing any Hazardous
Material (collectively, "Hazardous Materials Activities") in violation of any
law, rule, regulation, treaty or statute promulgated by any Governmental Entity
in effect on or prior to the Closing Date to prohibit, regulate or control
Hazardous Materials or any Hazardous Materials Activities.
(c) Permits. The Company and its Subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents (the
"Environmental Permits") necessary for the conduct of the Company's and its
Subsidiaries' Hazardous Materials Activities and other businesses of the Company
and its Subsidiaries as such activities and businesses are currently being
conducted, except where the failure to hold such Environmental Permits could not
be reasonably expected to result in a material liability to the Company and its
Subsidiaries taken as a whole.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Company's knowledge, threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of the Company or any of its
Subsidiaries.
2.20 Statements; Proxy Statement/Prospectus. None of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in (a) the Registration Statement will, at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading and (b) the
proxy statement/prospectus to be sent to the stockholders of the Company in
connection with the Company Stockholder Meeting (as defined in Section 4.5(a))
(such proxy statement/prospectus as amended or supplemented is referred to
herein as the "Proxy Statement/Prospectus") shall not, on the date the Proxy
Statement/Prospectus is first mailed to the Company's stockholders or at the
time of the Company Stockholder Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any time before
the Effective Time, any event relating to the Company or any of its affiliates,
officers or directors should be discovered by the Company which should be set
forth in a supplement to the Proxy Statement/Prospectus, the Company shall
promptly inform Parent. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information supplied or to be
supplied by Parent or Merger Sub that is, will be, or is required to be,
contained in any of the foregoing documents.
2.21 Certain Business Practices. Neither the Company nor any of its
Subsidiaries, and, to the knowledge of the Company, no Representative of the
Company or any of its Subsidiaries with respect to any matter relating to the
Company or any of its Subsidiaries, has: (a) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; (b) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended; or (c) made any other unlawful payment.
2.22 Interested Party Transactions. Except as disclosed in the Company SEC
Documents, neither the Company nor any of its Subsidiaries is indebted to any
director or officer of the Company or any of its Subsidiaries (except for
amounts due as normal salaries and bonuses and in reimbursement of ordinary
expenses), and no such person is indebted to the Company or any of its
Subsidiaries, and there are no other transactions of the type required to be
disclosed pursuant to Items 402 or 404 of Regulation S-K under the Securities
Act and the Exchange Act.
2.23 Insurance. The Company and each of its Subsidiaries has policies of
insurance and bonds of the type and in amounts customarily carried by persons
conducting businesses or owning assets similar to those of the Company and its
Subsidiaries. There is no claim pending under any of such policies or bonds as
to which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All premiums due and payable under all such policies and
bonds have been paid and the Company and its Subsidiaries are otherwise in
compliance in all material respects with the terms of such policies and bonds.
Company has no knowledge of any threatened termination of, or material premium
increase with respect to, any of such policies.
2.24 Minute Books. The minute books of the Company and its Subsidiaries
made available to Parent contain a complete and accurate summary of all meetings
of directors and stockholders or actions by written consent of the Company and
the respective Subsidiaries during the past three years and through the date of
this Agreement, and reflect all transactions referred to in such minutes
accurately in all material respects.
2.25 Vote Required. The affirmative vote of the holders of at least a
majority of the shares of Company Common Stock outstanding on the record date
set for the Company Stockholders Meeting is the only vote of the holders of any
of Company's capital stock necessary to approve this Agreement and the
transactions contemplated hereby.
2.26 Brokers' and Finders' Fees. The Company has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company, as follows (it being
understood that each representation and warranty contained in this Article III
is subject to: (a) the exceptions and disclosures set forth in the section of
the Parent Disclosure Schedule corresponding to the particular Section in this
Article III in which such representation and warranty appears; (b) any
exceptions or disclosures explicitly cross-referenced in such section of the
Parent Disclosure Schedule by reference to another section of the Parent
Disclosure Schedule; and (c) any exception or disclosure set forth in any other
section of the Parent Disclosure Schedule to the extent it is reasonably
apparent from the wording of such exception or disclosure that such exception or
disclosure is intended to qualify such representation and warranty):
3.1 Organization and Qualification. 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 and has full corporate power and authority
to conduct its business as and to the extent now conducted and to own, use and
lease its assets and properties. Parent and each of its Subsidiaries is duly
qualified, licensed or admitted to do business and is in good standing in each
jurisdiction in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so qualified,
licensed or admitted and in good standing which, individually or in the
aggregate, do not have and could not be reasonably expected to have a material
adverse effect on Parent and its Subsidiaries taken as a whole. Section 3.1 of
the Parent Disclosure Schedule sets forth the name and jurisdiction of
incorporation of each Subsidiary of Parent. Parent has delivered or made
available to the Company true and complete copies of the certificate of
incorporation and bylaws of Parent and similar governing instruments of each of
its Subsidiaries, as amended to date, and each such instrument is in full force
and effect. Neither Parent nor any of its Subsidiaries is in violation of any of
the provisions of its certificate of incorporation or bylaws or equivalent
governing instruments.
3.2 Capitalization.
(a) The authorized capital stock of Parent consists of 250,000,000 shares
of Parent Common Stock and 2,000,000 shares of preferred stock, par value
$0.0001 per share ("Parent Preferred Stock"), of which (i) 500,000 shares are
designated Series A Junior Participating Preferred Stock, none of which are
issued or outstanding, (ii) 2,000 shares are designated as Series E Convertible
Preferred Stock, of which approximately 923 shares are issued and outstanding,
(iii) 250 shares are designated as Series F Convertible Preferred Stock, of
which 194 shares are issued and outstanding, and (iv) 10,000 shares are
designated as Series G Convertible Preferred Stock, of which approximately 6,579
shares are issued and outstanding. As of the close of business on November 30,
2005, 20,929,673 shares of Parent Common Stock were issued and outstanding and
no shares of Parent Common Stock were held by Parent or any Subsidiary of
Parent.
(b) As of November 30, 2005, (i) 270,000 shares of Parent Common Stock were
reserved for issuance (ii) 2,291,669 shares were issuable upon exercise of
outstanding stock options granted under Parent's 2004 Equity Incentive Plan (the
"2004 Equity Incentive Plan"); 805,860 shares were issuable upon exercise of
outstanding stock options granted under Parent's 1995 Stock Incentive Plan (the
"1995 Stock Incentive Plan"); and (iii) Parent had reserved for issuance
13,671,488 shares of Parent Common Stock issuable upon exercise of outstanding
warrants to purchase shares of Parent Common Stock (the "Parent Warrants"). As
of November 30, 2005, (w) approximately 1,846,262 shares of Parent Common Stock
were issuable upon conversion of Parent's Series E Convertible Preferred Stock,
(x) 4,740,000 shares of Parent Common Stock were issuable upon conversion of
Parent's Series F Convertible Preferred Stock, and (y) approximately 13,157,560
shares of Parent Common Stock were issuable upon conversion of Parent's Series G
Convertible Preferred Stock. Except as set forth in the immediately preceding
two sentences, no shares of capital stock or other equity securities of Parent
are issued, reserved for issuance or outstanding. All of the outstanding shares
of Parent's capital stock have been duly authorized and validly issued and are
fully paid and nonassessable. All shares of Parent Common Stock issuable
pursuant to the 2004 Equity Incentive Plan and 1995 Stock Option/Stock Issuance
Plan, issuable upon exercise of Parent Warrants, issuable upon conversion of the
outstanding Parent Preferred Stock and issuable as payment of principal and
interest under certain of Parent's outstanding promissory notes, when issued in
accordance with the terms thereof, will be duly authorized, validly issued,
fully paid and nonassessable.
(c) Except as set forth in Section 3.2(b) above, there are no options,
warrants, equity securities or similar ownership interests, calls, rights
(including preemptive rights), commitments or agreements of any character to
which Parent or any of its Subsidiaries is a party or by which it is bound,
obligating Parent or any of its Subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, or repurchase, redeem or otherwise acquire, or
cause the repurchase, redemption or acquisition, of any shares of capital stock
of Parent or any of its Subsidiaries or obligating Parent or any of its
Subsidiaries to grant, extend, accelerate the vesting of or enter into any such
option, warrant, equity security or similar ownership interest, call, right,
commitment or agreement. There are no registration rights and there are no
voting trusts, proxies or other agreements or understandings with respect to the
registration or voting of any equity security of any class of Parent or any of
its Subsidiaries.
3.3 Authority. Each of Parent and Merger Sub has all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Merger
Sub, subject only to the filing of the Articles of Merger pursuant to Section
92A.200 of the NRS.
3.4 Binding Effect. This Agreement has been duly executed and delivered by
each of Parent and Merger Sub and, assuming the due authorization, execution and
delivery by the Company, constitutes a valid and binding obligation of each of
Parent and Merger Sub, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity.
3.5 Non-Contravention; Approvals and Consents.
(a) The execution and delivery of this Agreement by Parent and Merger Sub
do not, and the performance by Parent and Merger Sub of their respective
obligations hereunder and the consummation of the transactions contemplated
hereby will not, (i) conflict with or violate the certificate of incorporation
or bylaws of Parent, the articles of incorporation or bylaws of Merger Sub or
the equivalent organizational documents of any other Subsidiary of Parent, (ii)
subject to compliance with the requirements set forth in paragraph (b) below,
conflict with or violate any Law or Order applicable to Parent, Merger Sub or
any other Subsidiary of Parent or by which any of their respective properties is
bound or affected, or (iii) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or impair Parent's rights or alter the rights or obligations of Parent or
any third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any of
the properties, including any leased real property, or assets of Parent or any
of its Subsidiaries pursuant to, any Parent Material Contract. Section 3.5(a) of
the Parent Disclosure Schedule lists all consents, waivers and approvals under
any Parent Material Contract required to be obtained (other than those already
obtained) in connection with the consummation of the transactions contemplated
hereby, which, if not obtained, would have a material adverse effect on Parent
or any of its Subsidiaries or have a material adverse effect on the ability of
the parties to consummate the Merger.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to Parent or any of its Subsidiaries in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the Necessary Consents and (ii) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings which, if not obtained or made, would not be material to the Company or
Parent or have a material adverse effect on the ability of the parties to
consummate the Merger.
3.6 SEC Filings; Financial Statements.
(a) Parent has delivered (or made available on the SEC website) to the
Company accurate and complete copies of all registration statements, proxy
statements and other statements, reports, schedules, forms and other documents
filed by Parent with, and all Parent Certifications (as defined below) filed or
furnished by Parent with or to, the SEC since January 1, 2002, including all
amendments thereto (collectively, the "Parent SEC Documents"). All statements,
reports, schedules, forms and other documents required to have been filed or
furnished by Parent with or to the SEC since January 1, 2002 have been so filed
or furnished on a timely basis. None of Parent's Subsidiaries is required to
file or furnish any documents with or to the SEC. As of the time it was filed
with or furnished to the SEC: (i) each of the Parent SEC Documents complied as
to form in all material respects with the applicable requirements of the
Securities Act or the Exchange Act (as the case may be); and (ii) none of the
Parent SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading, except to the extent corrected: (A) in the
case of Parent SEC Documents filed or furnished on or prior to the date of this
Agreement that were amended or superseded on or prior to the date of this
Agreement, by the filing or furnishing of the applicable amending or superseding
Parent SEC Document; and (B) in the case of Parent SEC Documents filed or
furnished after the date of this Agreement that are amended or superseded prior
to the Effective Time, by the filing or furnishing of the applicable amending or
superseding Parent SEC Document. Each of the certifications and statements
relating to the Parent SEC Documents required by Rule 13a-14 under the Exchange
Act (collectively, the "Parent Certifications") is accurate and complete, and
complied as to form and content with all applicable Laws in effect at the time
each such Parent Certification was filed with or furnished to the SEC.
(b) Parent and its Subsidiaries maintain disclosure controls and procedures
required by Rule 13a-15 under the Exchange Act. Such disclosure controls and
procedures are designed to ensure that all material information concerning
Parent and its Subsidiaries required to be disclosed by Parent in the reports
that it is required to file, submit or furnish under the Exchange Act is
recorded, processed, summarized and reported on a timely basis to the
individuals responsible for the preparation of such reports. Parent has
delivered or made available to the Company accurate and complete copies of all
material policies, manuals and other documents promulgating, such disclosure
controls and procedures. Parent is, and has at all times since January 1, 2000
been, in compliance with the applicable listing and other rules and regulations
of the OTC Bulletin Board and has not since January 1, 2000 received any notice
from the OTC Bulletin Board asserting any non-compliance with any of such rules
and regulations.
(c) The financial statements (including any related notes) contained or
incorporated by reference in the Parent SEC Documents: (i) complied as to form
in all material respects with the published rules and regulations of the SEC
applicable thereto; (ii) were prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered, and (iii) fairly present in all
material respects the consolidated financial position of Parent and its
Subsidiaries as of the respective dates thereof and the consolidated results of
operations and cash flows of Parent and its Subsidiaries for the periods covered
thereby. No financial statements of any Person other than Parent and its
Subsidiaries are required by GAAP to be included in the consolidated financial
statements of Parent.
(d) Parent has delivered or made available to the Company the unaudited
consolidated balance sheet (including the notes thereto) of Parent and its
Subsidiaries as of September 30, 2005 (the "Parent Balance Sheet") and the
unaudited consolidated statement of income (including the notes thereto) of
Parent and its Subsidiaries for the fiscal period then ended (together with the
Parent Balance Sheet, the "Parent Financial Statements"). The Parent Financial
Statements: (i) were prepared in accordance with GAAP applied on a basis
consistent with the basis on which the financial statements contained in the
Parent SEC Documents were prepared; and (ii) fairly present in all material
respects the condensed, unaudited consolidated financial position of Parent and
its Subsidiaries as of September 30, 2005 and the condensed, unaudited
consolidated results of operations of Parent and its Subsidiaries for the fiscal
year then ended.
(e) Parent's auditor has, at all times since the date of enactment of the
Xxxxxxxx-Xxxxx Act, been: (i) a registered public accounting firm (as defined in
Section 2(a)(12) of the Xxxxxxxx-Xxxxx Act); (ii) "independent" with respect to
Parent within the meaning of Regulation S-X under the Exchange Act; and (iii) in
compliance with subsections (g) through (l) of Section 10A of the Exchange Act
and the rules and regulations promulgated by the SEC and the Public Company
Accounting Oversight Board thereunder. All non-audit services (as defined in
Section 2(a)(8) of the Xxxxxxxx-Xxxxx Act) performed by Parent's auditors for
Parent and its Subsidiaries were approved as required by Section 202 of the
Xxxxxxxx-Xxxxx Act.
(f) Other than as disclosed in the Parent SEC Documents, there are no
securitization transactions or "off-balance sheet arrangements" (as defined in
Item 303(c) of Regulation S-K under the Exchange Act) currently in effect and no
such transactions or arrangements have been effected by Parent or any of its
Subsidiaries since January 1, 2000.
3.7 Absence of Certain Changes or Events.
(a) Since the date of the Parent Balance Sheet, there has not been: (i) any
material adverse effect on Parent, (ii) any change by Parent in its accounting
methods, principles or practices, except as required by concurrent changes in
GAAP or the rules and regulations promulgated by the SEC, (iii) any revaluation
by Parent of any of its assets including writing down the value of capitalized
inventory or writing off notes or accounts receivable other than in the ordinary
course of business, or (iv) any split, combination or reclassification of the
capital stock of Parent or any of its Subsidiaries.
(b) From December 31, 2004 until the date of this Agreement, Parent and its
Subsidiaries have not taken or legally committed to take any of the actions
specified in Sections 4.2(a) through (r).
3.8 Absence of Undisclosed Liabilities. Except for matters reflected or
reserved against in the Parent Balance Sheet, neither Parent nor any of its
Subsidiaries had as of the date of the Parent Balance Sheet, or has incurred
since such date, any liabilities or obligations (whether absolute, accrued,
contingent, fixed or otherwise, or whether due or to become due) of any nature
that would be required by GAAP to be reflected on the Parent Balance Sheet,
other than liabilities and obligations that (i) were incurred in the ordinary
course of business consistent with past practice and (ii) have not been, and
could not be reasonably expected to be, individually or in the aggregate,
materially adverse to Parent and its Subsidiaries taken as a whole.
3.9 Legal Proceedings. Except as disclosed in the Parent SEC Documents
filed prior to the date of this Agreement, (a) there are no actions, suits,
arbitrations or proceedings pending or, to the knowledge of Parent or any of its
Subsidiaries, threatened against, relating to or affecting, nor to the knowledge
of Parent or any of its Subsidiaries are there any investigations or audits by a
Governmental Entity pending or threatened against, relating to or affecting,
Parent or any of its Subsidiaries or any of their respective assets and
properties which, if determined adversely to Parent or any of its Subsidiaries,
individually or in the aggregate, could be reasonably expected to have a
material adverse effect on Parent and its Subsidiaries taken as a whole or on
the ability of Parent to consummate the transactions contemplated by this
Agreement, and, to the knowledge of the Company or any of its Subsidiaries,
there are no facts or circumstances known to Parent or any of its Subsidiaries
that could be reasonably expected to give rise to any such action, suit,
arbitration, proceeding, investigation or audit, and (b) neither Parent nor any
of its Subsidiaries is subject to any Order that, individually or in the
aggregate, has or could be reasonably expected to have a material adverse effect
on Parent and its Subsidiaries taken as a whole or on the ability of Parent to
consummate the transactions contemplated by this Agreement.
3.10 Tangible Property and Assets. Except as disclosed in the Parent SEC
Documents filed prior to the date of this Agreement, Parent and its Subsidiaries
have good and marketable title to, or have valid leasehold interests in or valid
rights under contract to use, all tangible property and assets used in and,
individually or in the aggregate, material to the conduct of the businesses of
Parent and its Subsidiaries taken as a whole, free and clear of all Liens other
than (i) any statutory Lien arising in the ordinary course of business by
operation of law with respect to a liability that is not yet due or delinquent
and (ii) any minor imperfection of title or similar Lien which individually or
in the aggregate with all other such Liens does not materially impair the value
of the property or asset subject to such Lien or the use of such property or
asset in the conduct of the business of Parent or any such Subsidiary. All such
property and assets are, in all material respects, in good working order and
condition, ordinary wear and tear excepted, and adequate and suitable for the
purposes for which they are presently being used.
3.11 Intellectual Property Rights. Parent and its Subsidiaries have all
right, title and interest in, or a valid and binding license to use, all Parent
IP individually or in the aggregate material to the conduct of the businesses of
Parent and its Subsidiaries taken as a whole. Neither Parent nor any Subsidiary
of Parent is in default (or with the giving of notice or lapse of time or both,
would be in default) in any material respect under any license to use such
Parent IP, such Parent IP is not being infringed by any third party, and neither
Parent nor any Subsidiary of Parent is infringing any Intellectual Property
Rights of any third party, except for such defaults and infringements which,
individually or in the aggregate, do not have and could not be reasonably
expected to have a material adverse effect on Parent and its Subsidiaries taken
as a whole.
3.12 Real Property.
(a) Parent and each of its Subsidiaries has good, marketable and
indefeasible fee title to their respective Owned Real Properties, free and clear
of any Liens, other than Liens for current taxes not yet due and payable and
Liens that have arisen in the ordinary course of business and that do not (in
any case or in the aggregate) materially detract from the value of the assets
subject thereto or materially impair the operations of Parent or any of its
Subsidiaries.
(b) Section 3.12(b) of the Parent Disclosure Schedule sets forth an
accurate and complete list of each lease pursuant to which any real property is
being leased to the Parent or any of its Subsidiaries.
(c) Section 3.12(c) of the Parent Disclosure Schedule contains an accurate
and complete list of all subleases, occupancy agreements and other Parent
Contracts granting to any Person (other than the Parent or any of its
Subsidiaries) a right of use or occupancy of any Owned Real Property and Leased
Real Property of Parent.
3.13 Compliance; Permits.
(a) Neither Parent nor any of its Subsidiaries nor the conduct of their
respective businesses is, in any material respect, in conflict with, or in
default or, to the knowledge of the Company or any of its Subsidiaries,
violation of, any Law applicable to Parent or any of its Subsidiaries or by
which its or any of their respective businesses or properties is bound or
affected. No investigation or review by any Governmental Entity is pending or,
to the knowledge of Parent, threatened against Parent or any of its
Subsidiaries, nor has any Governmental Entity indicated to Parent or any of its
Subsidiaries an intention to conduct the same. There is no Order binding upon
Parent or any of its Subsidiaries which has or could reasonably be expected to
have the effect of prohibiting or materially impairing any business practice of
Parent or any of its Subsidiaries, any acquisition of material property by
Parent or any of its Subsidiaries or the conduct of business by Parent or any of
its Subsidiaries as currently conducted or presently proposed to be conducted.
(b) Parent and its Subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from Governmental Entities that are material to
the operation of the business of Parent and its Subsidiaries (collectively, the
"Parent Permits"). Parent and its Subsidiaries are in compliance in all material
respects with the terms of the Parent Permits.
3.14 Parent Material Contracts. Except as set forth on Section 3.14 of the
Parent Disclosure Schedule, neither Parent nor any of its Subsidiaries, nor, to
Parent's knowledge, any other party to a Parent Material Contract, is in
material breach, violation or default under, and neither Parent nor any of its
Subsidiaries has received written notice that it has breached, violated or
defaulted under, any of the material terms or conditions of any Parent Material
Contract in such a manner as would permit any other party to cancel or terminate
any such Parent Material Contract, or would permit any other party to seek
material damages or other material remedies (for any or all of such breaches,
violations or defaults, in the aggregate).
3.15 Taxes.
(a) Parent and each of its Subsidiaries has filed all tax returns and
reports required to be filed by it through the date hereof and will timely file
any such returns or reports required to be filed on or prior to the Closing
Date, and such returns and reports accurately reflect all taxes, charges and
assessments owed by Parent and its Subsidiaries. Section 3.15(a) of the Parent
Disclosure Schedule (i) lists every federal, state, local and foreign
jurisdiction in which Parent and its Subsidiaries are subject to Tax, and (ii)
indicates those Tax Returns that have been examined or audited and indicates
those Tax Returns that currently are the subject of examination or audit.
(b) No extension or waiver of any statute of limitations has been requested
of or granted by Parent or any of its Subsidiaries with respect to any Tax for
any period, and no extension or waiver of time within which to file any Tax
Return has been requested by or granted to Parent or any of its Subsidiaries.
(c) No deficiency, delinquency, or default for any Taxes relating to Parent
or any its Subsidiaries or its receipts, income, sales transactions or other
business activities has been claimed, proposed or assessed against Parent or any
of its Subsidiaries nor has Parent or any of its Subsidiaries received notice of
any such deficiency, delinquency, or default; and there is no audit,
examination, investigation, claim, assessment, action, suit, proceeding, lien or
encumbrance in effect, pending or proposed by any tax authority with respect to
any such Taxes or with respect to any Tax Return of Parent or any of its
Subsidiaries. There are no Liens for Taxes (other than for current Taxes not yet
due and payable) on any of the assets and properties of Parent and its
Subsidiaries.
(d) Parent and each of its Subsidiaries has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, stockholder or third party.
(e) There is no tax ruling, request for ruling, or settlement, compromise,
closing or Tax collection agreement in effect or pending which does or could
affect the liability of Parent or any of its Subsidiaries for Taxes for any
period after the Closing Date.
(f) Neither Parent nor any of its Subsidiaries has (i) been a member of an
Affiliated Group filing a consolidated federal Tax Return or (ii) incurred any
liability for the Taxes of any Person under Section 1.1502-6 of the Treasury
Regulations, under any provision of state, local or foreign law similar to
Section 1.1502-6 of the Treasury Regulations, as a transferee or successor, by
contract, or otherwise.
(g) Neither Parent nor any of its Subsidiaries is obligated to make any
payments, or is a party to any agreement that under any circumstances could
obligate Parent or any of its Subsidiaries to make any payments, that are not or
would not be deductible under Section 162(m) or Section 280G of the Code.
(h) None of the assets of Parent and its Subsidiaries (i) consists of or
secures any indebtedness, the interest on which is exempt from Tax; (ii) is "tax
exempt use property" within the meaning of Section 168(h) of the Code; or (iii)
will as of the Closing Date be subject to any "safe harbor lease" within the
meaning of former Section 168(f)(8) of the Internal Revenue Code of 1954.
3.16 Labor and Employment Matters.
(a) Parent and each of its Subsidiaries (i) has withheld and paid to the
appropriate Governmental Entities, or is withholding for payment not yet due to
such entities, all amounts required to be withheld from its employees; (ii) is
not liable for any arrears of wages, Taxes, penalties or other sums for failure
to comply with any of the foregoing; and (iii) has complied in all material
respects with all applicable Laws relating to the employment of labor, including
Title VII of the Federal Civil Rights Act of 1964, as amended, the Occupational
Safety and Health Act, and those relating to hours, wages, collective bargaining
and the payment and withholding of Taxes and other sums as required by
appropriate authorities.
(b) Neither Parent nor any of its Subsidiaries is a party to any collective
bargaining agreement or other labor contract applicable to the employees of
Parent or any of its Subsidiaries. Neither Parent nor any of its Subsidiaries is
subject to any (i) unfair labor practice complaint pending before the National
Labor Relations Board or any other federal, state, local or foreign agency, (ii)
pending or threatened labor strike, slowdown, work stoppage, lockout, or other
organized labor disturbance, or threat thereof, (iii) pending grievance
proceeding, (iv) pending representation question respecting the employees of
Parent or any of its Subsidiaries, (v) pending arbitration proceeding arising
out of or under any collective bargaining agreement or (vi) attempt by any union
to represent employees of Parent or any of its Subsidiaries as a collective
bargaining agent.
(c) None of the current or former independent contractors of Parent or any
of its Subsidiaries could be reclassified as an employee, except as would not
have and would not reasonably be expected to have or result in a material
adverse effect on Parent and its Subsidiaries.
3.17 Employees. Section 3.17 of the Parent Disclosure Schedule sets forth a
list of the names of all employees of the Parent and its Subsidiaries currently
employed in connection with its and their respective businesses (collectively,
the "Employees") and indicates the current salary or wage rate of each such
Employee. All of such salaries, wages and benefits will be paid by the Parent
and its Subsidiaries when due for all periods through the Closing Date. Section
3.17 of the Parent Disclosure Schedule sets forth a list of all Employees
terminated by the Parent and its Subsidiaries since the date 90 days prior to
the date hereof. The employment of each Employee is terminable at will.
3.18 Employee Benefit Plans.
(a) Section 3.18(a) of the Parent Disclosure Schedule sets forth a true and
complete list of all Parent Benefit Plans and identifies each such Parent
Benefit Plan as either a Welfare Plan or a Pension Plan.
(b) Parent has delivered or made available to the Company true and complete
copies of: (i) all plan texts, agreements and material employee communications
relating to each Parent Benefit Plan; (ii) all summary plan descriptions
(whether or not required to be furnished pursuant to ERISA), the most recent
annual report (including all schedules thereto) and the most recent annual and
periodic accounting and financial statements of related plan assets with respect
to each Pension Plan and Welfare Plan; and (iii) the most recent determination
letter received from the Internal Revenue Service with respect to each Pension
Plan.
(c) To the knowledge of the Company or any of its Subsidiaries, no event
has occurred (and there exists no condition or set of circumstances) in
connection with any Parent Benefit Plan that could subject Parent, Merger Sub,
the Company, the Surviving Corporation or any Parent Benefit Plan, directly or
indirectly, to any liability under ERISA, the Code or any other law, regulation
or governmental order applicable to any Parent Benefit Plan.
(d) Each Parent Benefit Plan (other than any Multiemployer Plan) conforms
to, and its administration is in compliance with, all applicable laws and
regulations, including but not limited to, ERISA and the Code, and no fiduciary
of any Parent Benefit Plan has taken any action that could result in such
fiduciary being liable for the payment of damages under ERISA Section 409 and
that would result in any liability for Parent, Merger Sub, the Company or the
Surviving Corporation.
(e) Each Pension Plan that is intended to qualify under Section 401(a) or
403(a) of the Code is so qualified and has received a favorable determination
letter from the Internal Revenue Service with respect to such qualification, its
related trust has been determined to be exempt from taxation under Section
501(a) of the Code, and nothing has occurred since the date of such letter that
could adversely affect such qualification or exemption.
(f) Each Parent Benefit Plan (other than any Multiemployer Plan) has been
maintained in accordance with its terms, and there are no pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened claims, lawsuits
or arbitrations (other than routine claims for benefits) that have been asserted
or instituted against or with respect to any such Parent Benefit Plan or the
assets of any of the trusts under any such Parent Benefit Plan.
(g) There has been no failure to comply with applicable ERISA or other
requirements as to the filing of reports, documents and notices with the
Secretary of Labor, the Secretary of the Treasury and the PBGC that could
subject any Parent Benefit Plan (other than any Multiemployer Plan), any
fiduciary thereof, Parent, Merger Sub, the Company or the Surviving Corporation
to a penalty, and any requirement of the furnishing of such documents to
participants or beneficiaries, due before the Closing Date, has been or will be
complied with by all of the Parent Benefit Plans prior to the Closing.
(h) No "prohibited transaction," as such term is defined in Code Section
4975 and ERISA Section 406, has occurred with respect to any Parent Benefit Plan
(other than a Multiemployer Plan) that could subject such Parent Benefit Plan,
any fiduciary thereof, Parent, Merger Sub, the Company or the Surviving
Corporation to a penalty for such prohibited transaction imposed by ERISA
Section 502 or a material tax imposed by Code Section 4975.
(i) Any bond required by applicable provisions of ERISA with respect to any
Parent Benefit Plan (other than a Multiemployer Plan) has been obtained and is
in full force and effect.
(j) No "reportable event," as such term is defined in ERISA Section 4043,
has occurred or is continuing with respect to any Pension Plan.
(k) No Pension Plan that is or was subject to Title IV of ERISA has been
terminated; no proceeding has been initiated to terminate any such plan; and
neither Parent nor any of its Subsidiaries has incurred, and does not reasonably
expect to incur, any liability, whether to the PBGC or otherwise, except for
required premium payments, which payments have been made when due, with respect
to the termination of any Pension Plan. No event has occurred (and there exists
no condition or set of circumstances) that presents a material risk of the
partial termination of any Pension Plan.
(l) No Parent Benefit Plan provides medical or death benefits (whether or
not insured) with respect to current or former employees of Parent or any of its
Subsidiaries beyond their retirement or other termination of service (other than
(i) coverage mandated by law or (ii) death benefits under any Pension Plan).
(m) There are no unfunded benefit obligations arising in any jurisdiction.
(n) The consummation of the transactions contemplated hereby will not (i)
entitle any current or former employee of the Parent or any of its Subsidiaries
to severance pay, unemployment compensation or any similar payment, or (ii)
accelerate the time of payment or vesting, or increase the amount of any
compensation due to any such employee or former employee.
(o) Section 3.18(o) of the Parent Disclosure Schedule sets forth a true and
correct list of all Multiemployer Plans to which Parent has contributed, or is
required to contribute, since January 1, 2003. To Parent's knowledge, each such
Multiemployer Plan has been maintained in substantial compliance with the
requirements prescribed by any and all applicable statutes, orders, rules and
regulations, including, but not limited to, ERISA and the Code. To Parent's
knowledge, no "prohibited transaction," as defined in ERISA Section 406 or Code
Section 4975, has occurred in connection with any such Multiemployer Plan.
Parent shall have made, on or prior to the Closing, all contributions required
to be made to each such Multiemployer Plan.
(p) Section 3.18(p) of the Parent Disclosure Schedule sets forth
accurately, for each Multiemployer Plan, (i) the amount of contributions by the
Parent and its Subsidiaries to such plan for the prior two plan years and (ii)
the amount of withdrawal liability as determined under Section 4201 of ERISA
that the Parent and its Subsidiaries would incur if any of them withdrew from
such plan in a complete withdrawal as of the date listed in Section 3.18(p) of
the Parent Disclosure Schedule. With respect to any Multiemployer Plan, neither
the Parent nor any of its Subsidiaries has incurred or otherwise become liable
for, or is reasonably expected to incur or become liable for, a "complete
withdrawal" or "partial withdrawal," as such terms are defined in Sections 4203
and 4205 of ERISA, respectively, with respect to events that have occurred
before or as of the Closing.
(q) Except as set forth in Section 3.18(q) of the Parent Disclosure Schedule,
Parent and its Subsidiaries do not have any medical, dental, disability or life
insurance programs, or stock option, incentive or deferred compensation plans or
other similar fringe or employee benefit plans, programs or arrangements for the
benefit of their respective employees.
3.19 Environmental Matters.
(a) Hazardous Material. No underground storage tanks and no amount of any
Hazardous Materials are present, as a result of the actions of Parent, its
Subsidiaries or any affiliate of Parent, or, to the knowledge of Parent, as a
result of any actions of any third party or otherwise, in, on or under any
property, including the land and the improvements, ground water and surface
water thereof, that Parent or any of its Subsidiaries has at any time owned,
operated, occupied or leased.
(b) Hazardous Materials Activities. Neither Parent nor any of its
Subsidiaries has engaged in any Hazardous Materials Activities in violation of
any law, rule, regulation, treaty or statute promulgated by any Governmental
Entity in effect on or prior to the Closing Date to prohibit, regulate or
control Hazardous Materials or any Hazardous Materials Activities.
(c) Permits. Parent and its Subsidiaries currently hold all Environmental
Permits necessary for the conduct of Parent's and its Subsidiaries' Hazardous
Materials Activities and other businesses of Parent and its Subsidiaries as such
activities and businesses are currently being conducted, except where the
failure to hold such Environmental Permits could not be reasonably expected to
result in a material liability to Parent and its Subsidiaries taken as a whole.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to
Parent's knowledge, threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of Parent or any of its
Subsidiaries.
3.20 Statements; Proxy Statement/Prospectus. None of the information
supplied or to be supplied by Parent for inclusion or incorporation by reference
in (a) the Registration Statement will, at the time it becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading and (b) the Proxy
Statement/Prospectus to be sent to the stockholders of the Company in connection
with the Company Stockholder Meeting shall not, on the date the Proxy
Statement/Prospectus is first mailed to the Company's stockholders or at the
time of the Company Stockholder Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Registration
Statement will comply as to form in all material respects with the provisions of
the Securities Act and the rules and regulations thereunder. If at any time
before the Effective Time, any event relating to Parent or any of its
affiliates, officers or directors should be discovered by Parent which should be
set forth in a supplement to the Proxy Statement/Prospectus, Parent shall
promptly inform the Company. Notwithstanding the foregoing, Parent makes no
representation or warranty with respect to any information supplied or to be
supplied by the Company that is, will be, or is required to be, contained in any
of the foregoing documents.
3.21 Certain Business Practices. Neither Parent nor any of its
Subsidiaries, and, to the knowledge of Parent, no Representative of Parent or
any of its Subsidiaries with respect to any matter relating to Parent or any of
its Subsidiaries, has: (a) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses relating to political activity; (b)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended; or (c)
made any other unlawful payment.
3.22 Interested Party Transactions. Except as disclosed in the Parent SEC
Documents, neither the Parent nor any of its subsidiaries is indebted to any
director or officer of the Parent or any of its Subsidiaries (except for amounts
due as normal salaries and bonuses and in reimbursement of ordinary expenses),
and no such person is indebted to the Parent or any of its Subsidiaries, and
there are no other transactions of the type required to be disclosed pursuant to
Items 402 or 404 of Regulation S-K under the Securities Act and the Exchange
Act.
3.23 Insurance. Parent and each of its Subsidiaries have policies of
insurance and bonds of the type and in amounts customarily carried by persons
conducting businesses or owning assets similar to those of the Parent and its
Subsidiaries. There is no claim pending under any of such policies or bonds as
to which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All premiums due and payable under all such policies and
bonds have been paid and Parent and its Subsidiaries are otherwise in compliance
in all material respects with the terms of such policies and bonds. Parent has
no knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.
3.24 Minute Books. The minute books of Parent and its subsidiaries made
available to the Company contain a complete and accurate summary of all meetings
of directors and stockholders or actions by written consent of Parent and the
respective subsidiaries during the past three years and through the date of this
Agreement, and reflect all transactions referred to in such minutes accurately
in all material respects.
3.25 Brokers' and Finders' Fees. Except for fees payable to Xxxxxxx Xxxx
Partners pursuant to an engagement letter agreement dated June 8, 2005, (true
and correct copies of which have been delivered to the Company), Parent has not
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
ARTICLE IV
COVENANTS
4.1 Confidentiality; Access and Investigation; No Modification of
Representations, Warranties or Covenants.
(a) Confidentiality. The parties acknowledge that Parent and the Company
have previously executed a Confidentiality Agreement, dated August 26, 2005 (the
"Confidentiality Agreement"), which will continue in full force and effect in
accordance with its terms.
(b) During the period commencing on the date hereof and ending as of the
earlier of the Effective Time or the termination of this Agreement (the
"Pre-Closing Period"), each party hereto shall, and shall cause its respective
Representatives to: (a) provide each other party hereto and such other party's
Representatives with reasonable access during normal business hours to the
Representatives, personnel and assets and to all existing books, records, Tax
Returns, work papers and other documents and information relating to itself and
its Subsidiaries; and (b) provide such other party and such other party's
Representatives with such copies of the existing books, records, Tax Returns,
work papers and other documents and information relating to itself and its
Subsidiaries as such other party may reasonably request. During the Pre-Closing
Period, each party hereto shall, and shall cause its Representatives and the
Representatives of its Subsidiaries to, permit each other party's senior
officers to meet, upon reasonable notice and during normal business hours, with
the chief financial officer and other officers of such party responsible for
such party's financial statements and the internal controls of such party and
its Subsidiaries to discuss such matters as such other party may deem necessary
or appropriate in order to enable such other party to satisfy its obligations
under the Xxxxxxxx-Xxxxx Act and the rules and regulations relating thereto. Any
information provided pursuant to this Section 4.1(b) shall be subject to the
Confidentiality Agreement.
(c) No Modification of Representations and Warranties or Covenants. No
information or knowledge obtained in any investigation or notification pursuant
to this Section 4.1 or Section 4.8 shall affect or be deemed to modify any
representation or warranty contained herein, the covenants or agreements of the
parties hereto or the conditions to the obligations of the parties hereto under
this Agreement.
4.2 Conduct of Business by Parent. During the Pre-Closing Period, Parent
(which for the purposes of this Section 4.2 shall include Parent and each of its
Subsidiaries) agrees, except (a) as required by law, (b) as specifically
provided in this Agreement or Section 4.2 of the Parent Disclosure Schedule or
(c) to the extent that the Company shall otherwise consent in writing, to carry
on its business in the ordinary course, in substantially the same manner as
heretofore conducted and in compliance with all applicable laws and regulations,
to pay its debts and taxes when due subject to good faith disputes over such
debts or taxes, to pay or perform other material obligations when due, subject
to good faith disputes over such obligations, and use its commercially
reasonable efforts consistent with past practices and policies to preserve
intact its present business organization, keep available the services of its
present officers and employees and preserve its relationships with customers,
suppliers, distributors, licensors, licensees and others with which it has
business dealings. In addition, except (i) as required by law, (ii) as
specifically provided in this Agreement or Section 4.2 of the Parent Disclosure
Schedule or (iii) to the extent that the Company shall otherwise consent in
writing, Parent shall not do any of the following and shall prevent its
Subsidiaries from doing any of the following:
(a) Except pursuant to the terms of the 2004 Equity Incentive Plan or
written agreements outstanding on the date hereof and disclosed to the Company
in Section 4.2(a) of the Parent Disclosure Schedule, accelerate, amend, modify
or waive any stock repurchase rights; accelerate, amend or modify the period of
exercisability or other material terms of options, warrants or restricted stock;
reprice or exchange options or warrants granted under any employee, consultant
or director stock plans or otherwise; or authorize cash payments in exchange for
any options, warrants or restricted stock granted under any of such plans or
otherwise;
(b) Enter into any material partnership arrangements, joint development
agreements or strategic alliances;
(c) Grant any severance or termination pay (cash, equity or otherwise) to
any officer or employee except pursuant to written agreements outstanding or
policies existing on the date hereof and as disclosed in Section 4.2(c) of the
Parent Disclosure Schedule or otherwise immaterial in amount (not to exceed
$15,000 individually and $150,000 in the aggregate), or adopt any new severance
plan or amend or modify or alter in any manner any severance plan, agreement or
arrangement existing on the date hereof;
(d) Transfer or license to any person or entity or otherwise extend, amend
or modify in any material respect any rights to the Parent IP, or enter into any
agreements or make other commitments or arrangements to grant, transfer or
license to any person future patent rights, other than non-exclusive licenses
granted to customers, resellers and end users in the ordinary course of business
consistent with past practices;
(e) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock;
(f) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Parent or its Subsidiaries, except repurchases of
unvested shares at cost in connection with the termination of an employment
relationship with any employee pursuant to stock option or purchase agreements
in effect on the date hereof;
(g) Except as contemplated by Section 4.18, issue, deliver, sell,
authorize, pledge or otherwise encumber any shares of capital stock or any
securities convertible into shares of capital stock, or subscriptions, rights,
warrants or options to acquire any shares of capital stock or any securities
convertible into shares of capital stock, or enter into or amend, modify or
consent to other agreements or commitments of any character obligating it to
issue any such shares or convertible securities, other than (i) the issuance,
delivery and/or sale of shares of Parent Common Stock pursuant to the exercise
of stock options or warrants therefor outstanding as of the date of this
Agreement, (ii) the issuance of Parent Common Stock upon the conversion of
Parent Preferred Stock, and (iii) the issuance of Parent Common Stock as payment
of principal and interest under certain of Parent's outstanding promissory
notes;
(h) Cause, permit or propose any amendments to the certificate of
incorporation or bylaws of Parent (or similar governing instruments of any
Subsidiaries);
(i) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a material portion of the assets of, or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or agree
to acquire any assets that are material, individually or in the aggregate, to
the business of Parent, other than in the ordinary course of business consistent
with past practice;
(j) Sell, lease, license, encumber, convey, assign, sublicense or otherwise
dispose of or transfer, in whole or in part, any properties or assets or any
interest therein (other than those transfers or licenses permitted by Section
4.2(d)) except for sales, leases, licenses, encumbrances, conveyances,
assignments, sublicenses, dispositions or other transfers (i) in the ordinary
course of business consistent with past practice or (ii) of property or assets
that are not material, individually or in the aggregate, to the business of
Parent;
(k) Except as contemplated by Section 4.18, incur any indebtedness for
borrowed money or guarantee any such indebtedness of another person, issue or
sell any debt securities or options, warrants, calls or other rights to acquire
any debt securities of Parent, enter into any "keep well" or other agreement to
maintain any financial statement condition or enter into any arrangement having
the economic effect of any of the foregoing other than (i) in connection with
the financing of ordinary course trade payables consistent with past practice or
(ii) pursuant to existing credit facilities in the ordinary course of business;
(l) Adopt or amend any Parent Benefit Plan or employee stock purchase or
employee stock option plan, or enter into any employment contract or collective
bargaining agreement (other than offer letters and letter agreements entered
into in the ordinary course of business consistent with past practice with
employees who are terminable "at will"), pay any special bonus or special
remuneration (cash, equity or otherwise) to any director, employee or
consultant, or increase the salaries or wage rates or fringe benefits (including
rights to severance or indemnification) of its directors, officers, employees or
consultants except payment of bonuses or increases in salaries or wage rates or
fringe benefits to non-officer employees or consultants in the ordinary course
of business consistent with past practice;
(m) Make payments outside of the ordinary course of business in excess of
$75,000 in the aggregate;
(n) Except in the ordinary course of business consistent with past
practice, modify, amend or terminate any Parent Material Contract or waive,
delay the exercise of, release or assign any material rights or material claims
thereunder;
(o) Revalue any of its assets or, except as required by GAAP, adopt or
change any accounting methods, principles or practices;
(p) Except as contemplated by Section 4.18, incur or enter into any
agreement or commitment in excess of $100,000 individually;
(q) Hire any employee or consultant with an annual compensation level in
excess of $75,000;
(r) Pay, discharge or satisfy any claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction of amounts in the ordinary course of
business, or as otherwise disclosed in the Parent Disclosure Schedule; or
(s) Agree (in writing or otherwise) to take any of the actions described in
Sections 4.2(a) through (r) above.
4.3 Conduct of Business by the Company. During the Pre-Closing Period, the
Company (which for the purposes of this Section 4.3 shall include the Company
and each of its Subsidiaries) agrees, except (a) as required by law, (b) as
specifically provided in this Agreement or Section 4.3 of the Company Disclosure
Schedule or (c) to the extent that Parent shall otherwise consent in writing, to
carry on its business in the ordinary course, in substantially the same manner
as heretofore conducted and in compliance with all applicable laws and
regulations, to pay its debts and taxes when due subject to good faith disputes
over such debts or taxes, to pay or perform other material obligations when due,
subject to good faith disputes over such obligations, and use its commercially
reasonable efforts consistent with past practices and policies to preserve
intact its present business organization, keep available the services of its
present officers and employees and preserve its relationships with customers,
suppliers, distributors, licensors, licensees and others with which it has
business dealings. In addition, except (i) as required by law, (ii) as
specifically provided in this Agreement or Section 4.3 of the Company Disclosure
Schedule (iii) as required by its existing debenture agreements or (iv) to the
extent that Parent shall otherwise consent in writing, the Company shall not do
any of the following and shall prevent its Subsidiaries from doing any of the
following:
(a) Except pursuant to the terms of the Company Stock Option Plans or
written agreements outstanding on the date hereof and disclosed to Parent in
Section 4.3(a) of the Company Disclosure Schedule, accelerate, amend, modify or
waive any stock repurchase rights; accelerate, amend or modify the period of
exercisability or other material terms of options, warrants or restricted stock;
reprice or exchange options or warrants granted under any employee, consultant
or director stock plans or otherwise; or authorize cash payments in exchange for
any options, warrants or restricted stock granted under any of such plans or
otherwise;
(b) Enter into any material partnership arrangements, joint development
agreements or strategic alliances;
(c) Grant any severance or termination pay (cash, equity or otherwise) to
any officer or employee except pursuant to written agreements outstanding or
policies existing on the date hereof and as disclosed in Section 4.3(c) of the
Company Disclosure Schedule or otherwise immaterial in amount (not to exceed
$15,000 individually and $150,000 in the aggregate), or adopt any new severance
plan or amend or modify or alter in any manner any severance plan, agreement or
arrangement existing on the date hereof;
(d) Transfer or license to any person or entity or otherwise extend, amend
or modify in any material respect any rights to the Company IP, or enter into
any agreements or make other commitments or arrangements to grant, transfer or
license to any person future patent rights, other than non-exclusive licenses
granted to customers, resellers and end users in the ordinary course of business
consistent with past practices;
(e) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock;
(f) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of the Company or its Subsidiaries, except repurchases
of unvested shares at cost in connection with the termination of an employment
relationship with any employee pursuant to stock option or purchase agreements
in effect on the date hereof;
(g) Except as contemplated by Section 4.18, issue, deliver, sell,
authorize, pledge or otherwise encumber any shares of capital stock or any
securities convertible into shares of capital stock, or subscriptions, rights,
warrants or options to acquire any shares of capital stock or any securities
convertible into shares of capital stock, or enter into or amend, modify or
consent to other agreements or commitments of any character obligating it to
issue any such shares or convertible securities, other than (i) the issuance,
delivery and/or sale of shares of Company Common Stock pursuant to the exercise
of stock options or warrants therefor outstanding as of the date of this
Agreement, and (ii) the issuance, delivery and/or sale of shares of Parent
Common Stock pursuant to the Company ESPP;
(h) Cause, permit or propose any amendments to the certificate of
incorporation or bylaws of the Company (or similar governing instruments of any
Subsidiaries);
(i) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a material portion of the assets of, or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof, or otherwise acquire or agree
to acquire any assets that are material, individually or in the aggregate, to
the business of the Company, other than in the ordinary course of business
consistent with past practice;
(j) Sell, lease, license, encumber, convey, assign, sublicense or otherwise
dispose of or transfer, in whole or in part, any properties or assets or any
interest therein (other than those transfers or licenses permitted by Section
4.3(d)) except for sales, leases, licenses, encumbrances, conveyances,
assignments, sublicenses, dispositions or other transfers (i) in the ordinary
course of business consistent with past practice or (ii) of property or assets
that are not material, individually or in the aggregate, to the business of the
Company;
(k) Except as contemplated by Section 4.18, incur any indebtedness for
borrowed money or guarantee any such indebtedness of another person, issue or
sell any debt securities or options, warrants, calls or other rights to acquire
any debt securities of the Company, enter into any "keep well" or other
agreement to maintain any financial statement condition or enter into any
arrangement having the economic effect of any of the foregoing other than (i) in
connection with the financing of ordinary course trade payables consistent with
past practice or (ii) pursuant to existing credit facilities in the ordinary
course of business;
(l) Adopt or amend any Company Benefit Plan or employee stock purchase or
employee stock option plan, or enter into any employment contract or collective
bargaining agreement (other than offer letters and letter agreements entered
into in the ordinary course of business consistent with past practice with
employees who are terminable "at will"), pay any special bonus or special
remuneration (cash, equity or otherwise) to any director, employee or
consultant, or increase the salaries or wage rates or fringe benefits (including
rights to severance or indemnification) of its directors, officers, employees or
consultants except payment of bonuses or increases in salaries or wage rates or
fringe benefits to non-officer employees or consultants in the ordinary course
of business consistent with past practice;
(m) Make payments outside of the ordinary course of business in excess of
$75,000 in the aggregate;
(n) Except in the ordinary course of business consistent with past
practice, modify, amend or terminate any Company Material Contract or waive,
delay the exercise of, release or assign any material rights or material claims
thereunder;
(o) Revalue any of its assets or, except as required by GAAP, adopt or
change any accounting methods, principles or practices;
(p) Except as contemplated by Section 4.18, incur or enter into any
agreement or commitment in excess of $100,000 individually;
(q) Hire any employee or consultant with an annual compensation level in
excess of $75,000;
(r) Pay, discharge or satisfy any claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction of amounts in the ordinary course of
business; or
(s) Agree (in writing or otherwise) to take any of the actions described in
Sections 4.3(a) through (r) above.
4.4 Proxy Statement/Prospectus; Registration Statement. As promptly as
practicable after the execution of this Agreement, Parent and the Company will
prepare and file with the SEC the Proxy Statement/Prospectus, and Parent will
prepare and file with the SEC the Registration Statement in which the Proxy
Statement/Prospectus is to be included as a prospectus. Parent, the Company and
Merger Sub will provide each other with any information with respect to it which
may be required or appropriate for inclusion in the Proxy Statement/Prospectus
and the Registration Statement, or in any amendments or supplements thereto, and
cause its counsel and auditors to cooperate with the other's counsel and
auditors in the preparation and filing of the Proxy Statement/Prospectus and the
Registration Statement pursuant to this Section 4.4. Each of Parent and the
Company will respond to any comments from the SEC, will use its best efforts to
cause the Registration Statement to be declared effective under the Securities
Act as promptly as practicable after such filing and to keep the Registration
Statement effective as long as is necessary to consummate the Merger and the
transactions contemplated hereby. Each of Parent and the Company will notify the
other promptly upon the receipt of any comments from the SEC or its staff in
connection with the filing of, or amendments or supplements to, the Registration
Statement and/or the Proxy Statement/Prospectus. Whenever any event occurs which
is required to be set forth in an amendment or supplement to the Proxy
Statement/Prospectus or the Registration Statement, Parent or the Company, as
the case may be, will promptly inform the other of such occurrence and cooperate
in filing with the SEC or its staff and/or mailing to stockholders of the
Company such amendment or supplement. Each of Parent and the Company shall
cooperate and provide the other with a reasonable opportunity to review and
comment on any amendment or supplement to the Registration Statement and Proxy
Statement/Prospectus prior to filing such with the SEC, and will provide each
other with a copy of all such filings made with the SEC. The Company will cause
the Proxy Statement/Prospectus to be mailed to its stockholders at the earliest
practicable time after the Registration Statement is declared effective by the
SEC. Each of the parties hereto shall cause the Proxy Statement/Prospectus and
the Registration Statement, as applicable, to comply as to form and substance as
to such party in all material respects with the applicable requirements of (i)
the Exchange Act, (ii) the Securities Act, and (iii) the rules and regulations
of the OTC Bulletin Board. Without in any way limiting or affecting the
requirements of Section 4.5(b), nothing in this Agreement shall preclude either
Parent or the Company from including in the Proxy Statement/Prospectus or any
amendment or supplement thereto any information that it reasonably determines is
required to be disclosed pursuant to applicable securities laws.
4.5 Meeting of Company Stockholders; Company Board Recommendation.
(a) Meeting of Company Stockholders. Promptly after the date hereof, the
Company will take all action necessary or advisable in accordance with Chapters
78 and 92A of the NRS ("Nevada Corporate Law") and its articles of incorporation
and bylaws to call, hold and convene a meeting of the Company's stockholders to
consider the approval and adoption of this Agreement and approval of the Merger
(the "Company Stockholder Meeting") as promptly as practicable. Subject to
Section 4.6(d), the Company will use its best efforts to solicit from its
stockholders proxies in favor of the approval and adoption of this Agreement and
approval of the Merger, and will take all other action necessary or advisable to
secure the vote or consent of its stockholders required by the rules of the OTC
Bulletin Board, Nevada Corporate Law and its articles of incorporation and
bylaws to obtain such approvals. Notwithstanding anything to the contrary
contained in this Agreement, the Company may adjourn or postpone the Company
Stockholder Meeting to the extent necessary to facilitate the provision of any
necessary supplement or amendment to the Proxy Statement/Prospectus, provided
that such supplement or amendment is provided to its respective stockholders in
advance of the vote to be taken at such meeting or, if as of the time for which
the Company Stockholder Meeting is originally scheduled (as set forth in the
Proxy Statement/Prospectus) there are insufficient shares of Company Common
Stock represented (either in person or by proxy) to constitute a quorum
necessary to conduct the business of the Company Stockholder Meeting. The
Company shall ensure that the Company Stockholder Meeting is called, noticed,
convened, held and conducted, and that all proxies solicited by it in connection
with the Company Stockholder Meeting are solicited in compliance with Nevada
Corporate Law, its articles of incorporation and bylaws, the rules of the OTC
Bulletin Board and all other applicable Laws.
(b) Board Recommendation. Subject to Section 4.6(d), except to the extent
that the Board of Directors of the Company, or if applicable, a committee
thereof, determines in good faith after consulting with and receiving the advice
of its outside legal counsel, that taking or failing to take such action is
reasonably likely to result in a breach of its fiduciary duties under applicable
law: (i) the Board of Directors of the Company shall recommend the approval and
adoption of this Agreement and the approval of the Merger by the stockholders of
the Company (the "Company Board Recommendation"), (ii) the Proxy
Statement/Prospectus shall include a statement to the effect that the Board of
Directors of the Company has made the Company Board Recommendation and (iii)
neither the Board of Directors of the Company nor any committee thereof shall
withdraw, amend or modify, or propose or resolve to withdraw, amend or modify in
a manner adverse to Parent, the Company Board Recommendation.
4.6 Acquisition Proposals.
(a) No Solicitation. Subject to Section 4.6(c), each of Parent and the
Company agrees that neither it nor any of its Subsidiaries shall, nor shall it
or any of its Subsidiaries authorize or permit any of their respective
Representatives to, and that it shall use commercially reasonable efforts to
cause its and its Subsidiaries' non-officer employees and other agents not to
(and shall not authorize any of them to) directly or indirectly: (i) solicit,
initiate, knowingly encourage, knowingly facilitate or knowingly induce any
inquiry with respect to, or the making, submission or announcement of, any
Acquisition Proposal (as defined in Section 4.6(g)) with respect to itself, (ii)
participate in any negotiations regarding, or furnish to any Person any
nonpublic information with respect to, or knowingly take any other action to
facilitate any inquiries or the making of any proposal that constitutes or may
reasonably be expected to lead to, any Acquisition Proposal with respect to
itself, (iii) engage in discussions with any Person with respect to any
Acquisition Proposal with respect to itself, except as to the existence of the
terms contained in this Section 4.6, (iv) release or permit the release of any
Person from, or waive or permit the waiver of any provision of, any
confidentiality, nondisclosure or similar agreement (other than as required
pursuant to the terms thereof as in effect on the date hereof) under which it or
any of its subsidiaries has any rights, or fail to use commercially reasonable
efforts to enforce or cause to be enforced in all material respects each such
agreement at the request of Parent (in the case of an agreement under which the
Company has any rights) or the Company (in the case of an agreement under which
Parent has any rights), (v) approve, endorse or recommend any Acquisition
Proposal with respect to itself (except to the extent specifically permitted
pursuant to Section 4.6(d)), (vi) approve any transaction under Section 78.438
of the NRS or Section 203 of the Delaware General Corporation Law, (vii) approve
of any Person becoming an "interested stockholder" under Section 78.438 of the
NRS or Section 203 of the Delaware General Corporation Law or (viii) enter into
any letter of intent or similar document or any contract, agreement or
commitment contemplating or otherwise relating to any Acquisition Proposal or
transaction contemplated thereby with respect to itself. Each of Parent and the
Company agrees that it and its Subsidiaries shall, and it shall cause its and
its Subsidiaries' Representatives to, and it shall use commercially reasonable
efforts to cause its and its Subsidiaries' non-officer employees and other
agents to immediately cease any and all existing activities, discussions or
negotiations with any third parties conducted heretofore with respect to any
Acquisition Proposal with respect to itself. Each of Parent and the Company
agrees that it will promptly request each Person that has entered into a
confidentiality agreement with Parent or the Company in connection with its
consideration of an Acquisition Proposal or equity investment to return all
confidential information heretofore furnished to such Person by or on behalf of
Parent or the Company or any of their Subsidiaries, as the case may be.
(b) Notification of Unsolicited Acquisition Proposals.
(i) As promptly as practicable (but in any event within one business day)
after any of Parent's or the Company's respective Representatives receives or
becomes aware of the receipt of any Acquisition Proposal by Parent or the
Company, as the case may be, or any request for nonpublic information or inquiry
which Parent or the Company, as the case may be reasonably believes could lead
to an Acquisition Proposal, Parent or the Company, as the case may be, shall
provide the other party hereto with written notice of the material terms and
conditions of such Acquisition Proposal, request or inquiry, and the identity of
the Person or group making any such Acquisition Proposal, request or inquiry and
a copy of all written materials provided in connection with such Acquisition
Proposal, request or inquiry. The recipient of the Acquisition Proposal, request
or inquiry shall keep the other party hereto informed as promptly as practicable
(but in any event within one business day) in all material respects of the
status and details (including all amendments or proposed amendments) of any such
Acquisition Proposal, request or inquiry and shall promptly (but in any event
within one business day) provide to the other party hereto a copy of all written
and electronic materials subsequently provided in connection with such
Acquisition Proposal, request or inquiry.
(ii)Parent or the Company, as the case may be, shall provide the other
party with 48 hours prior notice (or such lesser prior notice as is provided to
the members of its Board of Directors) of any meeting of its Board of Directors
at which its Board of Directors is reasonably expected to consider any
Acquisition Proposal.
(c) Superior Offers. Notwithstanding anything to the contrary contained in
Section 4.6(a), in the event that the Company receives an Acquisition Proposal
that constitutes or that the Board of Directors of the Company determines in
good faith is reasonably likely to result in a Superior Offer (as defined in
Section 4.6(g)) with respect to itself, it may, at any time prior to obtaining
the Company Stockholder Approval (but in no event after obtaining the Company
Stockholder Approval), take the following actions (but only (i) if the Company
has not breached Section 4.6(a) in connection with the Superior Offer and (ii)
to the extent that the Company's Board of Directors believes in good faith,
after consulting with and receiving the advice of its outside legal counsel,
that failure to take any such action is reasonably likely to result in a breach
of its fiduciary obligations under applicable law):
(i) Furnish nonpublic information to the third party making such
Acquisition Proposal, provided that (i) (A) at least one business day prior to
furnishing any such nonpublic information to such party, the Company gives
Parent written notice of its intention to furnish nonpublic information and (B)
the Company receives from the third party an executed confidentiality agreement,
the terms of which are at least as restrictive as the terms contained in any
confidentiality agreement between the Company and Parent, and (ii)
contemporaneously with furnishing any such nonpublic information to such third
party, the Company furnishes such nonpublic information to Parent (to the extent
such nonpublic information has not been previously so furnished); and
(ii) Engage in discussions or negotiations with the third party with
respect to the Superior Offer, provided that at least 48 hours prior to entering
into negotiations with such third party, the Company gives Parent written notice
of its intention to enter into negotiations with such third party.
(d) Change of Recommendation. Notwithstanding the provisions of Section
4.5(a) or (b), in response to the receipt of a Superior Offer, the Board of
Directors of the Company may withdraw, amend or modify the Company Board
Recommendation and, in the case of a Superior Offer that is a tender or exchange
offer made directly to its stockholders, may recommend that its stockholders
accept the tender or exchange offer (any of the foregoing actions in response to
the receipt of a Superior Offer, whether by a Board of Directors or a committee
thereof, a "Change of Recommendation"), if:
(i) it determines in good faith after consulting with and receiving the
advice of its outside legal counsel that taking or failing to take such action
is reasonably likely to result in a breach of its fiduciary duties under
applicable law; and
(ii) the Company shall have (A) at least five business days prior to a
Change of Recommendation provided to Parent written notice which shall state
expressly (1) that it has received such Superior Offer, (2) the material terms
and conditions of such Superior Offer and the identity of the Person or group
making the Superior Offer, (3) that it intends to effect a Change of
Recommendation and the manner in which it intends to do so, (B) provided to
Parent a copy of all written and electronic materials delivered to the Person or
group making the Superior Offer it has received, and (C) made available to
Parent all materials and information made available to the Person or group
making the Superior Offer it has received.
(e) Continuing Obligation to Call, Hold and Convene Company Stockholder
Meeting; No Other Vote. Notwithstanding anything to the contrary contained in
this Agreement, the obligation of the Company to call, give notice of, convene
and hold the Company Stockholder Meeting shall not be limited or otherwise
affected by the commencement, disclosure, announcement or submission to the
Company of any Acquisition Proposal with respect to it, or by any Change of
Recommendation and the Company shall not submit to the vote of its stockholders
any Acquisition Proposal or publicly propose to do so.
(f) Compliance with Tender Offer Rules. Nothing contained in this Agreement
shall prohibit the Company or its Board of Directors from taking and disclosing
to its stockholders a position contemplated by Rules 14d-9 and 14e-2(a) under
the Exchange Act; provided, that the content of any such disclosure thereunder
shall be subject to the terms of this Section 4.6. Without limiting the
foregoing proviso, the Company shall not make a Change of Recommendation unless
specifically permitted pursuant to the terms of Section 4.6(d).
(g) Certain Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(i) "Acquisition Proposal" means, with respect to any party, any offer or
proposal, relating to any transaction or series of related transactions
involving: (A) any purchase or acquisition by any Person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of more than a 15% interest in the total outstanding voting
securities of such party or any tender offer or exchange offer or other proposed
acquisition of voting securities of such party that, if consummated, would
result in any Person or "group" beneficially owning 15% or more of the total
outstanding voting securities of such party, (B) any merger, consolidation,
business combination or similar transaction in which the stockholders of such
party immediately preceding such transaction hold, directly or indirectly, less
than 85% of the equity interests in the surviving or resulting entity of such
transaction or in any parent entity immediately following such transaction, (C)
any purchase from such party of more than a 15% interest in the total
outstanding voting securities of such party or the granting or issuance of
rights to acquire more than a 15% interest in the total outstanding voting
securities of such party, including pursuant to options, warrants or similar
rights to purchase voting securities or the issuance of debt or other
instruments convertible, exchangeable or exercisable for voting securities of
such party, or (D) any sale, lease (other than in the ordinary course of
business), transfer, distribution, acquisition or disposition of more than 15%
of the assets of such party (including its subsidiaries taken as a whole).
(ii) "Superior Offer" means an unsolicited, bona fide written Acquisition
Proposal made by a third party after the date hereof on terms that the Board of
Directors of the Company believes in good faith (after consultation with its
outside legal counsel and financial advisor), taking into account, among other
things, all legal, financial, regulatory and other aspects of the Acquisition
Proposal and the Person making the offer and the strategic and other benefits of
the Merger, (i) is reasonably capable of being consummated on the terms
proposed, and (ii) if consummated on such terms would result in a transaction
more favorable, from a financial point of view, to the Company's stockholders
(in their capacities as stockholders) than the terms of the Merger. For the
purposes of this definition, the term "Acquisition Proposal" shall have the
meaning assigned to such term in Section 4.6(g)(i), except that references to
"15%" therein shall be deemed to be references to "50%".
4.7 Public Disclosure. Without limiting any other provision of this
Agreement, Parent and the Company will consult with each other and agree before
issuing any press release or otherwise making any public statement with respect
to the Merger, this Agreement or any Acquisition Proposal and will not issue any
such press release or make any such public statement prior to such consultation
and agreement, except as may be required by applicable Law. Notwithstanding the
provisions of this Section 4.7, in the event that there has been a Change of
Recommendation pursuant to Section 4.6(d), neither Parent nor the Company shall
have any further obligation to consult with each other, and agree, before
issuing any press release or otherwise making any public statement with respect
to the Merger, this Agreement or any Acquisition Proposal.
4.8 Notification of Certain Matters.
(a) By Parent. Parent shall give prompt notice to the Company when and if
Parent becomes aware that any representation or warranty made by it contained in
this Agreement has become untrue or inaccurate, or that it has failed to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 5.3(a) or (b) would not be satisfied.
(b) By the Company. The Company shall give prompt notice to Parent when and
if the Company becomes aware that any representation or warranty made by it
contained in this Agreement has become untrue or inaccurate, or that it has
failed to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement, in each case, such that
the conditions set forth in Section 5.2(a) or (b) would not be satisfied.
4.9 Third Party Consents; Termination of Certain Agreements. As soon as
practicable following the date hereof, Parent and the Company will each use
commercially reasonable efforts to obtain any material consents, waivers and
approvals under any of its or its subsidiaries' respective Contracts required to
be obtained in connection with the consummation of the transactions contemplated
hereby.
4.10 Stock Options and Employee Benefits.
(a) Assumption of Stock Options. At the Effective Time, each then
outstanding Company Stock Option, whether or not exercisable at the Effective
Time and regardless of the respective exercise prices thereof, will be assumed
by Parent. Each Company Stock Option so assumed by Parent under this Agreement
will continue to have, and be subject to, the same terms and conditions set
forth in the applicable Company Stock Option Plan (and any applicable stock
option agreement relating to such Company Stock Option) immediately prior to the
Effective Time (including any repurchase rights or vesting provisions), except
that (i) each Company Stock Option will be exercisable (or will become
exercisable in accordance with its terms) for that number of whole shares of
Parent Common Stock equal to the product of the number of shares of Company
Common Stock that were issuable upon exercise of such Company Stock Option
immediately prior to the Effective Time multiplied by the Exchange Ratio, as
adjusted, rounded down to the nearest whole number of shares of Parent Common
Stock and (ii) the per share exercise price for the shares of Parent Common
Stock issuable upon exercise of such assumed Company Stock Option will be equal
to the quotient determined by dividing the exercise price per share of Company
Common Stock at which such Company Stock Option was exercisable immediately
prior to the Effective Time by the Exchange Ratio, as adjusted, rounded up to
the nearest whole cent. Each assumed Company Stock Option shall be vested
immediately following the Effective Time as to the same percentage of the total
number of shares subject thereto as it was vested immediately prior to the
Effective Time.
(b) Incentive Stock Options. It is intended that the Company Stock Options
assumed by Parent shall (i) qualify following the Effective Time as incentive
stock options as defined in Section 422 of the Code to the extent that such
Company Stock Options qualified as incentive stock options immediately prior to
the Effective Time and (ii) not be treated as deferred compensation under
Section 409A of the Code, and the provisions of this Section 4.10 shall be
applied consistent with such intent.
(c) Assumption of Warrants. At the Effective Time, each then outstanding
Company Warrant, whether or not exercisable at the Effective Time and regardless
of the respective exercise prices thereof, will be assumed by Parent. Each
Company Warrant so assumed by Parent under this Agreement will continue to have,
and be subject to, the same terms and conditions set forth in the applicable
Company Warrant immediately prior to the Effective Time, except that (i) each
Company Warrant will be exercisable (or will become exercisable in accordance
with its terms) for that number of whole shares of Parent Common Stock equal to
the product of the number of shares of Company Common Stock that were issuable
upon exercise of such Company Warrant immediately prior to the Effective Time
multiplied by the Exchange Ratio, as adjusted, rounded down to the nearest whole
number of shares of Parent Common Stock and (ii) the per share exercise price
for the shares of Parent Common Stock issuable upon exercise of such assumed
Company Warrant will be equal to the quotient determined by dividing the
exercise price per share of Company Common Stock at which such Company Warrant
was exercisable immediately prior to the Effective Time by the Exchange Ratio,
as adjusted, rounded up to the nearest whole cent.
(d) Treatment of Company 401(k) Plan. If requested by Parent by written
notice, the Company shall terminate any and all 401(k) plans effective no later
than the day immediately preceding the Closing Date. The Company shall not issue
any shares of Company Common Stock as matching contributions under any Company
401(k) plan. If Parent provides such written notice to the Company, the Company
shall provide Parent with evidence that all such 401(k) plans have been
terminated (effective no later than the day immediately preceding the Closing
Date) pursuant to resolutions of the Company's Board of Directors. The form and
substance of such resolutions shall be subject to review and approval by Parent.
The Company shall also take such other actions in furtherance of terminating
such 401(k) plans as Parent may reasonably require.
(e) Benefits Generally. From and after the Closing Date, Parent or its
affiliates shall provide to the employees of the Company and its affiliates who
continue employment with the Company or any of its affiliates ("Continuing
Employees") benefits that are substantially similar, in the aggregate, to the
benefits offered to similarly situated employees of Parent. To the extent
permitted by applicable laws and applicable tax qualification requirements (and
subject to any generally applicable break in service or similar rule), Parent
shall cause Continuing Employees to be credited with service with the Company
for purposes of eligibility and vesting under any Parent 401(k) plan. Nothing in
this Section 4.10(e) shall be construed to entitle any Continuing Employee to
continue his or her employment with the Company or any of its affiliates.
(f) Form S-8. Parent agrees to file a registration statement on Form S-8
for the shares of Parent Common Stock issuable upon exercise of the assumed
Company Stock Options as soon as reasonably practicable after the Effective Time
and shall maintain the effectiveness of such registration statement thereafter
for so long as any of such stock options remain outstanding.
(g) Termination of Company ESPP. Prior to the Closing, the Company shall
take all such action as may be necessary or appropriate to terminate the Company
ESPP, such that on an after the Closing Date, the Company ESPP shall be of no
further force or effect.
4.11 Directors and Officers of Parent.
(a) As of the Effective Time, (i) Xxxxxx X. Xxxxxxx and R. Xxxxx Xxxx shall
resign as directors of Parent, and Parent shall increase the size of its board
of directors from five members to seven members; and (b) the board of directors
of Parent shall appoint Xxxxxxx X. Xxxxx, Xxxxxxx Xxxxxxxx, Xxxxxxx Xxxxxxxxx
and D. Xxxxx Xxxxxxxx (the "Director Designees") to serve as directors of Parent
until their successors shall have been duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with the
certificate of incorporation and bylaws of Parent. The three members of Parent's
board of directors who will continue to serve as directors of Parent after the
Effective Time shall have the right to appoint the Chairman of the Board of
Directors of Parent at the first meeting of the Board of Directors following the
Closing, to serve until the first anniversary of the Closing Date, or until his
successor is duly elected or appointed.
(b) As of the Effective Time, (a) Xxxxxx X. Xxxxxx shall resign as Acting
Chief Executive Officer and Interim Chief Financial Officer of Parent and (b)
the Board of Directors of Parent shall appoint Xxxxxxx X. Xxxxx to serve as
Chief Executive Officer of Parent and T. Xxxxx Xxxxxxxxxxx to serve as Chief
Financial Officer of Parent.
4.12 Resignation of Directors and Officers of the Company. The Company
shall obtain and deliver to Parent at or prior to the Effective Time the
resignations of such directors and officers of the Company as are necessary to
constitute the Board of Directors of the Surviving Corporation as set forth on
Schedule 1.4, and to cause the Surviving Corporation to have the same officers
as Parent.
4.13 Affiliates. Not later than 30 days prior to the Effective Time, the
Company shall deliver to Parent a letter identifying all persons who, in the
judgment of the Company, may be deemed at the time this Agreement is submitted
to the stockholders of the Company for the Company Stockholder Approval,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act
and applicable SEC rules and regulations, and such list shall be updated as
necessary to reflect changes from the date thereof. The Company shall cause each
person identified on such list to deliver to Parent not less than 15 days prior
to the Effective Time, a written agreement, in substantially the form attached
hereto as Exhibit A (an "Affiliate Agreement"). Parent will give stop transfer
instructions to its transfer agent with respect to any Parent Common Stock
received pursuant to the Merger by any stockholder of the Company who may
reasonably be deemed to be an affiliate of the Company for purposes of Rule 145
under the Securities Act and there will be placed on the certificates
representing such Parent Common Stock, or any substitutions therefor, a legend
stating in substance that the shares were issued in a transaction to which Rule
145 under the Securities Act applies and may only be transferred (a) in
conformity with Rule 145 or (b) in accordance with a written opinion of counsel,
reasonably acceptable to Parent in form and substance, that such transfer is
exempt from registration under the Securities Act.
4.14 Section 16 Matters. Prior to the Effective Time, each of Parent and
the Company shall take all such steps as may be required to cause any
dispositions of Company Common Stock (including derivative securities with
respect to Company Common Stock) or acquisitions of Parent Common Stock
(including derivative securities with respect to Parent Common Stock) resulting
from the transactions contemplated by Article I by each individual who is
subject to the reporting requirements of Section 16(a) of the Exchange Act, to
be exempt under Rule 16b-3 promulgated under the Exchange Act, such steps to be
taken in accordance with the guidance provided by the SEC.
4.15 FIRPTA Matters. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
Treasury Regulations, and (b) the Company shall deliver to the IRS the
notification required under Section 1.897 - 2(h)(2) of the Treasury Regulations.
4.16 [RESERVED]
4.17 Conversion of Debentures.
(a) Prior to the Effective Time, all outstanding convertible notes issued
by the Company which are convertible into shares of Company Common Stock shall
be converted into Company Common Stock or other securities of the Company, on
such terms as may be agreed upon by the Company, the holders of such notes, and
Parent.
(b) Prior to the Effective Time, one-half of all outstanding convertible
notes issued by Parent held by SDS Capital Group or its affiliates which are
convertible into shares of Parent Common Stock shall be converted into Parent
Common Stock or other securities of Parent, on such terms as may be agreed upon
by Parent, the holders of such notes, and the Company.
4.18 Bridge Financing. Prior to the Effective Time, each of Parent and the
Company may incur additional indebtedness or sell and issue additional shares of
its capital stock for the purpose of raising sufficient additional capital so
that each of Parent and the Company shall have adequate working capital to
satisfy their respective working capital requirements prior to Closing;
provided, however, that the Exchange Ratio shall be adjusted in accordance with
Sections 1.5(b) and (c).
4.19 Indemnification and Liability Insurance. Parent agrees that all rights
to indemnification now existing in favor of the directors or officers of Company
and its subsidiaries as provided in their respective charters and bylaws shall
become obligations of the Surviving Corporation following the Merger and shall
continue in full force and effect, to the fullest extent permitted by applicable
law, for a period of five (5) years from the Effective Time with respect to
matters occurring prior to the Effective Time. Prior to the Effective Time,
Merger Sub or, if so requested by Parent, Company, shall purchase a "Tail
Policy" or "Run-Off Coverage" (as those terms are hereafter defined) for the
benefit of the directors and officers of Company upon the terms and conditions
set forth below. For the purpose of this Section 4.19, a Tail Policy or Run-off
Coverage shall mean a policy insuring directors and officers of Company from
claims brought after termination or expiration of Company's current directors'
and officers' liability policy where the events giving rise to such claims
occurred prior to such termination or expiration.
(a) The term or duration of the Tail Policy or Run-Off Coverage shall be
three (3) years (without regard to cost) or such longer term as can be purchased
for premiums not to exceed $50,000 in total; and
(b) Except as set forth above, or as otherwise consented to in writing by
Parent and Company, the Tail Policy or Run-Off Coverage shall provide coverage
limits for claims and contain such other terms and conditions as are
substantially similar to Company's current directors' and officers' liability
insurance policy.
ARTICLE V
CONDITIONS PRECEDENT TO THE MERGER
5.1 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 Date of the
following conditions, any of which may be waived, in writing, by mutual
agreement of Parent and the Company:
(a) Stockholder Approval. The Company Stockholder Approval shall have been
obtained.
(b) No Injunctions or Restraints; Illegality. No Laws shall have been
adopted or promulgated, and no temporary restraining order, preliminary or
permanent injunction or other order, judgment, decision, opinion or decree shall
have been issued by a court or other Governmental Entity of competent
jurisdiction having the effect of making the Merger illegal or otherwise
prohibiting or unduly delaying consummation of the Merger.
(c) Registration Statement Effective; Proxy Statement/Prospectus. The SEC
shall have declared the Registration Statement effective. No stop order
suspending the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose, and no similar
proceeding in respect of the Proxy Statement/Prospectus, shall have been
initiated or threatened in writing by the SEC.
5.2 Additional Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations and Warranties. The representations and warranties of
the Company contained in this Agreement shall be true and correct on and as of
the Closing Date as though made on and as of such date (except in the case of
representations and warranties that speak as of a particular date, which shall
be true and correct in all material respects as of such date) except where the
failure of such representations and warranties to be so true and correct does
not have, and is not likely to have, individually or in the aggregate, a
material adverse effect on the Company, and Parent shall have received a
certificate to such effect signed on behalf of the Company by its Chief
Executive Officer and Chief Financial Officer.
(b) Agreements and Covenants. The Company shall have performed or complied
with the agreements and covenants required by this Agreement to be performed or
complied with in all material respects by it on or prior to the Closing Date,
and Parent shall have received a certificate to such effect signed on behalf of
the Company by its Chief Executive Officer and Chief Financial Officer.
(c) No Material Change. From the period beginning on the date of this
Agreement, there shall not have been any state of facts, events, changes,
effects, developments, conditions or occurrences that, individually or in the
aggregate, have had or would reasonably be expected to have a material adverse
effect on the Company.
(d) Consents and Approvals. All waivers, licenses, agreements, permits,
consents, approvals and authorizations of third parties and Governmental
Entities and any modifications or amendments to existing agreements with third
parties required to be obtained by the Company in order to consummate the Merger
shall have been obtained and shall be in full force and effect and without
conditions or limitations which unreasonably restrict the ability of the parties
hereto to consummate the Merger.
5.3 Additional Conditions to Obligations of the Company. The obligations of
the Company to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and warranties of
Parent contained in this Agreement shall be true and correct on and as of the
Closing Date as though made on and as of such date (except in the case of
representations and warranties that speak as of a particular date, which shall
be true and correct in all material respects as of such date) except where the
failure of such representations and warranties to be so true and correct does
not have, and is not likely to have, individually or in the aggregate, a
material adverse effect on Parent, and the Company shall have received a
certificate to such effect signed on behalf of Parent by its Acting Chief
Executive Officer and Interim Chief Financial Officer.
(b) Agreements and Covenants. Parent shall have performed or complied with
the agreements and covenants required by this Agreement to be performed or
complied with in all material respects by it on or prior to the Closing Date,
and the Company shall have received a certificate to such effect signed on
behalf of Parent by its Acting Chief Executive Officer and Interim Chief
Financial Officer.
(c) No Material Change. From the period beginning on the date of this
Agreement, there shall not have been any state of facts, events, changes,
effects, developments, conditions or occurrences that, individually or in the
aggregate, have had or would reasonably be expected to have a material adverse
effect on Parent.
(d) Consents and Approvals. All waivers, licenses, agreements, permits,
consents, approvals and authorizations of third parties and Governmental
Entities and any modifications or amendments to existing agreements with third
parties required to be obtained by Parent in order to consummate the Merger
shall have been obtained and shall be in full force and effect and without
conditions or limitations which unreasonably restrict the ability of the parties
hereto to consummate the Merger.
ARTICLE VI
TERMINATION
6.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time (whether before or after the Company Stockholder Approval is
obtained):
(a) by the mutual written consent of Parent and the Company, duly
authorized by their respective Boards of Directors;
(b) by either Parent or the Company if:
(i) the Merger shall not have been consummated by April 30, 2006 (the "End
Date"); provided, however, that a party shall not be permitted to terminate this
Agreement pursuant to this Section 6.1(b) if the failure to consummate the
Merger by the End Date is caused by a breach by such party of any covenant or
obligation in this Agreement required to be performed by such party at or prior
to the Effective Time;
(ii) a court of competent jurisdiction or other Governmental Entity shall
have issued a final and nonappealable Order, or shall have taken any other final
and nonappealable action, having the effect of permanently restraining,
enjoining or otherwise prohibiting the consummation of the Merger;
(iii) the Company Stockholder Approval is not obtained at the Company
Stockholder Meeting;
(c) by Parent if:
(i) the Company shall have breached or failed to perform in any material
respect any of its representations, warranties or covenants contained in this
Agreement, which breach or failure to perform (A) is incapable of being cured by
the Company prior to the End Date or is not cured by the earlier of (x) 30 days
following written notice to the Company by Parent of such breach or (y) the End
Date, and (B) would result in a failure of any condition set forth in Section
5.2(a) or (b); or
(ii) the Board of Directors of the Company shall (A) fail to authorize,
approve or recommend the Merger, or (B) effect a Change in Recommendation or, in
the case of an Acquisition Proposal made by way of a tender offer or exchange
offer, fail to recommend that the Company's stockholders reject such tender
offer or exchange offer within the ten business day period specified in Section
14e-2(a) under the Exchange Act;
(d) by the Company if:
(i) Parent shall have breached or failed to perform in any material respect
any of its representations, warranties or covenants contained in this Agreement,
which breach or failure to perform (A) is incapable of being cured by Parent
prior to the End Date or is not cured by the earlier of (x) 30 days following
written notice to Parent by the Company of such breach or (y) the End Date, and
(B) would result in a failure of any condition set forth in Section 5.3(a) or
(b); or
(ii) the Board of Directors of the Company makes a Change of Recommendation
in accordance with Section 4.6(d).
6.2 Effect of Termination. In the event of any termination of this
Agreement as provided in Section 6.1, the obligations of the parties hereunder
shall terminate and there shall be no liability on the part of any party hereto
with respect thereto, except for the provisions of this Section 6.2, Section 6.3
and Article VIII, each of which shall remain in full force and effect; provided,
however, that no party hereto shall be relieved or released from any liability
or damages arising from a willful breach of any provision of this Agreement.
6.3 Termination Fee.
(a) If this Agreement is terminated by either Parent or the Company as a
result of a Superior Offer, such party shall pay to the other party a fee equal
to $300,000; and in the event this Agreement is terminated by either Parent or
the Company pursuant to any of the following provisions, a fee shall be paid by
the terminating party to the other party equal to one-hundred and ten percent
(110%) of such other Party's actual out of pocket costs and expenses, not to
exceed $250,000 (in either event, the "Termination Fee"), which Termination Fee
shall be the non-terminating party's sole remedy with respect to the termination
of this Agreement except in the case of any willful breach of this Agreement by
the terminating party:
(i) Section 6.1(c); or
(ii) Section 6.1(d).
(b) If the terminating party is required to pay the other party a
Termination Fee, such Termination Fee shall be payable immediately prior to
termination of this Agreement in the event of termination, and not later than
one business day after the receipt by the non-terminating party of a notice of
termination from the terminating party, in each case by wire transfer of
immediately available funds to an account designated by the non-terminating
party.
(c) Parent and Company each agree that the agreements contained in this
Section 6.3 are an integral part of the transaction contemplated by this
Agreement, and that, without these agreements, the such parties would not enter
into this Agreement; accordingly, if the terminating party fails promptly to pay
any amounts due under this Section 6.3 and, in order to obtain such payment, the
other party commences a suit that results in a judgment against the terminating
party for such amounts, the terminating party shall pay interest on such amounts
from the date payment of such amounts were due to the date of actual payment at
the prime rate of Citibank, N.A. in effect on the date such payment was due,
together with the costs and expenses of the non-terminating party (including
reasonable legal fees and expenses) in connection with such suit.
ARTICLE VII
DEFINITIONS
"Affiliated Group" means any affiliated group within the meaning of Section
1504 of the Code.
"Benefit Plan" means any plan, agreement, arrangement or commitment
(whether provided by insurance, self-insurance or otherwise) that is an
employment, consulting or deferred compensation agreement; or an executive
compensation, incentive, bonus, employee pension, profit sharing, savings,
retirement, stock option, stock purchase, or severance pay plan; or a life,
health, post-retirement benefit, worker's compensation, unemployment benefit,
disability or accident plan; or a holiday, vacation, leave of absence, annual or
other bonus practice; or expense reimbursement, automobile or other
transportation allowance; or other employee benefit plan, agreement, arrangement
or commitment, including, without limitation, any "employee benefit plan," as
defined in section 3(3) of ERISA.
"Bridge Notes" means all promissory notes issued by the Company to
Parent during the period between December 1, 2005 and the Closing Date, which
evidence the Company's obligation to repay amounts loaned to the Company by
Parent to fund the Company's working capital requirements through the Closing
Date.
"Closing Net Working Capital," with respect to Parent or the Company,
means the actual net working capital of such party on December 31, 2005.
"Company Benefit Plan" means any Benefit Plan maintained by the Company
or any of its Subsidiaries or with respect to which the Company or any of its
Subsidiaries has or in the future may have, any contribution or other liability
or obligation with respect to any current or former employees (or their
beneficiaries) of the Company or any of its Subsidiaries.
"Company Contract" means any Contract: (a) to which the Company or any
of its Subsidiaries is a party; (b) by which the Company or any of its
Subsidiaries is bound; (c) under which the Company or any of its Subsidiaries is
a beneficiary; or (d) under which the Company or any of its Subsidiaries has any
right, any liability or any potential liability.
"Company Disclosure Schedule" means the written disclosure schedules,
dated as of the date hereof and certified by a duly authorized officer of the
Company, including all exhibits thereto, that have been prepared by the Company
and delivered to Parent upon the execution of this Agreement.
"Company ESPP" means the Company Employee Stock Purchase (2000) Plan
dated June 23, 2000.
"Company IP" means all Intellectual Property Rights in or to the
Company Products and all other Intellectual Property Rights and Intellectual
Property that are material to the business of the Company and its Subsidiaries
as currently conducted with respect to which the Company or any of its
Subsidiaries has (or purports to have) an ownership interest or an exclusive
license or similar exclusive right.
"Company Material Contract" means any Company Contract that is required
to be attached as an exhibit to any Company SEC Document pursuant to Item
601(b)(10) of Regulation S-K under the Exchange Act.
"Company Preferred Stock" means the preferred stock, par value $0.001
per share, of the Company outstanding and held of record by Crescent immediately
prior to the Effective Time.
"Company Product" means any product or service developed, manufactured,
marketed, distributed, provided, leased, licensed or sold, directly or
indirectly, by or on behalf of the Company or any of its Subsidiaries that is
material to the business of the Company or any of its Subsidiaries as currently
conducted, including any software (regardless of whether such software is owned
by the Company or any of its Subsidiaries or licensed to the Company or any of
its Subsidiaries by a third party) contained or included in or provided with any
such product or service or used in the development, manufacturing, maintenance,
repair, support, testing or performance of any such product or service.
"Contract" means any legally binding written, oral or other agreement,
contract, subcontract, lease, understanding, arrangement, instrument, note,
option, warranty, purchase order, license, sublicense, insurance policy or
commitment or undertaking of any nature.
"Crescent" means Crescent International Ltd. and/or its affiliates.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fully Diluted Shares Outstanding," with respect to Parent or the
Company, means the sum of (x) the total number of outstanding shares of Parent
Common Stock or Company Common Stock (as the case may be), (y) the total number
of shares of Parent Common Stock or Company Common Stock (as the case may be)
issuable upon exercise of all in-the-money options and warrants to purchase
Parent Common Stock or Company Common Stock (as the case may be), determined in
accordance with the treasury stock method, and (z) the total number of shares of
Parent Common Stock and Company Common Stock issuable upon conversion of all
other convertible securities, other than options and warrants, of Parent or the
Company (as the case may be); provided, however, that the Fully Diluted Shares
Outstanding of the Company shall not include any shares of Company Common Stock
issued or issuable to Parent upon conversion of the Bridge Notes.
"GAAP" shall mean generally accepted accounting principles in the
United States.
"Governmental Entity" means any domestic or foreign governmental or
regulatory authority, agency, commission, body, court or other legislative,
executive or judicial governmental entity.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Intellectual Property" means any and all algorithms, apparatus,
databases, data collections, diagrams, formulae, inventions (whether or not
patentable), know-how, logos, marks (including brand names, product names,
logos, and slogans), methods, processes, proprietary information, protocols,
schematics, specifications, software, software code (in any form, including
source code and executable or object code), techniques, user interfaces, URLs,
web sites, works of authorship and other forms of technology (whether or not
embodied in any tangible form and including all tangible embodiments of the
foregoing, such as instruction manuals, laboratory notebooks, prototypes,
samples, studies and summaries).
"Intellectual Property Rights" means all of the following types of
rights, which may exist or be created under the laws of any jurisdiction in the
world: (a) rights associated with works of authorship, including exclusive
exploitation rights, copyrights, moral rights and mask works; (b) trademark,
trade name and domain name rights and similar rights; (c) trade secret rights;
(d) patent and industrial property rights; (e) other proprietary rights in
Intellectual Property; and (f) rights in or relating to registrations, renewals,
extensions, combinations, divisions and reissues of, and applications for, any
of the rights referred to in clauses (a) through (e) above.
"Knowledge" means such party's actual knowledge after reasonable
inquiry of executive officers and directors within the meaning of Rule 405 under
the Securities Act.
"Law" means any federal, state, local or foreign law, statute or
ordinance, common law, or any rule, regulation, standard, judgment, order, writ,
injunction, decree, arbitration award, agency requirement, license or permit of
any Governmental Entity.
"Leased Real Property" means, with respect to any Person, all real
property leased to such Person.
"Lien" means any lien, claim, mortgage, encumbrance, pledge, security
interest or charge of any kind.
"Material," "materially adverse" and "material adverse affect." As used
in this Agreement, any reference to any event, change or effect being "material"
or "materially adverse" or having a "material adverse effect" on or with respect
to an entity (or group of entities taken as a whole) means such event, change or
effect is material or materially adverse, as the case may be, to the business,
condition (financial or otherwise), properties, assets (including intangible
assets), liabilities (including contingent liabilities), prospects or results of
operations of such entity (or, if with respect thereto, of such group of
entities taken as a whole).
"Order" means any judgment, decree, order, writ, permit or license of
any court, tribunal, arbitrator, authority, agency, commission, official or
other instrumentality of any Governmental Authority.
"Owned Real Property" means, with respect to any Person, all real
property owned by such Person and all buildings, structures, fixtures and other
improvements located on such real property.
"Parent Benefit Plan" means any Benefit Plan maintained by Parent or
any of its Subsidiaries or with respect to which Parent or any of its
Subsidiaries has or in the future may have, any contribution or other liability
or obligation with respect to any current or former employees (or their
beneficiaries) of Parent or any of its Subsidiaries.
"Parent Contract" means any Contract: (a) to which Parent or any of its
Subsidiaries is a party; (b) by which Parent or any of its Subsidiaries is
bound; (c) under which Parent or any of its Subsidiaries is a beneficiary; or
(d) under which Parent or any of its Subsidiaries has any right, any liability
or any potential liability.
"Parent Disclosure Schedule" means the written disclosure schedules,
dated as of the date hereof and certified by a duly authorized officer of
Parent, including all exhibits thereto, that have been prepared by Parent and
delivered to the Company upon the execution of this Agreement.
"Parent IP" means all Intellectual Property Rights in or to the Parent
Products and all other Intellectual Property Rights and Intellectual Property
that are material to the business of Parent and its Subsidiaries as currently
conducted with respect to which Parent or any of its Subsidiaries has (or
purports to have) an ownership interest or an exclusive license or similar
exclusive right.
"Parent Material Contract" means any Parent Contract that is required
to be attached as an exhibit to any Parent SEC Document pursuant to Item
601(b)(10) of Regulation S-K under the Exchange Act.
"Parent Product" means any product or service developed, manufactured,
marketed, distributed, provided, leased, licensed or sold, directly or
indirectly, by or on behalf of Parent or any of its Subsidiaries that is
material to the business of Parent or any of its Subsidiaries as currently
conducted, including any software (regardless of whether such software is owned
by Parent or any of its Subsidiaries or licensed to Parent or any of its
Subsidiaries by a third party) contained or included in or provided with any
such product or service or used in the development, manufacturing, maintenance,
repair, support, testing or performance of any such product or service.
"Parent Preferred Stock" means a series of preferred stock, par value
$0.0001 per share, of Parent which shall be convertible into shares of Parent
Common Stock and have such other rights, preferences and privileges as may be
mutually acceptable to Parent, the Company and Crescent.
"Person" means any individual, corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any company
limited by shares, limited liability company or joint stock company), firm,
society or other enterprise, association, organization, Governmental Entity or
other entity.
"Representative" means, with respect to any Person, any director,
officer, other employee, agent, attorney, accountant, advisor or other
representative of such Person.
"Required Net Working Capital," with respect to Parent or the Company,
means such party's actual net working capital as of September 30, 2005 plus an
amount equal to $1,000,000 less then actual cash reflected on such party's
balance sheet on such date.
"Xxxxxxxx-Xxxxx Act" means the Xxxxxxxx-Xxxxx Act of 2002, as it may be
amended from time to time.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means, with respect to any party, any corporation or other
entity, whether incorporated or unincorporated, of which more than fifty percent
(50%) of either the equity interests in, or the voting control of, such
corporation or other entity is, directly or indirectly, beneficially owned by
such party.
"Tax" or "Taxes" means (whether or not disputed) taxes of any kind,
levies or other like assessments, customs, duties, imposts, charges or fees,
including, without limitation, Income Taxes, gross receipts, ad valorem, value
added, excise, real property, personal property, occupancy, asset, sales, use,
license, payroll, transaction, capital, capital stock, net worth, estimated,
withholding, employment, social security, unemployment, unemployment
compensation, workers' compensation, disability, utility, severance, production,
environmental, energy, business, occupation, mercantile, franchise, premium,
profits, windfall profits, documentary, stamp, registration, transfer and gains
taxes, toll charges (for example, toll charges under Sections 367 and 1492 of
the Code), or other taxes of any kind whatsoever, imposed by or payable to the
United States, or any state, country, local or foreign government or
subdivision, instrumentality, authority or agency thereof or under any treaty,
convention or compact between or among any of them, and in each instance such
term shall include any interest (including interest on deferred tax liability
under Section 453A(c) of the Code and "look-back" interest under Section 460 of
the IRC and similar amounts of interest imposed by the IRC), penalties,
additions to tax or similar charges imposed in lieu of a tax or attributable to
any tax.
"Tax Return" means any return, declaration, report, claim for refund,
information return or statement that relates to Taxes, including any schedule or
attachment thereto and any amendment thereof.
ARTICLE VIII
MISCELLANEOUS
8.1 Survival. The representations and warranties of Parent and the Company
contained in this Agreement, or any certificate or instrument delivered pursuant
to this Agreement, shall terminate at the Effective Time, and only the covenants
that by their terms survive the Effective Time and this Article VIII shall
survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, (b) on the date of confirmation of receipt (or, the first business
day following such receipt if such date is not a business day) of transmission
by telecopy or telefacsimile or (c) on the date of confirmation of receipt (or,
the first business day following such receipt if such date is not a business
day) if delivered by a nationally recognized courier service. All notices
hereunder shall be delivered as set forth below, or pursuant to such other
instructions as may be designated in writing by the party to receive such
notice.
(a) if to Parent:
Wave Wireless Corporation
0000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Acting Chief Executive Officer
with a copy (which shall not constitute notice) to:
Xxxxxxxx, Xxxx, Hargreaves & Savitch LLP
000 X Xxxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxx, Esq.
(b) if to the Company:
WaveRider Communications Inc.
000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx
Xxxxxx X0X 0X0
Facsimile: (000) 000-0000
Attention: Chief Executive Officer
with a copy (which shall not constitute notice) to:
Xxxxx Xxxx LLP
Seaport World Trade Center West
000 Xxxxxxx Xxxxxxxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
8.3 Counterparts; Effectiveness. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same instrument. This Agreement shall become
effective when each party hereto has received counterparts signed and delivered
(by facsimile or otherwise) by all of the other parties hereto.
8.4 Entire Agreement; Third Party Beneficiaries.
(a) This Agreement (including the exhibits and the parties' disclosure
schedules hereto) and the Confidentiality Agreement constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and
thereof.
(b) This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any Person not a party to this Agreement any
rights, benefits or remedies of any nature whatsoever.
8.5 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Notwithstanding the foregoing, upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
8.6 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties, in whole or in
part (whether by operation of law or otherwise), without the prior written
consent of the other parties, and any attempt to make any such assignment
without such consent shall be null and void. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
8.7 Amendment. Subject to applicable Law, this Agreement may be amended by
the parties hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after obtaining the Company Stockholder
Approval; provided, that after obtaining the Company Stockholder Approval, no
amendment shall be made which by Law or in accordance with the rules of the OTC
Bulletin Board requires further approval by the stockholders of the Company
without such further stockholder approval. This Agreement may be not amended
except by execution of an instrument in writing signed on behalf of each of
Parent and the Company.
8.8 Extension; Waiver. At any time prior to the Effective Time, either
party hereto, by action taken or authorized by its respective Board of
Directors, may, to the extent permitted by applicable Law, (a) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties made to
such party contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements 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. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
8.9 Fees and Expenses. Subject to Section 6.3, whether or not the Merger is
consummated, all Expenses (as defined herein) incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such Expenses. As used in this Agreement, "Expenses" includes all
out-of-pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a party
hereto and its affiliates) incurred by a party or on its behalf in connection
with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby,
including the preparation, printing, filing and mailing, as the case may be, of
the Proxy Statement/Prospectus and the Registration Statement and any amendments
or supplements thereto, and the solicitation of the Company Stockholder Approval
and all other matters related to the transactions contemplated hereby.
8.10 Remedies; Specific Performance. Except as otherwise provided herein,
any and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy. 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. It is accordingly agreed that the parties shall be
entitled to seek 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.
8.11 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
8.12 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.13 Waiver of Jury Trial. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
ACTIONS OF ANY PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT HEREOF.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
"Company"
WAVERIDER COMMUNICATIONS INC.,
a Nevada corporation
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Chief Executive Officer
"Parent"
WAVE WIRELESS CORPORATION,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Acting Chief Executive Officer
"Merger Sub"
WAVE ACQUISITION CORPORATION,
a Nevada corporation
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Executive Officer
